RE/MAX Holdings Inc (RMAX) (Q1 2024) Earnings Call Transcript Highlights: Navigating Market ...

GuruFocus Research

4 May 2024 at 3:04 am·4-min read

Total Revenue: $78.3 million for Q1 2024.
Adjusted EBITDA: $19 million with a margin of 24.3%.
Adjusted Diluted EPS: $0.2.
Revenue Excluding Marketing Funds: $58.1 million, down 9.3% year-over-year.
Q2 2024 Revenue Forecast: $75 million to $80 million.
Full Year 2024 Revenue Forecast: $300 million to $320 million.
Q2 2024 Adjusted EBITDA Forecast: $24 million to $27 million.
Full Year 2024 Adjusted EBITDA Forecast: $90 million to $100 million.

Warning! GuruFocus has detected 5 Warning Signs with RMAX.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

RE/MAX agents continue to lead in productivity, with agents at large U.S. brokerages outselling competitors 2-to-1 in residential transaction sides.
RE/MAX agents in the US and Canada have been voted as the most trusted, emphasizing the brand's strong reputation and customer trust.
The proposed nationwide settlement agreement could potentially release RE/MAX from liability in multiple seller initiated commission lawsuits, pending final court approval.
RE/MAX's international agent count grew by 3,500 agents, showing strength particularly in Central and South America.
Despite challenging market conditions, RE/MAX's mortgage side continues to grow, with positive developments in franchise renewals and new openings.

Negative Points

The overall U.S. agent count has experienced a decline, reflecting broader industry contraction and challenges.
Organic growth decreased due to a reduction in events-related revenue and a lower U.S. agent count.
The real estate market remains uncertain with interest rates increasing, which could affect transaction volumes and market dynamics.
The proposed changes in business practices due to the settlement could require significant adjustments in how compensation and agreements are handled in the MLS systems.
Despite international growth, there is a need for increased sales and openings to maintain momentum in the franchise and mortgage sectors.

Q & A Highlights

Q: Do you feel like the VMDR settlements are enough to satisfy the DOJ's concerns, or do you think they may look to include additional stipulations before final approval? A: Erik Carlson, CEO of RE/MAX Holdings, mentioned that it's difficult to speculate on the DOJ's actions but emphasized that the settlement supports transparency in transactions and representation on both the buy and sell sides. Amy Lessinger, President of RE/MAX Holdings, added that agents are getting more questions from buyers and sellers about compensation and value, which they are prepared to handle due to their focus on transparency.

Q: Are you seeing any pushback from buyers on the commission rate early on? A: Amy Lessinger noted that there hasn't been significant pushback on commission rates. Most buyers understand the value of being represented, which includes local market expertise and negotiation skills on their behalf.

Q: What changes or potential refreshes might you have to do for the RE/MAX model to adapt to enhanced competition for the best agents in the industry? A: Erik Carlson acknowledged the need to evolve and compete for the best agents, emphasizing that RE/MAX's large network and community provide a competitive advantage. Amy Lessinger added that RE/MAX has always aimed to make agents more professional and productive, which aligns with the industry's direction towards more professional agents.

Q: On the capital allocation side, is there a level of cash balance you are targeting before considering share repurchases or dividends? A: Amy Lessinger explained that the focus is currently on rebuilding cash and managing leverage levels as stipulated in their credit agreement. The company aims to leverage the strong economic and cash flow characteristics of the business while navigating current uncertainties.

Q: How are you addressing the decline in U.S. agent count, and what are the characteristics of agents who are leaving? A: Karri Callahan, CFO of RE/MAX Holdings, mentioned that the industry contraction affects agent counts, but RE/MAX is well-positioned to attract agents who need support and wish to elevate their skills. Amy Lessinger added that RE/MAX agents tend to be more experienced and tenured compared to the industry average.

Q: What are the implications of the NAR ruling, and how are you preparing your agents and brokers? A: Erik Carlson stated that education and support are priorities to help agents and brokers navigate the changes. Amy Lessinger highlighted that while buyer agency agreements will become mandatory, they have been widely used for a long time, and RE/MAX is well-prepared to support its brokers and agents through these changes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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RE/MAX Holdings Inc (RMAX) (Q1 2024) Earnings Call Transcript Highlights: Navigating Market ...

Positive Points

Negative Points

Q & A Highlights

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