MIAMI--(BUSINESS WIRE)---- $REAX #therealbrokerage--The Real Brokerage welcomes Washington State's The Collective Group, a top-ranked 15-agent team with $575M in sales since 2020. ...

Summary of The Real Brokerage (REAX) FY Conference Call - August 13, 2025 Company Overview - **Company Name**: The Real Brokerage (REAX) - **Industry**: Real Estate Technology - **Founded**: 2014 - **Headquarters**: United States - **Public Listing**: Initially listed on TSX Venture Exchange in 2020, now only on NASDAQ Key Points and Arguments Industry Context - The U.S. real estate industry has approximately **1.5 million agents**, with around **160,000 in Canada** [6] - The industry generates roughly **$100 billion** in annual revenue from commissions paid to agents [7] - Traditional brokerages dominate the market, relying on physical office spaces and charging high fees for perceived low value [8] Company Growth and Market Position - The Real Brokerage has grown rapidly, capturing less than **2%** of the overall market, indicating significant growth potential [9] - LTM revenue reached **$1.6 billion**, a **6x increase** compared to Q2 2022, despite a **25% decline** in the overall housing market [14] - The company continues to attract agents due to its unique value proposition, including freedom, flexibility, and a strong technology platform [15][19] Unique Selling Propositions 1. **Agent Freedom and Flexibility**: Agents can build their businesses independently while benefiting from Real's resources [15][16] 2. **Compensation Model**: Agents keep **85%** of their commission, with a cap of **$12,000** annually, after which they retain **100%** of their earnings [19] 3. **Technology Platform**: The proprietary software, **Rezent**, enhances productivity, marketing, and community engagement among agents [20][21] 4. **Collaborative Culture**: A culture of collaboration over competition, with approximately **50%** of agents being shareholders [31] Technology and AI Integration - The company has invested **tens of millions** in its technology platform, with **$4 million** spent on R&D in Q2 [44] - The AI-driven platform, **LEO Copilot**, assists agents by managing transactions and improving customer support efficiency [28][29] - The technology allows for significant operational efficiencies, reducing transaction processing time from **hours to minutes** [25][26] Ancillary Services and Future Growth - The Real Brokerage has expanded into title and mortgage services, which have higher gross margins (title margins over **80%**, mortgage margins **40-50%**) [34] - Current attachment rates for these services are low, at **4%** for title and **1%** for mortgage, indicating substantial growth opportunities [35][54] - The company aims to enhance the home buying experience through AI-driven consumer-facing products, such as **LEO for clients** [36] Financial Performance and Projections - The Real Brokerage is on track to generate over **$1 million** in annual revenue from its RealWallet product, which offers agents financial services [40] - The company anticipates continued growth regardless of macroeconomic conditions, supported by its technology and high-margin services [41] Market Outlook - The speaker expressed optimism about the real estate market's recovery, suggesting that existing home sales are at historic lows and likely to rise [75] - The company is well-positioned to capitalize on market recovery due to its innovative business model and technology [76] Additional Important Insights - The company has a **headcount efficiency ratio** of **1 employee for every 87 agents**, significantly better than traditional brokerages [33] - The Real Brokerage's revenue share model incentivizes agents to recruit others, creating a scalable growth mechanism [68] - The company is focused on maintaining a disciplined approach to credit extension through its RealWallet product, ensuring only qualified agents receive loans [70] This summary encapsulates the key points discussed during the conference call, highlighting The Real Brokerage's innovative approach, growth potential, and strategic focus on technology and agent support.

Financial Data and Key Metrics Changes - Revenue in Q2 2025 increased by 59% year-over-year to $541 million, driven by a 62% increase in the number of transactions closed, exceeding 49,000 [7][27] - Gross profit rose by 50% to $47.9 million, while operating expenses increased by 42% to $46.2 million, resulting in the first-ever positive operating income of $1.7 million and positive net income of $1.6 million [9][30] - Adjusted EBITDA improved by 43% to $20 million from $14 million in the previous year [9][31] - The total value of homes transacted increased to $20.1 billion, a 60% year-over-year increase [32] Business Line Data and Key Metrics Changes - Ancillary business lines grew by 50%, contributing approximately 1% of total revenue and nearly 5% of gross profit [10] - One Real Mortgage saw exceptional revenue growth of 80%, while One Real Title's revenue grew by 7% [11] - RealWallet generated $250,000 in revenue, with total deposits exceeding $14 million, a nearly 70% increase since the last earnings call [12] Market Data and Key Metrics Changes - The company ended Q2 with 28,000 agents, marking a 43% increase year-over-year, with the agent count exceeding 29,200 as of the call [9][10] - Revenue churn remained low at 2%, indicating strong retention of productive agents [10] Company Strategy and Development Direction - The company aims to redefine the role of real estate brokerage by providing agents with financial incentives, a proprietary technology platform, and a collaborative culture [6] - A significant part of the long-term strategy involves the growth of ancillary business lines, which have higher gross margins compared to core brokerage [10] - The acquisition of FlyHome's AI-powered consumer home search portal is expected to enhance the client experience and strengthen the company's competitive position [15] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the challenges in the housing market but emphasized that the company's model is designed to empower agents to succeed in such environments [36] - The focus remains on building a comprehensive platform for agents to manage their businesses and provide clients with seamless services [38] Other Important Information - The company ended the quarter with unrestricted cash and investments at an all-time high of $55 million and no debt [32] - The company plans to increase share repurchases in the second half of the year under a buyback authorization [32] Q&A Session Summary Question: Impact of revenue share model enhancements - Management clarified that changes in the revenue share model would not impact financial statements but would redistribute revenue share within the agent community [41] Question: Expectations for gross margins in the second half - Management indicated that gross margins are expected to decline year-over-year in the second half due to more revenue being generated by capped agents [42][43] Question: Update on agent and team recruiting pipelines - The recruiting pipeline remains strong, with 1,200 agents added in the past five weeks, despite a significant offboarding of nonproductive agents [44][46] Question: Goals for ancillary services adoption - Management believes that meaningful adoption of ancillary services will come through product enhancements rather than traditional methods [54] Question: Utilization of contract labor - The company strategically uses a mix of contract labor and full-time employees to support growth, converting contractors to full-time roles as needed [86] Question: Goals for achieving positive earnings per share - Management aims to build on the momentum of achieving positive net income and will remain active in share buybacks and opportunistic M&A [88] Question: R&D prioritization strategy - The focus will be on strengthening core technology, leveraging AI for efficiency, and investing in the consumer roadmap [89]

Financial Performance - The company's revenue for the three months ended June 30, 2025, was $540747 thousand, compared to $340778 thousand for the same period in 2024[194] - Gross profit for the three months ended June 30, 2025, was $47861 thousand, compared to $31868 thousand for the same period in 2024[194] - Net income attributable to the owners of the company for the three months ended June 30, 2025, was $1512 thousand, compared to a net loss of $1215 thousand for the same period in 2024[194] - Adjusted EBITDA for the Q2 2025 was $20043 thousand[199] Agent Network and Transactions - The company has grown agent count by over 7x since the end of 2021[26, 69] - Total agents reached 28034 by Q2 2025[109] - Closed transaction sides reached 49282 in Q2 2025[208] Operational Efficiency - Agent-to-full time brokerage employee ratio was 87:1 in Q2 2025[65] - Adjusted operating expenses have declined from 74% to 50% over the past two years[65] Agent Incentives and Technology - Agents receive 85% of gross commissions before reaching an annual cap of $12000 in the US and CAD $15000 in Canada[41, 130] - Real Wallet generated $247K in revenue in Q2 2025 and was used by ~3600 Real agents as of July 2025[76] Market Outlook - Real's Agent Optimism Index increased to 595 in June from 570 in May, with 38% of agents feeling more optimistic[164] - In June 2025, 48% of agents indicated their local market favored buyers[169]

Core Viewpoint - Palantir Technologies has experienced significant stock growth, with shares increasing over 2,200% since the beginning of 2023, but its high market cap of $350 billion and price-to-sales ratio over 100 suggest future returns may be weak [1][2] Company Overview: The Real Brokerage - The Real Brokerage is a cloud-based digital brokerage aimed at modernizing the residential real estate market, which has been slow to adopt digital tools and continues to operate with high commission rates [4][5] - By eliminating physical offices and adopting a software-first approach, The Real Brokerage can offer lower transaction costs to real estate agents, making it an attractive alternative to traditional brokerages [6] Growth Metrics - The Real Brokerage has seen a 61% year-over-year increase in the number of agents, reaching approximately 27,000, which has contributed to a 76% revenue increase in the first quarter of 2025, totaling $354 million [7] - Since going public, The Real Brokerage's revenue has surged over 10,000% cumulatively, positioning it as one of the fastest-growing companies globally [8] Market Conditions - Despite a slowdown in existing home sales in the U.S. due to high interest rates, The Real Brokerage is gaining market share and is expected to benefit when the market rebounds [9][10] - The current environment has seen annualized transactions drop to 4 million, down from around 6 million in a typical market, indicating potential for future growth as conditions improve [9] Technological Innovation - The Real Brokerage is leveraging AI technology, having launched Leo AI, a digital concierge for real estate agents, to streamline the home buying and selling process [12] - The company aims to develop an AI-assisted real estate portal to compete with established players like Zillow Group, indicating ambitious long-term growth plans [13] Financial Position - The Real Brokerage currently has a market cap of $823 million and is close to breakeven, generating $128 million in gross profit while growing revenue at over 50% year-over-year [14]

Company Overview - The Real Brokerage Inc (NASDAQ: REAX) is a real estate company founded in 2014, operating across almost all of the United States and four Canadian provinces [1] Analyst Background - The author of the article is a financial journalist with over 10 years of experience in communications and has worked for various economic institutions [1] - The author also runs a podcast called Storiopolis, focusing on the history of finance [1] Market Position - The company is positioned not just as a real estate entity but also as a personal investment opportunity, indicating a broader perspective on its market role [1]

Core Viewpoint - The Real Brokerage Inc. (REAX) has received a Zacks Rank 2 (Buy) upgrade due to an upward trend in earnings estimates, indicating a positive outlook for the company's stock price [1][3]. Earnings Estimates and Stock Price Movement - Changes in a company's future earnings potential, as reflected in earnings estimate revisions, are strongly correlated with near-term stock price movements [4]. - Institutional investors utilize earnings estimates to determine the fair value of a company's shares, influencing their buying or selling actions, which subsequently affects stock prices [4]. Recent Performance and Outlook - The Real Brokerage has seen a 66.7% increase in the Zacks Consensus Estimate over the past three months, indicating a positive trend in earnings estimates [8]. - For the fiscal year ending December 2025, the company is expected to earn -$0.03 per share, unchanged from the previous year [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [7]. - The upgrade to Zacks Rank 2 places The Real Brokerage in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Summary of Real Brokerage Conference Call Company Overview - **Company**: Real Brokerage - **Industry**: Real Estate Technology and Brokerage - **Founded**: 2014 - **Agent Count**: Approximately 27,000 agents in the US and Canada as of March 2025, representing a 61% year-over-year growth [6][7] Key Financial Metrics - **Revenue Growth**: Revenue increased by over 80% year-over-year [6] - **Adjusted EBITDA**: Tripled during the same period [6] - **Annual Revenue**: Grew from $15 million in 2020 to $1.3 billion in 2024 [12] - **Gross Margins**: Approximately 9% for brokerage operations; over 80% for title services and over 50% for mortgage services [26] Market Position and Strategy - **Market Share**: Currently under 2% of the overall market, indicating significant growth potential [8] - **Traditional Brokerage Model**: The industry is dominated by traditional players like Century 21 and Keller Williams, which rely on office locations and manual processes [7][8] - **Value Proposition**: Real aims to provide more value at a lower cost by eliminating the need for office space and automating back-office processes [9][8] Technology and Innovation - **Technology Platform**: Focus on AI and proprietary technology to enhance agent productivity and efficiency [15][20] - **AI Assistant**: LEO, an AI tool for agents, answers over 2,000 questions daily, improving customer satisfaction and operational efficiency [22] - **Real Wallet**: A digital wallet for agents that allows for interest on deposits and potential credit lines, currently at a run rate of $1 million [33][36] Agent Recruitment and Retention - **Agent Growth**: 85% of growth comes from referrals; 15% from inbound inquiries [40] - **Churn Rate**: Agent churn is around 7.5%, with revenue churn at 2.5%, indicating a focus on retaining high-performing agents [49] - **Competitive Landscape**: Smaller independent brokerages may struggle to compete with Real's technology and cost structure, leading to potential consolidation in the industry [46] Ancillary Services - **Title and Mortgage Services**: Currently low attach rates (4% for title, 2% for mortgage) with plans to increase through initiatives like early commission payments [28][52] - **Future Plans**: Aiming to enhance attach rates by educating agents about the benefits of using Real's title and mortgage services [54] Financial Strategy - **Share Repurchase Program**: Announced a $150 million share repurchase authorization to support agent equity programs and enhance shareholder value [56] - **Path to Profitability**: Continuous improvement in profitability metrics, with a focus on balancing growth and investment in technology [58] Conclusion - Real Brokerage is positioned for continued growth in a challenging real estate market, leveraging technology to attract and retain agents while expanding its service offerings and improving profitability [38]

Company Performance - The Real Brokerage Inc. reported a quarterly loss of $0.02 per share, better than the Zacks Consensus Estimate of a loss of $0.05, and improved from a loss of $0.04 per share a year ago, representing an earnings surprise of 60% [1] - The company posted revenues of $353.98 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 7.65%, and up from $200.74 million in the same quarter last year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates four times and topped consensus revenue estimates four times [2] Stock Outlook - The Real Brokerage shares have declined approximately 2.8% since the beginning of the year, compared to a decline of 4.3% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is -$0.02 on revenues of $444.15 million, and for the current fiscal year, it is -$0.10 on revenues of $1.67 billion [7] - The estimate revisions trend for The Real Brokerage is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Technology Services industry, to which The Real Brokerage belongs, is currently ranked in the top 27% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Revenue for the first quarter reached $354 million, a 76% increase compared to $201 million in the prior year, driven by a 77% increase in closed transactions to 33,600 [9][26] - Gross profit was $33.9 million, up 63% year-over-year, while net loss improved to $5.1 million from a loss of $16.1 million in the prior year [9][30] - Adjusted EBITDA increased to $8.3 million, significantly up from $3.6 million in the first quarter of 2024 [9][31] - The company ended the quarter with net unrestricted cash and investments of approximately $35 million, up from $33 million at year-end [31] Business Line Data and Key Metrics Changes - Brokerage revenue reached $352 million, contributing to a 77% increase, while ancillary businesses generated $2.2 million, a 50% increase year-over-year [26] - RealWallet generated $126,000 in revenue during its first full quarter, with an annualized run rate exceeding $700,000, up from $500,000 previously [13][31] - OneReal Mortgage and OneReal Title saw revenue growth of 55% and 30% respectively [26] Market Data and Key Metrics Changes - The housing market experienced a 2% decline in existing home sales, contrasting with the company's 5% year-over-year increase in average transactions per agent [16][17] - The gross transaction value was $13.5 billion, an 80% increase year-over-year, with a median sale price of $380,000, up 2% year-over-year [32] Company Strategy and Development Direction - The company aims to redefine the role of real estate brokerage by providing agents with financial incentives, a proprietary technology platform, and a collaborative culture [6][8] - The long-term vision includes creating a holistic ecosystem of financial technology products and investment planning tools for agents [6][7] - The company is focusing on enhancing its technology platform and high-margin ancillary businesses to drive margin expansion and operating leverage [10][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertain operating environment but believes the company is well-positioned to thrive amid technological transformations, particularly with AI [36][37] - The company remains committed to investing in innovation and expanding its service offerings to deliver long-term value for agents and shareholders [37] Other Important Information - The company transitioned all inbound agent support calls to LEO, its AI-powered assistant, which now handles thousands of interactions daily [10][41] - The agent count increased to 26,870, up 61% year-over-year, with over 800 agents added since the start of the second quarter [9][10] Q&A Session Summary Question: How is agent adoption of AI and LEO services? - Management indicated that LEO is focused on improving service to agents, handling inbound calls and thousands of daily interactions, but consumer-facing metrics are still being developed [40][41] Question: Can you discuss trends in gross margins and capping? - Management noted that a higher mix of capped agents is expected to continue impacting gross margins, but fee changes and ancillary business growth should help offset this [42] Question: What opportunities do you see with voice AI? - Management highlighted plans to transition the agent support phone line to use AI voice technology, allowing for real-time conversations with potential buyers and sellers [46][47] Question: What is driving agent recruitment success? - Management emphasized a combination of value and cost efficiency as key factors in attracting agents, with no single initiative standing out [49][50] Question: How will the transition of employees in India to full-time affect product development? - Management believes this transition will strengthen team commitment and improve time to market for initiatives [52] Question: What is the strategy for expanding ancillary services? - Management stated that the focus remains on improving operations within current markets rather than expanding to all 50 states at this time [62]