Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stronger-than-expected financial performance in Q2 2024.
- Successful conversions of several real estate brokerages and teams, adding significant agent count.
- Effective cost management efforts, resulting in a 13.3% decrease in selling, operating, and administrative expenses.
- Positive reception and potential of the newly launched MAX/Tech Lead Concierge program.
- International agent count rebounded in Q2, with notable growth in India, Central, and South America.
Negative Points
- Revenue excluding marketing funds decreased by 4.8% compared to the same period last year.
- US agent count has not yet stabilized, with ongoing challenges in the macroeconomic environment.
- Negative organic growth driven by reduced US agent count and adverse foreign currency movements.
- Ongoing industry-wide and macroeconomic forces continue to impact growth initiatives.
- Litigation settlement is currently being appealed, adding uncertainty to future financial planning.
Q & A Highlights
Q: Erik, there's consensus that there will be fewer agents in the industry long term. Have you considered evolving your pricing model to take more of the economics on the actual transaction rather than just the number of agents?
A: Yes, we are considering all aspects of our business model. While our current model has been strong for decades, we are not naive to think it might not need to change. We are exploring opportunities to monetize not only the agent but also the transaction. However, no new models are being announced today. (W. Erik Carlson, CEO)
Q: Karri, on the EBITDA guide for the third quarter, it looks like you're forecasting similar revenue quarter over quarter, but EBITDA is stepping down. Is there some investment coming through or something else going on?
A: We had a strong second quarter with some onetime benefits that won't carry into Q3, such as favorable property tax expenses and strong collections. While we expect continued progress, the Q2 results were exceptionally strong. (Karri Callahan, CFO)
Q: Can you talk about the decision to lower the agent count guidance for the year?
A: The adjustment is informed by actual performance through July and ongoing macroeconomic headwinds. While we see positive trends in international markets, the US and Canada face challenges. (Karri Callahan, CFO)
Q: Do you have a sense of how much of the pressure on agent count is due to pending changes versus the broader housing market?
A: The macroenvironment is a significant factor, but the upcoming changes will also put pressure on agent count. We believe full-time, productive agents will fare better, and we are preparing our network accordingly. (W. Erik Carlson, CEO)
Q: Can you give specifics on your messaging to agents regarding buy-side commission rates and negotiating strategies?
A: We emphasize the value of experienced agents and have been preparing them to clearly articulate their value and have transparent conversations about compensation. (Amy Lessinger, President of RE/MAX, LLC)
Q: Any early learnings from implementing buyer agent agreements without adding too much friction?
A: Buyer agency agreements have been around for decades in many states. Our experienced agents are well-prepared to navigate these discussions, and we see this as an opportunity to highlight the value of professional representation. (Amy Lessinger, President of RE/MAX, LLC)
Q: Can you unpack the international agent growth trends?
A: We see strong growth in regions like Asia Pacific, Europe, South America, and Africa. Technological integration and strong leadership in these regions are driving growth. (Amy Lessinger, President of RE/MAX, LLC)
Q: The loss from Motto was higher this quarter. What drove the bigger sequential loss?
A: The challenging macroeconomic conditions in the mortgage market have impacted Motto. We are seeing some terminations but remain optimistic about future growth as market conditions improve. (W. Erik Carlson, CEO)
Q: Franchise sales for Motto have increased, but the number of open offices remains around 240. Is this due to market dynamics?
A: Yes, market dynamics are a significant factor. The challenging mortgage market has led to some terminations, but we expect growth to resume as conditions improve. (W. Erik Carlson, CEO)
Q: How does the dividend factor into your capital allocation strategy amid ongoing litigation?
A: Our focus is on replenishing cash reserves and reducing leverage ratios. We haven't made any decisions on capital allocation beyond that, but we look forward to having more optionality in the future. (Karri Callahan, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
