Falling real estate market leads Compass executives to cut forecasts and costs; the stock plunges

Shares of Compass Inc. fell after hours on Monday after the real estate broker and technology provider cut its full-year revenue forecast and revealed plans to cut costs due to a slowing housing market .

Compass COMP,
Executives slashed their full-year sales forecast by about $1.5 billion, with the current forecast calling for revenue of $6.15 billion to $6.45 billion after the previous forecast showed $7.6 billion. dollars to $8 billion. Executives also said they expect to seek $320 million in annual recurring costs for the impending cuts.

“Given the challenges the real estate market has faced so far this year and the likelihood that this challenging environment will continue for the foreseeable future, we are announcing a significant cost reduction program,” said Chief Executive Robert Reffkin in a statement. “We have a line of sight in every area that will drive these savings to our expenses, which we believe will enable us to be free cash flow positive in 2023. We plan to complete all targeted cost reductions in by the end of this calendar year. .”

Compass shares plunged between 10% and 20% in after-hours trading immediately after the earnings release. Stocks are already down 48.5% so far this year, as the S&P 500 SPX Index,
fell 10.2%.

For the second quarter, Compass reported a net loss of $101.2 million, or 24 cents per share, compared with a loss of 2 cents per share a year ago. Revenue rose to $2.02 billion from $1.95 billion a year ago, but beat expectations. Analysts on average had expected a loss of 17 cents per share on sales of $2.11 billion, according to FactSet.

For the third quarter, the forecasts of the leaders of Compass were very far from the expectations of Wall Street. Executives expect Adjusted EBITDA loss of $65-80 million on revenue of $1.4-1.5 billion, while analysts averaged positive Adjusted EBITDA of $45 million and revenue of $2.11 billion, according to FactSet.

Compass executives have scheduled a conference call for 4:30 p.m. EST to discuss the results in more detail.

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