RE/MAX(US:RMAX)2023-11-03 18:04Financial Data and Key Metrics Changes - Total revenue for Q3 2023 was $81.2 million, a decline of 8.7% year-over-year, with adjusted EBITDA of $26.7 million and an adjusted EBITDA margin of 32.9% [38][60] - Excluding marketing funds, revenue was $60.4 million, down 8.8% compared to the same period last year, driven by an 8.2% organic growth decline and adverse foreign currency movements of 0.6% [38][39] - The total leverage ratio as of September 30, 2023, was seven to one, expected to persist for the next four quarters before moderating significantly [43] Business Line Data and Key Metrics Changes - The mortgage segment continued to grow, with Motto's office count increasing nearly 15% year-over-year [54] - Franchise sales in U.S. owned regions were up 35% year-over-year through September 30, 2023 [51] - The company recorded a reduction in selling, operating, and administrative expenses by 13.3% to $43.1 million, primarily due to lower severance and reorganization charges [40] Market Data and Key Metrics Changes - The agent count is expected to increase by 0.25% to 1.25% over Q4 2022, with full-year 2023 guidance also reflecting a similar increase [19][20] - The overall decline in existing home sales has negatively impacted broker fees and transactions per agent, contributing to organic growth decline [39] Company Strategy and Development Direction - The company remains focused on long-term growth initiatives, including increasing U.S. agent count and expanding its mortgage business [74] - A significant settlement of $55 million was agreed upon to resolve industry class-action lawsuits, which the company believes was the best decision for all stakeholders [41][49] - The company has suspended its quarterly dividend to preserve capital in light of the recent settlement and challenging market conditions [44][75] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current challenges and anticipates growth when industry conditions improve, citing historical patterns [60] - The management team noted that many franchisees are pleased with the actions taken to settle litigation and protect the company [25][26] - There is an expectation of continued pressure on commission rates driven by supply and demand dynamics in the market [32][36] Other Important Information - The company has implemented a reduction in force, streamlining operations and reducing workforce by approximately 7%, expected to yield annual cash savings of about $6.5 million [40][49] - The company has seen positive trends in franchise sales and agent recruitment, with a notable increase in team formations [76] Q&A Session Summary Question: What are the conversations with broker customers looking like today? - Management noted that agent count follows market conditions, with a contraction in the number of agents as the real estate market faces pressure [4][5] Question: What are the implications of the settlement and industry lawsuits? - Management believes the settlement will not materially affect business practices or profitability, as many changes were already adopted [25][26] Question: What is the outlook for agent count and revenue? - The company expects a slight increase in agent count and has narrowed revenue guidance for Q4 2023 [19][20] Question: How is the company managing its capital allocation? - The company has suspended its dividend to preserve capital and is focused on long-term growth opportunities [44][75] Question: What is the impact of the current market conditions on agent attrition? - Attrition is attributed to a combination of retirements, competitive dynamics, and overall market conditions [87][92]