Compass Inc. has announced more job cuts as part of its ongoing cost-reduction efforts. The real estate brokerage is aiming to turn a profit even in a weakening US housing market.
In a memo obtained by Bloomberg, CEO Robert Reffkin said that the biggest reduction was in the technology team. Compass said in a regulatory filing on Tuesday that it estimates it will take a pre-tax cash charge of $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.
Reffkin said in a memo to Compass agents that some of the company's non-agent-facing teams have been reduced in size, with a focus on areas that do not impact agents' day-to-day experience.
Reffkin said that Compass still has more than 700 employees in its technology team, which is likely more tech workers than every traditional real estate brokerage combined. He added that this is 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 popular brokerage in New York, Los Angeles and Miami, thanks to its tech offerings and generous pay packages supported by venture capital funding, including roughly $1 billion from SoftBank Group Corp. However, it has never produced an annual profit, even in 2021 when it sold $251 billion worth of homes, more than any other US brokerage, according to RealTrends.
Now the company is facing a sharp decline in the housing market, and is urgently seeking ways to cut costs and stay afloat in the traditionally low-margin world of residential brokerages.
This is 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 touted its technology offerings as a key differentiator from other brokerages. New York-based Compass spent $900 million over a decade building a sales platform and other tools that executives say are now complete and no longer require the same level of staffing as when the technology was being developed.
Compass went public in April 2021, during the pandemic housing boom, with shares priced at $18. However, the stock has since slid to a record low of $2.58, down 4.1%, as of 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. This leaves the company without two key members of its executive team.
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