Will Compass report net debt/EBITDA of 4.0x or below by Q2 2026 (first two quarters combined)?

The starting leverage uncertainty is the dominant variable. BTIG's 4.4x estimate is the publicly cited figure and likely the one analysts will reference, making it the appropriate starting point. From 4.4x, reaching 4.0x in 6 months requires a 0.4x reduction — achievable at management's ~1x/year pace, but only if combined EBITDA runs at $700M+ annualized and some debt is paid down. The TTM EBITDA calculation complication is a meaningful risk: if the merger closed recently, the first truly combined TTM may not be calculable from Q2 2026 filings alone, which would default to NO. Q2 peak seasonality helps, but integration costs and housing market uncertainty create drag.

The derived leverage estimate of 3.4-3.9x deserves substantial weight. If actual starting leverage is closer to 3.7x, reaching 4.0x is trivially achieved — the threshold is already met. The wide discrepancy between BTIG's 4.4x and the derived 3.4-3.9x suggests the answer may hinge on which methodology is used. Combined EBITDA at the midpoint of $600-875M ($737M) with $3.16B debt yields 4.3x before any paydown. With $100M+ in combined FCF applied to debt in H1, leverage drops to ~4.1x. Synergy savings and Q2 seasonality could push the remaining 0.1x. This is genuinely close to a coin flip, with slight lean toward NO due to measurement complexity.

Taking the more conservative view: BTIG's 4.4x is the analyst consensus starting point. Combined EBITDA is genuinely uncertain with a $600-875M range — if it comes in at the lower end ($650M), leverage with $3.16B debt is 4.9x, far from the 4.0x threshold. Integration costs in H1 2026 are real and could suppress near-term EBITDA below run-rate. The resolution criteria require this to be 'as reported or calculable' by Oct 31, 2026, and the partial-period TTM issue is not trivial — Compass may only have 2-3 quarters of combined results by Q2 2026, making a clean TTM EBITDA figure hard to produce. The FUNDING_FRAGILITY classification of STRETCHED (with minority STRAINED) reinforces that this is a tight situation.

The 4.4x starting leverage from BTIG is the most commonly cited figure. Management targets 1x/year deleveraging, implying 0.5x in 6 months — which would reach 3.9x by mid-2026 if the pace holds. However, the first 6 months of an integration are typically the hardest for generating clean EBITDA numbers. Q2 peak seasonality helps but integration costs offset. The resolution hinges on whether a credible TTM EBITDA figure exists for Q2 2026 — if the merger is too recent for a full TTM, it defaults to NO regardless of actual performance.

The bimodal nature of the starting leverage estimate creates an unusual distribution. There is perhaps a 30-40% chance the actual leverage is already at or below 4.0x (the derived 3.4-3.9x scenario), and a 60-70% chance it starts at 4.4x requiring active deleveraging. In the 4.4x scenario, probability of reaching 4.0x by Q2 2026 is maybe 25-35% given EBITDA uncertainty and measurement issues. Blending these scenarios: 0.35 * 0.85 + 0.65 * 0.30 = ~0.49, which I discount slightly for general integration risk and measurement complexity. Franchise revenue stability from Anywhere is a genuine positive, providing a floor on EBITDA that pure-play Compass lacked.

Weighting the downside risks more heavily: the housing market is a key variable that could compress transaction revenue significantly. The stress scenario of 15% volume decline pushing leverage to 5.1-7.0x shows how sensitive this metric is to top-line performance. Even without a severe downturn, any softness in housing transactions disproportionately impacts the leverage ratio through lower EBITDA. SBC exclusion from Adj. EBITDA helps, but integration costs and restructuring charges create uncertainty about what 'adjusted' means in the first combined quarters. Low confidence reflects the genuinely wide range of outcomes.

Starting leverage of 4.4x with a 4.0x target in 6 months is aggressive but feasible. Management's 1x/year deleveraging plan supports a 0.5x reduction. Combined EBITDA at $700M+ and Q2 seasonality help. However, TTM EBITDA measurement from partial combined periods creates risk of defaulting to NO.

The FUNDING_FRAGILITY classification as STRETCHED signals elevated risk. Integration costs in H1 2026 likely suppress EBITDA below run-rate. If combined EBITDA is below $700M annualized, leverage stays above 4.5x even with modest debt paydown. The 4.0x threshold is a stretch from 4.4x in just two quarters.

The derived leverage of 3.4-3.9x provides upside optionality — if actual starting leverage is below 4.0x, the market resolves YES immediately. But the BTIG 4.4x figure is more conservative and widely cited. Franchise revenue from Anywhere stabilizes EBITDA but synergies take time to materialize. Near coin-flip leaning slightly NO.