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What changed in Compass, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Compass, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+381 added−437 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in Compass, Inc.'s 2023 10-K

381 paragraphs added · 437 removed · 323 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

67 edited+5 added−35 removed42 unchanged
Biggest changeOur platform includes an integrated suite of cloud-based software for customer relationship management, marketing, client service, brokerage services and other critical functionalities, all custom-built for the real estate industry and enabling our core brokerage services. The platform also uses proprietary data, analytics, artificial intelligence, and machine learning to deliver high-value recommendations and outcomes for Compass agents and their clients.
Biggest changeOur Business and Business Model We provide an end-to-end platform that empowers our residential real estate agents to deliver exceptional service to seller and buyer clients. Our platform includes an integrated suite of cloud-based software for customer relationship management, marketing, client service, brokerage services and other critical functionalities, all custom-built for the real estate industry.
Some companies may attempt to assemble various aspects of solutions that overlap with our offering, including: • vertical SaaS technology companies; • enterprise technology bellwethers; • real estate financial services; and • real estate brokerage firms.
Some companies may attempt to assemble various aspects of solutions that overlap with our offering, including: • real estate brokerage firms; • vertical SaaS technology companies; • enterprise technology bellwethers; and • real estate financial services.
Beginning in 2020, we expanded our title and escrow offerings to provide our agents’ clients with a more integrated, service-oriented solution and, in 2021, we launched OriginPoint, our residential mortgage origination joint venture with Guaranteed Rate, to provide an integrated service-oriented mortgage offering to our agents’ clients.
Beginning in 2020, we expanded our title and escrow offerings to provide our agents’ clients with a more integrated, service-oriented solution and, in 2021, we launched OriginPoint, our residential mortgage origination joint venture with Guaranteed Rate, to provide a service-oriented mortgage offering to our agents’ clients.
Advising Buyers Our platform enables agents to locate desirable properties at attractive prices for buyers. Our agents provide clients with access to comprehensive inventory, including private listings, help them understand local market dynamics, tour properties, prepare and close offers, and better manage the overall home buying process.
Our platform also enables agents to locate desirable properties at attractive prices for buyers. Our agents provide clients with access to comprehensive inventory, including private listings, help them understand local market dynamics, tour properties, prepare and close offers, and better manage the overall home buying process.
Human Capital Management At Compass, we believe that our long-term success is based on attracting, developing and retaining a diverse group of employees who espouse our entrepreneurship principles which define our culture: dream big; move fast; learn from reality; be solutions-driven; obsess about opportunity; collaborate without ego; maximize your strengths; and bounce back with passion.
Human Capital Management At Compass, we believe that our long-term success is based on attracting, developing and retaining a diverse group of employees who espouse our entrepreneurship principles which define our culture: dream big; move fast; learn from reality; 6 Table of Contents be solutions-driven; obsess about opportunity; collaborate without ego; maximize your strengths; and bounce back with passion.
From time to time, we intend to announce material information to the public also through the investor relations page on our website, press releases, public conference calls, public webcasts, and our Twitter feed (@Compass), our Facebook page, our LinkedIn page, our Instagram account, our YouTube channel, and Robert Reffkin’s Twitter feed (@RobReffkin) and Instagram account (@robreffkin).
From time to time, we intend to announce material information to the public also through the investor relations page on our website, press releases, public conference calls, public webcasts, and our X (formerly Twitter) feed (@Compass), our Facebook page, our LinkedIn page, our Instagram account, our YouTube channel, and Robert Reffkin’s X feed (@RobReffkin) and Instagram account (@robreffkin).
As we continue to build everything agents need in a single, integrated platform, we believe more great agents will continue to come to Compass. As more great agents join us, we believe our platform will help them provide great experiences to more of their buyer and seller clients.
As we continue to build everything agents need in a single, integrated platform, we believe more high-performing agents will continue to come to Compass. As more high-performing agents join us, we believe our platform will help them provide great experiences to more of their buyer and seller clients.
Our business faces competition nationally and in each of the markets we serve from other technology companies and real estate brokerage firms, including a growing number of internet-based brokerages and others who operate with a variety of business models.
Our business faces competition nationally and in each of the markets we serve from other real estate brokerage firms, including a growing number of internet-based brokerages and others who operate with a variety of business models.
Our AI-powered comparative market analysis (“CMA”) tool enables agents to optimize pricing strategies for clients, leveraging data on past sales and current listings to suggest representative comparable properties. Agents can also use our platform to conduct virtual tours and livestream open houses through our Open House app to ensure listings receive ample attention.
Our AI-powered comparative market analysis, or CMA tool enables agents to optimize pricing strategies for clients, leveraging data on past sales and current listings to suggest representative comparable properties. Agents can also use our platform to conduct virtual tours and livestream open houses through our Open House app to ensure listings receive ample attention.
The program has successfully unlocked incremental transactions for our agents, delivered higher sale prices and reduced selling times for our agents' seller clients and also helped us attract high-performing agents to our platform.
We believe the program has successfully unlocked incremental transactions for our agents, delivered higher sale prices and reduced selling times for our agents' seller clients and also helped us attract high-performing agents to our platform.
Marketing Center provides agents a powerful suite of tools they can use to easily create tailored marketing materials and execute marketing campaigns for any listing, seamlessly connecting to a multimedia repository containing a listing description, photos and floorplan, across digital, social, email, video and print channels, helping them attract buyers.
Marketing Center provides agents a powerful suite of tools they can use to easily create tailored marketing materials and execute marketing campaigns for any listing, seamlessly connecting to a multimedia repository containing a listing description, photos and floor plan, across digital, social, email, video and print channels, helping them attract buyers.
For example, Compass Concierge, which provides home sellers access to interest-free capital to front the cost of home improvement services, is designed to increase the sale value of the home and decrease the time on market.
For example, Compass Concierge, which provides home sellers access to capital to front the cost of home improvement services, is designed to increase the sale value of the home and decrease the time on market.
Two such examples are Team Collaboration, which allows agents to collaborate with any member of their team on any of their transactions, and Checklists, which enable agents to configure a set of tasks that get automatically applied to every transaction and can be assigned to specific members of their team. • Marketing Content Creation and Management.
Two such examples are Team Collaboration, which allows agents to collaborate with any member of their team on any of their transactions, and Checklists, which enable agents to configure a set of tasks that get automatically applied to every transaction and can be assigned to specific members of their team. 4 Table of Contents • Marketing Content Creation and Management.
Our benefits package includes base pay, bonus programs for selected roles, long-term equity grants, health, dental and vision insurance plans, fertility benefits, life and disability insurance benefits, paid time off (including vacation, a community service day, and paid parental leave), as well as other benefits, such as access to mental health resources, and the ability to participate in a broad-base 401K plan.
Our benefits package includes base pay, bonus programs for selected roles, long-term equity grants, health, dental and vision insurance plans, fertility benefits, life and disability insurance benefits, paid time off (including vacation, a community service day, and paid parental leave), as well as other benefits, such as access to mental health resources, an employee stock purchase plan and the ability to participate in a broad-base 401K plan.
With a broad array of integrated features, elegant templates and design capabilities, our Marketing Center allows agents to rapidly create, advertise and 6 Table of Contents promote their listings at scale through the channel of their choosing: digital, social, email, video, print or signage.
With a broad array of integrated features, elegant templates and design capabilities, our Marketing Center allows agents to rapidly create, advertise and promote their listings at scale through the channel of their choosing: digital, social, email, video, print or signage.
We generally enter into confidentiality agreements and invention or work product assignment agreements with our officers, employees, agents, contractors, and business partners to control access to, and clarify ownership of, our proprietary information. As of December 31, 2022, we had more than 40 trademark registrations and applications in the United States, including registrations for “Compass” and the Compass logo.
We generally enter into confidentiality agreements and invention or work product assignment agreements with our officers, employees, agents, contractors, and business partners to control access to, and clarify ownership of, our proprietary information. As of December 31, 2023, we had more than 42 trademark registrations and applications in the United States, including registrations for “Compass” and the Compass logo.
We have a dedicated team that works with a variety of stakeholders, including our brokers of record, to help manage and comply with these rules and policies. 11 Table of Contents Intellectual Property The protection of our technology and intellectual property is an important aspect of our business.
We have a dedicated team that works with a variety of stakeholders, including our brokers of record, to help manage and comply with these rules and policies. Intellectual Property The protection of our technology and intellectual property is an important aspect of our business.
Given a significant amount of an agent’s time is spent away from their desk, our powerful iOS and Android mobile apps allow agents to take advantage of our platform, no matter where they are. The efficiencies that agents gain from adoption of our technology give them the opportunity to spend more time with clients.
Given a significant amount of an agent’s time is spent away from their desk, our powerful iOS and Android mobile apps allow agents to take advantage of our platform, no matter their location. The efficiencies that agents gain from adoption of our technology give them the opportunity to spend more time with clients.
With Compass Collections, a curated visual workspace, Compass agents and their clients can easily find and organize homes of interest and then tag and discuss specific properties through an integrated chat feature. With near real-time search alerts and notifications, clients can monitor new listings and gain an edge in securing properties of interest.
With Compass Collections, a curated visual workspace, Compass agents and their clients can easily find and organize homes of interest and then tag and discuss specific properties through an integrated chat feature. With near real-time search alerts and notifications, clients can monitor new listings.
Given the unique nature of each property, location, buyer, seller, negotiation, title and financing, a real estate agent’s role as the driver of the majority of the workflow is indispensable.
Given the unique nature of each property, location, buyer, seller, 3 Table of Contents negotiation, title and financing, a real estate agent’s role as the driver of the majority of the workflow is indispensable.
When advising a seller, our services to the agent extend beyond the sale of the home. In preparing for and closing the transaction, our agents can use our platform to recommend adjacent services to clients such as title, escrow and mortgage services in certain markets and referrals to service providers post-closing.
When advising a seller, our services to the agent extend beyond the sale of the home. In preparing for and closing the transaction, our agents can, with one click, use our platform to recommend integrated services to clients such as title and escrow and mortgage in certain markets and referrals to service providers post-closing.
We build beautifully designed consumer-grade user interfaces, automated and simplified workflows for agent-client interactions, and insight-rich dashboards and reports backed by artificial intelligence and integrated data assets. We empower our agents with capabilities such as: • Customer Relationship Management.
We build beautifully designed consumer-grade user interfaces, automated and simplified workflows for agent-client interactions, and insight-rich dashboards and reports backed by AI, machine learning and integrated data assets. We empower our agents with capabilities such as: • Customer Relationship Management.
Title and Escrow Services Our title and escrow businesses provide – through a growing network of agents – full-service title and escrow/settlement services to real estate agents’ clients, real estate companies, and financial institutions relating to the closing of home purchases as well as the refinancing of home loans.
Title and Escrow Services Our title and escrow businesses provide full-service title and escrow/settlement services to real estate agents’ clients, real estate companies, and financial institutions relating to the closing of home purchases as well as the refinancing of home loans.
Other Real Estate Industry Rules. Aside from federal, state and local regulations, we are subject to a variety of rules promulgated by trade organizations including the NAR, state and local associations of REALTORS, and Multiple Listing Services (“MLSs”).
Other Real Estate Industry Rules Aside from federal, state and local regulations, we are subject to a variety of rules promulgated by trade organizations including the NAR, state and local associations of REALTORS, and MLSs.
In 2023, we plan to deepen our presence in our existing markets. Mortgage Joint Venture In July 2021, we and Guaranteed Rate, which is one of the nation’s largest retail mortgage companies, by and through our respective subsidiaries, formed OriginPoint, a residential mortgage origination company, which commenced operations in Chicago, Illinois in December 2021.
Mortgage Joint Venture In July 2021, we and Guaranteed Rate, which is one of the nation’s largest retail mortgage companies, by and through our respective subsidiaries, formed OriginPoint, a residential mortgage origination company, which commenced operations in Chicago, Illinois in December 2021.
Some of these competitors provide similar services or products to us, including: • providing software and technological innovation for agents, including marketing and CRM tools; • brokering transactions for home buyers and sellers; • providing tools to agents associated with real estate data aggregation; and • providing adjacent products associated with residential real estate transactions, such as title and escrow and mortgage origination.
Some of these competitors provide similar services or products to us, including: • brokering transactions for home buyers and sellers; • providing tools to agents associated with real estate data aggregation; and • providing integrated services products associated with residential real estate transactions, such as title and escrow and mortgage origination.
Our differentiated focus on the agent enables us to deliver a premier brokerage and technology-enabled agent experience at scale. 9 Table of Contents Regulation Regulation of the Brokerage Industry State Regulation. Brokerage businesses are primarily regulated at the state level by agencies dedicated to real estate matters or professional services.
Our differentiated focus on the agent enables us to deliver a premier brokerage and technology-enabled agent experience at scale. Regulation Regulation of the Brokerage Industry State Regulation. Brokerage businesses are primarily regulated at the state level by agencies dedicated to real estate matters or professional services. Real estate brokerage licensing laws vary widely from state to state.
It also leverages artificial intelligence to provide recommendations and insights, and integrates with other parts of our platform such as Marketing Center to create engaging content. • Business Tracker. Released in January 2021, Business Tracker provides agents with a centralized view of their entire business.
It also leverages AI to provide recommendations and insights, and integrates with other parts of our platform such as Marketing Center to create engaging content. • Business Tracker. Business Tracker provides agents with a centralized view of their entire business.
Home sellers can access funds to prepare their home for sale through Compass’ partnership with an independent third-party lender. In addition, in early 2023, we also initiated pilots with several alternative third-party service providers to help our agents' clients prepare their homes for listing and sale.
Home sellers can access funds to prepare their home for sale through Compass’ partnership with an independent third-party lender. In addition, since early 2023, we have maintained alternative home improvement programs with several third-party service providers to help our agents' clients prepare their homes for listing and sale.
Our business model is directly aligned with the success of our agents. We attract agents to our brokerage and partner with them as independent contractors that affiliate their real estate licenses with us, operating their businesses on our platform and under our brand.
Compass agents utilize the platform to grow their businesses, save time and manage their businesses more effectively. Our business model is directly aligned with the success of our agents. We attract agents to our brokerage and partner with them as independent contractors that affiliate their real estate licenses with us, operating their businesses on our platform and under our brand.
We provide title and escrow/closing services under a multitude of local brands. As of December 31, 2022, we operated five distinct, regional title agencies: KVS Title, LLC, LegacyTexas Title Co., First Alliance Title, LLC, CommonGround Abstract, LLC d/b/a SQS Square Settlements and Consumer's Title Company of California, Inc., as well as one standalone escrow business, Chartwell Escrow, Inc.
As of December 31, 2023, we operated five distinct, regional title agencies: KVS Title, LLC, LegacyTexas Title Co., First Alliance Title, LLC, CommonGround Abstract, LLC d/b/a SQS Square Settlements and Consumer's Title Company of California, Inc., as well as one standalone escrow business, Chartwell Escrow, Inc.
Item 1. Business. Our Company Compass, Inc. (the “Company”) was incorporated in Delaware on October 4, 2012 under the name Urban Compass, Inc. On January 8, 2021, the board of directors of the Company approved a change to the Company’s name from Urban Compass, Inc. to Compass, Inc.
Item 1. Business. Our Company Compass, Inc. (the “Company”) was incorporated in Delaware on October 4, 2012 under the name Urban Compass, Inc. On January 8, 2021, the board of directors of the Company approved a change to the Company’s name from Urban Compass, Inc. to Compass, Inc. The Company has been based in New York City since its incorporation.
Regulation of the Mortgage Industry The mortgage industry is a heavily regulated industry and private mortgage lenders operating in the U.S. are required to comply with a wide array of federal, state and local laws and regulations that regulate, among other things, the manner in which mortgage companies, including our mortgage joint venture, OriginPoint, can operate their loan origination and servicing businesses, the fees such companies may charge, and the collection, use, retention, protection, disclosure, transfer and other processing of personal information. 10 Table of Contents OriginPoint is required to be licensed in all relevant jurisdictions in which it operates and to comply with the respective laws and regulations of each such jurisdiction, as well as with applicable judicial and administrative decisions.
Regulation of the Mortgage Industry The mortgage industry is a heavily regulated industry and private mortgage lenders operating in the U.S. are required to comply with a wide array of federal, state and local laws and regulations that regulate, among other things, the manner in which mortgage companies, including our mortgage joint venture, OriginPoint, can operate their loan origination and servicing businesses, the fees such companies may charge, and the collection, use, retention, protection, disclosure, transfer and other processing of personal information.
The Fair Housing Act prohibits discrimination in the purchase or sale of homes and applies to real estate brokers and agents, among others. The Fair Housing Act prohibits expressing any preference or discrimination based on race, religion, sex, disability, and certain other protected characteristics, and applies broadly to many forms of advertising and communications.
The Fair Housing Act prohibits expressing any preference or discrimination based on race, religion, sex, disability, and certain other protected characteristics, and applies broadly to many forms of advertising and communications.
These laws and regulations generally prohibit competitors from fixing prices, boycotting competitors, dividing markets, or engaging in other conduct that unreasonably restrains competition.
The penalties for violating antitrust and competition laws can be severe. These laws and regulations generally prohibit competitors from fixing prices, boycotting competitors, dividing markets, or engaging in other conduct that unreasonably restrains competition.
Available Information We make available free of charge on our investor relations page on our website, www.compass.com, filings we make with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and our Proxy Statements, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC.
We intend to continue to evaluate the benefit of patent protection with respect to our technology, and will file additional applications when we believe it will be beneficial. 9 Table of Contents Available Information We make available free of charge on our investor relations page on our website, www.compass.com, filings we make with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and our Proxy Statements, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC.
The ability to create great client experiences drives continued business for agents with repeat and referral clients. This ultimately generates more revenue for the agent, and in turn, for Compass, which enables us to invest more into enhancing the platform.
The ability to create great client experiences drives continued business for agents with repeat and referral 5 Table of Contents clients. This ultimately generates more revenue for the agent, and in turn, for Compass, which enables us to invest more into enhancing the platform. These investments further empower agents to grow their businesses efficiently and effectively.
Under the Dodd-Frank Act, the CFPB is authorized to engage in rulemaking and examination activity with respect to consumer financial products and services (including mortgage finance) and to enforce compliance with federal consumer financial laws, including TILA and RESPA. The CFPB has issued myriad rules, including TILA-RESPA Integrated Disclosure rules, which impose significant obligations on OriginPoint.
Under the Dodd-Frank Act, the CFPB is authorized to engage in rulemaking and examination activity with respect to consumer financial products and services (including mortgage finance) and to enforce compliance with federal consumer financial laws, including TILA and RESPA.
Through our Marketing Center, agents can market their own personal brands by creating marketing collateral – digital ads, videos, listing presentations, email newsletters, print advertising and signage – as well as execute marketing campaigns, with mere minutes of effort.
Through our Marketing Center, agents can market their own personal brands by creating marketing collateral – digital ads, videos, listing presentations, email newsletters, print advertising and signage – as well as execute marketing campaigns, with mere minutes of effort. Our platform also enables agents to sell more homes in less time for a better price.
Agents can set up very precise saved search alerts for their clients to notify them of new listings that match their criteria in near real-time in the mobile app and in email. • Agent-Client Collaborative Home Search.
Our proprietary search algorithm and database simplifies and enhances the ability for Compass agents to find homes best suited for their clients’ needs. Agents can set up very precise saved search alerts for their clients to notify them of new listings that match their criteria in near real-time in the mobile app and in email. • Agent-Client Collaborative Home Search.
Antitrust litigation has been brought against other brokerages and real estate associations regarding the requirement to offer set buy–side commissions. If these cases are successful, that could affect the amount of buy-side commissions we are required to offer on listings, and how much we are able to earn on transactions where our agents represent the buyer.
If these cases are successful, that could affect the amount of buy-side commissions we are required to offer on listings, and how much we are able to earn on transactions where our agents represent the buyer.
According to NAR’s 2022 Profile of Home Buyers and Sellers, 86% of home sellers and 86% of home buyers use a real estate agent or broker - levels that have remained consistent over the last 10 years, with 2012 levels at 88% and 89%, respectively.
According to NAR’s 2023 Profile of Home Buyers and Sellers, 89% of home sellers and 89% of home buyers used a real estate agent or broker - levels that have remained consistent since our inception, with 2012 levels at 88% and 89%, respectively.
These laws and regulations generally detail minimum duties, obligations, and standards of conduct, including requirements related to contracts, disclosures, record-keeping, local offices, trust funds, agency representation, advertising, and fair housing.
All licensed market participants, whether individuals or entities, must follow the jurisdiction’s real estate licensing laws and regulations. These laws and regulations generally detail minimum duties, obligations, and standards of conduct, including requirements related to contracts, disclosures, record-keeping, local offices, trust funds, agency representation, advertising, and fair housing.
In each of the jurisdictions where our business operates, we have designated a properly licensed broker as the broker of record and, where required, we also hold a corporate real estate broker’s license. Federal Regulation. Several federal laws and regulations govern the real estate brokerage business, including federal Fair Housing Act and the Real Estate Settlement Procedures Act (“RESPA”).
In each of the jurisdictions where our business operates, we have designated a properly licensed broker as the broker of record and, where required, we also hold a corporate real estate broker’s license. 7 Table of Contents Federal Regulation.
Housing is the single largest consumer expenditure in the U.S., and homes are often a substantial source of household wealth. Selling and buying a home is one of the most significant, and often one of the most complex, time consuming, and consequential financial events in an individual’s life.
Selling and buying a home is one of the most significant, and often one of the most complex, time consuming, and consequential financial events in an individual’s life.
We are simplifying today’s complex, paper-driven, antiquated workflow to empower real estate agents to deliver an exceptional experience to every buyer and seller. Our platform is tailored to the real estate industry and combines integrated software with, in certain markets, value-added services, such as title and escrow and mortgage origination. We designed our platform for simplicity and flexibility.
Our platform is tailored to the real estate industry and combines integrated software with, in certain markets, value-added services, such as title and escrow and mortgage. We designed our platform for simplicity and flexibility.
None of our employees are represented by a labor organization or are party to a collective bargaining arrangement. We offer market-competitive compensation and benefits to our employees. We strive to offer a comprehensive benefit package and evaluate and supplement our benefits periodically.
We offer market-competitive compensation and benefits to our employees. We strive to offer a comprehensive benefit package and evaluate and supplement our benefits periodically.
Attracting and Retaining Clients Our platform provides a strong foundation for agents to create and foster client relationships. Our powerful customer relationship management (“CRM”) platform enables agents to develop automated yet customizable “drip campaigns” to stay in touch with their contacts at key moments over time.
Our powerful customer relationship management, or CRM, tool enables agents to develop automated yet customizable “drip campaigns” to stay in touch with their contacts at key moments over time.
These additional services support and service the needs of home buyers and sellers at various touch points of the residential real estate purchase process. We entered into the adjacent services market in 2018.
Integrated Services We complement our technology platform with integrated services that make our agents more successful and give them more tools to better serve their clients. These additional services support and service the needs of home buyers and sellers at various touch points of the residential real estate purchase process. We entered into the integrated services market in 2018.
In all states, licensed agents must be affiliated with a broker of record, managing broker, designated broker or similar licensee (a “broker of record”) to engage in licensed real estate brokerage activities. Generally, a brokerage must obtain a corporate real estate broker license, although in some jurisdictions the licenses are personal to individual brokers.
Generally, all individuals and entities acting as real estate brokers or salespersons must be licensed in each state where they operate. In all states, licensed agents must be affiliated with a broker of record, managing broker, designated broker or similar licensee (a “broker of record”) to engage in licensed real estate brokerage activities.
As of December 31, 2022, OriginPoint has received license approval in 33 states. 8 Table of Contents Compass Concierge Compass Concierge is a program in which we provide home sellers access to interest-free capital to front the cost of home improvement services.
The warehouse lines maintained by OriginPoint are collateralized by the underlying mortgages available for sale and are non-recourse to Compass. As of December 31, 2023, OriginPoint has received license approval in 36 states and Washington D.C. Compass Concierge Compass Concierge is a program in which we provide home sellers access to capital to front the cost of home improvement services.
Our employees and agents use our principles to help guide their work experience and align with our mission of helping everyone find their place in the world. As of December 31, 2022, we had 3,191 employees across our innovation hubs in New York and Seattle, as well as other locations throughout the U.S. and internationally.
Our employees use our principles to help guide their work experience and align with our mission of helping everyone find their place in the world. As of December 31, 2023, we had 2,549 employees across the U.S. and internationally. None of our employees are represented by a labor organization or are party to a collective bargaining arrangement.
These businesses have a combined presence across seven states (California, Colorado, Texas, Maryland, Virginia, New Jersey, and Pennsylvania) and Washington, D.C.
These businesses have a combined presence across seven states (California, Colorado, Texas, Maryland, Virginia, New Jersey, and Pennsylvania) and Washington, D.C. In 2024, we plan to remain opportunistic about adding additional title and escrow agencies and expanding our title and escrow operations in, and beyond, our current geographies.
We currently generate substantially all of our revenue from commissions paid to us by our agents' clients at the time that a home is transacted on our platform, which agents use to assist home sellers and buyers in listing, marketing, selling and finding homes as well as through the provision of services adjacent to the transaction, such as title, escrow and mortgage.
We currently generate substantially all of our revenue from commissions paid to us by our agents' clients at the time that a home is transacted on our platform.
Antitrust and Competition Laws Our business is subject to antitrust and competition laws in the various jurisdictions where we operate, including the Sherman Antitrust Act, the Federal Trade Commission Act and the Clayton Act and related federal and state antitrust and competition laws in the U.S. The penalties for violating antitrust and competition laws can be severe.
The CFPB has issued myriad rules, including TILA-RESPA Integrated Disclosure rules, which impose significant obligations on OriginPoint. 8 Table of Contents Antitrust and Competition Laws Our business is subject to antitrust and competition laws in the various jurisdictions where we operate, including the Sherman Antitrust Act, the Federal Trade Commission Act and the Clayton Act and related federal and state antitrust and competition laws in the U.S.
In many markets, clients typically look to their agents to refer them to the highest quality providers of these types of services after the purchase contract is signed. In 2022, our title and escrow businesses were involved in a number of transactions involving our agents and also saw significant business from non-Compass brokerages, consumers, and outside sources.
In many markets, clients typically look to their agents to refer them to the highest quality providers of these types of services after the purchase contract is signed. We provide title and escrow/closing services under a multitude of local brands.
Through December 31, 2022, we had partnered with our agents and sellers on Compass Concierge projects totaling approximately $978 million with an average project size of approximately $29,400. Compass Concierge homes have accounted for over $42 billion in Gross Transaction Value for Compass.
Since inception and through December 31, 2023, we had partnered with our agents and sellers on Compass Concierge projects totaling approximately $1.14 billion, with an average project size of approximately $28,800.
Our agents can use our platform to create paid digital ad campaigns on platforms such as Facebook and Instagram, with videos and engaging ad copy, in a matter of minutes. • Listing Search and Saved Search Notifications. Our proprietary search algorithm and database simplifies and enhances the ability for Compass agents to find homes best suited for their clients’ needs.
Our agents can use our platform to create paid digital ad campaigns on platforms such as Facebook and Instagram, with videos and engaging ad copy, in a matter of minutes. • AI-Driven Content. We have recently integrated the ChatGPT API into our platform.
See section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Comparison of the Years Ended December 31, 2022 and 2021 – Operating Expenses – Research and Development” for more information. The caliber and pedigree of our technology leadership helps us attract and retain top-tier technology talent globally.
See section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Comparison of the Years Ended December 31, 2023 and 2022 – Operating Expenses – Research and Development” for more information. Our Platform Capabilities Our platform aims to digitize, integrate and simplify all real estate workflows for Compass agents and their clients.
Using proprietary data, analytics, artificial intelligence and machine learning, our platform delivers a broad set of industry-specific capabilities for Compass agents and their clients. Additionally, certain of our Glide tools, which include completion of various real estate forms and offer preparation as well as eSignature and collaboration capabilities, are offered to non-Compass agents and their clients.
Additionally, certain of our Glide tools, which include completion of various real estate forms and offer preparation as well as eSignature and collaboration capabilities, are offered to non-Compass agents and their clients. We are simplifying today’s complex, paper-driven, antiquated workflow to empower real estate agents to deliver an exceptional experience to every buyer and seller.
To nurture our agent talent, our self-service Compass Academy program allows for shared learning from among the highest performing Compass agents. As Compass agents and their clients use the Compass platform to consolidate their activities for buying, selling, marketing and transacting real estate, they demonstrate high engagement with our platform.
We provide agents with transaction closing and post-closing support to reduce the complexity for clients and efficiently advise through a transaction’s lifecycle. As Compass agents and their clients use the Compass platform to consolidate their activities for buying, selling, marketing and transacting real estate, they demonstrate high engagement with our platform.
When measuring gross commission income growth, the analysis required that agent teams had been with Compass for at least 24 months in order to have a complete data set. 4 Table of Contents Our Platform We have built an integrated software platform that helps agents operate with the sophisticated capabilities of a modern technology company and the personal attention and service of a dedicated advisor.
Our Platform We have built an integrated software platform that helps agents operate with the sophisticated capabilities of a modern technology company and the personal attention and service of a dedicated advisor. Using proprietary data, analytics, AI and machine learning, our platform delivers a broad set of industry-specific capabilities for Compass agents and their clients.
We believe that we are well-positioned to capture meaningful revenue and EBITDA from the title and escrow services and mortgage origination as we continue to expand and diversify our offerings within the real estate ecosystem.
While integrated services comprise a small portion of our revenue to date, we believe we are well-positioned to capture meaningful revenue from integrated services as we continue to diversify our offerings within the real estate ecosystem. Our platform provides a strong foundation for agents to create and foster client relationships.
We continue to innovate and enhance our software platform with the goal of digitizing and automating all real estate workflows that empower agents to acquire and serve their clients. In 2022, we launched a series of new features across our agents’ workflow, including the ability to take a transaction from contract to payment via forms, offers, and e-signature functionality.
We continue to innovate and enhance our platform with the goal of digitizing and automating all real estate workflows that empower agents to acquire and serve their clients. In 2023, we enhanced our platform by adding 103 features, including Performance Tracker, Compass AI and '1-Click Title & Escrow'.
The broker of record in all jurisdictions must actively supervise the individual licensees and the brokerage’s activities within the applicable jurisdiction. All licensed market participants, whether individuals or entities, must follow the jurisdiction’s real estate licensing laws and regulations.
Generally, a brokerage must obtain a corporate real estate broker license, although in some jurisdictions the licenses are personal to individual brokers. The broker of record in all jurisdictions must actively supervise the individual licensees and the brokerage’s activities within the applicable jurisdiction.
In 2022, we acquired a title and escrow company and as of December 31, 2022, our title and escrow services were available for approximately half of our agents’ transactions. Additionally, OriginPoint is fully operational in 15 states and Washington D.C. and licensed in 18 other states.
As of December 31, 2023, we provided title and escrow services in 7 states and Washington D.C. Additionally, OriginPoint is fully operational in 30 states and Washington D.C. and licensed in 6 other states. The synergies between these integrated services and our brokerage business increase transparency and deliver a more integrated closing process for agents and their clients.
OriginPoint originates mortgages for Compass agents’ clients, as well as the clients of any other brokerage, among others, in the context of a new purchase or other customers not working with a brokerage in the context of a refinancing in order to make loans available to a broader consumer audience.
OriginPoint originates mortgages for Compass agents’ clients, as well as the clients of any other brokerage, in connection with purchase transactions and with other customers not working with a brokerage in refinancing situations. OriginPoint has established and maintains its own warehouse lines of credit, and it funds its own mortgage loan transactions from these independent sources.
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Our Business and Business Model We are a technology-enabled brokerage that provides an end-to-end platform of software, services, and support to empower our residential real estate agents to deliver exceptional service to seller and buyer clients.
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Our platform also uses proprietary data, analytics, AI, and machine learning to simplify workflows of agents and deliver high-value recommendations and outcomes for both agents and their clients. Additionally, we provide integrated services, such as title and escrow and mortgage, both of which are available on our platform.
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Real estate agents are themselves business owners, and Compass agents utilize the platform to grow their respective businesses, save time and manage their businesses more effectively.
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By drawing on our vast database of proprietary data, AI further enhances the agent experience and their ability to quickly perform tasks, such as creating listing brochures and descriptions, marketing materials, and even their agent profiles on our website. • Listing Search and Saved Search Notifications.
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While adjacent services comprise a small portion of our revenue to date, we are well-positioned to capture meaningful revenue from adjacent services as we continue to diversify our offerings within the real estate ecosystem. Through 2022, Compass agents have represented either sellers or buyers in more than 700,000 Total Transactions, totaling more than $780 billion in Gross Transaction Value.
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Several federal laws and regulations govern the real estate brokerage business, including federal Fair Housing Act and the Real Estate Settlement Procedures Act (“RESPA”). The Fair Housing Act prohibits discrimination in the purchase or sale of homes and applies to real estate brokers and agents, among others.
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With 4.6% 1 of the U.S. market share in 2022, up from 4.5% in 2021, Compass remains the largest independent real estate brokerage by Gross Transaction Value.
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OriginPoint is required to be licensed in all relevant jurisdictions in which it operates and to comply with the respective laws and regulations of each such jurisdiction, as well as with applicable judicial and administrative decisions.
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Of the large cities we serve that have a multiple listing service ("MLS Cities"), our market share in our top three MLS Cities by sales volume was approximately 28% as of December 31, 2022. For the ten MLS Cities launched in 2018, our average market share has grown to approximately 12% as of December 31, 2022.
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Antitrust litigation has been brought against us (as described in more detail in Note 11 to our consolidated financial statements included elsewhere in this Annual Report) and other brokerages and real estate associations regarding the requirement to offer set buy-side commissions.
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We believe there remains significant opportunity for us to grow our transactions by continuing to add agents to our platform and for our agents to grow their respective market shares even as we reduce our new agent recruiting incentives to zero.
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For the definitions of Average Number of Principal Agents, Total Transactions and Gross Transaction Value, please refer to the section entitled “Key Business Metrics” included elsewhere in this Annual Report.
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Our agent-first strategy and differentiated platform have delivered strong results for Compass agents and their clients in 2022: • our principal agents transact more than the average agent at 7.5 transactions per average principal agent versus the industry transactions per agent of 6.4; • our principal agent retention rate continued to exceed 90% in 2022; and • our agents are strong advocates, giving Compass a Net Promoter Score of 65.5. 1 We calculate our national market share by dividing our Gross Transaction Value, or the total dollar value of transactions closed by agents on our platform, by two times (to account for the sell-side and buy-side of each transaction) the aggregate dollar value of U.S. existing home sales as reported by the NAR. 3 Table of Contents Additionally, higher usage of our platform contributed to enhanced agent economics, productivity and retention.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor additional information, see risk factor entitled “We have identified material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is 21 Table of Contents not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.” If we identify any material weaknesses in our internal control over financial reporting in the future, are unable to comply with the requirements of Section 404 in a timely manner, or assert that our internal control over financial reporting is ineffective, or if our independent registered public accounting firm expresses an opinion that our internal control over financial reporting is ineffective, investors may lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our Class A common stock to decline, and we could become subject to investigations by the SEC, or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
Biggest changeIf we identify material weaknesses in our internal control over financial reporting in the future, are unable to comply with the requirements of Section 404 in a timely manner, or assert that our internal control over financial reporting is ineffective, or if our independent registered public accounting firm expresses an opinion that our internal control over financial reporting is ineffective, investors may lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our Class A common stock to decline, and we could become subject to investigations by the SEC, or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
Any decrease in our gross commission income or the percentage of commissions that we collect may harm our business, results of operations, and financial condition. Our business model depends upon our agents’ success in generating gross commission income, which we collect and from which we pay them net commissions.
Any decrease in our gross commission income or the percentage of commissions that we collect may harm our business, financial condition and results of operations. Our business model depends upon our agents’ success in generating gross commission income, which we collect and from which we pay them net commissions.
Cybersecurity incidents could disrupt business operations and result in the loss of critical and confidential information or litigation or claims arising from such incidents, any of which may adversely impact our reputation and business, financial condition, and results of operations.
Cybersecurity incidents could disrupt business operations and result in the loss of critical and confidential information or claims or litigation arising from such incidents, any of which may adversely impact our reputation and business, financial condition, and results of operations.
We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, which may result from interruptions in our service as a result of system failures. Any errors, defects, disruptions or other performance problems with our services could harm our business, results of operations, and financial condition.
We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, which may result from interruptions in our service as a result of system failures. Any errors, defects, disruptions or other performance problems with our services could harm our business, financial condition and results of operations.
However, as we grow, we may face challenges that may affect our ability to sustain our culture, including: failure to identify, attract, reward, and retain people in leadership positions in our organization who share and further our culture, values, and mission; increasing size and geographic diversity of our workforce; inability to achieve adherence to our internal policies and core values; the continued challenges of a rapidly-evolving industry; the increasing need to develop expertise in new areas of business that affect us; negative perception of our treatment of employees or our response to employee sentiment related to political or social causes or actions of management; and the integration of new personnel and businesses from acquisitions.
However, as we grow, we may face challenges that may affect our ability to sustain our culture, including: failure to identify, attract, reward, and retain people in leadership positions in our organization who share and further our culture, values, and mission; increasing size and geographic diversity of our workforce; inability to achieve consistent adherence to our internal policies and core values; the continued challenges of a rapidly-evolving industry; the increasing need to develop expertise in new areas of business that affect us; negative perception of our treatment of employees or our response to employee sentiment related to political or social causes or actions of management; and the integration of new personnel and businesses from acquisitions.
Our current settlement practice is to net settle vested RSUs, meaning that we withhold the equivalent number of RSUs that would otherwise be issued as shares of our Class A common stock in lieu of the amount required to satisfy tax withholding obligations on behalf of our employees by remitting the appropriate taxes to the relevant tax authorities.
Our current settlement practice is to net settle vested RSUs, meaning that we withhold the equivalent number of RSUs that would otherwise be issued as shares of our Class A common stock in lieu of the amount required to satisfy payroll tax withholding obligations on behalf of our employees by remitting the appropriate taxes to the relevant tax authorities.
Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition, or other change in control of our company that the stockholders may consider favorable, including provisions that: classify the board of directors into three classes with staggered three-year terms; permit the board of directors to establish the number of directors and to fill any vacancies and newly-created directorships; require super-majority voting to amend some provisions in our charter documents; authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; allow only our chief executive officer, chairperson of our board of directors, or a majority of our board of directors are authorized to call a special meeting of stockholders; prohibit cumulative voting; permit the removal of directors only “for cause” and only with the approval of the holders of at least two-thirds of the voting power of the then outstanding capital stock; prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of our stockholders; expressly authorize the board of directors to make, alter, or repeal our bylaws; and establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition, or other change in control of our company that the stockholders may consider favorable, including provisions that: classify the board of directors into three classes with staggered three-year terms; permit the board of directors to establish the number of directors and to fill any vacancies and newly-created directorships; require super-majority voting to amend some provisions in our charter documents; authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; allow only our chief executive officer, chairperson of our board of directors, or a majority of our board of directors are authorized to call a special meeting of stockholders; prohibit cumulative voting; permit the removal of directors only “for cause” and only with the approval of the holders of at least two-thirds of the voting power of the then outstanding capital stock; prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of our stockholders; expressly authorize the 29 Table of Contents board of directors to make, alter, or repeal our bylaws; and establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
A material portion of our real estate brokerage offices and agents are concentrated in certain geographic areas, such as Southern California, Northern California and the tri-state area. Local and regional real estate and economic conditions could differ materially from prevailing conditions in other parts of the U.S.
A material portion of our real estate brokerage offices and agents are concentrated in certain geographic areas, such as Southern California, Northern California, Texas and the tri-state area. Local and regional real estate and economic conditions could differ materially from prevailing conditions in other parts of the U.S.
We classify our agents as independent contractors, and if federal or state law mandates that they be classified as employees, our business, financial condition, and results of operations would be adversely impacted. We engage independent contractors that are subject to federal regulations and applicable state laws and guidelines regarding independent contractor classifications.
We classify our agents as independent contractors, and if federal or state law mandates that they be classified as employees, our business, financial condition, and results of operations would be adversely impacted. We engage independent contractors, including agents, that are subject to federal regulations and applicable state laws and guidelines regarding independent contractor classifications.
While we believe these investments help our agents succeed, there can be no guarantee that we will retain our agents across the markets we serve, nor that our investments will drive increased productivity for our agents. Additionally, at times, we expand our technology offerings by acquiring value-add real estate technology companies.
While we believe our investments help our agents succeed, there can be no guarantee that we will retain our agents across the markets we serve, nor that our investments will drive increased productivity for our agents. Additionally, at times, we expand our technology offerings by acquiring value-add real estate technology companies.
Our success is impacted, directly and indirectly, by a number of factors related to general economic conditions, the health of the U.S. real estate industry, and risks generally incident to the ownership of residential real estate, many of which are beyond our control, including: adverse changes in local, regional, or national economic conditions, including periods of slow economic growth or recessionary conditions; volatility in the residential real estate industry; seasonal and cyclical 12 Table of Contents trends in the residential real estate industry; changes in real estate market conditions; insufficient or excessive home inventory levels; increasing mortgage rates and down payment requirements or constraints on the availability of mortgage financing; low levels of consumer confidence in the economy or the residential real estate market; weak credit markets; instability of financial institutions; legislative or regulatory changes; high levels of foreclosure activity; the inability or unwillingness of consumers to enter into sale transactions; a decrease in the affordability of homes including the impact of rising mortgage rates, home price appreciation and wage stagnation or wage increases that do not keep pace with inflation; and decreasing home ownership rates, declining demand for real estate and changing social attitudes toward home ownership.
Our success is impacted, directly and indirectly, by a number of factors related to general economic conditions, the health of the U.S. real estate industry, and risks generally incident to the ownership of residential real estate, many of which are beyond our control, including: adverse changes in local, regional, or national economic conditions, including periods of slow economic growth or recessionary conditions; volatility in the residential real estate industry; seasonal and cyclical trends in the residential real estate industry; changes in real estate market conditions; insufficient or excessive home inventory levels; increasing mortgage rates and down payment requirements or constraints on the availability of mortgage financing; low levels of consumer confidence in the economy or the residential real estate market; weak credit markets; instability of financial institutions; legislative or regulatory changes; high levels of foreclosure activity; the inability or unwillingness of consumers to enter into sale transactions; a decrease in the affordability of homes including the impact of rising mortgage rates, home price appreciation and wage stagnation or wage increases that do not keep pace with inflation; and decreasing home ownership rates, declining demand for real estate and changing social attitudes toward home ownership.
We use cash to satisfy tax withholding obligations that arise in connection with the monthly net settlements of RSU awards granted to our employees, which may have an adverse effect on our financial condition and liquidity.
We use cash to satisfy payroll tax withholding obligations that arise in connection with the monthly net settlements of RSU awards granted to our employees, which may have an adverse effect on our financial condition and liquidity.
We may be subject to claims, lawsuits, arbitration proceedings, government investigations, and other legal and regulatory proceedings in the ordinary course of business, including those involving labor and employment, anti-discrimination, commercial disputes, competition, professional liability, consumer complaints, personal injury, wrongful death, intellectual property disputes, compliance with regulatory requirements, antitrust and anti-competition claims (including claims related to NAR or MLS rules regarding buyer-broker commissions), securities laws, and other matters, and we may become subject to additional types of claims, lawsuits, government investigations and legal or regulatory proceedings if the regulatory landscape changes or as our business grows and as we deploy new offerings, including proceedings related to our acquisitions, securities issuances or business practices.
We may be subject to claims, lawsuits, arbitration proceedings, government investigations, and other legal and regulatory proceedings in the ordinary course of business, including those involving labor and employment, anti-discrimination, commercial disputes, competition, professional liability, consumer complaints, personal injury, wrongful death, intellectual property disputes, compliance with regulatory requirements, antitrust and anti-competition claims (including claims related to NAR or MLS rules regarding buyer-broker commissions), securities laws, and other matters, and we may become subject to additional types of claims, lawsuits, government investigations and legal or regulatory proceedings if the regulatory landscape changes or as our business grows and as we deploy new offerings, including proceedings related to our acquisitions, integrated services business lines, securities issuances or business practices.
While we plan to continue to expand our brokerage and adjacent services businesses to other offerings, there is no guarantee that we will do so or be successful, and even if we do, the expansions might be at a slower pace than we anticipate. We may not realize the expected benefits from our mortgage joint venture.
While we plan to continue to expand our brokerage and integrated services businesses to other offerings, there is no guarantee that we will do so or be successful, and even if we do, the expansions might be at a slower pace than we anticipate. We may not realize the expected benefits from our mortgage joint venture.
As a result, we have invested significant resources, and plan to continue to invest, though to a lesser degree, additional resources, in research and development to improve and maintain our platform and support our technology infrastructure, which allows us to provide an expanded suite of technology offerings that we believe separate us from our competitors.
As a result, we have invested significant resources, and plan to continue to invest, though to a lesser degree, additional resources, in research and development to improve and maintain our platform and support our technology infrastructure, which allows us to provide an expanded suite of technology offerings that we believe differentiate us from our competitors.
In addition, we do not have “key person” insurance on any of our employees. We face intense competition for qualified individuals from numerous software and other technology companies. To attract and retain key personnel, we incur significant costs, including salaries and benefits and equity incentives.
In addition, we do not have “key person” insurance on any of our employees. We face intense competition for qualified individuals from numerous real estate, software and other technology companies. To attract and retain key personnel, we incur significant costs, including salaries and benefits and equity incentives.
Our ability to attract agents to our platform and to appeal to our agents’ clients depends upon providing a robust number of listings. To provide these listings in our services, in addition to the information provided by our agents, we maintain relationships with multiple listing services and other third-party listing providers.
Our ability to attract agents to our platform and to appeal to our agents’ clients depends upon providing a robust number of listings. To provide these listings in our services, in addition to the information provided by our agents, we maintain relationships with MLSs and other third-party listing providers.
The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations, financial condition, and growth prospects.
The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition and results of operations.
Natural disasters or other catastrophic events, such as fires, hurricanes, earthquakes, windstorms, tornados, floods, power loss, telecommunications failure, cyber-attacks, war, civil unrest, terrorist attacks, or pandemics or epidemics may cause damage or disruption to our operations, real estate commerce, and the global economy, and thus, could harm our business, results of operations and financial condition.
Natural disasters or other catastrophic events, such as fires, hurricanes, earthquakes, windstorms, tornados, floods, power loss, telecommunications failure, cyber-attacks, war, civil unrest, terrorist attacks, or pandemics or epidemics may cause damage or disruption to our operations, real estate commerce, and the global economy, and thus, could adversely affect our business, financial condition and results of operations.
Monetary policies of the federal government and its agencies may have an adverse impact on our business, results of operations, and financial condition. 16 Table of Contents The U.S. real estate market is significantly affected by the monetary policies of the federal government and its agencies, and is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the U.S. and impacts the real estate market through its effect on interest rates.
Monetary policies of the federal government and its agencies may have an adverse impact on our business, financial condition and results of operations. 10 Table of Contents The U.S. real estate market is significantly affected by the monetary policies of the federal government and its agencies, and is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the U.S. and impacts the real estate market through its effect on mortgage interest rates.
For these reasons, we may not be able to utilize a material portion of the NOLs, even if we were to achieve profitability. We rely on assumptions, estimates, and business data to calculate our key performance indicators and other business metrics, and real or perceived inaccuracies in these metrics may harm our reputation and negatively affect our business.
For these reasons, we may not be able to utilize a material portion of the NOLs, even if we were to achieve profitability. 20 Table of Contents We rely on assumptions, estimates, and business data to calculate our key performance indicators and other business metrics, and real or perceived inaccuracies in these metrics may harm our reputation and negatively affect our business.
In addition, we work with international staffing organizations that hire contractors in various jurisdictions who are subject to various local laws, including labor and employment laws, that differ from those in the United States. We may be subject to claims as a result of the staffing agencies’ practices, which are outside our control or direction.
In addition, we work with international staffing organizations that hire contractors in various jurisdictions who are subject to various local laws, including labor and employment laws, that differ from those in the United States. We may be subject 24 Table of Contents to claims as a result of the staffing agencies’ practices, which are outside our control or direction.
Any future determination to pay dividends will be at the discretion of our board of directors, and will depend on our 33 Table of Contents financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant. Item 1B. Unresolved Staff Comments. None.
Any future determination to pay dividends will be at the discretion of our board of directors, and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant. Item 1B. Unresolved Staff Comments. None.
Our real estate brokerage business, our title and escrow business, our mortgage joint venture, OriginPoint, and the businesses of our agents must comply with laws such as RESPA, the Fair Housing Act, the Dodd-Frank Act, the Exchange Act, and federal advertising and other laws, as well as some comparable state statutes; rules of trade organizations such as NAR and local MLSs .
Our real estate brokerage business, our title and escrow business, our mortgage joint venture, OriginPoint, and the businesses of our agents must comply with a variety of local, state, and federal laws, such as RESPA, the Fair Housing Act, the Dodd-Frank Act, the Exchange Act, GLBA, and federal advertising and other laws, as well as some comparable state statutes and rules of trade organizations such as NAR and local MLSs.
If we invest substantial time and resources to establish international operations and are unable to do so successfully or in a timely manner, our business, financial condition, and results of operations may be adversely impacted. Our management team is required to evaluate the effectiveness of our internal control over financial reporting.
If we invest substantial time and resources to establish international operations and are unable to do so successfully or in a timely manner, our business, financial condition, and results of operations may be adversely impacted. 19 Table of Contents Our management team is required to evaluate the effectiveness of our internal control over financial reporting.
Our platform, its features, and technology offerings may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from providing our products and services. 30 Table of Contents We cannot guarantee that our internally developed or acquired systems, technologies and content do not and will not infringe the intellectual property rights of others.
Our platform, its features, and technology offerings may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from providing our products and services. We cannot guarantee that our internally developed or acquired systems, technologies and content do not and will not infringe the intellectual property rights of others.
At times, we may also look to acquisitions to provide us with additional technology to further enhance our platform and accelerate our ability to offer new products or to expand our adjacent services offerings.
At times, we may also look to acquisitions to provide us with additional technology to further enhance our platform and accelerate our ability to offer new products or to expand our integrated services offerings.
To the extent these claims against unrelated companies are successful and we or our agents cannot distinguish our or their practices (or our industry’s practices), we could face significant liability and could be required to 27 Table of Contents modify certain business practices or relationships, either of which could materially and adversely impact our business, financial condition, and results of operations.
To the extent these claims against unrelated companies are successful and we or our agents cannot distinguish our or their practices (or our industry’s practices), we could face significant liability and could be required to modify certain business practices or relationships, either of which could materially and adversely impact our business, financial condition, and results of operations.
Any of these impacts would adversely affect our business, financial condition, and results of operations. We may not be able to maintain or establish relationships with multiple listing services and third-party listing providers, which could limit the information we are able to provide to our agents and our agents’ clients.
Any of these impacts would adversely affect our business, financial condition, and results of operations. We may not be able to maintain or establish relationships with MLSs and third-party listing providers, which could limit the information we are able to provide to our agents and our agents’ clients.
A significant adoption by consumers of alternatives to full-service agents could have an adverse effect on our business, financial condition, and results of operations. A significant change in consumer sales that eliminates or minimizes the role of the agent in the real estate transaction process could have an adverse effect on our business, financial condition, and results of operations.
A significant adoption by consumers of alternatives to full-service agents could have an adverse effect on our business, financial condition, and results of operations. 18 Table of Contents A significant change in consumer sales that eliminates or minimizes the role of the agent in the real estate transaction process could have an adverse effect on our business, financial condition, and results of operations.
Reffkin is able to determine and may significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our restated certificate of incorporation and amended and restated bylaws, and the approval of any merger, consolidation, 31 Table of Contents sale of all or substantially all of our assets, or other major corporate transaction.
Reffkin is able to determine and may significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our restated certificate of incorporation and amended and restated bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction.
Growing and operating our business, including by continuously innovating, improving, and expanding our platform, expanding our adjacent services and expanding into new markets, may require significant cash outlays, liquidity reserves, and capital expenditures.
Growing and operating our business, including by continuously innovating, improving, and expanding our platform, expanding our integrated services and expanding into new markets, may require significant cash outlays, liquidity reserves, and capital expenditures.
Our agents’ use of our platform to access and store data presents us with uncertainties and risks, 19 Table of Contents as they may accidentally or deliberately cause private information to be transmitted through unsecure channels, which may lead to breaches or other leaks of such information.
Our agents’ use of our platform to access and store data presents us with uncertainties and risks, as they may accidentally or deliberately cause private information to be transmitted through unsecure channels, which may lead to breaches or other leaks of such information.
Our efforts to expand our operations, including our brokerage and adjacent services businesses, and to offer additional adjacent services may not be successful. We have grown our brokerage business rapidly since our inception.
Our efforts to expand our operations, including our brokerage and integrated services businesses, and to offer additional integrated services may not be successful. We have grown our brokerage business rapidly since our inception.
Changes in accounting standards, subjective assumptions and estimates used by management related to complex accounting matters could have an adverse effect on our business, financial condition, and results of operations. 23 Table of Contents Generally accepted accounting principles in the U.S.
Changes in accounting standards, subjective assumptions and estimates used by management related to complex accounting matters could have an adverse effect on our business, financial condition, and results of operations. Generally accepted accounting principles in the U.S.
Additionally, if we choose to implement a “sell-to-cover” settlement method in the future, additional shares will be issued and sold in the market at settlement to cover tax withholding obligations, which would result in dilution to our stockholders.
If we instead choose to implement a “sell-to-cover” settlement method in the future, additional shares will be issued and sold in the market at settlement to cover payroll tax withholding obligations, which would result in dilution to our stockholders.
To protect our proprietary information and technology, we rely in part on agreements with our employees, investors, independent contractors, vendors and other third parties that place restrictions on the use and disclosure of this intellectual property.
To protect our proprietary information and technology, we rely in part on agreements with our employees, investors, 26 Table of Contents independent contractors, vendors and other third parties that place restrictions on the use and disclosure of this intellectual property.
We plan to continue our expansion of the brokerage business; however, there is no guarantee that we will be successful or will expand at the rate we anticipate. In addition, in 2018, we entered into the adjacent services market and expanded our adjacent services offerings to include title and escrow and mortgage origination services in certain markets.
We plan to continue our expansion of the brokerage business; however, there is no guarantee that we will be successful or will expand at the rate we anticipate. In addition, in 2018, we entered into the integrated services market and have since expanded our integrated services offerings to include title and escrow and mortgage origination services in certain markets.
As a result of findings from examinations, we also may be required to take a number of corrective actions, including modifying business practices and making refunds of fees or money earned. In addition, adverse findings in one state may 28 Table of Contents be relied on by another state to conduct investigations and impose remedies.
As a result of findings from examinations, we also may be required to take a number of corrective actions, including modifying business practices and making refunds of fees or money earned. In addition, adverse findings in one jurisdiction may be relied on by another state to conduct investigations and impose remedies.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party intermediaries from authorizing, offering, or providing, directly or 25 Table of Contents indirectly, improper payments or benefits to recipients in the public or private sector.
Real estate commission rates vary somewhat by market, and although historical rates have been relatively consistent over time across markets, there can be no assurance that prevailing market practice will not change in a given market or across the industry.
Real estate commission rates vary somewhat by market, and although historical rates have been relatively consistent over time across markets, there can be no assurance that prevailing market practice will not 11 Table of Contents change in a given market or across the industry.
Although we took deliberate actions to provide impacted employees with equitable separation packages and transition services, there can be no assurance that these actions will not adversely affect employee morale, our culture, and our ability to attract and retain employees.
Although we took deliberate actions to provide impacted employees with equitable separation packages and transition services, there can be no assurance that these actions will not adversely affect employee morale, 21 Table of Contents our culture, and our ability to attract and retain employees.
Such sales would not result in our use of additional cash to satisfy the tax withholding obligations for RSUs, but would result in greater dilution to our stockholders and increase costs to our employees with RSU awards than the net settlement model described above.
Such sales would not result in our use of additional cash to satisfy the payroll tax withholding obligations for RSUs, but would result in greater dilution to our stockholders and increase costs to our employees with RSU awards than the net settlement.
If we fail to identify and invest in our platform and expand our technology offerings via acquisitions in the way that creates value for our agents and our agents’ clients, we may fail to attract new agents, retain current agents or increase agents’ productivity through utilization of our platform, which may negatively impact our business, financial condition and results of operations.
If we fail to identify and invest in our platform and expand our technology offerings via acquisitions in the way that creates value for our agents and our agents’ clients, we may fail to attract new agents, retain current agents or increase agents’ productivity through utilization of our platform, which could adversely affect our business, financial condition and results of operations.
We believe that our ability to compete depends upon many factors, including: our ability to attract and retain agents; the timing and market acceptance of products and services offered by us or our competitors; the attractiveness of our adjacent services for agents and our agents’ clients; our ability to attract top talent to support our business model; and our brand strength relative to our competitors.
We believe that our ability to compete depends upon many factors, including: our ability to attract and retain agents; the timing and market acceptance of products and services offered by us or our competitors; the attractiveness of our integrated services for agents 13 Table of Contents and our agents’ clients; our ability to attract top talent to support our business model; and our brand strength relative to our competitors.
If we are unsuccessful in expanding these services into other markets, then we may not realize the expected benefits (including anticipated revenue), which could negatively impact our business, financial condition and results of operations.
If we are unsuccessful in expanding these services into other markets, then we may not realize the expected benefits (including anticipated revenue), which could adversely affect our business, financial condition and results of operations.
We think that the synergies between these adjacent services and our brokerage business increase transparency and deliver a more integrated closing process for our agents’ clients and thus, provides additional value to our agents. However, currently, our adjacent services are available only in certain markets and utilization rates remain low.
We think that the synergies between these integrated services and our brokerage business increase transparency and deliver a more integrated closing process for our agents’ clients and thus, provides additional value to our agents. However, currently, our integrated services are available only in certain markets.
In the future, we may implement a “sell-to-cover” settlement method to satisfy tax withholding obligations for our employees, under which shares of our Class A common stock with a market value equivalent to the tax withholding amounts would be automatically sold by the employees holding RSUs upon settlement to satisfy their tax withholding obligations, and the cash proceeds from such sales will be remitted by us to the relevant tax authorities.
In the future, we may implement a “sell-to-cover” settlement method to satisfy payroll tax withholding obligations for our employees, under which shares of our Class A common stock with a market value equivalent to or greater than the tax withholding amounts would be automatically sold by the employees holding RSUs upon settlement to satisfy their payroll 14 Table of Contents tax withholding obligations, and the cash proceeds from such sales will be remitted by us to the relevant tax authorities.
In addition, our business depends on our ability to continue to 17 Table of Contents attract, motivate, and retain a large number of skilled employees across our company.
In addition, our business depends on our ability to continue to attract, motivate, and retain a large number of skilled employees across our company.
As of February 22, 2023, Robert Reffkin, our founder, Chairman, and Chief Executive Officer, together with his financial planning vehicles and affiliated trusts (for purposes of this risk factor discussion, “Mr.
As of December 31, 2023, Robert Reffkin, our founder, Chairman, and Chief Executive Officer, together with his financial planning vehicles and affiliated trusts (for purposes of this risk factor discussion, “Mr.
Our agents operate as independent contractors and are responsible for their own data privacy compliance. Additionally, we provide training and our platform provides tools and security controls to assist our agents with their data privacy 25 Table of Contents compliance to the extent they store relevant data on our platform.
Our agents operate as independent contractors and are responsible for their own data privacy compliance. We provide training and our platform provides tools and security controls to assist our agents with their data privacy compliance to the extent they store relevant data on our platform.
In addition, our measure of certain metrics may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology and as a result our results may not be comparable to our competitors. Estimates of market opportunity may prove to be inaccurate.
In addition, our measure of certain metrics may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology and as a result our results of operations may not be comparable to our competitors.
If we fail to satisfy the expectations of investors, 26 Table of Contents employees and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected. Natural disasters and catastrophic events may disrupt real estate markets and harm our business.
If we fail to satisfy the expectations of investors, employees and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected. Natural disasters and catastrophic events may disrupt real estate markets and could adversely affect our business, financial condition and results of operations.
If any of our depository banks were to become unable to honor any portion of our deposits, our agents’ clients could seek to hold us responsible for such amounts and, if our agents’ clients prevailed in their claims, we could be subject to significant losses.
If any of our depository banks were to become unable to honor any portion of our deposits due to a bank failure or otherwise, our agents’ clients could seek to hold us responsible for such amounts and, if our agents’ clients prevailed in their claims, we could be subject to significant losses.
Incurring uninsured or underinsured costs or losses could harm our business. We process, store, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to data privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, and/or unfavorable publicity.
We process, store, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to data privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, and/or unfavorable publicity.
Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.
Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors.
We may also be subject to disputes between us and our employees and agents, which are primarily governed by mandatory arbitration provisions. The results of any such claims, lawsuits, arbitration proceedings, government investigations or other legal or regulatory proceedings cannot be predicted with certainty.
We may also be subject to disputes between us and our employees and agents, which are primarily governed by mandatory arbitration provisions, and become involved in disputes between agents where we are not a proper party. The results of any such claims, lawsuits, arbitration proceedings, government investigations or other legal or regulatory proceedings cannot be predicted with certainty.
In addition, many of our employees continue to work remotely, which may adversely affect our efficiency and morale. Our return to office initiative varies across geographies and certain employees may not agree with our approach and as a result may seek employment elsewhere.
In addition, many of our employees continue to work remotely, which may adversely affect our efficiency and morale. Certain employees may not agree with return to office initiatives and as a result may seek employment elsewhere.
Similarly, if our agents do not recommend our adjacent services to our agents’ clients, then our revenues from adjacent services will not grow as quickly as we expect.
Similarly, if our agents do not recommend our integrated services to our agents’ clients, then our revenue from integrated services will not grow as quickly as we expect.
If we are not able to maintain our culture, our business, financial condition and results of operations could be adversely affected. Our ability to recruit agents depends on the strength of our reputation, and adverse media coverage could harm our business.
If we are not able to continue to attract agents and our agents’ clients to our platform, our business, financial condition and results of operations could be adversely affected. Our ability to recruit agents depends on the strength of our reputation, and adverse media coverage could harm our business.
If we incur costs or liability as a result of unfavorable changes to these regulations or laws or our failure to comply therewith, the business, financial condition and results of operations of our business could be adversely affected.
If we incur costs or liability as a result of unfavorable changes to these regulations or laws or our failure to comply therewith, the business, financial condition and results of operations of our business could be adversely affected. Any costs incurred to prevent or mitigate this potential liability could also harm our business, financial condition, and results of operations.
We grant restricted stock unit (“RSU”) awards to our employees that vest based on the satisfaction of a service-based condition which is generally satisfied over four years. Under U.S. federal, state and local tax regulations, tax withholding obligations for RSUs arise in connection with their settlement.
Our stock-based compensation primarily consists of granting restricted stock unit (“RSU”) awards to our employees that vest based on the satisfaction of a service-based condition, which is generally satisfied over four years. Federal, state and local payroll tax withholding obligations for RSUs arise in connection with their settlement to employees.
Reffkin”) (and including his shares of Class A common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of February 22, 2023), held 8,749,266 shares of Class A common stock and all of the issued and outstanding shares of Class C common stock. Additionally, Mr.
Reffkin”) (and including his shares of Class A common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of December 31, 2023), held 8,928,686 shares of Class A common stock and all of the issued and outstanding shares of Class C common stock. As of December 31, 2023, Mr.
Persistent or pervasive fraudulent activity may cause our agents or our agents’ clients to lose trust in us and decrease or terminate their usage of our services, which could materially harm our operations, business, results, and financial condition.
Persistent or pervasive fraudulent activity may cause our agents or our agents’ clients to lose trust in us and decrease or terminate their usage of our services, which could materially harm our operations, business, results, and financial condition. We could be subject to losses if banks do not honor our escrow and trust deposits.
The trading price of the shares of our Class A common stock is likely to be volatile. Technology and real estate stocks historically have experienced high levels of volatility.
As a result, the market price of our Class A common stock could be adversely affected. 28 Table of Contents The trading price of the shares of our Class A common stock is likely to be volatile. Technology and real estate stocks historically have experienced high levels of volatility.
To date, we have done so through reductions in force, changes to our spending approval processes, adjustments to our sales incentives and sales teams, and otherwise by pivoting our focus from growth to profitability and cash flow.
We must conservatively manage our cash and expenses in light of these and other negative changes in market conditions. To date, we have done so through reductions in force, changes to our spending approval processes, adjustments to our sales incentives and sales teams, and otherwise by pivoting our focus from growth to profitability and cash flow.
Any changes to these laws or regulations or any new laws or regulations may make it more difficult for us to operate our business and may have a material adverse effect on our operations.
Our failure to comply with any of these laws and regulations may subject us to fines, penalties, injunctions and/or potential criminal violations. Any changes to these laws or regulations or any new laws or regulations may make it more difficult for us to operate our business and may have a material adverse effect on our operations.
Changes in the Federal Reserve Board’s policies, interest rate environment and the mortgage market are beyond our control and are difficult to predict and, as such, could have a material adverse effect on our business, results of operations and financial condition.
Changes in the Federal Reserve Board’s policies are beyond our control and are difficult to predict and could negatively impact the residential real estate market, which in turn could have a material adverse effect on our business, financial condition and results of operations.
For example, we may fail to obtain effective intellectual property protection or effective intellectual property protection may not be available in every country in which our products and services are available.
Various factors may pose a threat to our intellectual property rights, as well as to our platform and technology offerings. For example, we may fail to obtain effective intellectual property protection or effective intellectual property protection may not be available in every country in which our products and services are available.
In addition, integrating an acquired company, business, or technology is risky and may result in unforeseen operating difficulties and expenditures, particularly in new markets or with respect to new adjacent services.
In addition, integrating an acquired company, business, or technology is risky and may result in unforeseen operating difficulties and expenditures, particularly in new markets or with respect to new integrated services, and we have experienced these difficulties and expenditures in connection with certain of our previous acquisitions.
Any decrease in commission rates may adversely impact our business, financial condition, and results of operations may be adversely impacted. In addition, we collect fees from our agents for use of our platform, including our technology suite.
Any decrease in commission rates may adversely impact our business, financial condition, and results of operations. In addition, we collect fees from our agents for use of our platform, including our technology suite. There can be no assurance that we will be able to maintain the percentage of commission income or fees we collect from our agents.
Some of our title companies and our escrow company also provide escrow and closing services. These services facilitate the transfer of ownership of real property. We may be subject to liability and losses arising from the provision of these services. For example, we may be subject to liability and losses if we improperly handle consumer or other third-party funds.
Some of our title companies and our escrow company also provide escrow and closing services. These services facilitate the transfer of ownership of real property. We 15 Table of Contents may be subject to liability and losses arising from the provision of these services.
In addition, real estate transactions involve the transmission of funds by the buyers and sellers of real estate and consumers or other service providers selected by the consumer that may be the subject of direct cyber-attacks that result in the fraudulent diversion of funds, notwithstanding efforts we have taken to educate consumers with respect to these risks.
In addition, real estate transactions involve the transmission of funds by the buyers and sellers of real estate and consumers or other service providers selected by the consumer that may be the subject of direct cyber-attacks that result in the fraudulent diversion of funds, notwithstanding efforts we have taken to educate consumers with respect to these risks. 17 Table of Contents In addition, cybersecurity threat actors have attempted, and may attempt in the future, to conduct fraudulent activity by engaging with our agents or our agents’ clients, including in our title insurance and escrow business.
We believe that we have developed a strong reputation for helping agents succeed on the basis of our rapid growth in recent years, the technological sophistication of our platform, and our ability to offer a wide range of high-quality services.
We believe that we have developed a strong reputation for helping agents succeed on the basis of the technological sophistication of our platform and our ability to offer a wide range of high-quality services. General awareness and the perceived quality and differentiation of our platform are important aspects of our efforts to attract and retain agents.
We continue to make investments of resources to support our acquisitions, which we expect will result in significant ongoing operating expenses and may divert resources and management attention from other areas of our business. 18 Table of Contents Our failure to successfully integrate the companies we acquire and address risks or other problems encountered in connection with our past or future strategic acquisitions could cause us to fail to realize the anticipated benefits of such strategic acquisitions, incur unanticipated liabilities, and harm our business, financial condition, and results of operations.
Our failure to successfully integrate the companies we acquire and address risks or other problems encountered in connection with our past or future strategic acquisitions could cause us to fail to realize the anticipated benefits of such strategic acquisitions, incur unanticipated liabilities, and harm our business, financial condition, and results of operations.
Additionally, any decrease in the number of transactions our title and escrow business closes and the number of mortgages OriginPoint originates, could further impact our business, financial condition and results of operations. Our business is impacted by interest rates, and changes in prevailing interest rates may have an adverse effect on our financial results.
Additionally, any decrease in the number of transactions our title and escrow business closes and the number of mortgages OriginPoint originates, could further impact our business, financial condition and results of operations.
If one or more of these analysts who cover us ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. 32 Table of Contents We may need to raise additional capital to continue to grow our business and we may not be able to raise additional capital on terms acceptable to us, or at all.
If one or more of these analysts who cover us ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Any of the foregoing could have an adverse impact on OriginPoint’s results of operations and financial condition, which could result in us not being able to realize the expected benefits from the new joint venture. We have experienced rapid growth since inception, which may not be indicative of our future growth.
Any of the foregoing could have an adverse impact on OriginPoint’s results of operations and financial condition, which could result in us not being able to realize the expected benefits from the joint venture. We operate in highly competitive markets and we may be unable to compete successfully against competitors.
However, if an agent on our platform were to be subject to a claim for breach of data privacy laws, we could be found liable for their claims due to our relationship, which may require us to take more costly data security and compliance measures or to develop more complex systems.
However, if an agent on our platform were to be subject to a claim for breach of data privacy laws, we could be found liable for their claims due to our relationship, which may require us to take more costly data security and compliance measures or to develop more complex systems. 22 Table of Contents We utilize a number of third-party service providers to deliver web and mobile content and any disruption or delays in service from these third-party providers could adversely impact the delivery of our platform.
If we are unable to maintain or enhance agent awareness of our business, or if our reputation is damaged in a given market or nationally, our business, financial condition, and results of operations could be harmed. Some of our potential losses may not be covered by insurance. We may not be able to obtain or maintain adequate insurance coverage.
If we are not able to maintain our culture, our business, financial condition and results of operations could be adversely affected. Some of our potential losses may not be covered by insurance. We may not be able to obtain or maintain adequate insurance coverage.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We are headquartered in New York, New York, where we occupy approximately 100,000 square feet of office space pursuant to a lease that is expected to expire in May 2025 subject to the terms thereof. We also lease operating and sales offices throughout the United States and internationally. Item 3. Legal Proceedings.
Biggest changeItem 2. Properties. We are headquartered in New York, New York, where we occupy approximately 32,500 square feet of office space pursuant to a lease that is expected to expire in June 2030 subject to the terms thereof. We also lease operating and sales offices throughout the United States. Item 3. Legal Proceedings.
The information relating to legal proceedings contained in Note 11 to the consolidated financial statements included in Part II, Item 8 of this Annual Report is incorporated herein by this reference. Item 4. Mine Safety Disclosures. None. 34 Table of Contents PART II
The information relating to legal proceedings contained in Note 11 to the consolidated financial statements included in Part II, Item 8 of this Annual Report is incorporated herein by this reference. Item 4. Mine Safety Disclosures. None. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSales of Unregistered Securities From October 1, 2022 through December 31, 2022, we offered, sold and issued the following unregistered securities: (1) an aggregate of 240,592 shares of Class A common stock held by the Company's founder and Chief Executive Officer, Robert Reffkin, were exchanged for an equivalent number of shares of Class C common stock pursuant to the Equity Exchange Right Agreement; and (2) an aggregate of 698,088 shares of Class A common stock were issued on November 4, 2022 in connection with our previously disclosed acquisition of the Randall Family of Companies, as consideration for an earnout payable to the former owners.
Biggest changeSales of Unregistered Securities From October 1, 2023 through December 31, 2023, we offered, sold and issued the following unregistered securities: (1) as previously disclosed in Form 4s filed with the SEC, Robert Reffkin, our founder and Chief Executive Officer, exchanged an aggregate of 240,592 shares of Class A common stock for an equivalent number of shares of Class C common stock pursuant to an Equity Exchange Right Agreement on October 3, 2023, November 3, 2023, and December 5, 2023; (2) as discussed in more detail in Note 3 to our consolidated financial statements included elsewhere in this Annual Report and disclosed in a Form D filed with the SEC, 2,231,941 shares of Class A common stock were issued on October 6, 2023 in connection with an acquisition, in the amount of $6.5 million; and (3) as previously disclosed in Form D filed with the SEC, an aggregate of 289,509 shares of Class A common stock were issued on October 16, 2023 in connection with an earnout payment related to a prior acquisition, in the amount of $0.8 million.
Stock Performance Graph The stock performance graph set forth below shall not be deemed “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act and will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing. 35 Table of Contents The following graph compares the performance of our common stock to the Standard & Poor’s (“S&P”) 500 Index and Peer Group Index by assuming $100 was invested in each investment option as of April 1, 2021, which represents the day our common stock began trading on the NYSE.
Stock Performance Graph The stock performance graph set forth below shall not be deemed “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act and will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing. 33 Table of Contents The following graph compares the performance of our common stock to the Standard & Poor’s (“S&P”) 500 Index and Peer Group Index by assuming $100 was invested in each investment option as of April 1, 2021, which represents the day our common stock began trading on the NYSE.
The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with the view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. 36 Table of Contents Issuer Purchases of Equity Securities None. Item 6.
The recipients of the securities in each of these transactions 34 Table of Contents represented their intentions to acquire the securities for investment only and not with the view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. Issuer Purchases of Equity Securities None. Item 6.
Year 4/1/21 12/31/21 12/31/22 COMP $ 100 $ 45.11 $ 11.56 S&P 500 Index (1) $ 100 $ 118.57 $ 95.51 Peer Group Index (2) $ 100 $ 67.17 $ 23.05 ____________ (1) S&P 500 Index is a capitalization-weighted index of domestic equities of the largest companies traded on the NYSE and NASDAQ.
Year 4/1/21 12/31/21 12/31/22 12/31/23 COMP $ 100 $ 45.11 $ 11.56 $ 18.66 S&P 500 Index (1) $ 100 $ 118.57 $ 95.51 $ 118.66 Peer Group Index (2) $ 100 $ 67.17 $ 23.05 $ 35.64 ____________ (1) S&P 500 Index is a capitalization-weighted index of domestic equities of the largest companies traded on the NYSE and NASDAQ.
Stockholders As of February 22, 2023, there were 140 holders of record of our common stock. The actual number of stockholders is greater than this number of holders of record, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Stockholders As of February 23, 2024, there were 208 holders of record of our common stock. The actual number of stockholders is greater than this number of holders of record, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRESULTS OF OPERATIONS The following table sets forth our consolidated statements of operations data for the period indicated: Year Ended December 31, 2022 2021 2020 (in millions, except percentages) Revenue $ 6,018.0 100.0 % $ 6,421.0 100.0 % $ 3,720.8 100.0 % Operating expenses: Commissions and other related expense (1) 4,936.1 82.0 5,310.5 82.7 3,056.9 82.2 Sales and marketing (1) 575.1 9.6 510.4 7.9 402.1 10.8 Operations and support (1) 392.4 6.5 374.9 5.8 222.2 6.0 Research and development (1) 360.3 6.0 365.3 5.7 145.6 3.9 General and administrative (1) 208.1 3.5 288.5 4.5 105.8 2.8 Restructuring costs 49.1 0.8 — — 10.3 0.3 Depreciation and amortization 86.3 1.4 64.4 1.0 51.2 1.4 Total operating expenses 6,607.4 109.8 6,914.0 107.7 3,994.1 107.3 Loss from operations (589.4) (9.8) (493.0) (7.7) (273.3) (7.3) Investment income, net 2.8 — 0.1 — 2.0 0.1 Interest expense (3.6) (0.1) (2.4) — (0.6) — Loss before income taxes and equity in loss of unconsolidated entity (590.2) (9.8) (495.3) (7.7) (271.9) (7.3) Benefit from income taxes 0.9 — 2.5 — 1.7 — Equity in loss of unconsolidated entity (12.2) (0.2) (1.3) — — — Net loss (601.5) (10.0) (494.1) (7.7) (270.2) (7.3) Net (income) loss attributable to non-controlling interests — — — — — — Net loss attributable to Compass, Inc. $ (601.5) (10.0 %) $ (494.1) (7.7 %) $ (270.2) (7.3 %) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 2020 Commissions and other related expense $ 59.0 $ 128.7 $ 5.7 Sales and marketing 42.0 38.4 16.0 Operations and support 15.6 16.9 3.5 Research and development 57.5 92.7 1.4 General and administrative 60.4 109.6 16.6 Total stock-based compensation expense $ 234.5 $ 386.3 $ 43.2 42 Table of Contents Stock-based compensation for the year ended December 31, 2021 includes the following amounts related to the one-time acceleration of stock-based compensation expense in connection with the IPO: IPO Related Expense Commissions and other related expense $ 41.7 Sales and marketing 1.8 Operations and support 3.1 Research and development 46.9 General and administrative 55.0 Total stock-based compensation expense $ 148.5 Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, 2022 2021 $ Change % Change (in millions, except percentages) Revenue $ 6,018.0 $ 6,421.0 $ (403.0) (6.3 %) Revenue decreased by $403.0 million, or 6.3%, for 2022 compared to 2021.
Biggest changeEquity in Loss of Unconsolidated Entity Equity in loss of unconsolidated entity includes the results of our share of losses from our mortgage joint venture with Guaranteed Rate, Inc., which was formed in July 2021. 39 Table of Contents RESULTS OF OPERATIONS The following table sets forth our consolidated statements of operations data for the periods indicated: Year Ended December 31, 2023 2022 2021 (in millions, except percentages) Revenue $ 4,885.0 100.0 % $ 6,018.0 100.0 % $ 6,421.0 100.0 % Operating expenses: Commissions and other related expense (1) 4,007.0 82.0 4,936.1 82.0 5,310.5 82.7 Sales and marketing (1) 435.4 8.9 575.1 9.6 510.4 7.9 Operations and support (1) 326.9 6.7 392.4 6.5 374.9 5.8 Research and development (1) 184.5 3.8 360.3 6.0 365.3 5.7 General and administrative (1) 125.7 2.6 208.1 3.5 288.5 4.5 Restructuring costs 30.4 0.6 49.1 0.8 — — Depreciation and amortization 90.0 1.8 86.3 1.4 64.4 1.0 Total operating expenses 5,199.9 106.4 6,607.4 109.8 6,914.0 107.7 Loss from operations (314.9) (6.4) (589.4) (9.8) (493.0) (7.7) Investment income, net 8.5 0.2 2.8 — 0.1 — Interest expense (10.8) (0.2) (3.6) (0.1) (2.4) — Loss before income taxes and equity in loss of unconsolidated entity (317.2) (6.5) (590.2) (9.8) (495.3) (7.7) Benefit from income taxes 0.4 — 0.9 — 2.5 — Equity in loss of unconsolidated entity (3.3) (0.1) (12.2) (0.2) (1.3) — Net loss (320.1) (6.6) (601.5) (10.0) (494.1) (7.7) Net income attributable to non-controlling interests (1.2) — — — — — Net loss attributable to Compass, Inc. $ (321.3) (6.6 %) $ (601.5) (10.0 %) $ (494.1) (7.7 %) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 2021 Commissions and other related expense $ 11.6 $ 59.0 $ 128.7 Sales and marketing 35.0 42.0 38.4 Operations and support 16.1 15.6 16.9 Research and development 45.7 57.5 92.7 General and administrative 49.8 60.4 109.6 Total stock-based compensation expense $ 158.2 $ 234.5 $ 386.3 Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, 2023 2022 $ Change % Change (in millions, except percentages) Revenue $ 4,885.0 $ 6,018.0 $ (1,133.0) (18.8 %) Revenue decreased by $1,133.0 million, or 18.8%, for 2023 compared to 2022.
Financing Activities During 2022, net cash provided by financing activities was $135.4 million, primarily consisting of $150.0 million in proceeds from drawdowns on the Revolving Credit Facility, $15.7 million in net proceeds from drawdowns and repayments on the Concierge Facility and $9.0 million in proceeds from the exercise of stock options, partially offset by $23.5 million in taxes paid related to net share settlement of equity awards and $17.5 million in payments for acquisitions, including payments of contingent consideration.
During 2022, net cash provided by financing activities was $135.4 million, primarily consisting of $150.0 million in proceeds from drawdowns on the Revolving Credit Facility, $15.7 million in net proceeds from drawdowns and repayments on the Concierge Facility and $9.0 million in proceeds from the exercise of stock options, partially offset by $23.5 million in taxes paid related to net share settlement of equity awards and $17.5 million in payments for acquisitions, including payments of contingent consideration.
RSUs issued in connection with the Agent Equity Program are granted at the beginning of the year following the calendar year in which the commissions were earned and are subject to the terms and conditions of the 2012 Stock Incentive Plan and the 2021 Equity Incentive Plan, as applicable.
RSUs issued in connection with the Agent Equity Program were granted at the beginning of the year following the calendar year in which the commissions were earned and are subject to the terms and conditions of the 2012 Stock Incentive Plan and the 2021 Equity Incentive Plan, as applicable.
(2) Represents a charge of $10.5 million incurred during the year ended December 31, 2022 in connection with the Realogy Holdings Corp. matter and a $21.3 million expense incurred during the year ended December 31, 2021 in connection with the settlement of the Avi Dorfman and RentJolt, Inc. matter.
(2) Represents a charge of $10.5 million incurred during the year ended December 31, 2022 in connection with the Realogy Holdings Corp. matter and a charge of $21.3 million incurred during the year ended December 31, 2021 in connection with the settlement of the Avi Dorfman and RentJolt, Inc. matter.
We are the principal in the transaction and recognize as revenue the gross amount of the commission we expect to receive in exchange for those services. Revenue is recognized upon the transfer of control of promised services to the home sellers or home buyers.
We are the principal in the transaction and recognize as revenue the gross amount of the commission we receive in exchange for those services. Revenue is recognized upon the transfer of control of promised services to the home sellers or home buyers.
Our future capital requirements will depend on many factors, including, but not limited to, growth in the number of our agents and the associated costs to attract, support and retain them, our decision to resume expansion into new geographic markets, continued investment in adjacent services and other new revenue streams, future acquisitions, the timing of investments in technology and personnel to support the overall growth in our business and the extent and duration of the current and any future slowdown in the U.S. residential real estate market.
Our future capital requirements will depend on many factors, including, but not limited to, growth in the number of our agents and the associated costs to attract, support and retain them, our decision to resume expansion into new geographic markets, continued investment in integrated services and other new revenue streams, future acquisitions, the timing of investments in technology and personnel to support the overall growth in our business and the extent and duration of the current and any future slowdown in the U.S. residential real estate market.
An analysis of the significant line items on our statements of operations, as well as other information that we deem meaningful to understand our results of operations on a consolidated basis for the year ended December 31, 2021 compared to the year ended December 31, 2020 is included in our Form 10-K for the year ended December 31, 2021. • Key Business Metrics and Non-GAAP Financial Measures.
An analysis of the significant line items on our statements of operations, as well as other information that we deem meaningful to understand our results of operations on a consolidated basis for the year ended December 31, 2022 compared to the year ended December 31, 2021 is included in our Form 10-K for the year ended December 31, 2022. • Key Business Metrics and Non-GAAP Financial Measures.
During 2021, net cash used by investing activities was $192.5 million consisting of $137.4 million in payments for acquisitions, net of cash acquired, $50.1 million in capital expenditures and $5.0 million for investment in an 52 Table of Contents unconsolidated entity. The investment in an unconsolidated entity represents our investment in our joint venture that we formed in 2021.
During 2021, net cash used by investing activities was $192.5 million, consisting of $137.4 million in payments for acquisitions, net of cash acquired, $50.1 million in capital expenditures and $5.0 million for investment in an 49 Table of Contents unconsolidated entity. The investment in an unconsolidated entity represents our investment in our joint venture that we formed in 2021.
The financial covenants require that we maintain certain liquidity of at least $150.0 million as of the last day of each fiscal quarter and each date of a credit extension and (ii) consolidated total revenue as of the last day of each fiscal quarter be equal to or greater than the specified amount corresponding to such period.
The financial covenants require that (i) we maintain liquidity of at least $150.0 million as of the last day of each fiscal quarter and each date of a credit extension and (ii) consolidated total revenue as of the last day of each fiscal quarter be equal to or greater than the specified amount corresponding to such period.
The workforce reductions are part of a broader plan to take meaningful actions to improve the alignment between our organizational structure and our long-term business strategy, drive cost efficiencies enabled by our technology and other competitive advantages and continue to drive toward profitability and positive free cash flow.
The workforce reductions were part of a broader plan to take meaningful actions to improve the alignment between our organizational structure and our long-term business strategy, drive cost efficiencies enabled by our technology and other competitive advantages and continue to drive toward profitability and positive free cash flow.
The Second A&R Concierge Facility contains customary affirmative covenants, such as financial statement reporting requirements, as well as covenants that restrict its ability to, among other things, incur additional indebtedness, sell certain receivables, declare dividends or make certain distributions, and undergo a merger or consolidation or certain other transactions.
The Concierge Facility contains customary affirmative covenants, such as financial statement reporting requirements, as well as covenants that restrict its ability to, among other things, incur additional indebtedness, sell certain receivables, declare dividends or make certain distributions, and undergo a merger or consolidation or certain other transactions.
The principal amount, if any, is payable in full on March 4, 2026, unless earlier terminated or extended. We have the option to repay our borrowings, and to permanently reduce the loan commitments in whole or in part, under the Revolving Credit Facility without premium or penalty prior to maturity.
The principal amount, if any, is payable in full in March 2026, unless earlier terminated or extended. We have the option to repay our borrowings, and to permanently reduce the loan commitments in whole or in part, under the Revolving Credit Facility without premium or penalty prior to maturity.
This section provides our analysis and outlook for the significant line items on our statements of operations, as well as other information that we deem meaningful to understand our results of operations on a consolidated basis for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This section provides our analysis and outlook for the significant line items on our statements of operations, as well as other information that we deem meaningful to understand our results of operations on a consolidated basis for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Accordingly, real estate commissions are recorded as revenue at the point in time real estate transactions are closed (i.e., sale or purchase of a home). We also recognize revenue from other adjacent services related to the home transaction such as title and escrow services.
Accordingly, real estate commissions are recorded as revenue at the point in time real estate transactions are closed (i.e., sale or purchase of a home). We also recognize revenue from other integrated services related to the home transaction such as title and escrow services.
Our commissions and other related expense as a percentage of revenue is expected to fluctuate from period-to-period based on the mix of the commission arrangements we have with our agents, the fees we collect and any changes in adjacent services revenue.
Our commissions and other related expense as a percentage of revenue is expected to fluctuate from period-to-period based on the mix of the commission arrangements we have with our agents, the fees we collect and any changes in integrated services revenue.
As a result of restructuring actions taken during the year ended December 31, 2022, we incurred restructuring costs of $49.1 million, resulting from severance and other termination benefits for employees whose roles are being eliminated, lease terminations costs as a result of the accelerated amortization of various right-of-use assets and other restructuring costs, including those costs related to the wind-down of Modus.
As a result of restructuring actions taken during the year ended December 31, 2022, we incurred restructuring costs of $49.1 million, resulting from severance and other termination benefits for employees whose roles were eliminated, lease terminations costs as a result of the accelerated amortization of various right-of-use assets and other restructuring costs, including those costs related to the wind-down of Modus.
The decline was primarily driven by the macroeconomic conditions that contributed to the slowdown in the U.S. residential real estate market partially offset by agent additions. 47 Table of Contents Gross Transaction Value Gross Transaction Value is a key measure of the scale of our platform and success of our agents, which ultimately impacts revenue.
The decline was primarily driven by the macroeconomic conditions that contributed to the slowdown in the U.S. residential real estate market partially offset by agent additions. Gross Transaction Value Gross Transaction Value is a key measure of the scale of our platform and success of our agents, which ultimately impacts revenue.
During the periods presented, other items included (i) restructuring charges associated with lease termination and severance costs, (ii) acquisition-related expenses related to adjustments to the fair value of contingent consideration and acquisition consideration treated as compensation expense over underlying retention periods and (iii) litigation charges in connection with the Litigation Matters.
During the periods presented, other items included (i) restructuring charges associated with lease termination and severance costs, (ii) acquisition-related expenses related to adjustments to the fair value of contingent consideration and acquisition consideration treated as compensation expense over underlying retention periods and (iii) litigation charge in connection with the Litigation Matter.
In addition, we do not capitalize commissions paid to agents as incremental contract costs as there are no future benefits associated with the expenses. Stock-Based Compensation We measure compensation expense for all stock-based awards based on the estimated fair value of the awards on the date of grant.
In addition, we do not capitalize commissions paid to agents as incremental contract costs as there are no future benefits associated with the expenses. 51 Table of Contents Stock-Based Compensation We measure compensation expense for all stock-based awards based on the estimated fair value of the awards on the date of grant.
For the year ended December 31, 2022, our Gross Transaction Value represented 4.6% of residential real estate transacted in the United States, compared to 4.5% for the year ended December 31, 2021.
For the year ended December 31, 2023, our Gross Transaction Value represented 4.5% of residential real estate transacted in the United States, compared to 4.6% for the year ended December 31, 2022.
The minimum required consolidated revenue threshold for the trailing four fiscal quarters is $2,418.0 million during 2022, $3,799.0 million during 2023 and $4,668.0 million thereafter. As of December 31, 2022, we were in compliance with the financial covenants under the Revolving Credit Facility.
The minimum required consolidated revenue threshold for the trailing four fiscal quarters is $3,799.0 million during 2023 and $4,668.0 million thereafter. As of December 31, 2023, we were in compliance with the financial covenants under the Revolving Credit Facility.
This section provides an analysis of our liquidity and cash flows, as well as a discussion of our commitments that existed as of December 31, 2022. • Critical Accounting Estimates and Policies.
This section provides an analysis of our liquidity and cash flows, as well as a discussion of our commitments that existed as of December 31, 2023. • Critical Accounting Estimates and Policies.
The Revolving Credit Facility includes customary events of default that include, among other things, nonpayment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to 51 Table of Contents certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control and certain material ERISA events.
The Revolving Credit Facility includes customary events of default that include, among other things, nonpayment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control and certain material ERISA events.
The Agent Equity Program offers affiliated agents the ability to elect to have a portion of their commissions earned during a calendar year to be paid in the form of RSUs.
The Agent Equity Program offered affiliated agents the ability to elect to have a portion of their commissions earned during a calendar year to be paid in the form of RSUs.
Benefit from Income Taxes Benefit from income taxes consists of a partial reduction in the valuation allowance related to the carryover tax basis in deferred tax liabilities from acquisitions. The benefit from income taxes is reduced by current taxes in India that are not offset with future alternative minimum tax credits.
Benefit from Income Taxes Benefit from income taxes consists of a partial reduction in the valuation allowance related to the carryover tax basis in deferred tax liabilities from acquisitions. The benefit from income taxes is reduced by current taxes in India that are not offset with future alternative minimum tax credits, and state income tax expense.
Investment income, net increased during the year ended December 31, 2022 as a result of increased average interest rates on our short-term interest-bearing investments.
Investment income, net increased during the year ended December 31, 2023 as a result of increased average interest rates on our short-term interest-bearing investments.
We also issue RSUs to employees, affiliated agents and in certain cases in connection with business combinations. In addition to the issuance of RSUs to agents as equity compensation for the provision of services, we offer RSUs to affiliated agents through our Agent Equity Program.
We also issue RSUs to employees, affiliated agents and in certain cases in connection with business combinations. In addition to the issuance of RSUs to agents as equity compensation for the provision of services, we previously offered RSUs to affiliated agents through our Agent Equity Program.
We calculate our market share by dividing our Gross Transaction Value, or the total dollar value of transactions closed by agents on our platform, by two times (to account for the sell-side and buy-side of each transaction) the aggregate dollar value of U.S. existing home sales as reported by the National Association of Realtors.
We calculate our market share by dividing our Gross Transaction Value, or the total dollar value of transactions closed by agents on our platform, by two times (to account for the sell-side and buy-side of each transaction) the aggregate dollar value of U.S. existing home sales as reported by NAR.
In addition to the aforementioned workforce reductions, restructuring actions have included and are expected to include, but not be limited to, a reduction in U.S. hiring and backfills resulting from attrition; a reduction in spend through third party vendors; eliminating the use of incentives when recruiting new agents and reducing incentives for existing agents; a planned pause in M&A activity and new market expansion; and a review of occupancy costs with a view to consolidating offices and reducing related costs.
In addition to the workforce reductions, restructuring actions have included and are expected to include, but not be limited to, a reduction in U.S. hiring and backfills resulting from attrition; a reduction in spend through third-party vendors; eliminating the use of incentives when recruiting new agents and reducing incentives for existing agents; a planned slow down in new market expansion; and a review of occupancy costs with a view to consolidating offices and reducing related costs.
Operating Expenses Commissions and other related expense Commissions and other related expense primarily consists of commissions paid to our agents, who are independent contractors, upon the closing of a real estate transaction as well as stock-based compensation expense related to our Agent Equity Program and fees paid to external brokerages for client referrals, which are recognized and paid upon the closing of a real estate transaction.
Operating Expenses Commissions and other related expense Commissions and other related expense primarily consists of commissions paid to our agents, who are independent contractors, upon the closing of a real estate transaction as well as stock-based compensation expense related to our Agent Equity Program, which was discontinued following the completion of the 2022 Agent Equity Program, and fees paid to external brokerages for client referrals, which are recognized and paid upon the closing of a real estate transaction.
The decrease was primarily driven by the macroeconomic conditions that contributed to the current slowdown in the U.S. residential real estate market, a lower volume of transactions and a decline in Average Transaction Value, partially offset by an increase in the number of agents that joined our platform during 2021 and 2022.
The decrease was primarily driven by the macroeconomic conditions that contributed to the current slowdown in the U.S. residential real estate market, a lower 40 Table of Contents volume of transactions and a decline in Average Transaction Value, partially offset by an increase in the number of agents that joined our platform during 2022 and 2023.
We maintain a full valuation allowance against our deferred tax assets 41 Table of Contents for U.S. income tax purposes because we have concluded that it is more likely than not that the deferred tax assets will not be realized.
We maintain a full valuation allowance against our deferred tax assets for U.S. income tax purposes because we have concluded that it is more likely than not that the deferred tax assets will not be realized.
For RSUs granted in connection with the 2021 and 2022 Agent Equity Programs, we determined the value of the stock-based compensation expense at the time the underlying commission is earned and began to recognize the associated expense on a straight-line basis over the requisite service periods beginning on the closing date of the underlying real estate commission transactions.
For RSUs granted in connection with the 2021 and 2022 Agent Equity Programs, we determined the value of the stock-based compensation expense at the time the underlying commission was earned and recognized the associated expense on a straight-line basis over the requisite service periods beginning on the closing date of the underlying real estate commission transactions.
Adjusted EBITDA and Adjusted EBITDA margin are not presented in accordance with GAAP and the use of these terms varies from others in our industry. 48 Table of Contents The following table provides a reconciliation of Net loss attributable to Compass, Inc. to Adjusted EBITDA (in millions, except percentages): Year Ended December 31, 2022 2021 2020 Net loss attributable to Compass, Inc. $ (601.5) $ (494.1) $ (270.2) Adjusted to exclude the following: Depreciation and amortization 86.3 64.4 51.2 Investment income, net (2.8) (0.1) (2.0) Interest expense 3.6 2.4 0.6 Stock-based compensation 234.5 386.3 43.2 Benefit from income taxes (0.9) (2.5) (1.7) Restructuring costs 49.1 — 10.3 Acquisition-related expenses (1) 11.2 23.9 13.1 Litigation charges (2) 10.5 21.3 — Adjusted EBITDA $ (210.0) $ 1.6 $ (155.5) Net loss attributable to Compass, Inc. margin (10.0) % (7.7) % (7.3) % Adjusted EBITDA margin (3.5) % 0.0 % (4.2) % (1) Includes adjustments related to the change in fair value of contingent consideration and adjustments related to acquisition consideration treated as compensation expense over the underlying retention periods.
Adjusted EBITDA and Adjusted EBITDA margin are not presented in accordance with GAAP and the use of these terms varies from others in our industry. 45 Table of Contents The following table provides a reconciliation of Net loss attributable to Compass, Inc. to Adjusted EBITDA (in millions, except percentages): Year Ended December 31, 2023 2022 2021 Net loss attributable to Compass, Inc. $ (321.3) $ (601.5) $ (494.1) Adjusted to exclude the following: Depreciation and amortization 90.0 86.3 64.4 Investment income, net (8.5) (2.8) (0.1) Interest expense 10.8 3.6 2.4 Stock-based compensation 158.2 234.5 386.3 Benefit from income taxes (0.4) (0.9) (2.5) Restructuring costs 30.4 49.1 — Acquisition-related expenses (1) 1.9 11.2 23.9 Litigation charges (2) — 10.5 21.3 Adjusted EBITDA $ (38.9) $ (210.0) $ 1.6 Net loss attributable to Compass, Inc. margin (6.6) % (10.0) % (7.7) % Adjusted EBITDA margin (0.8) % (3.5) % — % (1) Includes adjustments related to the change in fair value of contingent consideration and adjustments related to acquisition consideration treated as compensation expense over the underlying retention periods.
We are also obligated to pay other customary fees for a credit facility of this size and type, including a commitment fee on a quarterly basis based on amounts committed but unused under the Revolving Credit Facility of 0.175% per annum and fees associated with letters of credit.
We are also obligated to pay other customary fees for a credit facility of this type, including a commitment fee on a quarterly basis based on amounts committed but unused under the Revolving Credit Facility of 50 Table of Contents 0.175% per annum, fees associated with letters of credit and administrative and arrangement fee.
Recent Developments Throughout 2022, a number of macroeconomic conditions contributed to the slowdown in the U.S. residential real estate market, impacting our business and financial results during the year ended December 31, 2022, as described in more detail in the section entitled “—Results of Operations”.
Recent Developments Throughout 2023 and 2022, a number of macroeconomic conditions continued to contribute to the slowdown in the U.S. residential real estate market, impacting our business and financial results during the years ended December 31, 2023 and 2022, as described in more detail in the section entitled “—Results of Operations”.
Gross Transaction Value is the sum of all closing sale prices for homes transacted by agents on our platform. We include the value of a single transaction twice when our agents serve both the home buyer and home seller in the transaction. We exclude transactions related to rentals in this metric.
Gross Transaction Value is the sum of all closing sale prices for homes transacted by agents on our platform. We include the value of a single transaction twice when our agents serve both the home buyer and home seller in the transaction. This metric excludes rental transactions.
These conditions have contributed towards slowed consumer demand and declining home affordability and began to have an impact on price appreciation. Any further slowdown or additional challenging conditions in the U.S. residential real estate market could have a significant impact on our business and financial results in the first quarter of 2023 and beyond.
These conditions have contributed toward slowed consumer demand and declining home affordability and began to have an impact on price appreciation. Any further slowdown or additional challenging conditions in the U.S. residential real estate market could have a significant impact on our business and financial results in 2024 and beyond.
We have the option to repay our borrowings under the Second A&R Concierge Facility without premium or penalty prior to maturity.
We have the option to repay our borrowings under the Concierge Facility without premium or penalty prior to maturity.
Additionally, in the event that we and our consolidated subsidiaries fail to comply with certain financial covenants that require us to meet certain liquidity-based measures, the commitments under the Second A&R Concierge Facility will automatically be reduced to zero and we will be required to repay any outstanding loans under the Second A&R Concierge Facility.
Additionally, in the event that we fail to comply with certain financial covenants that require us to meet certain liquidity-based measures, the commitments under the Concierge Facility will automatically be reduced to zero and we will be required to repay any outstanding loans under the Concierge Facility.
While adjacent services comprise a small portion of our revenue to date, we are well-positioned to capture meaningful revenue from adjacent services as we continue to expand and diversify our offerings within the real estate ecosystem.
While integrated services comprise a small portion of our revenue to date, we believe we are well-positioned to capture meaningful revenue from integrated services as we continue to diversify our offerings within the real estate ecosystem.
We discontinued the Agent Equity Program following the issuance of RSUs in January 2023 related to the 2022 program year. Our RSUs granted prior to December 2020 generally vest based upon the satisfaction of both a service-based condition and a liquidity event-based condition.
We discontinued the Agent Equity Program following the issuance of RSUs during the first quarter of 2023 related to the 2022 Agent Equity Program. Our RSUs granted prior to December 2020 generally vest based upon the satisfaction of both a service-based condition and a liquidity event-based condition.
We use the Average Number of Principal Agents, in combination with our other key metrics such as Total Transactions and Gross Transaction Value, as a measure of agent productivity. Our Average Number of Principal Agents for the year ended December 31, 2022 was 13,073, representing an increase of 18.2% from the year ago period.
We use the Average Number of Principal Agents, in combination with our other key metrics such as Total Transactions and Gross Transaction Value, as a measure of agent productivity. Our Average Number of Principal Agents for the year ended December 31, 2023 was 13,973, representing an increase of 5.1% from the year ago period.
These tables identify how each of the Operating expenses related financial statement line items contained within the accompanying consolidated statements of operations elsewhere in this Annual Report are impacted by the items excluded from Adjusted EBITDA (in millions): Year Ended December 31, 2022 Commissions and other related expense Sales and marketing Operations and support Research and development General and administrative GAAP Basis $ 4,936.1 $ 575.1 $ 392.4 $ 360.3 $ 208.1 Adjusted to exclude the following: Stock-based compensation (59.0) (42.0) (15.6) (57.5) (60.4) Acquisition-related expenses — — (11.2) — — Litigation charge — — — — (10.5) Non-GAAP Basis $ 4,877.1 $ 533.1 $ 365.6 $ 302.8 $ 137.2 49 Table of Contents Year Ended December 31, 2021 Commissions and other related expense Sales and marketing Operations and support Research and development General and administrative GAAP Basis $ 5,310.5 $ 510.4 $ 374.9 $ 365.3 $ 288.5 Adjusted to exclude the following: Stock-based compensation (128.7) (38.4) (16.9) (92.7) (109.6) Acquisition-related expenses — — (23.9) — — Litigation charge — — — — (21.3) Non-GAAP Basis $ 5,181.8 $ 472.0 $ 334.1 $ 272.6 $ 157.6 Year Ended December 31, 2020 Commissions and other related expense Sales and marketing Operations and support Research and development General and administrative GAAP Basis $ 3,056.9 $ 402.1 $ 222.2 $ 145.6 $ 105.8 Adjusted to exclude the following: Stock-based compensation (5.7) (16.0) (3.5) (1.4) (16.6) Acquisition-related expenses — — (13.1) — — Non-GAAP Basis $ 3,051.2 $ 386.1 $ 205.6 $ 144.2 $ 89.2 LIQUIDITY AND CAPITAL RESOURCES Since inception, we have generated negative cash flows from operations and have primarily financed our operations from net proceeds from the sale of convertible preferred stock and common stock.
These tables identify how each of the Operating expenses related financial statement line items contained within the accompanying consolidated statements of operations elsewhere in this Annual Report are impacted by the items excluded from Adjusted EBITDA (in millions): Year Ended December 31, 2023 Commissions and other related expense Sales and marketing Operations and support Research and development General and administrative GAAP Basis $ 4,007.0 $ 435.4 $ 326.9 $ 184.5 $ 125.7 Adjusted to exclude the following: Stock-based compensation (11.6) (35.0) (16.1) (45.7) (49.8) Acquisition-related expenses — — (1.9) — — Non-GAAP Basis $ 3,995.4 $ 400.4 $ 308.9 $ 138.8 $ 75.9 46 Table of Contents Year Ended December 31, 2022 Commissions and other related expense Sales and marketing Operations and support Research and development General and administrative GAAP Basis $ 4,936.1 $ 575.1 $ 392.4 $ 360.3 $ 208.1 Adjusted to exclude the following: Stock-based compensation (59.0) (42.0) (15.6) (57.5) (60.4) Acquisition-related expenses — — (11.2) — — Litigation charge — — — — (10.5) Non-GAAP Basis $ 4,877.1 $ 533.1 $ 365.6 $ 302.8 $ 137.2 Year Ended December 31, 2021 Commissions and other related expense Sales and marketing Operations and support Research and development General and administrative GAAP Basis $ 5,310.5 $ 510.4 $ 374.9 $ 365.3 $ 288.5 Adjusted to exclude the following: Stock-based compensation (128.7) (38.4) (16.9) (92.7) (109.6) Acquisition-related expenses — — (23.9) — — Litigation charge — — — — (21.3) Non-GAAP Basis $ 5,181.8 $ 472.0 $ 334.1 $ 272.6 $ 157.6 LIQUIDITY AND CAPITAL RESOURCES Since inception, we have generated negative cash flows from operations and have primarily financed our operations from net proceeds from the sale of convertible preferred stock and common stock.
While revenue from these services has been immaterial through 2022, we expect revenue from these services to grow over time as we expand existing and add new adjacent services to our platform.
While revenue from these services has been immaterial through 2023, we expect revenue from these services to grow over time as we expand existing and add new integrated services into our platform.
The outflow was primarily due to a $601.5 million net loss adjusted for $339.0 million of non-cash charges and cash outflow due to changes in assets and liabilities of $29.2 million.
For 2022, net cash used in operating activities was $291.7 million. The outflow was primarily due to a $601.5 million net loss adjusted for $339.0 million of non-cash charges and cash outflow due to changes in assets and liabilities of $29.2 million.
Our platform includes an integrated suite of cloud-based software for customer relationship management, marketing, client service and other critical functionality, all custom-built for the real estate industry and enabling our core brokerage services. The platform also uses proprietary data, analytics, artificial intelligence and machine learning to deliver high value recommendations and outcomes for Compass agents and their clients.
Our platform includes an integrated suite of cloud-based software for customer relationship management, marketing, client service, brokerage services and other critical functionalities, all custom-built for the real estate industry. Our platform also uses proprietary data, analytics, AI, and machine learning to simplify workflows of agents and deliver high-value recommendations and outcomes for both agents and their clients.
Research and development expense excluding such non-cash stock-based compensation expense was $302.8 million, or 5.0% of revenue for 2022 and $272.6 million, or 4.2% for 2021.
Research and development expense excluding such non-cash stock-based compensation expense was $138.8 million, or 2.8% of revenue for 2023 and $302.8 million, or 5.0% for 2022.
For additional information, see the section titled “—Liquidity and Capital Resources—Concierge Facility.” As of December 31, 2022, we had $150.0 million outstanding borrowings under our Revolving Credit Facility and outstanding letters of credit totaled approximately $33.0 million.
For additional information, see the section titled “—Liquidity and Capital Resources—Concierge Facility.” As of December 31, 2023, we had no outstanding borrowings under our Revolving Credit Facility and outstanding letters of credit totaled approximately $43.8 million.
Gross Transaction Value is primarily driven by home values in the markets we serve and by changes in the number of our agents in those markets, as well as seasonality and macroeconomic factors. Our Gross Transaction Value for the year ended December 31, 2022 was $230.3 billion, a decrease of 9.4% from the year ended December 31, 2021.
Gross Transaction Value is primarily driven by home values in the markets we serve and by changes in the number of our agents in those markets, as well as seasonality and macroeconomic factors. Our Gross Transaction Value for the year ended December 31, 2023 was $186.1 billion, a decrease of 19.2% from the year ended December 31, 2022.
These conditions include, but are not limited to, the conflict in Ukraine, volatility in the U.S. equity markets, rising inflation, rapidly rising mortgage interest rates and the Federal Reserve Board increasing the federal funds rate by an aggregate of 4.50% through January 2023 with possible further increases.
These conditions include, but are not limited to, the conflict in Ukraine, volatility in the U.S. equity markets, rising inflation, rapidly rising mortgage interest rates and the Federal Reserve Board increasing the federal funds rate by an aggregate of 5.25% through January 2024.
The effect of this seasonality on our revenue has a larger effect on our results of operations as many of our operating expenses (excluding commissions) are somewhat fixed in nature and do not vary directly in line with our revenue.
The effect of this seasonality on our revenue has a larger effect on our results of operations as many of our operating expenses (excluding commissions) are somewhat fixed in nature and do not vary directly in line with our revenue. We believe that this seasonality has affected and will continue to affect our quarterly results.
Sales and marketing expense excluding such non-cash stock-based compensation expense was $533.1 million, or 8.9% of revenue for 2022 and $472.0 million, or 7.4% for 2021, respectively.
Sales and marketing expense excluding such non-cash stock-based compensation expense was $400.4 million, or 8.2% of revenue for 2023 and $533.1 million, or 8.9% for 2022, respectively.
Included in Operations and support expense were non-cash expenses related to stock-based compensation of $15.6 million for the year ended December 31, 2022 and $16.9 million for the year ended December 31, 2021.
Included in Operations and support expense were non-cash expenses related to stock-based compensation of $16.1 million for the year ended December 31, 2023 and $15.6 million for the year ended December 31, 2022, which remained relatively flat.
Operating Expenses Commissions and other related expense Year Ended December 31, 2022 2021 $ Change % Change (in millions, except percentages) Commissions and other related expense $ 4,936.1 $ 5,310.5 $ (374.4) (7.1 %) Percentage of revenue 82.0 % 82.7 % Commissions and other related expense decreased by $374.4 million, or 7.1%, for 2022 compared to 2021.
Operating Expenses Commissions and other related expense Year Ended December 31, 2023 2022 $ Change % Change (in millions, except percentages) Commissions and other related expense $ 4,007.0 $ 4,936.1 $ (929.1) (18.8 %) Percentage of revenue 82.0 % 82.0 % Commissions and other related expense decreased by $929.1 million, or 18.8%, for 2023 compared to 2022.
As of December 31, 2022, we had cash and cash equivalents of $361.9 million and an accumulated deficit of $2.2 billion.
As of December 31, 2023, we had cash and cash equivalents of $166.9 million and an accumulated deficit of $2.5 billion.
The cash inflow provided by operations was partially offset by an increase of $40.0 million in other currents assets and an increase of $11.8 million in other non-current assets. For 2020, net cash used in operating activities was $58.1 million.
The cash inflow provided by operations was partially offset by an increase of $40.0 million in other currents assets and an increase of $11.8 million in other non-current assets.
Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin of 0.50% or (ii) a floating rate per annum equal to the rate at which dollar deposits are offered in the London interbank market plus a margin of 1.50%.
Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin of 0.50% or (ii) a rate per annum equal to SOFR plus a margin of 1.50%.
The base rate is equal to the highest of (a) the prime rate as quoted by The Wall Street Journal, (b) the federal funds effective rate plus 0.50%, (c) the rate at which dollar deposits are offered in the London interbank market for a one-month interest period plus 1.00%, and (d) 1.00%.
The base rate is equal to the highest of (a) the prime rate as quoted by The Wall Street Journal, (b) the federal funds effective rate plus 0.50%, (c) the SOFR term rate for a one-month interest period plus 1.00%, and (d) 1.00%.
The liquidity event-based vesting requirement was met on March 31, 2021, the effective date of our registration statement. In December 2020, we began issuing RSUs that vest upon the satisfaction of only a service-based vesting condition that generally ranges from one to five years.
The liquidity event-based vesting requirement was met on March 31, 2021, the effective date of the our registration statement, see Note 1 to our consolidated financial statements included in this Annual Report—“Business—Initial Public Offering.” In December 2020, we began issuing RSUs that vest upon the satisfaction of only a service-based vesting condition that generally ranges from one to five years.
Interest Expense Interest expense consists primarily of expense related to the interest expenses, including commitment fees for available borrowing capacities, and amortization of debt issuance costs associated with our Concierge Facility and Revolving Credit Facility.
Investment Income, net Investment income, net consists primarily of interest, dividends and realized gains and losses earned on our cash and cash equivalents. Interest Expense Interest expense consists primarily of expense related to the interest expenses, including commitment fees for available borrowing capacities, and amortization of debt issuance costs associated with our Concierge Facility and Revolving Credit Facility.
See Note 11 to our consolidated financial statements included elsewhere in this Annual Report for more information. Adjusted EBITDA was a loss of $210.0 million compared to income of $1.6 million during the years ended December 31, 2022 and 2021, respectively.
See Note 11 to our consolidated financial statements included in the 2022 and 2021 Form 10-K for more information. Adjusted EBITDA was a loss of $38.9 million compared to a loss of $210.0 million during the years ended December 31, 2023 and 2022, respectively.
Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2022: Payments Due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years (in millions) Operating lease obligations (1) $ 677.7 $ 118.9 $ 217.0 $ 163.1 $ 178.7 Other acquisition related compensation 21.9 14.3 7.6 — — Estimated undiscounted contingent consideration payments 14.0 10.0 3.1 0.9 — Acquisition related payables 13.5 13.3 0.2 — — Purchase obligations 74.6 30.4 31.0 13.2 — Total $ 801.7 $ 186.9 $ 258.9 $ 177.2 $ 178.7 __________ (1) As of December 31, 2022, the Company has additional operating leases for real estate that have not yet commenced of $11.2 million payable through 2033, which have been excluded from above.
Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2023: Payments Due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years (in millions) Operating lease obligations (1) $ 589.2 $ 121.2 $ 200.0 $ 148.0 $ 120.0 Other acquisition related compensation 2.9 1.0 1.3 0.6 — Estimated undiscounted contingent consideration payments 31.8 4.5 4.6 14.6 8.1 Acquisition related payables 1.1 0.7 0.4 — — Purchase obligations 88.0 48.5 39.1 0.4 — Total $ 713.0 $ 175.9 $ 245.4 $ 163.6 $ 128.1 __________ (1) As of December 31, 2023, the Company has additional operating leases for real estate that have not yet commenced of $10.0 million payable through 2033, which have been excluded from above.
Pursuant to the Second A&R Concierge Facility, the principal amount, if any, is payable in full in February 2024, unless earlier terminated or extended. As of December 31, 2022 and 2021, there were $31.9 million and $16.2 million, respectively, in borrowings outstanding under the Concierge Facility.
Pursuant to the Concierge Facility, the principal amount, if any, is payable in full in January 2026, unless earlier terminated or extended. As of December 31, 2023 and 2022, there were $24.8 million and $31.9 million, respectively, in borrowings outstanding under the Concierge Facility.
General and administrative Year Ended December 31, 2022 2021 $ Change % Change (in millions, except percentages) General and administrative $ 208.1 $ 288.5 $ (80.4) (27.9 %) Percentage of revenue 3.5 % 4.5 % General and administrative expense decreased by $80.4 million, or 27.9%, for 2022 compared to 2021.
General and administrative Year Ended December 31, 2023 2022 $ Change % Change (in millions, except percentages) General and administrative $ 125.7 $ 208.1 $ (82.4) (39.6 %) Percentage of revenue 2.6 % 3.5 % General and administrative expense decreased by $82.4 million, or 39.6%, for 2023 compared to 2022.
Investment income, net Year Ended December 31, 2022 2021 $ Change % Change (in millions, except percentages) Investment income, net $ 2.8 $ 0.1 $ 2.7 2700.0 % During the year ended December 31, 2022, interest income was $2.8 million and during year ended December 31, 2021, interest income was $0.1 million.
Investment income, net Year Ended December 31, 2023 2022 $ Change % Change (in millions, except percentages) Investment income, net $ 8.5 $ 2.8 $ 5.7 203.6 % During the year ended December 31, 2023, investment income was $8.5 million and during year ended December 31, 2022, investment income was $2.8 million.
The Concierge Facility provides for a $75.0 million revolving credit facility and is solely used to finance, in 50 Table of Contents part, our Compass Concierge Program. The Concierge Facility is secured primarily by the Concierge Receivables and cash of the Compass Concierge Program.
The Concierge Facility provides for a $75.0 million revolving credit facility and is solely used to finance, in part, our Compass Concierge Program. The Concierge Facility is secured primarily by the Concierge Receivables and cash of the Compass Concierge Program. The interest rate on the Concierge Facility was 8.93% as of December 31, 2023.
In addition to commission revenue, we generate revenue through adjacent services related to the home transaction such as title and escrow services which comprised an immaterial amount of the consolidated revenue for the years ended December 31, 2022, 2021 and 2020.
In addition to commission revenue, we generate revenue through integrated services related to the home transaction such as title and escrow services which comprised an immaterial amount of the consolidated revenue for the years ended December 31, 2023, 2022 and 2021. Our management evaluated and determined that no disaggregation of revenue is necessary or appropriate.
As principal, we recognize revenue in the gross amount of consideration to which we expect to receive in exchange for those services. We concluded that our brokerage revenue contains a single performance obligation that is satisfied upon the closing of a real estate services transaction, at which point the entire transaction price is earned.
We concluded that our brokerage revenue contains a single performance obligation that is satisfied upon the closing of a real estate services transaction, at which point the entire transaction price is earned.
Investing Activities During 2022, net cash used by investing activities was $100.1 million consisting of $70.1 million in capital expenditures, $15.0 million in payments for acquisitions, net of cash acquired, and $15.0 million for investment in an unconsolidated entity.
The investment in an unconsolidated entity represents our investment in our mortgage joint venture with Guaranteed Rate, Inc. that we formed in 2021. During 2022, net cash used by investing activities was $100.1 million, consisting of $70.1 million in capital expenditures, $15.0 million in payments for acquisitions, net of cash acquired, and $15.0 million for investment in an unconsolidated entity.
Year Ended December 31, 2022 2021 2020 Total Transactions 211,538 225,272 144,784 Gross Transaction Value (in billions) $ 230.3 $ 254.2 $ 151.7 Average Number of Principal Agents 13,073 11,058 8,686 Net loss attributable to Compass, Inc.
Year Ended December 31, 2023 2022 2021 Total Transactions 178,848 211,538 225,272 Gross Transaction Value (in billions) $ 186.1 $ 230.3 $ 254.2 Average Number of Principal Agents (1) 13,973 13,296 11,180 Net loss attributable to Compass, Inc.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 2020 (in millions) Net cash used in operating activities $ (291.7) $ (28.6) $ (58.1) Net cash used in investing activities (100.1) (192.5) (13.4) Net cash provided by financing activities 135.4 399.3 19.9 Net (decrease) increase in cash and cash equivalents $ (256.4) $ 178.2 $ (51.6) Operating Activities For 2022, net cash used in operating activities was $291.7 million.
The occurrence of an event of default could result in the acceleration of the obligations under the Revolving Credit Facility. 48 Table of Contents Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 2021 (in millions) Net cash used in operating activities $ (25.9) $ (291.7) $ (28.6) Net cash used in investing activities (11.7) (100.1) (192.5) Net cash (used in) provided by financing activities (157.4) 135.4 399.3 Net (decrease) increase in cash and cash equivalents $ (195.0) $ (256.4) $ 178.2 Operating Activities For 2023, net cash used in operating activities was $25.9 million.
Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin of 0.50% or (ii) a floating 53 Table of Contents rate per annum equal to the rate at which dollar deposits are offered in the London interbank market plus a margin of 1.50%.
Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin of 0.50% or (ii) a rate per annum equal to the secured overnight financing rate, or SOFR, plus a margin of 1.50%.
The decrease in Adjusted EBITDA during the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily due to the growth in operating expenses as a percentage of revenue resulting from investments in sales and marketing, operations and support and research and development and a slow down in revenue resulting from the current macroeconomic conditions impacting the U.S. residential real estate market as described in more detail under the section entitled “—Recent Developments”.
The decrease in Adjusted EBITDA loss during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily a result of the impact of our workforce reductions and cost reduction initiatives outpacing the impact of a slow down in revenue resulting from the current macroeconomic conditions impacting the U.S. residential real estate market as described in more detail under the section entitled “—Recent Developments”.
Interest expense Year Ended December 31, 2022 2021 $ Change % Change (in millions, except percentages) Interest expense $ 3.6 $ 2.4 $ 1.2 50.0 % Interest expense increased by $1.2 million, or 50.0%, for 2022 compared to 2021.
Interest expense Year Ended December 31, 2023 2022 $ Change % Change (in millions, except percentages) Interest expense $ 10.8 $ 3.6 $ 7.2 200.0 % 43 Table of Contents Interest expense increased by $7.2 million, or 200.0%, for 2023 compared to 2022.
We hold the real estate brokerage license that is necessary under relevant state laws and regulations to provide brokerage services and therefore we control those services that are necessary to legally transfer real estate between home sellers and buyers.
We hold the real estate brokerage license that is necessary under relevant state laws and regulations to provide brokerage services and therefore controls those services that are necessary to legally transfer real estate between home sellers and buyers. Although our agents are independent contractors, they cannot execute a real estate transaction without a brokerage license, which the Company possesses.
Included in Commissions and other related expense were non-cash expenses related to stock-based compensation of $59.0 million for the year ended December 31, 2022 and $128.7 million for the year ended December 31, 2021.
Included in Commissions and other related expense were non-cash expenses related to stock-based compensation of $11.6 million for the year ended December 31, 2023 and $59.0 million for the year ended December 31, 2022. The decline in stock-based compensation expense in 2023 as compared to 2022 was due to the discontinuation of the Agent Equity Program in 2023.
Our management evaluated and determined that no disaggregation of revenue is necessary or appropriate. 54 Table of Contents As we generally bill for our services at the time of revenue recognition, we do not have material deferred revenue or contract asset balances.
As we generally bill for our services at the time of revenue recognition, we do not have material deferred revenue or contract asset balances.
This section provides a summary of the most recent authoritative accounting standards and guidance that have either been recently adopted by our company or may be adopted in the future.
This section provides a summary of the most recent authoritative accounting standards and guidance that have either been recently adopted by our company or may be adopted in the future. INTRODUCTION We provide an end-to-end platform that empowers our residential real estate agents to deliver exceptional service to seller and buyer clients.
Included in Sales and marketing expense were non-cash expenses related to stock-based compensation of $42.0 million for the year ended December 31, 2022 and $38.4 million for the year ended December 31, 2021.
Included in Sales and marketing expense were non-cash expenses related to stock-based compensation of $35.0 million for the year ended December 31, 2023 and $42.0 million for the year ended December 31, 2022. The decrease in stock-based compensation expense for 2023 as compared to 2022 was due to lower headcount resulting from the aforementioned workforce reductions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk Our cash and cash equivalents as of December 31, 2022 consisted of $361.9 million. Certain of our cash and cash equivalents are interest-earning instruments that carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
Biggest changeOur market risk exposure is primarily a result of exposure resulting from potential changes in interest rates or inflation. 52 Table of Contents Interest Rate Risk Our cash and cash equivalents as of December 31, 2023 consisted of $166.9 million. Certain of our cash and cash equivalents are interest-earning instruments that carry a degree of interest rate risk.
Foreign Currency Exchange Risk As our operations in India have been limited, and we do not maintain a significant balance of foreign currency, we do not currently face significant risk with respect to foreign currency exchange rates. 56 Table of Contents
Foreign Currency Exchange Risk As our operations in India have been limited and we do not maintain a significant balance of foreign currency, we do not currently face significant risk with respect to foreign currency exchange rates. 53 Table of Contents
Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. Our Concierge Facility bears interest equal to Term SOFR plus a credit adjustment spread of 0.11448%, plus a margin of 2.35%.
Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. Our Concierge Facility bears interest equal to the term SOFR rate plus a margin of 2.75%.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure.
The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure resulting from potential changes in interest rates or inflation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates.
As of December 31, 2022, we had a total outstanding balance of $31.9 million under the Concierge Facility. Our Revolving Credit Facility bears interest equal to a base rate plus a margin of 1.50%. As of December 31, 2022, we had a total outstanding balance of $150.0 million under the Revolving Credit Facility.
As of December 31, 2023, we had a total outstanding balance of $24.8 million under the Concierge Facility. Our Revolving Credit Facility bears interest equal to SOFR plus a margin of 1.50%. As of December 31, 2023, we had no borrowings outstanding under the Revolving Credit Facility.

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