Compass CFO Kristen Ankerbrandt explains how the fast-growing brokerage company can reap profits

• The CFO of Compass believes profits will catch up to the real-estate brokerage's rapid growth.
• Kristen Ankerbrandt said the tech-forward firm would always favor the traditional role of the broker.

When Kristen Ankerbrandt first laid eyes on the residential real-estate brokerage Compass three years ago, it was an attractive investment target.

Ankerbrandt was working as an executive at the private-equity firm Carlyle, where she helped source acquisitions for its flagship $18.5 billion investment fund. The conversation took a turn when Compass' CEO and cofounder, Robert Reffkin, suggested instead that Ankerbrandt join as its chief financial officer.

"The first question for me was how big is the market opportunity," Ankerbrandt told Insider in an interview in November. "It was the $2 trillion residential real-estate industry, the $100 billion market for brokerage commissions, and opportunities to expand into ancillary businesses — it was massive."

Ankerbrandt has seized on that chance to expand, helping arrange the acquisition of a series of companies in businesses that are complementary to Compass' core focus in brokerage. It has, for instance, purchased title-insurance and escrow providers in hopes of bundling those services with the real-estate sales transactions it specializes in and boosting its profitability. It has also scooped up rival brokerage firms to add agents to the roughly 25,000 who already work for the company.

While Compass has gained a reputation as a voracious buyer in recent years, Ankerbrandt said she had also brought rigor and diligence to the company's growth.

To create its mortgage business, for instance, Compass eschewed an acquisition in favor of a joint venture with the origination company Guaranteed Rate over the summer.

"We're always really thoughtful about being disciplined financially whenever we do any kind of M&A," Ankerbrandt said. "Guaranteed Rate has expertise, it gives us speed to market, and we thought it was important to get access to a really high-quality offering."

The venture has helped Compass focus its spending in other areas. It bought the title company Common Ground Abstract in September for an undisclosed price. Last year it purchased the title companies Modus and KVS for $70 million and $50 million.

Earlier this year, Ankerbrandt helped steward Compass' much-anticipated initial public offering that valued the firm at about $7 billion.

Its shares have since sunk to under $9, less than half of their peak. Compass posted net losses in its first two quarters as a public company, and in its recent third-quarter earnings it disclosed it had lost $99.8 million during the three-month period. In the first three quarters of the year, it reported a total of $319.3 million in net losses, versus a $230.4 million loss during the same nine months in 2020.

But Ankerbrandt touted the company's revenue growth and suggested its push into ancillary services would boost profitability.

"We had $370 million in revenue in 2017, and we did $3.7 billion in 2020, which is pretty incredible," Ankerbrandt said. Compass has said it anticipates reaping up to $6.4 billion in revenue in 2021.

For years, upstarts in the residential real-estate business have sought to displace or deprioritize the role of the broker. Redfin, for instance, pays its agents a salary rather than commissions — an arrangement that suggests it sees its platform and exclusive listings as the key drivers of its business. Instant buyers like Opendoor, meanwhile, are making it possible for customers to buy and sell homes without the help of a third-party agent, while moving into the same lucrative add-on services like title and mortgage that Compass is hoping to attach to its deals.

Just as those two rivals have, Compass has billed itself as a leader in the growing overlap between the real-estate and technology sectors. But Ankerbrandt believes the key to its business lies in the increasingly traditional belief that brokers will retain their place at the heart of real-estate transactions in America.

"There have been a lot of dollars going into the real-estate space looking to disintermediate the agent," Ankerbrandt said. "We have a very unique focus on empowering the agent to be more efficient and productive and to allow them to invest their time the way they want to, with their clients, so they can grow their business."