RE/MAX Holdings, Inc. Q1 FY2024 earnings call

Housing Market

• Industry in early recovery with robust demand but rising for-sale home supply. Interest rates up affecting transactions.

RE/MAX Advantages

• Agents outbilled competition 2:1 in residential transaction sides, averaged 11.8 transaction sides vs. others' 5.9, 88 of top 100 brokerages by transaction sides per agent are RE/MAX. Agents trusted, key competitive advantages.

NAR Settlement

• Proposed settlement includes NAR payment and business practice changes. Relevant changes for RE/MAX affiliates include no offers of compensation in MLS and written agreements required. RE/MAX supported affiliates with education, materials, and focus on 4 areas: liability protection, preparing for NAR rule changes, transparent client communication, and staying updated on industry developments.

Growth Initiatives

• Expanded teams initiative launched April 1, CM&A program adding brokerages/agents. Mortgage side growing despite challenges, Tier 2 focused on controllable factors, Motto in renewal process.

Annual Convention

• R4 in Las Vegas with thousands of attendees, agents enthusiastic about opportunities.

Total revenue for the first quarter was $78.3 million. Excluding marketing funds, revenue was $58.1 million, a decrease of 9.3% compared to the same period last year due to negative organic growth, primarily from reduced event-related revenue and lower U.S. agent count, partially offset by higher mortgage segment revenue. Adjusted EBITDA was $19 million with an adjusted EBITDA margin of 24.3% and adjusted diluted EPS of $0.20.

Second Quarter 2024

• Agent count change -1.5% to 0% year-over-year, revenue in range of $75 million to $80 million (including marketing funds $19 million to $21 million), adjusted EBITDA in range of $24 million to $27 million.

Full Year 2024

• Agent count change -0.5% to +1.5% year-over-year, revenue in range of $300 million to $320 million (including marketing funds $78 million to $82 million), adjusted EBITDA in range of $90 million to $100 million.

• Regulatory Uncertainty: Uncertainty around DOJ's stance on NAR settlement and potential additional stipulations before final approval.
• Market Conditions: Slow housing market recovery, impact of interest rate fluctuations on transactions.
• Agent Retention: Continued agent count decline, need to address agent and broker satisfaction, provide tools and support.

Q: Do you feel like the NAR settlements are enough to satisfy the DOJ's concerns?

A: Erik Carlson said it's hard to speculate on DOJ's thinking, but the settlement supports transparent transaction and representation. Amy Lessinger added brokers are focused on educating agents, and agents are hearing from customers about compensation and value.

Q: On capital allocation, near term rebuild of cash mentality. Any framework on cash balance target?

A: Karri Callahan said focused on leveraging strong economics, eyes on credit facility leverage levels, and will focus on growth opportunities when appropriate.

Q: U.S. agent count decline, any thematics on leaving agents?

A: Amy Lessinger said industry contraction, RE/MAX positioned to capture agents needing support. Karri Callahan added RE/MAX agents have more experience and tenure than industry average.

Q: Implication of NAR ruling on agents and brokers?

A: Erik Carlson and Amy Lessinger said RE/MAX has been front-footed on education, brokers are supported with RE/MAX University, and changes in forms will be navigated by local brokers.

Q: International agent monetization opportunity?

A: Erik Carlson said it's on the road map with upside potential, but specific strategy not discussed.

Q: Agent count guidance and seasonality?

A: Amy Lessinger said international agent count has lumpy trends but expects mid-single-digit growth, U.S. and Canada have market challenges but sequential improvement expected.

Q: Motto franchise status?

A: Erik Carlson said close to 20 franchises to be open, 8 opened in 2024, aiming to sell more, with revenue potential of ~$5,000/month per franchise when live.