Good afternoon, everyone. Thanks for joining the fireside chat with Compass. Very excited to have Robert Reffkin, the company's CEO and founder, and Kalani Reelitz, the company's CFO. The format is a fireside chat. If you do have any questions that you would like to ask, feel free to put them in the chat box in the window below the stream, and then I will ask them as they come up and hit relevancy in our conversation. So gentlemen, thanks for joining. Before I kinda get into it, maybe Robert, just if you have just any thoughts on kind of we, you know, we've come off of earnings. I think I was saying to Kalani, we probably have the most amount of investor interest at a conference event than we've had in a while. There's probably a lot of reasons for that, not just Oppenheimer's great meeting scheduling capabilities, but just if you just wanna share thoughts on kind of the industry and the business and where we are right now. Yeah, no, thank you. Definitely, you know, feeling the interest. I think, you know, a lot of people see the opportunity, you know, to play rates going down over the course of the, hopefully the year ahead. But in terms of Compass, second quarter, we had all-time high net income, all-time high EBITDA, Free Cash Flow, now for four. We got to positive for four of the last five quarters, so, a big change from two years ago. We had. We grew our market share 50 basis points year-over-year to over 5%. Our agent economics grew 100 basis points. It's a really important point to illustrate, where, when you include commissions, but also the marketing budgets that they give, their agent economics improved by 100 basis points. So the average agent is paying Compass, and they are paying Compass 100 basis points more. And in light of that, having 97.3% core lead and retention, feel very good about that. And our revenue grew 14% year-over-year. Nine percent of that is attributable to organic, and that's in an environment where transactions declined 3%. So overall, I'm feeling good about, you know, the, the, you know, the results of Q2, and looking forward to the quarters ahead. Great. So let's start with, I guess trends. You know, you've seen you know, with rates now, I mean, honestly, the past, really, it's like the past 10 days, right? It's kind of almost been where all the action is. So- Mm What does that tell us kind of like now? It's probably more of, like, moving into, you know, fourth quarter, 'cause it probably won't have an impact on third quarter results, but, like, what does that tell us about fourth quarter, really, the beginning of next year? Yeah, so, look, I think right now, the mortgage rates are called 6.5%. They were y ou know, they went to 6.34% for a day. That was the lowest in 15 months. But at 6.5%, last time we were here, the 6.6% was last December going into last January, and that resulted in a seasonally adjusted annual rate of home sales of 4.4 million. Right now, the most recent one was 3.9, and that's because mortgage rates, you know, went from 6.4% up to 7.2%, and always have that two-month lag. So at the current mortgage rate environment, I'd say it's 4.4 million, seasonally adjusted annual rate of home sales, all things being equal, but things, all things aren't equal. We have more inventory today than we did in that last 6.6% mortgage rate environment. And so call it 4.4 million being 4.5 million, with more inventory at this current rate. My hope is that, if we can see that 6.5 million go down to low sixes or even break 6 million, and if we can do that in a soft landing environment, I think that, I think that would get us back to, if not 5 million, seasonally adjusted annual rate, very, very close. And you highlighted how you organically outperformed the industry in the most recent quarter, 9% versus the industry, you know, down a little bit. You know, we've definitely seen better performance in the high end or more expensive home, which you're clearly exposed to. But, you know, is it just that, or are there, like, other factors on, like, why Compass is winning, not just the fact that you tend to focus on more expensive homes? Yeah, I mean, look, we're now in a lot of different markets so we're not as high-end weighted as we have been in the past. And so, for example, we're in Louisiana, we're in the Carolinas. We're not just in Miami, Florida, we're all around Florida, and so a nd then we're becoming. We will, over time, become closer to the average. What we see is we're still w e hired over 500 principal agents last quarter. So we're still growing organically, of course, adding inorganic on top of that, and we see our agents being more productive using our tools, right? We've now invested over $1.6 billion in a platform that is solely designed to help agents grow their business, and to stay in touch with their clients, better serve their clients, and we see the results of that. The average of all our transactions, 17.5% of them were agents that got referrals from other agents, highlighting, you know, that our agents are, you know, the top agents in the industry. Of the top 1,000 agents in the industry per RealTrends, we have by far more at Compass than any other company. And that's evidenced in them growing their business. Just to highlight the referrals, you know, both of people joining and kind of, you know, cross-referring, that's really without the same level of equity incentive that there was several years ago. Yeah, I'm glad you brought that up. Yeah, when I said agent-to-agent client referral, 17.5%, I was referring to agents that referred their buyers or sellers to a Compass agent in a market where they're not in. But on w e are also getting, we call them Agent Introductory Program, where agents and sales managers can introduce agents to Compass. That's helping us hire more. But we are no longer giving agents w e discontinued equity and cash incentives to bring agents to Compass, two years ago. Pleased to say that we're still growing at a very healthy rate. Yeah. And I would say, Jason, we talked about this on Robert talked about on the call, right? We do believe we're growing faster than the market with our structural advantages, and that is the end-to-end platform that is different than everyone else. We have one end-to-end, put an address in once and it never repeats. The national scale we're at, and we're gonna continue to add inventory, right? But we're at 33,000 agents. We have just the differentiation, and they're all on our platform. Again, that then, you know, from a third structural advantage that allows us an agent network and allows us to be, you know, differentiated again there. And then, as Robert mentioned, that inventory, we're gonna continue to grow with our 30/30 program. So I think we're positioned, or we've come out of what has been the worst real estate market in what, 30 years, and positioned ourselves in a position of strength, which is what's exciting for us. So all of that combined, I think we're—you should expect us to continue to grow market share. I mean, like, you know, when people have looked at how many, you know, real estate agents are there, right? They've kind of been shocked at, I think, the level of growth of the number of real estate agents. Look, a lot of that is people who do this at either, you know, very part-time, you know, somebody has a license but maybe doesn't really do it anymore. I mean, so. But that being said, this is still a massively fragmented industry. There you can now count maybe on, like, on one hand, the number of actual companies who are investing in technology for their, for their agents. You know, you added 1,200 agents in the last 12 months. You know, the industry lost 100,000 agents. Now, with the NAR change, and, you know, again, it can be a good thing for the industry. We can debate, like, if it's gonna be bad, but it would seem that, you know- Mm, we The number of agents We can, we can debate if it's gonna be good. Who consolidate and the bidders, the bigger, the more successful companies keep getting bigger. I mean, just kind of work through that. Yeah, I do think you could debate if it could be better. There's an argument that buyer agents never knew they can negotiate their own commission until now, and they just accepted whatever the listing agent negotiated on their behalf. Now, buyer agents are going to negotiate their commission, and so I think, I'm certain that there are many top agents who will make more because of this. But who knows what happens in, with the average? You know, overall, I think with NAR and the settlement, it's important to note how little is changing. In the majority of our markets, they already required buyer representation agreements, and I think there is a misconception that this change on August 17th required compensation to be agreed to before the first showing. It does not. As evidenced by Zillow's touring agreement, just before the first showing, you just have to have an agreement that you're representing them during the touring period. You can still negotiate compensation, and have that agreement signed before the offer is made. And so for the many, many markets we're in, where the compensation historically was already required by state and it was put into the agreement as part of the right before the offer, for them, the only required structural change is that they have a touring agreement without compensation before touring. So it's a very small change. We could also note that we mentioned on the earnings call, in the last two months, of all the listings across the MLSs, the majority of the MLSs that we're in, not just Compass listings, all the listings in those MLSs, 99% of the sellers continued to pay a buyer agent. And of that, the rate that they were paying the buyer agents was consistent with before this change. And before or sorry, before the headlines. The last point that I would make is that there are MLSs that already made this change. So for example, sorry, was it, Is it Washington State? No, no, it wasn't Washington State. It was I have to come back. I think it was Indiana or Indianapolis, but there are, there are three different MLSs. Oh, yeah, Indianapolis. So MIBOR, and all of the three MLSs in Indiana, they've already went to this on July 1st, because their state just required them to do it earlier. So it's I think there's, like, this, "Let's wait and see until August 17th." I don't see I haven't seen the data yet that suggests that there's going to be, either from the historical headlines, a big shift, or from the actual changes, as well as the MLSs that we can see the evidence of in Indiana. But really, really where your confidence come from is that because you believe you have the, basically, the best salespeople in the industry, you know, if you send the, you know, the best salesperson in and tell them that something that wasn't in the negotiation, which it wasn't, but can be a negotiation those types of people thrive in that scenario. Yes, for sure that. And on the listing side, so the seller is continuing to pay the buyer agent, as they have, right? Nothing about the August 17th change will change the listing agent's conversation, or the dynamic between the listing agent and the seller on incentivizing the buyer agents. Not that I see at least. Yeah A nd so I think that kind of creates a floor in my mind, and then the buyer agent can negotiate on their behalf on top of that. But again, time will tell. And Jason, we said, I think it was two earnings calls now ago, you know, we firmly believe, right, that there will be little impact on that professional full-time agent, which is our Compass teams. We also believe that we will see increasingly, folks need to sell the value prop of the brokerage that's supporting them when they're coming to their clients, right? That's Compass. That's our platform, that's our tools that nobody else has, right? We also said we believe, and more today than yesterday, we believe that real estate agents are managing really complex multi-month things that happen for our clients only three to four times on average in their lifetime. So we do not believe that important role is gonna be displaced. And then we also, because of that, we do believe that the percentage of buyers and sellers will continue to be at the 90% level that we've seen in history. So I think, you know, we believe that folks are gonna pay for value over discount, and we believe, quite frankly, our agents are that full-time professional, as you mentioned, that is positioned well to react. And we quite frankly view this as an opportunity to really make sure that our agents feel prepared. Our teams have done, you know, hundreds of re-trainings. We've taken, again, half the states that we're in already have these kinds of activities. We're taking, you know, our network to train each other, and so we're seeing a lot of opportunity here. And then because of what's been happening, well, I guess one could argue that the MLSs are actually like, losing power, and they're having to be less, you know, I guess, rigorous or less diktats, you know, because of it gets into, you know, what, you know, potential antitrust and certain of the, the behaviors being looked at. So one of the things I think we've talked to you about is how previously there was rules around exclusives, where if you put an exclusive on your website, you could only have it on your website for 24hours, 48 hours, and then you had to put it on the MLS. That is starting to loosen up, which should ultimately help drive more consumer traffic to the Compass websites. Just talk a bit more about how you think other changes, you know, will be beneficial to kinda like the, you know, growth and driving activity for agents. I think we're in an environment where you can't tell homeowners what to do. Historically, the MLS stood for compensation, cooperation, and data. I think forcing anything around compensation or anything around cooperation is inevitable that it will end. I think we've already seen this now in compensation, and now it's going to be moving to cooperation. Homeowners should be able to decide how they want to market their properties. There are many reasons why a homeowner may choose to market their property outside of an MLS. Days on market is the killer of value. Price drop history is the killer of value. As I mentioned in the past, you don't go into a Mercedes-Benz lot, and on every car, right on top of it, it says, "Here's how long it's been on the market. Here's how many price drops they've had. 39% of the homes right now have a price drop on it. And that's not great for homeowners. I think the industry's moved too much to buyers because the industry was able to. MLSs and aggregators were able to get they knew they had the listing, so why do something for the homeowner? They're focused on buyers and what kind of insight they could put to get buyers. But I call these insights negative insights. Days on market, price drop history, crime, weather, Zestimate, automated, you know, estimates of the value of their home. These are not things that homeowners are asking for. And so I think what Compass has as an opportunity is to be the company that's focused on homeowner value. If you put it, as an example, in the MLS for only agents to view, you can give a homeowner 90% of the exposure with 0% of the risk, because 90% of buyers work with an agent, and they can be on compass.com, it could be with the agents. That's just one example of how you can protect homeowners from these negative insights, but also give them exposure. There's a lot around pricing, discovery, and marketing, where you can have a multi-phase program. Maybe it's a week for compass.com just to agents, where you can have a pricing party to really focus on accurate pricing. Maybe the next week, it's on compass.com as well, so you have more of the insights about how many people are coming in and repeat visitors to the listing to help better understand pricing. And then you go to the MLS agents, then lastly to third-party sites, and maybe three weeks later, but by the time you go there, you have your accurate pricing. Because once you go there, that's game time. And so that is a system that is better for homeowners, but also it's a system where inventory is, you know, where the consumer will, where on the buy side, consumers will know that there's more inventory to be searched on Compass. So, you can now onboard an agent 100% digitally. This is something that is somewhat new. It prior required a lot of work, then a little work, then some work, now almost no work. Just how does that make you wanna enter new markets? First of all, how does that play into kind of M&A, just like, you know, M&A growth through M&A? And then separately, how does that make you think about entering new markets on a franchise or asset-light basis? Kalani, you wanna take this one? Yeah, sure, happy to. Look, Jason, I think we've, we've made a lot of investments over the last few months to, to really enhance the flexibility of our platform. When we spoke kinda last year, right, we, we stayed away, given how much work it took to, to build out platforms. Our teams have done a really nice job to really allow our platform to be flexible. Which I think, to your question, allows us to bring on brokerages, particularly on the acquisition side, you know, in a way that potentially allows them to keep their brand, right? But unite our companies through the tech platform, growing our inventory overall. I think, I think the flexibility that we've added allows us to think a bit differently in organic opportunities, particularly again, M&A. We're excited, but also, you know, I don't wanna lose our focus, right? We're sitting in front of a ton of opportunity as we sit today, right? The market coming back from 4 million homes to 5.5 million, 5.5 million, I'll take either, right? It's just value unlocked, and our ability to support our agents is number one there to unlock that value. You know, we look at our T&E business and our integrated services businesses, and we still have a ton of opportunity. We're moving both kinda width and depth, right? So we'll be moving and focusing on, you know, getting into San Francisco, New York City, Seattle, Houston, Boston, Chicago. All of those are opportunities, and then in all of our markets- To be clear, that's T&E, you're saying? Just- Yeah, yeah. Sorry, title and escrow. I'm sorry, yeah. And so, I think the flexibility of our platform, and it is gonna allow us to do, and hopefully you see, you know, in the future, some really great opportunities. But I don't wanna get kind of the narrative too far in advance on franchising, when we really have hundreds of millions of dollars of kind of EBITDA value and cash flow value in what we're looking at and focused on today. So, and I, I wanna get to mortgage. Before we do that, let's tie back what we were just talking about to the 30, 30, 30 strategy. For those who don't know, Robert, just lay out what is the 30, 30, 30 strategy, and, and how do you get there? Yeah, our 30/30 Vision is to get 30% of the market share in our top 30 markets in 2026, potentially before. And- Where are you today? Yeah, we're close to 20. We're very close to 20. And the way we get there is three parts strategy. One, more agents that organically, our agents taking market share, 'cause they're the top agents. And then lastly, through inorganic. We have a very extensive pipeline of real conversations between data room to, you know, LOI, that makes us feel confident that we can get there. The interest in working with Compass, from this standpoint, from a CEO standpoint and acquisitions, has never been higher. So, I wanna go back, mortgage, this has always been a category that folks in your seat have, and your competitors have always wanted to unlock. It's just a very t here's very nice fees to unlock through mortgage origination, but hard, right? 'Cause you have RESPA rules that you can't force your agents to use your mortgage product. So it really has to be done on a product basis, where they wanna choose it, and there's a, you know, a lot of agents, you know, use mortgage brokers for relationships and cross, like, sharing leads. And so ultimately, to do mortgage, you gotta have such an amazing product that they say, "I'm willing to lose those other intangible benefits I get to use my in-house product." So I guess kind of, you know, you looked at doing it externally, you ultimately decided to do a JV. You know, where are we on in that, and kind of how meaningful could this be to the business, you know, if we're looking out two years from now? Kalani, you wanna take this one? Yeah. Yeah, Yeah, look, I think it's a market we've had to tread and balance, right? As you mentioned, it's we see an opportunity financially to attach those transactions, but also it's a market that's just depressed. And so we've really focused the last year on continuing to bring on the right originators. To your question, one of the best ways we've done technology, same way we should be doing all of our integrated services, which is ask the agent, right? So we don't do anything from a technology tool-wise that the agent hasn't asked for, or the agent doesn't say is really hurting them. And so that's our filter there. Same way, Corey and team, who are running our mortgage business with our JV, you know, they're asking the agents for the right originators. And so, we're focused on growing right now, the originators in the right way. I think it can be a really strong opportunity for us, particularly again, as always, with the ability to start to attach it to our platform, just like we've seen success in our title and escrow. So we're in a place where we're focused kind of on disciplined growth of the best originators. And as the market comes back, you know, we'll look to lean in more, to grow it. But it's an opportunity for sure. It's just at this point, it's, you know, how do we make sure we're, you know, not running behind, but also not running too far ahead, just given the capital requirements? So there was a question online: Assuming existing home sales roughly 5.5 million and no growth in agents or change in splits, are you willing to kind of throw out what the bogey could ultimately be for, like, EBITDA based on, like, the cost trajectory? Yeah, Robert, I'll start- A normalized EBITDA. Yeah, no, take it. Yeah, I'll start and see what you wanna add. You know, look, I think we believe, and we've said it on several calls, that we think there's hundreds of millions of dollars of cash flow and EBITDA unlocked. On the cost side, I think, you know, we control cost, and we've been really disciplined over the last two years. Our leadership team has really driven not only discipline, but also kind of a DNA and muscle of cost. We expect to grow costs in the 3%-4% range, kind of going forward organically. You know, as revenue in that scenario, Jason, looks probably like a CAGR of anywhere from 12%-17%, right? And we believe we should really gain value from that spread. I look at Q2 as a nice proxy, and quite frankly, hopefully more of the bear case, the downside case. If you look at Q2, and you just annualize it, right, it shows you that our cost base, on a more normalized revenue, and I don't even think Q2 revenue of $1.7 million on the quarter is the normalized $5.5 million type of schedule. But it certainly shows you more of a down case. You know, and you can start to see the numbers really work on an annualized basis. I think it can be stronger than that, just given home sales, if we can get it up closer to the mid- $5 million range. But I looked at Q2, and I really thought it was a nice proxy for the potential, even on the conservative side of value creation. Robert, anything I missed? Yeah, you know, I agree. Like, when I look at Q2, you multiply revenue by four, that gets to where we see the low side of mid-cycle, so, you know, low $5 million. And so with that cost structure and multiply the EBITDA for it, I think that's the low side, and everything is upside from there. Also, that doesn't include the impact of Client Dashboard. It doesn't include the impact of more title and escrow. It doesn't include the impact of more mortgage. It doesn't include the impact of our inventory strategy, where when you have 30% of the inventory in the top 30 cities, or 30% market in the top 30 cities, and you create an environment where the consumer and agents know that there's more inventory in Compass than any other place, you know, that brings more agents to you. They wanna stay with you more. That makes them more happy with the value that they're paying, and that gives them an edge to get buyers. It's an environment right now where it's important to give an edge to buyers, and our agents in many of our cities now, when they talk to buyers, they say: "Look, you don't hire me to show you what's on the aggregators. You hire me to show you what's coming on the market before, and we have the biggest off-market listing system in the country. So, that's a good segue. Are there one or two products coming down in the next 12 months that maybe you've spoken a little bit less about, that you wanna talk, you know, kind of you're excited for investors? Yeah. It's Client Dashboard and our Make Me Move, extending the search grid through our agents' contacts and their CRM all the way through Make Me Move. And so on the first, we've talked about a little bit in the past. Client Dashboard will give 24/7 transparency to buyers in their dashboard, but separately to sellers, eventually to multiple homeowners. But 24/7 transparency before, during, and after the transaction. It'll be a one-stop shop for all their real estate needs. Anything an agent gives their client can sit and live there. It'll have the transaction timelines and tasks. It will have all of the valuations and all of the different assets that have been given to the agent, or from the agent to their client, and they don't have all the documents. So, you know, a year after buying the home, say, "Hey, what, what was that, agreement again? Where was where's the inspection report?" They'll be able to go back to this Client Dashboard, so that's one. The second, again, really extending the search grid behind what people are searching on, on these, aggregators. There's, there's so much more inventory. And so one is the inventory coming on the market, the off-MLS listings. We believe that in the average market, that more than 20% of the market is off MLS, on the average market that we're in, and we think there are ways where we can be able to you know, bring that to Compass and to, to better serve our, our, our clients. Secondly, there our, our CRM, as we talked about, has over 100 million contacts. By the way, there's 34 million addresses in that, and so it shows that, you know, there could be three agents that have the same address. But of these, of these contacts and these addresses, we are now going to them and asking them, what is their aspirational Make Me Move price? A price that may seem aspirational for you is a great price for someone else. It could be, it could be a great price for someone else. So we are making this... these are all searches- A little, a little more efficient than the, just knocking on doors and saying, "Hey, I have an offer in an envelope. Exactly. Exactly. All what Compass is, is we're bringing the industry online. We're digitizing the process of a real estate agent. And so people do this today. One of our top agents, I mean, a lot of people do it, but they'll knock on. They're working with a very wealthy client, perhaps, and that client says, "I want a home that looks like that," or, "I want that home." And they will literally go on that door and knock on the home, or they know who their agent is, to see if they would be willing to sell. And we have made transactions like that. We're bringing that online. So this is what it will look like for an agent. "You're my client. You wanna see a SoHo?" you wanna buy a SoHo penthouse? Well, look, it looks like 80% of the penthouses in SoHo, our agents have relationships with those clients. And let's do a search. There's one on the market. There's, you know, two that are Compass Private Exclusives. There are three that are in my CRM, 'cause I focus on SoHo. There are another ten that are in other Compass agents' CRM. And of those three plus ten, five of them have Make Me Move prices. So let's, you know, let me work for you. Got it. But that's giving you an edge- Yeah, no, that- And that agent an edge. No, that is being the marketplace. And ultimately- When you do that right, the buyer is not, you know, probably gonna debate with you what the commission rate is- Exactly. When I'm When they see that property. When I'm the world we are creating is a world where... When I'm traveling, talking to agents, I say, "In the world that we're gonna create, is one where your clients don't question the commission because we're giving them so much value." And that's exactly right, Jason. You're not gonna question commission on either side. But what we have done is the seller, we literally got them a dream price, an aspirational price. And the buyer, we got them something they could never found otherwise. We're making our agents market makers. And this isn't something coming out in a year. The Client Dashboard is launching in October for our beta, and then in, looks like January for everyone. And the searching our contacts through Make Me Move. Make Me Move, we already launched in the platform. We're making it all searchable with the CRM contacts, we're hoping to have done by the end of the year. So maybe two more, just if anyone has... We have, like, minutes, if someone wants to put one in the chat. Once you're generating Free Cash Flow, I mean, you are now, but when you're generating meaningfully more, what do you do with that cash flow? Does it go to buybacks? Does it go to M&A? Just, you know- Yeah B roadly. Yeah, Jason, make sure a year from now, two years from now, you ask the same question, not with a when, but- Sure, guaranteed J ust how you're right. Make a promise. Look, I think we've done the work to get to that question, right? And when we think about, you know, our capital structure, you know, as we're kind of creating that, you know, that, again, that 2Q annualized, right? I think we have the opportunity. Right now, we're focused on fortifying our balance sheet, right? And using it in the right strategic ways on M&A. I think for us, you know, as we think about, you know, a year or two from now, our capital, I think, structure is pretty simple and then nuanced below that, right? But it's a third really looking at investing back in the business. A third really looking at fortifying our balance sheet. And then a third is really focused on shareholder value and shareholder return, right? And so I think, you know, on the investing in our, in our business, it can be more M&A, it can be, you know, different tech products that we're seeing that we wanna accelerate. Fortifying our balance sheet, we've seen over the last two years what it means to have a real healthy balance sheet, and so that's a priority. And then a third, you know, giving back shareholder value, I think, you know, whether it's buybacks or, or, you know, other means. But, you know, I think that's the structure loosely that we are focused on. So Robert, last question. Three years from now, we've gotten back to a normalized housing market. You know, rates are, I don't know, they're like down some amount, right? Will you be, at that time, talking about being an international business? I think I'm always gonna be, at the time, focused on how do we generate the most cash flow possible. And so we're I think we'll be a cash flow generating company, just looking to where we can generate the most. It's not clear to me that international is that place. To me, that place is integrated services, mortgage, title, home insurance, home security, and warranty, where we have platform-driven attach. I think we've already proven internally on how much we've shared, how much we had, but that our platform drives attach in a way that you can't drive without a platform, so above average attach. And I think that we'll continue to focus on creating a world where agents feel like they have an edge with buyers and sellers, and that's why they want to come to Compass, stay at Compass. And that they value the right economical relationship with Compass. And then lastly, where the consumer knows that they are at an advantage when they're working with a Compass agent. And they're at advantage when they're searching compass.com. Great. So that's a great way to end it. Gentlemen, thank you very much for- For joining today. If anyone has any more questions, feel free to email me and we can make the connection. Have a good day, everybody. Absolutely. Take care. Thanks, everyone. Thanks, Jason.