Compass, Inc. (COMP) Q3 2025 Earnings Call Transcript

Thank you for being here today for the Compass, Inc. 2025 Q3 Earnings Call. I will now pass it over to Soham Bhonsle, Head of Investor Relations. Soham, the floor is yours.

Thank you very much, operator, and good morning, everybody, and thank you for joining the Compass Third Quarter 2025 Earnings Call. Joining us today will be Robert Reffkin, our Founder and CEO; and Scott Wahlers, our Chief Financial Officer. In discussing our company's performance, we will refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in our third quarter 2025 earnings release posted on our Investor Relations website. Any discussion regarding organic revenue, organic OpEx, organic transactions or organic GTV excludes any activity from businesses we acquired since July 1, 2024. We will make forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include our guidance for the fourth quarter of 2025 and full year 2025, including comments related to our expected financial results, operating expenses and free cash flow, as well as our expectations for operational achievements. Our actual results may differ materially from these statements. You can find more information about risks, uncertainties and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and available on our Investor Relations website. You should not place undue reliance on any forward-looking statements. All information in this presentation is as of today's date, November 4. We expressly disclaim any obligation to update this information. In addition, as we announced in September, Compass has agreed to merge with Anywhere Real Estate. The transaction is pending customary regulatory and shareholder approval, and we expect to close in the second half of 2026. We intend to make limited comments related to the Anywhere transaction in our prepared remarks. However, given that we are currently in the regulatory process, please note that we will be unable to answer any questions or comment further on the transaction beyond our prepared remarks. I will now turn the call over to Robert Reffkin. Robert?

Thank you for joining us today for our third quarter conference call. In what remains a trough level housing market, I am pleased to share that the Compass team produced the strongest Q3 results in our history. In Q3, Compass delivered record third quarter market share, delivered record third quarter revenue, delivered record third quarter adjusted EBITDA, delivered record third quarter adjusted EBITDA margin, delivered record Q3 free cash flow. The Compass platform hit a Q3 record of 22 average weekly sessions per agent. And we grew our Q3 title and escrow revenue to record levels. Furthermore, we achieved a few all-time records once again, including: delivering the best organic principal agent recruiting quarter in the company's history, including adding 851 principal agents; growing our title and escrow attach in our legacy markets to all-time highs; and lastly, growing our mortgage JV earnings to record levels. Revenue in the third quarter increased by 23.6% year-over-year, and we achieved the high end of our revenue guide. Total transactions increased by 22% and organic transactions were up 7% year-over-year as compared to the overall market where transactions increased by 2%. So this means Compass' total transaction count growth outpaced the market's growth by close to 20 percentage points and Compass' organic transaction count growth outpaced the market's growth by 5 percentage points. For 18 consecutive quarters, spanning our entire history as a public company, Compass has outperformed the market on an organic basis. There has never been a quarter since we started measuring this metric where Compass hasn't grown faster than the market. And as I will touch on a little later, we believe we can continue to outgrow the market even once we close the Anywhere transaction. In Q3 2025, we generated adjusted EBITDA of $93.6 million, an increase of 80% from the $52 million in the year ago quarter, and we exceeded the high end of our adjusted EBITDA guidance by 17%. Quarterly principal agent retention was a solid 97.3%. In the quarter, we also successfully added 851 gross principal agents organically to Compass, which is a new record. We are seeing more momentum at this point in the quarter compared to the same point in the last quarter. Given this increased momentum, we expect to add 800 gross principal agents organically in Q4, and we see the new normal as 700 to 800 gross adds going forward as the new range. In the T&E business, excluding 2025 M&A, our attach rate continued to improve year-over-year and was once again at a record in Q3. The Christie's International Real Estate business also continues to grow with 4 new affiliates joining the network in the quarter and 6 affiliates in the pipeline. And as I will touch on a little later, I'm excited to share that the Christie's International Real Estate business is pacing better than our initial expectations, driven by outperformance in agent retention, outperformance in revenue synergies from T&E, outperformance in synergies from mortgage and outperformance in OpEx control. Revenue less commissions and other related expenses as a percentage of revenue in the third quarter was 18.6%, which is approximately 73 basis points above the 17.8% reported in the year ago quarter. Non-GAAP OpEx, excluding the $7.5 million related to the Anywhere transaction, was $252 million in Q3, which was relatively flat quarter-over-quarter as we continue to focus on OpEx control as a company. Last quarter, we shared that we expect to deliver an incremental $50 million to $75 million in adjusted EBITDA with at least $50 million of that adjusted EBITDA improvement realized in 2026. I'm excited to share that we remain on track to deliver against this goal. Now, let me take a moment to touch on the transformational merger we announced with Anywhere Real Estate a few weeks ago. Since we made the announcement, our teams have been hard at work getting all the necessary regulatory forms in place, and we have now filed our HSR forms to start the regulatory approval process. We continue to be confident in our ability to get the deal approved as we firmly believe that this is a pro-competitive deal that will bring more choice and better products to home sellers, to homebuyers, to real estate professionals and to franchise owners. As one of the largest shareholders in Compass, I believe this combination is highly compelling for all our shareholders. The positive reaction from agents inside and outside of Compass only reinforces my view that we are creating a premier platform in residential real estate that will make the home selling and home buying experience better for consumers and ensure that real estate professionals and franchise owners continue to thrive for decades to come. A common question we fielded from investors since the announcement is whether we believe we can continue to grow organically post the merger. To answer this question, we believe we already have a blueprint in the Christie's International Real Estate transaction, which I will refer to as CIRE going forward. So what have we observed since closing the CIRE acquisition? First, on agent count and retention, since close, we've been able to increase the number of net new principal agents in the business. Total principal agents didn't decline post close; they increased. Second, in the 9 months since we closed the transaction, their title business has experienced a 1,000 basis point lift in attach rate as more of our agents' clients choose to work with their title business. The Anywhere transaction will, one, add a T&E presence in 7 states where we currently have a brokerage presence but no T&E presence; and two, we'll increase our T&E market coverage in many of the markets we have a smaller T&E presence in that is limited in market coverage. Given this increase in T&E market coverage, we believe we will achieve a significant lift in attach in these new markets, as well as our existing markets. Next, in mortgage, Compass and CIRE both had guaranteed rate mortgage JVs under separate brands. Post-close, we improved the profitability of these businesses resulting from OpEx efficiencies and increased attach rates. Anywhere also has a guaranteed rate mortgage JV. So we expect the similar integration efficiencies and attach rate improvements. And lastly, in terms of cost synergies, we are on track to achieve our stated $30 million target by bringing the Compass OpEx improvement playbook to this transaction. So, as you can see, what we've been able to demonstrate in the CIRE transaction is that we can, one, grow agent count; two, increase T&E attach; three, improve mortgage JV profitability; and four, achieve the synergies that we set out to achieve. In summary, we have proven an ability to drive both top and bottom line growth in CIRE post close and to do so organically. I expect Anywhere agents to also see the positives of coming together to get the best of both worlds. And while we recognize that the Anywhere transaction is clearly much bigger in size, we are confident that we can replicate the CIRE playbook at Anywhere over time. Before I move on from the Anywhere transaction, I want to address our synergy targets directly. When we first committed to aggressive cost reductions to manage our burn rate, a commitment I made very clearly to this community, we followed through. In 2022, I said we would bring OpEx down by $320 million. By the end of 2023, we reduced our OpEx by $550 million with over $600 million reduced by 2025. We didn't just meet our goal; we exceeded it. That track record is the foundation of the commitment I am making today. Based on the analysis we completed at the time of the transaction, we articulated a net cost synergy target of $225 million plus; not $225 million, but $225 million plus. That was a conservative target, and we remain entirely confident in achieving it. However, as we have moved deeper into the integration process and worked with the merger integration experts, we have now retained a top 3 consulting firm. One consensus has emerged. We can do more. Therefore, I'm increasing our commitment. I am personally committing today that we will deliver more than $300 million in net cost synergies, representing 11% of combined annualized non-GAAP OpEx, and $150 million will be realized in the first year post-close. The more than $300 million in net cost synergies includes the same dissynergy assumption that we previously had. This is a CEO commitment, backed by the same discipline and focus that allowed us to reset our cost structure without compromising our core growth engine. My commitment is firm: more than $300 million in net cost synergies, including the same dissynergy assumption that we previously had. We will hold ourselves accountable to this new benchmark, and we will update you on our progress every quarter post-close. Now, let me provide an update on the major AI initiative that's underway at Compass. Our vision around AI is clear. AI will transform our business by: one, redefining agent productivity; two, driving greater efficiency across the organization; and three, enhancing the relationship our agents have with their clients. At Compass, we call it AI for AI, artificial intelligence to empower agent intelligence. As we shared last quarter, we began testing Compass AI 2.0 with our real estate professionals. In Q3, we completed an alpha that included hundreds of real estate professionals who tested Compass AI on both mobile and desktop. Our real estate professionals are finding tremendous value in simply using their voice to ask the Compass platform to perform tasks such as creating client collections, creating dashboards, creating business tracker folders or adding and tagging a CRM contact. What I've been particularly pleased to see is that some of our agents have already been testing it live with their clients during listing appointments, which is helping elevate them in the eyes of their clients. This is the power of agentic AI in action, which breaks down complex manual processes into actionable steps that the AI can handle autonomously. This ability to automate administrative work will ultimately allow our real estate professionals to focus on what matters most, which is serving their clients. What has become increasingly clear to us as we've continued to test Compass AI 2.0 is that Compass is well positioned to harness agentic AI in the brokerage vertical. This advantage stems from having invested nearly $2 billion to date in our proprietary end-to-end agent productivity platform compared to our competitors that almost all rely on multiple third-party software platforms that do not allow them to connect the various parts of an agent's workflow. In contrast to our competitors, our deeply integrated platform feeds our AI, giving it a unique contextual understanding. We believe Compass AI 2.0 has the ability to supercharge the adoption of the Compass platform and unlock a new wave of productivity for our agents. We expect to launch Compass AI 2.0 to all agents before the next earnings call and look forward to updating you on the impact. In addition to these efforts, I'm now hearing a significant shift in increased revenue coming from ChatGPT and similar generative AI chatbots. Specifically, I've had dozens of top real estate professionals tell me they're getting free business from today's conversational AI platforms as homebuyers are now asking models like ChatGPT for the best agents in their market. And here's a critical distinction. Unlike real estate portals that divert buyers to the highest paying agents, AI models like ChatGPT are sending buyers to agents that have verifiable real-world data, things like transaction history, unique listings and client reviews. This is a major tailwind for Compass because we are home to so many of the industry's highest performing real estate professionals that have a lot of this verifiable real-world data. Ultimately, we believe that as search in the residential real estate category evolves towards AI-based search, it will unlock a whole new era for agents at Compass. This new era will be defined by real estate transaction experience, results and reputation that are validated and verified. It will raise the bar and ensure that performance is directly rewarded with leads from these AI models, which will enhance the revenue of top brokerages and top agents like ours. And while we are optimistic that AI will elevate our agents even further, artificial intelligence is not emotional intelligence. I believe nothing can replace the ability our agents have to make meaningful connections, build relationships and get clients to trust them. In this new era of AI, artificial intelligence, emotional intelligence wins. Finally, we are using AI to drive cost containment from an OpEx perspective. We have launched a mandatory employee AI learning initiative across our organization, including but not limited to, engineering, transaction operations, legal and finance. The goal is to find better ways to work and become more efficient by leveraging AI to support routine tasks today and more complex tasks in the future. By embedding AI across all our workflows, we believe we can deliver: one, a lower cost to serve per transaction; two, limit the increase in our OpEx going forward; and three, deliver an even better experience for our real estate professionals. With that, I will now hand it over to Scott.

Thanks, Robert. As Robert stated earlier, our results this quarter were the strongest results for a third quarter in Compass' history and set a series of new records, both financially and operationally. Our third quarter revenue was $1.85 billion, an increase of 23.6% from the year-ago period and an all-time Q3 record for Compass. While M&A contributed to the year-over-year growth in revenue, even excluding M&A, revenue increased 11% on an organic basis. Transactions for the quarter increased 21.5%, or 6.6% on an organic basis, which compares favorably to the overall market where transactions increased by 2%. This outperformance to the industry is also reflected in our market share, which was 5.6% in the quarter, an increase of 83 basis points from the year ago period. As a reminder, due to seasonality, our quarterly market share in each third quarter is lower than the sequentially prior second quarter. This is driven by our West Coast markets that are typically a greater contributor to our total revenue mix in each Q2 period compared to Q3. Gross transaction value was $70.7 billion in the third quarter, an increase of 22.5% from a year ago, reflecting a 21.5% increase in total transactions, combined with an increase in average selling price of about 1%. The increase in our average selling price was closer to 5% on an organic basis. However, our acquisitions over the past year primarily operate in markets with lower average selling prices compared to our organic average selling price, which brings down the overall average. Our commissions and other related expenses as a percentage of revenue was 81.44% for the quarter, an improvement of 73 basis points compared to Q3 of last year at 82.17%, primarily driven by the impact of our January acquisition of Christie's International Real Estate, which has more favorable margins. Excluding M&A, our commissions and other related expenses as a percentage of revenue were down 20 basis points for the quarter versus the prior year quarter. Consistent with what we've seen all year, our highest producing agents, who generally carry higher splits, continue to take more of the market share gains, which contributes to the decline in this metric. As we said previously, we're okay with this trade-off today as these agents are driving higher gross commission income, and therefore, we retain a higher aggregate dollar value of revenue after commissions, albeit at a slightly lower effective rate. Our total non-GAAP operating expenses were $252 million in Q3, an increase from $215 million of OpEx in the year-ago period, which was largely driven by M&A, including the OpEx we assumed from the January 2025 acquisition of Christie's International Real Estate, the Washington Fine Properties acquisition in February 2025 and a number of other smaller brokerage and title companies we acquired this year. Excluding the impact of M&A, our non-GAAP OpEx over the prior year is higher by about 3.5%, reflecting our strong discipline on minimizing growth in organic OpEx. During the third quarter, we incurred $7.5 million of transaction expenses related to the announced merger with Anywhere, primarily legal fees and investment banking fees. We expect to continue to incur these types of expenses through the closing of the transaction, and we also expect to incur integration costs in future periods as we kicked off the planning process for bringing these two companies together. Given this dynamic, we've opened a new line item on our statement of operations this quarter titled Anywhere merger transaction and integration expenses to capture the $7.5 million incurred this quarter. And we've also excluded these costs from our non-GAAP operating expenses and excluded them from the calculation of adjusted EBITDA. Adjusted EBITDA was $93.6 million, a strong improvement of 80% from adjusted EBITDA of $52 million a year ago, and this also represents a record level of adjusted EBITDA for any third quarter period and the second strongest level of adjusted EBITDA for any quarter. Adjusted EBITDA benefited from the higher revenue and the continued strong discipline on operating expenses. For this quarter, adjusted EBITDA also benefited from the most profitable quarter we've ever had for our mortgage joint venture, which is now combined with the mortgage JV we acquired through the Christie's International Real Estate acquisition earlier this year. As a reminder, the mortgage JV results are included in the line item of our P&L titled equity in income of unconsolidated entities, which was a positive $3 million this quarter. Stock-based compensation expense in the quarter was $60 million and in line with our guidance. As a reminder, during our Q1 results call earlier this year, we explained that our stock-based compensation levels would be elevated during the second, third and fourth quarters of 2025 due to a change in our methodology for granting employee equity and the accounting rules related to that change. As a result, you should expect a similar level of SBC in the fourth quarter, followed by reductions in 2026 as the RSUs with the higher accounting values begin to vest out. GAAP net loss was $4.6 million in Q3 compared to GAAP net loss of $1.7 million a year ago. However, excluding the $7.5 million in deal-related expenses from the Anywhere transaction, net income would have been positive $2.9 million. As for cash, we generated $73.6 million in free cash flow in the third quarter, which was not only an improvement over the $32.8 million of free cash flow from Q3 2024, but also a new record level of quarterly free cash flow for any third quarter period. As a reminder, our Q2 '25 free cash flow would have been higher than Q3 had it not been for the second and final installment of the class action settlement we paid in Q2 for $29 million. Also as a reminder, due to the seasonality of our business, our Q2 and Q3 free cash flow levels are the highest, and you should expect lower levels of free cash flow over the next two quarters due to the seasonality. As a result of the strong cash flow in the third quarter, we paid down the $50 million balance on the revolver, which we previously drew to fulfill the cash portion of the purchase price for Christie's International Real Estate. We ended the third quarter with no outstanding balance on our revolver and $170 million of cash and cash equivalents on our balance sheet. Our basic weighted average share count for the third quarter was 566 million, which was in line with our prior guidance. Turning now to financial guidance for Q4. For Q4 of 2025, we expect revenue in the range of $1.59 billion to $1.69 billion and expect adjusted EBITDA to be in the range of $35 million to $49 million. We expect our weighted average share count for the third quarter to be between 571 million to 574 million shares. As you can see from our Q3 results, we remain very focused on OpEx discipline. Last quarter, we reduced our full-year OpEx guidance from the prior levels of $1.017 billion to $1.042 billion down to $1.01 billion to $1.02 billion, or a reduction of $14.5 million off the midpoint. However, we continue to pace favorably to this revised OpEx level, and therefore, we're further reducing our OpEx range for the full year 2025 to $1 billion to $1.005 billion. This updated full-year estimate includes the assumption of about $7 million of assumed in-year OpEx from four smaller acquisitions we completed during the third quarter. After considering the assumed OpEx from Q3 M&A, this reduction in our full-year OpEx estimate is an additional $19.5 million off the midpoints or an aggregate reduction of $34 million. The continued favorability reflected in our OpEx guide is in part due to the actions we announced last quarter with the goal of improving our profitability incrementally by $50 million to $75 million. When we announced this initiative last quarter, we stated we expected to achieve at least $50 million of this profitability enhancement to our adjusted EBITDA by 2026, and I'm pleased to say that we continue to expect to achieve this goal based on our progress to date. I would now like to turn the call over to the operator to begin Q&A.

Your first question comes from the line of Ryan McKeveny with Zelman & Associates.

Scott, just on that last point on the incremental $50 million to $75 million EBITDA. I think it sounded as though some of that may have flowed through this quarter, maybe also in the 4Q guide. Is that the case? And as we think about the incremental of that into '26, is the $50 million kind of inclusive of what we've already been achieving? Or could there be an incremental $50 million on top in 2026?

Ryan, great to speak with you. I appreciate your question. Yes, the $50 million to $75 million figure we discussed includes some elements we considered in our prior quarter's reduction. The additional reduction this quarter is on top of that. Our plan is for these operational expense reductions to carry into the baseline for 2026. This is essentially our initial projection for the $50 million to $75 million EBITDA profitability improvement, based on what we expected for 2026 as of last quarter.

Got it. Okay. That makes sense. And then, Robert, you mentioned on the Christie's business, I think you said there's been a 1,000 basis point uplift in attach. And my understanding is, they had pretty strong ancillaries to begin with. So can you drill into that a little bit? Is that just agents allocating more business to that? Or did you guys possibly incorporate One-Click Title into their markets? Anything to unpack that uplift a little would be helpful.

Absolutely. It comes from integrating our Compass agents. Previously, the title business only worked with its own agents and selectively with ours. By incorporating our agents and making them aware that the Christie's title business is part of the family, providing them with access to office integration and our technology, we help them understand that the success of the title business leads to success for everyone. The commitment and the efficiency gained from consolidating services is what drives this. We're eager to see how incorporating other title businesses from Anywhere into our existing markets can enhance this as well.

Your next question comes from the line of Bernard McTernan with Needham & Company.

Maybe to start, Robert, I thought the commentary on everything that's going on in agentic and generative AI was interesting. Do you have an actual integration with ChatGPT currently? Or is this all organic traffic? And if not, are those conversations going on for you to potentially partner and deepen that integration?

We have integrated with OpenAI through our Compass AI 1.0, transitioning to Compass AI 2.0, which is the agentic AI our agents are currently using in its alpha phase. By the next earnings call, it will be fully implemented across all our agents. Regarding the lead flow from ChatGPT, it is coming naturally from the market. It's remarkable because if you ask any top agent whether they have received leads from ChatGPT, they will say yes. In contrast, someone without transaction experience will likely say no. This is beneficial for us as we are a company with highly experienced real estate professionals. This marks a significant shift from the past when technology forced inexperienced agents to pay for leads. Now, technology is directing agents organically to the most qualified professionals. Some portals have utilized Google's goodwill to make consumers believe they are being guided to the best agents, while in reality, it is often a sponsored listing. However, ChatGPT is restoring the lead flow to its true nature, similar to how Google directs users to genuine answers, focusing on the most experienced agents. This development is advantageous for seasoned real estate professionals and for companies like Compass.

Yes, makes a lot of sense. And you mentioned the increased synergy target for the Anywhere transaction going from at least $225 million to at least $300 million. Any particular area you can say those costs are coming from? Or is it just more widespread?

I mentioned earlier on the call that we aren't providing any additional comments beyond what has already been shared, but I want to express my continued enthusiasm for the transaction for all the reasons we discussed today as well as in our previous call.

Your next question comes from the line of Chris Kuntarich with UBS.

Robert, if I could just ask on the increase in the number of agents you're going to be adding, I think you're talking to 700 to 800 now. That was previously 600 to 700. Could you just talk about what's giving you the confidence, what you're kind of seeing there to increase that expectation?

We're feeling confident due to the steady pipeline and the flow of interested real estate agents and walk-ins. As I mentioned earlier, we have more momentum this quarter than at the same time last quarter. I believe that average real estate professionals recognize that changes are happening and are looking for a proactive company that can help them navigate this shifting landscape and that has the resources to shape a better future for their industry. We've invested nearly $2 billion in our technology platform and have advocated for listing agents and their clients concerning home seller choice, especially in the face of potential fines from MLSs controlled by NAR for not listing with them. Additionally, some portals are imposing bans if listings aren't provided to them. The reality is that many real estate professionals do not feel adequately supported, whether it’s by NAR, their MLS, or certain leading portals. Compass exists solely to support real estate agents. If we can't help them achieve greater success, we have no purpose. We have a proven track record of 13 years of investing in their profession, so I think any investor or analyst checking the market sentiment regarding this merger will find that they're often positively surprised.

Super helpful. And just one quick follow-up on the 30% market share in your top 30 markets. Could you just give us a quick update on how that strategy is progressing?

Yes, we are not discussing that topic at this time but we appreciate the question.

Your next question comes from the line of Jason Helfstein with Oppenheimer & Co.

I apologize if this was addressed. Just a bunch of companies this morning. So 2 questions though. What drove the 2-point acceleration in organic growth and what's implied in 4Q? And I mean, it sounds like it's simply just adding more agents, but if there's just other ways you want to unpack that? And then two, Robert, just any more color, what's the current adoption of 3-Phased Marketing? And any thoughts you have around kind of adoption levels, given that we saw momentum, it slowed? Has it picked back up?

Jason, it's Scott. I'll discuss the organic growth. The performance in Q3 was primarily driven by September. We started the quarter fairly modestly in July and August, but gained significant momentum in September, which contributed to our strong organic results. We do not separate organic growth from M&A growth when providing future guidance, so we can't specify for Q4. However, you can infer from our performance in the first three quarters. The acquisition of Christie's International Real Estate in January has been the main contributor to our inorganic growth this year, and it will continue to be a key factor in the fourth quarter.

Regarding the 3-Phased Marketing, we are not providing specific guidance on that topic at the moment. However, I can tell you that clients are seeking more options rather than fewer. No seller has expressed a desire for limited marketing avenues. Sellers want flexibility in how their listings are marketed, and they appreciate choices such as the ability to test prices privately before entering the open market, avoiding potential price drops. Similarly, agents have not reported that offering our 3-Phased Marketing Strategy has diminished their chances of securing listings; rather, it seems to have enhanced their opportunities. Ultimately, sellers are looking for more choices, not fewer.

Your next question comes from the line of Alec Brondolo with Wells Fargo.

Maybe on Christie's, could you describe the propensity of the affiliates or the franchisees to work with you on operational improvements? Is it harder to bring operational improvements to bear in that business model relative to kind of the O&O model that the business is more accustomed to?

We have concentrated on the owned and operated model, but with the pending transaction, our focus has shifted more towards the franchise business. We are ensuring that the platform will be functional for the entire franchise operation from day one, allowing us to achieve the necessary efficiencies not only for the company and franchisor but also for real estate professionals. This platform will enable them to save time and better serve their clients. Thus, this has become a key focus given our current situation.

Got it. And maybe if I could just follow up on the question around ChatGPT and kind of agents in that modality, the ChatGPT having a greater propensity to kind of serve the customers to the agent as opposed to serve the customers to the portal. How do you think about syndicating more data into kind of the ChatGPT environment? A lot of data in this industry is behind the paywall. It's behind MLS. It's inside a broker's internal system. How do you think about over time, perhaps giving ChatGPT more access to Compass data, more access to Compass listings to perhaps accelerate the trend that you're describing?

Anything we do will be consistent with what sellers and their listing agents want. The issue isn't the MLS data, even though they compel agents to provide it under threat of fines, and then distribute it to numerous entities. As Compass values choice over platform control, our actions will align with the preferences of sellers and their agents. Home ownership is personal property, and property rights are important. The concept of privacy—both data and personal privacy—is gaining significance each year. Rather than selling data to platforms like ChatGPT, our focus should be on obtaining more listings by addressing the needs of clients. If a listing agent and their clients want a specific platform for better exposure, there are options available, like Homes.com, which supports agents and sellers by boosting listings. However, such decisions need to come from the listing agent and their seller. Regarding ChatGPT, top agents receive more free referrals, enabling them to avoid spending a significant portion of their commission on portal fees. This represents a major shift, and it benefits experienced agents greatly.

Your next question comes from the line of Matthew Bouley with Barclays.

I wanted to ask on Christie's, sticking with that topic. So some really helpful color around everything you've done since the deal, kind of growing agents and the synergies you've achieved and so forth. I wanted to ask on kind of the learnings on running the franchise business over the past 9 months. How do you think about what you can sort of leverage between your own brokerage and the franchises across perhaps leads or otherwise? And would refranchising ever be a consideration?

We have learned that the platform can scale to franchises and deliver significant benefits comparable to those of owned and operated businesses. From the perspective of a real estate agent, the approach remains similar. The key is to make it adaptable for multiple tenants and brands. We are currently in the midst of this work. We have discovered that the advantages we developed at Compass can also be extended to the franchise business. We can apply our successful strategies, like our enterprise sales engine and recruiting system, to support our franchise partners. We are in the testing phase with our existing franchise affiliates, and once validated, we plan to roll these benefits out more widely. Our transaction management capabilities will allow us to provide a lower service cost for processing transactions through our combined technology, processes, and personnel. Additionally, we have effectively utilized offshore resources and outsourcing to share these insights with franchise owners. We aim to provide them with the same growth and cost-efficiency strategies we have implemented for ourselves over the past four years, especially in response to market changes. I am genuinely enthusiastic about this and have a deep appreciation for real estate professionals, as they are, at heart, entrepreneurs. Our franchise owners epitomize this entrepreneurial spirit, and I am eager to support their growth and work closely with them as clients. Given the pending merger, we're pausing any additional tuck-in M&A to focus on executing the integration effectively. The priority is flawless integration and immediate execution of most tasks, while also generating some cash flow during this transitional period and afterwards for obvious reasons. The positive news is that our walkover motion has been highly effective. Typically, our agent teams can range from over 50 to as small as 20 or 30. For average small brokerages or boutiques with 20 to 100 agents, we are more appealing to them now than we were two years ago. Not only do we provide a robust platform, but we also offer strong brands, which is a significant advantage.

Just to add one comment to Robert's point there. We've talked about 4 acquisitions, 3 small brokerages and 1 title company that we acquired in the third quarter. That was all kind of pre the Anywhere transaction announcement. So we've effectively hit the pause button now.

Your final question comes from the line of Michael Ng with Goldman Sachs.

I just wanted to ask about OpEx management. Compass has obviously delivered a lot of good efficiencies in sales and marketing, ops and support. Is that kind of the key area of operational efficiencies that you see going forward? And then, as a follow-up, within the non-GAAP SG&A, were there any kind of meaningful legal expenses that are in there? I can appreciate the Anywhere transaction costs are excluded, but I was just wondering if there are any kind of legal costs related to pending lawsuits and litigation.

Yes, regarding the last question, there are legal expenses incurred for various ongoing litigation in the third quarter, which is reflected in our operating expense guidance for the fourth quarter. Specifically, those related to Anywhere are detailed separately. Concerning operational expense reductions, the entire company is focused on fiscal responsibility. This approach is ingrained in our employees. For instance, when there are resignations in certain groups, we evaluate whether the position needs to be filled again. If it does, we consider if it can be filled with lower-cost offshore labor. We have an internal team implementing Six Sigma methodologies to enhance efficiency and reduce costs in key processes. Additionally, we've launched an AI initiative across the company, led by one of our Senior Vice Presidents, encouraging all departments to explore how AI can boost productivity. In finance, we've utilized an outside consulting firm for years to assist with our accounts payable processes. However, due to improved efficiencies and offshore staffing, we expect to fully conclude our partnership with that consulting firm by the year's end, which will lower our costs. Overall, we're seeing these efficiencies throughout the company. We are also progressing well in integrating acquired businesses, which allows us to streamline and reduce various expenses. Our strategy is to continue investing in the platform and our agents while maintaining strict control over operating expenses, particularly as we prepare for the Anywhere transaction, which will involve significant debt. Therefore, every dollar saved now will contribute to accumulating cash for accelerating debt repayment once we finalize the deal.

Great. And if I could just have a quick follow-up. On those legal costs that are embedded in the fourth quarter guidance, are you expecting them to come off in 2026? Or do you think these things will be ongoing?

Yes. I think there's some that will be ongoing, a little bit fully tough to tell now. It kind of depends on how some of the actions occur in the fourth quarter. But for now, I would expect some of them will continue into 2026, and we'll obviously provide an update on that when we get closer to our next quarter when we put out some expectations for 2026 guidance.

There are no further questions at this time. I will now turn the call back to Robert for closing remarks.

Thank you, everyone, for joining our call today. I want to end by thanking all of our employees, all of our agents for their incredible hard work. Together, we delivered our best third quarter ever. And I look forward to building upon this momentum in 2026 together with the Anywhere team. Thank you, and have a great rest of your day.

This concludes today's call. Thank you for attending. You may now disconnect.