Compass Widens Market Lead and Raises Synergy Target
Revenue reached $4.31 billion as the brokerage gained ground against the housing market.
Real estate brokerage Compass (COMP) widened its housing-market outperformance and more than doubled adjusted EBITDA in the second quarter, as higher transaction values, acquisition-related scale and cost savings lifted results.
The gap between Compass and the broader market expanded from the first quarter. Brokerage gross transaction value rose 15.9% on a pro forma basis, roughly 1,000 basis points above market growth, after Compass outpaced the market by 580 basis points in the prior quarter.
Revenue rose 109% from $2.06 billion a year earlier and increased 14.3% against pro forma revenue of $3.77 billion. Revenue also climbed about 59% from the first quarter. GAAP net income increased to $92 million from $39 million, while diluted earnings rose to $0.11 a share from $0.07.
Adjusted EBITDA increased to $363 million from $125 million, and the adjusted EBITDA margin expanded to 8.4% from 6.1%. Operating income rose to $124 million from $39 million, lifting the GAAP operating margin to about 2.9% from about 1.9%.
Brokerage transactions increased 7.4% on a pro forma basis to 153,009, compared with 3.5% market growth. Gross transaction value grew more than twice as fast as transaction volume, reflecting a larger contribution from higher-value deals. Franchise gross transaction value similarly rose 11.7%, while franchise transactions increased 3.8%.
Compass reduced its brokerage agent count by 1,003 sequentially to 83,184 as it removed low- and nonproductive agents, while retention improved to 95.5% from 94.1%. Nearly half of the quarter’s agent separations involved agents who had produced no gross commission income during the preceding 12 months. Compass One adoption increased to 35% of closed home-sale transactions from 31.5% in the first quarter.
The company completed its initial $300 million first-year net-cost-synergy target five months early and raised the target to $330 million. Compass now expects $220 million of realized synergies in 2026, up from $200 million. Full-year non-GAAP operating-expense guidance rises to $2.75 billion to $2.80 billion, with acquisitions completed in July accounting for $35 million of the increase.
Cash increased $210 million during the quarter to $694 million as Compass generated $191 million of operating cash flow and $180 million of free cash flow, giving the company additional liquidity as it integrates the acquired businesses.