Q2 2021 Compass Inc Earnings Call

Morning.

[music].

Good day and welcome to the Compass second quarter 2021 earnings Conference call. My name is Catherine and I'll be your conference operator today.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer sessions.

<unk> Vice President of Investor Relations you May begin your conference.

Good afternoon, and thank you to everyone for joining <unk> second quarter earnings call today to review of our actual financials will address the continuing operations of conference and certain items and are presented on a non-GAAP basis.

Reconciliations between GAAP and non-GAAP measures for both our second quarter and year to date financing as well as our guidance are included at the back of the earnings release and the shareholder.

Please also see our disclosure on forward looking statements, which reflects company's current view of future financing.

Which mainly which may be materially different.

From our actual performance for reasons that we cite and our form 10-Q, and other SEC filings, including uncertainties posed by the COVID-19 pandemic and the difficulty in predicting its featured force and the impact from the housing market and the global economy.

Joining us today and will be Robert rescue Compass, as founder Chairman and Chief Executive Officer, and Chris and anchor Brit Compass.

And as Chief Financial Officer.

Robert will provide a brief overview of the conference this quarter and a discussion of our strategy and then Christian will cover the financial results and outlook in more detail with that I would like to turn the call over to Robert.

Thank you Ben and thanks to everyone for joining the call. We are excited to be back with you today to talk about compass and our second quarter results. Thanks to our agents and employees hard work throughout the quarter, we were able to deliver record results in terms of transactions growth transaction.

Value revenue and adjusted EBITDA and I can confidently say, we are in the strongest position, we have ever been and as a company.

On the financial side, we delivered all time record quarterly revenue of nearly $2 billion, which is up 186% year over year.

Non-GAAP Commission and other transaction related expenses as a percentage of revenue improved by 100 basis points and year over year.

Better than the 80 basis point improvement we saw in the first quarter.

Adjusted EBITDA for the quarter was a positive $71 million.

And if you look at our trailing 4 quarters, we generated $44 million of adjusted EBITDA.

In the second quarter, our national market share almost doubled from the prior year and share increased to 6.2% up from 3.3%, primarily driven by our agents growing their transaction counts and our increase in the compass agent base.

A strong housing market was certainly a tailwind, but we outperformed the industry by a wide margin.

Year over year, our transaction growth was 140% compared to industry transaction growth of 32%.

Due to a combination of our ongoing outperformance and the strength of the housing market and the impact of platform as having as an accelerant and business growth. We now believe that will be profitable on an adjusted EBITDA basis for the full fiscal year 2022.

A year earlier than we previously expected.

We are particularly excited that this financial success was driven by compass, and making agents more productive on the platform.

On average each of our principal agents closed 6.2 deals in the quarter and.

A new record.

This is up 93% per year over year.

And compares to industry transaction growth of 32%.

The combination of our outperformance on the number of transactions completed and a 19% increase and home prices drove <unk>, a record $77 billion and the quarter.

Up 186% year over year.

<unk> per principal agent and was $7.2 million up 130% from year over year.

Our agents recorded over 65000 transactions on the Compass platform in the second quarter, and we beat our prior record by over 18000 transactions.

Our agents make up roughly 1.5% of real estate agents and the U S from represents over 6% of the industry and market share.

This quarter, our principal even count increased to over 10006 hundred.

With retention rates that continue to lead the industry and above 90%.

I am pleased to say that our principal agent retention and Q2.2021 was higher than the prior quarter and higher than the prior year.

This is particularly important to us as retention as the primary indicator of the value our customers feel they are getting from our platform.

We are well positioned and the upper end of the market where price increases have outpaced the broader market and we will continue to expand our footprint into upper and mid tier markets throughout the course of the year.

And we launched 15, new markets and <unk>, including Indianapolis.

Charlotte and Minneapolis, bringing our total market accounts of 62, covering approximately 45% of the U S population.

The rate of new market launches is expected to slow in the second half of 2021, as we saw an opportunity to accelerate expansion and the first half of the year that was originally planned for the back half of the year.

Now, let's move to our platform and how it powers, our sustainable financial advantage relative to incumbents.

I know that many of them, who see us as just a brokerage and.

And I am proud that our team and has made us the fastest growing brokerage and United States.

But our strategy of compass is to be much more than a brokerage.

Over time, you will see how our platform powered a larger number of adjacent services within and above industry average attach creating a long term sustainable financial advantage for compass relative to others in the industry.

The size and nature of this opportunity is made possible because of our unique approach to creating the first and and integrated technology platform for real estate agents.

No traditional brokerage firms are making the necessary technology investments and power their agents to service the entirety of their client needs and facilitate the entirety of the transaction and and and 1 platform Compass has invested in over the past 7 years.

With our product and engineering team consisting of more than 1000 people come to US and has a technology team that is by far larger than any traditional brokerage firm.

Given our success to date.

By next summer, we expect to be the first company to provide <unk> with a platform that will allow them to facilitate the full transaction and 1 place without having to pay for or log onto any third party real estate and software from.

From first client contact to property marketing and for sellers and property search for buyers to CRM to offer management Trojan and vaccine management and closing the full transaction process will be connected to an integrated experience built on a single code base across both mobile and web.

Unlike some business the technology offerings and traditional brokerages include a collection of disconnected third party tools that don't speak to each other and that prevent them from fully integrating value added adjacent services and the natural workflow of the transaction.

<unk> approach to building an integrated platform gives the company a competitive advantage in England connecting more value added services over time into this transaction experience.

We already have multiple adjacent services to attach the transaction running through our platform.

And that's a traditional and services like title and escrow and in Q2, and we announced our mortgage JV with guaranteed rate.

In addition to more traditional adjacent services like home insurance home warranty home security and moving services. We also see a clear path to facilitating and monetizing dozens of additional adjacent services that are uniquely enabled by our platform, including property marketing spend.

Agent business spend and client spend position.

Positioning companies to have a share of all real estate spend.

Digital ads property videos, and <unk>, rendering and real estate volume production open house, the assures lithium photography client 15 programs for past buyers and sellers are just some of the many examples of these types of opportunities with third parties are seeking access to our agents.

Currently 8.

<unk> spent billions of dollars on these types of services and we can make them easier to access more convenient and more cost effective for agents and their clients by having everything centralized and 1 location through the compass platform.

With the incremental Tam provided by the addition of these value added services compass as potential revenue per transaction will be multiples above the industry average and creating a sustainable financial advantage relative to incumbents.

As I mentioned last month, we announced board and point, our mortgage JV with guaranteed rates. We are excited to bring our best in class agents high quality transaction funnel and technological expertise and origin point or.

Our goal is to be and business and multiple states.

A year and expand nationwide by year end 2022.

We aim for and attach rates at or above industry averages of eligible transactions and 3 to 5 years with profitability for the JV on an adjusted EBITDA basis expected in 2022.

Turning to the housing market. We believe there are incredibly strong fundamentals and we see continued strength and the future. This is not just and after effects of the pandemic.

<unk> demand among homebuyers remains high while interest rates remain near historic lows.

We had $7.5 million Americans have already moved with millions more are looking remember when you hear about 10 offers being put on the home only 1 and chosen the 9 buyers are still in the market.

Continued expectations of hybrid work environments will continue to spur demand for people are using their homes more than ever before and is continuing to lead people to look for new primary and second homes that help them better optimize their hybrid work lifestyle.

Moreover, millennials are entering their home buying years, which will further sustained demand and COVID-19 and have resulted in significant pent up demand from the international buyer.

And many of our key markets like Florida, and New York, and California buyers from places like Canada, Latin America, Asia, and Europe have been unable to travel to the U S for over a year now and that demand from those buyers is significant.

All of this and just to be optimistic and our outlook for the residential housing market this year and next.

That said the more lasting impact COVID-19 maybe.

From Covid, maybe on the acceleration and digital adoption, which looks like a permanent shift.

And we've seen that play out across many industries, including media streaming delivery and of course real estate.

Customers want the same high level of service to more digital interaction better suited to their lifestyle.

And real estate the winners will be the agents, who can best utilize technology to transform the client experience and the brokerage firms and best held even to utilize technology.

This has been compass is focused since our inception.

From this platform, which is unique in the industry is the result, and more than 7 years of engineering work and more than $600 million.

And investments.

And the support of being the company that best help agents use technology to realize their entrepreneurial potential.

Over the last 10 years technology has continued to empower agent and to serve more clients and more transactions each year.

It is.

Secular trends.

And 1 that compass has been on for years, and where we continue to lead the industry.

This can be seen and the transaction per average principal agent, which increased from 10 and 2018 to 13 and 2019 to 17 and 2022 and with 182021 over 1 and 2022, reflecting a further increase of 68%.

With digital adoption and real estate still and its relative infancy I've never felt more confident that Congress is the best positioned company and our industry to help agents use technology to use software to continually increase the number and quality and transactions they can complete.

Each year for clients, making compass, the best place for agents to grow their business.

I am now going and hand, it over to Christian who is going to go through the financials in more detail, but I just wanted to say once again, how pleased I am with the performance this quarter and how thankful I am to the 25000 people at Compass that have worked so hard to create such incredible results.

With that let me turn the floor over to Kristin and I'll be back at the end to answer Q&A.

Thanks, Robert and Mitch.

Hi, good to be here today to share our second quarter results and also go in and go a bit deeper and the Congress has passed to adjusted EBITDA profitability and provide some updated guidance for the remainder of the year.

Before we dive in and I wanted to start by reiterating channel outstanding and Q2 year over year results were across the board.

Revenue grew 186% transactions grew 140% and thats compared to the industry average and 32%, we nearly doubled our national market share to 6.2%.

We generated $71 million and adjusted EBITDA and improvement of $128 million year over year. Our average principal agents grew 25%, we launched 15, new market and we generated $81 million and free cash flow and we have over $800 million and cash.

And and untapped $350 million revolver, so our balance sheet is healthy.

Its strength breadth and persistent and these results show the momentum that exceeded our expectations coming in well ahead of our financial guidance on both revenue and adjusted EBITDA.

And our extraordinary agents armed with our tech platform delivered outsized results on both the top and bottom lines and these results truly were outside.

Revenue in the quarter was a record coming in at $195 billion more than $700 million better than our next first quarter.

Adjusted EBITDA was a positive $71 million, bringing us to adjusted EBITDA profitability up $44 million over the last 12 months and then clearly.

And 65000 transactions and the quarter, which equates to over 700 transactions per day.

We expect continued strength in our business, but the comps will get harder and now that we have last Q2.2020 per quarter, most negatively impacted by Covid.

And we saw 82% of revenue growth and the back half of 2020 compared to the prior year, but we see a lot of underlying strength and the residential real estate market that we believe will persist through the remainder of 2021 and beyond.

Continued strong demand simply cannot be met by the current low supply.

Pointing to continued strength and the housing market and for several quarters.

Since the IPO, we have grown the business ahead of our expectations and outperformed the market as a result, we generated significantly more adjusted EBITDA and the second quarter than anticipated as revenues came in stronger than expected. While we continued to operate the business at a lower expense base following COVID-19.

The combination of elevated growth and structural profitability that we saw in Q tail has accelerated our timeline to adjusted EBITDA profitability sooner than previously communicated we originally expected to achieve sustainable profitability and 2023, given our strong quarter and our river.

<unk> outlook, we now expect to be profitable on an adjusted EBITDA basis for the full year 2020 tail.

We're happy to report and a significant improvement and our full year 2021 guidance on our last earnings call. We provided annual guidance of 535 to $5.5 billion and revenue.

And now expect revenue and $615 billion to $6.35 billion, a year over year growth rate of 68% at the midpoint compared to a growth rate of 46% and our prior guidance. This reflects an increase of $800 million to our revenue guidance.

Our prior adjusted EBITDA guidance was a loss of $225 million to $245 million. We now expect a loss of $45 million to $85 million and adjusted EBITDA margin of negative 1% at the midpoint.

This reflects an improvement of $117 million compared to prior guidance and and $90 million improvement compared to a loss of $156 million per full year 2020.

For the third year, we expect for the third quarter, rather and we expect revenue of $1.65 to $1.75 billion.

At the midpoint this implies year over year growth of 43%, we seeing healthy activity and our market and July and August and fire.

For the third quarter, we expect adjusted EBITDA and to be breakeven to a loss of $20 million.

From $195 billion of revenue, we generated and the second quarter was strong and keep in mind that the 186% growth rate and saw was magnified by the weak prior year comparison due to COVID-19.

To normalize for the unusual seasonality and signed 2020. They look at the 2 year CAGR from 2019 to 2021 and <unk> 2 year CAGR with 65% and we expect a similar trend for revenue growth and Q3 and Q4.

These 2 year CAGR reflects continued year over year growth and our core business and early traction and adjacent services.

And to generate more revenue and the second half of the year and we did and the first half.

Our visibility into Q2 outperformance combined with our strong future outlook has given us the confidence to make investments and our business to drive long term profitability.

We opted to launch 15, new markets and Q2 versus our typical pace of 2 markets per quarter flow.

Our market accounts from $47.62 charged and the last quarter reflects an increase of 30% and there is cost associated with that and the back half and being here.

We are also investing to expand title and escrow to cover 7 states by year end and we made the decision to launch our mortgage business a year sooner than planned these.

And these investments and adjacent services will drive profitability and 2022 and.

And we continue to invest and our tech platform, which is what drives compass is outperformance relative to the industry.

Higher <unk> investment made it possible to nearly double our market share year over year and took a 6.2 percentage quarter as an example.

Phase III investments launching new markets expanding high margin adjacent services and building new proprietary technology to drive outperformance by our agents will drive sustainable long term profitability.

There are 3 reasons I have the confidence that we can achieve sustainable positive adjusted EBITDA in 2020.

First our ability to scale the business is most dependent on how successful we are at recruiting agents retaining agents and growing their transactions and we have done net consistently.

Second we are successfully growing our high margin and adjacent services business, including our mortgage JV.

Growth and adjacent services should steepening, the curve and adjusted EBITDA per transaction as our transaction counts continue to growth.

Third we see a clear path to profitability and the markets. We serve based on a demonstrated success that we have seen and scaling market share and driving profitability as our markets mature.

As detailed in our shareholder letter our expansion markets launched in 2018 scale to double digit market share and reach positive market level margin within 3 years of launch.

And that 7 MLS Mark and Compass launched in 2018 that had been operational for a full 3 years were unprofitable and their first and second years, but by the third year. Those 7 markets had an average 11% market share and and positive market level margin of 4%, which we expect to continue to.

And overtime.

The operating performance of our markets has been remarkably consistent with the same trends, having them prove and across various sized markets and different geographies across price points and exhaust and local market norms.

We've launched a number of markets. Since then with roughly half of our markets still in the investment and phase early indications show. These markets are off to a strong start performing in line with our expectations.

The combination of our ability to consistently grow our agent base and their transaction could scale, our adjacent services business and to drive market level profitability and share provides us with the confidence that we can deliver on this commitment to sustainable profitability and 2022.

All in this was another fantastic quarter for Compass, we achieved our best ever financial and operational results, we dramatically raised guidance for the full year 2021, and we now expect to achieve sustainable adjusted EBITDA profitability in 2022.

Most importantly, thanks to our team of agents and employees for all the hard work that made these amazing results possible.

Now with that we're happy to take your questions.

Operator first question please.

Our first question comes from the line of Brian Nowak with Morgan Stanley.

Hi, This is Alex Wang on for Brian and Thanks, So much for taking the questions first 1 just on number of principal agents added can you maybe help parse out.

What was leading that in terms of either new markets versus existing markets and Robert and talked about the $6.1.

Transactions per agent per quarter, which is really impressive maybe what's driving that and how sustainable do you think that going forward.

And the second question around profitability question I think.

New EBITDA guidance assumes a roughly 20% drop through on the incremental revenue and the pull forward by year can you maybe parse out of the 3 areas you're talking about.

Okay.

Which ones are sort of maybe pushing that more in terms of ancillary services new Tac.

<unk>.

And new markets.

And you.

Great. So how about I'll start with highlighting the driver of the $6.2 number and then I'll pass on to Christian.

And we've seen very consistently not just this quarter and at this time.

Prior quarter, our agent to outperforming the market this quarter, it was 93% growth and <unk>.

Transactions from average from principal agent versus the industry Boeing and 32%.

But it's been consistent over many years and so the number of transactions per year increased.

Per agent from 2018 to 2019 from 19 to 2020, and then further in 2021 and I'll get back to that 19% number that we've talked about in the past.

The average age and our compass across 5 years of cohort data across geographies is growing their business, 19% between year, 1 year or 2 and then further on top of that and subsequent years.

And that's.

And what Youre seeing now is the impact of that at scale and when you have a company of <unk>.

Now over a 1000 person and technology team I'll focus on the goal of helping agents grow their business and a larger company on top of that where we're all here to help agents grow their business and.

Have a better quality of life more money to support their family more times and with their family.

And these are the results you've done and we're bringing depot across many many different industries to bring their unique talented and unique insights to that growth.

And I'm happy to talk to to your other 2 questions. So in terms of the agent and addition that we saw and Q2 as we mentioned, we launched 15, new markets and Q2.

And at different points throughout the quarter on for our expansion team is working throughout the quarter to launch those markets and generally you see.

Announcements as as we launched and those markets.

And any quarter, where we have new markets that we're launching we do have our sales teams focused on ensuring that we're bringing new editions and those markets, but we have we have salespeople across all of our markets who are recruiting new agents into the base. So I would say is as you look at those new app.

And it's really split between our new markets and our existing markets and we haven't seen.

Anything unusual or any different anything different in terms of our ability to recruit agents and in <unk>.

These are the new markets or the existing markets.

In terms of your last question as we as we look at the increasing spend and the back half of the year and there were really 3 areas that I highlighted.

And the first phase is expansion and.

15 markets and they launched in Q2 and the 3 markets that we launched in Q1.

Those really are driving about a third of the incremental spend and the back half of the year.

The tech investment and driving another third and then the remaining third is mostly related to adjacent services. Although there are a few other small items and there as well.

Great. Thanks.

Your next question comes from the line of Mike King with Goldman Sachs.

Hey, good afternoon, and thank you very much for the question.

It really helpful to see the market level margins over time for the 2018 launches.

Can you talk a little bit about the key drivers of that margin improvement and how those leverage over time is it primarily C&I expenses or adjacent services attach that drives that drive that margin for instance, any detail there will be incredibly helpful. Thank you.

Sure.

Glad you and Joanne fee new disclosure.

For a major market and these are really new markets for retail and already have a presence.

As I talked about it generally takes 3 years from launch to get to double digit market share and profitability at the market level and.

And in the first and second half of market launch, we are focused on adding agents and building out our operations. We generally have to invest ahead of the revenue in those major markets and we typically crossed over to profitability and a third year as he built a strong agent and transaction base from which we can expand further and view.

As you look at the what's really driving NAV it is leveraged across and literally all cost categories.

And a specific data that we showed was and markets that were launched in 2018 at various points within 2018, there was little to no adjacent services.

Reflected and the numbers that you saw so that is all opportunity to come.

Great. Thank you very much I think worth noting also roughly half of our markets are still in the investment phase and Theyre moving a profitability at some point within the next 3 years, so even within the zone.

Markets that we have already launched there is a lot of opportunity for additional growth and profitability.

Great. Thanks Kristen.

Your next question comes from the line.

I'm sorry. Your next question comes from the line of Jason <unk> with Oppenheimer.

Bob.

All of I guess, the key metrics work and the right direction, maybe help us understand just a little more detail so on agent productivity.

Obviously this was I think it peaked at $6, 1 and $6.2.

How should we think about that going forward kind of stay at this level or does it need to come down.

I think we also saw a decline in commission and transaction as a percentage of revenue.

And maybe explain kind of on a year over year basis.

Why that was down and then you also saw a very nice gains and marketing marketing efficiency, maybe just talk about that a little bit more thanks.

And maybe I'll talk about the agent productivity and that's done through Christmas and talk to them and us.

Other 2 items.

Yes.

There may be fluctuation and agent productivity quarter to quarter, but.

And we're very confident that the trend line of agent productivity will increase year over year remember is 10 transactions per per year in 2018.

13, and 2019 and 2020. It was 17, so we feel very confident and that ongoing number going up and.

And to the right.

And again Thats, just because we have.

We have clear insight into the productivity tools that we're building for <unk>, we're making sure that any anything that can help us lead and grow their business that compass over time, we'll be able to provide as non today and then definitely overtime and we are constantly looking at everything out there that is helping <unk> grow and be more per.

Doctors and bring them to our agents.

And I'm happy to talk through your question on commissions and other so we did see commissions and other as a percentage of revenue improved 100 basis points every year and.

And we saw a similar trend in Q1, where we saw an 80 basis point improvement year over year. So we did even better than that.

<unk> and this is primarily the result of 3 things first improving.

Ethan economics, as our cohorts and tour and a recovery of New York City Post Covid, which we think will continue as international buyers, we enter the market and as Robert mentioned in his comments and then we have been focusing our expansion and markets, where the margin structure is more attractive the compass and.

So as we prioritize those markets for expansion.

And starting to see the benefit of that roll through the net financials.

And when it comes as far as the leverage we saw and the sales and marketing line first of all I mean, we've our relative fee operating leverage across all categories, we touched on commissions and other.

But we saw it down the entire P&L about 680 basis points came from sales and marketing and that was really related to autonomy.

And these are the scale given some offset by costs associated with a greater number of average control agents and some price increases we do have occupancy and that line and so that is 1 big chunk along with a couple of other things that are essentially fixed cost and that category and.

So thats what drove the outsized operating leverage and that line.

Thank you.

Our next question comes from the line of Ross Sandler with Barclays.

Hey, guys.

Just to follow up on that market disclosure data and then 1 other question.

And so.

The data looks great and is the breakeven point happening sooner today and it was may be and your first dozen or so mark and it's because of the role the adjacencies or compass anywhere is just playing and flipping those markets too.

And EBITDA positive.

Any color on like.

And.

And congrats obviously new over the last couple of years compared to the Doctor and the day. So can you get to breakeven and a lot quicker on these new markets I guess from the question.

And then just a high level question.

And so youre seeing some softening in the market price.

And which is a high and where you guys operate which is kind of across the board.

Is the value prop for our agents.

Moving the compass.

Higher or the same.

4 and a softening market versus the strong 1 that we've seen and any color on your ability to recruit agents from other platforms and whatnot.

And things start to cool off a little bit thanks, a lot.

Alright that flow.

And to get to hear from you in terms of the market level.

And mark and level of profitability, we have we've just gotten better at launching these market I'd say over time.

The 2018 cohort and is 1 that really reflects sort of our eyes.

Our newest expansion playbook, but we have continued to evolve since then.

We did see and improvement when it came to the 2018 cohorts in terms of that timeline and profitability relative to the markets that we launched before 2018 and.

And that's coming from a whole host and things.

And if anywhere plays a role and that essentially that creates incremental capacity and a market that doesn't require associated office space. So that's certainly a factor there.

And services.

And really does not impact those numbers were so new and adjacent services that most of the opportunity from a profitability perspective on a market level is to come so and we continue to rollout title and escrow and mortgage across all of our markets and is that a.

Pretty healthy expansion plan for title and escrow by the end of this year of course, we want to have mortgage operations across all of our markets by 2020.2.

That will be another catalyst for.

Reaching profitability and potentially think per car.

And on your second question about what happens to come to us if the housing market cools.

And we're seeing that.

Again, a very positive outlook on the market, but as the market does school.

We have built a business that has performed very successfully throughout many different market environments, particularly when you look at it at a local level and we have a very large buffer of growth on top of the market because our transactions have consistently outgrown and outperformed the market with our transaction growth this past quarter at 140%.

Industry at 32%, so even if there is.

As flat or decline.

And the market, we will still have a significant buffers allowance will grow.

Aggressively.

That said there are 2 an integrated.

Integrated consequences of a slowing market, which helped compass. The 1 is it makes it easier to talk to agents and these are really really busy England have enough time and the day and they are.

They are focused and just meeting their client needs and and without their family and having conversations with the company.

But when things slow down and more time to talk to our enterprise sales team.

The second is when their business goes down or slows and Theyre looking for growth encompasses the answer for that while a lot of brokerage firms are focused on.

Charging less and how to split the pie and in different time delays and we are uniquely focused on how to create more value for agents and help them grow their business and.

And that's where all of our energy wise and.

And the result of that is again when things slow down where the best answer for for growth.

Our net offers.

Comes from the line of.

And Camden with.

Thank you good evening and congrats on the quarter Christian I think you touched on this a little bit and response to a previous question, but could you maybe from the <unk> guide and the full year guide could you provide a little bit more clarity or granularity in terms of.

Underlying drivers your expectations on the average principal agent growth.

Productivity going forward and then also and concrete rock commission rates will they be resilient around these levels or do you expect any sort of fluctuation over the back half of the year, what's embedded in your guidance.

Sure well we.

Needless to say very pleased with our revenue growth and Q2 of 186% we provided guidance of $1.6 5% to 175 billion for Q3, reflecting continued strengthen in the real estate market and we expect to generate more revenue and the second half of the year than we did and the first.

Half of the year and the second half, we expect that price will grow year over year, but at a lower rate than it did in Q2 and this is good actually because lower prices will bring back buyers into the market and some buyers dropped out of the market and Q2 for fear of our paying this given where prices for Boeing and <unk>.

<unk> actions. We also expect will continue to grow year over year, partially as a result of that our pricing trends I talked about but also as a result of the loosening of supply and the market.

And it comes to the commission rates, we don't expect any significant changes there we expect for that for the commission rates to remain in line with levels that we've seen over the last over the last several quarters actually pretty steady.

And as we are thinking through the business.

And we are most focused on transactions and more transactions on our platform the more opportunities we have to attach adjacent services.

That's helpful color and then just a quick follow up on the Opex line, where do you see the most sort of leverage and the model not only and the back half of this year to sort of hit your targets early as you mentioned the 22 profitability targets.

On the Opex side, where do you see the most potential for scale benefits to play out. Thank you.

Sure.

Thanks for we see probably the most leverage is and B.

And the commissions and other line.

And we will see it really across all of the other expense categories.

And we won't go into a lot and detail today on that thats going and a level deeper in terms of 2022 guidance.

But that's how I would think about it.

Got it thank you so much.

Your next question comes from the line of.

Cash and <unk> with UBS.

Hi, Thank you so much for the question I was wondering if you guys could talk more about the puts and takes with rolling out and getting to profitability and the market JV and then if you got to give any more color on the economics.

Within the JV as well that would be super helpful. Thank you.

Well look we are really excited about mortgage its a big opportunity for us, it's a $50 billion Tam.

And it's also our mortgages and natural extension of our core business.

And we announced the JV with guaranteed rate.

About a month ago.

Guaranteed rate is an experienced partner for us with operational expertise and RV and is that it really de risks our ability to get to market quickly to grow this business and ultimately to be to be successful there.

As we look ahead, and we expect to be able to drive our cash.

Cash rates for mortgage.

And levels in line with the industry.

And we think we should be we could even do better than that as a result, and being able to integrate the offering directly into our platform of course.

And most important element there is to have a compelling offering 1 that our agents are proud to recommend to their clients and so we're really focused on that right. Now in addition, as theyre getting the operations from the JV set up.

We're working to get the warehouse line setup.

We are pursuing various regulatory approvals and we hope to originate our first mortgage before the end of the year and hope to cover all of our markets with a mortgage offering by the end of 2022 and.

Ultimately mortgage.

And a lot of potential financially, but within 2021, and it's going to be and I think a very small contributor to revenue, but 1 was with a lot of long term potential.

Great. Thank you.

I will share a R.

Our final question. Please.

Yes, Sir your last question comes from the line of Matthew <unk>.

<unk> with Compass point.

Hey, good afternoon, and thanks for taking the question Robert You mentioned, having the first and to end platform in place and next summer just wondering what pieces are aiming to develop there.

And then just following up on the adjacent services and expanding from maybe some beyond the traditional mortgage title and escrow just wondering how compasses platform might provide an opportunity to capture those services that and maybe traditional brokerages and might not be able to thanks.

And I think Robert May have been disconnected and unfortunately.

I think the operator is calling and back.

And as such the new Apollo and for technical difficulties, Yes, sorry, Anthony do have him reconnect it does Jeff.

Okay.

Thank you.

Hello and.

Robert has rejoined.

And that perhaps you can ask your question again, if you don't mind.

Yes, no problem and proceed.

The first from me, but.

Robert.

Just 2 quick questions you mentioned, having that end to end platform in place next summer, which just wondering what pieces are remaining to develop there and then on the adjacent services beyond traditional mortgage title and escrow.

Just wondering how compass platform by providing opportunities to capture those services.

And traditional brokerages and licensed might not be able to and.

Thank you and rejoining the call Robert.

Yeah, and then absolutely. So so let me start by sharing some of the key components..1 theres lithium search that's good enough that even don't have to look and multiple web sites and thats, both on data quality as well as functionality.

And there's 2 third party transaction management software.

Including the forms E signature and disclosures there is third party marketing tools to growth content creation and digital ads digital newsletters.

Organic social Bose.

Creating the sign by and creation. So all that stuff has to get created somewhere and being created through our platform not through a third party.

And all that exists today and then CRM.

And as well as market affords the key areas of opportunity are to continue the transaction management with forms esignature and Thats 1 of the reasons why we acquired glide.

Which is transaction management.

Software company based out of California, and then on some collaborative functionality for CRM.

The this decade is.

Going to be defined by collaborative workflow and hybrid work environment requires it by the way and what we're doing right. Now is an example of heightened workflow.

And of course zoom and Google meet et cetera, now when you look at professionals out there who has the most collaborative progression is really the agent the agent to get a transaction done has to coordinate with the third with a designer with and the system and her team with a transaction coordinator with a photographer with Homer per user.

Sure.

Home and sector with a loan officer title Officer and.

So.

<unk> investment in collaborative sharing permission and functionality throughout every aspect of the platform is a key area of and investment and opportunity.

In terms of the advantage that we get.

4 attach of adjacent services, both the traditional ones, but also the ones that true.

And can realize the way I would describe it as.

And at Compass, the platforms like a like a spine spine has 33 vertebrae, let's say our product.

<unk> 33 different products and on the spinal cord what goes to the spinal cord as the transaction 1 of the challenges of Attritional brokerage firm, let's say they have 2 or 3 of the vertebrae are there their own but the other the transaction the transaction management software is a third party.

Yes.

The lithium search it may not be happening on their platform the marketing of July and non their platform through a third party on our non the problem with then the brokerage firm doesn't know.

And when the key events happen to help facilitate the transaction recommend the right value added service.

And compensated accordingly, so here's an example.

The average brokerage firm would not know when the agents lifting.

<unk> is created by constantly and so.

And what we've created and wouldn't be able to study last time, you create a listing and create a day to lab.

Where do you like with this 1 click to created last year.

But because none of that as Steve and the platform and.

And on the title side.

And our listing goes into contract.

There that's true.

The type of history and engagement and <unk>.

<unk> see there as well and so that that's a weighted and trying to describe.

Why it's so critical to every interaction with the transaction and the client happen and 1 platform because it's the only way to be able to help facilitate it at the right point, where it matters and create the right simplicity and 1 option to make it easy for the agent and.

And ultimately their clients.

And.

Okay great.

Great.

Thank you everyone for joining us for the Q2 call.

Please reach out if we can be of any assistance and the future. Thank you.

Ladies and gentlemen. This concludes today's conference call everyone else has left the comp youre participating and you may now disconnect.

And.

Okay.

Okay.

And then.

Yes.

Yes.

Okay.

[music] growth.