Q2 2022 Compass Inc Earnings Call
Robert.
Thank you and welcome to everyone joining our earnings call today I.
I hope, everyone is safe well and enjoying the summer.
Today, we are sharing our financial results for the second quarter of 2022.
Our outlook for the third quarter and full year 2022, and updates on our ongoing expense reduction plans and how they position us to generate positive free cash flow in 2023.
To provide context this year the fed took repeated actions, which have had the direct effect of driving down our revenue.
Since June we've seen the fastest one week increase in mortgage rates in the history of the United States as well as other economic headwinds growing stronger.
This has created an enormous amount of uncertainty for the rest of the year.
While we are all hoping for a soft landing we are preparing for the real estate market. This calendar year to be nearly 25% below where industry experts believed it would be just six months ago.
Never in my time at <unk>, and we've seen such a big downturn in the market in such a short time.
We shared with you on our quarterly calls earlier this year and we have already been taking steps to manage our cash and normalize expenses. So we could deliver positive free cash flow in 2023 and beyond.
We are taking new additional actions to adjust to these market conditions specifically.
Specifically, we expect non-GAAP operating expenses after commissions and other in the range of 1.05 billion to $1, one 5 billion exiting 2022.
At the midpoint. This would result in a reduction of approximately $320 million from our LTM ended June 32022 period.
We believe our reduce expenses will enable us to generate positive free cash flow in 2023.
Specifically, we plan to reduce our two biggest areas of expense <unk>.
Technology.
And incentives to acquire agents.
While not reducing agent's service levels to ensure our existing revenue base is not impacted.
Moreover, we recently initiated the zero incentive program, which means we are now recruiting agents without equity or cash incentives anymore.
Our ability to do this is a reflection of the value of the platform provides.
My vision for companies is to create the best place in the real estate industry for agents to grow their business.
Over time, we have invested over $900 million to build an unprecedented platform of tools and services to support our outstanding Edens.
We believe we have created a large competitive moat with an enduring advantage over competitors that are unable or unwilling to build the tools that benefit the agents.
More importantly, having built the number one brokerage in the United States and with the heavy investment period behind us.
We have the ability to bring down opex from a position of strength.
Given the steep given the state of maturity of the platform the brands in our market presence.
We're able to reduce technology spend and eliminate financial incentives to hire agents without risking retention or agent recruiting.
We can now focus on scaling the business and moving to generate positive free cash flow in 2023 and beyond.
I recognize that compass has been proportionate to be able to invest during the strong financing and real estate markets for nine of our first 10 years at Compass.
We are now in position to pivot during these uncertain market conditions when revenue is under pressure.
Since our Q1 earnings call in May we have been taking more aggressive action to achieve positive free cash flow.
Going forward.
Im focusing the company's efforts around the following three objectives.
One generating free cash flow.
To profitably gaining market share.
And three.
Retaining our agents.
And our principal agent retention continued to be above 90%, even growing quarter over quarter.
We plan to maintain our number one industry position continue to offer the best <unk>.
Productivity enhancing platform of tools and services to our agents, we expect to come out of this downturn and even stronger company with a more profitable and scalable business.
Before I turn the call over to our new CFO , Greg <unk> to walk through the details of where we are taking the business I want to tell you a little bit about him.
<unk> came to compass two years ago, as our chief product officer and in partnership with our Chief Technology Officer, Joseph Roche has been responsible for taking our platform to the next level.
Not only did he oversees the transformation of the platform to an end to end solution.
But he has also been.
Hard work overseeing the design and implementation of our back office services platform, which will help drive down the cost of serving agents and help increase margins in the business.
Prior to Compass, Greg spent over 23 years at Amazon building and running global profitable businesses, including launching our Alexa and Echo and leading Prime video just to name a couple.
He brings a wealth of experience from a company known for its operational excellence at scale.
And with that I will.
I'll pass it along to Greg.
Thank you Robert it's good to be with all of you today I'm excited to be speaking to you in my expanded role of COO at Compass. After two years on the product side of the business.
As Chief operating officer, I'm committed to making sure that we can continue to build our incredible offering of tools and services to our agents, while ensuring that we do so within the expense range that our revenue dictates and that allows us to generate a return on investment.
While the residential real estate market is facing headwinds our core business is outperforming the industry as evidenced by our market share gains.
Our ability to continue to add agents and our industry, leading agent retention of over 90%.
We will stay laser focused on what we can control, especially operating expenses.
This year, our revenue has been under severe pressure. So we're taking the appropriate measures to reduce the expense side of the business.
As Robert outlines we expect non-GAAP operating expenses after commissions and other in the range of 1.05 billion to $1 5 billion.
Getting 2022.
We expect to complete the majority of targeted cost reductions by the end of September and all targeted cost reductions by the end of this calendar year.
Going forward I will work with the team to ensure that we can grow our market share.
Spanned our technology advantage.
And do so are working to generate positive free cash flow and solid adjusted EBITDA margins over the longer term.
With that said I'm very happy to announce that in September we plan to launch a significant set of new features to our platform of tools and services.
Our agents across the country will be able to manage all aspects of the transaction from first contact to close in one place without being forced to use third party software.
This is another significant milestone that will further strengthen our agents' ability to maximize their profits.
It is also what helps make complex unique and helps us retain Egypt.
Also helps recruiting them as well.
We are confident that the solution. We have built is the best in the industry for agents to grow their business.
Over the years, we have been reducing the financial incentives, we get too many agents as.
As we have highlighted on previous calls a great. Many agents have told us that they are coming to compass for our lower split when they were receiving at the prior brokerage.
Accordingly.
Not going to be providing equity or cash incentives to attract new agents.
In addition to the platform of services and tools, we have been improving and expanding upon to help agents grow their business my.
My team has also worked to develop software that standardizes and automates our interaction with agents.
Talking to you more in the coming months about what we call compass surfaces.
We'll be a way to drive down the cost to serve agents increased efficiencies and to ultimately improve our margins.
We are encouraged to see increasing inventory levels.
The recent stabilization of mortgage rates and improved stock market performance, we believe that a continuation of these trends can lead to a better real estate market.
However, I want to make it perfectly clear.
We will continue to evaluate market conditions and expense reduction opportunities in the coming weeks and months and we will adjust our operating expenses further if necessary to achieve our goal to be free cash flow positive in 2023.
If the market gets worse.
We will pursue the necessary steps to achieve that goal.
We're talking a lot about expense control because that's a focus area for us today.
But I want to assure you that we're looking at all aspects of the business. We're considering other new revenue streams to grow the top line of the business as well as additional ways to further enhance profitability via process standardization automation and efficiency.
I will now turn the call over to Kristin.
Thank you, Greg our second quarter revenue was $2 billion.
Up 4% compared to Q2, 2021, and our highest quarter to date, our adjusted EBITDA was a positive $4 million down from positive $71 million in Q2 2021.
Our revenue growth was affected by the market slowdown and some of our key markets. For example, California, which includes two of our top market has seen more transaction declined compared to the national average and as a result put more pressure on our top line. Despite this pressure we felt on increase in our LTM market share.
Second quarter transactions grew 2% to just under 67000 compared to a 10% decline in NAR transaction in China corner.
In Q2, our gross transaction volume was $77 million in.
In line with the prior year period.
A 2% increase in transactions was offset by a 2% decline in our average transaction value.
Excluding California are DTD grew 17% year over year in Q2.
Transactions per average principal agent were five two in the quarter down from $6. Two transactions in Q2 2021, it's important to remember that we are comparing against one of the strongest quarters in the history of real estate in Q2, 2021, and our stronger strongest quarter ever for this metric five two <unk>.
Action is for average principal agent is still one of our strongest quarters. Despite the declines we've seen in the market are transactions for average principal agent increased from 12, 5% in 2019 to $18 nine in the LTM Q2 2022 period.
Turning to expenses are higher in Q2 expense basis, driven by the annualized Nathan of key investments. We made in 2021 to drive long term profitable growth. These included progress to achieve completion of the commerce platform launching 27, new markets since the beginning of 2021 and scaling our adjacent.
Services businesses.
Our non-GAAP commissions and other as a percentage of revenue was 81, 5% in Q2 2022 up from 89% in the prior year period. This.
This year over year increase was driven primarily by reduced participation in the 2022 Asian equity program relative to 2021.
Excluding the impact of reduced AEP participation, we saw an improvement in the underlying brokerage economics of the business.
As we told you on our May 12 call in the second quarter, we paused all expansion into new markets and discontinued M&A activity.
In June as market conditions continued to weaken we initiated a cost reduction plan to better align our operating expenses with our lower revenue expectations that started with a 10% reduction in our employee workforce as well as other cost reduction measures.
During the second quarter of 2022, we incurred a GAAP net loss of $101 million compared to a net loss of $7 million in Q2 2021.
Included in the GAAP net loss with stock based compensation expense of $59 million in Q2, 2022 compared to $54 million in Q2 2021.
Also included with $19 million restructuring charge as a result of the June cost savings actions, we also incurred $6 million of additional depreciation and amortization expense for the noncash write off of intangible assets associated with the ammonia shutdown and the noncash write off of the remaining fixed assets associated.
With notice leases and other leases exited during Q2.
We had $431 million of cash and cash equivalents on our balance sheet as of the end of June when you incorporate our planned opex reductions we do not currently see the need for additional capital to fund our current business plan.
As Robert Gregg mentioned, we intend to bring down our non-GAAP operating expenses after commissions and other expenses to 1.15 to $1 one $5 billion as we exit 2022 at.
At the midpoint. This would result in a reduction of nearly $320 million from our LTM Q2, 2022 levels of approximately 142 billion.
Please see the schedule on page seven of the investor deck for more information.
While interest rates and broader equity market performance are not within our control we focus on the metrics that we can control to measure the health of our business. These metrics are market share gains agent acquisition and agent retention and these metrics remained strong in Q2, we increased our NAV.
<unk> market share by 50 basis points on an LTM basis compared to the prior year.
Note that this market share calculation is based on revised methodology, which is detailed in our earnings release.
In Q2, we also added 405 average principal agents, representing 22% growth year over year.
And in Q2, we continued to retain our principal agents and our industry leading rate of over 90%.
Now, let me turn to our Q3 2022 and full year 2022 outlook.
Even the market uncertainty, we are lowering our outlook for the full year 2022, 261, 5 billion to $6 four 5 billion, which represents revenue growth of negative 4% to positive <unk>, 5% for the full year.
Our market assumption for this range is our full year 2022 decline of 9% to 13% and this incorporates an assumed market decline for the second half of 2022 of 16% to 25%.
We are approaching the remainder of 2022 with caution we believe it is prudent to be conservative, particularly as we look to bring down our operating expenses to better align our spending with our updated revenue outlook. We are focused on effectively managing our cash position.
Our full year revenue outlook is down from our prior outlook of seven $6 billion to $8 billion in Q1, which had assumed to market growth of between one and 7%.
Our current outlook for the full year 2022, adjusted EBITDA is now a loss of $225 million to $150 million down from at least breakeven.
Turning to our third quarter 2022 guidance, we expect revenue of $1 4 billion to $1 5 billion and an adjusted EBITDA loss of 85 million to $60 million.
This range reflects the impact of macro challenges, we have seen in May and June most significantly peak mortgage rates and stock market declines, which we generally see impacting our business 30 to 60 days out.
Lastly, we remain confident in our long term adjusted EBITDA and free cash flow margin targets of 10% and 8% and 9% respectively.
However, the timeframe required to achieve these targets could extend beyond 2025, depending on the depth and duration of this market downturn.
For clarity, we are suspending our $1 2 billion adjusted EBITDA target for 2025.
Despite market challenges in the second half of 2022, we believe we can continue to grow our principal agent base increase our market share and effectively managing our cost structure to better align it with our updated revenue outlook. This will allow us to position ourselves to be free cash flow positive in 2023 and a variety.
<unk> of market conditions.
With that let me turn the call back to the operator to start the Q&A portion of the call.
At this time I'd like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Our first question will come from the line of Matthew Bouley with Barclays. Please go ahead.
Hey, good evening, everyone. Thank you for taking the questions.
The first one on the agent recruiting side.
Talk about sort of removing the incentives there is does that kind of come with any change in how you're thinking about the commission splits I guess is that kind of a more valuable way to recruit competitively or how else do you think about keeping that recruitment engine going in a world where you are moving.
Yes, great Great question.
But what are your contacts we eliminated the equity incentive.
Two four months ago, and it had no impact on our ability to bring on agents.
And given that this is one of the major areas of expense.
We decided that any agent that we started talking to.
As of.
Last Monday that we would give no financial incentive to for any.
In any way and that we.
We would be on our policy for that market. So.
Whatever our policy is if they were on if they had a better.
Current split and our policy.
Can keep that split for.
For one year. So that's the agreement that they make it out to our policy.
So again, no financial incentives to come in.
And if they're split is better than our policies, where they can have that for one year and then they go to our policy.
We already had and steadfast week over 50 people commit to coming.
For that which we feel really good about and we.
<unk>.
The vast majority.
<unk> two compass for either the same split or.
Or a more company preferential warm so that's a better split to the company.
Gotcha.
Early.
Early early data, but all signs are forced to positive.
Alright got it no. That's helpful color. Thanks for that Robert and then I guess, just secondly, zooming into the numbers.
If I am.
Just looking at the math right I think the new <unk>.
EBITDA guide.
Applies that I guess, the Q4 loss.
I guess narrow year over year and presumably the cost reductions are are a piece of that maybe you can kind of bridge to some of that outlook and then just kind of within the cost savings.
Run through the timing of.
As that rolls through the P&L and kind of where we can look forward to all of that thank you.
Sure.
So here, here's what I would say, we do expect at the midpoint that the EBITDA losses, we would see in Q4 could narrow relative to last year.
And that is in fact exactly as you said, reflecting some of the benefit of the cost reductions that we've been discussing on the call. Today. So that's the $320 million of cost reduction relative to the LTM opex run rate, excluding commissions and other expenses.
The timing there as Greg mentioned, we plan to implement a good chunk of those cost savings before the end of September and then the remainder of those savings through the course of Q4, so the timing there well certainly.
The one factor that will drive the EBITDA number in Q4. The other piece of course will just be the the revenue.
And.
We are we wanted to in our outlook provide you all with a with a view of <unk>.
Not only what we thought it wasn't appropriate outlook for the business, but also the associated market growth rate. So that you know as you all have your own view of what may happen in the market in Q3, and Q4, you'll be able to translate that into a revenue number for the business.
Regardless, our focus is really on 2023, making progress to bringing down the run rate Opex number coming out of 'twenty two heading into 2023, all with the goal of ensuring that we are free cash flow positive in 2023.
Okay.
Got it alright, thanks, Kristen Thanks, Robert for all the detail.
Your next question will come from the line of Brian Nowak with Morgan Stanley . Please go ahead.
Thanks for taking the question I have I have a couple of just the first one on the cost reductions Rob you've always talked a lot about being a tech company that tech platform et cetera can you give us. Some examples of some of the areas, where you are going to start to enforce you'll make some cutbacks in investment and how you think about that.
The technology of the platform evolving through these cost cuts and then the second one.
Any update there on how we should think about the timing of ancillary revenue impact and I think Greg you mentioned potentially other new revenue sources.
Are those examples.
I'll do the second one and Greg I think it's perfect for you on the first.
On adjacent services, we're still pursuing mortgage.
And we.
We expect to be in the majority of markets by the end of this year.
We are still pursuing title just not through.
Policy pause M&A for this period of time, and we're really focused on organic growth and attach.
We implemented.
Unattached working groups.
We meet weekly where I'm involved in a lot of our senior leaders and I go every week and it's a real priority of the company to drive margin.
Attach for adjacent services.
The next logical one home insurance, we are contemplating the right timing given the current environment.
Likely a pause and.
There there is another.
Low cost very low cost high profit opportunity.
I think we're prepared to share it publicly yet, but it probably will over the course of.
The next month.
Greg I'll, let you take the first question.
Sure. Thank you Robert so in terms of the reduction.
As Robert mentioned on the call we're going to focus.
The reductions on the two biggest areas of expense that we have technology and our incentives to acquire agents. So those are reflected in the R&D and sales and marketing lines on the P&L that we report.
And we're going to do that without reducing we can service levels to ensure that our existing revenue base isn't impacted one of the reasons that we believe that we're in a position to be able to do this is that with the delivery.
And platform rolling out across all of our national agent base in the coming weeks.
That puts us in a position to be able to moderate our investment in R&D and <unk>.
Additionally, we've also reached a point in our maturity as Robert outlined prior answer in terms of our recruiting approach, where we don't feel the need to give financial incentives to new regions to recruit them. So.
Incentive program that Robert mentioned launched a few weeks ago.
We're not providing equity or cash incentives and we've seen great results from that and so that reinforces our confidence that the <unk>.
Platform that we built is the best in the industry for agents to grow their business and to continue to attract new agents to our platform to the company.
Great. Thank you both.
Okay.
Our next question will come from the line of Jason Hoffman with Oppenheimer.
Okay.
I guess I'll ask two so the market share was flat quarter to quarter I think it for six of the new metrics was this because of the high end was more impacted with the decline in the stock market versus kind of overall real estate.
And then I guess connected to that it sounds like trends are not tens if not improve to June but you did talk about kind of a.
A lag.
So maybe if you just want to opine if mortgage rates.
Kind of stay where they are and the equity markets stabilize it is kind of.
What does that mean I guess as Youre, just thinking forward broadly without giving guidance and then just Greg can you give us an update on the ability for online closing hasnt been fully rolled out or just any other.
Color you can share on that product. Thanks.
Great.
<unk>.
Questions Yes.
Sure.
Sequentially quarter over quarter has been flat year over year.
About 50 basis points.
The.
The reason why.
<unk> was flat largely attributed to as you alluded to.
The high end has been hit disproportionately not only.
Sure.
Not only that.
The high end generally, but but also California, where we have is our biggest market.
The buyer profile, there, particularly northern California is more weighted towards the stock market.
And so we basically got a double whammy one from mortgage rates.
But also from theirs their portfolios their stock where players moving down.
Okay.
Yes.
As I.
As I shared earlier.
July because it was very difficult based off of some of the trends in mortgage rates as well as the stock market from June .
However, it does look like July could be.
The bottom for you.
Monthly year over year comp.
We have we have seen glimmers of hope in.
Some markets and market stabilization and others, but it's very important to note that we aren't putting any of that hope into our planning scenario.
By way of comparison, a large public company competitors said that this full year they expect market growth.
To be 6% to 11% down, we're assuming 9% to 13% down.
There's still there's low inventory there is still.
Buyer demand, but still prices are.
Flat in good markets, they are modestly down modestly down and so the more challenged markets.
But theres no longer multiple offers everywhere like we have before a decent market are definitely increasing and so overall, we're still negative on outlook, but.
The recent trends over the last one or two weeks to suggest things are stabilizing.
Again looks like July could be the bottom of the month over month comp, but where does not come up with year over year.
On a monthly basis, but we're just not putting any of that.
New.
New data into our our planning forecast.
Greg how would you take the second question.
Yeah on the second question. It's a great question. Thank you so.
The ability to consummate a transaction within the platform in terms of you know all of the different forms and documents.
Clients steps and then Brooks to transmit and receive an offer.
Esignature are already live in a number of regions in the rollout across the remainder of our regions by the end of September and so our agents will be able to go from contract.
First contact to close.
All in one place on the Compass platform, which we're very excited for.
And just a quick follow up for Chris and I guess, if I just play around with the model using the kind of implied expense guide.
Is it fair to assume that.
Comment about free cash flow positive for next year based on the expenses.
What kind of factor revenue kind of flat to down a bit next year.
Is that ballpark.
Yeah, Jason I think that's fair to say at this point, we're not providing guidance for 2023 beyond our focus on being free cash flow positive.
And as you can see in Robert's comments in Greg's comment that in my comments, we're being very prudent very conservative here as we're planning for the business.
So we'll look forward to providing 2023.
Got it.
More information on 2023 at the appropriate time, but.
But I think as you.
Your your assumptions there I see how youre getting to that using our numbers and the information that we provided today. Thank you.
Okay.
Your next question will come from the line of Brian Mckechnie with Zelman <unk> Associates. Please go ahead.
Hey, good afternoon, Thanks for taking my question.
So for weighing a bit on the question on the recruitment and retention topic.
I'm just curious Robert so outside of the economic or incentive changes around recruitment.
Are there any other changes in the way youre thinking about or approaching recruitment and retention into the slower macro market and I know new market expansion has been paused, but just curious on kind of the pipeline within existing markets and ultimately part of why I ask is I think historically, what we've seen is <unk>.
History agent count on an industry basis can obviously flux up and down with just the movement of the housing market.
Ultimately just gauging, how youre feeling about let's say near or intermediate term.
The ability to keep growing agent count, even if the market is down and potentially agent count for the industry.
<unk>. Thank you.
Great. Thanks.
Thanks for the question. So I think in terms of agent count growth for the industry I think it is worth noting that.
Virtually all of the agents that we hire top half for the industry.
Just because we are where we are hiring more mid tier agents, but we're not hiring agents that.
David will do less than $50000 or <unk>.
And Thats.
Even 2000, all GCI is approaching the media and that's where the industry.
And so given that.
We hired a real professional agents they tend to leave when the industry is challenged.
So I wouldn't expect.
As you have departures related to non professional agents, we mentioned women's get challenged in terms of retention.
By not expanding to new markets. It allows us to give more focus and support to the units in our markets. So our complaints.
You can hear from an agent when you are in the expansion mode is why are you focusing on expansion than us and so thats not exceeded actually helps drive more positive retention.
It's also worth noting that our retention sequentially improved quarter over quarter.
And it's within 1% of where it was this time last year.
We're just this past quarter last year so.
There is no sign that retention isn't it.
Incredibly strong there's still.
Above 90, and again, unlike our competitors our retention numbers based off of all of the principle. It is not just the top half of the top quartile and.
The the return.
<unk> include people, unlike our competitors that are.
That retire <unk> for cultural reasons move industries altogether in the cities that we don't support and so it's a very high integrity number.
And.
In terms of recruiting.
Sure.
There is no.
Change other than us not offering financial incentives and there.
Sentiment than many great theater as I've said before that in the downturn.
Sometimes we stopped doing you should have stopped doing a long time ago I think.
Our retention number always.
Showed us that we have strength.
We have we have more strength than the incentives that we were offering.
So this is a real test.
So that we can hire agents the platform is strong enough, where we don't need to give incentives to bring them on.
One of the the last major criticisms of the company.
Agents only.
People say, it's only come because we gave them a new financial incentives.
I'm really excited to see that sentence be eliminated over the weeks and months to come.
Thanks Robert.
Really helpful color there I appreciate it so one other question and this might be for you as well or maybe Greg.
A bit of a high level, one so with the market cooling off a bit I guess can you touch on some of the areas that maybe you are leaning in to keep client or keep agents engaged with the platform. So whether it's maybe things like training or education or even tech adoption.
Agents lets say do have a bit more time on their hands outside of working with buyers and sellers in the current market.
Is that giving opportunity to lean in on some of these more strategic areas that could benefit the platform on a long term basis, just any thoughts there.
Yes.
In the first earnings call.
The year I mentioned that.
One of the best things that happened recently is the launch of 10 by 10.
Coaching program.
We've now extended that to 10 by 10, where campus core every quarter, we have a coaching marketplace, we're launching a virtual assistant.
Program in the marketplace.
And we've created an entire group called customer success that rallies around this effort.
I think what I mentioned before as well.
But we did in the past is we trained agents on how to use technology and what we learned the hard way is no agent wants to learn technology. They want to learn how to grow their business and just so happens that technology is a way to help them and so the success that we saw early this year has been continued.
Over all of these months, we can continue to see strong.
Adoption of our tools through these programs and example of the most recent one that we just launched we got CMA <unk> CMA stands for comparative market analysis evaluation of the home.
And so with our agents we have this CMA today for a month where everyday rash.
We're asking each one of them to create a CMA and send it to one of their clients and just eight years evaluation with the messages around it and surprise surprise at least a lot of listings and client engagement and on top of that it leads to.
<unk> seen the value.
And our CMA in is a digital CMA that connects to their CRM that connects to the.
Their marketing collateral for the overall business tracker and their client pipeline and so that's an example of the sort.
On the training that we've invested in and are going to continue to put more effort behind.
Great. Thank you very much.
Okay.
Again for any questions. Please press star one your next question comes from the line of Justin Ages with Bahrenburg. Please go ahead.
Hi, Thanks for taking the questions.
First just.
Overall in general and I understand that you are moving into new markets.
Do you view this softer environment as an opportunity to not only go obviously deeper in the markets that you're in but continue to take share based on some of the programs or incentives that you've outlined to continue to recruit agents.
Yeah, no absolutely and as I mentioned on the call one of our top three objectives is continuing to gain market share in the markets that we're in.
And when we look at it on a.
Market by market basis by MLS, We see a very positive trend.
Like the.
The question alluded to earlier.
The sequential market share change being flat was largely driven by the top in the market and really California.
Okay. That's helpful. Thank you Robert and then.
Second.
<unk>.
I understand the Opex kind of target for exiting 2022 on the commission side, if I have what Christian laid out correctly.
Meaning that if the number of transactions went up.
Where the transaction value played out in home prices leveled off or went down do you think that could translate to more.
Savings, let's say on the commissions and other line.
So just a nice it's.
Nice to talk to you.
So the way that I would think about it is.
First of all we're all about making sure we are delivering as much productivity for our agents as possible when.
When we look at the market we have seen.
We have seen prices.
Starting to price increases start to slow down, which we think will ultimately be really positive for the market overall I think for a little while here you've had a bit of a disconnect between sellers price expectations.
And buyers coming in.
With less purchasing power, just given where mortgage rates are so I think you should expect to see incremental.
Incremental transactions in the market over time, but it is going to take some time for the market to find the right equilibrium and I think going forward in terms of as it relates to commission rate and by that.
The.
Commission that buyers and sellers are paying the agents, we have seen that commission rate pick up slightly over the last quarter and you can see that in the numbers when you run it through your model.
But we attribute that to just a tougher housing market actually drives more transactions to the very best agents in the very best agents are on the compass platform and they are able to.
Really deliver extraordinary results for their buyers and sellers even in these tough times, so thats been something thats been great great for us to CNR and our results and great for our agents to see for their own businesses.
Alright, I appreciate that thank you Kristen Thank you Robert.
Thank you.
We have no further questions at this time I will turn the conference back over to management for any closing remarks.
Thank you all for your time today, we appreciate the opportunity to update you on the business and look forward to speaking to you over the coming weeks. Thank you.
Ladies and gentlemen that will conclude today's call. Thank you all for joining you may now disconnect.