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Item 1A. Risk Factors

2023-03-01 compared with 2022-02-28 · 387 added, 567 removed, 302 unchanged (76% of the section changed)

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The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations, financial condition, and growth prospects.

In such an event, the market price of our Class A common stock could decline and you could lose all or part of your investment.

Summary of Risk Factors

Our business is subject to a number of risks and uncertainties including those described at length below.

These risks include, among others, the following, which we consider our most material risks:

Our success depends on general economic conditions, the health of the U.S.

real estate industry, and risks generally incident to the ownership of residential real estate, and our business may be negatively impacted by economic and industry downturns, including seasonal and cyclical trends, and volatility in the residential real estate market;

If we fail to continuously innovate, improve and expand our platform to create value for our agents and their clients, our business, financial condition and results of operations could be negatively impacted;

Our efforts to expand our brokerage and adjacent services businesses and offer additional adjacent services may not be successful;

We may not realize the expected benefits from our mortgage joint venture;

Mortgage originators are reliant on the secondary market so a change in the way the secondary market operates may impact our ability to originate mortgage loans;

We have experienced rapid growth since inception which may not be indicative of our future growth.

We expect that, in the future, even if our revenue increases, our rate of growth may decline;

We have incurred net losses on an annual basis since we were founded, anticipate increasing our operating expenses in the future, and may not achieve or sustain profitability;

The extent of the future impact of the ongoing COVID-19 pandemic

on our business and financial results will depend largely on future developments, which are highly uncertain and difficult to predict;

We operate in highly competitive markets and we may be unable to compete successfully against competitors;

Monetary policies of the federal government and its agencies may have a material impact on our business, results of operations and financial condition;

Any decrease in our gross commission income or the percentage of commissions that we collect may harm our business, results of operations and financial condition;

Our quarterly results and other operating metrics may fluctuate from quarter to quarter, which makes these difficult to predict;

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business;

Actions by our agents or employees could adversely affect our reputation and subject us to liability;

If we pursue acquisitions that are not successfully completed or integrated into our existing operations, our business, financial condition or results of operations may be adversely affected;

We are periodically subject to claims, lawsuits, government investigations and other proceedings that may adversely affect our business, financial condition and results of operations;

The majority of our agents are independent contractors, and if federal or state law mandates that they be classified as employees, our business, financial condition, and results of operations would be adversely impacted;

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand;

The multi-class structure of our common stock will have the effect of concentrating voting power with Robert Reffkin, our founder, Chairman and Chief Executive Officer, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our board of directors, the adoption of amendments to our restated certificate of incorporation and amended and restated bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions.

Risks Related to Our Business and Operations

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Our success is impacted, directly and indirectly, by general economic conditions, the health of the U.S.

real estate industry, and risks generally incident to the ownership of residential real estate, many of which are beyond our control.

Our business could be harmed by a number of factors that could impact the conditions of the U.S.

real estate industry, including:

a period of slow economic growth or recessionary conditions;

Our success is impacted, directly and indirectly, by a number of factors related to general economic conditions, the health of the U.S.

real estate industry, and risks generally incident to the ownership of residential real estate, many of which are beyond our control, including:

adverse changes in local, regional, or national economic conditions, including periods of slow economic growth or recessionary conditions;

volatility in the residential real estate industry;

insufficient or excessive home inventory levels by market or price points;

seasonal and cyclical

trends in the residential real estate industry;

changes in real estate market conditions;

insufficient or excessive home inventory levels;

increasing mortgage rates and down payment requirements or constraints on the availability of mortgage financing;

a low level of consumer confidence in the economy or the residential real estate market due to macroeconomic events domestically or internationally;

low levels of consumer confidence in the economy or the residential real estate market;

weak credit markets;

instability of financial institutions;

legislative or regulatory changes (including changes in regulatory interpretations or regulatory practices) that would adversely impact the residential real estate market as well as federal and/or state income tax changes and other tax reform affecting real estate and/or real estate transactions;

insufficient or excessive regional home inventory levels;

high levels of foreclosure activity, including but not limited to the release of homes already held for sale by financial institutions;

adverse changes in local, regional, or national economic conditions;

the inability or unwillingness of consumers to enter into sale transactions due to first-time homebuyer concerns about investing in a home and move-up buyers

having limited or negative equity in their existing homes;

legislative or regulatory changes;

high levels of foreclosure activity;

the inability or unwillingness of consumers to enter into sale transactions;

a decrease in the affordability of homes including the impact of rising mortgage rates, home price appreciation and wage stagnation or wage increases that do not keep pace with inflation;

decreasing home ownership rates, declining demand for real estate and changing social attitudes toward home ownership;

natural disasters, such as hurricanes, earthquakes and other events (including pandemics and epidemics) that disrupt local or regional real estate markets.

As our revenue is primarily driven by sales commissions and transaction fees, any slowdown or decrease in the total number of residential real estate sale transactions executed by our agents for any of the above reasons could adversely affect our business, financial condition and results of operations.

Additionally, any of the above factors could have an adverse impact on the number of transactions our title and escrow business closes and the number of mortgages OriginPoint originates, further impacting our business, financial condition and results of operations.

In addition, the residential real estate market historically has been seasonal, with greater demand from home buyers in the spring and summer, and typically weaker demand in late fall and winter, resulting in fluctuations in the quantity, speed and price of transactions on our platform.

Our financial results and working capital requirements reflect these seasonal variations.

Our success depends on our ability to continuously innovate and improve our platform to provide value to our agents and their clients, including developing our CRM, Business Tracker, Marketing Center, listing, search, CMA, and other platform features for agents.

As a result, we have and plan to continue to invest significant resources in research and development to improve and maintain our platform and support our technology infrastructure.

Our investments in our platform allow us to provide an expanded suite of technology offerings, which we believe separate us from our competitors.

In 2021, we made significant investments in our platform as we launched a number of new products and services.

However, there can be no guarantee that in the future we can continue to launch new products and services in a timely manner, or at all.

Even if we do launch new products and services, they might not be utilized by our agents at the rate we expect, or at all.

While we believe these investments help our agents succeed, there can be no guarantee that we will retain our agents across the markets we serve, nor that our investments will lead to increased utilization of our platform or that increased utilization of our platform will drive increased productivity for our agents.

Additionally, at times, we expand our technology offerings by acquiring value-add

real estate technology companies.

For example, in 2021, we acquired Glide, a real estate technology company, that enabled us to provide digital real estate forms, e-signatures

and related products to our agents.

and decreasing home ownership rates, declining demand for real estate and changing social attitudes toward home ownership.

As our revenue is primarily driven by sales commissions and transaction fees, any slowdown or decrease in the total number of residential real estate sale transactions executed by our agents could adversely affect our business, financial condition and results of operations.

Additionally, any decrease in the number of transactions our title and escrow business closes and the number of mortgages OriginPoint originates, could further impact our business, financial condition and results of operations.

Our business is impacted by interest rates, and changes in prevailing interest rates may have an adverse effect on our financial results.

The financial performance of our brokerage business may be adversely affected by changes in prevailing interest rates, which may be impacted by a number of factors.

We believe that low mortgage rates were a significant factor in the trend in increased homeowner equity and growth in home prices and sales.

Historically record low mortgage interest rates available to potential homebuyers until recently have been affected by the policies of the Federal Reserve Board, which began in creasing its primary policy interest rate in March 2022, as well as reducing the size of its balance sheet and such initiatives are expected to continue.

Consequently, mortgage interest rates have significantly increased at a rapid pace, and may continue to increase.

In 2022, the cost of financing for homebuyers increased, which resulted in higher monthly payment costs that make homes less affordable to buyers.

In addition, higher mortgage rates caused reductions to home inventory as sellers considering a move faced higher rates on their new home mortgage.

Both these trends caused a reduction in transaction volume.

The financial performance of our mortgage joint venture business may also be adversely affected by changes in prevailing interest rates.

As interest rates fall, refinancing generally becomes a larger portion of the mortgage loan market.

Likewise, as interest rates rise, refinancing generally becomes a smaller portion of the mortgage loan market and demand may also decrease for purchase mortgages as home ownership becomes more expensive.

As stated above, in 2022, mortgage interest rates significantly and rapidly increased as the result of actions taken by the Federal Reserve Board to increase interest rates.

In turn, reduced demand for both refinancing and purchase mortgages and the resulting increase in competition among loan originators negatively impacted revenue volume and gross profit margin for our mortgage joint venture, OriginPoint.

A continuation of these trends could perpetuate these negative business outcomes.

If we fail to continuously innovate, improve and expand our platform to create value for our agents and our agents’ clients, our business, financial condition and results of operations could be negatively impacted.

Our success depends on our ability to continuously innovate and improve our platform to provide value to our agents and our agents’ clients, including developing our CRM, Business Tracker, Marketing Center, listing, search, CMA, and other platform features for agents.

As a result, we have invested significant resources, and plan to continue to invest, though to a lesser degree, additional resources, in research and development to improve and maintain our platform and support our technology infrastructure, which allows us to provide an expanded suite of technology offerings that we believe separate us from our competitors.

However, as a result of our belief that we are in a position to reduce our go-forward investment in technology given the advancement of our technology platform, we announced workforce reductions in September 2022 and January 2023, which included significant reductions in headcount on our product and engineering team.

There can be no guarantee that we can continue to launch new products and services in a timely manner, or at all, and even if we do, they might not be utilized by our agents at the rate we expect.

While we believe these investments help our agents succeed, there can be no guarantee that we will retain our agents across the markets we serve, nor that our investments will drive increased productivity for our agents.

Additionally, at times, we expand our technology offerings by acquiring value-add real estate technology companies.

For example, in 2021, we acquired Glide, a real estate technology company, that enabled us to provide digital real estate forms, e-signatures and related products to our agents.

While we think these strategic acquisitions expand our capabilities into critical components of the transaction, our agents may not value these additions and may not utilize them at the rate we expect.

Our continued growth depends on our ability to attract highly-qualified agents in each of the markets we serve and, once they are on our platform, to retain them and to help them expand their businesses by utilizing our platform and technology offerings.

If we fail to identify and invest in our platform and expand our technology offerings via acquisitions in the way that creates value for our agents and their clients, we may fail to attract new agents, retain current agents or increase agents’ productivity through utilization of our platform, which may negatively impact our business, financial condition and results of operations.

Our efforts to expand our brokerage and adjacent services businesses and offer additional adjacent services may not be successful.

If we fail to identify and invest in our platform and expand our technology offerings via acquisitions in the way that creates value for our agents and our agents’ clients, we may fail to attract new agents, retain current agents or increase agents’ productivity through utilization of our platform, which may negatively impact our business, financial condition and results of operations.

Our efforts to expand our operations, including our brokerage and adjacent services businesses, and to offer additional adjacent services may not be successful.

We have grown our brokerage business rapidly since our inception.

We plan to continue our expansion of the brokerage business;

however, there is no guarantee that we will be successful or will expand at the rate that we anticipate.

For additional risks related to our rapid growth, see risk factor entitled “ – We have experienced rapid growth since inception which may not be indicative of our future growth.

We expect that, in the future, even if our revenue increases, our rate of growth may decline.”

In addition, in 2018, we entered into the adjacent services market and have expanded our adjacent services offerings to include title and escrow and mortgage origination services in certain markets.

We think that the synergies between these adjacent services and our brokerage business increase transparency and deliver a more integrated closing process for agents’ clients and thus, provides additional value to our agents.

however, there is no guarantee that we will be successful or will expand at the rate we anticipate.

In addition, in 2018, we entered into the adjacent services market and expanded our adjacent services offerings to include title and escrow and mortgage origination services in certain markets.

We think that the synergies between these adjacent services and our brokerage business increase transparency and deliver a more integrated closing process for our agents’ clients and thus, provides additional value to our agents.

However, currently, our adjacent services are available only in certain markets and utilization rates remain low.

For example, our title and escrow services were utilized on a mid-single

digit percentage of our Total Transactions in the fourth quarter of 2021.

If we are unable to convince our agents to recommend our adjacent services to their clients because of our agents’ pre-existing

relationships with third party adjacent service providers then our revenues from adjacent services will not grow as quickly as we expect.

Further, in order for us to be successful in the adjacent services market, we will need to continue to expand these services in other markets and encourage our agents to utilize the services in the new markets.

If we are not successful, these services may not result in additional value to our agents and we may not realize the expected benefits (including anticipated revenue), which could negatively impact our business, financial condition and results of operations.

Additionally, while we plan to expand our adjacent services to other offerings, there is no guarantee that we will do so or be successful.

If we are unsuccessful in expanding these services into other markets, then we may not realize the expected benefits (including anticipated revenue), which could negatively impact our business, financial condition and results of operations.

Similarly, if our agents do not recommend our adjacent services to our agents’ clients, then our revenues from adjacent services will not grow as quickly as we expect.

While we plan to continue to expand our brokerage and adjacent services businesses to other offerings, there is no guarantee that we will do so or be successful, and even if we do, the expansions might be at a slower pace than we anticipate.

We may not realize the expected benefits from our mortgage joint venture.

We and Guaranteed Rate, which is one of the nation’s largest retail mortgage companies, by and through our respective subsidiaries, formed OriginPoint, a mortgage origination company.

OriginPoint is structured as a non-exclusive joint

venture, where we hold a 49.9% equity interest and certain governance rights related to the joint venture, including representation on the management committee.

We may not realize the expected benefits (including anticipated revenue) from this new joint venture.

The mortgage industry is inherently cyclical in nature and volatile and, as discussed in this Annual Report, is subject to many of the same factors that affect our real estate brokerage and title and escrow services, including regulatory changes, changes in mortgage underwriting standards, increases in mortgage interest rates, other changes in market conditions, consumer trends, high levels of competition and decreases in operating margins.

Any one of these factors could adversely affect the mortgage industry and our new joint venture in a material way.

The benefits of OriginPoint will depend, in part, on the successful partnership between us and Guaranteed Rate and the successful day-to-day operation

of the business by OriginPoint’s management.

Guaranteed Rate acts in a capacity as a service provider, providing certain services to support OriginPoint’s day-to-day operations.

OriginPoint’s management may make decisions which adversely impact the joint venture.

Additionally, the joint venture is non-exclusive and

Guaranteed Rate may decide to focus on and pursue opportunities outside of the joint venture.

As a result, the services

which Guaranteed Rate will be engaged to provide to OriginPoint may deteriorate necessitating OriginPoint to make alternative arrangements.

In addition, OriginPoint or Guaranteed Rate could face operational or liquidity risks, such as litigation or regulatory investigations.

Even though we hold a minority ownership interest in the joint venture, improper actions by OriginPoint or Guaranteed Rate may lead to direct claims against us based on theories of vicarious liability, negligence, joint operations and joint employer liability, which, if determined adversely, could increase costs, negatively impact our reputation and subject us to liability for their actions.

Additionally, in the event that we have a disagreement with Guaranteed Rate with respect to a particular issue or as to the management or conduct of the business, we may not be able to resolve such disagreement in our favor.

Any such disagreement could have a material adverse effect on our interest in or the business of the joint venture and may consume management time and other resources to negotiate and resolve.

Any of the foregoing could have an adverse impact on OriginPoint’s results of operations and financial condition and result in us not being able to realize the expected benefits from the new joint venture.

We may not realize the expected benefits from OriginPoint, our mortgage joint venture, which will depend, in part, on the successful partnership between us and Guaranteed Rate and the successful day-to-day operation of the business by OriginPoint’s management.

The services which Guaranteed Rate is engaged to provide to OriginPoint may deteriorate and cause OriginPoint to make alternative arrangements.

Further, in the event of a disagreement with Guaranteed Rate, we may not be able to resolve such disagreement in our favor, which could have a material adverse effect on our interest in or the business of the joint venture.

In addition, improper actions by OriginPoint or Guaranteed Rate may lead to direct claims against us based on theories of vicarious liability, negligence, joint operations and joint employer liability, which, if determined adversely, could increase costs, negatively impact our reputation and subject us to liability for their actions.

Also, because OriginPoint is a mortgage origination company, it is subject to many of the same factors that affect our real estate brokerage and title and escrow services, including:

regulatory changes;

changes in mortgage underwriting standards;

increases in mortgage interest rates;

changes in real estate market conditions;

changes in consumer trends;

decreases in operating margins;

and changes in economic conditions.

Any of the foregoing could have an adverse impact on OriginPoint’s results of operations and financial condition, which could result in us not being able to realize the expected benefits from the new joint venture.

We have experienced rapid growth since inception, which may not be indicative of our future growth.

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In any event, we may not be able to grow as fast or at all, if we do not, among other things:

attract high-performing agents in markets we currently serve;

expand to new domestic markets;

attract and retain high-performing agents in markets we currently serve;

expand into new markets;

improve our software and develop additional functionality;

develop a broader set of solutions;

execute opportunistic mergers and acquisitions;

expand internationally.

To preserve our market position, we may expand organically or acquire brokerages in new markets more quickly than we would if we did not operate in such a highly competitive industry.

Expanding into new markets can be challenging as some new markets have very distinctive characteristics, some of which may be unanticipated or unknown to us.

and execute opportunistic mergers and acquisitions.

To preserve our market position, we may expand organically or acquire brokerages in new markets more quickly than if we did not operate in such a highly competitive industry, which can be challenging as some new markets have very distinctive characteristics, some of which may be unanticipated or unknown to us.

These differences may result in greater recruitment and transaction costs that may result in those markets being less profitable for us than those that we currently operate in, and may slow the rate of our revenue growth.

Additionally, to support our continuous rapid growth, we must continue to improve our management resources and our operational and financial controls and systems, and these improvements may increase our expenses more than anticipated and result in a more complex business.

Our continuous success will depend on our ability to plan for and manage our rapid growth effectively.

If we fail to do so, we may be unable to execute our business plan, which could have an adverse impact on our business and results of operations.

From time to time, we may make decisions, such as more conservatively managing our expense structure, that could have a negative effect on our near-term growth rates, if we believe those decisions will improve our operating results or profitability in the near- or long-term.

Additionally, to support our continuous rapid growth, we must continue to improve our management resources and our operational and financial controls and systems, which may increase our expenses more than anticipated and result in a more complex business.

We may also make decisions, such as more conservatively managing our expense structure, that could have a negative effect on our near-term growth rates, if we believe those decisions will improve our operating results or

profitability in the near- or long-term.

These decisions may not be consistent with the expectations of investors and may not produce the benefits that we expect, in which case our business could be materially and adversely affected.

We have incurred net losses on an annual basis since we were founded and we may incur significant losses in the future for a number of reasons.

As a result, we may not achieve and, if achieved, may not sustain profitability.

We incurred net losses of $494.1 million, $270.2 million and $388.0 million for 2021, 2020 and 2019, respectively.

We had an accumulated deficit of $1.6 billion as of December 31, 2021.

We expect to continue to make future investments in developing and expanding our business, including investing in technology, recruitment and training, expanding our adjacent services and pursuing strategic acquisitions and joint ventures.

These investments may not result in increased revenue or growth in our business and may continue to result in net losses for our business.

Additionally, we may incur significant losses in the future for a number of reasons, including:

Accordingly, our continuous success will depend on our ability to plan for and manage our rapid growth effectively.

If we fail to do so, we may be unable to execute our business plan, which could have an adverse impact on our business and results of operations.

We must carefully manage our expense structure and a failure to do so could have a material adverse effect on our business.

The real estate market has experienced an increase in interest rates followed by a material decrease in the number of real estate transactions.

We must conservatively manage our cash and expenses in light of these and other negative changes in market conditions.

To date, we have done so through reductions in force, changes to our spending approval processes, adjustments to our sales incentives and sales teams, and otherwise by pivoting our focus from growth to profitability and cash flow.

Although we expect to continue to make future investments in the development and expansion of our business, we may also in the future undertake further initiatives to restructure our operations to improve operational efficiency.

Gaining additional efficiencies may become increasingly difficult over time.

In addition, there are one-time restructuring costs and negative impacts on sales growth and company operations relating to restructurings.

We may be unable to successfully implement our cost savings strategies as much as is necessary given market conditions.

Moreover, since we were founded, we have incurred net losses and have had an accumulated deficit, and may continue to do so, for a number of reasons, including:

declines in U.S.

residential real estate transaction volumes;

our expansion into new markets, for which we typically incur more significant losses immediately following entry;

increased competition in the U.S.

residential real estate industry;

increased costs to attract and retain agents;

increased research and development costs to continue to advance the capabilities of our platform;

changes in general economic conditions;

changes in real estate market conditions;

expansion into new markets for which we typically incur more significant losses immediately following entry;

increased competition;

increased costs to attract and retain agents, to hire additional personnel to support our overall growth, for research and development, and for sales and marketing;

changes in our fee structure or rates;

our failure to realize anticipated efficiencies through our technology and business model;

inefficiencies in our technology and business model;

failure to execute our growth strategies;

increased sales and marketing costs;

hiring additional personnel to support our overall growth;

unforeseen expenses, difficulties, complications and delays, and other unknown factors.

Accordingly, we may not be able to achieve and, if achieved, may not sustain profitability.

Moreover, as we continue to invest in our business, we expect expenses to continue to increase in the near term.

If we fail to manage our expenses or grow our revenue sufficiently to keep pace with our investments, our business may be harmed.

Because we expect to incur significant costs and expenses to grow our business, and we may incur expenses prior to generating incremental revenue with respect thereto, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in an increase in revenue to offset these expenses, which would further increase our losses.

We anticipate using cash to satisfy tax withholding obligations that will arise in connection with the monthly net settlements of RSU awards granted to our employees, which may have an adverse effect on our financial condition and liquidity.

Additionally, if we choose to implement a “sell-to-cover” settlement

method in the future, additional shares will be issued and sold in the market at settlement to cover tax withholding obligations, which would result in dilution to our stockholders.

Prior to December 2020, we granted RSU awards to our employees that vest based upon the satisfaction of both a service-based condition and a liquidity event-based condition.

The service-based vesting condition for these awards is generally satisfied over four years.

The liquidity event-based vesting condition is satisfied on the occurrence of a qualifying event and was satisfied upon the completion of our IPO in April of 2021.

Starting in December 2020, we grant RSU awards to our employees that vest based on the satisfaction of a service-based condition only, which is generally satisfied over four years.

tax laws, tax withholding obligations for RSUs arise in connection with their settlement on the settlement date.

Our current settlement practice is to net settle vested RSUs, meaning we withhold a certain number of shares of our Class A common stock that would otherwise be issued with respect to the settling RSU awards and satisfy tax withholding obligations on behalf of our employees by remitting the appropriate taxes to the relevant tax authorities.

and unforeseen expenses, difficulties, complications and delays.

Any or all of the foregoing may cause a material adverse effect on our business.

Further, there can be no assurance that our strategic initiatives and cost savings efforts will result in sustained levels of profitability and positive cash flows that we intend or at all.

We use cash to satisfy tax withholding obligations that arise in connection with the monthly net settlements of RSU awards granted to our employees, which may have an adverse effect on our financial condition and liquidity.

Additionally, if we choose to implement a “sell-to-cover” settlement method in the future, additional shares will be issued and sold in the market at settlement to cover tax withholding obligations, which would result in dilution to our stockholders.

We grant restricted stock unit (“RSU”) awards to our employees that vest based on the satisfaction of a service-based condition which is generally satisfied over four years.

federal, state and local tax regulations, tax withholding obligations for RSUs arise in connection with their settlement.

Our current settlement practice is to net settle vested RSUs, meaning that we withhold the equivalent number of RSUs that would otherwise be issued as shares of our Class A common stock in lieu of the amount required to satisfy tax withholding obligations on behalf of our employees by remitting the appropriate taxes to the relevant tax authorities.

We refer to this as “net settlement.”

During the year ended December 31, 2021, we net settled all RSUs granted to our employees that had vested as of December 31, 2021 (the “2021 net settlements”).

In connection with the 2021 net settlements, we issued an aggregate of 7.1 million shares of Class A common stock to our employees and withheld an aggregate of 4.9 million shares of our Class A common stock to satisfy $62.4 million of tax withholding obligations on behalf of our employees.

We plan to continue to net settle vested RSUs granted to our employees on a monthly basis.

Accordingly, we will continue to fund tax withholding obligations on behalf of our employees and offset such funding by withholding shares of Class A common stock, which we would otherwise be obligated to deliver to them.

The future monthly net settlements may result in a significant use of our cash and may have an adverse effect on our financial condition and liquidity.

In the future, we may also choose to implement a “sell-to-cover” settlement

method to satisfy tax withholding obligations for our employees, under which shares of our Class A common stock with a market value equivalent to the tax withholding amount would be sold on behalf of the employees holding RSU awards upon settlement to satisfy their tax withholding obligations and the cash proceeds from such sales will be remitted by us to the relevant tax authorities.

Such sales would not result in our use of additional cash to satisfy the tax withholding obligations for RSU awards, but would result in dilution to our stockholders.

Additionally, we also grant RSU awards to our agents.

During the year ended December 31, 2021, we settled all RSUs granted to our agents that had vested as of December 31, 2021 and issued an aggregate of 3.8 million shares of our Class A common stock to them.

Because our agents are independent contractors, we do not have tax withholding obligations, and accordingly, we did not, and will not in the future, use any of our cash to pay their tax withholding obligations.

We currently, and plan to continue to, net settle vested RSUs granted to our employees on a monthly basis, which, depending upon the market value of shares of our Class A common stock underlying the RSUs, may result in a significant use of our cash and may have an adverse effect on our financial condition and liquidity.

In the future, we may implement a “sell-to-cover” settlement method to satisfy tax withholding obligations for our employees, under which shares of our Class A common stock with a market value equivalent to the tax withholding amounts would be automatically sold by the employees holding RSUs upon settlement to satisfy their tax withholding obligations, and the cash proceeds from such sales will be remitted by us to the relevant tax authorities.

Such sales would not result in our use of additional cash to satisfy the tax withholding obligations for RSUs, but would result in greater dilution to our stockholders and increase costs to our employees with RSU awards than the net settlement model described above.

Additionally, we also grant RSUs to our independent directors and our agents, but because they are either independent non-employee directors or independent contractors, we do not have tax withholding obligations with respect to the settlement of their vested RSUs.

Accordingly, we did not, and will not in the future, use any of our cash to pay their tax withholding obligations.

However, issuance of shares of Class A common stock at settlement has resulted, and will result in the future, in dilution to our stockholders.

We plan to continue to settle vested RSUs granted to our agents on the monthly basis.

The extent of the future impact of the ongoing COVID-19 pandemic

on our business and financial results will depend largely on future developments, which are highly uncertain and difficult to predict.

The extent of the future impact of the ongoing COVID-19 pandemic

on our business and financial results will depend largely on future developments, including emergence of new variants of the COVID-19

virus, the severity and transmission rates of the new variants, the duration and extent of the spread of the virus (including new variants), the timing, availability and effectiveness of vaccines (including booster shots) and vaccination rates, the prevalence of local, regional and national restrictions and regulatory orders in response to the ongoing COVID-19

pandemic and the extent and effectiveness of containment actions taken, all of which are highly uncertain and difficult to predict.

Additionally, the ongoing COVID-19

pandemic has had, and continues to have, a significant impact around the world, including the U.S., and it is difficult to assess or predict its future impact on the U.S.

and global economy.

As a result, a number of macroeconomic factors related to the ongoing COVID-19 pandemic,

including but not limited to the increase in unemployment rates and stagnant or declining wages, loss of consumer confidence in the economy and recessionary conditions, lower yields on individuals’ investment portfolios or volatility and declines in the stock market, lower rental prices in certain markets reducing demand to purchase homes, more stringent mortgage financing conditions, including increased down payment requirements and volatility in the mortgage interest rates, inflation rate and pressures, had, and could have in the future, an adverse impact on consumer spending, including on residential real estate transactions, and resulted, and may in the future result, in changes to home purchasing, selling, renting and financing trends.

For example, in the second quarter of 2020, the COVID-19 pandemic

significantly and adversely affected residential real estate transaction volume.

During that time, in addition to general macroeconomic instability, many governmental authorities put in place limitations on in-person activities

related to the sale of residential real estate, such as prohibitions or restrictions on in-home showings,

inspections and appraisals, and availability or hours of local real property documentation searches and new recordings.

While these measures were largely lifted later in 2020 and the overall residential real estate transaction volume for 2020 was not adversely impacted over the longer term, there is no guarantee that in the future, the outcomes will be similar.

COVID-19 has affected our business and may continue to affect our business.

Our success depends on a high volume of residential real estate transactions throughout the markets in which we operate.

This transaction volume affects all of the ways that we generate revenue, including generation of commissions from transactions executed by our agents, the number of transactions our title and escrow business closes and the number of mortgages OriginPoint originates.

If the ongoing COVID-19

pandemic has an adverse impact on the volume of residential real estate transactions, our business and financial results in future periods could be materially and adversely impacted.

In addition, many of our employees continue to work remotely, which may adversely affect our efficiency and morale.

As we continue to evaluate our return to work approach, it will likely vary across geographies depending on local health rules and regulations.

Any future part- or full-time re-opening

could expose our employees to health risks and could result in additional costs to us.

Further, certain employees may not agree with our return to work approach and as a result may seek employment elsewhere.

This transaction volume affects all the ways we generate revenue, including generation of commissions from transactions executed by our agents, the number of transactions our title and escrow business closes, and the number of mortgages OriginPoint originates.

The ongoing COVID-19 pandemic has had, and may continue to have, an adverse impact on the volume of residential real estate transactions, which has affected, and may continue to affect, our business and financial results.

The extent of the future impact of the ongoing COVID-19 pandemic on our business and financial results will depend largely on future developments, including the emergence of new variants of the COVID-19 virus, the severity and transmission rates of new variants, the duration and extent of the spread of the virus the timing, availability and effectiveness of vaccines and vaccination rates, the prevalence of local, regional and national restrictions and regulatory orders in response to the ongoing COVID-19 pandemic, and the extent and effectiveness of containment actions taken, all of which are highly uncertain and difficult to predict.

In addition, a number of macroeconomic factors relating to the ongoing COVID-19 pandemic have had, and could continue to have, an adverse impact on consumer spending and may result in changes to home purchasing, selling, renting and financing trends, including:

increased unemployment rates and stagnant or declining wages;

loss of consumer confidence in the economy and recessionary conditions;

lower yields on individuals’ investment portfolios;

volatility and declines in the stock market;

lower rental prices;

reduced demand to purchase homes;

more stringent mortgage financing conditions;

volatility in the mortgage interest rates;

and inflation rate and pressures.

In addition, COVID-19’s impact on our residential real estate transaction volume depends largely on the existence and prevalence of limitations on in-person activities related to the sale of residential real estate, such as prohibitions or restrictions on in-home showings, inspections and appraisals, and availability or hours of local real property documentation searches and new recordings.

We operate in highly competitive markets and we may be unable to compete successfully against competitors.

We operate in a competitive and fragmented industry, and we expect competition to continue to increase.

We believe that our ability to compete depends upon many factors both within and beyond our control, including the following:

We believe that our ability to compete depends upon many factors, including:

our ability to attract and retain agents;

the timing and market acceptance of our products and services for our agents and their clients, including new products and services offered by us or our competitors;

the attractiveness of our adjacent services for agents as well as their clients;

our ability to attract top engineering talent to further develop and improve our technology to support our business model;

our brand strength relative to our competitors.

Our business model depends on our ability to continue to attract agents and their clients to our platform, and to enhance their engagement in a cost-effective manner.

We face competition on a national level and in each of our markets from traditional real estate brokerage firms, some of which operate nationally and others that are limited to a specific region or regions.

We also face competition from real estate technology companies, including a growing number of Internet-based brokerages and others who operate with a variety of business models.

New entrants, particularly smaller companies offering point solutions, continue to join our market categories.

However, our existing and potential competitors include real estate technology companies and real estate brokerages that operate, or could develop, national and/or local businesses offering similar services, including real estate brokerage, title insurance and escrow services and mortgage origination services, to home buyers or sellers.

Several of these real estate technology companies which may enter our market categories could have significant competitive advantages, including better name recognition, greater resources, lower cost of funds and additional access to capital, and more types of offerings than we currently do.

These companies may also have higher risk tolerances or different risk assessments than we do.

In addition, these competitors could devote greater financial, technical and other resources than we have available to develop, grow or improve their businesses.

Because a material portion of our business is concentrated in certain geographic areas and high-end markets,

any adverse economic, real estate or business conditions in these geographic areas and/or impacting high-end markets

could have a material adverse effect on our operating results.

the timing and market acceptance of products and services offered by us or our competitors;

the attractiveness of our adjacent services for agents and our agents’ clients;

our ability to attract top talent to support our business model;

and our brand strength relative to our competitors.

Our business model depends on our ability to continue to attract agents and our agents’ clients to our platform, and to enhance their engagement in a cost-effective manner.

We face competition nationally and in each of our markets from traditional real estate brokerage firms, some of which operate nationally and others that are limited to a specific region or regions, from real estate technology companies, including a growing number of Internet-based brokerages and others who operate with a variety of business models, and from new entrants, particularly smaller companies offering point solutions.

Some of our competitors could have significant competitive advantages, including better name recognition, greater resources, lower cost of funds and access to additional capital, more product and service offerings, and higher risk tolerances or different risk assessments.

If we are not able to continue to attract agents and our agents’ clients to our platform, our business, results of operations and financial condition will be harmed.

Because a material portion of our business is concentrated in certain geographic areas and high-end markets, any adverse economic, real estate or business conditions in these geographic areas and/or impacting high-end markets could have a material adverse effect on our operating results.

A material portion of our real estate brokerage offices and agents are concentrated in certain geographic areas, such as Southern California, Northern California and the tri-state area.

and regional real estate and economic conditions could differ materially from prevailing conditions in other parts of the U.S.

Local and regional real estate and economic conditions could differ materially from prevailing conditions in other parts of the U.S.

While overall the U.S.

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Additionally, a material portion of our real estate transactions take place in high-end markets.

downturn in high-end markets

could result in a decline in our gross commission income and could have a material adverse effect on our operating results.

Further, if there is a downturn in high-end markets,

our agents may shift to transactions involving middle and lower range market prices, which, absent an increase in the number of transactions, could result in a decline in our gross commission income.

Any downturn in high-end markets could result in a decline in our gross commission income and could have a material adverse effect on our operating results.

Further, if there is a downturn in high-end markets, our agents may shift to transactions involving middle and lower range market prices, which, absent an increase in the number of transactions, could result in a decline in our gross commission income.

Monetary policies of the federal government and its agencies may have an adverse impact on our business, results of operations, and financial condition.

Our business is significantly affected by the monetary policies of the federal government and its agencies.

We are particularly affected by the policies of the Federal Reserve Board.

These policies regulate the supply of money and credit in the U.S.

and impact the real estate market through their effect on interest rates.

Increases in mortgage rates adversely impact housing affordability and we have in the past been and could in the future be negatively impacted by a rising interest rate environment.

real estate market is significantly affected by the monetary policies of the federal government and its agencies, and is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the U.S.

and impacts the real estate market through its effect on interest rates.

Changes in prevailing interest rates or U.S.

monetary policies that affect interest rates may have an adverse impact on our business.

For example, a rise in mortgage rates could result in decreased sale transaction volume if potential home sellers choose to stay with their lower mortgage rate rather than sell their existing home and pay a higher mortgage rate with the purchase of a new home or, similarly, if potential home buyers choose to rent rather than pay higher mortgage rates.

Additionally, during late 2021 and early 2022 interest rates rose 60 basis points for the average nonconforming mortgage and, as a result, the number of purchase and refinance mortgages is expected to fall 35% during 2022, according to the Mortgage Bankers Association.

If mortgage rates continue to rise, the growth of our mortgage origination business would be adversely impacted.

This volume decline would be felt across the mortgage industry, with varying impact on our competitors depending on their origination strategy and channel mix, but the increased competition for the remaining loan volume could have the effect of significantly reduced revenues and profit margins or could require us to increase sales and marketing expenditures as we seek to build out the business.

Changes in the Federal Reserve Board’s policies, the interest rate environment, and the mortgage market are beyond our control, are difficult to predict, and could have an adverse impact on our business, results of operations and financial condition.

Accordingly, our business may be negatively impacted by any rising interest rate environment.

As mortgage rates rise, the number of home sale transactions may decrease as potential home sellers choose to stay with their lower mortgage rate rather than sell their home and pay a higher mortgage rate with the purchase of another home, which may have an adverse impact on our mortgage origination business.

In addition, this decline in volume could increase competition for the remaining loan volume, which may significantly reduce revenues and profit margins and may require us to increase sales and marketing expenditures to build out the business.

Similarly, in higher interest rate environments, potential home buyers may choose to rent rather than pay higher mortgage rates.

Changes in the Federal Reserve Board’s policies, interest rate environment and the mortgage market are beyond our control and are difficult to predict and, as such, could have a material adverse effect on our business, results of operations and financial condition.

Any decrease in our gross commission income or the percentage of commissions that we collect may harm our business, results of operations, and financial condition.

Our business model depends upon our agents’ success in generating gross commission income, which we collect and from which we pay them net commissions.

Real estate commission rates vary somewhat by market, and although historical rates have been relatively consistent over time across markets, there can be no assurance that prevailing market practice will not change in a given market, or across the industry, in the future.

Customary commission rates could change due to market forces locally or industry-wide, as well as due to regulatory or legal changes in such markets, including as a result of litigation or enforcement actions.

In addition, in July of 2021, the Justice Department announced that it was withdrawing from the nation- wide antitrust settlement with the National Association of Realtors, (“NAR”) that was entered into in November 2020 to allow for a broader investigation of NAR’s rules and conduct, and there additionally have been recent statements and actions by the Federal Trade Commission (“FTC”) and the executive branch focused on increasing competition.

We cannot predict the outcome of the new investigation or the executive branch focus on this issue, but it may result in industry-wide regulatory action, the result of which may cause commission rates to decrease over time.

If any such decrease in commission rates were to occur, our business, financial condition, and results of operations may be adversely impacted.

In addition, there can be no assurance that we will be able to maintain the percentage of commission income that we collect from our agents for their use of our platform.

If industry conditions change such that other platforms offer similar technologies to ours at a lower price or for free, we may be forced to reduce the percentage of commissions that we collect from our agents, and our business, financial condition, and results of operations may be adversely impacted.

Customary commission rates could change due to market forces locally or industry-wide and due to regulatory or legal changes in such markets, including as a result of litigation or enforcement actions.

We cannot predict the outcome of any new investigations or enforcement actions, but any such actions may result in industry-wide regulations, which can cause commission rates to decrease.

Any decrease in commission rates may adversely impact our business, financial condition, and results of operations may be adversely impacted.

In addition, we collect fees from our agents for use of our platform, including our technology suite.

There can be no assurance that we will be able to maintain the percentage of commission income or fees we collect from our agents .

If industry conditions change, such that other platforms offer similar technologies to ours at a lower price or for free, we may be forced to reduce the percentage of commissions we collect from our agents, and our business, financial condition, and results of operations may be adversely impacted.

Our quarterly results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict.

Our results of operations have fluctuated in the past and are likely to fluctuate significantly from quarter-to-quarter and year-to-year in

the future for a variety of reasons, many of which are outside of our control and difficult to predict.

As a result, you should not rely upon our historical results of operations as indicators of future performance.

Numerous factors can influence our results of operations, including:

Our results of operations have fluctuated in the past and are likely to fluctuate significantly from quarter-to-quarter and year-to-year in the future for a variety of reasons, many of which are outside of our control and difficult to predict.

Factors that can influence our results of operations, include:

changes in real estate market conditions;

our ability to attract and retain agents;

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increases in and timing of operating expenses that we may incur to grow and expand our operations and to remain competitive;

changes in the legislative or regulatory environment, including with respect to real estate commission rates and disclosures;

system failures or outages, or actual or perceived breaches of security or privacy, and the costs associated with preventing, responding to, or remediating any such outages or breaches;

changes in the legislative or regulatory environment;

system failures or outages;

actual or perceived breaches of security or privacy, and the costs associated with preventing, responding to, or remediating any such outages or breaches;

adverse judgments, settlements, or other litigation-related costs and the fees associated with investigating and defending claims;

the overall tax rate for our business and the impact of any changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period;

the overall tax rate for our business;

the impact of any changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period;

the application of new or changing financial accounting standards or practices;

changes in regional or national business or macroeconomic conditions, including as a result of the ongoing COVID-19 pandemic,

which may impact the other factors described above.

In addition, our results of operations are tied to certain key business metrics and non-GAAP financial

measures that have fluctuated in the past and are likely to fluctuate in the future.

As a result of such variability, our historical performance, including from recent quarters or years, may not be a meaningful indicator of future performance and period-to-period comparisons

also may not be meaningful.

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business.

Our success depends upon the continued service of our senior management team, including, in particular, Robert Reffkin, our founder, Chairman and Chief Executive Officer.

and changes in regional or national business or macroeconomic conditions.

Because our results of operations are tied to certain key business metrics and non-GAAP financial measures that have fluctuated in the past and are likely to fluctuate in the future, our historical performance, including from recent quarters or years, may not be a meaningful indicator of future performance and period-to-period comparisons may not be meaningful.

As such, reliance should not be placed upon our historical results of operations as indicators of future performance.

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel, could harm our business.

Our success depends upon the continued service of our senior management team, including Robert Reffkin, our founder, Chairman and Chief Executive Officer.

Our success also depends on our ability to manage effective transitions when management team members pursue other opportunities.

In addition, our business depends on our ability to continue to attract, motivate and retain a large number of skilled employees across our company.

Furthermore, much of our key technology and processes are custom-made for our business by our personnel.

The loss of key engineering, product development, operations, marketing, sales and support, finance and legal personnel could also adversely affect our ability to build on the efforts they have undertaken and to execute our business plan, and we may not be able to find adequate replacements.

In addition, we currently do not have “key person” insurance on any of our employees.

In addition, our business depends on our ability to continue to

attract, motivate, and retain a large number of skilled employees across our company.

The loss of key engineering, product development, operations, marketing, sales and support, finance and legal personnel could also adversely affect our ability to build on the efforts such individuals have undertaken and to execute our business plan, and we may not be able to find adequate replacements.

In addition, we do not have “key person” insurance on any of our employees.

We face intense competition for qualified individuals from numerous software and other technology companies.

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Our success depends on the performance of our agents and employees.

Although our agents are independent contractors, if they were to provide lower quality services to their clients in a given market or overall, our image and reputation could be adversely affected.

In addition, if our agents make fraudulent claims about properties they show, if their transactions lead to allegations of errors or omissions, if they violate certain regulations, or if they engage in self-dealing or do not disclose conflicts of interest to their clients, we could also be subject to litigation and regulatory claims which, if adversely determined, could adversely affect our business, financial condition and results of operations.

For example, if an agent were to recommend that a client use an escrow service in which the agent had an ownership interest but failed to disclose that interest to the client and to us, we could see our reputation tarnished and be held liable for the agent’s failure to disclose that interest under the Real Estate Settlement Proceeding Act.

Similarly, we are subject to risks of loss or reputational harm in the event that any of our employees violate applicable laws, as such laws may harm our agents’ businesses or impact clients.

We may be subject to claims relating to the operations of our title and escrow businesses and incur losses resulting from fraud, defalcation or misconduct.

Although our agents are independent contractors, if they were to provide lower quality services to our agents’ clients, our image and reputation could be adversely affected.

In addition, if our agents make fraudulent claims about properties they show, their transactions lead to allegations of errors or omissions, they violate certain regulations, including employment laws applicable to the management of their own employees, or they engage in self-dealing or do not disclose conflicts of interest to our agents’ clients, we could be subject to litigation and regulatory claims which, if adversely determined, could adversely affect our business, financial condition and results of operations.

Similarly, we are subject to risks of loss or reputational harm in the event that any of our employees violate applicable laws.

We may be subject to losses relating to the operations of our title and escrow businesses as a result of errors, omissions, fraud, defalcation, or other misconduct.

Our title companies issue title insurance policies on behalf of title insurance underwriters.

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The title underwriter is typically liable for the payment of claims under title policies, but we may be subject to liability and losses if we are negligent.

Our title companies and our escrow company also provide escrow and closing services.

Some of our title companies and our escrow company also provide escrow and closing services.

These services facilitate the transfer of ownership of real property.

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Fraud, defalcation, and misconduct by employees and others are also risks inherent in our title and escrow business.

While we have insurance to protect us against some of these types of losses as well, we cannot be certain that our insurance coverage will be adequate.

To the extent that any loss or theft of funds related to our title and escrow companies substantially exceeds our insurance coverage, our business and results of operations could be adversely affected.

If we pursue acquisitions that are not successfully completed or integrated into our existing operations, our business, financial condition, or results of operations may be adversely affected.

We continue to evaluate a wide array of potential strategic opportunities, including acquisitions and “acqui-hires” of businesses in new geographies.

From time to time, we evaluate a wide array of potential strategic opportunities, including acquisitions and “acqui-hires” of businesses in new geographies.

We sometimes engage in acquisitions of brokerage businesses to provide us with greater access to a given market.

At times, we may also look to acquisitions to provide us with additional technology to further enhance our platform and accelerate our ability to offer new products or to expand our adjacent services offerings.

For example, in 2021, in addition to acquiring a number of smaller brokerage companies, we acquired all or majority control of four title and escrow businesses to cover additional markets served by our agents.

We also acquired Glide, a real estate technology company, that

enabled us to provide digital real estate forms, e-signatures

and related products to our agents, as well as non-Compass

These strategic acquisitions could be material to our financial condition and results of operations, but there can be no guarantee that they will result in the intended benefits to our business, and we may not successfully evaluate or utilize the acquired agents, businesses, products, or technology, or accurately forecast the financial impact of a strategic acquisition.

We may discover liabilities or deficiencies associated with the companies or assets we acquire that were not identified in advance or for which we are not adequately indemnified by sellers, which may result in significant unanticipated costs.

The effectiveness of our due diligence review and our ability to evaluate the results of such due diligence are dependent upon the accuracy and completeness of statements and disclosures made or actions taken by the companies we acquire or their representatives, as well as the limited amount of time in which acquisitions are executed.

In addition, integrating an acquired company, business, or technology is risky and may result in unforeseen operating difficulties and expenditures, particularly in new markets or with respect to new adjacent services.

Our failure to address risks or other problems encountered in connection with our past or future strategic acquisitions could cause us to fail to realize the anticipated benefits of such strategic acquisitions, incur unanticipated liabilities, and harm our business, financial condition and results of operations.

Strategic acquisitions may require us to issue additional equity securities, spend a substantial portion of our available cash, or incur debt or liabilities, amortize expenses related to intangible assets, or incur write-offs of goodwill, which could adversely affect our business, financial condition and results of operations and dilute the economic and voting rights of our then-current stockholders.

In June 2022, we announced the wind-down of Modus Technologies, Inc, a wholly-owned title and escrow software company, which was part of a broader plan to improve the alignment between the Company’s organizational structure and its long-term business strategy, drive cost efficiencies and continue to drive toward profitability and positive free cash flow.

Moreover, the integration of acquisitions requires significant time and resources, and we may not manage these processes successfully.

We continue to make investments of resources to support our acquisitions, which we expect will result in significant ongoing operating expenses and may divert resources and management attention from other areas of our business.

Our failure to successfully integrate the companies we acquire and address risks or other problems encountered in connection with our past or future strategic acquisitions could cause us to fail to realize the anticipated benefits of such strategic acquisitions, incur unanticipated liabilities, and harm our business, financial condition, and results of operations.

In addition, strategic acquisitions may require us to issue additional equity securities, spend a substantial portion of our available cash, or incur debt or liabilities, amortize expenses related to intangible assets, or incur write-offs of goodwill, which could adversely affect our business, financial condition, and results of operations and could result in dilution to our stockholders.

A change in mortgage underwriting standards could reduce the ability of homebuyers to access the credit markets on reasonable terms, or at all.

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In addition, certain lenders added new criteria or approvals necessary to underwrite mortgages in response to the COVID-19 pandemic.

Underwriting standards could be changed or tightened as a result of changes in regulations, including regulations enacted to increase guarantee fees of federally-insured mortgages.

This may result in the decreased number of real estate transactions that our agents execute and our title and escrow businesses close and in the decreased number of mortgages that OriginPoint originates, all of which would adversely affect our business, financial condition and results of operations.

Potential reform of Fannie Mae or Freddie Mac or certain federal agencies or a reduction in U.S.

government support for the housing market could have an adverse impact on the operations of our mortgage origination business.

Numerous pieces of legislation seeking various types of changes for government sponsored entities have been introduced in Congress to reform the U.S.

housing finance market including among other things, changes designed to reduce government support for housing finance and the winding down of the federal conservatorship of Fannie Mae or Freddie Mac over a period of years.

Legislation, if enacted, or additional regulation which curtails Fannie Mae’s and/or Freddie Mac’s activities and/or results in the wind down of the federal conservatorship of these entities could increase mortgage costs and could result in more stringent underwriting guidelines imposed by lenders or cause other disruptions in the mortgage industry.

Changes in other legislation, policies or guidelines such as the Fair Housing Act, USDA guidelines or Government Sponsored Enterprises (“GSE”) may impact the way we service and originate GSE and U.S.

government agency loans.

Any of the foregoing could have a material adverse effect on the housing market in general and the operations of our mortgage origination business.

We may not be able to maintain or establish relationships with multiple listing services and third-party listing services, which could limit the information we are able to provide to our agents and their clients.

Our ability to attract agents to our platform and to appeal to their clients depends upon providing a robust number of listings.

Underwriting standards could be changed or tightened as a result of changes in regulations, including those enacted to increase guarantee fees of federally-insured mortgages.

More stringent mortgage underwriting standards could adversely affect the ability and willingness of prospective buyers to finance home purchases or to sell their existing homes in order to purchase new homes, which may decrease the number of real estate transactions that our agents execute and that our title and escrow businesses close, and may decrease the number of mortgages that OriginPoint originates.

Any of these impacts would adversely affect our business, financial condition, and results of operations.

We may not be able to maintain or establish relationships with multiple listing services and third-party listing providers, which could limit the information we are able to provide to our agents and our agents’ clients.

Our ability to attract agents to our platform and to appeal to our agents’ clients depends upon providing a robust number of listings.

To provide these listings in our services, in addition to the information provided by our agents, we maintain relationships with multiple listing services and other third-party listing providers.

Certain of our agreements with real estate listing providers are short-term agreements that may be terminated with limited notice.

The loss of some of our existing relationships with listing providers, whether due to termination of agreements or otherwise, changes to our rights to use listing data, or an inability to continue to add new listing providers, may cause our listing data to omit information important to our agents or their clients.

Any loss or changes to our rights to use listing data or add listings, or any similar loss of rights in the markets we serve, could negatively impact agent and client confidence in the listing data we provide and reduce our ability to attract and retain agents, which could harm our business, financial condition, and results of operations.

The loss of our existing relationships with these parties, changes to our rights to use listing data, or an inability to continue to add new listing providers may cause our listing data to omit information important to our agents or our agents’ clients.

Any of these events could negatively impact our reputation and agent and client confidence in the listing data we provide and reduce our ability to attract and retain agents, which could harm our business, financial condition, and results of operations.

Cybersecurity incidents could disrupt business operations and result in the loss of critical and confidential information or litigation or claims arising from such incidents, any of which may adversely impact our reputation and business, financial condition, and results of operations.

We face growing risks and costs related to cybersecurity threats to our operations, our data and agent and client data, including but not limited to:

the failure or significant disruption of our operations from various causes, including human error, computer malware, ransomware, insecure software and systems, zero-day

vulnerabilities, threats to or disruption of third-party vendors who provide critical services, or other events related to our critical information technologies and systems;

the increasing level and sophistication of cybersecurity attacks, including distributed denial of service attacks, data theft, fraud or malicious acts on the part of trusted insiders, social engineering (including phishing attempts), or other unlawful tactics aimed at compromising the systems and data of our agents and their clients (including through systems not directly controlled by us, such as those maintained by our agents and third-party service providers);

the reputational and financial risks associated with a loss of data or material data breach (including unauthorized access to our proprietary business information or personal information of our agents and their clients), the transmission of computer malware, or the diversion of sale transaction closing funds.

Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to information technology systems via viruses, ransomware and other malicious software, to phishing, or to advanced and targeted attempts to breach systems launched by individuals, organizations or sponsored nation state actors.

These attacks may be directed at our business, our employees, agents, and clients and third-party service providers.

We face growing risks and costs related to cybersecurity threats to our operations and our data (including agent and client data) including:

the failure or significant disruption of our operations from various causes, such as human error, computer malware, ransomware, insecure software and systems, zero-day vulnerabilities, threats to or disruption of third-party service providers who provide critical services, or other events related to our critical information technologies and systems;

the increasing level and sophistication of cybersecurity attacks, such as distributed denial of service attacks, data theft, fraud or malicious acts on the part of trusted insiders, social engineering (including phishing attempts or the creation of copycat websites), or other unlawful tactics aimed at compromising the systems and data of our agents and our agents’ clients (including through systems not directly controlled by us, such as those maintained by our agents and third-party service providers);

and the reputational and financial risks associated with a loss of data or material data breach (including unauthorized access to our proprietary business information or personal information of our agents and our agents’ clients), the transmission of computer malware, or the diversion of sale transaction closing funds.

Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to information technology systems via viruses, ransomware, and other malicious software, to phishing or advanced and targeted attempts to breach systems launched by individuals, organizations, or sponsored nation state actors.

These attacks may be directed at our business, employees, agents, third-party service providers, and our agents’ clients.

An attack, threat, or breach of one system can impact one or more other systems.

In the ordinary course of our business, we and our third-party service providers, our employees, agents and clients may collect, store and transmit sensitive data, including our proprietary business information and intellectual property and that of our agents and their clients as well as personal information, sensitive financial information and other confidential information of our employees and agents and our agents’ clients.

Our agents’ use of our platform to access and store data presents us with uncertainties and risks, as they may accidentally or deliberately cause private information to be transmitted through unsecure channels which may lead to breaches or other leaks of such information.

Additionally, we increasingly rely on third-party data processing, storage providers, and critical infrastructure services, including cloud solution providers.

In the ordinary course of our business, we and our third-party service providers, our employees, agents, and agent’s clients may collect, store, and transmit sensitive data, including our proprietary business information and intellectual property and that of our agents and our agents’ clients as well as personal information, sensitive financial information, and other confidential information.

Our agents’ use of our platform to access and store data presents us with uncertainties and risks,

as they may accidentally or deliberately cause private information to be transmitted through unsecure channels, which may lead to breaches or other leaks of such information.

Additionally, we increasingly rely on third-party service providers that provide data processing, data storage, and critical infrastructure services, including cloud solution providers.

The secure processing, maintenance, and transmission of this information are critical to our operations and, with respect to information collected and stored by our third-party service providers, we are reliant upon their security procedures, controls, and adherence to our agreements.

A breach or attack affecting one of our third-party service providers or partners could adversely impact our business even if we do not control the service that is attacked.

Moreover, the real estate industry is actively targeted by cybersecurity threat actors which attempt to conduct electronic fraudulent activity (such as business email compromise), security breaches and similar attacks directed at participants in real estate services transactions.

In common with others in our industry, we manage and hold confidential personal information, including potentially sensitive personal information belonging to employees and agents or their clients or other individuals with whom agents transact, in the operation of our platform.

Accordingly, we have been and continue to be subject to a range of cyber-attacks, such as email-based phishing attacks on our agents.

Historically, these attacks have not been material either individually or in the aggregate.

We have enhanced our security measures and continue to invest in order to mitigate the risk of similar attacks in the future.

However, there can be no assurance that our enhanced security measures, which are also partially dependent upon the security practices of our agents, their clients and participants will timely detect or prevent other cyber-attacks in the future.

Cyber-attacks could give rise to the loss of significant

amounts of agents’ data and other sensitive information.

In addition, cyber-attacks could give rise to the disablement of our information technology systems used to service our agents.

Such threats to our business may be wholly or partially beyond our control as our employees and agents and our agents’ clients and other third-party service providers may use e-mail, computers,

smartphones and other devices and systems that are outside of our security control environment.

A breach or attack affecting one of our third-party service providers or partners could adversely impact our business, our client’s business, and our reputation even if we do not control the service that is attacked.

Moreover, the real estate industry is actively targeted by cybersecurity threat actors who attempt to conduct electronic fraudulent activity (such as business email compromise), security breaches, and similar attacks directed at participants in real estate services transactions.

In common with others in our industry, we manage and hold confidential personal information in the operation of our platform.

Accordingly, we have been and continue to be subject to a range of cyber-attacks, such as the creation of Compass or agent copycat websites, and email and text-based phishing attacks on our agents and our agents’ clients.

We have enhanced our security measures and continue to invest in these measures to mitigate the risk of new and similar attacks in the future.

However, there can be no assurance that our enhanced security measures, which are also partially dependent upon the security practices of our agents, our agents’ clients, and participants will timely detect or prevent other cyber-attacks in the future.

Cyber-attacks could give rise to the loss of significant amounts of data and other sensitive information and possibly disable our information technology systems which are used to service our agents.

Such threats may be beyond our control as our employees and agents and our agents’ clients and other third-party service providers may use e-mail, computers, smartphones, and other devices and systems that are outside of our security control environment.

In addition, real estate transactions involve the transmission of funds by the buyers and sellers of real estate and consumers or other service providers selected by the consumer that may be the subject of direct cyber-attacks that result in the fraudulent diversion of funds, notwithstanding efforts we have taken to educate consumers with respect to these risks.

In addition, the increasing prevalence and sophistication of cyber-attacks as well as the evolution of cyber-attacks and other efforts to breach or disrupt our systems or those of our employees, agents, agents’ clients, and third-party service providers, has led and will likely continue to lead to increased costs to us with respect to identifying, protecting, detecting, responding, recovering, mitigating, insuring against and remediating these risks, as well as any related attempted or actual fraud.

Moreover, we are required to comply with growing regulations at the local, state and federal level in the U.S., and in other countries where we have operations, that regulate cybersecurity, privacy and related matters, some of which impose steep fines and penalties for noncompliance.

Any further expansion domestically or internationally will necessarily subject us to additional, and possibly more stringent, regulations and penalty structures.

While we, our employees, our agents, and agents’ clients have experienced and expect to continue to experience these types of threats and incidents, none of them to date has been material to our business.

Although we employ measures to identify, protect, detect, address and mitigate these threats (including access controls, data encryption, penetration testing, vulnerability assessments, and maintenance of backup and protective systems), and conduct diligence on the security measures employed by key third-party service providers, cybersecurity incidents, depending on their nature and scope, could potentially result in harm to confidentiality, integrity, and availability of critical systems, data and confidential or proprietary information (our own or that of third parties, including personal information and financial information) and the disruption of business operations.

In addition, cybersecurity threat actors have attempted, and may attempt in the future, to conduct fraudulent activity by engaging with our agents or our agents’ clients, including in our title insurance and escrow business.

We make a large number of wire transfers in connection with loan and real estate closings and process sensitive personal data in connection with these transactions.

Although we have sophisticated fraud detection processes and have taken other measures to continuously improve controls to identify fraudulent activity on our mobile app, website, and internal systems, we may not be able to detect and prevent all such activity.

Persistent or pervasive fraudulent activity may cause our agents or our agents’ clients to lose trust in us and decrease or terminate their usage of our platform, which could materially harm our operations, business, results, and financial condition.

The increasing prevalence and sophistication of cyber-attacks as well as the evolution of cyber-attacks and other efforts to breach or disrupt our systems or those of our employees, agents, agents’ clients, and third-party service providers, has led and will likely continue to lead to increased costs to us with respect to identifying, protecting, detecting, containing, responding, recovering, mitigating, insuring against, and remediating these risks, as well as any related attempted or actual fraud.

While we have experienced and expect to continue to experience these types of threats and incidents, none of them have been material to our business.

Although we employ measures to identify, protect, detect, address, contain, and mitigate these threats, and conduct diligence on the security measures employed by key third-party service providers, cybersecurity incidents, depending on their nature and scope, could potentially result in harm to confidentiality, integrity, and availability of critical systems, data, and confidential or proprietary information (our own or that of third parties, including personal information and financial information) and the disruption of business operations.

The potential consequences of a material cybersecurity incident include regulatory violations of applicable U.S.

and international privacy and other laws, reputational damage, loss of market value, litigation with third parties (which could result in our exposure to material civil or criminal liability), diminution in the value of the products and services we provide to our agents and their clients, and increased cybersecurity protection and remediation costs (that may include liability for stolen assets or information), any of which in turn could have a material adverse effect on our competitiveness and business, financial condition and results of operations.

and to a lesser degree, international privacy law, reputational damage, loss of market value, litigation with third parties (which could result in our exposure to material civil or criminal liability), diminution in the value of the products and services we provide to our agents and our agents’ clients, and increased cybersecurity protection and remediation costs (that may include liability for stolen assets or information), any of which in turn could have a material adverse effect on our competitiveness and business, financial condition, and results of operations.

We cannot be certain that our insurance coverage will be adequate for data security liabilities actually incurred, will cover any indemnification claims against us relating to any incident, will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements,

could adversely affect our reputation, business, financial condition and results of operations.

We could be subject to losses if banks do not honor our escrow and trust deposits.

We act as escrow agents for certain clients of our agents.

As an escrow agent, we receive money from clients to hold until certain conditions are satisfied.

Upon the satisfaction of those conditions (in most cases as confirmed by such clients, lenders, their respective agents or other third parties), we release the money to the appropriate party.

We deposit this money with various depository banks and while these deposits are not assets of our business (and therefore excluded from our consolidated balance sheet), we remain contingently liable for the disposition of these deposits.

These escrow and trust deposits totaled $172.1 million and $46.1 million as of December 31, 2021 and 2020, respectively.

We act as escrow agents for certain of our agents’ clients.

As an escrow agent, we receive money from our agents’ clients to hold until certain conditions are satisfied.

Upon the satisfaction of those conditions, we release the money to the appropriate party.

We deposit this money with various depository banks and while these deposits are not assets of our business, we remain contingently liable for the disposition of these deposits.

A significant amount of these deposits held by depository banks may be in excess of the federal deposit insurance limit.

If any of our depository banks were to become unable to honor any portion of our deposits, clients could seek to hold us responsible for such amounts and, if the clients prevailed in their claims, we could be subject to significant losses.

If any of our depository banks were to become unable to honor any portion of our deposits, our agents’ clients could seek to hold us responsible for such amounts and, if our agents’ clients prevailed in their claims, we could be subject to significant losses.

A significant adoption by consumers of alternatives to full-service agents could have an adverse effect on our business, financial condition, and results of operations.

A significant change in consumer sales that eliminates or minimizes the role of the agent in the real estate transaction process could have an adverse effect on our business, financial condition, and results of operations.

These options may include direct-buyer companies (also called iBuyers) that purchase directly from the seller at below-market rates in exchange for speed and convenience and then resell them shortly thereafter at market prices, and discounters who reduce the role of the agent in order to offer sellers a low commission or a flat fee while giving rebates to buyers.

These options may include direct-buyer companies (also called iBuyers) that purchase directly from the seller at below-market rates in exchange for speed and convenience and then resell the properties shortly thereafter at market prices, and discounters who reduce the role of the agent in order to offer sellers a low commission or a flat fee while giving rebates to buyers.

Consumer preferences regarding buying or selling houses and financing their home purchase will determine if these models reduce or replace the long-standing preference for full-service agents.

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For example, we may need to establish relationships with new partners or acquire businesses in order to expand into certain countries, and if we fail to identify, establish, and maintain such relationships or successfully identify and acquire businesses, we may be unable to execute on our expansion plans.

Although we maintain engineering and related operations in India, none of our agents are located outside of the U.S.

Although we maintain limited operations in India, none of our agents are located outside of the U.S.

and we currently do not engage in any non-U.S.

property transactions, except for de-minimis transactions through partnerships with local non-U.S.

real property transactions, except for de-minimis transactions through partnerships with local non-U.S.

We expect that our international activities will grow in the future as we pursue opportunities in international markets, which may require significant dedication of management attention and will require significant upfront investment.

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Our management team is required to evaluate the effectiveness of our internal control over financial reporting.

If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy of our financial reports.

We are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control.

Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting.

Our independent registered public accounting firm will be required to deliver an attestation report on the effectiveness of our disclosure controls and internal control over financial reporting.

If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy of our financial reports, which could adversely affect our business.

Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and to report any material weaknesses in such internal control.

Our independent registered public accounting firm is required to deliver an attestation report on the effectiveness of our disclosure controls and internal control over financial reporting.

An adverse report may be issued in the event our independent registered public accounting firm is not satisfied with the level at which our controls are documented, designed, or operating.

When evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404.

For example, in connection with the preparation of our consolidated financial statements for 2020 and prior years, we identified material weaknesses in our internal controls over financial reporting.

When evaluating our internal control over financial reporting, we may identify material weaknesses during the year that we may not be able to remediate by year-end.

For example, in connection with the preparation of our consolidated financial statements for 2021 and prior years, we identified material weaknesses in our internal control over financial reporting.

Those material weaknesses have not yet been fully remediated and the same weaknesses remained at the time of the preparation of our financial statements for 2022.

For additional information, see risk factor entitled “ –We have identified material weaknesses in our internal controls over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.” If we identify any material weaknesses in our internal control over financial reporting in the future or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is ineffective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, we could fail to meet our reporting obligations or be required to restate our financial statements for prior periods.

For additional information, see risk factor entitled “We have identified material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is

not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.” If we identify any material weaknesses in our internal control over financial reporting in the future, are unable to comply with the requirements of Section 404 in a timely manner, or assert that our internal control over financial reporting is ineffective, or if our independent registered public accounting firm expresses an opinion that our internal control over financial reporting is ineffective, investors may lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our Class A common stock to decline, and we could become subject to investigations by the SEC, or other regulatory authorities, which could require additional management attention and which could adversely affect our business.

In addition, our internal control over financial reporting will not prevent or detect all errors and fraud.

Because of the inherent limitations in all control systems, no evaluation can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal control, investors may lose confidence in the accuracy and completeness of our financial reports and that could cause the price of our Class A common stock to decline.

In addition, we could become subject to investigations by the applicable stock exchange, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.

We have identified material weaknesses in our internal controls over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

In connection with the preparation of our consolidated financial statements for 2020 and prior years, we identified material weaknesses in our internal controls over financial reporting.

We have identified material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

During the preparation of our consolidated financial statements for 2021 and prior years, we identified material weaknesses in our internal control over financial reporting.

Those material weaknesses have not yet been fully remediated and the same weaknesses remained at the time of the preparation of our financial statements for 2022.

A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We did not design or maintain an effective control environment as we lacked sufficient oversight of activities related to our internal controls over financial reporting due to a lack of an appropriate level of experience and training commensurate with public company requirements.

We did not design or maintain an effective control environment as we lacked sufficient oversight of activities related to our internal control over financial reporting due to a lack of an appropriate level of experience and training commensurate with public company requirements.

This material weakness resulted in our identification of the following additional material weaknesses:

(1) we did not maintain formal accounting policies and procedures and did not design, document, and maintain controls related to substantially all of our business processes to achieve complete, accurate, and timely financial accounting, reporting, and disclosures, including controls over account reconciliations, segregation of duties, and the preparation and review of journal entries;

We did not design and maintain effective controls over information technology, or IT, general controls for information systems and applications that are relevant to the preparation of the consolidated financial statements.

applications, programs, and data to appropriate personnel, (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored, and (iv) testing and approval of controls for program development to ensure that new software development is aligned with business and IT requirements.

These IT deficiencies, when aggregated, could impact effective segregation of duties as well as the effectiveness of IT-dependent controls

that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected.

and (2) we did not design and maintain effective controls over information technology, or IT, general controls for information systems and applications that are relevant to the preparation of the consolidated financial statements.

Specifically, we did not design and maintain (i) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized, and implemented appropriately that are relevant to the preparation of our financial statements, (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate personnel, (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored, and (iv) testing and approval of controls for program development to ensure that new software development is aligned with business and IT requirements.

These IT deficiencies, when aggregated, could impact effective segregation of duties as well as the effectiveness of IT-dependent controls that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected.

Accordingly, our management has determined these deficiencies in the aggregate constitute a material weakness.

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However, each of the material weaknesses described above could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected, and, accordingly, we determined that these control deficiencies constitute material weaknesses.

To address our material weaknesses, we have added personnel and engaged an external advisor to assist with evaluating and documenting the design and operating effectiveness of our internal controls over financial reporting and assisting with the remediation of deficiencies, including implementing new controls and processes.

We intend to continue to take steps to remediate the material weaknesses described above through hiring additional personnel with public company experience, and further evolving our accounting and business processes related to internal controls over financial reporting.

To address our material weaknesses, we added, and intend to continue to add as necessary, personnel with public company experience and engaged an external advisor to assist with evaluating and documenting the design and operating effectiveness of our internal control over financial reporting and assisting with the remediation of deficiencies, including implementing new controls and processes.

We intend to further evolve our accounting and business processes related to internal control over financial reporting.

We will not be able to fully remediate these material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time.

Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal controls over financial reporting or that they will prevent or avoid potential future material weaknesses.

Furthermore, we cannot guarantee that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.

Further, weaknesses in our disclosure controls and internal controls over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our annual or interim financial statements.

Neither our management nor our independent registered public accounting firm has performed an evaluation of our internal controls over financial reporting in accordance with the SEC rules because no such evaluation has been required.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting until the filing of our second Annual Report on Form 10-K following

At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal controls over financial reporting is documented, designed, or operating.

Any failure to implement and maintain effective internal controls over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal controls over financial reporting that we will eventually be required to include in our periodic reports that are filed with the SEC.

Ineffective disclosure controls and procedures and internal controls over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock.

In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the New York Stock Exchange.

Further weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our

operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our annual or interim financial statements.

Our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting for the first time in connection with the filing of this Annual Report, and as a result of the material weaknesses described above, our independent registered public accounting firm's report states that our internal control over financial reporting is not currently effective.

Covenants in our debt agreements may restrict our borrowing capacity or operating activities and adversely affect our financial condition.

Our Revolving Credit and Security Agreement with Barclays Bank PLC, or the Concierge Facility, and our Revolving Credit and Guaranty Agreement with Barclays Bank PLC, or the Revolving Credit Facility, contain, and any future agreement relating to additional indebtedness which we may enter into may contain,

various financial covenants.

The Concierge Facility, which is secured by, and can be used to borrow against, eligible receivables and cash related to a part of our Compass Concierge program, and our Revolving Credit Facility, which is secured by substantially all the assets of us and our subsidiary guarantors, contains customary representations, warranties, affirmative covenants, such as financial statement reporting requirements, negative covenants, and financial covenants applicable to us and our restricted subsidiaries.

Our Revolving Credit and Security Agreement with Barclays Bank PLC (the “Concierge Facility”) and our Revolving Credit and Guaranty Agreement with Barclays Bank PLC (the “Revolving Credit Facility”) contain, and any future agreement relating to additional indebtedness which we may enter into may contain, various financial covenants.

The Concierge Facility, which is secured by, and can be used to borrow against, eligible receivables and cash related to part of our Compass Concierge Program, and our Revolving Credit Facility, which is secured by substantially all the assets of us and our subsidiary guarantors, contains customary representations, warranties, affirmative covenants, such as financial statement reporting requirements, negative covenants, and financial covenants applicable to us and our restricted subsidiaries.

The negative covenants include restrictions that, among other things, restrict our and our subsidiaries’ ability 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.

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the occurrence of such an event may have an adverse impact on our financial condition and results of operations.

Our ability to use our net operating losses, or NOLs, and other tax attributes may be limited.

As of December 31, 2021, we had approximately $1.2 billion of federal and $1.2 billion of state NOLs available to offset future taxable income.

Certain of our federal NOLs will begin to expire in 2032 and certain of our state NOLs will begin to expire in 2029.

The realization of these net operating losses depends on our future taxable income and there is a risk that these carryforwards could expire unused, which could materially affect our operating results.

Our ability to use our net operating losses and other tax attributes may be limited.

Certain of our federal net operating losses (“NOLs”) will begin to expire in 2032 and certain of our state NOLs will begin to expire in 2026.

The realization of these net operating losses depends on our future taxable income and there is a risk that these NOL carryforwards could expire unused, which could materially affect our operating results.

In addition, under Sections 382 and 383 of the U.S.

Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period is subject to limitations on its ability to utilize its pre-change NOLs

and other tax attributes such as research tax credits to offset future taxable income.

Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period is subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes, such as research tax credits to offset future taxable income.

We have not performed an analysis to determine whether our past issuances of stock and other changes in our stock ownership may have resulted in one or more ownership changes.

If it is determined that we have in the past experienced an ownership change, or if we undergo one or more ownership changes as a result of our IPO or future transactions in our stock, then our ability to utilize NOLs and other pre-change tax

attributes could be limited by Sections 382 and 383 of the Code.

Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 or 383 of the Code.

Future changes in our stock ownership could result in an ownership change under Sections 382 or 383 of the Code.

Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations.

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Changes in accounting standards, subjective assumptions and estimates used by management related to complex accounting matters could have an adverse effect on our business, financial condition, and results of operations.

Generally accepted accounting principles in the United States of America, or GAAP, and related accounting pronouncements, implementation guidance and interpretations with regard to a wide range of matters, such as revenue recognition, lease accounting, stock-based compensation, asset impairments, valuation reserves, income taxes and the fair value and associated useful lives of acquired long-lived assets, intangible assets and goodwill, are highly complex and involve many subjective assumptions, estimates and judgments made by management.

Generally accepted accounting principles in the U.S.

(“GAAP”) and related accounting pronouncements, implementation guidance, and interpretations, such as revenue recognition, lease accounting, stock-based compensation, asset impairments, valuation reserves, income taxes, and the fair value and associated useful lives of acquired long-lived assets, intangible assets, and goodwill, are highly complex and involve many subjective assumptions, estimates, and judgments made by management.

Changes in these rules or their interpretations or changes in underlying assumptions, estimates, or judgments made by management could significantly change our reported results and adversely impact our business, financial condition, and results of operations.

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Our platform is highly complex and the software and code underlying our platform is interconnected and may contain undetected errors, bugs, or vulnerabilities, some of which may only be discovered after the code or software has been released.

We release or update software code regularly and this practice may result in the more frequent introduction of errors, bugs, or vulnerabilities into the software underlying our platform, which can impact the agent and their client experience on our platform.

Additionally, due to the interoperative nature of the software and the systems underlying our platform, modifications to certain parts of our code, including changes to our mobile app, website, systems or third party application programming interfaces on which our platform rely, could have an unintended impact on other sections of our software or system, which may result in errors, bugs, or vulnerabilities to our platform.

Any errors, bugs, or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of our agents or their clients, loss of revenue or liability for damages, any of which could adversely affect our growth prospects and our business, financial condition and results of operations.

We regularly release or update software code, which may result in more frequent introduction of errors, bugs, or vulnerabilities into the software underlying our platform, potentially impacting the agent’s and their client’s experience on our platform.

Additionally, due to the interoperative nature of the software and the systems underlying our platform, modifications to certain parts of our code, including changes to our mobile application, website, systems, or third-party application programming interfaces on which our platform rely, could have an unintended impact on other sections of our software or system, which may result in errors, bugs, or vulnerabilities to our platform.

Any errors, bugs, or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of our agents or our agents’ clients, loss of revenue or liability for damages, any of which could adversely affect our growth prospects and our business, financial condition, and results of operations.

Furthermore, our development and testing processes may not detect errors, bugs, or vulnerabilities in our technology offerings prior to their implementation as they may not be identified or detected at the time of implementation.

Any inefficiencies, errors, bugs, system misconfiguration, technical problems, or vulnerabilities arising in our technology offerings after their release could reduce the quality of our products, system performance, or interfere with our agents’ access to and use of our technology and offerings.

Our management team has limited experience in operating a public company.

Our management team has limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies.

Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.

These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management

of our business, which could adversely affect our business, financial condition, and results of operations.

Our company culture has contributed to our success, and if we cannot maintain this culture as we grow, our business could be harmed.

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failure to identify, attract, reward, and retain people in leadership positions in our organization who share and further our culture, values, and mission;

the increasing size and geographic diversity of our workforce;

shelter-in-place

orders in certain jurisdictions where we operate that may result in many of our employees working remotely;

the inability to achieve adherence to our internal policies and core values;

increasing size and geographic diversity of our workforce;

inability to achieve adherence to our internal policies and core values;

the continued challenges of a rapidly-evolving industry;

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negative perception of our treatment of employees or our response to employee sentiment related to political or social causes or actions of management;

the integration of new personnel and businesses from acquisitions.

and the integration of new personnel and businesses from acquisitions.

In addition, many of our employees continue to work remotely, which may adversely affect our efficiency and morale.

Our return to office initiative varies across geographies and certain employees may not agree with our approach and as a result may seek employment elsewhere.

Additionally, our return to office approach could expose our employees to health risks and could result in additional costs to us.

In addition, we have at times undertaken workforce reductions to better align our operations with our strategic priorities, to manage our cost structure, or in connection with acquisitions.

For example, in response to the early effects of the COVID-19 pandemic

on the industry, including our business, we took certain cost-saving measures, including reduction of our workforce and salary reductions.

Although we have increased our workforce to above pre-pandemic levels

and the salary reductions have been reversed and we have made our employees whole through additional equity awards, there can be no assurance that these actions will not adversely affect employee morale, our culture and our ability to attract and retain employees.

For example, in response to macroeconomic conditions impacting our industry, we took certain cost-saving measures, such as reductions of our workforce in June and September 2022 and January 2023.

Although we took deliberate actions to provide impacted employees with equitable separation packages and transition services, there can be no assurance that these actions will not adversely affect employee morale, our culture, and our ability to attract and retain employees.

If we are not able to maintain our culture, our business, financial condition and results of operations could be adversely affected.

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We believe that we have developed a strong reputation for helping agents succeed on the basis of our rapid growth in recent years, the technological sophistication of our platform, and our ability to offer a wide range of high-quality services.

General awareness and the perceived quality and differentiation of our platform are important aspects of our efforts to attract and retain agents.

In addition, our actions and growth are frequently reported on in national and regional trade publications and other media, and media coverage of our business can be critical, and may not be fair or accurate.

Our reputation may be harmed due to adverse media coverage related to our actions, the actions of our agents, or other unforeseeable events, which may cause our ability to attract and retain agents to suffer.

General awareness and the perceived quality and differentiation of our platform are important aspects of our efforts to

attract and retain agents.

In addition, our actions and growth are frequently reported in national and regional trade publications and other media, and media coverage of our business can be critical, and may not be fair or accurate.

Our reputation may be harmed due to adverse media coverage related to our actions, the actions of our agents, or other events, which may cause our ability to attract and retain agents to suffer.

If we are unable to maintain or enhance agent awareness of our business, or if our reputation is damaged in a given market or nationally, our business, financial condition, and results of operations could be harmed.

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Incurring uninsured or underinsured costs or losses could harm our business.

We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity.

We receive, store and process personal information and other employee, agent, agents’ client and consumer information.

There are numerous federal and state laws, as well as regulations and industry guidelines, regarding privacy and the storing, use, processing, and disclosure and protection of personal information, which are continually evolving, subject to differing interpretations, and may be inconsistent between state and federal governments and across countries or conflict with other rules.

Additionally, laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the TCPA (as implemented by the Telemarketing Sales Rule), the CAN-SPAM Act,

and similar state consumer protection laws.

We seek to comply with industry standards and are subject to the terms of our own privacy policies and privacy-related obligations to third parties.

We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data security protection to the extent possible.

However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or regulations, making enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent.

Any failure or perceived failure by us to comply with our privacy policies, privacy-related obligations to agents, clients or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized access to or unintended release of personally identifiable information or other agent or client data, may result in governmental enforcement actions, litigation, or public statements against us by consumer advocacy groups or others.

Any of these events could cause us to incur significant costs in investigating and defending such claims and, if found liable, pay significant damages.

Further, these proceedings and any subsequent adverse outcomes may cause our agents and clients to lose trust in us, which could have a materially adverse effect on our reputation and business.

Any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of personal information, or regarding the manner in which the express or implied consent of agents and their clients for the use and disclosure of personal information is obtained, could require us to modify our platform and its features, possibly in a material manner and subject to increased compliance costs, which may limit our ability to innovate, improve and expand our platform and its features that make use of the personal information that our agents and their clients voluntarily share.

For example, California recently enacted legislation, the CCPA, that became operative on January 1, 2020 and became enforceable by the California Attorney General on July 1, 2020, along with related regulations which came into force on August 14, 2020.

The CCPA gives California residents expanded rights related to their personal information, including the right to access and delete their personal information, and receive detailed information about how their personal information is used and shared and increases the privacy and security obligations of businesses handling personal data.

The CCPA is enforceable by the California Attorney General and there is also a private right of action relating to certain data security incidents.

The CCPA provides for civil penalties for violations, which could result in statutory penalties of up to $2,500 per violation, or up to $7,500 per violation if the violation is intentional.

We cannot yet fully predict the impact of the CCPA or subsequent guidance on our business or operations, but it may require us to further modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

Decreased availability and increased costs of information could adversely affect our ability to meet our agents’ requirements and could have an adverse effect on our business, results of operations, and financial condition.

Additionally, the CPRA, which will take effect on January 1, 2023 and replace CCPA, imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt-outs for

certain uses of sensitive data and sharing of personal data as well as an expanded definition of “sale” to include sharing of personal information, and data minimization and data retention requirements.

The CPRA also establishes a new enforcement agency, the California Privacy Protection Agency, which may take a more active role in enforcement.

Other states have and are likely to continue to implement their own privacy statutes in the near term.

The effects of the CCPA, CPRA and other similar state regulations are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

Any of the foregoing could materially adversely affect our business, results of operations and financial condition.

We process, store, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to data privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, and/or unfavorable publicity.

We collect, store, share, and process personal information and other employee, agent, agents’ client and consumer information.

There are numerous federal and state laws, as well as regulations and industry guidelines, regarding privacy and the storing, use, processing, sharing, and disclosure and protection of personal information, which are continually evolving, subject to differing interpretations, and may be inconsistent between state and federal governments and across countries or conflict with other rules.

We seek to comply with industry standards, applicable laws, and legal obligations concerning data security protection, and are subject to the terms of our own privacy policies and privacy-related obligations to third parties.

However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, making enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent.

Any failure or perceived failure by us to comply with our privacy policies, terms of service, privacy-related obligations to agents, our agents’ clients or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized access to or unintended release of personally identifiable information or other agent or client data, may result in governmental enforcement actions, litigation, or public statements against us by consumer advocacy groups or others.

Any of these events could cause us to incur significant costs in investigating and defending such claims and, if found liable, pay significant fines or damages.

Further, these proceedings and any subsequent adverse outcomes may cause our agents and our agents’ clients to lose trust in us, which could have a materially adverse effect on our reputation and business.

Any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of personal information, or regarding the manner in which the express or implied consent of agents and our agents’ clients for the use and disclosure of personal information is obtained, could require us to modify our platform and its features, possibly in a material manner and subject to increased compliance costs, which may limit our ability to innovate, improve and expand our platform and its features that make use of the personal information that our agents and our agents’ clients voluntarily share.

Numerous states have enacted, or are in the process of enacting, state level data privacy laws and regulations aimed at creating and enhancing individual privacy rights by governing the collection, use, sharing, disclosure, selling, and retention of state residents’ personal information.

The continued proliferation of privacy laws in the jurisdictions in which we operate is likely to result in a disparate array of privacy rules with unaligned or conflicting provisions, accountability requirements, individual rights, and enforcement powers, which may require us to further modify our data processing practices and policies, and may subject us to increased regulatory scrutiny and business costs, and lead to unintended confusion among our agents’ and our agent’s clients.

Our agents operate as independent contractors and are responsible for their own data privacy compliance.

Additionally, we provide training and our platform provides tools and security controls to assist our agents with their data privacy compliance to the extent they store relevant data on our platform.

However, if an agent on our platform were to be subject to a claim for breach of data privacy laws, we could be found liable for their claims due to our relationship, which can require us to take more costly data security and compliance measures or to develop more complex systems.

Additionally, we provide training and our platform provides tools and security controls to assist our agents with their data privacy

compliance to the extent they store relevant data on our platform.

However, if an agent on our platform were to be subject to a claim for breach of data privacy laws, we could be found liable for their claims due to our relationship, which may require us to take more costly data security and compliance measures or to develop more complex systems.

Our fraud detection processes and information security systems may not successfully detect all fraudulent activity by third parties aimed at our employees or agents, which could adversely affect our reputation and business results.

Third-party cybersecurity threat actors have attempted in the past, and may attempt in the future, to conduct fraudulent activity by engaging with our agents or their clients, including in our title insurance and escrow business.

Third-party cybersecurity threat actors have attempted in the past, and may attempt in the future, to conduct fraudulent activity by engaging with our agents or our agents’ clients, using copycat websites, or illegitimate money transfer requests.

These threats may also affect our title insurance and escrow business.

We make a large number of wire transfers in connection with loan and real estate closings and process sensitive personal data in connection with these transactions.

Although we have sophisticated fraud detection processes and have taken other measures to continuously improve controls to identify fraudulent activity on our mobile app, website and internal systems, we may not be able to detect and prevent all such activity.

Persistent or pervasive fraudulent activity may cause our agents or their clients to lose trust in us and decrease or terminate their usage of our platform, which could materially harm our operations, business, results, and financial condition.

Although we have sophisticated fraud detection processes and have taken other measures to continuously improve controls to identify fraudulent activity on our mobile app, website and internal systems, we may not be able to detect or prevent all such activity.

Persistent or pervasive fraudulent activity may cause our agents or our agents’ clients to lose trust in us and decrease or terminate their usage of our services, which could materially harm our operations, business, results, and financial condition.

We utilize a number of third-party service providers to deliver web and mobile content and any disruption or delays in service from these third-party providers could adversely impact the delivery of our platform.

We primarily rely on Amazon Web Services in the U.S.

to host our cloud computing and storage needs.

Our brand, reputation and ability to attract customers and real estate partners and deliver quality products and services depend on the reliable performance of our network infrastructure and content delivery processes.

To deliver mobile app and web content, we utilize a number of third-party service providers to support essential functions of our business, including Amazon Web Services, who we primarily rely on to host our cloud computing and storage needs.

We do not own, control, or operate our cloud computing physical infrastructure or their data center providers.

Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, system

vulnerabilities, earthquakes and similar events at the sites of such providers.

Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, system vulnerabilities, earthquakes and similar events at the sites of such providers.

The occurrence of any of the foregoing events could result in damage to systems and hardware or could cause them to fail completely, and our insurance may not cover such events or may be insufficient to compensate us for losses that may occur.

A failure of these systems at one or multiple sites could result in reduced capabilities or a total failure of our systems, which could cause our mobile app or website to be inaccessible, impairing our agents’ ability to use our platform.

Problems faced by our third-party cloud service providers with their telecommunications network providers with which they contract or with the systems by which they allocate capacity among their customers, including us, could adversely affect the experience of our agents.

Our third-party cloud service providers could decide to close their facilities without adequate notice resulting in loss of service and negative effects in our systems.

Any financial difficulties, such as bankruptcy reorganization, faced by our third-party web-hosting providers

or any of the service providers with whom they contract may have negative effects on our business, the nature and extent of which are difficult to predict.

If our third-party web-hosting providers

are unable to keep up with our growing needs for capacity, our agents and their clients and our business could be harmed.

In addition, if distribution channels for our mobile app experience disruptions, such disruptions could adversely affect the ability of agents and their clients to access or update our mobile app, which could harm our business.

We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business, which may result from interruptions in our service as a result of system failures.

A failure of our third-party cloud service providers systems could result in reduced capabilities or a total failure of our systems, which could cause our mobile app or website to be inaccessible, impairing our agents’ ability to use our platform.

Their failure to perform as expected or as required by contract could result in significant disruptions and costs to our operations.

In light of our reliance on Amazon Web Services and other third-party cloud service providers, coupled with the complexity of obtaining replacement services, any disruption of or interference with our use of these third-party services could adversely impact our operations and business.

We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, which may result from interruptions in our service as a result of system failures.

Any errors, defects, disruptions or other performance problems with our services could harm our business, results of operations, and financial condition.

Third parties with whom we do business may be unable to honor their obligations to us or their actions may put us at risk.

We rely on third parties for various aspects of our business, including technology collaborations, advertising partners and development services agreements.

Although we require these parties to sign our data security addendum, their actions may put our business, reputation and brand at risk.

In many cases, third parties may be given access to sensitive and proprietary information or personal data in order to provide services and support to our teams or agents, and they may misappropriate and engage in unauthorized use of our information, technology or agents’ or their clients’ data.

In addition, the failure of these third parties to provide adequate services and technologies, or the failure of the third parties to adequately maintain or update their services and technologies, could result in a disruption to our business operations.

Further, disruptions in the mobile application industry, financial markets, economic downturns, poor business decisions, or reputational harm may adversely affect our partners and may increase their propensity to engage in fraud or otherwise illegal activity which could harm our business reputation, and they may not be able to continue honoring their obligations to us, or we may cease our arrangements with them.

Alternative arrangements and services may not be available to us on commercially reasonable terms or at all and we may experience business interruptions upon a transition to an alternative partner or vendor.

If we lose one or more business relationships, or experience a degradation of services, our business could be harmed and our financial results could be adversely affected.

Investors’ expectations of our performance relating to environmental, social, and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, employees and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance factors.

There is an increasing focus from certain investors, employees, and other stakeholders concerning corporate responsibility, specifically related to environmental, social, and governance (“ESG”) factors.

Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies relating to corporate responsibility are inadequate.

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Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead.

In addition, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals.

If we fail to satisfy the expectations of investors, employees and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected.

Catastrophic events may disrupt our business.

Natural disasters or other catastrophic events may cause damage or disruption to our operations, real estate commerce, and the global economy, and thus could harm our business.

For example, the COVID-19 pandemic

and the reactions of governments, markets, and the general public to the COVID-19 pandemic,

has resulted in and may continue to have a number of consequences for our business and results of operations, the ultimate magnitude of which is difficult to predict.

In addition, in the event that we communicate certain initiatives and goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals.

If we fail to satisfy the expectations of investors,

employees and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected.

Natural disasters and catastrophic events may disrupt real estate markets and harm our business.

Natural disasters or other catastrophic events, such as fires, hurricanes, earthquakes, windstorms, tornados, floods, power loss, telecommunications failure, cyber-attacks, war, civil unrest, terrorist attacks, or pandemics or epidemics may cause damage or disruption to our operations, real estate commerce, and the global economy, and thus, could harm our business, results of operations and financial condition.

In particular, the COVID-19 pandemic and the reactions of governments, markets, and the general public to the COVID-19 pandemic, caused a number of consequences for our business and results of operations.

Additionally, properties located in the markets in which we operate, including New York, Northern California, Southern California and South Florida, are more susceptible to certain natural hazards (such as fires, hurricanes, earthquakes, floods, or hail) than properties in other parts of the country.

In the event of a major fire, hurricane, earthquake, windstorm, tornado, flood or catastrophic event such as pandemic, flood, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure reputational harm, delays in developing our platform and solutions, breaches of data security and loss of critical data, all of which could harm our business, results of operations and financial condition.

Closures of local recording offices or other governmental offices in charge of real property records, including tax or lien-related records, would adversely affect our ability to conduct operations in the affected geographies.

Any of these delays will likely result in extended hold times, increased costs, and value impairment.

Also, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions.

A natural disaster or other catastrophic event in any of these cities could disrupt our operations and have a negative impact on our business.

As we grow our business, the need for business continuity planning and disaster recovery plans will increase in significance.

If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, and successfully execute on those plans in the event of a disaster or emergency, our business and reputation would be harmed.

Declining home inventory levels may result in insufficient supply, which could negatively impact home sale transaction growth.

Home inventory levels have been declining in certain markets and price points in recent years, which has caused more homeowners to retain their homes for longer periods of time, driving a negative impact on the volume of home sale transactions closed by our brokers and agents.

This decline has been caused by pressures outside our control, including slow or accelerated new housing construction, macroeconomic conditions, and real estate industry models that purchase homes for long-term rental or corporate use.

The continuing decline in home inventory levels could have a material adverse effect on our business and profitability.

Risks Related to Our Legal and Regulatory Environment

We are periodically subject to claims, lawsuits, government investigations, and other proceedings that may adversely affect our business, financial condition, and results of operations.

We may be subject to claims, lawsuits, arbitration proceedings, government investigations and other legal and regulatory proceedings in the ordinary course of business, including those involving labor and employment, anti-discrimination, commercial disputes, competition, professional liability and consumer complaints, intellectual property disputes, compliance with regulatory requirements, antitrust and anti-competition claims (including claims related to the NAR or MLS rules regarding buyer-broker commissions), securities laws and other matters, and we may become subject to additional types of claims, lawsuits, government investigations and legal or regulatory proceedings as our business grows and as we deploy new offerings, including proceedings related to our acquisitions, securities issuances or business practices.

We may be subject to claims, lawsuits, arbitration proceedings, government investigations, and other legal and regulatory proceedings in the ordinary course of business, including those involving labor and employment, anti-discrimination, commercial disputes, competition, professional liability, consumer complaints, personal injury, wrongful death, intellectual property disputes, compliance with regulatory requirements, antitrust and anti-competition claims (including claims related to NAR or MLS rules regarding buyer-broker commissions), securities laws, and other matters, and we may become subject to additional types of claims, lawsuits, government investigations and legal or regulatory proceedings if the regulatory landscape changes or as our business grows and as we deploy new offerings, including proceedings related to our acquisitions, securities issuances or business practices.

We may also be subject to disputes between us and our employees and agents, which are primarily governed by mandatory arbitration provisions.

The results of any such claims, lawsuits, arbitration proceedings, government investigations or other legal or regulatory proceedings cannot be predicted with certainty.

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Determining reserves for our pending litigation is a complex and fact-intensive process that requires significant subjective judgment and speculation.

These proceedings could also result in harm to our reputation and brand, sanctions, consent decrees, injunctions or other orders requiring a change in our business practices.

It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that could adversely affect our business, financial condition, and results of operations, or could cause harm to our reputation and brand, sanctions, consent decrees, injunctions or other orders requiring a change in our business practices.

Any of these consequences could adversely affect our business, financial condition and results of operations.

Furthermore, under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of our business and commercial partners and current and former directors, officers and employees.

For example, in 2021, we settled a lawsuit involving plaintiff Avi Dorfman, who sought compensation for certain services and other contributions allegedly provided in our formation, and recorded an expense of $21.3 million in connection with the settlement within General and administrative expense in the accompanying consolidated statements of operations.

In addition, since 2016 we have included mandatory arbitration provisions in our agreements with each of our agents, and since 2018 we have added mandatory arbitration provisions in our agreements with our employees.

The provisions are intended to cover all disputes between us and our employees and agents, if permitted by law.

These provisions are intended to streamline the litigation process for all parties involved, as arbitration can in some cases be faster and less costly than litigating disputes in state or federal court.

However, arbitration may become more costly for us or the volume of arbitration may increase and become burdensome, and the use of arbitration provisions may subject us to certain risks to our reputation and brand, as these provisions have been the subject of increasing public scrutiny.

In addition, these mandatory arbitration provisions are intended to cover claims related to our agent equity program, if permitted by law, though it is currently unclear whether such provisions are enforceable with respect to claims arising under the U.S.

federal securities laws.

In order to minimize these risks to our reputation and brand, we may limit our use of arbitration provisions or be required to do so in a legal or regulatory proceeding, either of which could increase our litigation costs and exposure.

Further, with the potential for conflicting rules regarding the scope and enforceability of arbitration on a state-by-state basis,

as well as between state and federal law, there is a risk that some or all of our arbitration provisions could be subject to challenge or may need to be revised to exempt certain categories of protection.

If our arbitration agreements were found to be unenforceable, in whole or in part, or specific claims are required to be exempted from arbitration, we could experience an increase in our costs to litigate disputes and the time involved in resolving such disputes, and we could face increased exposure to potentially costly lawsuits, each of which could adversely affect our business, financial condition and results of operations.

In addition, litigation, claims, and regulatory proceedings against companies unrelated to us in the residential real estate or technology industry, or in other industries, may impact us when the rulings in those cases cover practices common to the broader industry.

Examples may include claims associated with RESPA compliance, broker fiduciary duties, and sales agent classification.

To the extent these claims against unrelated companies are successful and we or our agents cannot distinguish our or their practices (or our industry’s practices), we could face significant liability and could be required to

modify certain business practices or relationships, either of which could materially and adversely impact our business, financial condition, and results of operations.

We classify our agents as independent contractors, and if federal or state law mandates that they be classified as employees, our business, financial condition, and results of operations would be adversely impacted.

We recruit agents as independent contractors and are subject to federal regulations and applicable state laws and guidelines regarding independent contractor classifications.

We engage independent contractors that are subject to federal regulations and applicable state laws and guidelines regarding independent contractor classifications.

These regulations, laws and guidelines are subject to judicial and agency interpretation.

Moreover, such regulations, laws, guidelines and interpretations continue to evolve.

California changed its classification laws effective January 1, 2020 (with a specific carveout for real estate agents) and the United States Congress and certain states have introduced proposed changes to existing classification law;

additionally, the Biden administration may make additional changes to applicable laws.

California changed its classification laws effective January 1, 2020 (with a specific carveout for real estate agents).

Additionally, federal and other state governments have introduced and may continue to introduce proposed changes to existing classification laws.

If our business is found to have misclassified employees as independent contractors, we could face penalties and have additional exposure under laws regarding employee classification, federal and state tax, workers’ compensation, unemployment benefits, compensation, overtime, minimum wage, meal and rest periods, and discrimination laws.

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We could also incur substantial costs, penalties and damages due to any such future challenges by current or former professionals to our classification or compensation practices, including with respect to their status as exempt or non-exempt employees.

Any of these outcomes could result in substantial costs to us, could significantly impair our financial condition and our ability to conduct our business as currently contemplated, and could damage our reputation and impair our ability to attract agents.

Any of these outcomes could result in substantial costs to us, significantly impair our financial condition and our ability to conduct our business as currently contemplated, damage our reputation, and impair our ability to attract agents.

In addition, we work with international staffing organizations that hire contractors in various jurisdictions who are subject to various local laws, including labor and employment laws, that differ from those in the United States.

We may be subject to claims as a result of the staffing agencies’ practices, which are outside our control or direction.

We may also be subject to claims that these contractors are employees of Compass.

We are subject to a variety of federal and state laws, many of which are unsettled and still developing, and certain of our businesses are highly regulated.

Any failure to comply with such regulations or any changes in such regulations could adversely affect our business.

Our real estate brokerage business, our title and escrow business, our mortgage joint venture and the businesses of our agents must comply with RESPA and a variety of similar state regulations.

RESPA and comparable state statutes prohibit providing or receiving payments, or other things of value, for the referral of business to adjacent service providers in connection with the closing of certain real estate transactions such as those involving federally-backed mortgages (under RESPA) or any residential sale (under certain state regulations).

Our real estate brokerage business, our title and escrow business, our mortgage joint venture, OriginPoint, and the businesses of our agents must comply with laws such as RESPA, the Fair Housing Act, the Dodd-Frank Act, the Exchange Act, and federal advertising and other laws, as well as some comparable state statutes;

rules of trade organizations such as NAR and local MLSs .

RESPA and comparable state statutes prohibit providing or receiving payments, or other things of value, for the referral of business to settlement service providers in connection with the closing of certain real estate transactions.

Such laws may to some extent impose limitations on arrangements involving our real estate brokerage, escrow services, title agency and mortgage origination services.

RESPA and related regulations do, however, contain a number of provisions that allow for payments or fee splits between providers if certain requirements are met, including fee splits between title underwriters and agents, brokers and agents, and market-based fees for the provision of goods or services and marketing arrangements.

In addition, RESPA allows for referrals to affiliated entities, when specific requirements have been met.

We rely on these provisions in conducting our business activities and believe our arrangements comply with RESPA.

However, RESPA compliance may become a greater challenge under certain administrations for most industry participants offering title and escrow services and mortgage origination services, including brokerages, because of expansive interpretations of RESPA or similar state statutes by certain courts and regulators.

RESPA compliance may become a greater challenge under certain administrations for most industry participants offering title and escrow services and mortgage origination services, including brokerages, because of expansive interpretations of RESPA or similar state statutes by certain courts and regulators.

Permissible activities under state statutes similar to RESPA may be interpreted more narrowly and enforcement proceedings of those statutes by state regulatory authorities may also be aggressively pursued.

RESPA also has been invoked by plaintiffs in private litigation for various purposes and some state authorities have also asserted enforcement rights.

The mortgage industry is a highly regulated industry so if any applicable local, state or federal laws change it may impact our business.

In addition, title and escrow services are highly regulated.

Our title agency services business also is subject to regulation by insurance and other regulatory authorities in each state in which we provide title insurance.

For example, the State of Washington Office of Insurance Commissioner ordered our Modus Title subsidiary’s insurance producer license revoked as of April 1, 2021.

Even though the order was rescinded as of June 9, 2021 and the license revocation was stayed throughout the appeal process, our title agency services business could be subject to similar types of actions in the future, which may not be resolved in our favor.

We are also, to a lesser extent, subject to various other rules and regulations such as “controlled business” statutes, which impose limitations on affiliations between providers of title and escrow services on the one hand, and real estate brokers, mortgage lenders and other real estate service providers on the other hand, or similar laws or regulations that would limit or restrict transactions among affiliates in a manner that would limit or restrict collaboration among our businesses.

In addition, our title agency services business is also subject to regulation by insurance and other regulatory authorities in each state in which we provide title insurance.

We are also, to a lesser extent, subject to various other rules and regulations such as “controlled business” statutes and similar laws or regulations that would limit or restrict transactions among affiliates in a manner that would limit or restrict collaboration among our businesses.

For certain licenses, we are required to designate a broker of record as qualified individuals and/or persons who control and supervise the operations of applicable licensed entities.

Certain licensed entities also are subject to routine examination and monitoring by state licensing authorities.

We cannot assure you that we, or our licensed personnel, are and will remain at all times, in full compliance with state and federal real estate, title insurance and escrow, and consumer protection laws and regulations, and we may be subject to litigation, government investigations and enforcement actions, fines or other penalties in the event of any non-compliance.

We cannot provide assurances that we, or our licensed personnel, are and will remain at all times, in full compliance with state and federal real estate, title insurance and escrow, and consumer protection laws and regulations, and we may be subject to litigation, government investigations and enforcement actions, fines or other penalties in the event of any non-compliance.

As a result of findings from examinations, we also may be required to take a number of corrective actions, including modifying business practices and making refunds of fees or money earned.

In addition, adverse findings in one state may be relied on by another state to conduct investigations and impose remedies.

In addition, adverse findings in one state may

be relied on by another state to conduct investigations and impose remedies.

If we apply for new licenses, we will become subject to additional licensing requirements, which we may not be in compliance with at all times.

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Our business reputation with consumers and third parties also could be damaged.

Compliance with, and monitoring of, these laws and regulations is complicated and costly and may inhibit our ability to innovate or grow.

Our failure to comply with any of the foregoing laws and regulations may subject us to fines, penalties, injunctions and/or potential criminal violations.

Compliance with, and monitoring of, the foregoing laws and regulations is complicated and costly and may inhibit our ability to innovate or grow.

Our failure to comply with any of these laws and regulations may subject us to fines, penalties, injunctions and/or potential criminal violations.

Any changes to these laws or regulations or any new laws or regulations may make it more difficult for us to operate our business and may have a material adverse effect on our operations.

We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with

such laws can subject us to criminal or civil liability and harm our business, financial condition, and results of operations.

We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition, and results of operations.

We are subject to the U.S.

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Any costs incurred to prevent or mitigate this potential liability could also harm our business, financial condition, and results of operations.

Adverse decisions in litigation against companies unrelated to us could impact our business practices and those of our agents in a manner that adversely impacts our financial condition and results of operations.

Litigation, claims and regulatory proceedings against other participants in the residential real estate or technology industry may impact us when the rulings in those cases cover practices common to the broader industry.

Examples may include claims associated with RESPA compliance, broker fiduciary duties, and sales agent classification.

Similarly, we may be impacted by litigation and other claims against companies in other industries.

To the extent plaintiffs are successful in these types of litigation matters, and we or our agents cannot distinguish our or their practices (or our industry’s practices), we and our agents could face significant liability and could be required to modify certain business practices or relationships, either of which could materially and adversely impact our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

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Our trade secrets, trademarks, copyrights and other intellectual property rights are important assets, and litigation to defend intellectual property can be expensive and lengthy.

Various factors outside of our control also pose a threat to our intellectual property rights, as well as to our platform and technology offerings.

Various factors may pose a threat to our intellectual property rights, as well as to our platform and technology offerings.

For example, we may fail to obtain effective intellectual property protection or effective intellectual property protection may not be available in every country in which our products and services are available.

Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable.

Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective;

and our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable.

Despite our efforts to protect our proprietary rights, there can be no assurance our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business or that unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary.

In addition to registered intellectual property rights such as trademark registrations, we rely on non-registered proprietary

information and technology, such as trade secrets, confidential information, know-how and

technical information.

In order to protect our proprietary information and technology, we rely in part on agreements with our employees, investors, independent contractors and other third parties that place restrictions on the use and disclosure of this intellectual property.

In addition to registered intellectual property rights such as trademark registrations, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how, and technical information.

To protect our proprietary information and technology, we rely in part on agreements with our employees, investors, independent contractors, vendors and other third parties that place restrictions on the use and disclosure of this intellectual property.

These agreements may be breached, or this intellectual property, including trade secrets, may otherwise be disclosed or become known to our competitors, which could cause us to lose any competitive advantage resulting from this intellectual property.

To the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how

and inventions.

To the extent that our employees, independent contractors, vendors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality.

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We cannot guarantee that our internally developed or acquired systems, technologies and content do not and will not infringe the intellectual property rights of others.

In addition, we use content, software and other intellectual property rights from third parties and may be subject to claims of infringement or misappropriation if we have failed to obtain appropriate intellectual property licenses from such parties, or such parties do not possess the necessary intellectual property rights to the products or services they license to our business.

We have in the past and may in the future be subject to claims that we have infringed the copyrights, trademarks, or other intellectual property rights of a third party.

In addition, we rely on products, content, software, technology, and other intellectual property that we license from third parties for use in our platform, its features, and technology offerings.

These third parties may be subject to infringement claims, the results of which could severely limit our ability to develop our services containing their intellectual property and our business could be disrupted or otherwise harmed.

We cannot guarantee that these licenses will continue to be available to us on commercially reasonable terms, if at all, and we may be subject to claims of infringement or misappropriation if we have failed to obtain appropriate intellectual property licenses from such parties, or such parties do not possess the necessary intellectual property rights to the products or services they license to our business.

If we are unable to obtain necessary licenses from third parties, we may be forced to acquire or develop alternate technology, which may require significant time and effort and may be of lower quality or performance standards and/or may be prohibited by contract from developing competing products.

We have been, and may be, subject to claims that we have infringed the copyrights, trademarks, or other intellectual property rights of a third party.

Any intellectual property-related infringement or misappropriation claims, whether or not meritorious, could result in costly litigation and divert management resources and attention.

Should we be found liable for infringement or misappropriation, we may be required to enter into licensing agreements, if available on acceptable terms or at all, pay substantial damages, limit or curtail our offerings and technologies or take other action, which could harm our business and results of operations.

Moreover, we may need to redesign some of our systems and technologies to avoid future infringement liability.

Should we be found liable for infringement or misappropriation, we may be required to redesign some of our systems and technologies, enter into licensing agreements, pay substantial damages, limit or curtail our offerings and technologies, or take other action, which could harm our business and results of operations.

Any of the foregoing could prevent us from competing effectively and could expose our business to significant liabilities.

We rely on licenses to use the intellectual property rights of third parties which are incorporated into our platform, its features and technology offerings.

Failure to renew or expand existing licenses may require us to modify, limit or discontinue certain offerings, which could materially affect our business, financial condition and results of operations.

We rely on products, technologies and intellectual property that we license from third parties for use in our platform, its features and technology offerings.

We cannot assure that these third- party licenses, or support for such licensed products and technologies, will continue to be available to us on commercially reasonable terms, if at all.

In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit our use of the products and technologies that include or incorporate the licensed intellectual property.

We cannot be certain that our licensors are not infringing the intellectual property rights of others or that our suppliers and licensors have sufficient rights to the technology in all jurisdictions in which we may operate.

Some of our license agreements may be terminated by our licensors for convenience.

If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to develop our services containing that technology could be severely limited and our business could be disrupted or otherwise harmed.

Additionally, if we are unable to obtain necessary technology from third parties, we may be forced to acquire or develop alternate technology, which may require significant time and effort and may be of lower quality or performance standards and/or may be prohibited by contract from developing competing products.

This would limit and delay our ability to provide new or competitive offerings and increase our costs.

If alternate technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition and results of operations.

Some of our products and services contain open source software, which may pose particular risks to our proprietary software, products, and services in a manner that could have a negative effect on our business.

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or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services.

Additionally, we could face claims from third parties alleging ownership

of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license.

These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until it can re-engineer such

source code in a manner that avoids infringement.

This re-engineering process

could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process

successfully.

In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software.

Additionally, we could face claims from third parties alleging ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license.

These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license, or cease offering the products or services unless and until we can re-engineer such source code in a manner that avoids infringement.

This re-engineering process could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully.

In addition, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software.

Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business, financial condition and results of operations.

Risks Related to Ownership of Our Class A Common Stock

The multi-class structure of our common stock has the effect of concentrating voting power with Robert Reffkin, our founder, Chairman and Chief Executive Officer, and his financial planning vehicles and affiliated trusts, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our board of directors, the adoption of amendments to our restated certificate of incorporation and amended and restated bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions.

As of February 14, 2022, Robert Reffkin, our founder, Chairman and Chief Executive Officer, together with his financial planning vehicles and affiliated trusts, (and including his shares of Class A common stock subject to outstanding Restricted Stock Units (“RSUs”) for which the service condition has been satisfied or would be satisfied within 60 days of February 14, 2022), held 9,023,131 shares of Class A common stock and all of the issued and outstanding shares of Class C common stock.

Additionally, our founder holds two performance-based RSU awards and one time-based RSU award, which vest monthly.

Pursuant to the exchange agreement, our founder has a right to require us to exchange any shares of Class A common stock that he receives upon settlement of his vested RSUs for shares of Class C common stock, which he has elected in connection with the 2021 net settlement and future monthly net settlements.

As of February 14, 2022, our founder, together with his financial planning vehicles and affiliated trusts, held approximately 48.9% of the voting power of our outstanding capital stock, which voting power may increase over time as our founder’s RSU awards vest and settle and resulting shares of Class A common stock get exchanged for shares of Class C common stock.

If all such awards had been vested, settled and exchanged for shares of Class C common stock as of February 14, 2022, our founder, together with his financial planning vehicles and affiliated trusts, would have held approximately 67% of the voting power of our outstanding capital stock.

As a result, our founder is able to determine and may significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our restated certificate of incorporation and amended and restated bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction.

Our founder may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests.

The multi-class structure of our common stock has the effect of concentrating voting power with Robert Reffkin, our founder, Chairman, and Chief Executive Officer, and his financial planning vehicles and affiliated trusts.

As of February 22, 2023, Robert Reffkin, our founder, Chairman, and Chief Executive Officer, together with his financial planning vehicles and affiliated trusts (for purposes of this risk factor discussion, “Mr.

Reffkin”) (and including his shares of Class A common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of February 22, 2023), held 8,749,266 shares of Class A common stock and all of the issued and outstanding shares of Class C common stock.

Additionally, Mr.

Reffkin holds two performance-based RSU awards and one time-based RSU award, which vest monthly.

Pursuant to the exchange agreement, Mr.

Reffkin has a right to require us to exchange any shares of Class A common stock that he receives upon settlement of his vested RSUs for shares of Class C common stock, which he has elected in connection with the 2022 net settlement and future monthly net settlements.

As of February 22, 2023, Mr.

Reffkin held approximately 47.3% of the voting power of our outstanding capital stock, which may increase over time as his RSU awards vest and settle and resulting shares of Class A common stock get exchanged for shares of Class C common stock.

If all such awards had been vested, settled and exchanged for shares of Class C common stock as of February 22, 2023, Mr.

Reffkin would have held approximately 64% of the voting power of our outstanding capital stock.

As a result, Mr.

Reffkin is able to determine and may significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our restated certificate of incorporation and amended and restated bylaws, and the approval of any merger, consolidation,

sale of all or substantially all of our assets, or other major corporate transaction.

This concentrated control may have the effect of delaying, preventing, or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company, and might ultimately affect the market price of our Class A common stock.

Future transfers by the holders of Class C common stock will generally result in those shares automatically converting into shares of Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning or other transfers by our founder.

In addition, each share of Class C common stock will convert automatically into one share of Class A common stock upon the earlier of (i) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the first date on which the number of shares of our Class C common stock held by our founder, his permitted entities and permitted transferees is less than 50% of the number of shares of Class C common stock held by our founder, permitted transferees and permitted entities as of the date of the effectiveness of our IPO registration statement;

(ii) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the first date that both (A) our founder is no longer providing services to us as an officer, employee

or consultant and (B) our founder is no longer a member of our board of directors as a result of a voluntary resignation by our founder or as a result of a written request or agreement by our founder not to be renominated as a member of our board of directors at a meeting of our stockholders;

(iii) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the date on which our founder is terminated for cause (as defined in our restated certificate of incorporation);

(iv) the date that is 12 months after the death or disability (as defined in our restated certificate of incorporation) of our founder;

(v) two days prior to the date specified in writing upon which our shares of capital stock will be included on the S&P 500 index following written notice and confirmation from Standard & Poor’s of such specified date and;

(vi) the date specified by the affirmative vote of the holders of our Class C common stock not representing less than two-thirds (2/3)

of the voting power of the outstanding shares of our Class C common stock, voting separately as a single class;

or (vii) seven years from the date of the effectiveness of our IPO registration statement.

However, until one of these triggering events occurs, voting power will be concentrated with our founder and his financial planning vehicles and affiliated trusts.

In addition, each share of Class C common stock will convert automatically into one share of Class A common stock upon certain conditions.

However, until one of those certain triggering events occurs, voting power will be concentrated with Mr.

We cannot predict the effect our multi-class structure may have on the market price of our Class A common stock.

We cannot predict whether our multi-class structure will result in a lower or more volatile market price of our Class A common stock, in adverse publicity, or other adverse consequences.

For example, certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices.

In July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multi-class share structures to certain of its indices.

Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500.

Also in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and

multi-class structures and temporarily barred new multi-class listings from certain of its indices and in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria.

However, pursuant to our restated certificate of incorporation, each share of our Class C common stock will convert into one share of our Class A common stock two days prior to the date specified in writing upon which our shares of capital stock will be included on the S&P 500 index following written notice and confirmation from Standard & Poor’s of such specified date and inclusion.

Under such announced policies, the multi-class structure of our common stock would make us ineligible for inclusion in certain indices and may discourage such indices from selecting us for inclusion, notwithstanding this automatic termination provision.

We cannot predict whether our multi-class structure will result in a lower or more volatile market price of our Class A common stock, adverse publicity, or other adverse consequences.

Pursuant to our restated certificate of incorporation, each share of our Class C common stock will convert into one share of our Class A common stock two days prior to the date specified in writing upon which our shares of capital stock will be included on the S&P 500 index following written notice and confirmation from Standard & Poor’s of such specified date and inclusion.

Under certain index providers’ announced policies that restrict the inclusion of companies with multi-class share structures in certain of their indices, the multi-class structure of our common stock would make us ineligible for inclusion in certain indices and may discourage such indices from selecting us for inclusion, notwithstanding this automatic termination provision.

As a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to track those indices would not invest in our Class A common stock.

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As a result, the market price of our Class A common stock could be adversely affected.

The trading price of the shares of our Class A common stock is likely to be volatile, and purchasers of our Class A common stock could incur substantial losses.

The trading price of the shares of our Class A common stock is likely to be volatile.

Technology and real estate stocks historically have experienced high levels of volatility.

The trading price of our Class A common stock may fluctuate substantially.

These fluctuations could cause you to incur substantial losses, including all of your investment in our Class A common stock.

Factors that could cause fluctuations in the trading price of our Class A common stock include the following:

significant volatility in the market price and trading volume of technology companies in general and of companies in the real estate technology industry in particular;

Accordingly, the trading price of our Class A common stock may fluctuate substantially, due to factors including:

loss of investor confidence in, or significant volatility in the market price and trading volume of, technology companies in general and of companies in the real estate technology industry in particular;

changes in mortgage interest rates;

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announcements of new solutions, commercial relationships, acquisitions, or other events by us or our competitors;

price and volume fluctuations in the overall stock market from time to time;

price and volume fluctuations in the overall stock market;

changes in how agents perceive the benefits of our platform and future offerings;

the public’s reaction to our press releases, other public announcements, and filings with the SEC;

the public’s reaction to our press releases, other public announcements, and filings with the SEC, or those of other companies in the industries in which we compete;

fluctuations in the trading volume of our shares or the size of our public float;

sales of large blocks of our common stock;

actual or anticipated changes or fluctuations in our results of operations or financial projections;

sales, or the anticipated sale, of a substantial amount of our Class A common stock, particularly sales by our directors, executive officers, or principal stockholders;

fluctuations in our results of operations or financial projections;

changes in actual or future expectations of investors or securities analysts;

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governmental or regulatory actions or audits;

regulatory developments applicable to our business, including those related to privacy in the U.S.

regulatory developments applicable to our business;

real estate market conditions;

general economic conditions and trends;

major catastrophic events in our markets;

departures of key employees.

major catastrophic events;

and departures of key employees.

In addition, if the market for technology or real estate stocks, or the stock market, in general, experiences a loss of investor confidence, the trading price of our Class A common stock could decline for reasons unrelated to our business, financial condition or results of operations.

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If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our Class A common stock will, to some extent, depend on the research and reports that securities or industry analysts publish about us or our business.

The trading market for our Class A common stock may, to some extent, depend on the research and reports that securities or industry analysts publish about us or our business.

We do not have any control over these analysts.

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We may need to raise additional capital to continue to grow our business and we may not be able to raise additional capital on terms acceptable to us, or at all.

Growing and operating our business, including by continuously innovating, improving and expanding our platform, expanding our adjacent services and expanding into new markets, may require significant cash

outlays, liquidity reserves and capital expenditures.

Growing and operating our business, including by continuously innovating, improving, and expanding our platform, expanding our adjacent services and expanding into new markets, may require significant cash outlays, liquidity reserves, and capital expenditures.

If cash on hand, cash generated from operations, and cash equivalents and investment balances are not sufficient to meet our cash and liquidity needs, we may need to seek additional capital and we may not be able to raise the necessary cash on terms acceptable to us, or at all.

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If additional capital is not available to us on terms acceptable to us or at all, we may need to modify our business plans, which would harm our ability to grow our operations.

Sales of substantial amounts of our Class A common stock in the public markets, or the perception that they might occur, could cause the market price of our Class A common stock to fluctuate or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.

All of the shares of Class A common stock sold in our IPO are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, (the “Securities Act”), except for any shares held by our affiliates as defined in Rule 144 under the Securities Act (including shares purchased by our affiliates in the IPO).

All shares of Class A common stock issued prior to our IPO were subject to the lock-up agreement

or market stand-off agreements

until September 27, 2021 when our lock-up period

Upon expiration of the lock-up and

market stand-off agreements,

a higher number of sales of our Class A common stock than usual took place in the public market and the market price of our Class A common stock fluctuated.

On February 28, 2022, we plan to settle approximately 13,624,457 million shares of Class A common stock based on the same number of fully vested restricted stock units we granted to our agents who had deferred a portion of their commission income into our Agent Equity Program during calendar year 2021.

Those shares are freely tradeable and sales of those shares, to generate cash to cover estimated taxes on those RSU grants or otherwise, could occur.

Future sales of a substantial amounts of our Class A common stock, particularly sales by our directors, executive officers or principal stockholders, or the perception that such sales might occur in the future, could cause the market price of our Class A common stock to fluctuate or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.

Provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may limit attempts by our stockholders to replace or remove our current management.

Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition or other change in control of our company that the stockholders may consider favorable.

In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.

Among other things, our restated certificate of incorporation and amended and restated bylaws include provisions that:

provide that our board of directors is classified into three classes of directors with staggered three-year terms;

permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships;

require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws;

Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition, or other change in control of our company that the stockholders may consider favorable, including provisions that:

classify the board of directors into three classes with staggered three-year terms;

permit the board of directors to establish the number of directors and to fill any vacancies and newly-created directorships;

require super-majority voting to amend some provisions in our charter documents;

authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;

provide that only our chief executive officer, chairperson of our board of directors or a majority of our board of directors are authorized to call a special meeting of stockholders;

eliminate the ability of our stockholders to call special meetings of stockholders;

allow only our chief executive officer, chairperson of our board of directors, or a majority of our board of directors are authorized to call a special meeting of stockholders;

prohibit cumulative voting;

provide that directors may only be removed “for cause” and only with the approval of the holders of at least two-thirds

of the voting power of the then outstanding capital stock;

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws;

establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

Moreover, Section 203 of the Delaware General Corporation Law, or DGCL, may discourage, delay, or prevent a change in control of our company.

Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock.

permit the removal of directors only “for cause” and only with the approval of the holders of at least two-thirds of the voting power of the then outstanding capital stock;

prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of our stockholders;

expressly authorize the board of directors to make, alter, or repeal our bylaws;

and establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

Moreover, Section 203 of the Delaware General Corporation Law (“DGCL") may discourage, delay, or prevent a change in control of our company by imposing certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock.

Our restated certificate of incorporation and amended and restated bylaws contain exclusive forum provisions for certain claims, which may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine.

Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

Our restated certificate of incorporation provides that the federal district courts of the U.S.

In addition, our restated certificate of incorporation provides that the federal district courts of the U.S.

will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or Federal Forum Provision.

Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law.

While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and the Federal Forum Provision will apply, to the fullest extent permitted by law, to suits brought to enforce any duty or liability created by the Exchange Act.

Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court, to the fullest extent permitted by law.

Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.

Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision.

These provisions may limit a stockholders’ ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or employees, which may discourage lawsuits against us and our directors, officers, and employees.

Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation or restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and results of operations.

Because we do not anticipate paying any cash dividends on our Class A common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains.

However, there can be no assurance that federal or state courts will find the choice of forum provision contained in our restated certificate of incorporation or restated bylaws to be applicable or enforceable in every case.

We do not anticipate paying any cash dividends on our Class A common stock in the foreseeable future.

We have never declared or paid any dividends on our Class A common stock.

We currently intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future.

Any determination to pay dividends in the future will be at the discretion of our board of directors.

In addition, the terms of our future debt agreements, if any, may prevent us from paying dividends.

As a result, you may only receive a return on your investment in our Class A common stock if the market price of our Class A common stock increases.

Any future determination to pay dividends will be at the discretion of our board of directors, and will depend on our

financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant.

Unresolved Staff Comments.

We are headquartered in New York, New York, where we occupy approximately 100,000 square feet of office space pursuant to a lease that is expected to expire in May 2025 subject to the terms thereof.

We also lease operating and sales offices throughout the United States and internationally.

Legal Proceedings.

The information relating to legal proceedings contained in Note 11 to the consolidated financial statements included in Part II, Item 8 of this Annual Report is incorporated herein by this reference.

Mine Safety Disclosures.

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-K

Item 1A. Risk Factors