RE/MAX(US:RMAX)2021-08-07 03:33Financial Data and Key Metrics Changes - The company reported record revenue of $77.2 million and adjusted EBITDA of $30.5 million for Q2 2021, with adjusted diluted EPS of $0.63 [8][35] - Total revenue increased by nearly 3% due to acquisitions, while organic revenue growth showed a mid-single-digit increase [36][37] - The company converted almost 70% of adjusted EBITDA into free cash flow over the past 12 months [34] Business Line Data and Key Metrics Changes - The acquisition of RE/MAX INTEGRA added over 19,000 agents and 1,100 offices, contributing significantly to growth [9][10] - Motto Mortgage experienced a nearly 30% year-over-year increase in open offices, with 164 open franchises and a target of 200 by year-end [28][30] - The mortgage segment contributed over 1% to overall topline organic growth for the quarter [55] Market Data and Key Metrics Changes - The U.S. housing market saw record home sales and prices, with June sales up more than 14% over May [13][15] - The median sales price reached a record of $336,000, a 4.9% increase from the previous record [13] - Inventory of homes listed for sale grew by 1.9% over May, marking the first increase since March 2020, although still down 37.5% from June 2020 [14] Company Strategy and Development Direction - The company plans to focus on integrating the acquired INTEGRA regions and paying down debt while exploring further strategic acquisitions [12][64] - Investments in technology and branding are aimed at enhancing the value proposition for agents and franchisees [11][21] - The company is exploring opportunities to provide additional services to enhance the customer experience throughout the homeownership lifecycle [64] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the housing market's strength and the company's growth trajectory, expecting continued mid-single-digit organic growth [15][37] - The successful refinancing of the credit facility is expected to improve financial flexibility and support future growth initiatives [41][42] - The company anticipates a strong second half of 2021, driven by the integration of the INTEGRA acquisition and favorable market conditions [46] Other Important Information - The company has over $100 million in cash on its balance sheet, providing flexibility for future acquisitions [12] - The First app, which aids agents in identifying potential clients, won an Innovation Award and is expected to enhance agent productivity [22][25] Q&A Session Summary Question: How much was factored into the guidance for the INTEGRA deal? - The guidance includes an annualized run rate and adjustments for interest cost improvements, with an expected adjusted EPS contribution increase of $0.05 to $0.06 [48] Question: Is the international business maturing? - Management does not believe the international business has hit a maturity point affecting growth, attributing any slowdowns to ongoing COVID-19 lockdowns [51] Question: What was the contribution from Motto and newer businesses? - Motto contributed a little over 1% to overall topline organic growth, with expectations for high-single-digit contributions for the full year [55][56] Question: Are there any identified cost synergies from the INTEGRA acquisition? - Year one cost synergies are included in the EBITDA contribution, with ongoing optimization expected during integration [66] Question: What is the outlook for the mortgage broker channel? - The broker channel is growing, with a year-over-year volume increase of nearly 72%, driven by competitive pricing and strong performance from Motto franchisees [70] Question: What is the business model for Gadberry and other acquisitions? - Gadberry operates on a recurring revenue model, while wemlo is more transactional, with expectations for long-term margin characteristics similar to RE/MAX [74] Question: Is there expected attrition of agents from the INTEGRA conversion? - Management does not anticipate significant attrition, as key leaders from the previous franchise system remain in place [76] Question: What is the target leverage ratio? - The company aims for a leverage ratio of four times on a gross basis and three times on a net basis, with a focus on cash generation for future allocations [87]