RE/MAX Holdings, Inc. Class A

for all earnings-related materials, including our standard earnings presentation, and to access the live webcast and the replay of the call today. 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 facilities, dividends, share repurchases, litigation settlement, 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 fourth quarter 2024 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 our 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 Eric Carlson, our Chief Executive Officer, and Carrie Callahan, our Chief Financial Officer. Board Morrison will join us for Q&A. With that, I'd like to turn the call over to RE-MAX Holdings CEO, Eric Carlson. Eric?

Thank you, Andy, and thanks to everyone for joining us this morning. There were many positives in our fourth quarter results, which were headlined by better than anticipated profit performance for the third consecutive quarter. Operational efficiency remains a focal point for our team, and that effort continues to contribute to our strong margin and bottom line results. The housing macro environment remains in a state of transition. There are a lot of variables, inventory, interest rates, and moves by the current administration, to name a few. However, change and uncertainty bring opportunity, and our networks are built for times like these. They have proven they can succeed in almost any market. The resilience of our company, coupled with the confidence we have in our growth strategy, alongside our proven ability to execute on operational efficiency sets us up for future success. Although we still have more work to do, it's encouraging to see our efforts reflected in our financial performance. Regarding agent count, our international agent count accelerated during the fourth quarter, increasing almost 9% over last year's Q4. In fact, we've more than doubled our international agent count since 2017, ending 2024 with over 70,000 agents outside the US and Canada for the first time. In Canada, where the RE-MAX brand and network is the industry leader, we had over 25,000 agents as of year end. One important side note, in order to protect the company and RE-MAX network in Canada, we have substantially agreed on monetary terms and to make certain business practice changes to settle two industry class action lawsuits, including one on a nationwide basis. We still have some work to do on the final settlement agreement, and we believe this is absolutely the best decision for all of our stakeholders, affiliates, employees, shareholders, and debt holders alike. We very much appreciate our Canadian network and believe this is in the best interest and shows strong support for what they do on a day-in, day-out basis. Terry will provide some additional details in just a bit. Here in the U.S., we experienced some Asian decline, which is typical at year end. We remain laser focused on enhancing our overall value proposition and delivering innovative new products and services designed to bend to the trend and stabilize and grow agent count. Now, when we look back at this past quarter and 2024 overall, in addition to operational efficiency, we directed much of our effort on building or improving upon foundational elements universal to every successful business, culture, leadership, and system. These critical areas will continue to be points of emphasis throughout 2025 and over the long term. Embedded in our culture is the focus on improving the customer experience at every opportunity. One key to that objective is our voice of the customer program, through which we solicit, measure, manage, and respond to customer feedback. We're leaning into the power of our networks for insights and using that important information to shape our strategy and our operational plans. This methodology will aid our ongoing efforts to increase agent count. Our quest to improve the customer experience has also yield incremental revenue opportunities. For example, our MaxTech Lead Concierge and Remax Media Network initiatives came as a direct result of building out capabilities designed to enhance the customer experience. Last fall, we launched Lead Concierge in the U.S., and we're expecting to begin testing it in Canada very soon. The idea is to nurture high intent leads from Remax.com and Remax.ca and transform them into action ready buyers. It saves agent time, alleviates frustration of chasing down leads that eventually hit a dead end. And look, it materially improves the customer experience. A Remax Media Network program essentially providing high quality advertisements on our heavily trafficked websites has compelling upside. and we believe it could eventually generate a seven-digit revenue figure annually. Both our lead concierge and RE-MAX Media Network efforts are just starting to contribute to our top line and should ramp up throughout this year and well beyond. As we move into 2025, we're starting from a position of strength. We have the most enviable set of competitive advantages in the business. The leading brand in real estate, an unmatched global footprint, a scaled business with attractive financial characteristics, and the most trusted, professional, and productive agents. RE-MAX agents are simply the best. Our strategy is straightforward. Continue to strengthen and enhance our existing business, develop new products and services to help our networks, and evaluate other growth opportunities. These are exciting times at RE-MAX, and we're open for business. From a leadership perspective, we started the year off strong with two impactful additions to our team. Chris Lim joined RE-MAX earlier this month as Executive Vice President and Chief Growth Officer. With over 22 years of experience in real estate, franchise development, brokerage operations, and strategic growth, Chris brings a wealth of expertise to the role. As a seasoned real estate executive, his proven track record of leadership and innovation will help RE-MAX attract the industry's best talent while elevating the affiliate experience, and in turn, the home buyer and seller experience. Chris oversees the teams dedicated to supporting franchise growth and strength in the U.S. company-owned regions. Church franchises receive customized support that aligns with their needs and driving the company's objectives of increasing agent count and expanding market presence. Travis Saxon also recently joined the company as Executive Vice President of Strategy. Travis brings over two decades of expertise in residential real estate technology, digital marketing, and management consulting. Throughout his career, Travis has held executive positions where he's helped elevate technology solutions and content strategies to improve business outcomes. Travis has worked closely with leading real estate brokerages across the US and Canada, including many of the RE-MAX Network's largest and most successful affiliates, helping them refine, innovate, and leverage business systems for growth and efficiency. In his new role, Travis guides real estate strategy and innovation with a focus on integrating solutions to optimize operations, and support affiliate growth. Chris, Travis, and the rest of our outstanding team will continue to work toward improving our value proposition so our network can win more listings, make more money, and save time while doing so, all while helping brokerages improve their profitability. Regarding our mortgage segment, we see positive developments amid the current industry conditions, which are impacting our overall performance. Motto continues to sell franchises, consistently adding capable entrepreneurs to our network. There's a steady interest in the opportunity, and that is reflected in the fact that despite the sluggish macro environment, model sales last year were roughly on par with 2023. Regarding WEMLO, other industry players are taking notice of our growing market presence, and we're fielding more inquiries from third parties looking to explore partnership opportunities. For example, last month, a leader in the wholesale mortgage lending space announced WEMLO as a process partner, an exclusive concierge service designed to enhance the loan processing support for its customers. We continue to lean in, be curious, and to challenge everything. We're striving to improve on the best we currently have to offer while simultaneously innovating and improving our value proposition and advancing our position as a leader in the industry. Beginning with R4, our annual agent convention next week, you should expect to see a steady stream of compelling announcements and initiatives to come out this year. We've got exciting opportunities involving referrals, artificial intelligence, marketing, branding, social networks, and more. 2025 is shaping up to be an important year for Remax Holdings and its brands, a year of transition, continued building, innovation, and evolution. We look forward to sharing our progress with you. With that, I'll turn it over to Carrie.

Thank you, Eric. Good morning, everyone. We finished the year positively and delivered strong margin and profit performance, continuing a trend we started in the second quarter. Diligent expense management and strong collections were the primary drivers for the better than expected results across these metrics. Some of our notable quarterly financial highlights included total revenue of $72.5 million, adjusted EBITDA of $23.3 million, up almost 2% over Q4 of last year, adjusted EBITDA margin of 32.2%, an increase of 220 basis points over the fourth quarter of 2023, and adjusted diluted EPS of 30 cents. Looking closer at revenue, excluding the marketing funds, revenue was 53.8 million, a decrease of 3.9% compared to the same period last year, driven by negative organic growth of 3.5%, and adverse foreign currency movements of 0.4%. Negative organic growth was principally driven due to U.S. agent counts and reduced revenue from previous acquisitions. Once again, margin performance improved thanks to strong cost management and encouraging collections. Throughout the year, we implemented process improvements and added additional resources, which contributed to improved collections activity. Fourth quarter selling operating and administrative expenses decreased 3.4 million or 8.6 percent to 35.8 million the cost reductions were primarily driven by a decrease in bad debt and investments and events partially offset by certain higher personnel costs improved collections and enhanced operational efficiency drove strong cash flow generation in the quarter as two-thirds of our adjusted EBITDA and nearly one-third of our revenue converted to adjusted free cash flow. As Eric mentioned, we have reached agreement on monetary terms to settle two industry class action lawsuits in Canada for approximately five and a half million US dollars. Execution of the final settlement agreement is subject to the parties reaching an agreement on all terms. These cases are comparable to the ones that we have settled here in the US. Upon finalizing the formal settlement agreement, the company its subsidiaries and affiliates, and RE-MAX sub-franchisors, franchisees, and their sales associates in Canada would be released from all claims on a nationwide basis. Similar to the U.S., the final settlement agreement will require court approval. We continue to deny the allegations made in the complaint and in no way acknowledge any wrongdoing. We believe that protecting our Canadian network from the risk of potential damages and the uncertainty of litigation makes this decision the right course of action. As industry leaders, RE-MAX affiliates understand the value of transparency, clarity, and fully informed buyers and sellers. These are key elements to the foundation of repeat and referral business, the basis of top producing agents. As a result of the strategic decision to settle the Canadian litigation, our total leverage ratio ticked up slightly to 3.57 to one, as of the end of the year. Given the cash generative nature of our business, we believe our cash reserves will continue to grow and enable us to deliver as we move throughout 2025. We are prioritizing strategically reinvesting in the business and believe resuming a modest level of stock repurchases given the current price is attractive. However, as always, we remain judicious regarding capital allocation decisions. Our first quarter, and full year 2025 outlook assumes no further currency movements, acquisitions, or divestitures. For the first quarter of 2025, we expect agent count to increase 1 to 2% over first quarter 2024, revenue in a range of 71 to 76 million, including revenue from the marketing funds in a range of 18 to 20 million, and adjusted EBITDA in a range of $16 to $18.5 million. And for the full year 2025, we expect agent count to change negative 1% to positive 1% over full year 2024, revenue in a range of $290 to $310 million, including revenue from the marketing funds in a range of $71 to $75 million, and adjusted EBITDA in a range of 90 to 100 million. With that, operator, let's open it up for questions.