Compass, Inc.

What they do

Compass operates an owned-brokerage business primarily under the @properties, Coldwell Banker, Compass, Corcoran and Sotheby's International Realty brands, where independent contractor agents associate their licenses with the company and it collects a share of gross sales commissions. It also franchises brands including Better Homes and Gardens Real Estate, Century 21, Christie's International Real Estate, Coldwell Banker Commercial and ERA, earning royalties plus marketing and technology fees. A third segment, Integrated Services, provides title, escrow, mortgage, relocation and title underwriting services, partly through minority-owned joint ventures. The company reports in three segments: Brokerage, Franchise and Integrated Services.

Revenue drivers

• Brokerage — Commission splits from independent contractor agents on home sales; in 2025 substantially all revenue and earnings came from this segment plus integrated services, with roughly 37,000 agents at owned-brokerages across 39 states and Washington DC at year-end 2025.
• Franchise — Royalties based on a percentage of franchisee gross sales commissions plus marketing and technology fees; after the Anywhere Merger the franchise portfolio covers brands including Century 21, Coldwell Banker, ERA and Sotheby's International Realty.
• Integrated Services — Title, escrow and settlement services plus mortgage via a minority-owned joint venture; the Anywhere Merger added relocation through Cartus and title underwriting via a minority-owned joint venture.

Recent performance

Q2 2026 revenue was $4.31 billion, up 109% year over year and up 14.3% versus pro forma Q2 2025 revenue of $3.77 billion. GAAP net income in Q2 2026 was $92 million compared to $39 million in Q2 2025, and Adjusted EBITDA was $363 million. Operating cash flow was $191 million and free cash flow was $180 million in the quarter, with the cash balance rising $210 million sequentially to $694 million and no balance on the revolver. Brokerage GTV rose 15.9% year over year on a pro forma basis versus market volumes up 6%, about 1,000 basis points of outperformance, while brokerage transactions rose 7.4% versus market transactions up 3.5%.

Strategy

Compass closed the Anywhere Merger on January 9, 2026 and reports three segments: Brokerage, Franchise and Integrated Services. It has actioned the entire $300 million Year 1 net cost synergy target five months ahead of plan and raised the Year 1 actioned target to $330 million and the 2026 realized net cost synergy target to $220 million, of which $150 million is expected through the P&L and $70 million as a capex synergy. Management reiterates confidence in a $500 million net cost synergy target over three years. It says deleveraging is a key focus and intends to redeem the $500 million 9.75% Notes when first callable in Q2 2027, citing $470 million of expected future cash tax savings from $1.8 billion of net operating losses.

Risks

• Housing market cyclicality — Results depend on U.S. residential real estate conditions including mortgage rates, inventory levels, affordability and consumer confidence, all of which are beyond the company's control.
• Integration of Anywhere — The January 2026 merger combined multiple owned-brokerage and franchise brands and added relocation and title underwriting services, creating execution and integration risk reflected in $34 million of merger and integration expenses in Q2 2026 alone.
• Leverage and debt refinancing — Long-term debt was $3.14 billion at June 30, 2026, including $500 million of 9.75% notes the company says it intends to redeem when first callable in Q2 2027.
• Commission model and regulation — Revenue depends on collecting a share of agent gross sales commissions, exposing the company to regulatory and industry changes affecting how real estate commissions are set and paid.

Outlook

Management guided to 2026 realized net cost synergies of $220 million, split between $150 million in the P&L and $70 million as a capex synergy, and targets $500 million of net cost synergies over three years. It expects positive free cash flow in the second half of 2026 to support redeeming the $500 million 9.75% notes when first callable in Q2 2027. Management states that fully realizing the cost synergies should support durable profitability and balance-sheet deleveraging even in a muted market, with upside if housing recovers.