Compass Q3 Earnings Call Highlights

Key Points

• Compass posted record third-quarter results: Revenue was $3.9 billion, net income was $62 million, adjusted EBITDA was $306 million, and free cash flow reached a quarterly record of $240 million.
• Weaker housing activity clouds the near-term outlook: Compass forecast fourth-quarter revenue of $3.15 billion to $3.35 billion and adjusted EBITDA of $100 million to $130 million, citing pending home sales down 15% year over year. Recent mortgage-rate declines could provide an upside if sustained.
• Cost savings are exceeding targets: Compass has actioned $360 million in net cost synergies, above its $330 million year-end target, and expects about $245 million of synergies in 2026.

Compass NYSE: COMP reported record third-quarter revenue and profit as cost cuts following its Anywhere acquisition helped offset a difficult housing market, but executives warned that weaker pending home sales could weigh on fourth-quarter results.

The real estate brokerage posted revenue of $3.9 billion, net income of $62 million and adjusted EBITDA of $306 million for the third quarter of 2026. It also generated $240 million in free cash flow, a record for any quarter in its history, Chief Financial Officer Scott Wahlers said.

Founder and CEO Robert Reffkin said the results came as the 30-year mortgage rate rose to 7.6% during the quarter and seasonally adjusted home sales fell below 4 million. Compass ended the quarter with $841 million in cash and a net debt-to-adjusted EBITDA ratio of 2.7 times, he said.

Fourth-Quarter Outlook Reflects Slower Sales

Compass forecast fourth-quarter revenue of $3.15 billion to $3.35 billion and adjusted EBITDA of $100 million to $130 million. At the midpoint, the revenue outlook implies a 4.5% organic decline from a year earlier, although pro forma revenue would rise 2.6%.

Wahlers said national pending home sales in the four weeks ended Oct. 30 were down 15% from a year earlier. Pending sales typically convert to completed sales in 30 to 60 days, he said, adding that the data pointed to a weaker fourth quarter than current industry forecasts contemplated.

The company’s guidance reflects weaker transaction volumes partly offset by expected home price appreciation. Wahlers said Compass expects prices in its markets to rise by roughly 7% to 8%, similar to the third quarter, and expects its transaction performance to outpace the broader market.

Mortgage rates had fallen by about 50 basis points since October, which could provide upside to fourth-quarter revenue if sustained, Wahlers said. Reffkin said the guidance did not reflect the most recent decline in rates.

For the full year, Compass expects adjusted EBITDA of $830 million to $860 million and non-GAAP operating expenses of $2.71 billion to $2.73 billion.

Cost Synergies and Debt Reduction

Compass has actioned $360 million in net cost synergies, exceeding the $330 million year-end target it shared last quarter, Reffkin said. He reiterated the company’s goal of $500 million in synergies in less than three years.

Wahlers said Compass now expects to realize about $245 million in synergies in 2026, up from its earlier forecast of $220 million. Approximately $175 million is expected to benefit adjusted EBITDA and cash flow through the income statement, while $70 million would come from lower capital spending.

Some cost actions originally planned for early 2027 were pulled into 2026 as interest rates rose, Wahlers said. He cautioned that an actioned synergy does not immediately translate into savings, citing vendor contracts that may be scheduled for cancellation at a later date.

Compass expects to redeem $500 million of its 9.75% notes in the second quarter of 2027, Wahlers said. He also said investors should plan for roughly $120 million in additional 2027 operating expenses from the full-year effect of the Anywhere acquisition and third-quarter franchise conversions; those expenses come with associated revenue and gross profit and are not expected to dilute adjusted EBITDA.

Brokerage and Platform Expansion

Organic revenue in the owned brokerage business rose 8.2% from a year earlier to $3.42 billion, while organic transactions slipped 0.3%, Wahlers said. Brokerage gross transaction value increased 7.5% to $133.1 billion, driven by higher average selling prices.

The organic comparisons are presented on a pro forma basis and include businesses owned by Compass or Anywhere as of July 1, 2025. Compass had 85,476 agents in its owned brokerage operations at the end of September and added 2,734 agents organically during the quarter. Retention was 98.7% among agents who generated more than $20,000 in gross commission income over the prior 12 months.

Reffkin said the company expects agent additions to improve from the third-quarter level, citing a stronger recruiting pipeline. Franchise organic gross transaction value rose 2.3% from a year earlier, outperforming the broader market for a second consecutive quarter.

Compass is also rolling out its Home technology platform to agents from acquired brands. Reffkin said 33,950 agents had been onboarded by the end of October, and the company expects to bring the remainder of the 46,000 owned brokerage agents from Coldwell Banker, Corcoran and Sotheby’s International Realty onto the platform by year-end. That would bring the total on the platform to approximately 85,000 agents.

The company plans to begin onboarding franchise broker owners in late spring 2027, Reffkin said. He also said newly onboarded agents had imported 29 million contacts into the platform, bringing its total to 225 million.

In integrated services, third-quarter revenue rose 3.1% on a pro forma basis to $197 million. Compass combined its two mortgage joint ventures with Guaranteed Rate under the OriginPoint brand; Wahlers said the combined business is expected to be a top 10 U.S. retail mortgage lender this year.

About Compass (NYSE:COMP)

Compass, Inc is a technology-enabled residential real estate brokerage company that operates in the United States. The company provides services designed to help clients buy, sell, and rent homes, while supporting real estate agents with digital tools and brokerage services.

Its platform includes property search and marketing capabilities, customer relationship management tools, transaction management, and other technologies intended to streamline the real estate process. Compass works with independent agents and brokerage teams, who serve clients across a range of residential markets and property types.

Compass was founded in 2012 by Ori Allon and Robert Reffkin.

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