Good day and welcome to the Compass First Quarter 2021 Earnings Conference Call. My name is Sunidra and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Ben Barrett, Vice President of Investor Relations for Compass, you may begin your conference.

Good afternoon and thank you to everyone for joining Compass’ first ever earnings call. Today’s review of actual financials will address the continuing operations of Compass and certain items are presented on a non-GAAP basis. The reconciliations between GAAP and non-GAAP measures for both our Q1 financials as well as our guidance are included at the back of the earnings release and shareholder letter. Please also see our disclosure on forward-looking statements, which reflects Compass’ current view of future financial performance, which may be materially different from our actual performance, for reasons that we cite in our Form 10-Q and other SEC filings, including uncertainties posed by the COVID-19 pandemic and the difficulty in predicting its future course and the impact on the housing market and the global economy. Joining us today will be Robert Reffkin, Compass’ Founder, Chairman and Chief Executive Officer and Kristen Ankerbrandt, Compass’ Chief Financial Officer. Robert will provide a brief introduction to Compass and discussion of our strategy and then Kristen will cover the financial results and outlook in more detail. With that, I would like to turn the call over to Robert.

Thank you, Ben and thanks to everyone for joining the call. We are excited to be here today to share more about Compass and our outstanding first quarter results. But first, I wanted to provide some context on the housing market. Overall, the housing market is strong today and we expect it to remain strong for some time. Consumer demand among homebuyers remains high, while interest rates remain at historic lows. After the experience of the last year, everyone wants more space that is better suited to their needs. People are looking for more indoor space, more outdoor space, more home office space, and the desire for second homes has never been stronger. In addition, more people are looking to buy as Millennials are just now entering their home buying years. This has created a permanent shift in the demand curve that will take years to meet. At the same time, COVID has accelerated trends towards digital adoption that we had previously thought would take a decade to play out, creating an opportunity for technology-powered real estate agents to distinguish themselves and win share in this high demand environment. In the midst of these long-term fundamental shifts, we are focused on providing our nearly 21,000 agents with the tools they need to deliver best-in-class service to their clients. Our first quarter results were strong both in terms of revenue and adjusted EBITDA. Revenue was $1.1 billion, up 80% from the prior year and adjusted EBITDA improved by 70%. We grew our principal agent count by 20% compared to last year and we now have nearly 10,000 principal agents operating their businesses on Compass. These agents closed over 40,000 transactions in the first quarter, up 67% from last year. This was the best first quarter for transactions in our history and our third largest quarter ever. These agents closed nearly $44 billion in gross transaction value, up 75% and another record for first quarter and we see this momentum continuing into the second quarter. Our platform is driving these outsized results and helps our agents to grow their business. This can be seen in our results as we grew faster than the market. While the real estate market grew transactions just 14% in Q1 year-over-year, we grew our transactions per principal agent by 39%, with our total transactions growing 67% and this is supported by our increased platform usage. The ratio of daily active users to weekly active users was 69%, up 7 percentage points from the prior year period. In total sessions, we are also up 120%. Compass provides an end-to-end platform that empowers agents to deliver exceptional outcomes to their clients. It is an integrated suite of cloud-based software for CRM, marketing, client communications, and other critical functionality, all custom-built for the real estate industry. It also uses proprietary data and analytics to deliver high value recommendations and outcomes for Compass agents. Agents are essential to the real estate transaction, where they have never had a seamless, fully integrated end-to-end technology platform to help them serve more clients, grow their business, and save time. The average agent logs into 13 different systems every day to do their job and the average number of engineers employed by traditional brokerage firms is zero, even though this is one of the largest asset classes in the world. By combining the platform with our agents, we are seeing some amazing results, a 19% increase in transaction growth in year two compared to year one for our agents in homes selling quicker, with 21% fewer days on market versus the peers. These results drive agent satisfaction with industry-leading agent retention rates of over 90%. We operate in 47 markets in the U.S. In Q1, we launched 3 new major markets and expanded into new cities within our existing markets. Some markets, which are extensions of our existing markets, allow us to expand efficiently by leveraging our existing infrastructure in agent network. Our share of the U.S. market is only 5%. So, we have plenty of runway left to grow. In our three largest MLS markets, we have operated the longest; we have 26% share. So, we know how to grow share and we are confident that we can continue to grow share cost-efficiently by simply replicating our expansion playbook, including through our Compass Anywhere program. Our 850-plus person product engineering team is constantly introducing new and updated products and features that drive agent productivity and efficiency. For example, in Q1, we launched Business Tracker, which allows agents to visualize their entire pipeline, leads, buyers, sellers, renters, landlords, all from one place. Prior to Business Tracker, most agents managed their pipeline on a piece of paper or on a whiteboard, but now can do it within the platform. They can now view details about each transaction from listing to contract to close. This saves agents time and reduces the reliance on staff or other third-party software. Another great example is our AI-powered likely to sell recommendation engine, which predicts which properties are most likely to sell. It incorporates data like property details, pricing history, and mortgage data to rate how likely a property is to sell in the next 12 months. Agents are then alerted to reach out to these contacts, helping them to win the listing before competing agents. Even though the property is in play, likely to sell recommendations result in a 61% higher win rate for our agents compared to properties we did not classify as likely to sell. Our platform is proprietary and built in-house, but we look for opportunities to accelerate our product roadmap when there is an opportunity to acquire a technology that agents love. The acquisition of Glide, which closed last week, is a great example. Glide is a fast-growing software services platform that provides Compass and non-Compass agents with critical transaction management tools, such as offer and transaction management, digitization of key forms, e-signature, and digital disclosures. Glide is used by tens of thousands of real estate agents in California and we plan to expand its reach both within and outside of Compass to more states across the country. We also made progress in expanding our adjacent services business. Our extensive network of top-performing agents and their transactions creates an opportunity to capture more spend in the real estate ecosystem adjacent to the transaction. Today, we offer services in title and escrow and digital marketing and we plan to provide mortgage and other adjacent services in the future. In February, we acquired KVS Title, a leading title company serving the Washington DC area. Compass’ closing services portfolio now operates in California, Florida, Washington State, Maryland, Virginia, and Washington DC. We plan to continue to scale our title and escrow business in existing geographies and new markets going forward. The first quarter of 2021 provided a strong start to our journey as a public company. The market is growing, but our revenue, transaction volume, and EBITDA are all growing much faster. Every day more agents are joining Compass and using our platform to grow their business and improve their real estate experience for their buyers and sellers. And for those that are skeptical about the future role of agents, agents are not going away. In fact, people are using them more over time, not less. According to the National Association of Realtors, 89% of home sellers and 88% of homebuyers use an agent. Contrary to what some may have assumed, those rates have actually increased over time, rising from 83% in 2010 and even less than that in 2000. At Compass, our strategy is to replace today’s overly complex, paper-driven, antiquated workflow with a seamless, all-digital end-to-end platform that empowers every real estate agent to provide exceptional experiences to their buyers and sellers. This will take time and continued investment, but the opportunity is enormous. And Compass is approaching the problem from a different angle than any other player by empowering agents with a proprietary end-to-end platform that drives growth in their business. Real estate agents are CEOs of their businesses positioned at the center of a complex multi-party transaction. An agent serves as a liaison between the clients, the counterparty, and many other stakeholders from pre-sale to post-close. As we continue to expand our platforms to serve the real estate industry, we will continue to get closer to our vision of modernizing an archaic industry for the benefit of everyone: agents, clients, and shareholders. Now with that, I will turn the call over to Kristen to walk you through the details of our first quarter. Kristen, take it away.

Thanks, Robert. We have met a lot of you on the virtual road over the past few months and we look forward to reconnecting. Q1 was a busy quarter for us, culminating with our IPO on April 1, but we kept our eye on the ball operationally and delivered a record first quarter. We grew significantly faster than the industry, while improving profitability. Our unique platform and vision help us attract top agents in new and existing markets, which in turn drives transaction volume, market share gains, and strong revenue growth. Three things really stand out to me as highlights this quarter. The first is the revenue growth we showed at scale. The second is our EBITDA improvements. We are growing fast from the top line, but also showing improving margins and a commitment to financial discipline. And third, the ongoing momentum in our business is reflected in the guidance that we will provide today. Let’s start with the top line. Revenue was $1.1 billion in the first quarter, up 80% compared to the prior year. That growth was driven by a few factors. Closed transactions grew 67% year-over-year. Transactions for principal agents grew 39%. This measure captures both market strength and the power of our platform to unlock additional transactions and revenue for our existing agents. Also, we grew our principal agent base by 20%. As we grow our agent base, our ability to increase transactions for principal agents paired with our industry-leading retention rates of over 90% creates compelling agent lifetime value. This quarter, we saw notable strengths in Florida, California, and the New York region, including early signs of a strong recovery in New York City, where revenue was up 89% in March year-over-year. Finally, adjacent services delivered strong revenue growth off a small base as we drive attach rates for title and escrow in existing regions and expand into new ones. We are really starting to see the power of the platform, which helps us to attract and retain agents by making them more productive, unlocking more transactions, and then layering on more revenue per transaction through the addition of adjacent services. I think it’s remarkable. It really speaks to the strength of the flywheel that underpins our business and our competitive moat. Next, on the path to profitability, adjusted EBITDA in the quarter was negative $31 million, an improvement of $71 million year-over-year. This improvement is even more clear on a margin basis where we saw an improvement of nearly 14 percentage points, moving from a negative 16.5% margin in the first quarter of 2020 to negative 2.7% in the first quarter of 2021. The improvement in adjusted EBITDA was driven by strong top line growth and a focus on cost management. We saw improvements in operating leverage across all expense lines on a non-GAAP basis. This includes an 80 basis point improvement in commissions and other related expenses as a percentage of revenue. This was the second consecutive quarter where this metric improved and it highlights our ability to manage costs through geographic and agent mix. We continue to reduce the costs required to support our agents on the platform. In the first quarter of 2021, we saw a reduction in our per agent support cost of over 15% compared to the same period last year. We expect additional improvements to automation and we will continue to invest to further reduce the marginal cost of an agent as more agents join our platform. We have refined our expansion playbook in a variety of new markets. This allows us to drive faster market share gains, which leads to market level profitability sooner. Programs like Compass Anywhere are key to driving efficient expansion. This allows us to improve overall agent economics while reducing occupancy and support costs per agent. And we continue to see our capital positions strengthen. Q1 free cash flow improved $120 million versus the prior year. We ended the quarter with over $750 million of cash when including our net IPO proceeds. In addition, our $350 million revolver is undrawn. We have ample liquidity to execute our strategy. And our top priority is to drive profitable growth through smart investments in our business. Now, let me turn to the guidance. We expect 2021 to be a strong year for the residential housing market, while we also expect our agents to continue to capture more share. In the second quarter, we expect revenue of $1.5 billion to $1.6 billion, implying growth of 127% at the midpoint. We expect to see outsized growth as we lap the COVID impact felt most acutely in the second quarter of 2020. We expect second quarter adjusted EBITDA of negative $10 million to positive $10 million. At the midpoint, this implies that we will be breakeven for the second quarter. For full year 2021, we expect revenue of $5.35 billion to $5.55 billion. At the midpoint, this represents 46% year-over-year growth. This top line guidance reflects our ability to successfully grow our existing agents' businesses, bring new agents on to our platform and the strength of the housing market. Finally, we expect our full year adjusted EBITDA to be in the range of negative $225 million to negative $245 million, or a negative 4.3% margin at the midpoint. This is roughly in line with our EBITDA margin in 2020. Given the current momentum, we see a compelling opportunity to invest in future growth while also ensuring our path to profitability and better unit economics. We plan to reinvest roughly half of the incremental profits back into the business in two areas: first, accelerating the expansion of adjacent services, where our long-term adjusted EBITDA margins are strong; and second, investment in R&D, with a focus on automating internal workflows to reduce the marginal cost of acquiring and supporting our agents. We expect these investments to drive our ability to scale profitably as we grow, provide meaningful value to our agents and their clients, and substantially increase our total addressable market. We are well on our way to delivering on our vision for a seamless all-digital end-to-end platform that empowers real estate agents to deliver an exceptional experience to their clients. We have the vision, the experience, and the engineering talent, along with the capital and financial profile to enable us to continue to build upon our mission to transform real estate. In closing, we had a phenomenal start to 2021. We are executing well from our leadership position, gaining share and driving operating efficiencies, all while creating tremendous value for our agents, their clients, and their broader residential real estate ecosystem. With that, we will open the line to your questions.

And your first question comes from Lloyd Walmsley with Deutsche Bank.

Thanks, guys. Two questions. First, can you help us understand the magnitude of adjacent services revenue in the quarter that we were just trying to kind of assume flattish commission rates year-over-year at 2.46% of GTV, it was implying something like just shy of $40 million of adjacent services revenue, which seemed pretty high. Are we in the right ballpark here? And if so, can you let us know what’s driving the strength there? And then second on the mortgages opportunity, can you just talk about how you guys plan to go to market there? Is that something you are building right now? Is that something you will move into through acquisition, through partnership? Give us a sense for how you are going to attack that and kind of where you guys are in preparing for that? Thanks.

Sure. So, Lloyd, nice to talk to you here. So I will take the first question in terms of adjacent services. Our adjacent services business grew nicely in the first quarter. We were really glad to see that. Of course, it grows off of a small base, but we think we have got a huge runway ahead of us there. As a reminder, the overall market opportunity for title and escrow is $35 billion. So, we are spending some time and focus there. We are not going to disclose an exact amount in terms of adjacent services revenue, but we are very focused on continuing to deepen our presence in existing markets and also looking for opportunities to expand to new markets. I think the second part of your question on adjacent services was really on sort of the implied commission rates. I think there are a couple of things that are included in our revenue that are not necessarily captured in GTV. So, I think that’s part of your right adjacent services is bridging part of that gap when you do just review rough math on the commission rates. The other things that are included in revenue that aren’t captured in GTV are rentals and referrals. We actually did see a slight pickup in commission rates, but it was a slight uptick, not something that we think is necessarily indicative of a longer-term trend. So hopefully, that clarification is helpful.

And on the question around mortgage, buy versus build, we look at the buying versus building versus joint venture and we have committed on a path towards a joint venture when balancing the quality of an outcome, the speed of an outcome, and the potential size of the outcome. A joint venture is where we think there will be the most opportunity.

Alright. Thanks, guys.

Operator. Next question, please.

And your next question comes from Jason Helfstein with Oppenheimer.

Thanks for taking the questions. So, two. Just let me start with Compass Anywhere. I think you said 38% of agents were Compass Anywhere. What was that last year in the first quarter? And any plans to have any new markets be comprised entirely of Compass Anywhere agents? And then secondly, I can’t help ask after the Open Door call, I think they highlighted how they were in a position to start doing homes over a million. I think they quoted doing a home like a 1.4 million in Los Angeles and maybe it was a one-off. But to the extent that iBuyers, if they are able to move up market, which most people were skeptical of how you think about that, i.e., relative to your business and you need to take more of the overall transaction into your system? Thank you.

Thank you for the question. How about I'll start with iBuyer, then I will pass on to Kristen to walk through Compass Anywhere in Q1. In terms of iBuyer, to put it in context, there were 6 million transactions last year and I believe around 15,000 of them were iBuyer. I believe this year is expected to be around 17,000. The actual impact on our industry hasn’t been felt as much by our agents. When I think about what concerns me in terms of competition, I think about anything that an agent says is hurting their ability to do their business, serve their clients or something that makes them want to leave Compass Anywhere somewhere else. We are not hearing from our 21,000 agents that they are losing business in any meaningful way from iBuyer. Now, in terms of them moving in the spectrum of value of a home, I think there are a couple of challenges with that. One is it’s more capital-intensive and on top of an already very capital-intensive business. Secondly, as you move up price points, that type of clientele is more accustomed to using an advisor and paying for advisory services. And finally, the homes are more differentiated, making it harder to algorithmically ascertain the value of a home. But, I mean, with that, I will pass on to Kristen to walk through Compass Anywhere.

Sure. Thanks, Robert. So in terms of Compass Anywhere, 38%, you are correct, 38% of the agents who joined in Q1 were Compass Anywhere agents. Compass Anywhere agents made up about 30% of the total base of agents in 2020. We did see a slightly higher percentage of agents who joined in 2020 were Compass Anywhere agents. The thing that makes the first quarter of 2021 a little bit different from 2020 is just the number of new markets that we have launched. As we talked about before, when we launched a new market, we start off by really recruiting top-producing agents. Those tend to be less often Compass Anywhere agents. That sort of explains the differential in mix quarter-to-quarter. I think your second question was on whether or not we would look to launch Compass Anywhere-only markets. As we move across all the market opportunities that we have in the U.S., we have a plan to be in every market in the U.S., but our strategy may shift market to market. I think there is a possibility at some point in the future that we may look to launch Compass Anywhere-only markets, but that’s not in the current plan.

Thank you.

Your next question comes from Mayank Tandon with Needham.

Thank you. Good evening. Congrats on the quarter and the recent IPO. I wanted to start with Kristen with could you talk about what’s embedded in your guidance around agent adds, the number of transactions and the average transaction value, just so from a modeling perspective that would be helpful?

Yes. So I am happy to talk through that. In terms of total transactions, we expect for that number to increase. You can tell by the way that we are guiding for the second quarter that we expect for transactions to increase. In order to support that, we did see a 4% increase in terms of price in terms of average transaction value in the first quarter. I think you should expect to see that go up as well. We do also expect to see continued strength in that transactions per principal agent metric as well. It’s been really great for us to see that in the midst of what is admittedly a very strong market, our agents seem to be gaining share in the market and in Q2 we expect for that to continue.

Okay, that’s helpful. And then I wanted to go back to the adjacent services, how are you thinking about the roadmap for adding additional services? Should we expect more M&A or is that going to be more of an organic initiative? And then also if you could talk about the economics of the attach rates of the adjacent services over time how we should be thinking about that as we look beyond 2021 and longer term? Thank you.

Sure. So in terms of our title and escrow business, we have been growing that business. We have sort of taken a dual-pronged approach. We have been looking to grow it both organically and we have done some from M&A. To the extent, we used M&A to grow that strategy. It’s really about timing. That helps us to accelerate our ability to grow that business. Keep in mind what we are getting is title and escrow officers, generally, assets where we already see strong attach with Compass agents. We just replicate the playbook that we have to drive attach rates higher over time. As we look to expand the playbook services beyond title and escrow, Robert talks about how we are currently working through a strategy around mortgage. We are in active discussions around that. Really when it comes to acquisitions, it’s just about our pace of being able to accelerate our progress into new areas. We are targeting attach rates in the industry for title and escrow specifically at around 40%. In mortgage, we see attach rates around 20%, and we think that’s really a good target for us, but I am sure if you’ve talked to Robert, he will tell you, he thinks that’s really a floor for what we can do.

Yes. I think we have two advantages to get above the average attach rates: one, agents and two, integration. On the agent side, real estate agents are the number one source of recommendations for adjacent services, whether it’s title and escrow and even mortgage. The typical client doesn’t have a title or escrow first, and they tend to go back to the agent, who is the trusted advisor there. On integration, we are building an integrated platform where the recommendation can go through the workflow, and an actual title experience and work experience can flow through that. That’s a real advantage. Other brokerage firms have title, escrow, and mortgage, but it’s just united by a common legal entity. It’s not united in a single pane of glass. It’s not united through a one-login experience. That’s really the advantage we have over the market.

That’s helpful color. Thank you so much.

Your next question comes from Daniel Adam with Loop Capital Markets.

Hi, good afternoon and thanks for taking my question. Congratulations on the great quarter and your first earnings call as a public company. My first question is on interest rates, which while they remain at historically low levels, they have been increasing recently, particularly the treasury yields. To the extent we continue to see interest rates rise, is there a level at which you would expect that to have an impact on transaction volumes?

Let me just give a little bit of context that our business is more weighted towards the high-end of our markets relative to the traditional brokerage company. In the high-end, there is less use of mortgage. Yes, as interest rates go up to above a certain level that will have an impact, but we will not be impacted as much as some of our peers. Secondly, interest rates are still at historic lows and that they are going to keep rates low for two years. So, we feel pretty positive about the future ahead of us.

Yes. One thing I might add to that, if you look at our business historically, as Robert said, we have operated in a number of different rate environments. The fact is what really dictates our growth has been our ability to continue to add agents to our platform and our ability to help them grow their business once they are on our platform. We are generally focused much more on that as opposed to the rate environment as a determinant of our ability to grow the business.

Okay, great. That’s super helpful. And then secondly, so you guys grew total transactions by 67% in the first quarter, considerably higher than the market’s 14% growth rate. I guess how sustainable do you think that level of share gain is not just this year, but over the next 2 to 3 years?

The metric that we look at that we think is sort of the best measure of that is our transactions for average principal agents. If you look at the transactions for principal agents in 2019, that number was about 12.8%. We grew that number by about 30% to 16.7% in 2020. Of course, we grew that number 39% in the first quarter year-over-year. We have been really successful in terms of being able to drive that going forward. We believe that the combination of having the best agents on the best platform will continue to drive productivity, and that productivity is what allows us to capture more share. We see increases in these metrics of transactions for average principal agent as evidence that the platform is working. Our agents typically see a 19% growth in their transactions year one to year two on our platform, and they continue to see growth beyond that. As a reminder, that 19% is really an average that we have seen consistently over the course of the last five years. So we have seen that across cohorts, across markets. As Compass, we are obsessed with agent workflow and we always look for opportunities to use software to drive efficiencies for agents. We think that at least 50% of the time that an agent is spending now can be given back to them by just making our platform better, and they can use that time to invest back in their business, which will allow them to create more transactions and allow us to gain share over time.

Okay, great. Thanks, again and congratulations.

Thank you.

And your next question comes from Trevor Young with Barclays.

Hi, thanks for the questions. First, you highlighted some new product rollouts like the Business Tracker as well as the recently completed Glide acquisition, which sort of rounds out the platform. Can you help us understand maybe the one or two areas where you feel there is some need to continue to infill on functionality and your appetite for further acquisitions? And then the second one just on Glide, you noted that it has non-Compass agents. How should we think about monetization for that and revenue potential as you noted it’s going to expand to other Compass agents nationwide? Thanks.

On the two areas that I would say we are investing the most into filling out the platform are one, team functionality role permissioning. This is agent of the center of a highly complex multi-party transaction and they have teams; there are agents on other sides. There are their own clients. There is a lot of work that requires role permissioning and team functionality. Over time, we want to extend that collaborative functionality to the title officer and the mortgage officer. That’s a core part of the platform that we need to continue to invest in. Secondly is what we call agent brokered workflow and more traditional words would be just transaction management. There are a lot of disclosure forms, e-signatures, contracts; we all need to flow through the system to create simplicity for all sides: buyer, seller, agent, as well as the Compass agents. Those are the two areas. In terms of Glide, yes, they currently serve non-Compass agents and we want to continue to extend that product to states across the country. The priority is focusing on bringing the best of the functionality to the Compass platform. That’s the priority. But we want to continue to serve the non-Compass agents that they have to-date and we are committed to that as well as expanding into two additional markets.

Great. Thank you.

And your next question comes from Brian Nowak with Morgan Stanley.

Hi, this is Alex Wong on for Brian. Thanks for taking the question. Two questions. First, I think you talked a little bit on the formal remarks around changing up the playbook as it relates to some of the newer markets. Can you maybe provide some color on that? And it would be helpful to get a little bit of context, how you think about sort of the payback period and over what time period for some newer markets? And then second, I think you also called out very encouraging metrics around the weekly to sort of daily to weekly users, up sort of 7 percentage points year-over-year. Obviously, I think in some parts of the workflow, you are trying to save agent time, so it may not be a direct read, but are there any sort of areas you would call out that are really driving that in terms of areas that agents are being more interactive with the Compass platform?

Sure. So I am happy to address the first one, the question around our expansion playbook. We have our presence today in 47 markets. We launched three new major markets in the first quarter and we actually launched another three in the fourth quarter. We have got a lot of experience in terms of how to expand successfully in markets across the country. We have had a lot of opportunity to refine that playbook. First and foremost, we are focused on using technology to allow us to launch more quickly in these new markets. A really good example is we have accelerated our ability to ingest data feeds that are required in the market from MLSs. We have refined our virtual onboarding capabilities that allow us to essentially bring new agents onto our platform very, very quickly. We have got a strategy focused on really finding the most influential and most productive agents in the market and bringing them on to the platform and from there, accelerating market share gains. What you really see in terms of our expansion playbook is experience. We really know in a variety of markets how to do that effectively. I would say over the course of the last couple of quarters and going forward, we are really focused on expansion in mid-sized cities. Tampa is a good example. Jacksonville, Florida is another. We already have operations in Nashville, Atlanta, and Austin. We are really looking to those markets as really good templates in terms of how to successfully launch and grow these markets, and the faster we are able to grow market share in those markets, the faster we get to profitability in those markets.

In terms of product usage and what’s driven the largest impact as we have had our weekly average usage go up 5 percentage points year-over-year, daily active users have increased by 9 percentage points year-over-year and DAU over WAU has gone 7 percentage points. The biggest impact over the last year has been marketing center and CRM. The biggest impact I would expect over the next year will be team functionality and transaction management. On the former marketing center CRM, the reason for that impact is it helps agents grow their business by staying top of mind with their sphere. Helping someone buy and sell a home is executing the business, but the best way to grow the business is to ensure that everyone in your sphere of influence thinks of you when they think about buying or selling a home. Whenever they have a friend who thinks about buying or selling a home, they refer you. CRM helps you know who to reach out to and when to reach out, and what to say. Marketing center gives our agents the power of being a professional designer in the palm of their hand, for digital and print, whether it’s digital newsletters, social media, postcards, brochures, or even client gifts. It’s an entire program for staying in touch and marketing yourself. That gives them the content to reach out to their sphere and helps them grow their sphere of influence, keeping them top of mind and as a result, getting more business. Going forward for the next year, team functionality and transaction management is about executing more of the foundational workflow in the day-to-day job, as opposed to generating business. This is more about the execution of the business, particularly the business post-finding the home.

Great. Helpful.

And your final question comes from Matt Gaudioso with Compass Point.

Hey, good afternoon and congratulations on the strong quarter out of the gate. Just a question on the commission line item, good to see the improvement of 80 basis points there. I was wondering if you could help us think about some of the puts and takes in that line item moving forward just between kind of geographic mix, new agent adds, volume? And then longer-term, just wondering how you view the commission split line item as a lever to hit your longer-term margin targets? Thanks so much.

Sure. We were needless to say very pleased with the trends in the commissions and other line. That improvement of 80 basis points is really good to see. We have started to see a nice trend in the fourth quarter of 2020, but this was a really nice step up. It was the result of a few different things that you mentioned. First, we see improving margins as our agent cohorts mature and we are able to deliver more value for our agents. We expect for that to continue going forward. We are really focused on geographically expanding into higher margin markets. We started doing that in earnest in 2020, and we will continue to integrate that into our expansion strategy. As I mentioned in my remarks, we are seeing a nascent recovery in New York City already, and New York is one of our oldest markets. That’s a nice lift in New York should be good for margins over the foreseeable future. Lastly, our move into adjacent services will be helpful there too. As we also look to bring on more up-and-coming mid-tier agents onto our platform, we tend to have more attractive economics, which will also support good performance in that line. It’s really all five of those things together that come together to help us drive improvements there. I would expect to see continued improvements in that line over the next few years, but this performance we saw in the first quarter was certainly great to see.

I will now turn the conference back over to Kristen Ankerbrandt for closing remarks.

Alright. Thank you, all for listening to the Compass first quarter 2021 earnings call. Please feel free to reach out if we can be of further assistance. Thank you.

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.