What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-02-28 compared with 2023-03-01 · 178 added, 237 removed, 452 unchanged (48% of the section changed)

2 unchanged sentences

You should carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

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.

Risks Related to Our Business and Operations

5 unchanged sentences

volatility in the residential real estate industry;

seasonal and cyclical

trends in the residential real estate industry;

seasonal and cyclical trends in the residential real estate industry;

changes in real estate market conditions;

11 unchanged sentences

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 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 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.

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 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.

Additionally, if we fail to manage our continuous rapid growth effectively, we may be unable to execute our business plan, which could have an adverse impact on our business and results of operations.

We have experienced rapid growth since our founding in 2012.

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

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

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;

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, 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.

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.

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

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 mortgage interest rates.

The Federal Reserve Board took aggressive actions aimed at controlling inflation in 2022 and 2023, including raising the interest rate and reducing its holdings of mortgage-backed securities.

Rising interest rates in 2022 and 2023 have contributed to rising mortgage interest rates, which in turn contributed to a decline in residential real estate home sale transaction volume and inventory constraints.

While the Federal Reserve Board has indicated that it was shifting its policy toward pausing additional interest rate increases and potentially lowering interest rates in 2024 as inflation declines, there is no guarantee that it will not shift its focus back to increasing interest rates or lower interest rate at a speed that we anticipate or at all.

Changes in the Federal Reserve Board’s policies are beyond our control and are difficult to predict and could negatively impact the residential real estate market, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Rising interest rates have contributed to a decline in residential real estate home sale transaction volume and title and escrow and mortgage activity, which has had an adverse effect on our business, financial condition and results of operations.

Rising interest rates have contributed to a decline in residential real estate home sale transaction volume, which has had an adverse effect on our business, financial condition and results of operations.

As mortgage interest rates rise, potential home sellers are more likely to choose to stay with their lower mortgage rate rather than sell their home and pay a higher mortgage interest rate with the purchase of another home, or prefer to rent rather than purchase a home.

Additionally, the overall affordability of homes generally decreases in the high mortgage interest rates environment.

Both of these trends have contributed to inventory constraints and a decline in home sale transaction volume in the recent years.

If inventory constraints remain and home sale transaction volume continues to decline, due to the mortgage interest rates or otherwise, we expect such decline to continue to have an adverse effect on our business, financial condition and results of operations.

A decline in home sale transaction volume also has a negative impact on the title and escrow activities, which could have an adverse effect on our business, financial condition and results of operations.

Rising interest rates have also had an adverse effect on the mortgage origination business of our mortgage joint venture.

As interest rates rise, mortgage interest rates rise as well, reducing demand for purchase mortgages and making refinancing generally a smaller portion of the mortgage loan market.

Reduced demand for purchase mortgages and refinancing generally results in an increase in competition among loan originators, which has, and is likely to continue to have, a negative impact on revenue volume and gross profit margin for our mortgage joint venture.

Ongoing industry antitrust class action litigation (including the Antitrust Lawsuits filed against us) or any related regulatory activities, could result in meaningful industry-wide changes and could have a materially adverse effect on our business, operations, financial condition, and results of operations.

The ongoing industry antitrust class action litigation, as well as the Antitrust Lawsuits filed against us (as described in more detail in Note 11 to our consolidated financial statements included elsewhere in this Annual Report (including any injunctive relief, appeals or settlements), either alone or in combination with related regulatory or governmental actions, or any resulting changes to competitive dynamics or consumer preferences, could result in meaningful industry-wide changes, including changes to the broker commission structure and meaningful decreases in the average broker commission rate (including the average buy-side commission rate).

Such changes could have a materially adverse effect on our business, operations, financial condition and results of operations.

There can be no assurances as to whether the DOJ or FTC, their state counterparts, state or federal courts, or other governmental body will determine that any industry practices or developments have an anti-competitive effect on the industry or are otherwise proscribed.

Any such determination could result in industry investigations, enforcement actions, changes in legislation, regulations, interpretations or regulatory guidance or other legislative or regulatory action or other actions, any of which could have the potential to result in additional limitations or restrictions on our business, cause material disruption to our business, result in judgments, settlements, penalties or fines (which may be material), or otherwise have a direct or indirect materially adverse effect on our business, financial condition and results of operations.

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

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.

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.

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.

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.

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

20 unchanged sentences

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.”

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.

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 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.

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, Texas and the tri-state area.

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.

real estate market could be performing well, a downturn in a geographic area where we have a material presence could result in a decline in our gross commission income and could have a material adverse effect on our operating results.

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

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.

Our success depends on our ability to continuously innovate and improve our platform to provide value to our agents and their clients.

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 our 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.

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

Our efforts to expand our operations, including our brokerage and integrated services businesses, and to offer additional integrated 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 we anticipate.

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

We think that the synergies between these integrated 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 integrated services are available only in certain markets.

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

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

While we plan to continue to expand our brokerage and integrated 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.

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

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.

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

3 unchanged sentences

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;

the attractiveness of our integrated services for agents

and our agents’ clients;

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

3 unchanged sentences

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.

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.

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.

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

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.

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

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.

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.

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 we are not able to continue to attract agents and our agents’ clients to our platform, our business, financial condition and results of operations could be adversely affected.

Our ability to recruit agents depends on the strength of our reputation, and adverse media coverage could harm our business.

We believe that we have developed a strong reputation for helping agents succeed on the basis of 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 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 adversely affected.

We have experienced rapid growth in the past, which may not be indicative of our future growth.

Additionally, given our recent focus on our expense structure and cost savings efforts, we may not be able to re-accelerate our business growth, which could have an adverse effect on our business, financial condition and results of operations.

We experienced rapid growth for several years since our founding in 2012 but in recent years, due to market conditions, our decision to conservatively manage our expense structure and focus on cost savings, as well as other factors, our rate of growth has slowed.

We may also make other decisions, such as more conservatively managing our expense structure, that could further slow our growth.

In the future, we may not be able to grow as fast as we had in the past or at all.

If we experience rapid growth again, given our recent focus on our expense structure and cost savings efforts, we may not be able to scale our business as quickly as we need to in order to take advantage of all the growth opportunities available to us and meet all of the demands of our new agents and their clients.

Any failure of or delay in scaling our business timely and efficiently could cause us to miss out on future opportunities.

Additionally, to support growth in the future, 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 use cash to satisfy payroll 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.

If we instead 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 payroll tax withholding obligations, which would result in dilution to our stockholders.

Our stock-based compensation primarily consists of granting 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 payroll tax withholding obligations for RSUs arise in connection with their settlement to employees.

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 payroll 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.” 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 payroll tax withholding obligations for our employees, under which shares of our Class A common stock with a market value equivalent to or greater than the tax withholding amounts would be automatically sold by the employees holding RSUs upon settlement to satisfy their payroll

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 payroll 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.

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

21 unchanged sentences

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.

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.

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

To attract and retain key personnel, we incur significant costs, including salaries and benefits and equity incentives.

11 unchanged sentences

These services facilitate the transfer of ownership of real property.

We may be subject to liability and losses arising from the provision of these services.

may be subject to liability and losses arising from the provision of these services.

For example, we may be subject to liability and losses if we improperly handle consumer or other third-party funds.

5 unchanged sentences

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.

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.

1 unchanged sentence

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 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.

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 integrated services, and we have experienced these difficulties and expenditures in connection with certain of our previous acquisitions.

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

8 unchanged sentences

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.

We may not be able to maintain or establish relationships with MLSs 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.

To provide these listings in our services, in addition to the information provided by our agents, we maintain relationships with MLSs 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 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.

Additionally, if the MLSs cease to be the

predominant source of listing data, we might not be able to provide comprehensive listing data to our agents and their 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.

Cybersecurity incidents could disrupt business operations and result in the loss of critical and confidential information or claims or litigation 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 and our data (including agent and client data) including:

1 unchanged sentence

• 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.

• 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.

2 unchanged sentences

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.

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.

20 unchanged sentences

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.

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

4 unchanged sentences

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, 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.

If any of our depository banks were to become unable to honor any portion of our deposits due to a bank failure or otherwise, 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.

2 unchanged sentences

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.

We have integrated, and may continue to integrate in the future, machine learning and AI in certain tools and features available on our platform.

Machine learning and AI technology present various operational, compliance and reputational risks and if any such risks were to materialize, our business and results of operations may be adversely affected.

We have integrated machine learning and AI in a number of tools and features available on our platform that our agents use in their daily activities.

For example, our “Likely to Sell” feature uses machine learning to recommend contacts to our agents with the highest likelihood of selling their homes within the next 12 months, and certain of our marketing tools use AI to help our agents write social media and marketing content, including, but not limited to, property descriptions and emails to their clients.

We may continue to integrate machine learning and AI technology in new offerings.

Notwithstanding the use of AI within our platform and certain agent activities, we have yet to utilize AI within our financial reporting or internal control over financial reporting functions.

Given that machine learning and AI is a new and rapidly developing technology that is in its early stages of business use, it presents a number of operational, compliance and reputational risks.

AI algorithms are currently known to sometimes produce unexpected results and behave in unpredictable ways (e.g., “hallucinatory behavior”) that can generate irrelevant, nonsensical, deficient or factually incorrect content and results, which may result in reputational harm to us and our agents and be damaging to our “Compass” brand.

Additionally, content, analyses or recommendations that are based on machine learning and AI might be found to be biased, discriminatory or harmful, might present ethical concerns and might violate current and future laws and regulations.

We expect that there will continue to be new laws or regulations concerning the use of machine learning and AI technology, which might be burdensome for us to comply with and may limit our ability to offer our existing tools and features or new offerings based on machine learning and AI technology.

Further, the use of machine learning and AI technology involves complexities and requires specialized expertise.

We may not be able to attract and retain top talent to support our machine learning and AI technology initiatives and maintain our systems and infrastructure.

Any disruption or failure in our machine learning and AI systems or infrastructure could result in delays and operational challenges.

If any of the operational, compliance or reputational risks were to materialize, our business and results of operations may be adversely affected.

We plan to expand into international markets, which will expose us to significant risks.

20 unchanged sentences

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 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.

While those material weaknesses have been remediated as of December 31, 2023, we may again identify material weaknesses in our internal control over financial reporting in the future.

If we identify 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.

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.

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;

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.

None of the control deficiencies described above resulted in a material misstatement to our annual consolidated financial statements.

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 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 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 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.

17 unchanged sentences

While these numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring such information.

In addition, our measure of certain metrics may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology and as a result our results may not be comparable to our competitors.

Estimates of market opportunity may prove to be inaccurate.

Market opportunity estimates are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.

The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that our market opportunity estimates will reflect actual revenue that we will generate from our platform in the future.

Any expansion in our markets depends on a number of factors, including the cost, performance, and perceived value associated with our platform and the products and services of our competitors.

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.

15 unchanged sentences

increasing size and geographic diversity of our workforce;

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

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

the continued challenges of a rapidly-evolving industry;

3 unchanged sentences

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.

Certain employees may not agree with return to office initiatives and as a result may seek employment elsewhere.

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 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.

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.

Our ability to recruit agents depends on the strength of our reputation, and adverse media coverage could harm our business.

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.

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.

Some of our potential losses may not be covered by insurance.

5 unchanged sentences

We may not be able to maintain our current coverage, or obtain new coverage in the future, on commercially reasonable terms or at all.

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

Incurring uninsured or underinsured costs or losses could have an adverse effect on our business 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.

11 unchanged sentences

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.

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.

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.

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.

8 unchanged sentences

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.

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

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

7 unchanged sentences

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.

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

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

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.

2 unchanged sentences

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.

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

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 could be adversely affected and our reputation could be harmed.

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, 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.

We may also be subject to disputes between us and our employees and agents, which are primarily governed by mandatory arbitration provisions, and become involved in disputes between agents where we are not a proper party.

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

6 unchanged sentences

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

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

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

We engage independent contractors, including agents, 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).

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

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.

4 unchanged sentences

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 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, subjecting us to corporate tax and other liabilities.

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, 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 .

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

9 unchanged sentences

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 jurisdiction 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.

1 unchanged sentence

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

Certain of our businesses may also be subject to the GLBA, which governs how personal information collected in the context of financial services can be used and shared across our businesses and how that information must be protected.

The GLBA's requirements include certain disclosures related to collection of information and sharing practices and implementation of a cybersecurity program that adequately protects the collected information.

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

5 unchanged sentences

domestic bribery laws, and other anti-corruption and anti-money laundering laws in the countries in which we conduct business.

Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.

indirectly, improper payments or benefits to recipients in the public or private sector.

If we engage in international sales and business with partners and third-party intermediaries to market our products, we may be required to obtain additional permits, licenses, and other regulatory approvals.

30 unchanged sentences

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.

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.

39 unchanged sentences

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 of December 31, 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 December 31, 2023), held 8,928,686 shares of Class A common stock and all of the issued and outstanding shares of Class C common stock.

As of December 31, 2023, Mr.

Reffkin held approximately 46.5% 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.

41 unchanged sentences

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 integrated 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.

11 unchanged sentences

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;

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.

10 unchanged sentences

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 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.

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.

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