Compass Inc at Needham Technology and Media Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Well, maybe just to start, you came off a strong earnings performance. Can you just give some of the highlights from the quarter?

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Yeah. No, it's a great quarter. That's a lot there. Maybe just that point you're making on the confidence in getting to free cash flow. What are you seeing that's giving you that confidence in a volatile market right now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:45PM, COMP.N - Compass Inc at Needham Technology and Media Conference

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Yeah. That's -- in-contract listings higher year over year. I mean, that's huge, right?

Question: Bernie McTernan - Needham & Company, LLC - Analyst : No, because I mean, the way that we model it, it's kind of like down 20% in 2Q, with the year ending down 13.5%. But it's really like the end of 4Q is when we think we're getting closer to year-over-year growth. So if that's happening earlier, I mean that 15% to 20% seems pretty conservative for the industry.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Yeah, okay. Great. Just -- a question we get a lot from investors is just how we think about or how investors should think about housing affordability and what impacts that's having on the market. And so, I would love to get your thoughts.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : And we start talking 10% EBITDA margins.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : So it doesn't sound like you think that the housing market inventory situation right now is just structurally lower. You think it's more of a short-term phenomenon because of how mortgage rates have been trending? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:45PM, COMP.N - Compass Inc at Needham Technology and Media Conference

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Got it. And so now that you're seeing this seemingly, more than bottoming but like turning of the housing market, is there anything that you want to make sure that you're leaning in on or (multiple speakers)

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Just in terms of if -- we just went through a period of retrenchment in the housing market. (inaudible) in those how we're playing defense. Now, how do you make sure you play offense as the housing market returns so that you can continue to take share?

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Okay. So everything with Compass over the next two or three years, what is the right level of agent growth that you should be targeting these days?

Question: Bernie McTernan - Needham & Company, LLC - Analyst : So I guess you think about in the laddering up more.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Right. Okay. So then what's the -- how do you get from where we are now to there? Like, where are the [building was in]. And so hiring agent recruiters is part of that. And the market improving is probably part of that as well.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Fine. So 96% agent retention in the first quarter. I mean that --

Question: Bernie McTernan - Needham & Company, LLC - Analyst : And so maybe that's a good part to ask about just generative AI. It's a question we get a lot about -- you get from investors a lot on the real estate industry and if it's really a threat or opportunity accessory for you guys who already invested $1.5 billion in technology. The fear would be there would be some sort of like obsolescence to that, but we'd love to get your view on how your tech holds up in a generative AI world.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : That's a great answer. And one of the exciting things from the earnings call, too, is I think -- I forget if it was you or Greg who were just talking about the agent enthusiasm for ChatGPT tools. So it's like, as you mentioned, AI having this moment. Is that driving more agents to use that technology? Because you used to give the stats where the agents who use the technology were just the better performing agents. So could this AI, whether hype cycle or not, drive even more adoption?

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Got it. Maybe just touching on some of the ancillary revenue. You mentioned title and escrow before. So can you describe the way the process was to what it is now? I think you said from 30 minutes down to one click, but just more detail (multiple speakers)

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Right. No, that's interesting. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:45PM, COMP.N - Compass Inc at Needham Technology and Media Conference

Question: Bernie McTernan - Needham & Company, LLC - Analyst : And so how much more do you monetize one of those transactions that's done on your platform versus some other way?

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Has that been a big shift in the way that the recruiters recruit agents to the platform?

Question: Bernie McTernan - Needham & Company, LLC - Analyst : I'd imagine that's playing a big part of that 96% retention is the kind of agents that you're recruiting now. If it's all about the technology and not about other things, then now, they're coming using the technology. And that's what they're saying for versus trying to kind of sell them on the cash incentives to start and saying, hey, you should use this technology.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Right. And so when you bring a few different pieces together (inaudible) saying getting back to 10% to 15% growth agents in the lower -- not lower GTV threshold. And then also, there's been less of a push to go to the new geographies. So you think you can do the 10% to 15% growth by -- there's enough of that kind of second-tier or lower earners that could go out and drive those. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:45PM, COMP.N - Compass Inc at Needham Technology and Media Conference

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Well, I want to make sure that we hit on the OpEx. You mentioned in the beginning about the $850 million to $950 million range this year, getting to the midpoint by year end, just confidence in that. But then what I noticed on the earnings call was I think there was an increased confidence for you guys that that level is the level that will be there for the next couple of years. So just maybe the puts and takes of how you do that, how big of a priority that is even if the housing market does come back.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Yeah.

Question: Bernie McTernan - Needham & Company, LLC - Analyst : Well, I think that's a perfect way to end it. Thanks, Robert. Thanks, everyone, for joining us today. Appreciate the time.