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 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]

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, primarily contributing to the overall revenue growth, while ancillary businesses generated $2.2 million, a 50% increase year-over-year [26] - OneReal Mortgage saw a 55% increase, and OneReal Title experienced 30% growth in revenue [26] - RealWallet generated $126,000 in revenue during its first full quarter, with an estimated annualized run rate exceeding $700,000, up from $500,000 previously [13][31] Market Data and Key Metrics Changes - The housing market showed a 2% decline in existing home sale transactions, contrasting with the company's 5% year-over-year increase in average transactions per agent [16][17] - The median sale price was $380,000, reflecting a 2% increase 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 acknowledged the uncertain operating environment but expressed confidence in the company's ability to thrive amid technological transformations, particularly with AI [34][35] - The company plans to continue investing in innovation and expanding its service offerings to agents and clients [35] 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][39] - 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 [38][39] 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 provide some offset [40] 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 [44][45] 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 reason identified for the growth [49] Question: How will the transition of employees in India to full-time affect product development? - Management stated that while there would be no financial impact, the transition is expected to strengthen team commitment and improve time to market for initiatives [51] Question: What is the strategy for expanding ancillary services? - Management clarified that the focus remains on improving operations within current markets rather than expanding to all 50 states at this time [61]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $354 million, a 76% increase compared to $201 million in Q1 2024, driven by a 77% increase in closed transactions to 33,600 [8][27] - Gross profit increased to $33.9 million, up 63% from $20.8 million in the prior year, while net loss improved to $5.1 million from a loss of $16.1 million [8][32] - Adjusted EBITDA rose to $8.3 million, more than doubling from $3.6 million in Q1 2024 [9][33] - The company ended the quarter with net unrestricted cash and investments of approximately $35 million, up from $33 million at year-end [33] Business Line Data and Key Metrics Changes - Brokerage revenue reached $352 million, contributing significantly to overall revenue growth, while ancillary businesses generated $2.2 million, a 50% year-over-year increase [27][28] - OneReal Mortgage saw a 55% increase in revenue, and OneReal Title grew by 30% [28] - 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][29] Market Data and Key Metrics Changes - The existing home sale industry experienced a 2% decline in transactions, contrasting with the company's 77% increase in closed transactions [8][16] - The median sale price was $380,000, reflecting a 2% year-over-year increase [34] Company Strategy and Development Direction - The company aims to redefine the role of real estate brokerage by providing agents with financial incentives, a technology platform, and a collaborative culture [6][7] - The long-term vision includes creating a holistic ecosystem of financial technology products and investment planning tools for agents [6] - The company is focusing on enhancing its technology platform and high-margin ancillary businesses to drive margin expansion and operating leverage [10][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain operating environment but expressed confidence in the company's model designed to thrive in any market condition [37][38] - The rise of AI is seen as a transformative opportunity, with the company actively investing in innovation and technology to enhance agent productivity [37][39] 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, a 61% rise year-over-year, with over 800 agents added since the start of Q2 [9][10] Q&A Session Summary Question: Agent adoption of AI and LEO services - Management indicated that LEO is currently focused on improving service to agents, handling inbound calls and providing support for compliance and tech-related questions [41][42] Question: 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 growth in ancillary services will help offset this [43][44] Question: Opportunities with voice AI - Management discussed plans to leverage voice AI for agent support and consumer interactions, enhancing the value proposition for agents [48][49] Question: Agent recruiting and value proposition - Management emphasized the importance of providing value and maintaining a balance between cost and service to attract agents, with no single factor driving recruitment [51][52] Question: Impact of converting contractors to full-time employees - Management stated that this transition would strengthen team commitment and potentially improve time to market for product initiatives [54] Question: Growth pipeline and onboarding - Management confirmed a strong pipeline with no significant changes in onboarding times, despite challenging market conditions [58][61] Question: Expansion to all 50 states for ancillary services - Management clarified that the focus remains on improving operations within current markets rather than expanding to all states at this time [62]