RE/MAX Holdings, Inc. Class A

Q3 2021 Earnings Conference Call


spk_0: morning and welcome to the remarks holdings preliminary third quarter twenty twenty one earnings conference call and webcast my name is julie and and i will be facilitating the audio portion of today's call at the time i would like to turn to call over to eighty shot vice president of a better life than that your shots
spk_1: but you operator good morning everyone in the country we met leave preliminary report want you to learn leave conference call please visit the best relation section of remake folding dot com for all leaves related materials and to access to live webcast and replay the cold today if you are participating through the web please note that you will need to advance flags as we move through the presentation during the flight to are prepared remarks in the answers to questions entrees call may contain forward looking statements for looking things include those related to agent camp franchise sales financial measures and outlook brand expansion competition technology housing and mortgage market conditions capital allocation dividends strategic an operational plans and business models forward looking statements represent management's current estimates rematch holdings things no obligation to update any for are 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 for looking statements these are disgusting are preliminary their color twenty twenty one financial results press release and other okay filings also we will refer to certain on get measures on for this call please see the definitions and reconciliations of known get measures contained in our most recent quarterly financial results press release which is available on our website we felt that or third quarter twenty twenty one financial results and other related information discussed on this call our preliminary or final results and financial information for the third quarter twenty twenty one may vary materially from the preliminary financial information disgust on this call join me on our call today are unconscious or chief executive officer to callahan or chief financial officer big baby president of relax and work more seat president of model franchising with that i'd like to turn the call over to remake folding theo am conscious adam thank you andy and thanks to everyone for joining a call today looking at like three we again posted record financial results and the third quarter are strong performance with given by better than anticipated results from our recent acquisition of relax tegra as north american regions broad contributions from core operations and a healthy housing market and both us and canada we believe the third quarter was a strong affirmation of our strategy over the past few years we've been investing to diversify and expand our revenue and growth opportunities or third quarter results illustrate how those efforts are paying off lol perhaps the best example of that expansion a diversification now recently celebrated its good birthday and the brand actually truly coming of age franchise jails will be brisk and the open office count was up more than thirty percent year over year during a third quarter we expect moto to start generating a profit beginning next year which is a notable achievement were start of angels overall relax will lose revenue for the third quarter what ninety one billion an all time high with much of the year over year increase driven by our reach an entire acquisition which so far has exceeded our expectations
spk_2: more than the moment
spk_1: on or other recent acquisitions gathered group now apology seventy three was another out with former hosting a quarterly profit first and we love our to tech start ups are both showing steady progress and we expect to see more meaningful bradley contributions from them in twenty twenty two excluding the marketing buds our core business generated almost seven percent organic revenue growth in the third quarter of contributions from multiple passage across the company and or acquisition black their respective first year anniversaries and start to kill more of the organic bucket we're confident we'll see continued organic growth which we expect to be in the mid single digits we will continue to drive additional organic revenue growth leveraging the strength of our business model as much of each incremental
spk_2: dollar of lebanon and to translate in the profit we saw that dynamic play out in two three as we generated a record adjusted ebitda a thirty five million and record adjusted the with a dps of seventy one cents
spk_1: a strong results enabled us to again increase our propagating or point on what charge was paid our outlook is just a few minutes as i know the earlier or jaeger acquisition is off to a great start
spk_2: this is a large complicated and important investment tremendous progress has been made to date with significant portions of the integration already completed primarily where we have prioritize transition the customer facing elements of the business
spk_1: the teams involved are doing a terrific job and are focused and ensuring that our franchise eden agents continue to receive the outstanding support services and products they need to help them brother businesses for immediate future at least the remainder of this year and first part of twenty twenty two will focused largely in facilitating a smooth transition and enhancing a future growth trajectory of the significant investment living is like war on the heels of the second most active september and the fourteen year history of the relax national housing or or october home sales and fifty one surveyed metro's to lot of six point four percent from september almost double the typical know the decline in many markets home sales are getting pinched by new record prices and record low inventory we're seeing the effects of a long sustained run up and prices and month over month home sales and the days and immediate sales multiple authors and bidding wars are virtually every property are beginning to wait cool down is somewhat overdue the october death and sales could be a step toward a more balanced housing market overall the market remains relatively robust even as a trend towards more seasonal lot killed or still happening quickly but at a slightly slower pace than earlier this year october's average days or market a twenty seven was one day more than september and reflected sales that were eleven days bastard on average that in october twenty twenty
spk_3: inventory when an issue
spk_1: the one point three months supply than before october with down from september one point five month supply and having more homes on the market will be welcome news oh bowlers are trying to fill the gap especially with multi family home construction but many of them are being delayed by shortages in labor and materials as well as general supply change
spk_4: challenges
spk_1: homebuyers me he's a really and price appreciation during the coming months you've been has sale level stay hot sellers remain in a very strong position but would price stabilization and continuation of competitive interest rates banks should try to coming months to be more advantageous than any kind earlier this year in any of that twenty twenty one has been a stronger for sales and should continue to be the value of it's skilled full time most a professional will be even more evident as the market rebalances a bet that alternate over the next for some greater detail on me that thanks adam good morning everyone looking applied clyde overall eight and can increase nearly five percent year over year to a new record almost one hundred and forty one thousand agents we value over six thousand agents were wide from september twenty twenty highlighted by exceptional girl in canada in are combined you age and counted approaching levels we haven't seen in over doesn't the years despite the competitive marketplace and the unusual circumstances of the past year you are they can count help set a year over year i lighting of a million see and it's activists about brand because of their productivity react native tongue to be coming aggressively a good system like a special by brands with an agent of agent recruiting not collected activated stay with our network however because they die you have men benefits and advantages atop his country used to be on providing the best services so that our agents from focus on increasing productivity and helping consumers close more sales the industry is filled with it can options and complex compensation structures are we continue to build our market pregnant by appealing to stall time professionals who would rather work with buyers and sellers than recruit other agents we believe that the sound strategy that will spur new growth productive go over time it's happening in canada right now while growth is accelerating allow over two thousand agents a significant ten percent gain year over year a canada were being a real estate is widely viewed as a full time profession rematch is the market leader and the best choice for those who want to work among others strong like minded professionals
spk_0: adding a canadian portion associated with the integra transaction position that or even greater things cross the country bringing the reenact ontario lana canada region and our company owned western canada region together as a unified course is enabling us to scale our efforts in technology marketing and other services the line of work
spk_1: create a more seamless experience or branch id ids agents and even consumers and shipping twelve thousand canadian agents from an independent reagan to a company owned will open up even more opportunities in the future when you factor in our long time market leadership a comeback the process across all a can become even more exciting it is also one of the many reasons we continue to and back to that canada operations this point we recently announced earlier this month the booze was launched in canada the introduction of our proprietary technology suite greatly enhanced or value proposition and further their differentiate that's from the competition
spk_3: into the global arena or international agent can increase over eight and a half percent the more than fifty five thousand ages
spk_1: recall when that was to pack fifty thousand agents outside us game canada in the summer of two thousand and twenty so encouraging more than ten percent the little over a year during a pandemic had been impressive growth and despite already being and over one hundred and ten countries and territories we continue to moon each new geography is due to the strong desire to the affiliated with three
spk_5: next by it
spk_6: during the past many days we've been out details of mass weapons as right into three additional countries pakistan deanna and in pakistan
spk_1: very exciting news and would be feels come additional opportunity to go turning to slide six we continue to induction our division and hansa overall value proposition we recently announced a complete reinvention of a ring as university but one and exclusive to relax learning curve designed to help agents level lock their professional expertise
spk_6: built on intuitive new technology reaction of or she put agents in control at when were what and how they weren't it's a modern mobile base user experience and it will help ourselves to develop new skills and after did like because we believe the more you learn the more you on it that your neck and found that
spk_1: and to engage with your next university on average goes more transactions and earned more commission having been a leader for decades react understand the markets change over time when that shit comes and education becomes a more immediate priority the new reduction or she will already be in place it's another example of us working ahead of the curb and being prepared for what ever the future may bring with that i will turn it over to one titanic look at slide seven the last monday's had been a very exciting time for a mortgage stagnant and the moto side to continue to sell franchises that a near record great through september thirty and expect to sell sixty or more franchises this year i find a day we have now's sold almost three hundred franchise weeks back to college that significant milestone before year end notably office openings continue a salary and expected we are seeing the echo of fact that last year's inflection and franchise sales are experiencing a similar have taken off his openings which grew more than thirty percent year over year and you three in fact year to date we had okay more officer the mood sold a first and are too three now have over a hundred and seventy five open bottle franchises almost forty stage and we're aiming to had two hundred open you a year and a big area of organizational focus for our motto mortgage business year this year had been the continued development of law required we will last year to solve one of our motto franchisees primary paintings finding steady dependable and economic loan processing services but he does your wiener moto office you now have access to an operation need rain third party long process and team which is how to the same high standards of customer service that a come to define the moto mortgage brand be exciting news mean our last month with the introduction of most loan brokering system or l b s we believe our l b s's of revolutionary technology a software suite purpose built to address exactly you needs at the professional loan originator operating in the mortgage broker channel and importantly to stream i mean lot of us doesn't require brokers navigate through relevant system path designed for other landing in channels we spent the past five years gathering real world experiences from hundreds about alone originators of he could understand precisely where traditional origination systems fall short for the broker jail in developing a we of yes we've been assessed about how to better leverage a mortgage brokers most valuable resource time or to know that loan originators often spend precious time navigate through unneeded components and antiquated loan system that last time be better spent developing value add solutions for a franchise the a high quality service to their consumers or model affiliates deserve the efficiency of a purpose built platform and the bunker channels more than ready for modern technology that simplified very unique work flow the we will all be us will officially launched and mortgage mortgage industry in january twenty twenty two a model officers will be granted first access and begin on board in this year moto village are receiving the obvious that a one at no additional fee as well as a missile discounts on the integrated meanwhile loan processing offerings and exclusive l b s par teachers with that are like attorney paul over the carry
spk_7: thank you weren't good morning everyone
spk_0: looking for flight eight total revenue grew twenty eight percent to a record ninety one million excluding the markings on revenue at almost sixty eight million acquisitions increase overall revenue by eighteen percent primarily due the incremental revenue from the relax and tegra north american reach and acquisition however and you're also thing year over year growth for both meanwhile and gathering effect impacted reading it by negligible notably are organic revenue girl with up almost seven percent even after setting aside by griffey if that is the second quarter in a row regenerated lead single digit are given a graph now many organic growth driver contributed to our strong topline performance during here three including aging can growth pricing model and more targeting youth of he's recruiting invented the name the most notable one if you exclude the booze like if he ran off our advantage growth and proven by honest and other sixty basis we believe of he continued a single digit organic growth for the foreseeable future which should drive further margin expansion looking at fine i'm telling operating and administrative expenses their fifty one point one million in a third quarter of twenty twenty one up significantly over the prior year the year over year compared for after when they are not particularly meaningful eighty one time items and twenty twenty related to the pandemic and are reduced and and cute ray of last year additionally are twenty twenty one third quarter as though and i included extended related to the acquisition of reenactment aggro north american operation while our staff travel picking up in response to the importance of in person or van and training and our customers are how eager to participate in are spending levels remain well behind our pre pandemic level eighty thousand and feet internet or newer businesses we continue to see margins for her recent acquisition of trending in the right direction lol god barry has already started to generate a monthly profit ahead of our expectation first and meanwhile are ramping up at we are plans in place to do is offered revenue and twenty twenty few moto continued to perform well authored by the accelerated office opening along with me wrong we expect our mortgage business jet the rate of profit and twenty twenty few and they're after moving to flight pen the company fourth quarter and four year twenty twenty one outlook have been no further kiting of new acquisition or divestiture for the fourth quarter of twenty twenty one we expect eight and can't increase two and a half to three and a half percent over fourth quarter twenty twenty revenue in a range of eighty six million to ninety million including revenue from the marketing fight and a range of twenty two million for twenty four million and adjusted any that are and or a change of twenty five and a half million the thirty and a half million for the full year twenty twenty one or decreasing are asian time guidance it is lower than expected global growth tightening our revenue range and increasing aren't of it either guidance to better than expected third quarter adult we expect a didn't count to increase two and a half to three and a half percent over for your twenty twenty down from five to six percent revenue in a range of three hundred and twenty six and a half million three hundred and thirty and a half million including revenue from the marketing fire in a range of eighty one and a half million eighty three and a half million change from three hundred and twenty one million three hundred and thirty six million an adjusted either in a range of one hundred and sixteen millimeter to one hundred and nineteen million up from one hundred and thirty million one hundred and eighty million now i'll turn it back the adam
spk_1: like scary looking at lotta love your records third quarter and many respects a recent acquisition of green action figures north american christians is off to a terrific start rushing are many investments will be begin a ah we are more diversified business with plentiful growth opportunities we believe me a grill moment right now we're looking forward to finishing twenty twenty one more strength and having set a strong foundation to build upon for ten twenty do with that operator let's open it up for question
spk_0: certainly if you'd like to ask a question please crushed star followed by the number one on your telephone keypad to try a question please post i one again or parts for just a moment to compile a key on a roster your first question comes from richard health and morgan stanley please call headliners is open
spk_1: very good morning guys about thanks for the prepared remarks in their own the additional color but i did wanna talk maybe a little bit more about your revenue per gens on what does that look like in a had that decreased how do you think about that relative to where in a honda you asians are going in and made some the trend that you're seeing your age account
spk_0: so good looking or it's a great question if we think about revenue present and i think it really highlight the differences in the reenact model your with over sixty percent of our revenue being recurring in nature that revenue per age and especially in our own region here in north america has been pretty consistent front of in that twenty six twenty seven hundred dollars per agent obviously when broker fee and home price appreciation are moving upward that can hit continuing to increase our revenue for agent but just the difference in our business model and the recurring of the nature really helps protect bethany any kind of macro environment and we've been that pretty consistent with up or trajectory and contributions from broker fee as well as that continue franchise fee increase we did earlier this year
spk_3: okay guys and then if you made a pretty interesting comment
spk_1: her were not really works your mouth with that you're keeping the most productive brokers how to navigate measure that and i'm not pushing back on it i just like of maybe a little bit more transparency and how you think through that yeah for a child neck a good question that not something that actually been on our radar as we look across as system with for printed large large we have a number of ways that we look at each and every franchisee to make sure that they're performing at the required levels and so we have taken as we do on a regular basis i'm an analysis of all of our our franchisees and we have to look at those that are underperforming and unfortunately may not be part of the system and so we have had some terminations for underperformance that has then part of just a regular course of business but without a few of those recently and that their core
spk_8: thanks guys are going back and mcewen queue to time
spk_0: your next question comes from ryan that kept me from zalman and associates please go ahead the line is open
spk_9: he morning at thanks for taking the questions
spk_10: so in terms of the
spk_9: the the acquisitions and over the past few years to suggest seventy three was when you call that in particular are mentioning the quarterly profit was hoping that he can remind us on canada's the revenue model there are the economic model there and then also a neatly think about of first sounds like that still an industry know that that delegates in a twenty twenty two maybe that flips so secure as he can just it again it on that you seventy three can be economic model their how we should think about that and then i'm for all of these antlers i guess is is this flowing through i believe within the french as cells and other and there was some you know better growth there than at least i was modeling so is that a reflection of of the is a new businesses starting to work to ramp up there on the revenue side arm and on either a second question of them back you thank you
spk_11: shirt and morning rain and carry the greek question if we look at the holistic investments that we've made in the business it's been a part of a broader effort over the last couple years from a diversification perspective and we're starting to see on the momentum across across our are all of the enlightenment so from from a got very perfect
spk_0: at more of a subscription based on revenue stream and of based on the products that are sold ideas running through france i failed and other revenue on and tell them the that performance was contributing to the overall pop mine i think that we're so excited about you know if that if we can get the top line going given the strength of our friends i have mine all that would translate into into profit and so as we look ahead to twenty twenty two and beyond i need a little bit slower ramp and twenty one but positioning ourselves the well for heater adoption across first mean low and continue profitable growth and drag on cadbury in the future
spk_1: and all was it's out of the morning allah i'll add a little bit bomb you know this is just the really kind of the earth the results of what we've been talking about over the past couple years of our efforts to ensure that we provide on you know and a deeper knowledge base and capability an outdated technology for agents and or franchisees obviously with the efforts of helping that the consumer so much better so when you're starting to see what these results
spk_6: is that won't even say and hey we're going to see some results from this and and more see and that occur now from these different technology acquisitions in the integrations going on in the in the network but also our our lack of dependence you know we're pretty outdated technology independent our the industry and that's a good thing for our network and
spk_1: our system because it allows us to provide on your effort in the areas that we see the agents you know desiring a better value out of that so eight we're we're pretty crowded the direction is headed and down you know anticipating he continued progress in his
spk_9: thanks added that that's helpful and and then one follow up question for ward on the mortgage dad so it with a window and the lds system and get just to clarify a your comment so it it sounds like the the moto brokers will get either free or discounted access to that so i guess my question is in terms of that i'll be a system it is there should be think about that is as in area of incremental revenue profit potential for read next and through it's motto brokers are with the not a brokers effectively couldn't unquote pay for that three their kind of crunch as fees and then it sounds like you're suggesting the opportunity maybe at least remedy lies might be even greater outside of the not own network of of loan brokers are
spk_1: or brokered mortgage brokers that might i want i want to use this product made maybe just clarify their around the comments he made about that either react as are discounted access on the moto side and kind of what the potential terrorists thank you the and so on the bottom side at we used to provide the main campus and we will be beaten all of our people off of that platform onto the meanwhile we us there who are he will be no cause to our motto owners to be on our platform for was no cost to be any encompass platform prior however even consider in the platform now and believe it will drive the processing service or we know that side of the house on is not always be hit a button that says no process now with remote so we believe that's going to start to move the needle on the memo processing but you are writing as of january we will rule out of me will be as to the mortgage broker channel as a software as a service so we we there's incremental upside bear as we start to on well the program alec and offer to the industry and we do believe that will be no additional revenue the weekend you don't gain gain share on as before
spk_9: got that them eccentric york
spk_0: your next question comes from anthony anthony how long some jp morgan he's got heck align itself and
spk_12: i great idea good morning
spk_1: my first question is which regards to the reduced age conquered can you talk about how you know where i know what region perhaps are driving match and also made you what's changed her or why
spk_6: more specifically to reduced out with
spk_1: on absolutely so coming into twenty one and especially coming into the quarter we had begun to see obviously the investments we've made in the attention around just overall recruiting and have a lot of bright spots from around the is globally candidates during terrific we have states within us that are performing just as we had indicated early in the year the we expected to add hundreds of agents throughout the year something that we looked at that i mentioned on on the no earlier question that impacted it's coming into que three is as we look around at the us specifically and we have three states california indiana and ohio and her i'm sorry i'm new jersey the time when we were looking at some on us i'm of the franchisees in those areas we had some some significant underperformers that actually were terminated from our system and three and that did someone interrupts that momentum that we had coming into que three so still looking into continuing on with the momentum of the gross as in the top line thanks we had some unexpected terminations communicate three that we don't expect as much moving forward
spk_8: and then entire global that's our one thing dimension
spk_1: unlike us in canada the one thing that we're seeing globally is the pandemic comes with continues because of the severity of some of the lockdown and specific countries completely hundred business growth and even as rough as recent as yesterday the news around europe and and the amount of restriction that's happening here it's just much more significant than what we're seeing here in north america and we believed that continues to affect our we originally forecasted okay got it in and he had called out the strength in canada and in the growth that you're cheating there can you talk about ah or put some brackets around where you see your market share now where you think i could go just don't understand ah the run what you might have their still yeah i think the markets here has always been a great contributor to our strength all across canada which are you know we average the approaching thirty plus percent all across canada and even in say that comeback region upwards of forty percent so very very strong market addition throughout throughout the country and i think you couple that with the
spk_6: strong real estate market
spk_1: even in hansen's our ability to grow and we see that across the us as well in the cities in the markets where we have the strongest amount of market share we have the greatest strength in france or sales were the greatest strength and age account growth and so just canada as a whole we believe market shares a major driver in in helping us grow organically okay and it is our last night for carry on the shoppers with and i anything we should keep in mind and normalizing as away and also or non cash comp wanna go for days as consumers are looked i made as desert kind of noise you're in a quarter
spk_0: yeah but as a little bit annoying than a quarter of i'm with regard to some of the equity to compensation it was up a little that due to them one time charges for integra on a productive baker thing he for an hour and beyond looking to get back to kind of what we thought of the beginning of a year in terms of kind of our seven million dollar per quarter right henri a couple of other things on non cash why is related to amortization expand their we are expecting an incremental emerged with each expense coming from the and tiger acquisition quarterly run rate kind of in that two to three million dollars of incremental amortization expense as a result of on as or
spk_13: rather than sandra
spk_6: okay and that albion that will be an adjusted each yes
spk_14: he had to or
spk_7: yeah that one the fact that we're affect the just to dps
spk_6: the anti will or will not a lot
spk_15: okay got it thank you
spk_0: as a reminder to ask a question please press star followed by the number one on your telephone phone keypad your next question comes from games holly from stevens he's got had your line is open
spk_16: a good morning thanks for taking my question
spk_1: so first year i just in the earnings release you cited that already new driver was pure recruiting initiative could you briefly so i'll shine some light on the issue is that you may have dropped and then some that you also kept that are working while
spk_11: target marine corps when we look at recruiting initiative it's really am a holistic view across the value proposition and then other on incentives that we might pull from a financial perspective that nothing new that we've done on the it's been a holistic view really over the last several years
spk_0: new had placed a little bit heavier ah okay phantom of the financial incentives previously while we were really focusing on enhancing the value proposition and really as a transitioned into twenty twenty one really much more of a fellow get on delivery of the value proposition and that last utilization of fee waiver and so the that's what you're seeing in terms of the year are you over year come from a financial perspective
spk_1: okay understood parents and then just that one more click here could you also shared pre acquisition with integra it's agent town and how it's been running across the us and canada relative to our he knocks own
spk_11: yeah totally look at arm and we look at the and tiger regions holistically they have been on the forefront of growth from an agent count perspective though both of the us and canada had been outside grower than terms of a compare offense against the rest of our operation at the reason why we were so excited about
spk_7: the opportunity and as we noted on a scripted remark in the third quarter but after even performed better than our expectations and still continuing to see that outside his performance both in terms of agent count brother as well as that leading few revenue and earning a contribution that well
spk_16: very helpful thank you president
spk_0: we have no further questions and queue and like a call back off or to any shops for any closing remarks
spk_1: thank you operator and thanks to everyone draw any that's on the cold today have a great pulled a week for those in the us this concludes all
spk_0: this concludes today's common tongue thank you for your participation you may now disconnect

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