What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-28 · 242 added, 341 removed, 886 unchanged (40% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations for the years ended December 31, 2024 , 2023 and 2022

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2023 , 2022 and 2021

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024 , 2023 and 2022

Consolidated Statements of Cash Flows for the years ended December 31, 2024 , 2023 and 2022

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of Compass, Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022 and the related consolidated statements of operations, of convertible preferred stock and stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2023 appearing under Item 15(a)2 (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2024 appearing under Item 15(a)2 (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

31 unchanged sentences

The principal considerations for our determination that performing procedures relating to revenue recognition - commissions revenue is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to revenue recognition.

As disclosed by management, a material weakness existed during the year related to the Company’s control environment, which impacted this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

28 unchanged sentences

Concierge credit facility 23.6 24.8

Revolving credit facility — 150.0

Total current liabilities 353.2 292.5

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Net loss ( 154.5 ) ( 320.1 ) ( 601.5 )

Net income attributable to non-controlling interests ( 1.2 ) — —

Net loss (income) attributable to non-controlling interests 0.1 ( 1.2 ) —

Net loss attributable to Compass, Inc.

4 unchanged sentences

Compass, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(In millions, except share amounts)

Preferred Stock Common Stock Additional Paid-in

Common Stock Additional Paid-in

Capital Accumulated

1 unchanged sentence

Stockholders’

Equity (Deficit) Non-controlling

Equity Non-controlling

Interest Total

Stockholders’

Equity (Deficit)

Shares Amount Shares Amount

Shares Amount

Balances at December 31, 2021

1 unchanged sentence

Net loss — — — ( 601.5 ) ( 601.5 ) — ( 601.5 )

Acquisition related non-controlling interest — — — — — — — 3.8 3.8

Conversion of Series D convertible preferred stock ( 15,920,450 ) ( 67.6 ) 15,920,450 — 67.6 — 67.6 — 67.6

Conversion of convertible preferred stock to common stock in connection with the initial public offering ( 221,127,100 ) ( 1,419.1 ) 223,033,725 — 1,419.1 — 1,419.1 — 1,419.1

Issuance of common stock in connection with the initial public offering, net of issuance costs — — 26,296,438 — 438.7 — 438.7 — 438.7

Other activity related to non-controlling interests — — — — — ( 0.2 ) ( 0.2 )

Issuance of shares in connection with acquisitions 1,033,340 — 3.6 — 3.6 — 3.6

2 unchanged sentences

Vesting of early exercised stock options — — 5.5 — 5.5 — 5.5

Issuance of common stock in connection with the 2021 Agent Equity Program 13,608,896 — 100.0 — 100.0 — 100.0

Issuance of common stock under the ESPP 578,921 — 2.3 — 2.3 — 2.3

Stock-based compensation — — 177.9 — 177.9 — 177.9

9 unchanged sentences

Issuance of common stock under the ESPP 759,835 — 2.5 — 2.5 — 2.5

Issuance of common stock in connection with the Strategic Transaction 8,957,910 — 30.0 — 30.0 — 30.0

Stock-based compensation — — 147.6 — 147.6 — 147.6

6 unchanged sentences

Issuance of common stock upon settlement of RSUs, net of taxes withheld 16,223,306 — ( 35.0 ) — ( 35.0 ) — ( 35.0 )

Vesting of early exercised stock options — — — — 0.6 — 0.6 — 0.6

Issuance of common stock in connection with the 2022 Agent Equity Program — — 14,147,480 — 53.3 — 53.3 — 53.3

Issuance of common stock under the ESPP 721,275 — 2.2 — 2.2 — 2.2

Issuance of common stock in connection with the Strategic Transaction — — 8,957,910 — 30.0 — 30.0 — 30.0

Stock-based compensation — — 131.3 — 131.3 — 131.3

9 unchanged sentences

Net loss $ ( 154.5 ) $ ( 320.1 ) $ ( 601.5 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 82.4 90.0 86.3

2 unchanged sentences

Change in acquisition related contingent consideration 6.0 2.6 ( 2.2 )

Bad debt expense 4.4 7.3 8.9

Bad debt allowance ( 2.1 ) 4.4 7.3

Amortization of debt issuance costs 0.7 0.7 0.9

8 unchanged sentences

Accrued expenses and other liabilities 42.0 ( 10.6 ) ( 36.5 )

Net cash used in operating activities ( 25.9 ) ( 291.7 ) ( 28.6 )

Net cash provided by (used in) operating activities 121.5 ( 25.9 ) ( 291.7 )

Investing Activities

4 unchanged sentences

Financing Activities

Proceeds from exercise and early exercise of stock options 4.5 9.0 26.9

Proceeds from exercise of stock options 9.5 4.5 9.0

Proceeds from issuance of common stock under the Employee Stock Purchase Plan 2.2 2.5 2.3

6 unchanged sentences

Payments related to acquisitions, including contingent consideration ( 3.4 ) ( 14.6 ) ( 17.5 )

Proceeds from issuance of common stock upon initial public offering, net of offering costs — — 439.6

Other ( 0.1 ) ( 1.5 ) ( 0.6 )

Net cash (used in) provided by financing activities ( 28.0 ) ( 157.4 ) 135.4

Net (decrease) increase in cash and cash equivalents ( 195.0 ) ( 256.4 ) 178.2

Net increase (decrease) in cash and cash equivalents 56.9 ( 195.0 ) ( 256.4 )

Cash and cash equivalents at beginning of period 166.9 361.9 618.3

4 unchanged sentences

Issuance of common stock for acquisitions $ 26.6 $ 17.9 $ 3.6

Conversion of convertible preferred stock in connection with initial public offering $ — $ — $ 1,419.1

Conversion of Series D convertible preferred stock $ — $ — $ 67.6

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

4 unchanged sentences

(the “Company”) was incorporated in Delaware on October 4, 2012 under the name Urban Compass, Inc.

On January 8, 2021, the board of directors approved a change to the Company’s name from Urban Compass, Inc.

to Compass, Inc.

The Company provides an end-to-end platform that empowers its residential real estate agents to deliver exceptional service to seller and buyer clients.

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The Company currently generates substantially all of its revenue from commissions paid by clients at the time that a home is transacted.

In March 2021, the Company’s board of directors and the stockholders of the Company approved a ten -for-one forward stock split of the Company’s common stock and convertible preferred stock (collectively, the “Capital Stock”), which became effective on March 19, 2021.

The authorized number of each class and series of Capital Stock was proportionally increased in accordance with the ten -for-one stock split and the par value of each class of Capital Stock was adjusted from $ 0.0001 to $ 0.00001 as a result of this forward stock split.

All common stock, convertible preferred stock, stock options, restricted stock units (“RSUs”) and per share information presented within these consolidated financial statements have been adjusted to reflect this forward stock split on a retroactive basis for all periods presented.

Initial Public Offering

On April 6, 2021, the Company completed its initial public offering (“IPO”) and the Company’s Class A common stock began trading on the New York Stock Exchange on April 1, 2021 under the symbol “COMP”.

In connection with the IPO, the Company issued and sold 26.3 million shares of its common stock at a public offering price of $ 18.00 per share.

The Company received aggregate proceeds of $ 438.7 million from the IPO, net of the underwriting discount and offering costs of approximately $ 11.0 million (of which $ 0.9 million were paid in 2020).

Offering costs, including the legal, accounting, printing and other IPO-related costs have been recorded in Additional paid-in capital against the proceeds from the offering.

During April 2021, also in connection with the IPO, all series of the Company’s convertible preferred stock then outstanding were converted into 223.0 million shares of common stock and the Company reclassified $ 1.4 billion of convertible preferred stock to Additional paid-in-capital.

Summary of Significant Accounting Policies

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

Compass, Inc.

Notes to Consolidated Financial Statements

Consolidation

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These judgments, estimates and assumptions are used for, but not limited to (i) valuation of the Company’s common stock and stock awards, (ii) fair value of acquired intangible assets and goodwill, (iii) fair value of contingent consideration arrangements in connection with business combinations, (iv) incremental borrowing rate used for the Company’s operating leases, (v) useful lives of long-lived assets, (vi) impairment of intangible assets and goodwill, (vii) allowance for Compass Concierge receivables and (viii) income taxes and certain deferred tax assets.

The Company determines its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances.

However, actual results could differ from these estimates and these differences may be material.

Since inception, the Company has primarily generated negative cash flows from operations and has primarily financed operations from net proceeds from the issuance of convertible preferred stock and common stock.

In addition, a number of macroeconomic conditions, including rising inflation and rapidly rising mortgage interest rates, have contributed to a slowdown in the U.S.

residential real estate market, which has had an adverse impact on the Company’s business and may continue to adversely impact the Company’s business in the future.

During the years ended December 31, 2023 and 2022, the Company enacted various restructuring actions designed to improve the alignment between the Company’s organizational structure and its long-term business strategy, drive cost efficiencies enabled by the Company’s technology and other competitive advantages and continue to drive toward profitability and positive free cash flow.

As the residential real estate market and related transaction volumes may remain challenging throughout 2024, operating losses and negative cash flows from operations will continue for certain quarterly periods in the foreseeable future.

The Company will continue to assess the impact that changing macroeconomic factors and the slowdown of the U.S.

residential real estate market, as well as other factors such as litigation risks, will have on its business and may need to adjust its operations, including further operating expense reductions, as necessary.

There is no assurance that the Company will be successful in further adjusting its operating expenses to align to the changing real estate market conditions.

As of December 31, 2023 and 2022, the Company held cash and cash equivalents of approximately $ 166.9 million and $ 361.9 million, respectively.

Additionally, the Company has a Revolving Credit Facility that matures in March 2026, which it can draw upon provided it maintains continued compliance with certain financial and non-financial covenants.

As of December 31, 2023, the Company had $ 306.2 million available to be drawn under the Revolving Credit Facility.

Further, the Company was in compliance with each of the financial and non-financial covenants.

See Note 9 — "Debt" for further details.

The Company's operating cash flows vary depending on the seasonality of the real estate business.

The Company believes that it will have sufficient liquidity from cash on hand, its Revolving Credit Facility and future operations to sustain its business operations for the next twelve months and beyond.

The Company determines its estimates and judgments on historical

Compass, Inc.

Notes to Consolidated Financial Statements

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The Company’s Chief Executive Officer is the Company’s CODM.

The CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance.

As such, the Company has one operating and reportable segment.

Substantially all long-lived assets are located in the United States and substantially all revenue is attributed to sellers and buyers based in the United States.

experience and on various other assumptions that it believes are reasonable under the circumstances.

However, actual results could differ from these estimates and these differences may be material.

Net Loss Per Share Attributable to Compass, Inc.

5 unchanged sentences

is the same as basic net loss per common share attributable to Compass, Inc., because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Foreign Currency

The Company established its first foreign subsidiary in India in 2020.

The functional currency of the entity is U.S.

Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the exchange rate on the transaction date.

Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured at period-end using the period-end exchange rate.

Realized and unrealized gains and losses from foreign exchange were immaterial for the years ended December 31, 2023, 2022 and 2021.

Cash and Cash Equivalents

9 unchanged sentences

Opening balance $ 8.6 $ 9.0

Allowances 3.6 5.5

Changes in allowances ( 2.5 ) 3.6

Net write-offs and other ( 1.7 ) ( 4.0 )

Closing balance $ 4.4 $ 8.6

Compass, Inc.

Notes to Consolidated Financial Statements

Prepaid Agent Incentives

6 unchanged sentences

Major improvements are capitalized.

Compass, Inc.

Notes to Consolidated Financial Statements

The Company capitalizes costs associated with developing software systems that are in the application development stage.

22 unchanged sentences

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or asset groups (collectively, “asset groups”) may not be recoverable.

This includes but is not limited to significant adverse changes in business climate, market conditions, or other events that indicate an asset groups’ carrying

Compass, Inc.

Notes to Consolidated Financial Statements

amount may not be recoverable.

This includes but is not limited to significant adverse changes in business climate, market conditions, or other events that indicate an asset groups’ carrying amount may not be recoverable.

Recoverability of asset groups to be held and used is measured first by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset group.

4 unchanged sentences

The Company has one reporting unit and tests goodwill for impairment at the reporting unit level.

As part of the goodwill impairment test, the Company first performs a qualitative assessment to determine whether further impairment testing is necessary.

As part of the goodwill impairment test, the Company first performs a qualitative assessment to determine whether

Compass, Inc.

Notes to Consolidated Financial Statements

further impairment testing is necessary.

If, as a result of its qualitative assessment, it is more-likely-than-not that the fair value of the Company’s reporting unit is less than its carrying amount, a two-step impairment test is required.

17 unchanged sentences

Operating leases are presented separately as operating lease ROU assets and operating lease liabilities, current and non-current, in the accompanying consolidated balance sheets.

Compass, Inc.

Notes to Consolidated Financial Statements

Revenue Recognition

5 unchanged sentences

As principal, the Company recognizes revenue in the gross amount of consideration to which the Company expects to receive in exchange for those services.

Compass, Inc.

Notes to Consolidated Financial Statements

The Company concluded that its brokerage revenue contains a single performance obligation that is satisfied upon the closing of a real estate services transaction, at which point the entire transaction price is earned.

2 unchanged sentences

The Company operates exclusively in the United States and generates substantially all of its revenue from commissions from home sellers and buyers.

In addition to commission revenue, the Company generates revenue through integrated services related to the home transaction such as title and escrow services which comprised an immaterial amount of the consolidated revenue for the years ended December 31, 2023, 2022 and 2021.

In addition to commission revenue, the Company generates revenue through integrated services related to the home transaction such as title and escrow services which comprised an insignificant amount of the consolidated revenue for the years ended December 31, 2024, 2023 and 2022.

Management evaluated and determined that no disaggregation of revenue is necessary or appropriate.

7 unchanged sentences

Sales and Marketing

Sales and marketing expense consists primarily of marketing and advertising expenses, compensation and other personnel-related costs for employees supporting sales, marketing, expansion and related functions, occupancy-related costs for the Company’s regional offices, agent acquisition incentives and costs related to administering the Compass Concierge Program, including associated bad debt expenses.

Sales and marketing expense consists primarily of marketing and advertising expenses, compensation and other personnel-related costs for employees supporting sales, marketing, expansion and related functions, occupancy-related costs for the Company’s regional offices, agent incentives and costs related to administering the Compass Concierge Program, including associated bad debt expenses.

Advertising expense primarily includes the cost of marketing activities such as print advertising, online advertising and promotional items, which are expensed as incurred.

1 unchanged sentence

Compensation costs includes salaries, taxes, benefits, bonuses and stock-based compensation.

Compass, Inc.

Notes to Consolidated Financial Statements

Operations and Support

3 unchanged sentences

General and Administrative

General and administrative expense primarily consists of compensation costs for executive management and administrative employees, including finance and accounting, legal, human resources and communications, the occupancy costs for the Company’s New York headquarters and other offices supporting administrative functions, professional services fees, insurance expenses and talent acquisition expenses.

Compass, Inc.

Notes to Consolidated Financial Statements

Company’s New York headquarters and other offices supporting administrative functions, litigation charges, professional services fees, insurance expenses and talent acquisition expenses.

Restructuring

Costs and liabilities associated with management-approved restructuring activities are recognized when they are incurred.

Restructuring charges primarily consist of costs associated with a workforce reduction and operating lease right-of-use asset impairments.

Restructuring charges primarily consist of costs associated with workforce reductions and operating lease right-of-use asset impairments.

One-time employee termination costs are recognized at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period.

Ongoing employee termination benefits are recognized as a liability when it is probable that a liability exists and the amount is reasonably estimable.

Restructuring charges are recognized as an operating expense within the consolidated statements of operations and related liabilities are recorded within Accrued expenses and other liabilities on the consolidated balance sheets.

The Company periodically evaluates and, if necessary, adjusts its estimates based on currently available information.

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The Company’s policy is to adjust these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in

Compass, Inc.

Notes to Consolidated Financial Statements

which such determination is made and could have a material impact on its financial condition and operating results.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on its financial condition and operating results.

The provision for income taxes includes the effects of any reserves that management identifies.

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Level 3 Unobservable inputs that are supported by little or no market activity, requiring the Company to develop its own assumptions.

Compass, Inc.

Notes to Consolidated Financial Statements

The carrying amount of the Company’s financial instruments including Cash and cash equivalents, Accounts receivable, Compass Concierge receivables, Accounts payable and Commissions payable approximate their respective fair values because of their short maturities.

1 unchanged sentence

See Note 5 — “Fair Value of Financial Assets and Liabilities,” for more information on the fair value of financial assets and liabilities.

Segment Reporting

Operating segments are defined as components of an entity with discrete financial information reviewed by the Chief Operating Decision Maker (“CODM”) to allocate resources and assess performance.

The Company’s CODM is its Chief Executive Officer, who evaluates financial information on a consolidated basis.

Accordingly, the Company has one operating and reportable segment.

Substantially all long-lived assets and revenue are based in the United States.

The CODM measures segment performance based on net income (loss), using it to guide key operating decisions, including budget allocation across the significant expense categories included in operating expenses within the consolidated statements of operations.

Other measures of profit or loss are also utilized.

There are no other expense categories regularly provided to the CODM that are not already included in the primary financial statements herein.

Stock-Based Compensation

2 unchanged sentences

The Company recognizes forfeitures as they occur.

For stock options, which the Company issues to employees, affiliated agents and in certain cases in connection with business combinations, the Company generally estimates the fair value using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (1) the fair value of common stock, (2) the expected stock price volatility, (3) the expected term of the award, (4) the risk-free interest rate and (5) expected dividends.

The Company also issues RSUs to employees, affiliated agents and in certain cases in connection with business combinations.

In addition to the issuance of RSUs to agents as equity compensation for the provision of services, the Company offered RSUs to affiliated agents through its Agent Equity Program.

The Company issues RSUs to employees, and to affiliated agents and in certain cases in connection with business combinations.

In addition to the issuance of RSUs to agents as equity compensation for the provision of services, the Company previously offered RSUs to affiliated agents through its Agent Equity Program.

The Agent Equity Program offered affiliated agents the ability to elect to have a portion of their commissions earned during a calendar year to be paid in the form of RSUs.

1 unchanged sentence

The Company discontinued the Agent Equity Program following the issuance of RSUs during the first quarter of 2023 related to the 2022 Agent Equity Program.

The Company’s RSUs granted prior to December 2020 generally 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 , except for the RSUs associated with the 2020 Agent Equity Program which vested immediately on the date of issuance.

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

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

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

Compass, Inc.

Notes to Consolidated Financial Statements

In December 2020, the Company began issuing RSUs that vest upon the satisfaction of only a service-based vesting condition that generally ranges from one to five years .

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

Any vested RSUs that require only a service-based vesting condition will convert to common stock following vesting and their prescribed delayed settlement periods.

For RSUs granted in connection with the 2021 and 2022 Agent Equity Programs the Company determined the value of the stock-based compensation expense at the time the underlying commission was earned and recognized the associated expense on a straight-line basis over the requisite service periods beginning on the closing date of the underlying real estate commission transactions.

2 unchanged sentences

Such awards were valued using a Monte Carlo simulation and the underlying expense will be recognized as the associated vesting conditions are met.

During the years ended December 31, 2024, 2023 and 2022, the number of stock options granted was immaterial.

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The guidance amends ASC 805 to require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.

The amendment is effective for public companies with fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The amendment should be applied prospectively to business combinations occurring on or after the effective date.

The Company adopted this standard as of January 1, 2023 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) - Troubled Debt Restructurings and Vintage Disclosures , which requires enhanced disclosure of certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty while eliminating certain current recognition and measurement accounting guidance.

This ASU also requires the disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company adopted this standard as of January 1, 2023 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis.

The Company adopted ASU 2023-07 retrospectively as of January 1, 2024.

Refer to our significant accounting policies above for the impact of adoption.

Compass, Inc.

Notes to Consolidated Financial Statements

New Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

An update was also issued expanding the scope of this guidance.

The guidance provides optional expedients and exceptions for applying GAAP to contracts or other transactions affected by reference rate reform if certain criteria are met.

The guidance was issued on March 12, 2020 and may be applied prospectively through December 31, 2022.

On December 21, 2022, the FASB issued ASU 2022-06, R eference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848, which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

The Company has evaluated applicable contracts and transactions and determined the standard did not have a material impact on the Company’s consolidated financial statements.

Business Combinations and Asset Acquisitions

In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures .

This standard includes enhanced income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid for annual periods.

The amendments in this update are effective for public companies with fiscal years beginning after December 15, 2024, with early adoption permitted.

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

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses.

This new guidance is designed to improve the disclosures of specific account categories, including employee compensation, depreciation, and amortization, and costs incurred related to inventory and manufacturing activities.

The amendments in this update are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

Assets acquired and liabilities assumed in business combinations are recognized at their acquisition date fair values.

2 unchanged sentences

Goodwill generated from all business combinations completed was primarily attributable to expected synergies from future growth and potential monetization opportunities.

2024 Acquisitions

During the year ended December 31, 2024, the Company completed the acquisition of 100 % of the ownership interests in Latter & Blum Holdings, LLC and Parks Village Nashville, LLC, two residential real estate brokerages, and the acquisition of 100 % ownership interest in a title insurance and escrow settlement services company.

The purpose of these acquisitions was to expand the Company’s existing brokerage business and title and escrow presence in key domestic markets.

The Company has accounted for these acquisitions as business combinations.

The consideration for the acquisitions completed during the year ended December 31, 2024 is comprised of $ 26.1 million in the Company's Class A common stock, $ 21.3 million of cash paid at or near closing, net of cash acquired, an additional $ 2.7 million to be paid in cash and the Company's Class A common stock at a later date and an estimated $ 7.1 million of additional Class A common stock or cash that may be paid contingent on certain earnings-based targets being met at various payment dates through 2027.

Payments in excess of the original estimate may impact the Company's statement of operations in future periods.

The future consideration amounts were recorded within Accrued expenses and other current liabilities and Other non-current liabilities in the consolidated balance sheet.

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

$ 28.7 million of customer relationships;

$ 2.4 million of trademark intangible assets;

$ 20.0 million of other current and non-current assets;

and $ 18.3 million of current and non-current liabilities.

The excess of the aggregate purchase price over the aggregate fair value of the acquired net assets was recorded as goodwill of $ 24.4 million.

Goodwill represents the expected synergies from combining the acquired assets and the operations of the acquirer as well as the intangible assets that do not qualify for separate recognition.

The acquired intangible assets are being amortized over the estimated useful lives of approximately 5 to 6 years.

Approximately $ 9.3 million of the goodwill recorded during the year ended December 31, 2024 is deductible for tax purposes.

The amount of tax-deductible goodwill may increase in the future to approximately $ 16.4 million dependent on the payment of certain contingent consideration arrangements.

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

deferred tax assets.

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

Any adjustments during the measurement period would have a corresponding offset to goodwill.

Upon conclusion of the

Compass, Inc.

Notes to Consolidated Financial Statements

measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the consolidated statements of operations.

Pro forma revenue and earnings for 2024 acquisitions have not been presented because they are not material to the Company’s consolidated revenue and results of operations, either individually or in the aggregate.

2023 Acquisitions

2 unchanged sentences

The Company has accounted for these transactions as business combinations.

The consideration for the acquisitions completed during the year ended December 31, 2023 is primarily comprised of $ 6.8 million in the Company's Class A common stock, $ 1.1 million of cash paid at closing, an additional $ 1.0 million to be paid at a later date and an estimated $ 14.0 million of additional Class A common stock and cash that may be paid contingent on certain earnings-based targets being met at various payment dates through 2033.

The consideration for the acquisitions completed during the year ended December 31, 2023 is primarily comprised of $ 6.8 million in the Company's Class A common stock, $ 1.1 million of cash paid at closing, an additional $ 1.0 million paid at a later date and an estimated $ 14.0 million of additional Class A common stock and cash that may be paid contingent on certain earnings-based targets being met at various payment dates through 2033.

Payments in excess of the original estimate may impact the Company's statement of operations in future periods.

The future consideration amounts were recorded as Accrued expenses and other current liabilities and Other non-current liabilities in the consolidated balance sheet.

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

The fair value of the assets acquired and the liabilities assumed, inclusive of any measurement period adjustments, primarily resulted in the recognition of:

$ 10.8 million of customer relationships;

7 unchanged sentences

deferred tax assets.

Any adjustments during the measurement period would have a corresponding offset to goodwill.

Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the consolidated statements of operations.

Pro forma revenue and earnings for 2023 acquisitions have not been presented because they are not material to the Company’s consolidated revenue and results of operations, either individually or in the aggregate.

12 unchanged sentences

Acquired intangible assets are being amortized over their estimated useful lives of approximately 3 to 5 years.

None of the goodwill recorded during the year ended December 31, 2022 is deductible for tax purposes.

The amount of tax-deductible goodwill may increase in the future to approximately $ 2.6 million dependent on the payment of certain

Compass, Inc.

Notes to Consolidated Financial Statements

contingent consideration, holdbacks and acquisition-related compensation arrangements.

Approximately $ 0.3 million of the goodwill recorded during the year ended December 31, 2022 is deductible for tax purposes.

The amount of tax-deductible goodwill may increase in the future to approximately $ 1.6 million dependent on the payment of certain contingent consideration arrangements.

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

1 unchanged sentence

Pro forma revenue and earnings for 2022 acquisitions have not been presented because they are not material to the Company’s consolidated revenue and results of operations, either individually or in the aggregate.

2021 Acquisitions

During the year ended December 31, 2021, the Company completed several business acquisitions including the acquisition of 100 % of the ownership interests in KVS Title, LLC, a title insurance and escrow settlement services company, Glide Labs, Inc., a real estate technology company, Randall Family of Companies, a group of Southern Coastal New England residential real-estate brokerage entities, three additional small real estate brokerages and three additional small title insurance and escrow settlement services companies.

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

During 2021, the Company completed two asset acquisitions of smaller residential real estate brokerages in connection with ongoing agent recruitment efforts in key domestic markets.

The consideration for these two acquisitions comprised $ 13.2 million in cash, net of cash acquired, $ 5.8 million in the Company’s Class A common stock and an estimated $ 3.4 million of additional cash that may be paid contingent on certain earnings-based targets being met.

During the year ended December 31, 2021, the Company recorded net assets of $ 23.9 million primarily comprised of customer relationships.

Such amounts are also included in the tables below.

The following table summarizes the aggregate fair value of the components of the purchase consideration, as of the respective dates of each of the business combinations and asset acquisitions (in millions):

Cash paid at closing $ 148.6

Class A common stock issued 5.8

Cash to be paid after closing 21.8

Contingent Consideration

Non-controlling interest 3.8

The following table summarizes the allocations of the purchase price for the business combinations and asset acquisitions (in millions):

Cash and cash equivalents $ 11.2

Other current assets 4.1

Property and equipment 2.5

Operating lease right-of-use assets 12.8

Intangible assets (2)

Acquired Technology 5.5

Customer relationships 90.7

Trademarks 11.3

Total assets $ 206.6

Total liabilities $ ( 21.0 )

Net assets $ 185.6

Compass, Inc.

Notes to Consolidated Financial Statements

Approximately $ 59.0 million of the goodwill is deductible for tax purposes.

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

The identified intangible assets have a useful life of 2 - 9 years.

Pro forma revenue and earnings for 2021 acquisitions have not been presented because they do not have a material impact to the Company’s consolidated revenue and results of operations, either individually or in the aggregate.

Contingent Consideration

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

11 unchanged sentences

Accordingly, this consideration is accounted for as compensation for future services and the Company recognizes the expenses over the underlying retention periods.

As of December 31, 2023, the Company expects to pay an additional $ 2.9 million in future cash consideration to sellers in connection with these arrangements.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 0.2 million, $ 0.6 million and $ 13.4 million, respectively, in compensation expense within Operations and support in the accompanying consolidated statements of operations related to these arrangements.

As of December 31, 2024, the Company does not expect to make any further material payments under these arrangements.

Joint Venture

In July 2021, the Company and Guaranteed Rate, Inc.

(“Guaranteed Rate”) formed a joint venture, OriginPoint, LLC (“OriginPoint”), a new mortgage origination company.

(“Guaranteed Rate”) formed a joint venture, OriginPoint, LLC (“OriginPoint”).

OriginPoint was formed for the purpose of conducting a mortgage origination and lending business and providing related services for the Company’s real estate brokerage clients, as well as the clients of any other brokerage in the context of a new purchase or other customers not working with a brokerage in the context of a refinancing, in order to make loans available to a broad consumer audience.

OriginPoint will originate, process, underwrite, close and/or fund mortgage loans for sale, transfer and assignment to investors and eligible wholesale lenders, including affiliates, or effect any other secondary market transactions related to such mortgage loans.

OriginPoint began originating mortgages in December 2021.

OriginPoint originates, processes, underwrites, closes and/or funds mortgage loans for sale, transfer and assignment to investors and eligible wholesale lenders, including affiliates, or effects any other secondary market transactions related to such mortgage loans.

OriginPoint is owned 49.9 % by the Company and 50.1 % by Guaranteed Rate.

The Company and Guaranteed Rate each contributed capital of $ 5.0 million when OriginPoint was formed in July 2021.

The Company has contributed $ 1.2 million and $ 15.0 million of additional capital during the year ended December 31, 2023 and 2022.

The Company is accounting for OriginPoint as an equity method investment and will record its equity earnings or losses related to OriginPoint within Equity in loss of unconsolidated entity in the consolidated statements of operations.

The Company made capital contributions to OriginPoint of $ 2.0 million and $ 1.2 million, respectively, during the years ended December 31, 2024 and 2023.

The Company accounts for OriginPoint as an equity method investment and records its equity earnings or losses related to OriginPoint within Equity in loss of unconsolidated entity in the consolidated statements of operations.

The Company’s investment in OriginPoint had a balance of $ 5.7 million at December 31, 2024 and is included within Other non-current assets on the accompanying consolidated balance sheet.

11 unchanged sentences

The Company’s contingent consideration liabilities of $ 31.0 million and $ 20.9 million as of December 31, 2024 and 2023, respectively, are the Company’s only Level 3 financial instruments.

See Note 3 — “Business Combinations and Asset Acquisitions” for changes in contingent consideration during the years ended December 31, 2023, 2022 and 2021.

See Note 3 — “Acquisitions” for changes in contingent consideration during the years ended December 31, 2024, 2023 and 2022.

The following tables present the balances of contingent consideration as presented in the consolidated balance sheets (in millions):

3 unchanged sentences

There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the periods presented.

Level 3 Financial Liabilities

The Company’s Level 3 financial liabilities relate to acquisition-related contingent consideration arrangements.

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

The primary method the Company used to estimate the fair value of contingent consideration liabilities was a Monte Carlo simulation, which is based on inputs such as forecasted future results of the acquired businesses, which are not observable in the market, discount rates and earnings volatility measures.

The Company has not presented certain quantitative information regarding the unobservable inputs utilized to measure contingent consideration liabilities given changes in these assumptions have not and are not expected to materially impact the Company’s operating results during 2024 or in future periods.

Changes in the fair value of Level 3 financial liabilities are included within Operations and support in the consolidated statements of operations (see Note 3 – “Acquisitions”).

Property and Equipment, Net

6 unchanged sentences

Property and equipment, net $ 125.5 $ 151.7

The Company recorded depreciation expense related to property and equipment of $ 57.1 million, $ 48.2 million and $ 38.5 million for the years ended December 31, 2023, 2022 and 2021, respectively which includes $ 12.3 million, $ 9.4 million and $ 6.0 million, respectively, related to capitalized internally–developed software.

The Company capitalized internally-developed software costs of $ 5.7 million and $ 17.0 million during the years ended December 31, 2023 and 2022, respectively.

Compass, Inc.

Notes to Consolidated Financial Statements

The Company recorded depreciation expense related to property and equipment of $ 47.5 million, $ 57.1 million and $ 48.2 million for the years ended December 31, 2024, 2023 and 2022, respectively, which includes $ 11.6 million, $ 12.3 million and $ 9.4 million, respectively, related to internally–developed software.

The Company capitalized internally-developed software costs of $ 9.7 million and $ 5.7 million during the years ended December 31, 2024 and 2023, respectively.

Goodwill and Intangible Assets, Net

2 unchanged sentences

Acquisitions 11.4

Measurement period adjustments 1.3

Balance at December 31, 2023

Acquisitions 24.4

Measurement period adjustments $ ( 0.6 )

Balance at December 31, 2024

39 unchanged sentences

Accrued expenses and other current liabilities consisted of the following (in millions):

Agent equity program $ — $ 41.7

Accrued compensation $ 51.1 $ 43.3

Accrued Litigation Charge 28.8 —

Other 60.4 47.5

2 unchanged sentences

In July 2020, the Company entered into a Revolving Credit and Security Agreement (the “Concierge Facility”) with Barclays Bank PLC, as administrative agent, and the several lenders party thereto, which was subsequently amended on July 29, 2021, August 5, 2022 and August 4, 2023.

The Concierge Facility provides for a $ 75.0 million revolving credit facility and is solely used to finance, in part, the Company’s Compass Concierge Program.

The Concierge Facility provides for a $ 75.0 million revolving credit facility and is solely used to finance a portion of the Company’s Compass Concierge Program.

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

2 unchanged sentences

On August 4, 2023, the revolving period under the Concierge Facility was extended to August 3, 2025.

The interest rate on the Concierge Facility was 8.93 % as of December 31, 2023.

The interest rate on the drawn down balance of the Concierge Facility was 7.49 % as of December 31, 2024.

Pursuant to the Concierge Facility, the principal amount, if any, is payable in full in January 2026, unless earlier terminated or extended.

21 unchanged sentences

As of December 31, 2024, there were no borrowings outstanding under the Revolving Credit Facility and outstanding letters of credit under the Revolving Credit Facility totaled approximately $ 53.8 million.

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

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

The financial covenants require that (i) the Company maintains liquidity of at least $ 150.0 million as of the last day of each fiscal quarter and each date of a credit extension and (ii) the Company’s consolidated total revenue as of the last day of each fiscal quarter be equal to or greater than the specified amount corresponding to such period.

The minimum required consolidated revenue threshold for the trailing four fiscal quarters is $ 3,799.0 million during 2023 and $ 4,668.0 million thereafter.

Minimum liquidity is defined as unused amounts under the $ 350.0 million Revolving Credit Facility plus the unrestricted cash of Compass and its restricted subsidiaries.

The minimum required consolidated revenue threshold for the trailing four fiscal quarters is $ 4,668.0 million during 2024 and thereafter.

As of December 31, 2024, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

40 unchanged sentences

Except as identified with respect to the matters below, the Company does not believe that the outcome of any individual existing legal or regulatory proceeding to which it is a party will have a material adverse effect on its results of operations, financial condition or overall business in each case, taken as a whole.

The Company and its subsidiaries have been named as defendants in ten putative class action lawsuits (the "Antitrust Lawsuits") that allege, among other things, violations of Section 1 of the Sherman Act, 15 U.S.C.

Five of the putative class action lawsuits, captioned Gibson, et al.

National Association of Realtors, et al., No.

4:23-cv-00788-FJG (W.D.

Mo.) (“Gibson”), filed on October 31, 2023, Grace v.

National Association of Realtors, et al., No.

3:23-cv-06352 (N.D.

Cal.) (“Grace”), filed on December 8, 2023, Umpa, et al.

National Association of Realtors, et al., 4:23-cv-00945 (W.D.

Mo.) (“Umpa”), filed on December 27, 2023, Fierro, et al.

National Association of Realtors, et al., Case No.

2:24-cv-00449 (C.D.

Cal.) (“Fierro”), filed on January 17, 2024, and Boykin v.

National Association of Realtors, et al., No.

2:24-cv-00340 (D.

Nev.) (“Boykin”), filed on February 16, 2024, name the Company as a defendant and allege, among other things, that certain trade associations, including the National Association of Realtors, multiple listing services, and real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

§ 1 by entering into a continuing agreement to require sellers of residential property to make inflated payments to brokers representing buyers.

The plaintiffs in the Gibson and Umpa matters allege a nationwide scope, while the Grace and Fierro matters are limited in scope to Northern California and Southern California, respectively.

The Company and the defendants in the Gibson and Umpa matter filed a series of motions to dismiss those complaints on February 26, 2024.

The plaintiffs’ opposition to those motions are due on March 25, 2024, and replies are due on April 22, 2024.

Real Estate Commission Antitrust Litigation

On March 21, 2024, the Company entered into a settlement agreement to resolve the Gibson and Umpa cases on a nationwide basis.

The settlement resolves all claims in these cases and similar claims in other lawsuits alleging claims on behalf of sellers on a nationwide basis against the Company and its subsidiaries (collectively, the “Claims”) and releases the Company, its subsidiaries and affiliated agents from the Claims.

Under the settlement agreement, the Company agreed to pay $ 57.5 million and make certain changes to its business practices.

The Company’s motion for final approval of the settlement agreement was granted on October 31, 2024 and the settlement agreement is now effective.

The final approval ruling was appealed by certain class members that objected to the settlement, including but not limited to plaintiffs in the March and Friedman matters, referenced below, which are now pending before the United States Circuit Court of Appeals for the Eighth Circuit.

The objecting parties must file their briefs by March 20, 2025.

Responses, including those by the Company, are due by April 21, 2025.

The objecting parties may file any replies by May 12, 2025.

Two of the putative class action lawsuits, March v.

2 unchanged sentences

Real Estate Board of New York, et al., Case No.

1:23-cv-09601 (S.D.N.Y.) (“Friedman”), filed on January 18, 2024, name the Company as a defendant and allege, among other things, that

Compass, Inc.

Notes to Consolidated Financial Statements

the Real Estate Board of New York, and a number of real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

1:23-cv-09601 (S.D.N.Y.) (“Friedman”), filed on January 18, 2024, name the Company as a defendant and allege, among other things, that the Real Estate Board of New York, and a number of real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

§ 1 by entering into a continuing agreement to require sellers of residential property to make inflated payments to brokers representing buyers.

The Friedman and March matters also allege violations of the Donnelly Act, N.Y.

Compass, Inc.

Notes to Consolidated Financial Statements

§ 340, and the March matter further seeks injunctive relief pursuant to Section 16 of the Clayton Act, 15 U.S.C.

The Friedman and March matters are limited in scope to the New York City boroughs of Brooklyn, and Manhattan, respectively.

Two of the putative class action lawsuits, QJ Team, LLC, et al.

The March and Friedman matters are stayed pending the appeal of the final approval of the settlement agreement.

One putative class action lawsuit, QJ Team, LLC, et al.

Texas Association of Realtors, Inc., et al., No.

4:23-cv-01013 (E.D.

Tx.) (“QJ Team”), filed on November 13, 2023, and Martin, et al.

Tx.) (“QJ Team”), filed on November 13, 2023, names Realty Austin, LLC, a subsidiary of the Company, as a defendant and alleges, among other things, that certain trade associations, including the Texas Association of Realtors, and a number of real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

§ 1 by entering into a continuing agreement to require sellers of residential property to make inflated payments to brokers representing buyers.

Martin, et al.

Texas Association of Realtors, Inc., et al., No.

423-cv-01104 (E.D.

Tx.) (“Martin”), filed on December 14, 2023, name Realty Austin, LLC, a subsidiary of the Company, as a defendant and allege, among other things, that certain trade associations, including the Texas Association of Realtors, and a number of real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

Tx.) (“Martin”), filed on December 14, 2023, was consolidated into the QJ Team matter on March 21, 2024.

The QJ Team matter is stayed pending the appeal of the final approval of the settlement agreement.

One putative class action lawsuit, Peiffer v.

Latter & Blum Holding, LLC, et al., Case No.

2:24-cv-00557 (E.D.

La.) (“Peiffer”), filed on March 5, 2024, names Latter & Blum, a subsidiary of the Company, as a defendant and alleges, among other things, that certain trade associations, including the National Association of Realtors, multiple listing services, and a number of real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

§ 1 by entering into a continuing agreement to require sellers of residential property to make inflated payments to brokers representing buyers.

On April 3, 2024, the Company announced that it had entered into an agreement to acquire Latter & Blum.

The Peiffer matter is stayed pending the appeal of the final approval of the settlement agreement.

National Ass’n of Realtors et al., Case No.

1:24-cv-02371 (S.D.N.Y.) (“Wang”), an individual lawsuit filed on March 28, 2024, named the Company as a defendant and alleges, among other things, that certain trade associations, including the National Association of Realtors and the Real Estate Board of New York, and a number of real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

§ 1 by entering into a continuing agreement to require sellers of residential property to make inflated payments to brokers representing buyers.

The Company entered an agreement with the plaintiff in Wang to settle the matter on December 27, 2024 and the parties filed a stipulation of dismissal with prejudice on December 31, 2024.

The Company does not expect the terms of the proposed settlement of the Gibson and Umpa cases, as well as the resolution of any of the stated matters or the process of moving to enforce the settlement nationwide to have a material impact on its future operations.

The Company and its subsidiaries have been named as defendants in eight putative class action lawsuits and one individual lawsuit (the "Antitrust Lawsuits") that allege, among other things, violations of Section 1 of the Sherman Act, 15 U.S.C.

Four of the putative class action lawsuits, captioned Gibson, et al.

National Association of Realtors, et al., No.

4:23-cv-00788-FJG (W.D.

Mo.) (“Gibson”), filed on October 31, 2023, Grace v.

National Association of Realtors, et al., No.

3:23-cv-06352 (N.D.

Cal.) (“Grace”), filed on December 8, 2023, Fierro, et al.

National Association of Realtors, et al., Case No.

2:24-cv-00449 (C.D.

Cal.) (“Fierro”), filed on January 17, 2024, and Whaley v.

Arizona Association of Realtors, Case No.

2:24-cv-00105 (D.

Nev.) (“Whaley”), filed on January 15, 2024, name the Company as a defendant and allege, among other things, that certain trade associations, including the National Association of Realtors, multiple listing services, and real estate brokerages engaged in a continuing contract, combination, or conspiracy to unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.

§ 1 by entering into a continuing agreement to require sellers of residential property to make inflated payments to brokers representing buyers.

National Association of Realtors, et al., 4:23-cv-00945 (W.D.

Mo.) (“Umpa”), filed on December 27, 2023, was consolidated into the Gibson matter on April 23, 2024.

National Association of Realtors, et al., No.

2:24-cv-00340 (D.

Nev.) (“Boykin”), filed on February 16, 2024, was terminated and consolidated into the Whaley matter on March 20, 2024.

The plaintiffs in the Gibson and Umpa matters allege a nationwide scope, while the Grace and Fierro matters are limited in scope to Northern California and Southern California, respectively and the Whaley matter is limited in scope to Nevada.

The Grace, Fierro and Whaley matters are stayed pending the appeal of the final approval of the settlement agreement.

During the three months ended March 31, 2024, the Company recognized an expense of $ 57.5 million within General and administrative expense in the consolidated statements of operations in connection with the settlement agreement.

Compass, Inc.

Notes to Consolidated Financial Statements

the settlement was paid during the three months ended June 30, 2024.

The remaining 50 % is expected to be paid during the second quarter of 2025.

Batton, et al.

Compass, Inc., et al.

Batton, et al.

Compass, Inc., et al., No.

2 unchanged sentences

§ 1 and state law antitrust statutes, violated state consumer protection statutes, and were unjustly enriched by industry rules that set the manner by which buyer’s brokers are compensated.

The deadline to respond to the Batton II complaint is April 5, 2024.

The allegations in Batton II are substantially similar to those contained in the case captioned Batton, et al.

The allegations in Batton are substantially similar to those contained in the case captioned Batton, et al.

National Association of Realtors, et al., No.

1:21-cv-00430 (N.D.

Ill.) (“Batton I”), filed on January 25, 2021, which does not name the Company but names the National Association of Realtors and seven other brokerages.

On February 20, 2024, in Batton I, the Court granted the defendants’ Motion to Dismiss in part and denied in part, allowing most of the case to proceed.

On December 27, 2023, plaintiffs in the Gibson and Umpa matters filed a motion before the United States Judicial Panel on Multidistrict Litigation (“JPML”), captioned In re Real Estate Commission Litigation, No.

48 (J.P.M.L.), seeking to transfer and consolidate for pretrial proceedings the Gibson, Umpa, Grace, March, QJ Team, Martin, and three additional putative class actions to which the Company has not been named as a party, to one multidistrict litigation.

The deadline to respond to the complaints in the Martin, QJ Team, and March matters have been stayed pending a decision from the JPML on consolidation.

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

The Company plans to vigorously defend itself against all claims.

The ultimate resolution of these matters could have a material adverse effect on the Company’s financial position, results of operations, and cash flow.

Ill.) (“Batton I”), filed on January 25, 2021 which does not name the Company but names the National Association of Realtors and six other brokerages.

The Company and the defendants in the Batton II matter filed a motion to dismiss the amended complaint on June 21, 2024.

The plaintiffs filed an opposition to the motion to dismiss on August 5, 2024 and the Company and the defendants filed a reply on September 4, 2024.

The motion to dismiss remains pending before the court.

The Company is unable to predict the outcome of Batton II or to reasonably estimate the possible loss or range of loss, if any, arising from the claim asserted therein.

The ultimate resolution of Batton II could have a material adverse effect on the Company’s financial position, results of operations, and cash flow.

Letter of Credit Agreements

1 unchanged sentence

As of December 31, 2024 and 2023, the Company was contingently liable for $ 53.8 million and $ 44.4 million, respectively, under these letters of credit.

As of December 31, 2023, $ 43.8 million and $ 0.6 million of these letters of credit were collateralized by the Company’s Revolving Credit Facility and cash and cash equivalents, respectively.

As of December 31, 2022, $ 33.0 million and $ 15.0 million of these letters of credit were collateralized by the Company’s Revolving Credit Facility and cash and cash equivalents, respectively.

As of December 31, 2024, $ 53.8 million of these letters of credit were collateralized by the Revolving Credit Facility.

As of December 31, 2023, $ 43.8 million and $ 0.6 million of these letters of credit were collateralized by the Revolving Credit Facility and the Company's cash and cash equivalents, respectively.

Escrow and Trust Deposits

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

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

The escrow and trust deposits totaled $ 147.1 million and $ 120.0 million as of December 31, 2024 and 2023, respectively.

1 unchanged sentence

However, the Company remains contingently liable for the disposition of these deposits.

Compass, Inc.

Notes to Consolidated Financial Statements

Preferred Stock and Common Stock

Convertible Preferred Stock

In 2020, the Company amended its certificate of incorporation and changed the authorized shares of Series G convertible preferred stock to 22.4 million and issued an additional 0.1 million shares of Series G convertible preferred stock for proceeds of $ 1.0 million.

In 2020, 9.4 million shares of Series D convertible preferred stock were converted into an equal number of shares of Class A common stock at the election of the holder resulting in the reclassification of $ 40.0 million in carrying value from Convertible preferred stock to Common stock and Additional paid-in capital.

The Company’s convertible preferred stock authorized, issued and outstanding, the aggregate liquidation preferences, including dividends that would be due if and when declared by the board of directors were as follows as of December 31, 2020 (in millions, except share and per share amounts):

December 31, 2020

Series of Convertible

Preferred Stock Year Issued Shares

Authorized Shares

Outstanding Issuance Price/

Liquidation Price

(Per Share) Aggregate

Value Carrying Value

Issuance Costs)

Series A 2013 54,811,930 54,811,930 $ 1.0000 $ 54.8 $ 54.7

Series B 2014-2015 18,133,240 18,133,240 2.0766 37.7 37.5

Series C 2015-2016 13,580,260 13,580,260 4.0500 55.0 54.8

Series D 2016-2017 25,303,070 15,920,450 4.2632 67.9 67.6

Series E 2017-2018 78,543,890 78,543,890 6.7478 530.0 529.0

Series F 2018 33,686,160 33,686,160 11.8570 399.4 398.8

Series G 2019-2020 22,371,620 22,371,620 15.4269 345.1 344.3

246,430,170 237,047,550 $ 1,489.9 $ 1,486.7

In March 2021, the holders of 15.9 million shares of the Company’s Series D convertible preferred stock elected to convert such shares into an equal number of shares of Class A common stock.

During April 2021, in connection with the IPO, all series of the Company’s convertible preferred stock then outstanding were converted into 223.0 million shares of Class A common stock and the Company reclassified $ 1.4 billion of Convertible preferred stock to Additional paid-in-capital.

As of December 31, 2023 and 2022, the Company had no convertible preferred stock outstanding.

Undesignated Preferred Stock

2 unchanged sentences

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

On March 31, 2021, in connection with the effectiveness of the registration statement for the Company’s IPO, 15.2 million shares of Class A common stock held by the Company’s founder and CEO were automatically exchanged for an equivalent number of shares of Class C common stock.

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

Any Class A common stock issued to the Company’s CEO from RSU awards granted prior to February 2021 are able to be exchanged for Class C common stock.

Each share of Class C common stock is entitled to twenty votes per share and will be convertible at any time into one share of Class A common stock and will automatically convert into Class A common stock under certain “sunset” provisions.

Other than certain permitted transfers for estate

Other than certain permitted transfers for estate planning purposes, upon a transfer of Class C common stock, the Class C common stock will convert into Class A common stock.

Compass, Inc.

Notes to Consolidated Financial Statements

planning purposes, upon a transfer of Class C common stock, the Class C common stock will convert into Class A common stock.

In April 2021, the Company adopted a restated certificate of incorporation and changed its authorized capital stock to consist of 12.5 billion shares of Class A common stock, 1.25 billion shares of Class B common stock and 100 million shares of Class C common stock.

Each class has par value of $ 0.00001 .

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

As of December 31, 2021, the Company had 2.3 million shares of Class A common stock issued and held as treasury stock which were subsequently retired on July 1, 2021.

The followings tables reflect the authorized, issued and outstanding shares for each of the common share classes as of December 31, 2024 and 2023:

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The liquidation rights of the holders of Class A and Class B common stock are subject to and qualified by the rights and preferences of the holders of convertible preferred stock.

Compass, Inc.

Notes to Consolidated Financial Statements

Each share of Class A common stock may be converted to one share of Class B common stock at the option of the holder.

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such conversion shall be deemed to have been made immediately prior to the closing date of the public offering.

Compass, Inc.

Notes to Consolidated Financial Statements

Each share of Class C common stock is convertible at any time of the option of the holder into one share of Class A common stock.

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In August 2023, the Company entered into a definitive asset purchase agreement with a Canadian real estate proptech company (the "Strategic Transaction") under which the Company received $ 32.3 million of cash in exchange for 9.0 million shares of Class A common stock and committed to make an additional contingent payment in the form of Class A common stock or cash, as determined by the Company.

The contingent payment is dependent on a volume-weighted stock price target for the Company's Class A common stock and is payable up to a maximum of $ 5.5 million in May 2025 (unless the volume-weighted stock price target is triggered).

As of December 31, 2023, the Company has estimated a liability of $ 2.9 million in connection with this contingent arrangement and has included the amount in the Other non-current liabilities line of its consolidated balance sheet.

The contingent payment was dependent on a volume-weighted stock price target for the Company's Class A common stock and was payable up to a maximum of $ 5.5 million in May 2025 (unless the volume-weighted stock price target is triggered).

During the year ended December 31, 2024, the volume-weighted price target was met and the Company was released of its liability to make any additional payment in connection with this arrangement.

Stock-Based Compensation

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In October 2012, the Company adopted the 2012 Stock Incentive Plan (the “2012 Plan”).

Under the 2012 Plan, employees and non-employees could be granted stock options, RSUs and other stock-based awards, including awards earned in connection with the Agent Equity Program.

Under the 2012 Plan, employees and non-employees could be granted stock options, RSUs and other stock-based awards.

Generally, these awards were based on stock agreements with a maximum ten-year term for stock options and a maximum seven-year term for RSUs, subject to board approval.

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In February 2021, the Company’s board of directors and stockholders adopted and approved the 2021 Equity Incentive Plan (the “2021 Plan”), with an initial pool of 29.7 million shares of common stock available for granting stock-based awards plus any reserved shares of common stock not issued or subject to outstanding awards granted under the 2012 Plan.

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

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

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

As of December 31, 2024, there were 60.8 million shares available for future grants under the 2021 Plan, inclusive of those shares transferred from the 2012 Plan.

Effective January 1, 2024, the shares available for future grants were increased by an additional 24.2 million shares as a result of the annual increase provision described above.

Effective January 1, 2025, the number of shares available for future grants was increased by an additional 25.7 million shares as a result of the annual increase provision described above.

2021 Employee Stock Purchase Plan

In February 2021, the Company’s board of directors and stockholders adopted and approved the 2021 Employee Stock Purchase Plan (the “ESPP”), with an initial pool of 7.4 million shares of Class A common stock available for authorized purchase rights to the Company’s employees or to employees of its designated affiliates.

In addition, on January 1 st of each

Compass, Inc.

Notes to Consolidated Financial Statements

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

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

No more than 150.0 million shares of common stock may be issued over the term of the ESPP, subject to certain exceptions set forth in the ESPP.

As of December 31, 2024, 18.1 million shares of Class A common stock remain available for grant under the ESPP.

Effective January 1, 2024, the authorized shares increased by 4.7 million shares as a result of the annual increase provision described above.

The Company has elected to forgo the annual increase to the number of authorized shares available for grant under the ESPP that would have occurred on January 1, 2025.

The ESPP permits employees to purchase shares of the Company’s Class A common stock through payroll deductions accumulated during six-month offering periods up to a maximum value of $ 12,500 per offering period.

The offering periods begin each February and August, or such other period determined by the Compensation Committee.

On each purchase date, eligible employees may purchase the shares at a price per share equal to 85 % of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP.

Compass, Inc.

Notes to Consolidated Financial Statements

purchase date, eligible employees may purchase the shares at a price per share equal to 85 % of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP.

During the year ended December 31, 2024, the Company issued 0.7 million shares of Class A common stock under the ESPP.

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The fair value of each stock option award is estimated on the grant date using the Black-Scholes option pricing model.

For the year ended December 31, 2023, stock options granted were not material to the Company's financial statements.

For the years ended December 31, 2022 and 2021, the table below demonstrates the inputs used for options granted.

Year Ended December 31,

Expected term (in years) 6.2 6.3

Risk-free interest rate 3.0 % 0.9 %

Expected volatility 50.5 % 49.3 %

Dividend rate — % — %

Fair value of common stock (range for the period) $ 2.33 - $ 8.25

$ 8.80 - $ 18.00

Weighted average grant date fair value of options granted $ 2.31 $ 8.68

Each of these inputs is subjective and generally requires significant judgment.

Expected Term — The expected term represents the period that the stock-based awards are expected to be outstanding.

The Company uses the simplified method to calculate the expected term due to insufficient historical experience, which assumes a ratable rate of exercise over the contractual term.

Risk-Free Interest Rate — The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the date of grant for zero-coupon U.S.

Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term.

Expected Volatility — As a result of the lack of historical and implied volatility data of the Company’s common stock prior to the IPO, the expected stock price volatility has been estimated based on the historical volatilities of a specified group of companies in its industry for a period equal to the expected life of the option.

The Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, and position

Compass, Inc.

Notes to Consolidated Financial Statements

within the industry and with historical share price information sufficient to meet the expected term of the stock options.

The historical volatility data was computed using the daily closing prices for the selected companies.

Dividend Rate — The expected dividend rate is zero as the Company has not declared or paid any cash dividends and does not anticipate to do so in the foreseeable future.

Fair Value of Common Stock — Prior to the IPO, the fair value of the shares of common stock underlying stock options and RSUs were historically determined by the board of directors as there was no public market for the common stock.

The board of directors determined the fair value of the Company’s common stock by considering a number of objective and subjective factors including:

the valuation of comparable companies, sales of convertible preferred stock to unrelated third parties, the Company’s operating and financial performance, secondary transactions involving the Company’s common stock, the lack of liquidity of common stock and general and industry specific economic outlook, amongst other factors.

For the years ended December 31, 2024, 2023 and 2022 stock options granted were not material to the Company's financial statements.

A summary of stock option activity under the 2012 Plan and the 2021 Plan, including 1.1 million stock options that were granted outside of the 2012 Plan in 2019, is presented below (in millions, except share and per share amounts):

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As of December 31, 2024, unrecognized compensation costs totaled $ 11.8 million and are expected to be recognized over a weighted-average period of 1.2 years.

Compass, Inc.

Notes to Consolidated Financial Statements

Restricted Stock Units

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Forfeited ( 3,629,419 ) 4.65

( 25,765,385 ) 6.13

Balance as of December 31, 2024

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(1) During the year ended December 31, 2024, the Company net settled all RSUs through which it issued an aggregate of 24.4 million shares of Class A common stock and withheld an aggregate of 8.1 million shares of Class A common st ock to satisfy $ 35.0 million of tax withholding obligations on behalf of the Company’s employees.

Compass, Inc.

Notes to Consolidated Financial Statements

(2) Included in forfeited shares are 17.2 million performance based RSUs previously held by the Company’s Chief Executive Officer that were cancelled in connection with changes made to the CEO's compensation package in December 2023.

The cancellation of these awards was accounted for as a modification and is not expected to have a material impact on the Company's statements of operations.

As of December 31, 2024, all unvested RSUs had total compensation costs of $ 102.9 million not yet recognized and is expected to be recognized over a weighted-average period of 2.2 years.

As previously disclosed, prior to 2022 the Company generally provided share-based compensation to its employees through grants that vested ratably over four-year periods.

Beginning in 2022, the Company changed the method of its employee grants to a series of four consecutive annual grants (each at 25 % of the previous four-year value) that each vest over the one-year period following grant.

As of December 31, 2024, the Company has remaining commitments to its employees related to this methodology to grant an aggregate of 26.4 million RSUs during 2025, 2026 and 2027 which will each vest over the subsequent one-year period following the respective grant dates.

Beginning in 2025, the Company will revert to its previous method of one grant vesting ratably over a four-year period following the grant date for substantially all new equity commitments.

Note the foregoing excludes a non-material number of additional committed but not yet granted RSUs which the Company will grant during 2025 which commitments were denominated in dollar values rather than shares.

Agent Equity Program

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Following the issuance of these RSUs, the Company discontinued the Agent Equity Program.

Compass, Inc.

Notes to Consolidated Financial Statements

Stock-Based Compensation Expense

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Total stock-based compensation expense $ 127.5 $ 158.2 $ 234.5

The decrease in stock-based compensation expense in 2023 as compared to 2022 was due to lower headcount resulting from workforce reductions .

The decrease in stock-based compensation expense in 2022 as compared to 2021 was almost entirely the result of the required accounting treatment for RSUs which differed before and after the March 31, 2021 effective date of the Company’s IPO.

The RSUs outstanding prior to the IPO contained a liquidity-event based vesting condition, in addition to a time-based vesting condition.

The liquidity-event based vesting condition did not allow for the recognition of stock based-compensation expense until this condition was satisfied at the time of the IPO.

The Company recognized a one-time acceleration of stock-based compensation expense of $ 148.5 million in connection with the IPO when this liquidity-event based vesting condition was satisfied on March 31, 2021 and recognized additional stock-based compensation expense subsequent to the IPO over the periods that the time-based vesting conditions are satisfied.

Compass, Inc.

Notes to Consolidated Financial Statements

based compensation expense for the year ended December 31, 2021 includes the following amounts related to a one-time acceleration of stock-based compensation expense in connection with the IPO (in millions):

Commissions and other related expense $ 41.7

Sales and marketing 1.8

Operations and support 3.1

Research and development 46.9

General and administrative 55.0

Total stock-based compensation expense $ 148.5

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

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The Company had an income tax benefit for the years ended December 31, 2024, 2023 and 2022 resulting from a partial reduction in the valuation allowance related to the carryover tax basis in deferred tax liabilities from acquisitions.

The benefit from income taxes is reduced by current taxes in India that are not offset with future alternative minimum tax credits and state income tax expense.

The benefit from income taxes is reduced by current taxes in India that are not offset with future alternative minimum tax

Compass, Inc.

Notes to Consolidated Financial Statements

credits and state income tax expense.

In 2024, the Company also recognized benefit from income taxes as a result of the recognition of deferred tax assets in India.

The effective income tax rate differed from the statutory federal income tax rate as follows:

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As of December 31, 2024 and 2023, the Company’s deferred tax assets were primarily the result of U.S.

federal and state net operating losses, operating lease obligations, capitalized research and development costs, stock-based compensation and other compensation related accruals.

federal and state net operating losses, operating lease obligations, capitalized research and development costs, stock-based compensation and other compensation and expense related accruals.

A full valuation allowance was maintained against its U.S.

gross deferred tax asset balances as of December 31, 2024 and 2023.

As of each reporting date, the Company considers new evidence, both positive and negative, that could impact the Company’s view with regard to future realization of deferred tax assets.

As of December 31, 2023 and 2022, the Company continued to maintain that the realization of its deferred tax assets has not achieved a more-likely-than-not threshold primarily due to the evidence that the Company continued to maintain three-year

As of each reporting date, the Company considers new evidence, both positive and negative, that could impact the Company’s view with regard to future realization of deferred

Compass, Inc.

Notes to Consolidated Financial Statements

cumulative pre-tax book losses.

As of December 31, 2024 and 2023, the Company continued to maintain that the realization of its deferred tax assets has not achieved a more-likely-than-not threshold primarily due to the evidence that the Company continued to maintain three-year cumulative pre-tax book losses.

As of December 31, 2024, the valuation allowance was approximately $ 703.8 million, an increase of $ 38.9 million from December 31, 2023, which includes the impact of acquisition activity.

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As of December 31, 2024 and 2023, the Company had approximately $ 2.0 billion and $ 1.9 billion of gross state net operating losses, respectively, that will begin to expire in 2026.

In connection with the previously announced shutdown of Modus Technologies, Inc.

(“Modus”), the Company recognized an ordinary worthless stock deduction for U.S.

income tax purposes.

This resulted in an increase to the gross federal net operating loss of approximately $ 27.0 million.

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

The Company had no material uncertain tax positions as of December 31, 2024, 2023 and 2022.

The Company does not anticipate a material increase or decrease in the uncertain tax positions in the next twelve months after the reporting period.

The Company does not anticipate a material increase or decrease in uncertain tax positions in the next twelve months after the reporting period.

It is the Company’s policy to record interest and penalties related to uncertain tax positions as a component of the provision for income taxes.

No material amounts of interest or penalties were recognized in the consolidated financial statements for the years ended December 31, 2024, 2023 and 2022.

The Company has obtained an income tax holiday for one of the three locations it operates in India, which expires in 2024.

This incentive is conditional on meeting certain direct investment thresholds.

If the Company fails to satisfy the conditions, the Company may be required to refund previously realized benefits.

The Company does not expect these amounts to be material to the Company’s consolidated financial statements.

The Company has obtained an income tax holiday for one of the three locations it operates in India, but the Company exited the location in 2024.

As a result of the exit, the Company recognized certain deferred tax assets that were not previously applicable for when the Company had the income tax holiday.

The number of years with open tax audits varies depending upon the tax jurisdiction.

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Compass Concierge receivables (“Concierge Receivables”) are stated at the amount advanced to the home sellers, net of an estimated ACL in the accompanying consolidated balance sheets.

For the years ended December 31, 2023, 2022 and 2021, the Company did not recognize any material income from

For the years ended December 31, 2024, 2023 and 2022, the Company did not recognize any material income from the Compass Concierge Program.

The Company incurs service fees payable to the Lender and incurs bad debt expense in connection with the Compass Concierge Program.

Compass, Inc.

Notes to Consolidated Financial Statements

the Compass Concierge Program.

The Company incurs service fees payable to the Lender and incurs bad debt expense in connection with the Compass Concierge Program.

The Company manages its credit risk by establishing a comprehensive credit policy for the approval of new loans while monitoring and reviewing the performance of its existing Concierge Receivables.

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

Accordingly, the net loss per share attributable to common stockholders will be the same for Class A common stock, Class B common stock and Class C common stock on an individual or combined basis.

Accordingly, the net loss per share attributable to Compass, Inc.

will be the same for Class A common stock, Class B common stock and Class C common stock on an individual or combined basis.

The following table sets forth the computation of basic and diluted net loss per share attributable to Compass, Inc.

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Restructuring Activities

During the year ended December 31, 2022, the Company enacted certain workforce reductions, wound down Modus and terminated certain of its operating leases.

The workforce reductions were part of a broader plan by the Company to take meaningful actions to improve the alignment between the Company’s organizational structure and its long-term business strategy, drive cost efficiencies enabled by the Company’s technology and other competitive advantages and continue to drive toward profitability and positive free cash flow.

In addition to the workforce reductions, restructuring actions have

Beginning in 2022, the Company enacted certain workforce reductions, wound down Modus Technologies, Inc.

("Modus"), terminated certain of its operating leases and took actions to reduce its occupancy costs, the most significant being the scaling down of its New York administrative office.

The workforce reductions were part of a broader plan by the Company to take meaningful actions to improve the alignment between the Company’s organizational structure and its long-term

Compass, Inc.

Notes to Consolidated Financial Statements

included and are expected to include, but not be limited to, a reduction in U.S.

hiring and backfills resulting from attrition;

a reduction in spend through third-party vendors;

eliminating the use of incentives when recruiting new agents and reducing incentives for existing agents;

a planned slow down in new market expansion;

and a review of occupancy costs with a view to consolidating offices and reducing related costs.

As a result of restructuring actions taken during the year ended December 31, 2022, the Company incurred restructuring costs of $ 49.1 million, resulting from severance and other termination benefits for employees whose roles were eliminated, lease terminations costs as a result of the accelerated amortization of various right-of-use assets and other restructuring costs, including those costs related to the wind-down of Modus.

business strategy, drive cost efficiencies enabled by the Company’s technology and other competitive advantages and continue to drive toward profitability and positive free cash flow.

As a result of restructuring actions taken during the years ended December 31, 2024, 2023 and 2022, the Company incurred restructuring costs of $ 9.7 million, $ 30.4 million and $ 49.1 million, respectively, resulting from severance and other termination benefits for employees whose roles were eliminated, lease terminations costs as a result of the accelerated amortization of various right-of-use assets and other restructuring costs, including those costs related to the wind-down of Modus.

These costs have been presented within the Restructuring costs line in the consolidated statements of operations.

The Company incurred additional non-cash charges of approximately $ 7.1 million during the year ended December 31, 2022 associated with the discontinued use of certain intangible assets associated with Modus and charges pertaining to the write-down of fixed assets for certain real estate leases that have been exited, or partially exited.

These costs have been included within the Depreciation and amortization line in the consolidated statements of operations.

During the year ended December 31, 2023, the Company implemented a further workforce reduction and took actions to reduce its occupancy costs, the most significant being the scaling down of its New York administrative office.

During the year ended December 31, 2023, the Company incurred restructuring costs of $ 30.4 million in connection with these actions.

These costs are a result of severance and other termination benefits for employees whose roles were eliminated and lease termination costs as a result of the accelerated amortization of various right-of-use assets and other lease-related costs.

These expenses have been presented within the Restructuring costs line in the consolidated statements of operations.

The Company incurred additional non-cash charges of approximately $ 5.3 million during the year ended December 31, 2023 associated with the write-down of fixed assets for certain real estate leases that have been exited, or partially exited.

The Company incurred additional non-cash charges of approximately $ 2.0 million, $ 5.3 million and $ 2.5 million during the years ended December 31, 2024, 2023 and 2022, respectively, associated with the write-down of fixed assets for certain real estate leases that have been exited, or partially exited.

The Company incurred additional non-cash charges of approximately $ 4.6 million during the year ended December 31, 2022 associated with the discontinued use of certain intangible assets associated with Modus.

These costs have been included within the Depreciation and amortization line in the consolidated statements of operations.

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Year Ended December 31,

2024 2023 2022

Severance related personnel costs $ — $ 8.9 $ 40.6

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Year Ended December 31,

2024 2023 2022

Restructuring costs $ 9.7 $ 30.4 $ 49.1

1 unchanged sentence

Total expense $ 11.7 $ 35.7 $ 56.2

Compass, Inc.

Notes to Consolidated Financial Statements

The following table summarizes the estimated timing of the Company's future lease and lease-related payments, net of amounts contractually subleased, related to restructuring activities for lease termination costs as of December 31, 2024 (in millions):

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Thereafter 9.9

Subsequent Event

On January 13, 2025, the Company closed its previously announced merger transaction (the “Transaction”) contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated November 25, 2024, by and among the Company, Compass Brokerage, LLC, Company Merger Sub, LLC, At World Properties Holdings, LLC, known as

Compass, Inc.

Notes to Consolidated Financial Statements

@properties Christie’s International Real Estate (“Christie’s International Real Estate”), At World Properties Principals Blocker, Inc.

(“Principals Blocker”), At World Properties IX Blocker, Inc.

(“IX Blocker”), Apple IX Blocker Merger Sub, Inc., Apple Principals Blocker Merger Sub, Inc., and Quad-C LLC, as seller representative.

Pursuant to the Merger Agreement, on the Closing Date, the Company acquired all of the issued and outstanding equity securities of each of Principals Blocker, IX Blocker and Christie’s International Real Estate and each of Principals Blocker, IX Blocker and Christie’s International Real Estate became a wholly-owned subsidiary of the Company.

The aggregate consideration (“Total Consideration”) payable pursuant to the Merger Agreement consisted of (i) $ 150 million (the “Cash Consideration”), subject to certain customary purchase price adjustments and (ii) 44.1 million shares of the Company’s Class A common stock (the “Share Consideration”).

The Share Consideration is subject to further adjustment (the “Share Consideration Adjustment”) if the value of the Share Consideration on the 366th day following the Closing Date, determined using the price per share equal to the volume-weighted average price of the Company’s Class A common stock for the 10 -trading day period ending on the 366th day following the Closing Date (the “Post-Closing Share Price”), is (i) greater than $ 344 million, in which case the Share Consideration will be reduced by a number of shares in an aggregate amount of up to $ 50 million (determined using the Post-Closing Share Price), up to a maximum of 5.6 million shares, or (ii) less than $ 344 million, in which case the Share Consideration will be increased by a number of shares in an aggregate amount of up to $ 50 million (determined using the greater of $ 6.6612 and the Post-Closing Share Price), up to a maximum of 7.5 million shares.

Given the recent date of this acquisition, the Company has not yet completed its preliminary purchase price allocation.

The Company expects to finalize its analysis within the measurement period (up to one year from the acquisition date) of the transaction.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data