Two big residential real estate players have released their latest earnings reports, with Compass and Redfin both noting small revenue dips amid last year’s challenging market. Compass even expects to become free cash flow positive in 2024.
“Over the past two years, we have successfully navigated the worst residential real estate market in decades and significantly reset our operating expense levels, positioning Compass for what we believe will be significant upside when the market begins to recover,” said Robert Reffkin, Founder and Chief Executive Officer of Compass. “As we reduced operating expenses, we continued to invest in growth, our agents and our technology platform, the industry’s only proprietary first-contact to close platform. We recruited more than 2,000 principal agents without cash or equity sign-on incentives since eliminating those incentives in August 2022 and we increased the number of principal agents 7.7 percent in Q4 2023 compared to Q4 2022. We grew quarterly market share both year-over-year and quarter-over-quarter2 in Q4 2023 and we continued the trend of strong agent retention, achieving 97 percent principal agent retention in Q4 2023. In 2023, we continued to build our technology advantage as we added 103 features to our platform including Performance Tracker, Compass AI enhancements and ‘1 Click Title & Escrow.’”
For the fourth quarter, Compass reported revenue decreased by 1 percent year-over-year to $1.1 billion as transactions declined 4.9 percent driven by macroeconomic factors. For the full year, 2023 revenue was $4.9 billion compared to $6 billion in 2022, a decrease of 19 percent.
Over at Redfin, fourth quarter revenue was $218.1 million, a decrease of 2 percent compared to the fourth quarter of 2022. Gross profit was $73.2 million, an increase of 32 percent year-over-year. Real estate services gross profit was $29.9 million, an increase of 14 percent year-over-year, and real estate services gross margin was 22.5 percent, compared to 18 percent in the fourth quarter of 2022.
Net loss was $22.9 million, compared to a net loss of $61.9 million in the fourth quarter of 2022.
Full year revenue from continuing operations was $976.7 million, a decrease of 11 percent year-over-year. Gross profit from continuing operations was $329.8 million, an increase of 7 percent year-over-year.
“In a dreadful housing market, Redfin got more efficient in the fourth quarter, again improving gross margins and operating margins, even as we laid the foundation for meaningful long-term growth,” said Redfin CEO Glenn Kelman. “Our site continued to draw visitors from rivals. And new sales initiatives are driving breakthroughs on fronts where Redfin has been stymied for years. First, our all-variable pay plan is delivering significant revenue growth in major California cities. Second, a commission refund to customers who hire a Redfin agent after the first tour seems likely to increase home-buyer close-rates in its first four pilot markets. We expect these projects to pay off throughout 2024 and 2025.”