RE/MAX(US:RMAX)2023-05-05 18:44Financial Data and Key Metrics Changes - RE/MAX Holdings reported total revenue of $85.4 million for Q1 2023, a decrease of 6.2% compared to the previous year [12][26] - Adjusted EBITDA was $19.9 million, with an adjusted EBITDA margin of 23.3% [12][37] - Selling, operating, and administrative expenses increased by 2.7% to $49.1 million, primarily due to higher costs associated with the annual RE/MAX agent convention and bad debt expense [27] Business Line Data and Key Metrics Changes - The company saw agent count growth in Canada and global regions, with a regain in momentum for Motto franchise sales [11][14] - Wemlo's business increased month-over-month throughout Q1, meeting or exceeding expectations for loans submitted and cleared [15] - Franchise sales regained momentum, with 10 franchises sold in Q1, aligning with historical sales pace [38] Market Data and Key Metrics Changes - The overall housing market continued to adjust to higher interest rates, impacting agent count growth negatively [35] - RE/MAX agents averaged 13.6 transaction sides, significantly outperforming competitors who averaged 6.2 sides [19] - The Canadian market showed signs of decline but rebounded faster than the U.S. market, maintaining strong growth potential [104][134] Company Strategy and Development Direction - The company is focused on growth through strategic initiatives, including the MAXRecruit program aimed at enhancing local affiliates' skills [20][21] - Investments are being directed towards technology and support for mortgage business growth, with a long-term goal of generating $100 million in annual mortgage-related revenue [40] - The company is strategically investing in its network to better position itself as the market regains momentum [44][77] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the spring selling season, noting improved transaction volume trends [52] - The outlook for Q2 2023 anticipates a slight decline in agent count and revenue in the range of $79 million to $84 million [29][76] - Management acknowledged the challenges in forecasting due to the current macroeconomic environment but remains optimistic about potential improvements [54][112] Other Important Information - The company is undergoing a CEO transition, with a global leadership advisory firm assisting in the selection process [13] - The annual RE/MAX agent convention had robust attendance, reinforcing the value of in-person networking [74] - The company plans to return capital to shareholders through stock buybacks, although the pace has slowed for monitoring performance [75] Q&A Session Summary Question: Can you provide insights on bad debt expense and historical trends? - Management noted that bad debt expense levels are comparable to pre-pandemic levels, with expectations for a slight decrease in Q2 [32][59] Question: What are the expectations for existing home sales and interest rates? - Management indicated that stabilization in interest rates could lead to increased consumer confidence and activity in the housing market [60][62] Question: How is the competitive landscape evolving? - The company is not seeing competitors offering large signing bonuses, which has slowed down significantly, and agents are focusing more on productivity [86] Question: What are the implications of the guidance for adjusted EBITDA? - Management acknowledged that increased costs from conventions and bad debt expenses impacted margins, but they expect to maintain a reasonable SO&A run rate [66][110] Question: Can you provide updates on the CEO search? - The company is working with a well-known recruiting firm and expects to have a permanent CEO in place by summer [115][116]