RE/MAX Holdings, Inc. Class A

Good morning, and welcome to the RE-MAX Holdings Second Quarter 2020 Earnings Conference Call and Webcast. My name is James, and I'll be facilitating the audio portion of today's call. At this time, I'd like to turn the call over to Andy Schulz, Vice President of Investor Relations. Mr. Schulz, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to RE-MAX Holdings Second Quarter 2020 Earnings Conference Call. Please visit the investor relations page of RE-MAX.com for all earnings related materials and to access the live webcast and replay of the call today. If you are participating through the webcast, please note that you will need to advance the slides as we move through the presentation. Turning to slide two, our prepared remarks and answers to your questions on today's call may contain forward-looking statements. Forward-looking statements include those related to agent count, franchise sales, Financial Measures and Outlook, Brand Expansion, Competition, Technology, Housing and Mortgage Market Conditions, and included statements about recovery of those markets, capital allocation, dividends, strategic and operational plans, and business models. Forward-looking statements represent management's current estimates. REMAX Holdings assumes no obligation to update any forward-looking statements in the future. forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements. These are discussed in our second quarter 2020 financial results press release and other SEC filings. We will refer to certain non-GAAP measures on today's call. Please see the definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release which is available on our website. Joining me on our call today are Adam Kontos, our Chief Executive Officer, Karri Callahan, our Chief Financial Officer, Ward Morrison, President of Moda Mortgage, and Nick Bailey, RE-MAX Chief Customer Officer. With that, I'd like to turn the call over to RE-MAX Holdings CEO, Adam Kontos. Adam?

Thank you, Andy, and thanks to everyone for joining our call today. Looking at slide three, the coronavirus pandemic of 2020 has been the business stress test that no one could have imagined. And while this year has certainly been challenging, it has also reconfirmed the many strengths of our company, brands, and networks. It brought the resiliency of our model in clear focus and reinforced our confidence in our systems, networks, and people. Overall, I'm very pleased with the results to date. I'd like to thank our entire team for their hard work, dedication, and perseverance amid these extreme conditions. Highlights of the second quarter included revenue of $52.2 million, adjusted EBITDA of $18.9 million, adjusted EPS of $0.38, total RE-MAX agent count continued to grow up almost 4% and finishing at almost 132,000 agents. RE-MAX affiliates increasingly adopted RE-MAX technology tools and took advantage of our training during the lockdowns. And perhaps most notably, model franchise sales accelerated and we have a real chance to have our best year of model franchise sales ever in 2020. We view our performance thus far in 2020 as an affirmation of our business model, our multi-year investments in technology, our financial discipline and our overall strategy. Ward, Nick and Karri will elaborate more on that in a moment. In the field, our RE-MAX and model professionals have adapted to the environment exceptionally well, leveraging technology and adhering to social distancing guidelines to expertly guide consumers in a safe and largely virtual way. Our networks are finding opportunities to grow and build their businesses in this demanding time. In fact, model saw its sales increase during the second quarter and posted its best second quarter of franchise sales yet. On the RE-MAX side, global agent count continued to rise. While agent count in the US and Canada stabilized in June and July, we also saw continued uptake of our BOOSH platform as many brokers, agents, and teams added contacts, built their websites, and positioned themselves to maximize the technology advantages they have at their disposal during their stay-at-home time. Our franchisees in both brands continue to demonstrate their local leadership by bringing productive agents and loan originators into our networks. and then helping those individuals get even better at what they do. Their recruiting efforts supported by our programs and services are critical to our ability to succeed in every kind of environment. We're grateful for the memberships of both networks for their contributions and we appreciate their trust in our strategy and vision. Turning to slide four, the second quarter was one for the record books for US housing as the market whipsawed in an unprecedented manner. As we discussed on our last earnings call in May, we saw promising signs in the leading indicators we watched closely, like showings and new listings. We believed back then that consumer sentiment was leaning toward transacting, and we were optimistic housing would snap back. Our views have since been validated. Despite a record low in month supply of inventory, June home sales posted a month-to-month gain of 37%, according to the RE-MAX National Housing Report, Based on June MLS data of 53 metros surveyed, this gain was in stark contrast to the significant reduction seen in April and May, when many states had stay-at-home orders in place. With historically low interest rates, favorable demographics, and increased mobility tied to working remotely, buyer demand remains high in most areas of the country. Many leading indicators such as showings, pending sales, and mortgage applications continue to be positive. A potential headwind, however, is available housing supply. Inventory dropped 27.9% year over year in June, pushing the month supply of inventory to a new report low. The number of homes for sale at June 30 is at low levels not consistently seen since 2018. In addition to monitoring inventory levels, we are also carefully watching employment trends, as well as the effects of the ongoing pandemic. That said, The best agents tend to stand out in times of a shifting market, and many of the best agents hang their licenses at RE-MAX. In fact, for the sixth consecutive year, RE-MAX placed more agents and teams than any other brand in the America's Best Real Estate Professionals rankings. In this year's survey, one in five, or 20% of America's best, are RE-MAX agents and teams, and we are hearing from many of them in our network, that they are having their best year ever during this unforgettable 2020. We believe we're well positioned to help our affiliates build on the existing positive housing momentum given the financial and structural strength of our business model, which has enabled us to continue expanding our value proposition. Looking ahead, we're focused on driving increased adoption of our technology across both brands, enhancing our recruiting and retention efforts and culture, and strategically investing for future growth. With that, I'll turn it over to Ward.