The Real Brokerage, Inc.

Let me spend a moment on how each of our businesses performed. Brokerage revenue grew 53% to $565 million, driven by both agent growth and higher productivity. We ended the quarter with over 30,100 agents, up 39% from a year ago, and as of today, our agent count stands at approximately 30,700. Real agents closed more than 53,500 transactions, totaling over $21 billion, up 49%. That performance speaks to the strength of our attraction flywheel and the quality of the agents who continue to choose real. Our brokerage business was once again profitable on a net income basis, and we continue to reinvest these earnings back into our ancillary businesses, which typically generate gross margins that are five to eight times higher than brokerage. In one real title, revenue was $1.3 million as we continued transitioning from team-based to state-based joint ventures, a shift designed to enhance scalability and long-term profitability. Under our new title, Leadership, we expect this structure to begin contributing more meaningfully in the quarters ahead, and we are encouraged that attach rates among our JV partners exceeded 35% in the quarter. One Real Mortgage delivered another strong quarter, with revenue up 47% year-over-year to $1.8 million. Growth was driven by the addition of productive loan officers and the launch of our inside sales team earlier this year. As of now, the business included approximately 100 loan officers, more than 60 of whom are participating in our Real Originate program. Lastly, RealWallet, our financial technology platform, continues to scale quickly and is deepening engagement with our agents. Quarterly revenue reflects the launch of our RealWallet Rewards program, a new benefit that we believe will further accelerate adoption. As of today, more than 4,600 agents now use real wallet business checking accounts with total deposits exceeding $20 million, up from approximately $14 million at the time of our last earnings call. Earlier this month, we launched real wallet capital across 28 U.S. states, providing agents with fast access to liquidity, allowing them to invest in their business and help manage cash flow between transactions. For agents, income can often be highly variable. In some cases, months can pass between closings, and traditional lenders simply aren't equipped to underwrite that type of earnings profile. With Real Wallet Capital, we can extend credit based on an agent's production history and projected income with Real, offering financing that many banks could not. We believe Real is the only major brokerage offering agents this kind of embedded access to capital. and doing so often same day. Beyond the financial opportunity, we view Real Wallet Capital as both a differentiated attraction and retention mechanism, a solution that helps agents remain engaged on our platform. While we're still in the early innings, we see this as a meaningful differentiator for agents choosing where to build their business. Today, Real Wallet is currently operating at an annualized revenue run rate of over $1.2 million, and we remain encouraged by the momentum. Now, For more detail on our operational performance, I'll turn it over to our COO, Jenna Rosenblatt.

Thanks, Tamir, and good morning. During the third quarter, our operations organization made meaningful progress in leveraging AI and automation to streamline workflows, enhance service metrics, and improve our ability and overall cost to serve. I'll give a few examples. In September, we launched Real's dedicated AI automation team, focused on using AI and workflow automation to reduce manual or low-value processes across the organization. In just their first few weeks, the team delivered more than a dozen live automations, collectively saving the business more than 10,000 hours annually, equivalent to multiple full-time roles. Those hours represent capacity we've been able to reallocate toward higher value activities, improving agent support, quality assurance, and product development without adding additional headcount. For example, an automation of our protein migration process allowed us to complete the migration of all of our existing teams into our protein infrastructure months ahead of schedule. At the same time, we're continuing to scale our agent-facing AI tools through Leo Copilot, our proprietary intelligent assistant integrated within the Reason app. As a reminder, in Q2, we rolled out Leo as the first line of agent support for phone calls in Reason, answering questions instantly, routing requests, and resolving issues before they reach our human support team. In Q3, we expanded Leo's reach to also be the first line of support for agent emails. In the second quarter, Leo handled about 28% of all calls initiated through Reason. By the end of the third quarter, that figure had grown to approximately 47%, handling more than 10,000 agent phone and email interactions autonomously. Overall, even as our agent base grew nearly 40% year over year, response and resolution times declined, and agent satisfaction remained above 90%. Importantly, these improvements are translating into stronger agent retention, evidenced by our revenue churn, which declined to 1.4% in the third quarter, the lowest level in more than two years. Each of these initiatives, while small individually, compound to create significant productivity gains over time. They enable us to handle higher transaction volume and agent growth with limited incremental cost, directly contributing to Real's improving operating expense per transaction and overall operating leverage. Now, before I hand it over to Ravi, I want to highlight two additional developments impacting our agent community. First, next week we'll host our annual Rise Agent Conference in Orlando, where 2,000 agents and industry partners will gather to share best practices, collaborate in person, and celebrate the culture that makes Real so unique. We'll also showcase several new initiatives designed to further power our agents' businesses and enhance their ability to win in today's market. So stay tuned. Second, this month we officially expanded our operations into Saskatchewan, our fifth Canadian province. Canada continues to be a meaningful growth opportunity for Real, and we expect this expansion to unlock additional agent and transaction growth as we strengthen our presence across the country. In short, we're executing on the operational foundation that enables Real to grow faster than the market, while continuously improving efficiency, scalability, and engagement. Now, I'll turn it over to Ravi to walk through the financial impact in more detail.

Thank you, Jenna, and good morning, everyone. Our third quarter results demonstrate the continued strength of REEL's model, high organic growth, disciplined expense management, and improving operating margins. Total revenue for the third quarter rose 53% to $568.5 million compared to $372.5 million in the same period last year. Growth was driven primarily by our North American brokerage segment, which saw a 49% increase in closed transactions to more than $53,000 in the quarter. Our ancillary businesses generated $3.2 million in revenue of 25% year-over-year, led by one real mortgage and real wallet, while one real title was impacted by the shift from team-based to state-based joint ventures. Gross profit increased 40% to $44.9 million compared to $32.1 million a year ago, with gross margin of 7.9% versus 8.6% in the prior year period. The year-over-year change primarily reflects a higher proportion of transactions completed by agents who have reached their annual cap. For reference, the percentage of total transactions closed that were post-cap increased by approximately 500 basis points relative to last year. As a reminder, once an agent caps, they stop paying real the standard 15% split and instead pay a $285 per transaction fee, which results in lower gross margin on those post-cap transactions. While this mixed shift creates near-term pressure, it also reflects the maturity and productivity of our agent base. We do expect this to normalize as market activity improves and transaction growth becomes more evenly distributed between capped and non-capped agents. And of course, over time, continued growth in our ancillary businesses should support overall gross margin expansion. Operating expenses, including G&A, marketing, and R&D, totaled $45.3 million, up 31% from $34.6 million last year. The largest driver was revenue share expense, which rose 35% to $15.6 million, up from $11.7 million in the prior year, consistent with our strong agent production. The remainder reflects investments to support growth, including expanding our operations and R&D teams and further enhancing our technology platform. Operating expenses represented 8% of revenue in the third quarter, an improvement of 130 basis points from 9.3% a year ago, reflecting strong cost discipline. Adjusted operating expense, what we view as our fixed cash costs, was 21.7 million, or 3.8% of revenue, down from 4.5 percent in the third quarter of 2024. On a per-transaction basis, adjusted operating expense declined 13 percent year-over-year to $405 compared to $468 in the third quarter of 2024. For the third quarter, we reported an operating loss of negative $0.5 million compared with a $2.5 million loss in the third quarter of 2024. Operating margin improved to negative 0.1% from negative 0.7% in the prior year period. Our core brokerage segment remained profitable, generating $0.8 million of operating income, while we continued to reinvest in one real mortgage, one real title, and real wallet, which collectively generated an operating loss of $1.3 million as they scale. On a non-GAAP basis, adjusted EBITDA rose 54% to $20.4 million, up from $13.3 million last year, reflecting growth in gross profit, outpacing growth in operating expenses. Total stock-based compensation was $19.9 million, with $12.6 million related to the agent stock purchase program recorded in cost of sales, $3.9 million in agent equity awards recorded in marketing, and $3.4 million in employee-related stock compensation. We generated cash flow from operating activities at $8.8 million in the quarter and returned capital to shareholders by repurchasing 3.2 million shares for $15.5 million under our existing buyback authorization. We ended the quarter with nearly $56 million in unrestricted cash and short-term investments, an all-time high, and continue to carry no debt, giving us ample flexibility to fund growth and future share repurchases. To close, a few key operating metrics. Our median sale price was 390,000, a 2% year-over-year increase, and our headcount efficiency ratio, which reflects the number of full-time employees, excluding title and mortgage employees, divided by the number of agents on our platform, was 1 to 89, compared to 1 to 87 last quarter, still among the most efficient in the industry. While we don't provide formal guidance consistent with typical industry seasonality, we expect fourth quarter revenue to decline compared to the third quarter and for lower gross margin year over year in line with trends we've seen throughout 2025. From an OPEX standpoint, we expect an increase in our non-variable OPEX in the fourth quarter. This reflects both planned headcount additions to support future growth as we prepare for an even stronger 2026 as well as costs associated with our annual RISE agent conference, which takes place in the fourth quarter each year. More details on our results and key operating metrics can be found in the earnings press release and investor presentation that companies call. I'll now turn it back to Tamir.

Thank you, Ravi, and thank you, Jenna. In closing, our continued outperformance is not the result of any one initiative, but of a system working together at scale, a differentiated business model, a powerful technology platform, and a culture that attracts productive agents who want to build their businesses at real, not just hang their license. From my perspective, three key themes defined our performance this quarter. First, our model continues to win in any market environment. Our growth has been broad-based and entirely organic, driven by word-of-mouth, productive agent networks, and the strength of our value proposition. Agents come to real because our economics are aligned with theirs, our platform simplifies their workflows, and our culture enables collaboration over competition. Second, we are scaling with discipline. Once again, we grew revenue and gross profit faster than our operating expense base. That operational discipline, paired with automation, AI adoption, and a culture that thrives on doing more with less, continues to strengthen our path towards sustained profitability and margin expansion. We are transforming what a modern real estate platform can be. Our vision extends beyond brokerage. Instead, we're building an integrated ecosystem that simplifies a transaction, better serves consumers, and increases agent productivity while expanding new, higher-margin revenue streams. Mortgage, title, and financial products like RealWallet are still early, but advancing meaningfully and strategically every quarter. We remain deeply confident in our strategy, our people, and our opportunity, and we're just getting started. We look forward to updating you on our continued progress in the quarters ahead. Now let's move to the Q&A session.

Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And the first question today is coming from Stephen Sheldon from William Blair. Stephen, your line is live.

Hey, good morning, and nice results here. First, I wanted to start on the reduction in agent churn. Great to see, you know, that kind of pullback sequentially. So can you just talk about some of the factors that drove that so much lower, you know, 2Q to 3Q? And then I know it can be a little volatile quarter to quarter, but, you know, how should investors be thinking about that kind of metric trending as we look forward? You know, should we expect some stabilization there and or potentially that continuing to trend a little bit lower? I guess just generally, how are you thinking about agent churn trends?

Hi, Stephen. Good morning. Yeah, as you said, there's volatility in agent churn. Having said that, I do think that the platform delivers more and more value as we continue to progress. So I think that the lower numbers reflect the value and the fact that the platform just becomes more and more sticky. I also think that if agents think about some alternatives out there, I don't think that there's any better alternative in terms of a brokerage And that's probably what those numbers signal. I think that we will continue to work hard on improving the service. I think that everything that Jenna mentioned on the AI front and the fact that we're putting AI to work provides a better level of service to our agents and everything that we're doing with the wallet just makes the platform itself more sticky. So I think that as long as we continue to be under 2% revenue churn per quarter, As we have been for quite a long time, we'll continue to see those numbers, and we're happy with what we're seeing. It's just about execution, delivering great service, great products, great features, and just continuing to lead the market, and the numbers speak for themselves.

Got it. That's helpful. And then on title, I guess, what have been some of the early takeaways as you've shifted to state-based JVs? And takeaways, I guess, both in terms of the attach rates you're getting and the eventual profitability. I think you mentioned 35% attach rates for JV partners this quarter. I guess, just generally, how has that been trending throughout the quarter? And how long do you think it could take for title to really start to ramp monetization and gross profit overall?

It's a great question because we're putting a lot of emphasis and focus on ancillary services and title primarily, I would say. I actually looked at the data a couple of hours ago. And at the beginning of the year, our attach rates were in the range of 2.4% to 3% overall. And then we transitioned from the team-based JVs to state-based JVs. And that transition created headwinds of about minus 50% for us as a business. In September, we had attach rates of 3.7%. So I think that we're making some progress in terms of attach rates. As Ravi mentioned, the attach rates on the new JVs are at around 35%. I think that we can get much higher, but we're seeing great momentum in some states. And just to remind everybody, this is still early on in this new strategy of state-based JVs. I think that just in order to put things in perspective overall, on the brokerage side, we started the company back in 2014. And during the first six years of the company, we added about 800 agents. So between 2014 and 2020, we had about 800 agents in 2020. The following five years, we added 30,000 agents. And I think that we were able to do that through a lot of trial and error and tech innovations. and listening to our agents, and I think that the same will happen with Tidal. I think that we are approaching a point where we have a critical mass of features and incentives and alignment with our agents in order to drive massive adoptions to our ancillary services. One more thing, next week we have our annual RISE conference where we will be announcing what I believe is the biggest tech innovation that we have announced since starting the company, and that innovation will have massive impact on our ability to attach a title mortgage wallet and insurance later on. Um, so I think that we're very close to seeing, um, a meaningful change in, in the adoption of our insular services.

Good to hear. I look forward to hearing more about that next week. Um, maybe just one last one. There have been some, some large MNA, uh, announced that'll drive some brokerage consolidation. Just generally when something like that happens, does it usually drive opportunities to pick up, uh, churn from agents that aren't happy at those firms, that aren't happy about the change? And have you started to see any of that following recent announcements?

If we look at our numbers over the past few years, we're seeing that we are taking market share from everybody else. I'm not sure that those recent announcements about M&A intentions are really making a big impact on the market as we speak. I think that Once that transaction closes, we will likely see a little bit more interest from people who are kind of searching for a new path. But we're not counting on that. We're counting on our organic growth and our ability to attract agents based on our value proposition, and we're not capitalizing on anybody else's troubles or discomfort in order to fuel our growth. So for us, it will be just a cherry on top of the cake, but we continue to grow regardless.

Good to hear. Thank you.

Thank you. The next question will be from Navid Khan from B Reilly Securities. Navid, your line is live. Great. Thank you very much.

Maybe just to touch on this Leoco palette. Looks like usage is up, but just talk about adoption in terms of the percentage of agents that are using it. more versus those who might not have or might be early on in that. Where are you in terms of training and onboarding people to just kind of be more effective with the use of Copilot?

And then I have a follow-up. Yes, I can take that one.

Yeah, sorry. So actually, when we think about the usage of Leo, it's 100% usage because all of our support goes through those channels. And so whenever an agent actually reaches out to our support team, that's all done through Leo. So naturally, they're going to be using Leo when they get support. It's something that we go over with them when they come on to the company. We have training sessions to go through how to utilize Leo. But from an adoption standpoint, there's 100% adoption from agents needing support.

Got it. And then when it comes to mortgage, I guess you talked about having 100 loan officers. Around 60% of those are unreal. But what are some of the levers you can pull to kind of drive the attach for mortgage higher from here? And how many states are you in currently? How do you plan to expand that offering?

Yeah, we're trying to go deeper into the states we're already operating in, and we operate in about 15 states. I think that the biggest lever that we can pull is on the technology integration side, and it goes back to what I said about this announcement that we're going to make next week. I think that making the entire process easier, both for our agents and for their clients, and having everything on the app and everything integrated so that they can receive real time updates. They have full visibility into the process. The agent is fully aware of what's going on on the mortgage side. The buyer is fully aware. I think that that could drive a meaningful adoption and we will talk about it a little bit more on the rise conference.

Got it. If I have to think about, and this is last questions, but if I were to think about, um, capped versus uncapped mix of agents. How does it, how did it compare in the last quarter versus prior periods, prior third quarter periods? Is that going higher? Seems like the mix of transactions through the more, you know, people who are uncapped is higher and that's why your gross margins are lower. But how should we think about that stabilizing at certain levels around here or just give us your thoughts on the mix?

Yeah. Hey, Navid. Thanks for the question. So, you know, the agent mix, it's typically anywhere between 10 and 12% of agents hit their cap at any moment in time. That's the percentage of agents who are capped. I think the more operative stat, though, is this quarter, approximately 500 basis points of our total revenue mix increased relative to last year that was driven by post-cap transactions. So, you know, rough order of magnitude, if 40% of our transactions were post-cap last Q3, this year it was closer to 45%. And so that's really what drove that margin mix shift that we discussed.

Understood. Thank you, guys. Thanks, Navid.

Thank you. And as a reminder, it is star one on your phone if you wish to enter the Q&A for today's call. The next question is coming from Matthew Erdner from Jones Trading. Matthew, your line is live.

Hey, guys. Good morning. Congrats on another solid quarter. Most of the questions that I had have been taken, but I kind of want to follow up on what you touched on earlier as it relates to non-variable operating expenses. It looks like there was a pretty good sequential increase in the R&D expenses. You know, should we treat 3Q as kind of a go-forward run rate, you know, as it relates to R&D?

Yeah. Hey, Matt, good question. I would say if you look at the R&D line over time, it has been increasing, and that's really a function of the investments we're making in technology across the business. This quarter in particular, though, does reflect the addition of the folks from Flyhomes and the Flyhomes assets we acquired. at the beginning of the quarter. And so you will continue to see R&D grow year over year. It's the fastest growing portion of our fixed OPEX space. But we do view that as a good and necessary investment, and that's one of the things that will also take up sequentially, particularly as we launch some of these AI features and As you know, there are costs associated with investing in AI, both on the personnel side as well as just the cost to serve. As always, if you look across our fixed cost base, in general, our OpEx base grew 31% versus the 40% increase in gross profit. We will continue to be disciplined and focus on growing overall OpEx at a slower pace than gross profit, but R&D will continue to be a, you know, a focus area for us to continue to invest for the future.

Right. That's helpful color there. I appreciate that. And then, you know, in prior quarters, you guys have kind of talked a little bit on the M&A front, you know, and then you just mentioned fly homes there. Do you guys kind of expect to do anything or still looking in the market? Or at this point, is it just, you know, investing in your own businesses, the ancillary services? and kind of building from within rather than kind of acquiring a piece and adding it on.

Tamir, do you want to take that one?

Yeah, I'll take it. Hi, Matt. We believe we have all of the components and the technology that we need in order to build what we plan to build in the coming years and just accomplish our vision. Having said that, we are looking at several M&A opportunities. I don't think that it'll be on the technology front. We also, as you know, we have grown organically and we haven't really ever made any brokerage-related acquisition. I think that it could be interesting for us to look at some small acquisitions when it comes to title companies just to create some local presence strengthen our local presence. And this is something that we're looking at at the moment. But even if this will not materialize, I think that we have everything we need from an M&A perspective.

That's very helpful. Thank you, guys. I appreciate the comments, as always.

Thanks, Matt. Thank you. And the next question is coming from Nick McAndrew from Zellman & Associates. Nick, your line is live.

Hey guys, thanks for taking my questions. Congrats on another strong quarter. And I think that the 2000 plus agent additions is pretty encouraging to see. So maybe just as we think about the sustainability of agent growth into 2026, anything to call out and just the levers that are driving that continued momentum. And maybe if you could also just expand on what gives you the confidence that this pace of net additions can be maintained as the agent base just grows beyond 30,000. Thanks.

Hi, Nick. So, yeah, we're currently at a little bit over 30,800 agents, and we have a very strong pipeline, hopefully, to finish the year with. We have some large opportunities, larger than ever before, so I feel very confident about our growth in the coming months and actually coming years. I think that the confidence is coming out of the understanding that we have built a extremely compelling for agents. And we have to remember that all of the growth is organic and about 85% of the growth is coming from our agents attracting other agents. We have a very small growth team consisting of four people. So we're not doing too much of an outbound, even though we started now kind of implementing some outbound strategy. And I think that just the market potential is there. So as we look into the next five to 10 years and everything that is changing within the traditional brokerage world, I think that more and more agents, more and more teams, and more and more independent brokerages will be looking for alternatives that are similar to what we offer. And we are very well positioned to capture a meaningful part of that churn that will be happening on the traditional model side. So we feel confident. We have what it takes. And we rely on our efforts and on our agents' efforts in order to attract other agents. And as I said, we have a strong pipeline that supports that.

Thanks, Tamir. That's really helpful. And Jenna, apologies if you touched on any of this already, but I think adjusted OpEx per transaction was down 13% year over year. And I'm just wondering if there's anything to call out and just what's driving that leverage, because I think last quarter, you mentioned that roughly half of transactions could be processed automatically through reason with pretty limited human oversight. And I'm just wondering, where does that figure stand today? And are there still remaining workflows that you see as kind of the next opportunity for automation?

Yeah, absolutely. So as I mentioned in my section, we've really been investing in this AI and automation team and really just getting started. So even things that maybe we didn't think possible before, we're diving headfirst into. So there's a lot of great updates that I'll be providing most likely on our next call, recapping Q4. But yes, you're correct. We're working on automating the 50% of the transactions and also a number of other areas for automating reviewing contracts automatically through our automated broker review. And so there's a number of different initiatives that we're working on that are just going to continue to push the needle there and make us even more efficient month over month.

Great. Thanks, guys. Thanks, Nick.

Thank you. There were no further questions from analysts in the queue. I will now hand the floor over to CFO Ravi Jani for questions from retail investors.

Great. Thank you, Paul. Now that we conclude the analyst portion, we wanted to address some of the questions received from shareholders on the Say Technologies Q&A portal. We received a number of excellent questions, and so thank you to all who participated. I think some of them were actually addressed in the analyst portion, so I'll just address two that haven't been. First one for Tamir, how has the real wallet growth progressed, and what revenue numbers can we expect from the real wallet?

Sure. First of all, the RealWallet is a very exciting product, and we're really proud of how quickly the wallet has scaled. In less than a year since launching it, we now have over 4,600 agents using RealWallet business checking accounts with deposits totaling around $20 million, and those deposit numbers are growing. As you remember last call, it was around $14 million. The product is already generating over $1 million in annual revenues, annualized high margin revenue, and that does not include the incremental opportunity from real wallet capital, which we launched in the U.S. this month. The early adoption and engagement rates are very, very strong. It deepens the relationship we have with our agents and provides meaningful day-to-day value beyond just brokerage economics. I think that looking at the numbers of real wallet capital, that makes me extremely optimistic as to the opportunity of real wallet and how well it was received by our agent community in the U.S. since launch.

Thanks, Tamir. And the last question was, how is the company planning to expand profit margins? What are expected margins in three to five years? I'll take this question. It's a great question. And obviously, we are focused on margin expansion that will come from both gross margin improvement and OPEX leverage. It's obviously difficult to have a crystal ball and predict five years out, but I think directionally we see the path to adding a few hundred basis points of margin expansion over that time through that combination of higher mix shift and better expense leverage. So I think with that, if you have any additional questions on today's earnings release, please feel free to contact me directly. Otherwise, Paul, would you please give the conference call replay instructions again?

Certainly. Thank you, everyone. This does conclude today's conference call. Today's conference will be available for replay from 11 a.m. today. The replay phone number is 877-481-4010, and the replay code is 52933. Once again, the replay phone number is 877-481-4010, and the replay code is 52933. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.