Q3 2025 Compass Inc Earnings Call
Speaker #1: Ladies and gentlemen, thank you for joining us, and welcome to the Compass, Inc. 2025 Q3 earnings call. After today's prepared remarks, we will host a question-and-answer session.
Speaker #1: If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star 9 to raise your hand and star 6 to unmute.
Speaker #1: I will now hand the conference over to Soham Bhonsle, Head of Investor Relations. Soham, please go ahead.
Speaker #2: Thank you very much, Operator, and good morning, everybody. And thank you for joining the Compass third quarter 2025 earnings call. Joining us today will be Robert Reffkin, our founder and CEO, and Scott Wallers, our Chief Financial Officer.
Speaker #2: In discussing our company's performance, we will refer to some non-GAAP measures. You can find the reconciliation of the non-GAAP measures to the most directly comparable GAAP measures in our third quarter 2025 earnings release posted on our Investor Relations website.
Speaker #2: Any discussion regarding organic revenue, organic OPEX, organic transactions, or organic GTV excludes any activity from businesses we acquired since July 1, 2024. We will make forward-looking statements that are based on our current expectations forecasts and assumptions and involve risks and uncertainties.
Speaker #2: These statements include our guidance for the fourth quarter of 2025 and full year 2025. Including comments related to our expected financial results, operating expenses, and free cash flow, as well as our expectations for operational achievements.
Speaker #2: Our actual results may differ materially from these statements. You can find more information about risks, uncertainties, and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and available on our Investor Relations website.
Speaker #2: You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, November 4. We expressly disclaim any obligation to update this information.
Speaker #2: In addition, as we announced in September, Compass has agreed to merge with Anywhere Real Estate. The transaction is pending customary regulatory and shareholder approval, and we expect to close in the second half of 2026.
Speaker #2: We intend to make limited comments related to the Anywhere transaction in our prepared remarks. However, given that we are currently in the regulatory process, please know that we will be unable to answer any questions or comment any further on the transaction beyond our prepared remarks.
Speaker #2: I will now turn the call over to Robert Reffkin. Robert?
Speaker #3: Thank you for joining us today for our third quarter conference call. In what remains a trough level housing market, I am pleased to share that the Compass team produced the strongest Q3 results in our history.
Speaker #3: In Q3, Compass delivered record third quarter market share. Delivered record third quarter revenue. Delivered record third quarter adjusted EBITDA. Delivered record third quarter adjusted EBITDA margin.
Speaker #3: Delivered record Q3 free cash flow. The Compass platform hit a Q3 record of $22 average weekly sessions per agent. And we grew our Q3 title and escrow revenue to record levels.
Speaker #3: Furthermore, we achieved a few all-time records once again. Including delivering the best organic principal agent recruiting quarter in the company's history. Including adding 851 principal agents.
Speaker #3: Growing our title and escrow attach in our legacy markets to all-time highs. And lastly, growing our mortgage JV earnings to record levels. Revenue in the third quarter increased by 23.6% year over year.
Speaker #3: And we achieved the high end of our revenue guide. Total transactions increased by 22%. And organic transactions were up 7% year over year. As compared to the overall market, where transactions increased by 2%.
Speaker #3: So this means Compass's total transaction count growth outpaced the market's growth by close to 20 percentage points. And Compass's organic transaction count growth outpaced the market's growth by 5 percentage points.
Speaker #3: For 18 consecutive quarters, spanning our entire history as a public company. Compass has outperformed the market on an organic basis. There has never been a quarter since we started measuring this metric where Compass hasn't grown faster than the market.
Speaker #3: And as I will touch on a little later, we believe we can continue to outgrow the market even once we close the Anywhere transaction.
Speaker #3: In Q3 2025, we generated adjusted EBITDA of $93.6 million. An increase of 80% from the $52 million in the year ago quarter and we exceeded the high end of our adjusted EBITDA guidance by 17%.
Speaker #3: Quarterly principal agent retention was a solid 97.3%. In the quarter, we also successfully added 851 gross principal agents organically to Compass. Which is a new record.
Speaker #3: We are seeing more momentum at this point in the quarter compared to the same point in the last quarter. Given this increased momentum, we expect to add 800 gross principal agents organically in Q4.
Speaker #3: And we see the new normal as 700 to 800 gross ads going forward. As the new range. In the T&E business, excluding 2025 M&A, our attach rate continued to improve year over year and was once again at a record in Q3.
Speaker #3: The Christie's International Real Estate business also continues to grow. With four new affiliates joining the network in the quarter and six affiliates in the pipeline.
Speaker #3: And as I will touch on a little later, I'm excited to share that the Christie's International Real Estate business is pacing better than our initial expectations driven by outperformance in agent retention, outperformance in revenue synergies from T&E, outperformance in synergies from mortgage, and outperformance in OPEX control.
Speaker #3: Revenue less commissions and other related expenses has a percentage of revenue in the third quarter was 18.6%. Which is approximately 73 basis points above the 17.8% reported in the year ago quarter.
Speaker #3: Non-GAAP OPEX, excluding the 7.5 million related to the Anywhere transaction, was $252 million in Q3. Which was relatively flat quarter over quarter as we continue to focus on OPEX control as a company.
Speaker #3: Last quarter, we shared that we expected to deliver an incremental 50 to 75 million dollars in adjusted EBITDA, with at least 50 million of that adjusted EBITDA improvement realized in 2026.
Speaker #3: I'm excited to share that we remain on track to deliver against this goal. Now, let me take a moment to touch on the transformational merger we announced with Anywhere Real Estate a few weeks ago.
Speaker #3: Since we made the announcement, our teams have been hard at work getting all the necessary regulatory forms in place. And we have now filed our HSR forms to start the regulatory approval process.
Speaker #3: We continue to be confident in our ability to get the deal approved. As we firmly believe that this is a pro-competitive deal that will bring more choice and better products to home sellers, to home buyers, to real estate professionals, and to franchise owners.
Speaker #3: As one of the largest shareholders in Compass, I believe this combination is highly compelling for all our shareholders. The positive reaction from agents inside and outside of Compass only reinforces my view that we are creating a premier platform in residential real estate that will make the home selling and home buying experience better for consumers and ensure that real estate professionals and franchise owners continue to thrive for decades to come.
Speaker #3: A common question we fielded from investors since the announcement is whether we believe we can continue to grow organically post the merger. To answer this question, we believe we already have a blueprint in the Christie's International Real Estate transaction.
Speaker #3: Which I will refer to as CIRE going forward. So what have we observed since closing the CIRE acquisition? First, on agent count and retention, since close, we've been able to increase the number of net new principal agents in the business.
Speaker #3: Total principal agents didn't decline post-close; they increased. Second, in the nine months since we closed the transaction, their title business has experienced a 1,000 basis point lift in attach rate as more of our agents' clients choose to work with their title business.
Speaker #3: The Anywhere transaction will, one, add a T&E presence in seven states where we currently have a brokerage presence, but no T&E presence. And two, will increase our T&E market coverage in many of the markets we have a smaller T&E presence in that is limited in market coverage.
Speaker #3: Given this increase in T&E market coverage, we believe we will achieve a significant lift in attach in these new markets as well as our existing markets.
Speaker #3: Next, in mortgage, Compass and CRE both had guaranteed rate mortgage AVs under separate brands. Post-close, we improved the profitability of these businesses, resulting from OPEX efficiencies and increased attach rates.
Speaker #3: Anywhere also has a guaranteed rate mortgage AV. So we expect the similar integration efficiencies in attach rate improvements. And lastly, in terms of cost synergies, we are on track to achieve our stated 30 million dollar target by bringing the Compass OPEX improvement playbook to this transaction.
Speaker #3: So as you can see, what we've been able to demonstrate in the CIRE transaction is that we can, one, grow agent count; two, increase T&E attach; three, improve mortgage JV profitability; and four, achieve the synergies that we've set out to achieve.
Speaker #3: In summary, we have proven an ability to drive both top and bottom line growth in CIRE post-close and to do so organically. I expect Anywhere agents to also see the positives of coming together to get the best of both worlds.
Speaker #3: And while we recognize that the Anywhere transaction is clearly much bigger in size, we are confident that we can replicate the CRE playbook at Anywhere over time.
Speaker #3: Before I move on from the Anywhere transaction, I want to address our synergy targets directly. When we first committed to aggressive cost reductions to manage our burn rate, a commitment I made very clearly to this community.
Speaker #3: We followed through. In 2022, I said we would bring OPEX down by 320 million dollars. By the end of 2023, we reduced our OPEX by 550 million dollars, with over 600 million dollars reduced by 2025.
Our real estate professionals are finding tremendous value in simply using their voice. To ask the compass platform to perform tasks such as creating client collections creating client. 1, dashboards creating business tracker folders or adding and tagging a CRM contact.
What I've been particularly pleased to see is that some of our agents have already been tested live with their clients during listing appointments, which is helping Elevate them in the eyes of their clients.
This is the power of agentic AI in action which breaks down complex manual processes into actual steps that the AI can handle autonomously.
This ability to automate administrative work will ultimately allow our real estate professionals to focus on what matters most, which is serving their clients.
What has become increasingly clear to us as we've continued to test Compass. AI 2.0,
Is that Compass is well, positioned to harness agentic AI in The Brokerage vertical.
Proprietary end in agent productivity platform, compared to our competitors. That almost all rely on multiple third-party software platforms, that do not allow them to connect the various parts of an agent's workflow.
In contrast to our competitors are deeply integrated platform. Feeds our AI, giving it a unique contextual understanding. We Believe Compass. AI 2.0 has the ability to supercharge the adoption of the compass platform and unlock a new wave of productivity for our agents. We expect to launch compass. AI 2.0 to all agents before the next experience, call and look forward to updating you on the impact.
In addition to these efforts, I'm now hearing a significant shift in increased Revenue coming from chat gbt and similar generative. AI chat Bots.
Specifically, I've had dozens of top real estate professionals. Tell me they're getting free business. From today's conversational. AI platforms as home. Buyers are now asking models, like chatty B team for the best agents in their Market.
And here's their critical distinction. Unlike real estate portals. That divert buyers to the highest paying agents AI models like chat. Gbt are sending buyers to agents that have verifiable real world, data things like transaction, history, unique listings and client reviews. This is a major Tailwind for Compass because we are home to so many of the industry's highest performing real estate professionals that have a lot of this verifiable real world data, ultimately,
We believe that as search in the residential real estate category evolves towards AI based search, it will unlock a whole new era for agents. At Compass. This new era will be defined by real estate transaction experience, results in reputation that is validated and verified. It will raise the bar and ensure that performance is directly rewarded with leads from these AI models.
Which will enhance the revenue of top brokerages and top agents like ours.
And while we are optimistic that AI will Elevate our agents even further artificial intelligence is not emotional intelligence. I believe nothing can replace the ability. Our agents have to make meaningful connections, build relationships, and get clients to trust them.
in this new era of AI, artificial intelligence
EQ, emotional intelligence wins.
Finally.
We are using AI to drive Cost, Containment from an Opex perspective.
We have launched a mandatory employee AI learning initiative, across our organization, including but not limited to engineering transaction operations, legal and finance. The goal is to find better ways to work and become more efficient by leveraging AI to support routine. Tasks today, and more complex tasks in the future.
By embedding AI across all our workflows. We believe we can deliver 1 a lower cost to serve per transaction.
To limit the increase in our Opex going forward. And 3, delivery experience for our real estate professionals.
With that, I will now hand it over to Scott.
Thanks, Robert.
As Robert stated earlier our results, this quarter were the strongest results for a third quarter, encompasses history.
And set a series of new records, both financially and operationally.
Our third quarter Revenue was 1.85 billion, an increase of 23.6% from the year ago period and an all-time Q3 record for compass.
While m&a contributed to the year-over-year growth in Revenue, even excluding m&a Revenue increased 11% on an organic basis.
Transactions for the quarter increased 21.5% or 6.6% on an organic basis.
Which compares favorably to the overall Market where transactions increased by 2% this outperformance. To the industry is also reflected in our market share which was 5.6% in the quarter and increase of 83 basis points from the year ago period.
As a reminder, due to seasonality our quarterly market share in each third quarter is lower than the sequentially prior second quarter. This is driven by our West Coast markets that are typically a greater contributor to our total revenue mix in each Q2 period compared to Q3
The increase in our average selling price was closer to 5% on an organic basis. However our Acquisitions over the past year primarily operate in markets with lower average selling prices compared to our organic average selling price, which brings down the overall average.
Our commissions and other related expense as a percentage of Revenue was 81.44% for the quarter and Improvement of 73 basis points compared to Q3 of last year at 82.17% primarily driven by the impact of our January acquisition of Christie's International real estate which has more favorable margins.
Excluding m&a our commissions and other related expense. As a percentage of Revenue was down 20 basis points for the quarter versus the prior year quarter.
Consistent with what we've seen all year. Our highest producing agents who generally carry higher splits continue to take more of the market share gains, which contributes to the decline in this metric.
As we said, previously, we're okay with this trade-off. Today as these agents are driving higher gross commission, income and therefore we retain a higher aggregate dollar value of Revenue after commissions albeit at a slightly lower effective rate.
Our total non-gaap operating expenses, were 252 million in Q3 an increase from 215 million of Opex. In the year ago period, which was largely driven by m&a, including the Opex, we assumed from the January 2025 acquisition of Christie's International, real estate, the Washington fine properties acquisition in February 2025, and a number of other smaller brokerage and title companies we acquired this year.
Excluding the impact of m&a.
Our non-gaap Opex over the prior year is higher by about 3. And a half percent reflecting our strong discipline on minimizing growth in organic Opex.
During the third quarter, we incurred 7.5 million of transaction. Expenses related to the announced merger with anywhere, primarily, legal fees, and Investment Banking fees.
We expect to continue to incur these types of expenses through the closing of the transaction.
And we also expect to incur integration costs in future periods.
As we kicked off the planning process for bringing these 2 companies together.
Given this Dynamic, we've opened a new line item on our statement of operations this quarter titled anywhere. Merger transaction and integration expenses to capture the 7.5 million incurred. This quarter
And we've also excluded these costs from our non-gaap operating expenses and excluded them from the calculation of adjusted iPad. Do, we'll continue to present these types of costs on this new line, item in future periods.
Adjusted IBA was 93.6 million, a strong Improvement of 80% from adjusted IBA of 52 million a year ago.
And this also represents a record level of adjusted Eva for any third quarter period and the second strongest level of adjusted Eva for any quarter.
Adjust the IBA benefited from the higher Revenue.
And they continued strong discipline on operating expenses but this quarter adjusted Eva also benefited from the most profitable quarter we've ever had for our mortgage joint venture, which is now combined with the mortgage JV. We acquired through the Christie's International real estate acquisition earlier this year.
as a reminder, the mortgage JB results are included in the line item of our pnl titled equity in income of unconsolidated entities, which was a positive 3 million this quarter
Stock-based compensation expense in the quarter was 60 million and in line with our guidance, as a reminder during our q1 results call earlier this year, we explained that our stock based compensation levels would be elevated during the second. Third, and fourth quarters of 2025 due to a change in our methodology for granting employee equity, and the accounting rules related to that change.
As a result you should expect a similar level of SBC in the fourth quarter.
Followed by reductions in 2026 as the rsus with the higher accounting values. Begin to vest out
gaap. Net loss was 4.6 million in Q3 compared to gaap. Net loss of 1.7 million a year ago
However, excluding the 7.5 million in Deal related expenses from the anywhere transaction. Net income would have been a positive 2.9 Million.
As for cash, we generated 73.6 million in free cash flow in the third quarter.
which was not only an improvement over the $32.8 million of free cash flow from Q3 2024 but also a new record level of quarterly free cash flow for any third quarter period.
As a reminder, our Q2 255 free cash, flow would have been higher than Q3.
also, as a reminder,
due to the seasonality of our business, our 22 and Q3 free cash. Flow levels are the highest and you should expect lower levels of free cash flow over the next 2 quarters due to this seasonality,
As a result of the strong cash flow in the third quarter, we paid down the $1 million balance on the revolver, which we previously drew to fulfill the cash portion of the purchase price for Christie's International Real Estate.
We ended the third quarter with no outstanding balance on our revolver.
And 170 million of cash and cash equivalents on our balance sheet.
Our basic weighted average share count for the third quarter was 566 million which was in line with our prior guidance.
Turning now to financial guidance for Q4.
For Q4 of 2025, we expect revenue and the range of 1.59 billion to 1.69 billion and expected adjusted evida to be in the range of 35 to 49 million.
We expect our weighted average share count for the third quarter to be between 571 to 574 million shares.
As you can see from our Q3 results. We remain very focused on Opex discipline.
Last quarter. We reduced our full year, Opex, guidance from the prior levels of 1.017 to 1.042 billion.
Down to 1.01%.
However, we continue to Pace favorably to this revised Opex level. And therefore, we're further reducing our Opex range for the full year 2025 to 1 billion to 1.005 billion.
This updated, full year estimate, includes the Assumption of about 7 million dollars of assumed in your Opex from 4 smaller Acquisitions. We completed during the third quarter,
after considering the assumed Opex from Q3 m&a.
This reduction in our full year Opex estimate is an additional 19.5 million off the midpoints for an aggregate reduction of 34 million.
The continued favorability reflected in our Opex guide is in part due to the actions we announced last quarter, with the goal of improving our profitability incrementally by $50 to $75 million.
But we announced this initiative last quarter. We stated we expected to achieve at least 50 million of this profitability billion enhancement to our adjusted, EA by 2026. And I'm pleased to say that we continue to expect to to achieve this goal based on our progress to date.
I would now like to turn the call over to the operator to begin Q&A.
We will now begin the question and answer session.
Please limit yourself to 1 question.
1 follow-up.
If you would like to ask a question, please raise your hand now.
if you have dialed into today's call, please press star 9, to raise your hand and start 6 to unmute
Please stand by while we compile the Q&A roster.
Your first question comes from the line of Ryan McKinney with zelman and Associates. Your line is open. Please go ahead.
Hey, thank you. Uh, good morning and and great job on the quarter. Uh Scott just on that last point on the on the incremental 50 to 75 million ibida. I think it sounded as though, some of that may have flowed through this quarter. Maybe also in the fork you guide, uh, is, is that the case? And, and as we think about the incremental of that into 26, is the 50 kind of inclusive of what we've already been achieving or could there be an incremental 50 on top in in 2026. Thank you. Yeah. Hey, Ron, good, good to talk to you. Thanks for the question. Yeah. And it's really um it's included in the 50 to 75 guide. We talked about some when we brought that up last quarter we talked about the fact that some of it was already being considered in the reduction that we put out last quarter. And then with the reduction, this quarter it's incremental to that. The idea is that those reductions in Opex will continue into the base
Baseline for 2026, and that's really kind of that initial what we put out as $50 million to $75 million. Kind of EVA do profitability improvement on really what our 2026 expectations are, as of the quarter ago.
Before they were that that title business was only working with um, their own agents in selectively with with ours and but when we bring our agents into the fold and let them know that the the Chrissy's out properties title business is part of the family. Um, it and giving them access to the officers integration into our technology um, helping them understand that when, um, the title business succeeds. We all succeed. When that that buy in, and the time saved by, you know, bringing into the same house is what drives it. Uh, and, and so we, we are excited to see how bringing other title businesses from anywhere into our into markets, where we already operate, um, how that can drive attached and uh, as well.
Got it. Thank you very much.
Your next question comes from the line of Bernard mcternan with Neiman company. Your line is open, please go ahead.
Hi, good morning. Thanks for taking the question. Maybe it's a start. Um, Robert I thought the commentary on everything that's going on in agentic. Um and generative. AI was interesting. Do you have a do you have an actual integration with chat GPT currently or is this all organic traffic and if not um are those conversations going on for you to potentially partner and and deepen? That integration?
What we have integration with openai, through our, our Compass, um, Compass AI, 1.0 moving to Commerce, AI 2.0. That's the agentic AI. That's that are agents are using. It's in Alpha, that will be uh, in for full with all of our agents, by the uh, by the next earnings, call in terms of the chat GTP. Gbt, um,
Lead flow. That's that's just coming organically from the world and it really, it's it's just such a wonderful thing. You should just call any top agent you. You know and say have you gotten leads received leads from Jack of G and they're going to say yes and and then you know ask you know this this ask the same question from someone who has no transaction experience um and they're going to say no. And so what that's great for us is we're a company of Highly experienced real estate professionals but a lot of transaction experience and and it's it it really does Mark a different era. Like the technology was being used by companies to force agents to pay for leads.
That didn't have experience. And and and now technology is being
Used to guide agent organically to the best agents. Let me say share it this way.
With some portals have do not to mention any name. With some portals do is they've taken the Goodwill of Google.
And they've made the consumer think that similar to Google Just guide you to the right answer guides you to exactly what you're looking for.
Um and when it's not guiding you there it says it says sponsored ad. It's taken the Goodwill of Google and then it it is guided. The is made the buyer think that they're always being guided to the best agent. Um, when or the listing agent and it's not seen when it's a paid agent, it's not saying like Google that just sponsored paid agents. Um, and so what's great about Chad, gbt is it's bringing lead the lead flow back to, um, the truth consumer. It's the way Google did to the organic, um, path to the best most experienced agent. And that's a great thing for. Um, highly experienced real estate professionals is a great things for companies like compass.
Yep, makes a lot of sense. Um, and you mentioned the, the increase in energy Target for the annual transaction, going from 220, at least 225 to, at least 300, any particular area. You can say those costs are coming from or is it just more more widespread? Thank you. So, um, mentioned earlier on the call, we aren't commenting beyond the update provided earlier, but I, I would like to just reiterate My overall excitement for the transaction of all the reasons that we laid out on the call today, but also the call, the last call that we have.
Got it. Thanks Robert.
Your next question comes from the line of Chris Kenard with UBS. Your line is open. Please go ahead.
Great, thanks for taking the question. Robert, if I could just ask on the increasing number of agents that are going to be adding, I think you're talking to 7 to 800. Now that was previously 6 to 700. Could you just talk about what's giving you the confidence? What you're kind of seeing their to increase that expectation?
Of interested. Uh real estate agents and walkovers. Um and like I mentioned on the call, we're seeing we have more momentum at this point in the quarter than we did in the same point in the quarter, uh, last um, in last quarter. And, you know, we
we see I, I think what
I think the, the, the average real estate professionals sees that things are changing, um, and they're looking for a company that is going to be proactive as the world changes, uh, and not reactively and a company that has the resources to, um, to build the the right future for their profession. You know, we've invested nearly 2 billion dollars in our technology platform. We've advocated for, uh, lifting agents, and their clients for home, seller choice in an environment where, um,
Where they are being?
Fined up to 5,000 dollars by mls's own, you know, controlled by Nar. Um,
If whenever they don't give a listing to the MLS and now of course you know they're being banned by, you know, certain portals. Um if they don't give their listing to the portal. So just it's such a
It's such a, it's a, it's a, it's an environment where I don't think the average real estate professional feels like they are being supported. Um, I don't think the average real estate. Professional feels like they've been supported by Nar. I don't think they have a real estate. Professional feels like they're being supported by their MLS. I don't think the average real estate. Professional feels like they're being supported by, you know, certain leading portals. Um, and you know, we the only reason companies exist is to support the real estate agent. If we can help real estate agents create more success, we have no reason to exist. Um, and we have now a track record of 13 years of investing in their profession and and, and so uh, yeah. I think if any any investor or analyst that does Market checks on how people are feeling about this moment and uh, the potential of these 2 companies coming together, I think you you know you'll be continuously pleasantly surprised.
Super helpful and just 1 quick. Follow-up on the 30% market share in your top 30 markets. Could you just give us a quick update on how that strategy is progressing? Thanks.
yeah, we um, at this time we're we're not talking about uh, that topic but um,
But definitely appreciate the question.
Thanks.
Your next question comes from the line of Jason hulstine with Oppenheimer and Co your line is open.
Please go ahead. Thanks. Good morning, everyone. And I apologize if this was addressed just a bunch of companies this morning. So 2 questions though, um what drove the 2.1 acceleration in organic growth and and what supplied in for you. And I mean it sounds like it's simply just adding more agents. But if there's other ways you want to impact that and then 2 um Robert um just any more color, what's the current adoption 3-phase marketing. Um and any thoughts you have around kind of adoption levels given that you know we saw momentum. It slowed has has a pick back up. Thanks,
Hey, Jason, it's Scott. I'll go into the um, the organic growth. I mean really the, the the Q3 was really, really a, a story of September. We, you know, we started out the quarter, um, with a decent July July, and August, but really, kind of, um, hit a nice stride in September, and that's what led to the beat, really on the organic side.
We don't break out. Um we don't break out the organic burst um, m&a growth for our future guidance. So we don't have that for Q4 but you know, you can see. You can kind of back into that based on what we've done through the first um, 3 quarters, the Christy's International real estate.
Acquisition back in January, is the primary driver for the for the inorganic growth. Um, all year and it will be um, the same way in the fourth quarter.
It is and on, uh, 3 phase marketing. Um, we just given where things are, uh, we're we're not, um,
we're not diving into that topic, but I can share with you that
um,
Option to not have days on market and price drop history on my listing, I don't know. A seller says, I don't want an option to test price privately um, before being on, uh,
The the open market where you have the risk of price drops, um, and I don't know an agent who went into a listing presentation came back and said, you know what?
Because I offered the compass 3 phase marketing strategy, Phase 1 private exclusive Phase 2 coming soon, um, testing price privately with a large network of top agents in the country. Um, and the then going to, you know, the open market. I know no agents told me in the last quarter, that that
Reduced their chances of getting the listing. I've only heard that. It's increased their chances again, sellers want more choices. Not less choices.
Okay, thank you loud and clear. Thank you.
Your next question comes from the line of Alec Broad.
With Wells, Fargo, your line is open, please go ahead.
Hey, thanks so much for the question, I appreciate it. Um, maybe. Maybe on Christie's, could you describe the propensity of of the Affiliates, or the franchises to work with you in operational improvements? Is it harder to bring operational improvements to bear in that business model, uh, Arielle relative to kind of the yellow and no model that, you know, the business is more accustomed to thank you.
um, we
We have really focused on the oh, and oh. Um, but given
the um, the pending transaction, we are focusing much more on the franchise business and
We are ensuring that uh, that the platform will be able to, you know, work for an entire franchise business day 1. Uh and that we will be able to get the appropriate efficiencies. Um not just for the company, the franchise or but also for the real estate professional giving them the platform that will allow them to move to, to save time and to better serve their clients. And so we, you know. Yeah. And so it's it's a key Focus given the the moment that we're in
Got it. Thanks. And maybe if I could just follow up on the question around chat TPT and kind of agents and in that modality, uh, the the chat you be having a greater propensity to kind of serve the customers to the agent, as opposed to serve the customers the portal. How do you think about syndicating more data into kind of the chat sheet environment? You know, a lot of data in this industry is behind a pay wall. It's behind the MLS, it's inside. A brokerage internal system. How do you think about over time, perhaps giving chatty chatty, more access to Compass data, and more access to Compass listings? Perhaps accelerate the uh, Trend that you're describing
Is it definitely? Um, well.
um,
anything we do will be uh, along will be consistent with what sellers in their
listing agents want, right? It's, it's, yeah, I think.
It's not mls's data, although they as a monopoly, they force you to this agent, to give it to them uh out of your thousand dollar fines and then they sell it to to well over 100 different entities. Uh, and so I think given that we're cumber stands for is Choice over platform control. Anything, we do will be consistent with what Sellers and, uh, their listing agents want. I do think.
the home is personal property, I think people have property rights, um, and I think the theme of
Privacy data, privacy, personal privacy. I think that theme is becoming more valuable every year that goes by not less. And so if we can the greater value than you know, selling data to chat to BT. Um
That, you know, I think is in getting more listings by serving the client's needs. Um, again that said, if the listing agent and their client, uh, would like
Any certain platform to have their listing um for more exposure as you know, um, homes.com is boosting every listing that's banned, um, and support of the listing agent and the seller and support of choice. So, you know, the yeah, there there, I think there will be
Opportunities.
Their seller. The last thing on chat should be T. It's not just that the
Top agents are getting more referrals, but they're getting them for free. So you could you could spend 40% of your of your commission, getting it from 1 and inexperienced agent can spend 40% of their commission to give it to um, a portal uh, or an an experienced agent. Can
Get no, no referral fee and just get a free, a free referral from chat. Gbt. So it it really is a paradigm shift and I'm I'm happy for all the experienced agents that are benefiting In This Moment.
Thank you so much.
Your next question comes from the line of Matthew bully with Barclays. Your line is open, please go ahead. Good morning everyone. Thank you for taking the questions. Um, I wanted to ask on Christie's, um, speaking with that topic. So so really helpful caller around everything you've done since the deal kind of growing agents and the synergies you've achieved and so forth. Um, I wanted to ask on kind of the learnings, um, on running a franchise business over the past 9 months. How do you think about what you can sort of Leverage between your own brokerage, uh, and the franchises across perhaps leads or otherwise? And would, uh, reranch ever be a consideration. Thank you.
And so the, what what we learned is the platform can scale to franchises and provide provide tremendous benefits to franchises. Just like owned and operated. I mean, it's the same from a real estate agent perspective. It's the same thing. Uh, and you just have to make a multi-tenant multi-brand. Uh, and so that that's exciting and we're in the middle of that work. Now uh, what we've learned is that
We can.
we can give the same advantages that Compass created for ourselves to be franchised business, and
So you know, think you know what are the things that we have had outside success with at compass?
That we would want to bring to others. So, for example, our Enterprise sales engine, right? With a recruiting engine, for Compass, we can give that the same strategic growth manager. Um, process sales me sales process and give it to our franchise. So, we're, we're in the process of, um,
Of bring of of testing that with our current, the franchise Affiliates but we're going to, you know, give them more broadly afterwards. And so you know all the things that the transaction management we have the ability to do to provide, you know, a lower cost of serve to process transactions which is a combination of our technology processes. Um and our people
as well as we, we've really leaned in into our to Offshore and Outsourcing and so bringing that those same learnings to the franchise owners, and really, everything that we've had to do on what the growth or on the cost side for ourselves in the context of these last
You know, 4 years with the market turning giving those same advantages to our franchise owners and I, you know, I'm I'm really, really excited. I mean, I love real estate professionals but that at the core of what I love are entrepreneurs and these franchise owners are entrepreneurs at the highest level. And I'm, you know, I'm excited to help them grow and to have them as my, my client.
Got it. Oh that's really helpful. Caller. Thank you for that Robert. Um secondly I wanted to ask on you know maybe smaller m&a and growth investment in into new markets. Um so obviously I heard you loud and clear, kind of put the 3030 aside. Are there additional markets around the country on your wish list where you would look to build scale? If we're thinking out over the next several years? Kind of, where would you focus that next leg of growth investment? Thank you. Yeah, given the the pending merger, you know, we're going to hit a pause on incremental tuck in m&a as we shift our focus on executing the integration philosophy. They got that that is, you know, the main thing is keeping the main thing, the main thing and that is a Flawless integration day, 1 executives.
And you know, the platform for everybody. Yeah. Well and well, while driving free cash flow in the interim period and of course afterwards, uh, for the obvious reason, um, the good news is that our walk over motion has been working incredibly well, and as a reminder, these are the typically, the agent teams, that could range from, uh, you know, 50, um, Plus or even as small as 20 to 30. But that there's a lot of, if you're the average,
In 20 to 100, we're more interesting to them today than we were 2 years ago. And you have not just the platform. Um, but you also have.
Yeah, you you you you have, you have, you know, the brand as well, which is, which is great. Yeah, just just to add 1 1, comment to Robert's point there. You know, we talked about 4 Acres, 3, small brokerages, and 1 title company that we Acquired and that they're recorded. That was all kind of pre anywhere transaction announcement. So so we've we've effectively hit the pause button now.
Got it. Well, thanks guys. Good luck.
Thank you.
Your final question comes from the line of Michael engh with Goldman Sachs. Your line is open, please go ahead.
Hi, good afternoon, thank you for the question. Um, I just wanted to ask about Opex management, um, you know, compasses is obviously delivered a lot of good efficiencies and and sales and marketing Ops and support. Um, you know, is that kind of the key area of, of operational efficiencies that you see going forward, um, and then and then as a follow-up, um, you know, within within the, the non-gaap sgna were there, any kind of meaningful um, legal expenses that are in there, you know, I can appreciate the, you know, anywhere transaction costs or excluded but I was just wondering if there are any kind of legal costs related to uh pending lawsuits and um litigation thank you.
Yeah, quick quickly on the last question, first. Yeah, there there's some legal expenses that are, um, being incurred for the, the various litigation matters. We have outstanding, um, in the third quarter and we have that in our in our Opex guide for the fourth quarter. Um but as you know to clarify that the stuff related to anywhere specifically has been broken out on that separate line.
On the on the where, where we see the Opex, reductions, you know, as we've talked about in the past, it's really the whole companies really aligned on a fiscally responsible management approach here. And as we said before, it's really
embedded into the DNA of our employees at this point.
You know, I'll give you a couple of examples, but but it kind of goes around the around the board when we have a a resignation, um, and somebody's group, we challenge if the role needs to be backfilled and if it does need to be backfilled, we challenge ourselves. If it can be staffed in an offshore um, lower cost labor market. We've got an internal team that focuses on applying 6 Sigma methodologies to some of the key process areas with a goal of creating efficiencies and lowering costs. Um, Robert talked about the AI initiative, we, we've launched the company that's being led by, uh, 1 of our senior vice presidents where all of our departments are being challenged on how they can use AI to improve. Um, productivity,
Just in my own area of Finance, we've been using an outside consulting firm to augment, um, some of the support on our accounts, payable processing for, for years now, but due to efficiency gains and some offshore Staffing, we're we're going to be fully wound down on that consulting firm. Um, by the end of this year, that's going to bring a lower cost to that service. So, it's really kind of just across the board, we're seeing this. Um, and then, of course we're making good progress on integrating the acquired businesses. And, and when we do that, we have opportunities to also consolidate and reduce
Some of these things categories. So the way we're really thinking about it is we're going to continue to invest in the platform invest in our agents. But we're being really disciplined on Opex because when we
When we close you anywhere transaction we're going to pick up a lot of debt, we realize that. And so any dollar we save Now is really kind of being put into the the cash accounts and that'll be used to to accelerate The Debt Pay down while we close that deal.
Great. Thank you, Scott. And and if I could just have a quick follow-up on, on those legal, uh, costs that are in the fourth quarter guidance. Are you expecting them to come off in 2026 or do you think these things will be ongoing? Thank you.
Yeah, I I think there's some there's some that will be ongoing um a little bit little bit fully tough to tell. Now kind of depends on how some of the some of the um actions occur in the fourth quarter. But for now I would expect some of them will continue um into 2026 and we'll obviously provide an update on that when we get closer to our um next quarter, when we put out some expectations for 2026 guidance, great, thank you very much.
There are no further questions at this time. I will now turn the call back to Robert for closing remarks.
Thank you, everyone, for joining our call today. I want to end by thanking all of our employees and all of our agents for their incredible hard work. Together, we delivered our best third quarter ever, and I look forward to building upon this momentum in 2026 together with the Anywhere team. Thank you, and have a great rest of your day.
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