Compass Inc. cut more jobs, part of cost-reduction moves by the real estate brokerage as it aims to turn a profit even in a weakening US housing market.
(Bloomberg) — Compass Inc. cut more jobs, part of cost-reduction moves by the real estate brokerage as it aims to turn a profit even in a weakening US housing market.
Chief Executive Officer Robert Reffkin said in a memo obtained by Bloomberg that the biggest reduction was in the technology team. Compass said Tuesday in a regulatory filing that it estimates it will take a pre-tax cash charge of about $23 million to $26 million for severance and other benefits for employees being terminated during the third quarter. A company spokesman declined to disclose how many employees were being laid off.
“Today we reduced the size of some of our non agent-facing teams, focused on areas that do not impact your day-to-day experience,” Reffkin said in the memo to Compass agents.
Compass still has more than 700 employees in its technology team, which Reffkin said was likely more tech workers than every traditional real estate brokerage combined. That’s about half of the “over 1,500 highly experienced product and engineering professionals” worldwide that the company reported in a February filing.
Compass has become a go-to brokerage in New York, Los Angeles and Miami, luring agents with its tech offerings and generous pay packages supported by venture capital funding, including roughly $1 billion from SoftBank Group Corp. But it’s never produced an annual profit, even in 2021 as it sold $251 billion worth of homes, more than any other US brokerage, according to RealTrends.
Now the company is facing a swift downturn in the housing market, urgently seeking ways to cut costs and stay afloat in the traditionally low-margin world of residential brokerages.
The layoffs were the brokerage’s second major wave of job cuts this year, after reducing its workforce by 10% in June as US home sales began to slow. Compass said last month that it would seek to implement cost cuts that would save the company about $320 million in expenses next year.
The company had previously pitched its technology offerings to investors and agents as what differentiated it from other brokerages. New York-based Compass spent $900 million over a decade building a sales platform and other tools that executives say are complete and no longer require the same amount of staffing that was needed while the technology was being developed.
Compass rode the pandemic housing boom to an initial public offering in April 2021, when the shares were priced at $18. The stock has slid since then, with shares down 4.1% to a record low of $2.58 at 9:36 a.m. in New York Tuesday.
Chief Technology Officer Joseph Sirosh was ousted in August and the company said it didn’t intend to replace him. Chief Financial Officer Kristen Ankerbrandt announced earlier in the year that she planned to depart in September.
(Updates shares in ninth paragraph.)
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