The Real Brokerage(US:REAX)2024-05-12 18:29Financial Data and Key Metrics Changes - Revenue in Q1 2024 increased to $201 million, an 86% rise compared to Q1 2023, driven by a 74% increase in closed transactions and a 7% increase in average revenue per transaction [19][88] - Gross profit reached $20.8 million, a 92% increase from $10.8 million in Q1 2023, with a gross margin of 10.3%, reflecting a 30 basis point improvement year-over-year [7][88] - Net loss was $16.1 million in Q1 2024, including $9.9 million in litigation expenses, compared to a net loss of $7.4 million in Q1 2023 [23] - Adjusted EBITDA improved to $3.6 million in Q1 2024, a significant improvement from negative $800,000 in Q1 2023 [23][88] Business Line Data and Key Metrics Changes - Brokerage revenue saw an 86% increase, with closed transactions exceeding 19,000 [19][88] - Revenue from ancillary businesses totaled $1.5 million, a 104% increase year-over-year, driven by a 427% growth in One Real Mortgage and a 33% growth in One Real Title [20][89] - Adjusted operating expense per transaction declined 18% year-over-year to $715, down from $870 [24] Market Data and Key Metrics Changes - The total value of homes transacted over the platform increased to $7.5 billion, an 88% year-over-year increase [24] - Canada accounted for 13% of commission revenue in Q1 2024, up from 11% in Q1 2023 [11] 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 [86][87] - The rollout of the One Real consumer-facing mobile app is expected to enhance client experience and increase attachment of higher-margin ancillary services [86][91] - The company anticipates that disruptions within traditional brokerages will drive greater consolidation across the industry, positioning itself as a consolidator [28] Management's Comments on Operating Environment and Future Outlook - The management views the NAR settlement as an opportunity rather than a challenge, expecting to emerge stronger from the changes [26] - The company remains optimistic about the outlook for the year, citing a robust open transaction pipeline that is currently at an all-time high, up over 75% year-over-year [90] - Despite a volatile interest rate environment, the company continues to grow rapidly due to its differentiated business model [90] Other Important Information - The company ended Q1 2024 with unrestricted cash and investments of approximately $34.5 million, an increase of $5.6 million from the end of 2023 [10] - The company is making strategic hires for onboarding and agent experience teams to support the growing agent count [25] Q&A Session Summary Question: Impact of NAR settlement on pipeline of new agents and teams - Management indicated that many brokerages are inquiring about the Private Label and ProTeams offerings, viewing Real as a potential destination for agents seeking better opportunities [31][32] Question: Revenue churn and retention of productive teams - Revenue churn was reported at 1.9%, the lowest in years, with management expressing confidence in retaining high-performing teams [33][34] Question: Timeline for onboarding teams - The onboarding process can take between 45 to 90 days, depending on the team's size and readiness, while the actual activation can occur within 24 hours once a decision is made [41] Question: Percentage of transactions captured by One Real Mortgage - The attach rate for One Real Mortgage is currently below 2%, but the company anticipates growth as they scale responsibly [45] Question: Plans to attract institutional investors - The company aims to attract more institutional investors by delivering exceptional results and sustainably compounding earnings and cash flow per share [82]