Compass Inc will turn free cash flow positive in 2023: CEO Reffkin

Compass Inc (NYSE: COMP) – the American licensed real estate broker just announced its third round of layoffs in the midst of its push to cut costs. Shares are up nearly 15% on Monday.

Compass could be free cash flow positive in 2023

In a recent filing with the U.S. Securities and Exchange Commission, Compass agreed that the said layoffs will result in a $10 million to $12 million hit in its first financial quarter.

On the plus side, though, it expects the job cuts to limit its adjusted operating expense between $850 million and $950 million that will pave the way for it to be free cash flow positive by mid-2023. On CNBC’s “Squawk on the Street”, CEO Robert Reffkin said:

I think it’s worth noting that if we would have done [layoffs] a year earlier, we would have been free cash flow positive last year. If the market would have grown last year as expected, we would have been free cash flow positive.

CEO Reffkin attributes the delay to rate hikes

In its latest reported quarter, Compass Inc lost a narrower than expected 27 cents per share.

CEO Reffkin attributed the delay in turning free cash flow positive primarily to the Federal Reserve that moved to aggressively lift rates in its battle against inflation (read more).

Fed came in and artificially reduced the revenue of our industry, bringing mortgage rates from an all-time low in January to a 20-year high in less than nine months, creating the sharpest decline in real estate transactions on record.

He is, however, convinced that the housing market bottomed in the fourth quarter. Compass stock has gained about 40% over the past two weeks.

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