Q1 2024 Compass Inc Earnings Call

Participants

Richard Simonelli; IR; Compass Inc

Robert Reffkin; Chairman of the Board, Chief Executive Officer, Founder; Compass Inc

Kalani Reelitz; Chief Financial Officer; Compass Inc

Jason Helfstein; Analyst; Oppenheimer & Co Inc

Soham Bhonsle; Analyst; BTIG LLC

Ryan McKeveny; Analyst; Zelman & Associates LLC

Presentation

Operator

Thank you for standing by. My name is Jasmine, and I will be your conference operator today. At this time, I would like to welcome everyone to the company's first quarter 2024 financial results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again, thank you. And I would now like to turn the call over to Richard Simonelli, Senior Vice President, Investor Relations. Please go ahead.

Richard Simonelli

Thank you, operator, and good afternoon to all of you thank you for joining the Compass First Quarter Earnings Call. Joining us today will be Robert Ruskin, our Founder and Chief Executive Officer Officer, and Connie realists, our Chief Financial Officer.
In discussing our company's performance, we will refer to some non-GAAP measures. You'll find the reconciliation of these non-GA
AP measures to the most directly comparable GAAP measures in our first quarter 2024 earnings release posted on our Investor Relations website. We will be making forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include our guidance for the second quarter of 2024 and full year 2024, including comments related to our operating expenses and free cash flow as well as our expectations for operational achievements. Our actual results may differ materially from these statements.
You can find out 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. You should not place undue reliance on any forward looking statements. All information in this presentation is as of today's date May eighth, and we expressly disclaim any obligation to update this information.
I'll now turn the call over to Robert Raskin.

Robert Reffkin

Robert, thank you for joining us today for our first quarter 2024 Results Conference Call. We had strong first quarter results with revenue towards the higher end of our guidance range and adjusted EBITDA that exceeded our guidance range and with our agents continuing to outperform the market, I am pleased to say that in Q1 2024 in a historically challenged market and the slowest quarter of the year comp-based generated positive free cash flow.
This proves that our focus on cost reductions and cash generation, while still investing in agent growth in our proprietary technology platform are working. We grew revenue considerably in Q1 2024. We generated an increase in revenue of 10% year over year as we increased transaction 7.1% from a year ago, which compares favorably to the 3.5% decline in transactions for the entire market in the first quarter we grew market share considerably in Q1 2024.
Our quarterly market share increased 26 basis points year over year and 35 basis points on a sequential basis compared to Q4 2023. This is a testament to our agent productivity, which is further enhanced by proprietary technology platform. I have shared repeatedly that content has the best agents in the industry and they are demonstrating their skill and experience navigating this difficult market.
We continue to grow our agent base considerably. Our principal agent count has increased by nearly 1,000 agents between Q1 2023 and Q1 2024 at a 7.3% increase, which is in stark contrast to industry trends. The vast majority of agents that come to call it. Companies tell us that the platform is the number one reason that they join originally.
We organically in Q1 2024, we recruited 518 principal agents, the highest quarterly accounts since we ceased using cash and equity sign on bonuses. Just last month, in April, we added more than 1,000 principal agents with our accretive acquisition of ladder and Bloom, the largest agency in the Gulf South and New Orleans, we are growing total agents faster than the market at Compass.
The number of total agents increased 2.1% year over year, while our three largest public company competitors by agent count reported decreases of 2%, decreases of 5% in decrease of 6% in the same period. Moreover, this includes a reduction of over 1,000 non productive agents in the last two quarters. As a reminder, ladder and Bloom, it's not in these numbers.
Our balance sheet is strong. We ended Q1 with $165 million in cash and cash equivalents and no outstanding draws on our credit facility. We continue to drive cost improvements internally, we remain laser focused on driving efficiencies and reducing costs using technology. These improvements are also positively contributing to free cash flow. We reduced our OpEx in the first quarter to $211 million, an increase of $32 million from Q1 2023 OpEx of $243 million. We also reduced OpEx sequentially from Q4 2023 OpEx of $224 million. As always, collecting our Chief Financial Officer, will walk you through the financials later on this call.
Moving on to the market. I still believe 2024 will be better than 2023 and 2025 will be better than 2024 with a mid-cycle coming in 2026, my opinion is influenced by the following one. Inventories up 33% from a year ago. More inventory leads to more sales.
Two, the percentage of all cash buyers is at the highest level in over two years with the stock market near an all-time high homebuyers are less reliant on mortgages. Three, the percentage of sellers with Forbes in mortgage rates or below is approaching 50% after dropping from approximately 75% at the peak. And this way, we believe in two years, only approximately 25% of people may still have 4%.
Mortgage rates are below nearly eliminating the biggest bottleneck to the mid-cycle real estate market. And for we now have over two years of pent up demand, assuming 2024 is just modestly better than 2023. This will end up being a three year housing downturn, forcing many people to live in Maine and homes that they don't want to be.
And we believe when rates come down, you will create a massive surge in transactions for longer. That lasts stronger market bounce will be as I mentioned on the last call, assuming we continue to add net agents annually, maintain or modestly improve our economics and keep our $600 million of annual cost savings with minimal inflationary growth of 3% to 4% in 2025 and beyond.
We believe that is a formula for generating hundreds and hundreds of millions of dollars in adjusted EBITDA and free cash flow as the market recovers to a more normalized mid-cycle annual home sales level of [5.4] million to [5.6] million -- homes. But in the meantime, as I mentioned on our last earnings call, we have conservatively budgeted for a flat year on transactions and have brought our OpEx to that level.
We expect to be free cash flow positive in 2024, even after the cost of the first payment related to a litigation settlement, which we agreed in February to April 24, in which we expect to make in the second quarter. The number one question we are getting from investors is what is the settlement having on the business? What effect is it having to help with this question let me share with you five banks as well as five beliefs. Let's start with the tax one.
Buyers are using buyer agents now more than ever in 2023, 89% of buyers using agents, which is up from 75% just 20 years ago. In 23, two buyer agreements are not new and they're already required in half of the states in which Congress operates. Thousands of Compass agents have been getting buyer representation agreements signed three years with no issue. Three, 90% of our agents have been trained and are prepared from the rules.
Since the verdict, we have provided our agents with 57 national training sessions and hundreds of local training sessions. With these efforts have seen our agents transition from initially being worried to now being confident for per non-real trends.
Commissions were 5.5% in 2023. That compares to 5.1% just 20 years earlier in 2005, the industry has not seen a noticeable change in either the percentage of sellers that offer a buyer agents' commission, nor in the average commission amount that you're paying the buyer's agent. We reviewed the MLS data in the market, generating the majority of our revenue since the announcement of the NR settlement on March 15th, here is what we found more than 99% of new listings since March included offers to pay the buyer agents.
Furthermore, more than 96% of all listings included offers to be 2% or more and more than 67%, our offering to pay 2.5% or more to date. We are not hearing from agents that any of these numbers are coming down. We believe the sensational press has caused significantly more reaction than what we expect to see from the actual rule changes.
Specifically the headlines since the March 15th, nor settlements have led to sellers asking if they need to pay a buyer agents more than never before. And the result of those conversations is that sellers felt more than 99% of the time that it was still in their interest to provide a commission to buyers agents.
Now here are some of our beliefs after conversations with hundreds of our agents across the country. One, we believe there will be little impact on the professional full-time agents. Encompass is composed of experienced full-time agents with very strong repeat and referral business two, we believe that Indians will increasingly need to be able to sell their brokerages value proposition to communicate that to buyers.
And that company has the best value proposition for buyers of any brokerage firm. For example, companies has access to off-market inventory through Compass, private exclusive and companies coming tunes, which is particularly important in a low inventory environment.
Another example, being buyer technology tools like Compass collections like Compass, digital tour sheets like Compass, CNA and the client dashboard launching in less than a year three, we believe real estate agents are project managing highly complex, multi month process where they can often be coordinating between over a dozen different parties, loan officers, title officers, home inspectors, home appraisers, pagers stages for Target was good yard with agents on the other side and so on.
We do not believe this important role will be displaced or discounted for, we believe the percentage of buyers and sellers that will use an agent will continue to be at the 90% level. Buying and selling a home is the biggest financial decision that most people make in their lifetime However, for decades, people have been declaring that there will be a decline in the use of the real estate agents in the last 20 years
since the rise of the Internet you've seen so many attempts to replace the agents such as for sale by owner companies and then you had the aggregators, but any other discounters, they had the iBuyers and then the power buyers get despite all of these attempts to disrupt the real estate agents, buyers and sellers are using agents more than ever before in the last 20 years, the percentage of buyers using an agent has increased from 75% in 2003 to 89% in 2023.
And finally, we believe the vast majority of buyers and sellers prefer to pay for value over receiving a discount if saving money on commissions was the most important thing to sell or the majority of home sales would be for sale by owner. Obviously that is not the case in every market. We know there are countless agents and brokerages that offer low commission rates.
Discounters are not new and have been operating the market for decades, many of the discount firms have either gone out of business where have not gained traction. In fact, one of the largest public companies in residential real estate today is a professional discounter offering, the majority of the country discounted commissions with salaried agents for decades.
This company can go to every seller and say we have more than $50 million visitors on our site a month, more Internet exposure and every other brokerage firm in the country combined for your listing. And we only charge 1%. However, after 20 years, of offering discounts, they have only 0.8% market share.
That is the proof that buyers and sellers are speaking with their checkbooks and that they prefer professional advice over a discount in closing, I believe Compass is approaching an inflection point. We have done the hard work. We have brought expenses down and continuing to grow our agent count and inventory advantage to market will inevitably come back. And when the Fed cuts rates, we will be in a position to thrive.
I want to thank the entire company's team of employees and agents. I see their commitment to making Compass successful with their incredible dedication and determination. It has allowed us to be named the number one real estate brokerage by sales volume in the United States for three years in a row and to have a strong foundation for the future.
I will now pass and over to Lonnie.

Kalani Reelitz

Thank you, Robert. Before getting into the financials, I wanted to give you some details on our operations. In the first quarter, we processed 38,449 transactions, an increase of 7.1% from a year ago, which compares favorably to the 3.5% decline in transactions for the entire residential real estate market in the first quarter as reported by National Association of Realtors.
Our market share for Q1 2024 was 4.76%, up 26 basis points year over year and up 35 basis points sequentially from Q4 2023. Historically, we disclosed our principal agent count as an average for each quarter, which reflects the average of the principal agent count as of the end of each of the three months in any given quarter.
We've been consistent with that since our IPO and the logic was to avoid the choppiness that can sometimes occur as a result of using a specific date at the end of the quarter versus an average across the quarter. However, the feedback we've received from many analysts and investors is that this was a confusing metric as it results on a go forward basis will disclose our principal agent count as of the last day of the quarter. On this basis, as of March 31, 2024, we had 14,591 principal agents compared to 13,601 as of March 31, 2023 an increase of 990 year-over-year or 7.3%.
Our team recruited 518 principal agents in the first quarter, which was a strong recruiting quarter for us. Historically, the first quarter tends to be a higher than average quarter for attrition, and we saw that again, this is Q1. Our net principal agent count shows a net decline of 92 in Q1, but this number includes more than 100 principal agents who exited that had no production in the prior 12 months and therefore, their absence will have no impact on our financials.
Let me now turn to our first quarter financial results and our guidance for the second quarter. Our first quarter revenue was $1.05 billion, an increase of 10% from a year ago period, which was towards the higher end of our guidance range of $975 million to $1.075 billion. Gross transaction value was $40.1 billion in the first quarter, an increase of 9.6% from a year ago, reflecting the 7.1% increase in total transactions, combined with a slight increase in average selling price.
Our non-GAAP commission expense as a percent of revenue was 81.8%, an increase of 39 basis points from Q1 of last year. The majority of this or about 25 basis points of the 39 basis points is attributable to the acquisitions we closed since the year ago period that were made in markets with lower average splits than our overall brokerage.
Our total non-GAAP operating expenses, excluding commissions and other related expenses, were $211 million for the first quarter. This reflects a reduction in expense of $32 million or 13% from Q1 a year ago. Even after considering the added expenses, we assumed related to each of the third, the three brokerage acquisitions we completed in 2023 and our Florida Title acquisition this past January.
I'm very pleased with the continued cost discipline in place across the organization. And we've committed to it as a management team and it's become part of the culture of how we operate as a company. That said, it's important to note that Q1 OpEx figure is the low watermark for OpEx for the for the 2024 quarters, as there is some anticipated inflation to consider beginning in Q2 in particular related to the effect of compensation increases for our staff coming out of our annual performance cycle at the end of March.
The additional OpEx we assumed from ladder and Bloom acquisition that closed in April and the seasonal increase in agent marketing expenses typically seen in the second quarter. As a reminder, the non-GAAP operating expenses, we refer to exclude certain expenses that exclude from the calculation of adjusted EBITDA, including stock compensation, depreciation and amortization.
And in this quarter, the $57.5 million charge related to the class-action litigation settlement. We've included tables on page pages 12 and 13 in our Q1 investor deck that reconcile these amounts to our GAAP operating expenses. Our adjusted EBITDA for the first quarter was a negative $20.1 million, which was slightly better than the favorable end of our guidance range of a negative $22 million to negative $40 million and an improvement of 70% over the adjusted EBITDA loss of $67 million a year ago.
Our GAAP net loss for the first quarter was $133 million, which reflects the full charge of the $57.5 million settlement for the class action lawsuit that we previously disclosed. We took the full P&L charge during Q1 however, we expect that half of this amount will be paid in cash in Q2 of 2024 and the other half in Q2 of 2025, free cash flow for the first quarter was positive $5.9 million, which compares very favorably to negative $59 million of free cash flow in the year ago quarter.
It's extremely rewarding to see the results of our efforts over the past two years that have allowed us to generate positive free cash flow in the first quarter, which is a seasonally weak quarter for the brokerage industry as we consider full year performance. It's important to note that our positive cash flow in Q1 is partially due to a couple of timing items that we'll have offsetting effects later in the year. First, many of the fees that are billed to our agents occur at the beginning of the calendar year. So our cash flow in the early part of the year is aided by the timing of when the fees are paid and it will have an offsetting effect later in the year.
Second, we tend to see seasonal impacts to working capital that are favorable in the first two quarters of the year when the cash collections from our brokerage commissions are higher at the end of each of these quarters compared to the beginning of these quarters. The opposite is generally true in Q3 and especially in Q4 when seasonality impacts working capital in a negative way. These two timing items should be neutral for the year, but can create choppiness for individual quarters within the year. For those listening to the call that our modeling cash flow for the year, you should not assume a similar conversion of adjusted EBITDA to free cash flow for the remaining quarters of 2024.
With that said, I have maintained since I started here at Compass that we will be focused on free cash flow. And over the last six quarters, our operations and finance teams are delivering on that relentless focus and the results are becoming more and more evident each quarter. We ended the first quarter with $166 million of cash and cash equivalents on our balance sheet, and we have no outstanding draws on our revolving line of credit. We believe we are well-positioned to react to continued market challenges.
Now turning to our financial guidance for Q2 of 2024, we expect revenue in the range of $1.6 billion to $1.7 billion. And we expect adjusted EBITDA to be in the range of $55 million to $75 million last quarter, we stated that for the full year 2024, we are targeting a non-GAAP OpEx level between $855 to $875 with a midpoint of $865.
As a reminder, the midpoint of this range equates to $850 million for the Company's core OpEx, plus the additional $15 million of OpEx from two acquisitions we closed in September 2023. We are maintaining that range for the current business, but are increasing the range, the total range by $12 million on both low and high end to consider the additional OpEx for the balance of 2024 that we assumed for the latter Bloom acquisition that we just closed in April.
We expect this acquisition to be accretive to adjusted EBITDA in 2024 for the additional OpEx needs to be considered. Additionally, we are reiterating our expectation to be free cash flow positive for the full year of 2024.
I'll end by saying thank you again to our agents and team members for all that you do for Compass. And I would now like to turn the call over to the operator to begin Q&A.

Question and Answer Session

Operator

Thank here. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one. Again, if you are called upon to ask your question and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute. When asking your question again, please press star one to join the queue. Your first question comes from the line of Jason Helfstein of Oppenheimer.
Please, Scott and everybody.

Jason Helfstein

Our two questions are on Robert. Just first, can you give us your thoughts on second half and just broad thoughts as we're all trying to work through our models? And then secondly, it seems like agent productivity improved in the quarter on, was this culling less productive agents for from kind of improvements in workflow or other factors or a combination of both?
Thank you.

Robert Reffkin

Yes.
So on the first question, the the risks, the key constraint to transactions last year, it was in buyer demand.
It was lack of inventory on. So what what is making the part more positive about this year than last year is more inventory, like I mentioned in the call, there's 33% more inventory today than there was this time last year.
It looks like we may have in the weeks ahead, more inventory coming into the market than any time last three years.
And so that that's I mean, it leaves me feeling positive about the second half, of course, mortgage rates do they go to eight A plus? Do they stay where they are? Do they go to the sixes that we'll have is as big of an impact as inventory on.
But assuming that margins stay where they are right now, I would expect the second half of the year to be better than last year, but also keep in mind numbers, second half of last year was 8% mortgage rates. So you had lower inventory.
You had 8% mortgage rates for the first time in well over a decade on and it came in right in front of the fall market. And so it's hard to see circumstances that could lead to it being worse than it was last year. Or another way, no way to say it is hard to see it not being better than it was last year in terms of wire, it is more productive.
We mentioned on the last call, we mentioned on this call as well that we bid on separating ways with agents that are not producing because they take away resources from our other agents who and we have limited resources and we want to give to agents that are that are producing that, that, along with technology and coaching and training, we believe makes them more productive I think we mentioned in the last con call before we have something called that we had something called the back-to-basics challenge.
There's a 100-day challenge for the first 100 days of the year where we had national awards local awards for in total, there are hundreds of different awards and categories on for agents that developed their repeat and referral business. The most through in-person connections on their sort of ways we recommended how they would do that and to login every in-person interaction in the campus platform. And that we believe that also is contributing to the outperformance.

Jason Helfstein

Thank you.

Operator

Your next question comes from the line of Soham bond Class BTAG.
Please go ahead again.

Soham Bhonsle

Good evening from Robert. First, maybe on market share on the unit count side, you know, I guess wondering if you could give us some more color there were certain markets or price points where you think you took more share? And who do you think you're sort of taking share from today?

Robert Reffkin

Yes. So I'm sorry. So retaking again. So let me start with, I think, in down markets the best agents gain market share and the best brokerages gain market share.
It's been that way forever. And we are a company of top agents. Average comes agents sells more than the average age in the country on. And so I think they're gaining market share on balance from lower producers in the industry that are having a harder time competing on at a company level. We are also gaining market share. And I think the the entities that are having a harder time, I would say are the boutique brokerages.
I think over the last five years. It is it requires a brokerage firm is required to offer agents more than they were five years ago. It's more in terms of technology, margins, coaching and training and it's harder for a small firm to be able to stay competitive.

Soham Bhonsle

Got it. And then finally, on the OpEx side, I think you said a 50 at the core, but then acquisitions, you get to get you to a $865 from the 2023 acquisitions. Now you're raising that midpoint, I guess by $12 million. So that's $877 at the midpoint. But I guess I guess the question is, what gets you to the low end of that guide revenues? You've kept the low end sort of still open. So I'm just wondering what gets you there. And then I guess high end, the AITS $887, I guess, I guess is that just more M&A from here?

Kalani Reelitz

Yes.
So and so I think we think about OpEx in those two pieces, right?
The core at eight 50. And I think importantly, we are on track to deliver that. And then the additive and accretive acquisitions.
And I think to answer your question directly, what gets us to the low end, I think we've seen continued diligence right cost for us and cost discipline is an ongoing muscle. Now it is a core competency.
And so we are continuously looking at new ways to cut costs to save costs to just quite frankly, be more efficient. So as I think about the lower end, it's just our continued focus and ability to kind of drive more efficiencies and everything from looking at a eye on marketing robotics in our back office.
We have a lean Six Sigma team are those those folks are working actively.
They can drive us to the bottom of that range. I think the top end is probably to more acquisitions or a bit of some agent expenses. If the if the market comes back and we see some of the small variable marketing expenses pop a little more.

Soham Bhonsle

Okay, and if I could just squeeze one more in, Robert, wondering to get your thoughts on the M&A environment out there. You touched on the boutiques and the challenges there. So maybe are you hearing more concern from them in what could develop going forward and sort of what's your appetite to continue to consolidate? Thank you.

Robert Reffkin

So I'll pass on to quality, but yes. And I speak to the brokerage firm owners. There's more interest in selling to companies than ever before.
And by a huge margin, of course, there's the natural driver of difficult industry dynamics, whether market or the broader dynamics, the ones I addressed earlier on. But I think on top of that, the when I'm speaking to the brokerage owners on what I'm hearing from them say is when agents are coming to campus now they're seeing that they're coming for the technology.
And remember, this is it took $1.6 billion for us to build this and no, because I don't believe it will be built by another brokerage firm. And on this, the unintended consequence, one of the or unforeseen consequences of discontinuing all equity and cash incentive to hire agents is that before brokers from owners would always say, oh, they just came from Money HQ for money.
When we stopped that, then in Asian left, the brokerage owner had to say, oh, there must actually be something better at Compass. And so now they do that now almost two years. I think verbally owners are realizing that we have a real competitive advantage of what we built that isn't just financial. It's value in terms of the value that we can provide agents, they cannot.
But then secondly, the impact of understanding the value of the brokerage of the technology is a lot of brokerage owners. They really care about agents. We all do and they don't want they don't want to merge with or sell to a brokerage firm where they can look their agents. And I and say I promise you like is going to be better on the now that a with the conviction around the platform also is going to market going on the market more broadly, they can look at and nine take trust me. This would be better for you and that really that really changes on the level of interest from Berger donors.
Now I'll pass on to Quantum.

Kalani Reelitz

Yes, I would I would just add a few things.
One is just that excitement.
We're seeing we're seeing the advantage meeting not only from M&A, but also organically, as we mentioned, or one of our highest growth quarters. And so that advantage is organic inorganic, I think, from M&A.
So I'm we we do believe M&A allows us to quickly move into new markets.
You saw that in the latter in blue It also allows us to expand our presence in top markets and grow that inventory. I think we we firmly believe that our ability to amortize our platform across more agents, our ability to drive continuing growth in inventory for us will lead to further margin expansion and value creation.
And I think, look, we're extremely pleased with the partners that we've brought on over the last 12 to 18 months.
And I think you'll see us continue to review accretive deals that are favorable terms to Compass going forward.

Soham Bhonsle

Our next, thank you.

Operator

Your next question comes from the line of Matthew Bouley from Barclays. Please go ahead.

Good evening.
You have an e-catalog here on for Matt. Thanks for taking my questions. And so first off, you know, in your prepared remarks, you spoke to commissions about 5.5% level. I'm just curious, looking ahead where you think this will trend, you assume that this kind of stays the same. And it's just the way that it's communicated and displayed that changes, whereas there may be risks that we can see some further compression.

Robert Reffkin

Yes.
Yes, we just given the sensitive nature of the topic, we're not going to stand on it beyond what we said on the call.

Brilliant.And then my second question, could you speak to some of the cost efforts that you guys have been taking? And maybe if there's like sluggish macro backdrop process, is there a risk that you might pause on some of these efforts and maybe risk your OpEx target takes?
Yes.

Kalani Reelitz

Thanks, Anita, for the question. Look, I think I mentioned in the last questions, Tom, I think from from OpEx and from costs, we started 12, 18 months ago with kind of a need to run cost programs that take cost out of our organization. I think what it has built for us is a core competency around both cost and continuous improvement. We have we have executed about 95% of our activity that's needed to achieve the $850 million of OpEx that core OpEx we talked about in 2024 for the remaining is really just timing items been contracts. I think what's exciting about our cost and our efficiency efforts is we're starting to move from kind of the hard status quo cuts that were needed early early on in the market to more continuous improvement?
Right.
So we have a we have we are looking at and have actually implemented some AI from a marketing standpoint. We're looking at robotics and have automation in our back office. We have a lean Six Sigma team that's really driving process improvement.
And so we'll kind of continue to do this as a regular thing.
I think one, it allows us to be agile. If the market turns, I don't think it slows us down or we stop. I think these are things that actually both cut costs and also make process improvements that we're making it easier for everybody. But it also in good and bad times allows us to fuel our own growth and fund our own growth. And so we'll continue with those types of things if we have to, but we have to move harder faster. I think we've proven our ability to be agile, and it's something we think about almost every day.

Great.
Thank you, both.

Operator

Tim, again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Ryan McKeveny of Zalman. Please go ahead.

Ryan McKeveny

Thank you. Nice job on the quarter. I wanted to go back to letter and Bloom, obviously great brokerage, strong history, a great leadership team. So So congrats on the deal. I guess my question is considering all the noise out there right now, settlements, litigation, et cetera? And maybe some more color on just kind of what gave you the confidence to make that acquisition now and maybe talk to us how you're I'm thinking about the risk reward of acquisitions going forward, that would be kind of part one.
And the second aspect of it, what I think is rather interesting about the deal as well. The Gulf markets are obviously much lower price, significantly lower ASP. in a lot of your geographies. So to some degree, could we think of the Compass platform operating in the same way as existing markets are there differences we should be thinking about in terms of is the opportunity within a lower price market for things like productivity? Any thoughts there would be.
Thank you.

Robert Reffkin

And so on the let me start the second question going to platform and work in the same way on and either they're great agents. They're just like every other market that operate their business on with the same workflows as every other market is the difference is ASP. and but it will be the tools and programs and offerings and platform that we have will help them create success and better serve their buyers and sellers just like every other markets we feel good about that.
On the former question, what gave us confidence? Look, it's a highly it's an accretive deal transaction on with one of the most respected names in the space and with incredible leadership, incredible culture. I'm very proud to come to have them join the Qantas family and consistent with what I shared in my prepared remarks.
We don't view there being as much on fax aren't supporting that as much as happening as the headlines and on and that creates opportunity as well on with our agent, it creates a great option to coach them, train them, make them feel confident. And with other brokerage firms increased, obviously say, hey, let's come together and let's create success together on.
And so I see this for sure more as an opportunity than a challenge this entire environment. And I believe we'll look back a year from now and say that there were some tremendous positives that came out of it.

Ryan McKeveny

It's very helpful. And apologies if I missed this one. I think last quarter you talked about expecting to launch the first phase of Compass client dashboard and 24. Any any updates in that regard?
Thank you.

Robert Reffkin

Yes.
So we were launching our pre-release test in Q4 on and and we're very excited. Thanks for asking about it. I believe it can be a transformational moment for the company and to our agents for sure, as we give them a huge edge on and on, it will be great for clients it will be the first thing, 95% of what we built. You can go to canvas.com and see as many as a consumer buyer seller because it's all for agents.
This will be something that the public will be able to see the column resolves that agents are almost too good at their job.
They hide the clients from your pain because that's because you're trying not to stretch them out.
There's so much going on.
And so at the end of a transaction, does the buyer seller today? Remember all that Eaton has done for them to remember all the phone calls, all the e-mails, all the tax, how quickly they respond, how early in the morning and late at night.
So they remember how many valuation report CMA's acreage.
They remember how many companies collections they had, how many tours they took on, how many open houses they performed, how many people came to us have announced that they had negotiated with how many different people they had a scheduled appointments with how many people they negotiated on it that they negotiated for on their behalf they don't even tell them all the time to negotiate trying to make things happen on. And so this what this will do is put the majority of those events in a beautiful client dashboard that will almost be like a visible visual receipt of all the agent has done for them, durably three different buckets.
One, the entire waiting for this for buyers and several hundred sellers, but the first bucket we call it time lines in task.
So the entire process time line memory we talked earlier about agents are actually project managers managing a highly complex branches across multiple months, gradually up to upwards of a dozen different people.
The entire process will be there.
And again, chart form just like when merger and investment bankers and meet with people. When I was in investment banking, we had the Gant chart an entire process, and David coordinate the lawyers and accountants on that will all be visual in this place with all the tasks and who does what Second are the documents solid documentation from the beginning, middle to the end of the transaction, Libby narrow in place.
Lastly, it will be all of the things that the agent is currently sending to them by e-mail will be living in there.
And that would be the all the digital Torsades, the CMA's the current campus collections to lifting insights to open house report and feedback and much more. But we're really excited by that again, believe it will give the company agents a huge edge in helping to communicate their value. And I believe it's the kind of thing that when buyers and sellers at the end, the transaction on that for them, it will be the kind of thing that will encourage them to even more referred our agents to their friends.

Ryan McKeveny

Great to hear.
Thank you, Robert.

Operator

Your next question comes from the line of Ben black of Deutsche Bank. Please go ahead.

Hi, this is Jeff Steiner on for Ben. Thanks for taking my question on. Can you just kind of give an update on how you're thinking on the commission splits trends over the immediate to sort of long term, just given some of the moving parts like recent broker acquisitions, I mean the current principal agent growth and then maybe sort of what's coming down the pike with the regulatory front in the on air settlement to extent maybe that fixed increase, you talked about increased training needs or increased red tape? Or any thoughts on how that's going, we may or may not have an impact on kind of the commission splits going forward?

Robert Reffkin

I'll let Galante answer more broadly.
But I do believe that brokerage firms will be more valuable to agents because of the NR settlements than before.
And here's why this historically, every almost every agent has a listing presentations again, I'm an investment banker.
I mean, would you I'm pitching myself and pitching the company? What can I do for you? What can the Company do for you or the company has international, both on network, all that stuff, relationships everywhere and then you go into the valuation and here's the process time line and on the agents have a listing position where when you go with the seller, they say here's why you want to look. I mean, I've been in business for 10 years. I do all this in your neighborhood on ag.
Here's my team, then it goes to brokerage and the brokerage for December. We have international exposure a little at Compass. We are we have more we're a we are in number one in more top markets than any other brokerage firm in the country.
And we have and for you as a seller we have listening in, we have listening insights we have open house to have to give you feedback. We have collections for valuations and CNA's management tools.
We have competency years.
We can front load the cost of staging some of your home move-in ready. So that is because people today want things they want to pick up their bags from your go to Dallas and drop them and they don't want to renovate homes on this at the end. They also need that they don't have vision to see what the phase will look like.
So you stage it sort of looks select elegant and then it will sell for more money and less time. And so those are some examples of in that listing presentation how you talk about on the company and those words are Compass' containers and the tools and the national network on. But when it comes to buyers historically, I'd say less than 5% of agents, much less than 1% of agents have a presentation for buyers.
I believe the reason why that is is because historically agents weren't asking for buyers to sign as much of the compensation agreement upfront as they were, of course, with sellers.
That's where the money is. But now that's moving to buyers on to buyers as well as the bank's reputation where it will include compensation in all of these agreements. And so that is making agents feel like they need to have a buyer presentation says, here's where you want to look. I mean, here's one of my company.
And that's why I referenced earlier.
Well, you want to work with me and my company because what my company is a low inventory environment and Compass has access to more unique inventory than almost any other brokerage firm because of competition coming to the chemist private exclusives.
Oh, I can also help you is highly complicated process and a lot of almost all the other brokerage firms there is going to have to send you links of liftings from different sites beyond your text message and what's happening on the very comforted here, everything will be encompass collections will make it really simple for you.
And by the way, if you want your spouse or your daughter or your or your mom or dad to be on it, everyone could be on and look at it exact same time we could all comment is like a Pinterest board for on the buyer, the buyer process and of course, digital tours sheets.
So you know where you're going is on your phone after you've gone, it's all recorded in the digital tour sheet and some of the other tools like client dashboard are coming soon. So I say all that to highlight that brokerages will be more valuable to agents going forward because you'll need them not just for the seller conversation, but for the buyer conversation on and because of that, I think it will empower brokerages. They have a good value proposition to buyers who will empower them to charge a fair split and that's on declining?

Kalani Reelitz

Yes, no, well said, Robert, I think long term for all the reasons Robert said, I do think though, as a brokerage, we will provide more and more value to agents, I think you should and we do expect margin over time to increase for all the reasons Robert mentioned, plus the mix as we continue to recruit the right set of agents and balance that portfolio as well as our title and escrow and our overall integrated services continue to grow. We think there's a tremendous opportunity there. So I think long term, we see lots of tailwinds.
I think as we think about short term, we're going to kind of see headwinds and tailwinds, you know, pretty cross each other out a little bit in the short term, right, that the headwinds for us in it from a rate perspective in 24 is going to be M&A.
So the acquisitions that we did in September and including that in Bloom will have some impact. If you think about the it declined this quarter?
Yes, two thirds of it was M&A that will continue. And then I think we do see some headwinds on just geographic mix, for example, the other third, the majority of the remaining drag on year over year is geographic mix. Really our East Coast, New York being becoming a slightly smaller part of our portfolio in Japan, offsetting some of the with favorable margins there.
So yes, I think short term, we can expect kind of headwinds and tailwinds cards further out.
But I definitely think over time and expect over time for margin to be accretive to us for all of those reasons as we drive more value for our agents.

Ryan McKeveny

Great.
That was really helpful. But maybe quickly, just in a similar vein, given all the given all the benefits, Robert, that you highlighted and maybe helping agents navigate this regulatory landscape. And I know you obviously you guys have been acquisitive in the recent in recent times.
Do you think this regulation could almost be a driver of like industry consolidation and going forward around the brokers who maybe have the capabilities or the ability to offer and provide that platform for agents to kind of succeed and sort of under the new rules?

Robert Reffkin

Yes, it's hard for me to see a scenario where in the years to come, there's not near record levels of industry consolidation.

Ryan McKeveny

That's really helpful.
Thank you.

Operator

And we have a follow-up question from Soham Barnsley of BTAG. Please go ahead.
Again.

Soham Bhonsle

This is really less of a question more just something that we've been thinking about and it's around the idea that look historically no brokers you win when they had a listing that would go on the MLS and then you would then get syndicated to the portals out there.
But as we sort of go forward, I mean the power I'm just trying to think about the shift in power here because at the end of the day, the listing sits with the brokerage and you guys can decide sort of where you want to put that in the MLS debatable, right? What's the value there long term, right will agents continue to go down or maybe you have a view there, but I'm just curious on your thoughts around them.
You touched on Robert's sort of off market listings and maybe a private listing services and things like that. So I'm curious like where do you see that going? Is there an opportunity here for you to maybe even monetize some of the listings in a different way than you ever did before. So just curious, that's an open-ended question.

Robert Reffkin

Yes.
So let me start by sharing why private exclusives are valuable for some sellers as well as coming to private squeezes mean that there off market not searchable on in the public domain on the right, one of the reasons why he's days on market is the killer of value, the he's the he's foreseen sellers to show price drop. History is the killer value because if you're a seller, you wanted to aspirationally listed for I'm just for a number. And then you have the big buyers aren't there.
You do a price drop BioSante, they're doing the price rather than the sharks come out.
And so we have a fiduciary responsibility to our sellers to help them maximize value and drive exclusives at our are even allow you to test the market privately as opposed to publicly.
You've got pricing parties with your agents where you bring them in and then you can test that you can test the market and pricing also you shouldn't have to sell your privacy to sell your home if you want to sell your own solution to sell your privacy. But those are some of the reasons why the why Travis cruises are good for sellers coming soon on the in.
We see them a lot in certain markets and less so in others coming to do is they create tension. So think about a movie trailer neutral as our launch their first trailer three days before the first showing like people do it open houses and they launched Maybe the first one or two months before the 17nd trailer then a month later with a thirty seconds rather than a week before you have a minute trailer, then you get a line around the block to the movie coming soon to recommend to strategy two months a month before with one photo, then you add more photos and more content and more descriptions.
And then backing that tension created a line around the block for a home to get a lot of people to that open house. It also when you look at them, the most sophisticated people and real estate because the developers they can sell a home office floor plans.
And what they do is they say, hey, it's not it's not fully available yet and embedded. It is just a floor plans.
We want to come and I can show it to you.
I was going to go to live is going to be complete live in two months.
But if you want to put an offer now you can decrease tension. And so these are we is it seen agents are have to be professional marketers to maximize home value sales for sellers that the fiduciary responsibility is I just wanted to share that on and on and I.

Soham Bhonsle

Yes, look, I appreciate the question.

Robert Reffkin

Thank you.

Operator

There are no further questions. I will now turn the conference back over to Robert Keane for closing remarks.

Robert Reffkin

Thank you for joining today's call and in the midst of this difficult residential real estate market.
We have aggressively taken control over what we can control and made come back stronger than ever.
It is starting to show in our financial results. I'm very passionate about what we are doing. And hopefully, as you can see one day, we will return to a normal market and the hard work we have put in as agents and employees at Columbus will lead to even greater success.
Thank you.

Operator

Ladies and gentlemen, that concludes today's call and thank you all for joining. You may now disconnect.