Earnings Call Transcript - COMP Q2 2021

Operator, Operator

Good day and welcome to the Compass Second Quarter 2021 Earnings Conference Call. My name is Catherine 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, you may begin your conference.

Ben Barrett, Vice President of Investor Relations

Good afternoon and thank you to everyone for joining Compass' second quarter earnings call. Today's review of our 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 second quarter and year-to-date financing as well as our guidance are included at the back of the earnings release from the 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 overview of Compass' quarter and a 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.

Robert Reffkin, Founder Chairman and CEO

Thank you, Ben and thanks to everyone for joining the call. We are excited to be back with you today to talk about Compass and our second quarter results. Thanks to our agents' and employees' hard work throughout the quarter, we were able to deliver record results in terms of transactions, gross transaction value, revenue, and adjusted EBITDA. I can confidently say we are in the strongest position we have ever been in as a company. On the financial side, we delivered all-time record quarterly revenue of nearly $2 billion, which is up 186% year-over-year. Non-GAAP commission and other transaction-related expenses as a percentage of revenue improved by 100 basis points year-over-year, better than the 80 basis point improvement we saw in the first quarter. Adjusted EBITDA for the quarter was a positive $71 million. And if we look at our trailing four quarters, we generated $44 million of adjusted EBITDA. In the second quarter, our national market share almost doubled from the prior year as share increased to 6.2% up from 3.3%, primarily driven by our agents growing their transaction counts and our increase in the Compass agent base. The strong housing market was certainly a tailwind, but we outperformed the industry by a wide margin. Year-over-year our transaction growth was 140% compared to industry transaction growth of 32%. Due to the combination of our agents' ongoing outperformance, the strength of the housing market, and the impact our platform is having as an accelerant to business growth, we now believe that we'll be profitable on an adjusted EBITDA basis for the full fiscal year 2022, a year earlier than we previously expected. We are particularly excited that this financial success was driven by Compass making agents more productive on the platform. On average, each of our principal agents closed 6.2 deals in the quarter, a new record. This is up 93% year-over-year and compared to industry transaction growth of 32%. The combination of our agents' outperformance on the number of transactions completed and the 19% increase in home prices drove GTV to a record $77 billion in the quarter, up 186% year-over-year. GTV per principal agent was $7.2 million, up 130% year-over-year. Our agents recorded over 65,000 transactions on the Compass platform in the second quarter and we beat our prior record by over 18,000 transactions. Our agents make up roughly 1.5% of real estate agents in the US, but represent over 6% of the industry's market share. This quarter, our principal agent count increased to over 10,600 with retention rates that continue to lead the industry at above 90%. I am pleased to say that our principal agent retention in Q2 2021 was higher than the prior quarter and higher than the prior year. This is particularly important to us, as retention is the primary indicator of the value our customers feel they are getting from our platform. We are well positioned in the upper end of the market, where price increases have outpaced the broader market. And we will continue to expand our footprint into upper-and-mid-tier markets throughout the course of the year. We launched 15 new markets in Q2 including Indianapolis, Charlotte and Minneapolis bringing our total market count to 62, covering approximately 45% of the U.S. population. The rate of new market launches is expected to slow in the second half of 2021 as we saw an opportunity to accelerate expansion in the first half of the year that was originally planned for the back half of the year. Now, let's move to our platform and how it powers our sustainable financial advantage relative to incumbents. I know that many of you see us as just a brokerage. And I am proud that our team has made us the fastest-growing brokerage in the United States. But our strategy at Compass is to be much more than a brokerage. Over time, you will see how our platform powers a larger number of adjacent services with an above-industry average attach, creating a long-term sustainable financial advantage for Compass relative to others in the industry. The size and nature of this opportunity is made possible because of our unique approach to creating the first end-to-end integrated technology platform for real estate agents. No traditional brokerage firms are making the necessary technology investments to empower their agents to service the entirety of their client needs and facilitate the entirety of the transaction end-to-end in one platform the way Compass has invested in over the past seven years. With the product and engineering team consisting of more than 1,000 people Compass has a technology team that is by far larger than any traditional brokerage firm. Given our success to date, by next summer, we expect to be the first company to provide agents with a platform that will allow them to facilitate the full transaction in one place, without having to pay for or log on to any third-party real estate software. From first client contact, to property marketing for sellers, and property search for buyers to CRM, to offer management, to transaction management and closing, the full transaction process will be connected to an integrated experience, built on a single code base across both mobile and web. Unlike Compass, the technology offering to traditional brokerages includes a collection of disconnected third-party tools that don't speak to each other, and that prevent them from fully integrating value-added adjacent services in the natural workflow of the transaction. Compass' approach to building an integrated platform gives the company a competitive advantage in easily connecting more value-added services over time into their transaction experience. We already have multiple adjacent services to attach the transaction running through our platform, such as traditional services like title and escrow. In Q2, we announced our mortgage joint venture with Guaranteed Rate. In addition to more traditional adjacent services like home insurance, home warranty, home security, and moving services, we also see a clear path to facilitating and monetizing dozens of additional adjacent services that are uniquely enabled by our platform including property marketing spend, agent business spend, and client spend positioning Compass to have a share of all real estate spending. Digital ads, property videos, 3D renderings, real estate sign production, open house brochures, listing photography, client gifting programs for past buyers and sellers are just some examples of these types of opportunities, where third parties are seeking access to our agents. Currently, agents spend billions of dollars on these types of services. And we can make them easier to access, more convenient, and more cost-effective for agents and their clients by having everything centralized in one location through the Compass platform. With the incremental total addressable market provided by the addition of these value-added services, Compass' potential revenue per transaction will be multiples above the industry average, creating a sustainable financial advantage relative to incumbents. As I mentioned, last month we announced OriginPoint, our mortgage joint venture with Guaranteed Rate. We are excited to bring our best-in-class agents, high-quality transaction funnel, and technological expertise to OriginPoint. Our goal is to be in business in multiple states this year and expand nationwide by year-end 2022. We aim for an attach rate at or above industry averages of eligible transactions in three to five years, with profitability for the joint venture on an adjusted EBITDA basis expected in 2022. Turning to the housing market, we believe there are incredibly strong fundamentals and we see continued strength in the future. This is not just an aftereffect of the pandemic. Consumer demand among home buyers remains high, while interest rates remain near historic lows. Yes, 7.5 million Americans have already moved, but millions more are looking. Remember, when you hear about 10 offers being put on a home, only one is chosen, meaning nine buyers are still in the market. Continued expectations of hybrid work environments will continue to spur demand. People are using their homes more than ever before, and it’s continuing to lead people to look for new primary and secondary homes that help them better optimize their hybrid work lifestyle. Moreover, millennials are entering their home-buying years, which will further sustain demand, and COVID has resulted in significant pent-up demand from international buyers. In many of our key markets, like Florida, New York, and California, buyers from places like Canada, Latin America, Asia, and Europe have been unable to travel to the US for over a year now. And that demand from those buyers is significant. All this leads us to be optimistic in our outlook for the residential housing market this year and next. That said, the more lasting impact COVID may be on the acceleration in digital adoption, which looks like a permanent shift. And we've seen it play out across many industries, including media streaming, food delivery, and, of course, real estate. Customers want the same high level of service with more digital interaction, better suited to their lifestyle. In real estate, the winners will be the agents who can best utilize technology to transform the client experience and the brokerage firms that can best help agents to utilize technology. This has been Compass' focus since our inception. The Compass platform, which is unique in the industry, is the result of more than seven years of engineering work and more than $600 million in investments, all in support of being the company that best helps agents use technology to realize their entrepreneurial potential. Over the last 10 years, technology has continued to empower agents to serve more clients in more transactions each year. This is a secular trend and one that Compass has been on for years and where we continue to lead the industry. This can be seen in the transactions per average principal agent, which increased from 10 in 2018 to 13 in 2019, to 17 in 2022, and with 1H 2021 over 1H 2022, reflecting a further increase of 68%. With digital adoption in real estate still in its relative infancy, I've never felt more confident that Compass is the best positioned company in our industry to help agents use technology, to use software to continually increase the number and quality of transactions they can complete each year for clients, making Compass the best place for agents to grow their business. I am now going to hand it over to Kristen, who is going to go through the financials in more detail. But I just want to say once again, how pleased I am with the performance this quarter and how thankful I am to the 25,000 people at Compass that have worked so hard to create such incredible results. With that, let me turn the floor over to Kristen and I'll be back at the end to answer questions.

Kristen Ankerbrandt, Chief Financial Officer

Thanks, Robert. I'm excited to be here today to share our second quarter results. I'm also going to go a bit deeper into Compass' path to adjusted EBITDA profitability and provide some updated guidance for the remainder of the year. Before we dive in, I want to start by reiterating how outstanding our Q2 year-over-year results were across the board. Revenue grew 186%. Transactions grew 140%, and that's compared to the industry average of 32%. We nearly doubled our national market share to 6.2%. We generated $71 million of adjusted EBITDA, an improvement of $128 million year-over-year. Our average principal agents grew 25%. We launched 15 new markets. We generated $81 million of free cash flow, and we have over $800 million of cash and an untapped $350 million revolver. So our balance sheet is healthy. The strength, breadth, and persistence of these results showed momentum that exceeded our expectations, coming in well ahead of our financial guidance on both revenue and adjusted EBITDA. Our extraordinary agents, armed with our tech platform delivered outsized results on both the top and bottom lines, and these results truly were outsized. Revenue in the quarter was a record coming in at $1.95 billion, more than $700 million better than our next best quarter. Adjusted EBITDA was a positive $71 million bringing us to adjusted EBITDA profitability of $44 million over the last 12 months. We closed 65,000 transactions in the quarter, which equates to over 700 transactions per day. We expect continued strength in our business, but the comps will get harder now that we have lapped Q2 2020, the quarter most negatively impacted by COVID. We saw 82% of revenue growth in the back half of 2020 compared to the prior year, but we see a lot of underlying strength in the residential real estate market that we believe will persist through the remainder of 2021 and beyond. Continued strong demand simply cannot be met by the current low supply, pointing to continued strength in the housing market for several quarters. Since the IPO, we have grown the business ahead of our expectations and outperformed the market. As a result, we generated significantly more adjusted EBITDA in the second quarter than anticipated as revenues came in stronger than expected while we continued to operate the business at a lower expense base following COVID. The combination of elevated growth and structural profitability that we saw in Q2 has accelerated our timeline to adjusted EBITDA profitability sooner than previously communicated. We originally expected to achieve sustainable profitability in 2023. Given our strong quarter and our revised outlook, we now expect to be profitable on an adjusted EBITDA basis for the full year 2022. We're happy to report a significant improvement in our full-year 2021 guidance. On our last earnings call, we provided annual guidance of $5.35 billion to $5.5 billion in revenue. We now expect revenue of $6.15 billion to $6.35 billion, a year-over-year growth rate of 68% at the midpoint compared to a growth rate of 46% in our prior guidance. This reflects an increase of $800 million to our revenue guidance. Our prior adjusted EBITDA guidance was a loss of $225 million to $245 million. We now expect a loss of $45 million to $85 million and adjusted EBITDA margin of negative 1% at the midpoint. This reflects an improvement of $170 million compared to prior guidance and a $90 million improvement compared to our loss of $156 million for the full year 2020. For the third year, we expect – for the third quarter rather, we expect revenue of $1.65 billion to $1.75 billion. At the midpoint, this implies year-over-year growth of 43%. We've seen healthy activity in our markets in July and August so far. For the third quarter, we expect adjusted EBITDA to be breakeven to a loss of $20 million. The $1.95 billion of revenue we generated in the second quarter was strong. Keep in mind that the 186% growth rate we saw was magnified by the weak prior year comparison due to COVID. To normalize for the unusual seasonality we saw in 2020, we looked at the two-year CAGR from 2019 to 2021. In Q2, this two-year CAGR was 65%, and we expect a similar trend for revenue growth in Q3 and Q4. These two-year CAGRs reflect continued year-over-year growth in our core business and early traction in adjacent services. We expect to generate more revenue in the second half of the year than we did in the first half. Our visibility into Q2 outperformance combined with our strong future outlook has given us the confidence to make investments in our business to drive long-term profitability. We opted to launch 15 new markets in Q2 versus our typical pace of two markets per quarter. Growing our market count from 47 to 62 just in the last quarter reflects an increase of 30%, and there is cost associated with that in the back half of the year. We are also investing to expand Title and Escrow to cover seven states by year-end and we made the decision to launch our mortgage business a year sooner than planned. These investments in adjacent services will drive profitability in 2022. And we continue to invest in our tech platform, which is what drives Compass' outperformance relative to the industry. Prior tech investment made it possible to nearly double our market share year-over-year to 6.2% this quarter as an example. These three investments: launching new markets, expanding high-margin adjacent services and building new proprietary technology to drive outperformance by our agents will drive sustainable, long-term profitability. There are three reasons I have the confidence that we can achieve sustainable positive adjusted EBITDA in 2022. First, our ability to scale the business is most dependent on how successful we are at recruiting agents, retaining agents, and growing their transactions, and we have done this consistently. Second, we are successfully growing our high-margin adjacent services business including our mortgage joint venture. Growth in adjacent services should steepen the curve in adjusted EBITDA per transaction as our transaction count continues to grow. Third, we see a clear path to profitability in the markets we serve based on the demonstrated success that we have seen in scaling market share and driving profitability as our markets mature. As detailed in our shareholder letter, our expansion markets launched in 2018 scaled to double-digit market share and reached positive market-level margins within three years of launch. The seven MLS markets Compass launched in 2018 that have been operational for a full three years were unprofitable in their first and second years. But by the third year, those seven markets had on average 11% market share and a positive market-level margin of 4%, which we expect to continue to expand over time. The operating performance of our markets has been remarkably consistent with these same trends having been proven across various sized markets in different geographies across price points and local market norms. We've launched a number of markets since then, with roughly half of our markets still in the investment phase. Early indications show these markets are off to a strong start performing in line with our expectations. The combination of our ability to consistently grow our agent base and their transactions, scale our adjacent services business, and drive market-level profitability and share provides us with the confidence that we can deliver on this commitment to sustainable profitability in 2022. All in, this is another fantastic quarter for Compass. We achieved our best ever financial and operational results. We dramatically raised guidance for the full year 2021 and we now expect to achieve sustainable adjusted EBITDA profitability in 2022. Most importantly, thanks to our team of agents and employees for all the hard work that made these amazing results possible. Now, with that, we're happy to take your questions.

Ben Barrett, Vice President of Investor Relations

Operator, first question, please?

Operator, Operator

Our first question comes from the line of Brian Nowak with Morgan Stanley.

Alex Wong, Analyst

Hi. This is Alex Wong on for Brian. Thanks so much for taking the question. First one just on number of principal agents added. Can you maybe help parse out what was leading that in terms of either new markets versus existing markets? And Robert, you talked about the 6.1 transactions per agent in the quarter, which is really impressive. Maybe what's driving that and how sustainable do you think that's going forward? And the second question around profitability. Kristen, I think the new EBITDA guidance assumes a roughly 20% drop-through on the incremental revenue and the pull-forward by year. Can you maybe parse out of the three areas you're talking about which ones are sort of maybe pushing that more in terms of ancillary services new tech and new markets? Thank you.

Robert Reffkin, Founder Chairman and CEO

Great. I'll begin by highlighting the reason behind that 6.2 figure and then turn it over to Kristen. We have consistently observed, not only this quarter but also in the previous one, that our agents are outperforming the market. This quarter saw a 93% increase in transactions for an average principal agent, while the industry growth was at 32%. This consistency has been evident over many years. The number of transactions per agent has risen yearly from 2018 to 2019, 2019 to 2020, and further into 2021. This ties back to the previous mention of a 19% growth rate, as the average agent at Compass has been increasing their business by 19% between their first and second year based on five years of cohort data across various regions, and this trend continues in subsequent years. This growth is now being realized at scale. With a technology team exceeding 1,000 people dedicated to supporting agents in growing their businesses, and a larger organization focused on enhancing agents' lives with better financial returns and more family time, these are the results we achieve. We are also attracting talents from diverse industries to bring their unique skills and insights to this mission.

Kristen Ankerbrandt, Chief Financial Officer

I'm glad to address your other two questions. Regarding the agent additions we experienced in Q2, we launched 15 new markets throughout the quarter. Our expansion team worked diligently to facilitate these launches and typically, you will see announcements as those markets open. Whenever we introduce new markets in a quarter, our sales team concentrates on bringing in new agents for those regions. However, we also have salespeople in all of our markets recruiting agents. I would say that the new additions are evenly distributed between our new and existing markets, and we have not encountered any unusual challenges in recruiting agents in either area. For your last question about the increase in spending in the latter half of the year, I highlighted three main areas. First is expansion, with the 15 markets launched in Q2 and the three from Q1 contributing about a third of the additional spending. Technology investments account for another third, and the remaining third is primarily related to adjacent services, along with a few smaller expenses.

Mike Ng, Analyst

Hey. Good afternoon. Thank you very much for the question. It was really helpful to see the market-level margins over time for the 2018 launches. Would you talk a little bit about the key drivers of that margin improvement and how those leverage over time? Is it primarily C&O expenses or adjacent services attached that drive that margin for instance? Any detail there will be incredibly helpful. Thank you.

Kristen Ankerbrandt, Chief Financial Officer

Sure. Well, glad you enjoyed the new disclosure. For a major market and these are really new markets where we don't already have a presence, as I've talked about it generally takes three years from launch to get to double-digit market share and profitability at the market level. In the first and second year of a market launch, we're focused on adding agents and building out our operations. We generally have to invest ahead of the revenue in those major markets. And we typically cross over to profitability in the third year as we build a strong agent and transaction base from which we can expand further. What's really driving that is leveraged across literally all cost categories. And the specific data that we showed was markets that were launched in 2018. At various points within 2018, there was little to no adjacent services reflected in the numbers that you saw. So that is all opportunity to come. Probably worth noting also that roughly half of our markets are still in the investment phase and they're moving to profitability at some point within the next three years. So, even within the markets that we have already launched there's a lot of opportunities for additional growth and profitability.

Jason Helfstein, Analyst

It appears that most key metrics are moving in a positive direction. Can you provide more details on agent productivity, which seems to be at a peak of 6.1 to 6.2? How should we view that going forward? Will it remain at this level, or is a decrease expected? Additionally, we noticed a drop in commission and transaction revenue percentage. Could you clarify the year-over-year reasons for that decline? Lastly, there were significant improvements in marketing efficiency; could you elaborate on that?

Robert Reffkin, Founder Chairman and CEO

I will discuss agent productivity and then pass it over to Kristen for the other two items. While there may be fluctuations in agent productivity from quarter to quarter, we are very confident that the overall trend will show an increase year over year. For context, agents completed an average of 10 transactions per year in 2018, 13 in 2019, and 17 in 2020. We believe that this upward trajectory will continue. This optimism stems from our clear understanding of the productivity tools we are developing for agents. We are committed to providing anything that can assist an agent in growing their business, not just now but also in the future. We are consistently evaluating tools and solutions that can enhance agent productivity and offer them to our agents.

Kristen Ankerbrandt, Chief Financial Officer

I'm pleased to address your question regarding commissions and other factors. We observed an improvement of 100 basis points year-over-year in commissions and other as a percentage of revenue. In Q1, we experienced an 80 basis point improvement year-over-year, and we performed even better this quarter. This progress is mainly due to three factors: first, the improving economics for agents as our cohorts develop; second, the recovery of New York City following COVID, which we expect to continue as international buyers return to the market, as Robert highlighted earlier; and third, our strategic focus on expanding into markets with more favorable margin structures for Compass. By prioritizing these markets for growth, we are beginning to see the financial benefits materialize. Regarding the leverage we witnessed in the sales and marketing expenses, we were very pleased to see operating leverage across all categories. We have already discussed the improvements in commissions and other areas, but this operating leverage was evident across the entire profit and loss statement. Approximately 680 basis points of this came from sales and marketing, largely stemming from economies of scale, despite being somewhat offset by costs related to an increased number of average principal agents and some price hikes. We did incur occupancy costs in this area, which represents a significant portion along with several other fixed costs. These elements contributed to the notable operating leverage we experienced in this category.

Ross Sandler, Analyst

Hello, everyone. I wanted to follow up on the market disclosure data and ask another question. The data looks excellent. Is the breakeven point occurring sooner now compared to your initial dozen markets due to the impact of adjacencies or Compass Anywhere in moving these markets to EBITDA-positive? Can you share any insights on this, considering it's a new approach compared to previous years? Also, at a high level, you've noted some softening in the market, though not as much at the premium end where you operate. How does the value proposition for agents transitioning to Compass compare during a soft market versus the stronger market we've seen? Additionally, can you provide insight into your ability to attract agents from other platforms as conditions start to cool? Thank you.

Kristen Ankerbrandt, Chief Financial Officer

In terms of market-level profitability, we have improved our market launches over time. The 2018 cohort is a clear example of our latest expansion strategy, and we have continued to refine it since then. We noticed a faster timeline to profitability for the 2018 cohorts compared to the markets we launched prior to 2018. This improvement results from various factors, including Compass Anywhere, which increases market capacity without needing additional office space. Adjacent services are not affecting those numbers yet, as we are still early in their implementation, meaning most profitability opportunities in the markets are still to come. As we expand our title, escrow, and mortgage services across all markets—with a solid plan for expanding title and escrow by the end of this year and aiming for mortgage operations to be in place by 2022—these services could accelerate our path to profitability.

Robert Reffkin, Founder Chairman and CEO

And on your second question about what happens to Compass if the housing market cools, I think it's what we're seeing that we have again a very positive outlook on the market. But if the market does cool, we have built a business that has performed very successfully throughout many different market environments, particularly when you look at it at a local level. And we have a very large buffer of growth on top of the market because our transactions have consistently outgrown and outperformed the market with our transaction growth this past quarter at 140% versus the industry at 32%. So even if there is flat or decline in the market, we will still have a significant buffer to allow us to grow aggressively. That said, there are two unanticipated consequences of a slowing market which help Compass. The one is it makes it easier to talk to agents. When things are really, really busy agents don't have enough time in the day and they're focused on just meeting their client needs and after that their family not having conversations with new companies. But when things slow down they have more time to talk to our enterprise sales team. The second is when their business goes down or slows they're looking for growth. And Compass is the answer for that. While a lot of brokerage firms are focused on charging less and how to split the pie in different kinds of ways, we are uniquely focused on how to create more value for agents and help them grow their business. That's where all of our energy lies. And the result of that is again when things slow down we're the best answer for growth.

Mayank Tandon, Analyst

Thank you. Good evening. Congratulations on the quarter. Kristen, you mentioned this briefly in response to a previous question. However, could you provide more clarity on the drivers behind your expectations for average principal agents growth and productivity moving forward in the 3Q and full-year guidance? Additionally, can you share insights on commission rates? Do you anticipate they will remain stable, or do you foresee any fluctuations in the latter half of the year? What information is included in your guidance?

Kristen Ankerbrandt, Chief Financial Officer

We were very pleased with our revenue growth in the second quarter, which increased by 186%. We have provided guidance of $1.65 billion to $1.75 billion for the third quarter, indicating ongoing strength in the real estate market. We anticipate generating more revenue in the second half of the year compared to the first half. In the second half, we expect year-over-year price growth, but at a slower pace than in the second quarter. This is a positive trend as lower prices could attract more buyers back into the market; some buyers left due to concerns about overpaying given the rising prices. We also project continued year-over-year transaction growth, driven by the favorable pricing trends I mentioned and the easing of supply in the market. Regarding commission rates, we do not foresee any significant changes and expect them to remain stable at levels consistent with recent quarters. As we assess the business, our primary focus is on increasing transactions, as more transactions on our platform lead to greater opportunities for offering additional services. Sure. The place where we see probably the most leverage is in the commissions and other line, and we will see it really across all of the other expense categories. We won't go into a lot of detail today on that; that's going in a level deeper in terms of 2022 guidance, but that's how I would think about it.

Akaash Agarwal, Analyst

Hi. Thank you so much for the question. I was wondering if you guys could talk more about the puts and takes of rolling out and getting to profitability in the mortgage joint venture. And then if you guys could give any more color on the economics within the joint venture as well that would be super helpful. Thank you.

Kristen Ankerbrandt, Chief Financial Officer

We are really excited about the mortgage opportunity, as it represents a $50 billion total addressable market and is a natural extension of our core business. About a month ago, we announced a joint venture with Guaranteed Rate, which is a seasoned partner with operational expertise. We believe this partnership minimizes our risks while accelerating our market entry to grow this business successfully. Looking ahead, we anticipate driving mortgage attach rates that align with industry standards, and we may even outperform that due to our capability to integrate the offering directly into our platform. The key is to present a compelling product that our agents can confidently recommend to their clients, and we are currently focused on achieving that. Additionally, as we establish the operations for the joint venture, we are also working on setting up the warehouse line and pursuing the necessary regulatory approvals. We aim to originate our first mortgage before the end of the year and to have our mortgage offering available across all our markets by the end of 2022. While we expect mortgage to contribute only a small amount to revenue in 2021, it holds significant long-term potential.

Ben Barrett, Vice President of Investor Relations

Operator, final question please.

Operator, Operator

Yes, sir. Your last question comes from the line of Matthew Gaudioso with Compass Point.

Matthew Gaudioso, Analyst

Hey, good afternoon, and thanks for taking the question. Robert, you mentioned having the first end-to-end platform in place next summer. Just wondering what pieces are remaining to develop there? And then just following up on the adjacent services and expanding to maybe some beyond the traditional mortgage title escrow. Just wondering how Compass' platform might provide an opportunity to capture those services that maybe traditional brokerages might not be able to? Thanks.

Robert Reffkin, Founder Chairman and CEO

Sure. Let me outline some key components. First, we have a listing search that is efficient enough for agents to avoid browsing multiple websites, thanks to both data quality and functionality. We also offer third-party transaction management software, which includes forms, e-signatures, and disclosures. Additionally, there are various third-party marketing tools for content creation, digital ads, newsletters, and social media posts, all of which need to be generated through our platform rather than through external providers. This is already in place, along with CRM capabilities and market reports. A primary opportunity lies in enhancing transaction management with forms and e-signatures, which is one of the reasons we acquired Glide, a California-based transaction management software company. We are also focusing on collaborative functionality for CRM as this decade will be driven by collaborative workflows, which are essential in a hybrid work environment. Our current operations are a reflection of that hybrid workflow, similar to platforms like Zoom and Google Meet. In the professional landscape, agents represent the most collaborative profession. To complete a transaction, agents need to coordinate with various parties, including designers, assistants, transaction coordinators, photographers, appraisers, inspectors, loan officers, and title officers. Therefore, investing in collaborative, sharing, and permissioning features throughout our platform is a significant opportunity. When it comes to adjacent services, both traditional ones and those that traditional brokerages might struggle to offer, I like to think of Compass as having a platform akin to a spine, with our 33 products representing the vertebrae. The transactions pass through this framework. Traditional brokerage firms might only control a few vertebrae while relying on third parties for transaction management software, listing searches, and digital ad marketing. This lack of integration often prevents them from tracking key events necessary for facilitating transactions and recommending value-added services to get compensated properly. For instance, an average brokerage might not know immediately when an agent's listing is created. If we could trigger a prompt after a listing creation for agents to instantly create a digital ad, that would streamline their process, but without a cohesive platform, that data is often lost. Regarding the title side, when a listing goes under contract, similar tracking and engagement history is not preserved either. Therefore, it is crucial to have every interaction between the transaction and the client happen on a single platform. This approach not only facilitates the process at the right moment but also simplifies it, allowing for easy one-click options for agents and their clients.

Ben Barrett, Vice President of Investor Relations

Okay Great. Thank you everyone for joining us for the 2Q call. And please reach out if we can be of any assistance in the future. Thank you.