Compass, Inc. Q2 FY2026 earnings call

• Leverage and Balance Sheet Progress

  • Net debt to trailing 12-month pro forma adjusted EBITDA fell to 3.3x in Q2 2026 from 4.2x in Q1 2026, a 1-turn reduction in one quarter
  • Ended the quarter with $694 million in cash, no outstanding revolver borrowings, and management expects the net leverage ratio to fall below 3.0x by the end of 2026
  • GAAP net income reached $92 million, a significant improvement from $39 million in the prior year

• Cost Synergy and Integration

  • Hit the full year-one net cost synergy target of $300 million five months ahead of schedule, and now expects $330 million in actioned net cost synergies by the end of 2026
  • 2026 in-year realized net cost synergies are upgraded to $220 million (from $200 million prior), with $150 million expected to hit the P&L (up from $130 million prior) and $70 million as CapEx synergies
  • Management maintains the total 3-year target of $500 million in net cost synergies, but expects to hit the target early and potentially exceed it

• Technology and AI

  • Completed a successful pilot launch of the unified Compass home platform to 4,000 agents across acquired Caldwell Banker, Corcoran, and Sotheby's International Realty brands, earning an 82% CSAT score
  • By end of September 2026, 80,000 total agents (including original Compass agents) will have access to the platform, with 128,000 domestic franchise agents onboarding in Q1 2027
  • AI is deployed to both reduce operating expenses and boost agent productivity: 50-60% of new code is now AI-generated, and $8 million in near-term cost savings and avoidance have already been identified; the new AI assistant for agents has doubled platform engagement per agent, cutting time spent on routine tasks and helping identify proprietary leads

• Market Outperformance and Strategic Initiatives

  • Compass brokerage has outperformed the market organically for 21 consecutive quarters as a public company, and has outperformed the market for two consecutive quarters including the Anywhere acquisition
  • Strong momentum in the Bay Area driven by tech sector wealth: year-over-year revenue growth of 19% in July and August (business day adjusted), following 20% growth in June
  • The Rocket Redfin partnership has delivered 60,000+ leads to Compass agents and 20,000+ Coming Soon listings to Redfin; in Chicago, Compass.com sessions grew 111% year-over-year, 77 percentage points above the company average, driven by flexible Coming Soon listing rules
  • Management is advocating for pro-competition reform of the MLS and dominant portal ecosystem, noting that anti-competitive MLS rules currently restrict agent and seller choice, and that more jurisdictions are codifying seller rights to choose how to market their properties, aligned with Compass's three-phase marketing strategy

• Long-Term Earnings Potential

  • Assuming 4.1 million flat existing home sales: ~$1 billion adjusted EBITDA, $750 million unlevered free cash flow
  • Assuming 4.8 million existing home sales: ~$1.5 billion adjusted EBITDA, $1 billion unlevered free cash flow
  • Mid-cycle 5.5 million existing home sales: $2 billion adjusted EBITDA, $1.5 billion unlevered free cash flow
  • Upside 6 million existing home sales: $2.5 billion adjusted EBITDA, ~$2 billion unlevered free cash flow These figures do not include incremental upside from organic share gains, margin improvement, higher attach rates, or ancillary revenue

Compass operates three core segments, with the following Q2 2026 performance: 1. Owned Brokerage: Generated $3.96 billion in revenue (92.1% of total consolidated revenue), with gross transaction value (GTV) of $155.2 billion, up 16% year-over-year on a pro forma basis. Segment adjusted EBITDA was $377 million. Transactions were up 7.4% year-over-year, outpacing the overall market growth of 3.5%, and GTV outperformed the market by 1000 basis points. 2. Franchise: Generated $135 million in revenue (3.1% of total consolidated revenue), up 7.6% year-over-year on a pro forma basis. GTV was up 11.7% year-over-year, outperforming the overall market by 570 basis points, with luxury brands Sotheby's International Realty and Corcoran leading outperformance. Segment adjusted EBITDA was $87 million. 3. Integrated Services: Generated $211 million in revenue (4.9% of total consolidated revenue), up 7.7% year-over-year on a pro forma basis, driven by strong title and escrow growth. Segment adjusted EBITDA was $52 million. After accounting for $153 million in unallocated corporate expenses, consolidated adjusted EBITDA for the quarter was $363 million, with total consolidated revenue of $4.3 billion, up 14.3% year-over-year on a pro forma basis.

• Q3 2026 consolidated revenue is expected to be between $3.85 billion and $4.05 billion
• Q3 2026 consolidated adjusted EBITDA is guided to a range of $275 million to $305 million
• Full year 2026 non-GAAP operating expenses are expected between $2.75 billion and $2.80 billion, a $50 million upward revision from prior guidance, driven by $35 million in operating expenses from an early July brokerage acquisition and incremental compensation from Q2 overperformance
• Q3 2026 basic weighted average share count is expected between 767 million and 769 million shares
• Management expects positive free cash flow in Q3 2026, and remains on track to redeem $500 million of 9.75% notes in Q2 2027
• Compass has $1.8 billion in net operating losses that will shield approximately $470 million in future cash taxes

No specific material new risks or operational failures were explicitly discussed by management during the call. The standard disclaimer that forward-looking statements involve inherent risks and uncertainties was provided at the opening of the call.

Q: What is current penetration of the three-phase marketing strategy, particularly Coming Soon listings, and how are network effects developing? / A: As of July 2026, 57% of new Compass brokerage listings use the Coming Soon modality, up from 35% last quarter, and management expects this to reach 80% by the end of Q3 2026. Coming Soon acts as a price discovery tool for sellers with no downside, so adoption is accelerating across newly onboarded Anywhere brands as they gain access to the platform. Network effects are already driving large traffic gains, with Chicago sessions up 111% year-over-year after coming soon rules were relaxed.

Q: The impressive Chicago traffic results from the Redfin partnership raise questions about replicability, and what is the upside for transactions per agent as the market normalizes? / A: Chicago is not unique—over 60% of US markets now allow flexible Coming Soon rules that let agents share listings with all MLS members while listing publicly on Compass.com, and this is quickly becoming the norm. For transactions per agent, the metric will continue to rise directionally, because Compass is actively removing low and zero-production agents from the roster: 49% of agent separations this quarter came from agents with zero trailing 12-month GCI, which naturally increases average productivity per remaining agent.

Q: As the housing market recovers, should we expect Compass to maintain or grow its current market share given its luxury exposure, and what should we expect for agent growth in coming quarters? / A: Compass guides based on current near-term trending data rather than making explicit market share assumptions for future recovery scenarios, but the firm's consistent outperformance to date has been driven by its luxury and high-end market exposure that benefits from current economic trends. Agent growth will remain steady in H2 2026 as the enterprise sales recruiting model is rolled out to acquired Anywhere owned brands, with full scale launching in January 2027; management prioritizes productive agent growth over raw agent count, which does not impact overall growth targets.

Q: How long will it take the acquired Anywhere brands to reach Compass's current Coming Soon penetration levels, and does strong direct traffic growth from Coming Soon change Compass's portal strategy? / A: Management expects Anywhere brands to reach the same Coming Soon penetration levels as Compass by the 2027 spring buying season. Compass remains confident that as anti-competitive MLS rules that force agents to give up their listing data to third parties are eliminated, Compass, as the largest holder of US listings, should become a top consumer search destination. There is no change to the partnership strategy with Redfin, which continues to be a strong pro-competition partner that benefits Compass agents and sellers.