What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-10 · 174 added, 180 removed, 486 unchanged (42% of the section changed)

3 unchanged sentences

(In millions, except share and per share data, unaudited)

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

Property and equipment, net

Operating lease right-of-use assets

Operating lease right-of-use

Intangible assets, net

Other non-current assets

Other non-current

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)

6 unchanged sentences

Total current liabilities

Non-current lease liabilities

Other non-current liabilities

lease liabilities

Other non-current

Total liabilities

Commitments and contingencies (Note 6)

Convertible preferred stock, $ 0.00001 par value, 0 and 246,430,170 shares authorized at June 30, 2021 and December 31, 2020, respectively;

0 and 237,047,550 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Convertible preferred stock, $ 0.00001 par value, 0 and 246,430,170 shares authorized at September 30, 2021 and December 31, 2020, respectively;

0 and 237,047,550 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Stockholders’ equity (deficit)

Common stock, $ 0.00001 par value, 13,850,000,000 and 700,754,910 shares authorized at June 30, 2021 and December 31, 2020, respectively;

396,669,967 and 125,221,900 shares issued at June 30, 2021 and December 31, 2020, respectively;

394,419,967 and 122,971,900 shares outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Common stock, $ 0.00001 par value, 13,850,000,000 and 700,754,910 shares authorized at September 30, 2021 and December 31, 2020, respectively;

399,082,563 and 125,221,900 shares issued at September 30, 2021 and December 31, 2020, respectively;

399,082,563 and 122,971,900 shares outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in

Accumulated deficit

Total Compass, Inc.

stockholders’ equity (deficit)

Non-controlling

Total stockholders’ equity (deficit)

4 unchanged sentences

In millions, except share and per share data, unaudited

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

17 unchanged sentences

(In millions, except share amounts, unaudited)

Convertible Preferred

Preferred Stock

Comprehensive

Stockholders’

Equity (Deficit)

For the three months ended June 30, 2021:

Balances at March 31, 2021

Issuance of shares in connection with acquisitions

Conversion of convertible preferred stock to common stock in connection with the initial public offering

( 221,127,100

Issuance of common stock in connection with the initial public offering, net of offering costs

Exercise of stock options

Early exercise of stock options

Non-controlling

Stockholders’

For the three months ended September 30, 2021:

Balances at June 30, 2021

Capital contribution from non-controlling

Issuance of stock for option exercises and RSU settlements

Vesting of early exercised stock options

Stock-based compensation

Balances at September 30, 2021

For the three months ended September 30, 2020:

Balances at June 30, 2020

For the three months ended June 30, 2020:

Balances at March 31, 2020

Unrealized loss on investments

Issuance of shares in connection with acquisitions

Exercise of stock options

Issuance of stock for option exercises

Stock-based compensation

Balances at June 30, 2020

Balances at September 30, 2020

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

5 unchanged sentences

Stockholders’

Equity (Deficit)

For the six months ended June 30, 2021:

Non-controlling

Stockholders’

For the nine months ended September 30, 2021:

Balances at December 31, 2020

Issuance of shares in connection with

Capital contribution from non-controlling

Issuance of shares in connection with acquisitions

Conversion of Series D convertible preferred stock

Conversion of

stock to common stock in

connection with the initial public

Conversion of convertible preferred stock to common stock in connection with the initial public offering

( 221,127,100

Issuance of common stock in connection with the initial public offering, net of offering

Exercise of stock options

Issuance of common stock in connection with the initial public offering, net of issuance costs

Issuance of stock for option exercises and RSU

Early exercise of stock options

1 unchanged sentence

Stock-based compensation

Balances at June 30, 2021

For the six months ended June 30, 2020:

Balances at September 30, 2021

For the nine months ended September 30, 2020:

Balances at December 31, 2019

3 unchanged sentences

Issuance of Series G convertible preferred stock, net of issuance costs

Exercise of stock options

Issuance of stock for option exercises

Stock-based compensation

Balances at June 30, 2020

Balances at September 30, 2020

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In millions, unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

9 unchanged sentences

Other current assets

Other non-current assets

Operating lease right-of-use assets and operating lease liabilities

Other non-current

Operating lease right-of-use

assets and operating lease liabilities

Accounts payable

13 unchanged sentences

Payments of contingent consideration related to acquisitions

Payments of debt issuance costs for the Revolving Credit and Guaranty Agreement

Payments of debt issuance costs for credit facilities

Proceeds from capital contribution of non-controlling

interest in OriginPoint, LLC joint venture

Proceeds from issuance of common stock upon initial public offering, net of offering costs

5 unchanged sentences

Cash paid for interest

Supplemental non-cash information:

Supplemental non-cash

Issuance of common stock for acquisitions

33 unchanged sentences

On March 31, 2021, in connection with the effectiveness of the Company’s IPO registration statement, 15,244,490 shares of Class A common stock held by the Company’s founder and Chief Executive Officer were exchanged for an equivalent number of shares of Class C common stock.

In addition, any Class A common stock issued to the Company’s Chief Executive Officer from RSU awards granted prior to February 2021 are able to be exchanged for Class C common stock

once the RSUs have been settled for the underlying Class A common stock.

In addition, any Class A common stock issued to the Company’s Chief Executive Officer from RSU awards granted prior to February 2021 are able to be exchanged for Class C common stock once the RSUs have been settled for the underlying Class A common stock.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries.

The activities of OriginPoint LLC (“OriginPoint”), a mortgage origination company and joint venture formed in July 2021 between the Company and Guaranteed Rate, Inc.

(“Guaranteed Rate”), are consolidated within the accompanying condensed consolidated financial statements.

OriginPoint is owned 49.9 % by the Company and 50.1 % by Guaranteed Rate and the activities of OriginPoint are consolidated since the Company has the power to direct those activities that will significantly affect the economic performance of the joint venture.

The economic interests related to Guaranteed Rates’ 50.1% ownership interest are reflected as non-controlling

interest in the accompanying financial statements.

All intercompany accounts and transactions have been eliminated in consolidation.

1 unchanged sentence

GAAP”) and include the assets, liabilities, revenues and expenses of all controlled subsidiaries.

The condensed consolidated statements of operations include the results of entities acquired from the date of the acquisition.

The condensed consolidated statements of operations include the results of entities acquired from the date of each respective acquisition.

The unaudited interim condensed consolidated financial statements and related disclosures have been prepared by management on a basis consistent with the annual consolidated financial statements and, in the opinion of management, include all adjustments necessary for a fair statement of the interim periods presented.

39 unchanged sentences

The liquidity event-based vesting condition is satisfied on the occurrence of a qualifying event, generally defined as a change in control or the effective date of the registration statement for the Company’s IPO.

Upon the satisfaction of both vesting conditions and any delayed settlement period, the Company will issue shares to the award holders from the pool of authorized but unissued common stock.

The Company intends to settle RSUs for which all vesting conditions have been satisfied on September 28, 2021 (for affiliated agents) and October 28, 2021 (for employees).

The fair value of these RSUs is measured based on the fair value of the Company’s common stock on the grant date and will begin to be recognized as expense when both the required service-based vesting condition and the liquidity event-based vesting condition has been achieved using the accelerated attribution method.

The liquidity event-based vesting requirement was met on March 31, 2021, the effective date of the Company’s registration statement, see Note 1—“Business and Basis of Presentation—Initial Public Offering.”

Beginning in December 2020, the Company began issuing RSUs that vest upon the satisfaction of only a service-based vesting condition that is generally ranging from four

to five years .

Beginning in December 2020, the Company began issuing RSUs that vest upon the satisfaction of only a service-based vesting condition that is generally ranging from four to five years .

The fair value of these RSUs is measured based on the fair value of the Company’s common stock on the grant date and will be recognized as expense on a straight-line basis as the required service-based vesting condition is satisfied.

1 unchanged sentence

For RSUs to be granted in connection with the 2021 Agent Equity Program, the Company determines the value of the stock-based compensation expense at the time the underlying commission is earned and begins to recognize the associated expense on a straight-line basis over the requisite service periods beginning on the closing date of the underlying real estate commission transactions.

The stock-based compensation expense is recorded as a liability and will be reclassified to additional paid-in

The stock-based compensation expense is recorded as a liability and will be reclassified to Additional

capital at the end of the vesting period when the underlying RSUs are issued.

For the six months ended June 30, 2021, the Company recognized stock-based compensation expense and an associated liability of $ 13.7 million in connection with RSUs earned as a part of the 2021 Agent Equity Program.

For the nine months ended September 30, 2021, the Company recognized stock-based compensation expense and an associated liability of $ 40.1 million in connection with RSUs earned as a part of the 2021 Agent Equity Program.

The associated liability is recorded within Accrued expenses and other current liabilities in the condensed consolidated balance sheet.

5 unchanged sentences

assets on the condensed consolidated balance sheet.

During the three months ended June 30, 2021, $ 11.0 million of deferred offering costs were recorded against the proceeds from the initial public offering in Additional paid-in

capital on the condensed consolidated balance sheet and as of June 30, 2021 there were no remaining deferred offering costs included on the condensed consolidated balance sheet.

During the nine

months ended September

30, 2021, $ 11.0 million of deferred offering costs were recorded against the proceeds from the initial public offering in Additional paid-in

capital on the condensed consolidated balance sheet and as of September 30, 2021 there were no remaining deferred offering costs included on the condensed consolidated balance sheet.

New Accounting Pronouncements

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Early adoption is permitted.

The Company adopted this guidance on January 1, 2021 and the adoption of this standard did not have a material impact on the Company’s financial statements.

The Company adopted this guidance on January 1, 2021 and the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04,

5 unchanged sentences

The Company is evaluating applicable contracts and transactions to determine whether to elect the optional guidance.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

During the six months ended June 30, 2021, the Company completed several business acquisitions including the acquisition of 100% of the ownership interests in KVS Title, LLC, a title insurance and escrow settlement services company, Glide Labs, Inc., a real estate technology company and four small real estate brokerages.

The purpose of these acquisitions was to expand the Company’s title and escrow offerings, to grow the Company’s transaction management tools included in its end to end real estate platform, and to expand its existing brokerage business in key domestic markets.

The adoption of this standard is not expected to have a material impact on the Company’s condensed consolidated financial statements.

During the nine months ended September 30, 2021, the Company completed several business acquisitions including the acquisition of 100% of the ownership interests in KVS Title, LLC, a title insurance and escrow settlement services company, Glide Labs, Inc., a real estate technology company, Randall Family of Companies, a group of Southern Coastal New England residential real-estate brokerage entities, four additional small real estate brokerages and one additional small title insurance and escrow settlement services company.

The purpose of these acquisitions was to expand the Company’s title and escrow offerings, to grow the Company’s transaction management tools included in its end-to-end

real estate platform, and to expand its existing brokerage business in key domestic markets.

The Company has accounted for two of the real estate brokerages as asset acquisitions and the remaining acquisitions were accounted for as business combinations.

Total Consideration

The total consideration for acquisitions completed during the six months ended June 30, 2021 comprised $ 117.0 million of cash, net of cash acquired, $ 5.8 million in Class A Common Stock of the Company and up to $ 4.7 million of additional cash that may be paid contingent on certain earnings-based targets being met through 2023.

During the six months ended June 30, 2021, $ 103.8 million in cash was paid in connection with these acquisitions, net of cash acquired, and up to an aggregate of $ 13.2 million will be paid once certain indemnification matters and pre-acquisition contingencies are resolved.

Future cash payments were recorded as Accrued expenses and other current liabilities in the condensed consolidated balance sheet.

The total consideration for acquisitions completed during the nine months ended September 30, 2021 comprised $ 148.5 million of cash, net of cash acquired, $ 5.8 million in Class A Common Stock of the Company and up to $ 5.4 million of additional cash that may be paid contingent on certain earnings-based targets being met through 2023.

During the nine months ended September 30, 2021, $ 127.3 million in cash was paid in connection with these acquisitions, net of cash acquired, and up to an aggregate of $ 21.2 million will be paid once certain indemnification matters and pre-acquisition

contingencies are resolved.

These future cash payments were recorded as Accrued expenses and other current liabilities in the condensed consolidated balance sheet.

The fair value of the assets acquired and the liabilities assumed primarily resulted in the recognition of:

9 unchanged sentences

Acquired intangible assets are being amortized over their estimated useful lives of approximately 2 to 9 years.

Approximately $ 23.8 million of the goodwill recorded during the six months ended June 30, 2021 is deductible for tax purposes.

Approximately $ 22.0 million of the goodwill recorded during the nine months ended September 30, 2021 is deductible for tax purposes.

The amount of tax-deductible

goodwill may increase in the future to approximately $ 61.7 million dependent on the payment of certain holdbacks and acquisition related compensation arrangements.

These amounts are not expected to have an impact on the income tax provision while the Company maintains a full valuation allowance on its U.S.

deferred tax assets.

These amounts are not expected to have an impact on the income tax provision while the Company maintains a full valuation allowance on its domestic deferred tax assets.

The Company has recorded the preliminary purchase price allocation as of the acquisition dates and expects to finalize its analysis within the measurement period (up to one year from the acquisition date) of the respective transaction.

3 unchanged sentences

Contingent Consideration

Contingent consideration represents obligations of the Company to transfer cash and common stock to the sellers of certain acquired businesses in the event that certain targets and milestones are met.

As of June 30, 2021, the undiscounted maximum payment under these arr a

ngements was $ 87.4 million.

Contingent consideration represents obligations of the Company to transfer cash and common stock to the sellers of certain acquired busin e

sses in the event that certain targets and milestones are met.

Approximately $ 13.0 million of the obligations as of September 30, 2021 are fixed in value.

As of September 30, 2021, the undiscounted maximum payment under these arrangements was

$ 28.2 million.

Changes in contingent consideration measured at fair value on a recurring basis were as follows (in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Opening balance

Payments and issuances

Fair value losses (gains) included in net loss

Fair value (gains) losses included in net loss

Closing Balance

2 unchanged sentences

These retention-based payments are accounted for as compensation for future services and the Company recognizes the expenses over the service period.

As of June 30, 2021, the Company expects to pay up to an additional $ 44.9

million in future compensation to such selling shareholders in connection with these arrangements.

For the three months ended June 30, 2021 and 2020, the Company recognized

$ 7.2 million and $( 0.1 ) million, respectively, and for the six months ended June 30, 2021 and 2020, the Company recognized $ 11.4 million and $ 1.2 million, respectively, in compensation expense (income) within Operations and support in the accompanying condensed consolidated statements of operations related to these arrangements.

During the six months ended June 30, 2021, the Company granted

277,776 shares of common stock to sellers in accordance with arrangements where vesting of the shares is contingent on such sellers providing continued service to the Company.

As of September 30, 2021, the maximum

future compensation to such selling shareholders in connection with these arrangements was $ 57.7

For the three months ended September 30, 2021 and 2020, the Company recognized $ 7.5 million and $ 0.4 million, respectively, and for the nine months ended September 30, 2021 and 2020, the Company recognized $ 18.9 million and $ 1.6 million, respectively, in compensation expense within Operations and support in the accompanying condensed consolidated statements of operations related to these arrangements.

During the nine months ended September 30, 2021, the Company granted 277,776 shares of common stock to sellers in accordance with arrangements where vesting of the shares is contingent on such sellers providing continued service to the Company.

Accordingly, these share-based payments will be accounted for as stock-based compensation expense over the underlying retention periods.

no stock-based compensation expense related to these compensation arrangements recognized during the six months ended June 30, 2021.

As a result, the Company recognized $ 0.7 million stock-based compensation expense related to these compensation arrangements during the three and nine months ended September 30, 2021.

Fair Value of Financial Assets and Liabilities

The Company’s cash and cash equivalents of $ 810.7 million and $ 440.1 million as of June 30, 2021 and December 31, 2020, respectively, are held in cash and money market funds which are classified as Level 1 within the fair value hierarchy because they are valued using quoted prices in active markets.

The Company’s cash and cash equivalents of $ 789.6 million and $ 440.1 million as of September 30, 2021 and December 31, 2020, respectively, are held in cash and money market funds which are classified as Level 1 within the fair value hierarchy because they are valued using quoted prices in active markets.

These are the Company’s only Level 1 financial instruments.

The Company does not hold any Level 2 financial instruments.

The Company’s contingent consideration liabilities of $ 33.0 million and $ 39.8 million as of June 30, 2021 and December 31, 2020, respectively, are the Company’s only Level 3 financial instruments.

See Note 3 – “Acquisitions” for changes in contingent consideration for the three and six months ended June 30, 2021 and 2020.

The following table presents the balances of contingent consideration (in millions):

June 30, 2021

The Company’s contingent consideration liabilities of $ 27.1 million and $ 39.8 million as of September 30, 2021 and December 31, 2020, respectively, are the Company’s only Level 3 financial instruments.

See Note 3 – “Acquisitions” for changes in contingent consideration for the three and nine months ended September 30, 2021 and 2020.

The following table presents the balances of contingent

consideration (in millions):

September 30, 2021

December 31, 2020

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The following tables present quantitative information regarding the significant unobservable inputs utilized by the Company in the fair value measurement of Level 3 liabilities, consisting of different contingent consideration agreements, measured at fair value on a recurring basis:

June 30, 2021

December 31, 2020

September 30,

Discount rate

8 unchanged sentences

The Concierge Facility is secured primarily by the Concierge Receivables and cash of the Compass Concierge Program.

Prior to July 29, 2021 borrowings under the Concierge Facility accrued interest at rates equal to the adjusted London interbank offered rate (“LIBOR”) plus a margin of 3.00 as adjusted, or an alternate rate of interest upon the occurrence of certain changes in LIBOR.

Prior to July 29, 2021 borrowings under the Concierge Facility accrued interest at rates equal to the adjusted London interbank offered rate (“LIBOR”) plus a margin of 3.00 %

as adjusted, or an alternate rate of interest upon the occurrence of certain changes in LIBOR.

Additionally, prior to July 29, 2021, the Company was required to pay an annual commitment fee of 0.50 % on a quarterly basis based on the unused portion of the Concierge Facility irrespective of the Company’s utilization rate.

1 unchanged sentence

Pursuant to the A&R Concierge Facility, the principal amount, if any, is payable in full in January 2023 , unless earlier terminated or extended.

The interest rate on the Concierge Facility was 3.16 % as of June 30, 2021.

As of June 30, 2021 and December 31, 2020, there were $ 11.1 million and $ 8.4 million, respectively, in borrowings outstanding under the Concierge Facility.

The interest rate on the Concierge Facility was 3.15 % as of September 30, 2021.

The Company has the option to repay the borrowings under the Concierge Facility without premium or penalty prior to maturity.

1 unchanged sentence

Additionally, in the event that the Company fails to comply with certain financial covenants that require the Company to meet certain liquidity-based measures, the commitments under the Concierge Facility will automatically be reduced to zero and the Company will be required to repay any outstanding loans under the Concierge Facility.

As of June 30, 2021, the Company was in compliance with the covenants under the Concierge Facility.

As of September 30, 2021, the Company was in compliance with the covenants under the Concierge Facility.

Revolving Credit Facility

10 unchanged sentences

The Company has the option to repay the Company’s borrowings, and to permanently reduce the loan commitments whole or in part, under the Revolving Credit Facility without premium or penalty prior to maturity.

As of June 30, 2021, there were no borrowings outstanding under the Revolving Credit Facility and outstanding letters of credit under the Revolving Credit Facility totaled approximately $ 15.3 million.

The Revolving Credit Facility contains customary representations, warranties, financial covenants applicable to the Com p

any and to the Company’s restricted subsidiaries, affirmative covenants, such as financial statement reporting requirements, and negative covenant wh i

ch restrict its ability, among other things, to incur liens and indebtedness, make certain investments, declare dividends, dispose of, transfer or sell assets, make stock repurchases and consummate certain other matters, all subject to certain exceptions.

As of September 30, 2021, there were no borrowings outstanding under the Revolving Credit Facility and outstanding letters of credit under the Revolving Credit Facility totaled approximately $ 16.3 million.

The Revolving Credit Facility contains customary representations, warranties, financial covenants applicable to the Company and to the Company’s restricted subsidiaries, affirmative covenants, such as financial statement reporting requirements, and negative covenant which restrict its ability, among other things, to incur liens and indebtedness, make certain investments, declare dividends, dispose of, transfer or sell assets, make stock repurchases and consummate certain other matters, all subject to certain exceptions.

The financial covenants require that the Company maintain certain liquidity-based measures and total revenue requirements.

As of June 30, 2021,

the Company was in compliance with the covenants under the Revolving Credit Facility.

As of September 30, 2021, the Company was in compliance with the covenants under the Revolving Credit Facility.

The Revolving Credit Facility includes customary events of default that include, among other things, nonpayment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control and certain material ERISA events.

19 unchanged sentences

Defendants have one motion in limine pending.

A trial date was previously set for September 2021 ;

in August 2021, the trial date was rescheduled to January 2022.

A trial date has been set for January 2022.

On October 25, 2021, the parties agreed to a settlement in principle.

Once the settlement is finalized ,

the case will be dismissed with prejudice.

The Company recorded an expense of

million during the three and nine months ended September 30, 2021 in connection with the settlement within General and administrative expense in the accompanying condensed consolidated statements of operations.

Realogy Holdings Corp., et al v.

5 unchanged sentences

In September 2019, Plaintiffs filed an amended complaint, removing one claim and adding a claim for defamation.

In November 2019, the Company moved to compel arbitration related to claims asserted by Corcoran and moved to

dismiss all of the counts.

In November 2019, the Company moved to compel arbitration related to claims asserted by Corcoran and moved to dismiss all of the counts.

In June 2020, the Court denied the motion to dismiss and denied the motion to compel arbitration as moot, granting Plaintiffs leave to amend the complaint as to claims asserted by Corcoran without prejudice to Defendants’ ability to move to compel or dismiss the Second Amended Complaint.

4 unchanged sentences

On June 1, 2021, the First Department affirmed the lower Court’s denial of the Company’s motion to compel arbitration.

Discovery is proceeding ,

with an end date

June 30, 2022.

Discovery is proceeding, with an end date set for October

The Company is unable to predict the outcome of this action or to reasonably estimate the possible loss or range of loss, if any, arising from the claims asserted therein.

1 unchanged sentence

The Company has irrevocable letters of credit with various financial institutions, primarily related to security deposits for leased facilities.

As of June 30, 2021 and December 31, 2020, the Company was contingently liable for $ 57.3 million and $ 50.7 million, respectively, under these letters of credit.

As of June 30, 2021, $ 15.3 million and $ 42.0 million of these letters of credit were collateralized by the Company’s Revolving Credit Facility and cash and cash equivalents, respectively.

As of September 30, 2021 and December 31, 2020, the Company was contingently liable for $ 51.7 million and $ 50.7 million, respectively, under these letters of credit.

As of September 30, 2021, $ 16.3 million and $ 35.4 million of these letters of credit were collateralized by the Company’s Revolving Credit Facility and cash and cash equivalents, respectively.

As of December 31, 2020, all letters of credit were collateralized by the Company’s cash and cash equivalents.

1 unchanged sentence

As a service to its home buyers and home sellers, the Company administers escrow and trust deposits which represent undistributed amounts for the settlement of real estate transactions.

The escrow and trust deposits totaled $ 282.5 million and $ 46.1 million, respectively as of June 30, 2021 and December 31, 2020.

The escrow and trust deposits totaled $ 205.7 million and $ 46.1 million, respectively as of September 30, 2021 and December 31, 2020.

These deposits are not assets of the Company and therefore are excluded from the accompanying condensed consolidated balance sheets.

7 unchanged sentences

In April 2021, the Company adopted a restated certificate of incorporation which provides for authorized undesignated preferred stock to 25,000,000 .

As of June 30, 2021, there are no shares of the Company’s preferred stock issued and outstanding.

As of September 30, 2021, there are no shares of the Company’s preferred stock issued and outstanding.

In February 2021, the Company approved the establishment of Class C common stock and an agreement with the Company’s CEO to exchange his Class A common stock for Class C common stock.

4 unchanged sentences

In April 2021, the Company adopted a restated certificate of incorporation and changed its authorized capital stock to consist of 12,500,000,000 shares of Class A common stock, 1,250,000,000 shares of Class B common stock and 100,000,000 shares of Class C common stock.

As of June 30, 2021, the Company had three classes of common stock:

As of September 30, 2021, the Company had three classes of common stock:

Class A common stock, Class B common stock and Class C common stock.

Each class has par value of $0.00001.

June 30, 2021

September 30, 2021

Shares Issued

Class A common stock

8 unchanged sentences

December 31, 2020

Shares Issued

Class A common stock

6 unchanged sentences

On July 1, 2021, the board of directors of the Company approved the conversion of all outstanding shares of the Company’s Class B common stock into the same number of shares of the Company’s Class A common stock effective on that date.

A description of all other rights, preferences and privileges of the holders of the Company’s common stock are included in the Company’s IPO prospectus on Form S-1 filed

with the Securities and Exchange Commission .

As of June 30, 2021 and December 31, 2020, the Company had shares of common stock reserved for issuance as follows:

June 30, 2021

December 31, 2020

Convertible preferred stock outstanding

Options issued and outstanding

Restricted stock units issued and outstanding

Shares available for future stock-based incentive award issuances

As of June 30, 2021 and December 31, 2020, the Company had 2,250,000 shares of Class A common stock issued and held as treasury stock which were subsequently retired on July 1, 2021 .

A description of all other rights, preferences and privileges of the holders of the Company’s common stock are included in the Company’s IPO prospectus on Form S-1

filed with the Securities and Exchange Commission.

As of December 31, 2020, the Company had 2,250,000 shares of Class A common stock issued and held as treasury stock which were subsequently retired on July 1, 2021 .

Stock-Based Compensation

7 unchanged sentences

In February 2021, the Company’s board of directors and stockholders adopted and approved the 2021 Equity Incentive Plan (the “2021 Plan”), with an initial pool of 29,666,480 shares of common stock available for granting stock-based awards plus any reserved shares of common stock not issued or subject to outstanding awards granted under the Company’s 2012 Plan.

In addition, on

of each year beginning in 2022 and continuing through 2031, the aggregate number of shares of common stock authorized for issuance under the 2021 Plan shall be increased automatically by the number of shares equal to five percent (5%) of the total number of outstanding shares of common stock and shares of preferred stock of the Company outstanding (on an as converted to common stock basis) on the immediately preceding December 31 st

, although the Company’s board of directors or one of its committees may reduce the amount of such increase in any particular year.

In addition, on January 1st of each year beginning in 2022 and continuing through 2031, the aggregate number of shares of common stock authorized for issuance under the 2021 Plan shall be increased automatically by the number of shares equal to five percent (5%) of the total number of outstanding shares of all classes of common stock on the immediately preceding December 31st, although the Company’s board of directors or one of its committees may reduce the amount of such increase in any particular year.

The 2021 Plan became effective on March 30, 2021 and as of that date, the Company ceased granting new awards under the 2012 Plan and all remaining shares available under the 2012 Plan were transferred to the 2021 Plan.

As of June 30, 2021, there were 35,035,925 shares available for future grants under the 2021 Plan, inclusive of those shares transferred from the 2012 Plan.

As of September 30, 2021, there were

27,437,628 shares available for future grants under the 2021 Plan, inclusive of those shares transferred from the 2012 Plan.

2021 Employee Stock Purchase Plan

1 unchanged sentence

The ESPP authorizes the issuance of 7,416,620 shares of common stock to purchase rights granted to the Company’s employees or to employees of its designated affiliates.

In addition, on January 1 st

of each year beginning in 2022 and continuing through 2031, the aggregate number of shares of common stock authorized for issuance under the ESPP shall be increased automatically by the number of shares equal to one percent ( 1 %) of the total number of outstanding shares of common stock and shares of preferred stock of the Company outstanding (on an as converted to common stock basis) on the immediately preceding December 31 st

, although the Company’s board of directors or one of its committees may reduce the amount of the increase in any particular year.

In addition, on January 1st of each year beginning in 2022 and continuing through 2031, the aggregate number of shares of common stock authorized for issuance under the ESPP shall be increased automatically by the number of shares equal to one percent ( 1 %) of the total number of outstanding shares of common stock and shares of preferred stock of the Company outstanding (on an as converted to common stock basis) on the immediately preceding December 31st, although the Company’s board of directors or one of its committees may reduce the amount of the increase in any particular year.

No more than 150,000,000 shares of common stock may be issued over the term of the ESPP, subject to certain exceptions set forth in the ESPP.

1 unchanged sentence

Stock Options

A summary of stock option activity under the 2012 Plan and the 2021 Plan, including 1,061,250 stock options that were granted outside of the 2012 Plan in 2019, is presented below (in millions, except share and per share amounts):

Weighted Average

Exercise Price

Weighted Average

A summary of stock option activity under the 2012 Plan and the 2021 Plan, including 1,061,250

stock options that were granted outside of the 2012 Plan in 2019, is presented below (in millions, except share and per share amounts):

Number of Shares

Contract Term

Intrinsic Value

Balances as of December 31, 2020

Balances as of June 30, 2021

Exercisable and vested at June 30, 2021

During the six months ended June 30, 2021 and 2020, the intrinsic value of options exercised was $ 88.5 million and $ 2.7 million, respectively.

Balances as of September 30, 2021

Exercisable and vested at September 30, 2021

During the nine months ended September 30, 2021 and 2020, the intrinsic value of options exercised was $ 97.6 million and $ 4.8 million, respectively.

Restricted Stock Units

A summary of RSU activity under the 2012 Plan and the 2021 Plan is presented below:

Number of Shares

Weighted Average

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Vested and converted to common stock

Balances as of June 30, 2021

Balances as of September 30, 2021

Included in the table above are 8,611,810 RSUs granted to an executive employee during the three months ended March 31, 2021.

These RSUs have service, performance and market-based vesting conditions that include stock price targets to be met after the listing of the Company’s stock on a public exchange.

These RSUs have service, performance and market-based vesting conditions that include stock price targets to be met after the listing of the Company’s stock on a public

During the nine months ended September 30, 2021 and 2020, the fair value of restricted stock units that vested and converted to common stock was $ 51.1 million and $ 0 , respectively.

During October and November 2021, the Company net settled all RSUs that had vested as of October 31, 2021.

In connection with these settlements, the Company issued an aggregate of 6.8 million shares of Class A common stock and withheld an aggregate of 4.7 million shares of Class A common stock to satisfy $ 60.3 million of tax withholding obligations on behalf of the Company’s employees.

Stock-Based Compensation Expense

Total stock-based compensation expense included in the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 is as follows (in millions):

Three Months Ended June 30,

Six Months Ended June 30, 2021

Total stock-based compensation expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 is as follows (in millions):

Three Months Ended September 30,

Nine Months Ended September 30,

Commissions and other related expense

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Total stock-based compensation expense

As more fully described in Note 1 – “Business and Basis of Presentation”, the Company recognized $ 148.5 million in stock-based compensation expense in connection with the effectiveness of the Company’s IPO registration statement on March 31, 2021.

Stock-based compensation expense for the six months ended June 30, 2021 includes the following amounts related to a one-time

As more fully described in Note 1 – “Business and Basis of Presentation”, the Company recognized $

148.5 million in stock-based compensation expense in connection with the effectiveness of the Company’s IPO registration statement on March 31, 2021.

Stock-based compensation expense for the nine months ended September 30, 2021 includes the following amounts related to a one-time

acceleration of stock-based compensation expense in connection with the IPO (in millions):

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Total stock-based compensation expense

As of June 30, 2021, unrecognized stock-based compensation expense totaled $ 523.4 million and is expected to be recognized over a weighted-average period of 3.3 years.

As of September 30, 2021, unrecognized stock-based compensation expense totaled $ 598.0 million and is expected to be recognized over a weighted-average period of 3.2 years.

The Company has not recognized any tax benefits from stock-based compensation as a result of the full valuation allowance maintained on its deferred tax assets.

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Shares received from such early exercises are subject to repurchase in the event of the optionee’s termination of service until the stock options are fully vested at the lesser of the original issuance price or the fair value the Company’s common stock.

During the six months ended June 30, 2021, 818,590 stock options were early exercised for total proceeds of $ 5.0 million.

As of June 30, 2021, 1,431,410 shares of common stock received by holders from an early exercise were subject to repurchase.

During the nine months ended September 30, 2021, 818,590 stock options were early exercised for total proceeds of $ 5.0 million.

As of September 30, 2021, 1,181,720 shares of common stock received by holders from an early exercise were subject to repurchase.

The cash proceeds received for unvested shares of common stock recorded within Accrued expenses and other current liabilities and Other non-current

liabilities in the condensed consolidated balance sheet was $ 8.1 million as of June 30, 2021.

liabilities in the condensed consolidated balance sheet was $ 6.8 million as of September 30, 2021.

Amounts recorded are transferred into Common stock and Additional paid-in

capital within the condensed consolidated balance sheets as the shares vest.

The Company recognized a benefit from income taxes of $ 1.3 million and $ 2.0 million for the three and six months ended June 30, 2021, respectively.

The Company recognized a benefit from income taxes of $ 1.3

million and $ 3.3 million for the three and nine months ended September 30, 2021, respectively.

This benefit resulted from a partial reduction in the valuation allowance related to the carryover tax basis in deferred tax liabilities from acquisitions.

Additionally, the Company incurred current tax expense from its operations in India, which was fully offset by a deferred tax benefit for future AMT tax credits.

The Company recognized a benefit from income taxes of $ 0.9 million for the three and six months ended June 30, 2020.

The Company recognized a benefit from income taxes of $ 0.9 million for the nine months ended September 30, 2020.

The Company continues to maintain a full valuation allowance on all domestic net deferred tax assets based on numerous factors including estimated future taxable income and historic profitability.

The Company does not have any amount recorded related to uncertain tax positions as of the period ended June 30, 2021 nor does it expect a substantial increase in the next 12 months.

The Company does not have any amount recorded related to uncertain tax positions as of the period ended September 30, 2021 nor does it expect a substantial increase in the next 12 months.

If applicable, the Company recognizes interest and penalties related to uncertain tax positions in the income tax provision.

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The Company computes net loss per share under the two-class

method required for multiple classes of common stock and participating securities.

method required for multiple classes of common stock and participating securities (convertible preferred stock).

The rights, including the liquidation and dividend rights, of the Class A common stock, Class B common stock and Class C common stock are substantially identical, other than voting rights.

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The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in millions, except share and per share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net loss attributable to common stockholders

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Net loss per share attributable to common stockholders, basic and diluted

The following participating securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive (on an as-converted

Three Months Ended June 30,

Six Months Ended June 30,

The following securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive:

Three Months Ended September 30,

Nine Months Ended September 30,

Convertible preferred stock

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Under the Concierge Capital program, the Lender originates and services unsecured consumer loans to home sellers following its independent underwriting process pursuant to program-level criteria provided by the Company.

Pursuant to the Company’s agreement with the Lender, the consumer

loans are unsecured, interest-free and have no associated fees except for late fees that the Lender may charge in its sole discretion.

Pursuant to the Company’s agreement with the Lender, the consumer loans are unsecured, interest-free and have no associated fees except for late fees that the Lender may charge in its sole discretion.

The Company has no right or obligation with respect to any individual consumer loan originated by the Lender.

Under the agreement with the Lender, the Company has repayment rights against the Lender in connection with a corporate loan.

Payment to the Company for these services under the Concierge Classic model or repayment of the loan funds under the Concierge Capital model is due upon the earlier of a successful home sale, the termination of the listing agreement, or one year from the date in which co s

ts were originally funded.

Compass Concierge receivables (“Concierge Receivables”) are stated at the amount advanced to the home sellers, net of an estimated allowance for credit losses (“ACL”).

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Concierge Receivables associated with properties that are eventually sold have a lower credit risk than those that are associated with properties that are not sold.

For Concierge Receivables where repayments have not been triggered (i.e., earlier of (i) sale of the property, (ii) termination of a listing agreement or (iii) 12 months from the date costs were originally funded), the Company establishes an estimate as to the percentage of underlying properties that will be sold based on historical data.

For Concierge Receivables where repayments have not been triggered (i.e., earlier of (i) sale of the pr o

perty, (ii) termination of a listing agreement or (iii) 12 months from the date costs were originally funded), the Company establishes an estimate as to the percentage of underlying properties that will be sold based on historical data.

This estimate is updated quarterly and on an annual basis.

As of June 30, 2021 and December 31, 2020, the amount of outstanding Concierge Receivables related to unsold properties was approximately 95 % and 93 %, respectively.

As of September 30, 2021 and December 31, 2020, the amount of outstanding Concierge Receivables related to unsold properties was approximately 97 % and 93 %,

respectively.

Allowance for credit losses

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Historical loss experience is generally the starting point when the Company estimates the expected credit losses.

The Company then considers whether (i) current conditions, such as the impact of COVID-19

The Company then considers whether (i) current conditions, such as the impact of

and related economic uncertainty surrounding the pandemic, (ii) future economic conditions and (iii) any potential changes in the Compass Concierge Program that are reasonable and supportable would impact on its ACL.

The following table summarizes the activity of the ACL for Concierge Receivables for the three and six months ended June 30, 2021 (in millions):

The following table summarizes the activity of the ACL for Concierge Receivables for the three and nine months ended September 30, 2021 (in millions):

Three Months Ended

June 30, 2021

Six Months Ended

June 30, 2021

September 30, 2021

Nine Months Ended

September 30, 2021

Beginning of period

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Changes in the Company’s estimate to the ACL is recorded through bad debt expense as Sales and marketing expense in the condensed consolidated statements of operations and individual accounts are charged against the allowance when all reasonable collection efforts are exhausted.

The following tables present the aging analysis of Concierge Receivables as of June 30, 2021 (in millions):

June 30, 2021

The following tables present the aging analysis of Concierge Receivables as of September 30, 2021 (in millions):

September 30, 2021

Restructuring Activities and COVID-19

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Additionally, the pandemic’s impacts on the overall economy and credit markets could significantly impact the Company’s estimates of fair value, which could affect the carrying amount of certain assets and liabilities.

As of June 30, 2021, the impacts of the pandemic have not significantly impacted the carrying amount of the Company’s assets and liabilities.

The expenses resulting from these cost-saving measures were included in the consolidated statement of operations for the three and six months ended June 30, 2020, as follows (in millions):

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

As of September 30, 2021, the impacts of the pandemic have not significantly impacted the carrying amount of the Company’s assets and liabilities.

The expenses resulting from these cost-saving measures were included in the consolidated statement of operations for the three and nine months ended September 30, 2020, as follows (in millions):

Three Months Ended

September 30, 2020

Nine Months Ended

September 30, 2020

Sales and marketing

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General and administrative

The Company did not recognize any restructuring expenses during the six months ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, the Company did no t have any material remaining liabilities related to restructuring costs.

Subsequent Events

On July 13, 2021, the Company and Guaranteed Rate, Inc.

(“Guaranteed Rate”) announced the entry into a definitive agreement by their respective subsidiaries to form OriginPoint, a new mortgage origination company.

OriginPoint will originate mortgages for the Company’s real estate brokerage clients, as well as the clients of any other brokerage, in order to make loans available to a broad consumer audience.

On July 19, 2021, the Randall Family of Companies, a group of Southern Coastal New England residential real-estate brokerage entities, joined the Company through a stock purchase agreement.

The Company did not recognize any restructuring expenses during the nine months ended September 30, 2021.

As of September 30, 2021 and December 31, 2020, the Company did no t have any material remaining liabilities related to restructuring costs.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements