RE/MAX Holdings, Inc. Class A

Good morning and welcome to the REMAX Holdings Third Quarter 2023 Earnings Conference Call and Webcast. My name is Krista and I will be facilitating the audio portion of today's call. At this time, I would like to turn the call over to Andy Schultz, Senior Vice President of Investor Relations. Mr. Schultz, you may begin.

Thank you, Operator. Good morning, everyone, and welcome to REMAX Holdings Third Quarter 2023 Earnings Conference Call. Please visit the investor relations section of www.remaxholdings.com for all earnings-related materials and to access the live webcast and the replay of the call today. If you're participating through the webcast, please note that you will need to advance the slide as we move through the presentation. Compared 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 and open offices, financial measures and outlook, brand expansion, competition, technology, housing and mortgage market conditions, capital allocation, credit facility, dividends, share repurchases, litigation settlement, strategic and operational plans, and business models. Forward-looking statements represent management's current estimates. Max 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 third quarter 2023 financial results press release and other SEC filings. Also, 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 also available on our website. Joining me on our call today are Steve Joyce, our Chief Executive Officer, Terry Callahan, our Chief Financial Officer, and the presidents and CEOs of our brands, Nick Bailey and Ward Morrison. With that, I'd like to turn the call over to Remax Holdings CEO, Steve Joyce. Steve?

Thank you, Andy, and thanks to everyone for joining our call today. Looking at slide three, our financial and operational performance was once again in line with our expectations, highlighting the resilience and stability of our attractive 100% franchise model. The majority of our global scale business is driven by recurring revenue, providing fairly dependable revenue streams. Together with low fixed costs, we tend to generate strong margins and healthy cash flows. even when the housing and mortgage market conditions are like they are today. Although we cannot control the macro environment that impacts our business, we made continued progress on our core strategic initiatives, which include aggressively pursuing aging growth opportunities in the U.S., increasing our Canadian and global aging accounts, and growing our mortgage business. Ultimately, we believe we will successfully navigate these challenging times and grows significantly when industry conditions improve, a pattern we've seen repeatedly for 50 years. Our brands and networks are unmatched in many ways, and we believe our future is very bright. Even today, we see positive trends worth noting, like the momentum we have with both REMAX franchise sales and our conversions, acquisitions, and mergers initiative, as well as continued growth in our mortgage business. Some of our notable quarterly financial highlights include RE-MAX Holdings total revenue was $81.2 million. We generated adjusted EBITDA of $26.7 million. Our adjusted EBITDA margin was 32.9%. And adjusted diluted EPS was $0.40. During the third quarter, we made two difficult but necessary moves in the current environment. First, as previously announced in mid-August, we streamlined our operations and reduced our overall workforce by 7%. Second, during September, RE-MAX LLC agreed to settle costly litigation and protect the company and RE-MAX Network from multiple industry class action lawsuits. While it came at a significant financial cost, we believe it was absolutely the best decision for all of our stakeholders, affiliates, employees, shareholders, and debt holders alike. Nick will elaborate further in a few moments. Subsequent to quarter end, the Board of Directors decided to suspend our quarterly dividend. In light of the recent litigation settlement, which includes a $55 million payment and challenging housing and mortgage market conditions, the company believes this action to preserve its capital is prudent. Regarding our CEO search, I am pleased to report that we are nearing a conclusion and expect to announce our new leader within the next couple of weeks.