RE/MAX Holdings, Inc. Class A

section of www.remaxholdings.com 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 facility dividends, share repurchases, litigation settlement, strategic and operational plans, and business models. Forward-looking statements represent management's current estimates. RE-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 first quarter 2025 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 available on our website. Joining me on our call today are Eric Carlson, our Chief Executive Officer, and Kerry Callahan, our Chief Financial Officer. Ward 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. We started the year on a positive note from a financial perspective as our first quarter results feature higher than expected revenue, margins, and profits. Our team's focus on operational excellence continues to help margins, enhance overall profitability, and strengthen our foundation. Kerry will provide more details in a few moments. Broadly, the macroeconomic situation and the real estate market are clouded with uncertainty. There are many puts and takes, including tariffs, rising inventory, what could happen with interest rates, even recent debate and change in industry policies. Let me spend a moment on that. The National Association of Realtors recently modified its clear cooperation policy, which aims to provide more flexibility for home sellers and their agents while maintaining the transparency and fairness of the MLS system. REMAX continues to support transparency and fairness as cornerstones in real estate. The recent introduction of the updated policy provides a balanced approach, addressing diverse seller preferences while preserving the intent of the clear cooperation policy. It's imperative that agents ensure transparency with their clients, clearly outlining the implications of delaying the marketing of listings and helping them adjust expectations accordingly. Ultimately, promoting listings to a broader audience remains in the best interest for most buyers and sellers, a position that Remax has consistently held and still supports. We are proactively helping our network navigate this change, and we remain focused on those things within our control. Having the number one brand in real estate and the most trusted, most productive professionals in the business gives us great confidence in our network's ability to adapt and succeed as they have for over 50 years. As we mentioned on our last call, 2025 is an important year for RE-MAX Holdings and its brands. It's a year of transition, continued building, innovation, evolution, and execution. Since I arrived, we've been working on improving the strength of our foundation, people, process, products, and platforms. These efforts are positioning us for long-term success. We are focused on elevating our value proposition to help affiliates win more listings, save time, and profitably build their business. Since our last earnings call, we've unveiled bold new resources to help us achieve these objectives. They all support our strategy of expanding and modernizing our products and services and enhancing our competitive advantage. We've made several notable announcements this year involving refreshed dynamic branding, expanded access to productivity-boosting agent education, a user-friendly social influencer platform, advanced new marketing resources, a comprehensive global referral system, and importantly, an innovative onboarding program called Aspire that will help us attract and develop the next generation of top-producing REMAX agents. At this year's R4 convention in February, we unveiled a refresh of our REMAX logotype and balloon logo, designed to continue efforts to modernize the branding online and on social media. The dynamic visual identity will help RE-MAX affiliates present themselves in a contemporary way across all digital platforms. We're excited to continue rolling out the Refresh brand throughout 2025 and beyond. We also introduced MaxEngage, an easy-to-use social influencer platform that provides trending content and shareable posts, and features rewards, loyalty, and gamification components. It helps the brand get loud, get loud across social channels and throughout the RE-MAX network. encouraging agents to embrace the size and scale of the RE-MAX brand, including our tools, education, and unique culture of highly productive and professional agents. We know it's critical for agents to present themselves online in a professional manner. The vast majority of customers start their home buying or selling journey online, and three-quarters of consumers rate a company on how they show up across digital channels. We're committed to providing tools to modernize how the number one brand in real estate and the most trusted agents in the industry present themselves across digital platforms. These first two programs are Refresh Branding and MaxEngage, help create a more consistent and professional Remax image across the board. Exciting new marketing tools are also being deployed, including the launch of a global marketing platform that can be customized at the local franchise and agent level, the successful MaxTech Lead Concierge Program, and AI-powered website enhancements. We also recently launched the HomeView app, which enables agents to easily communicate with and maintain post-sale engagement with clients. Coming soon, a new full-service global referral system called MaxRefer will be available, with AI layered in, to easily enable a Remax agent to find the right referral partner and track everything, including the referral fee being paid. Our worldwide footprint, a network of 145,000 agents, is unmatched and growing. As evidenced by the fact, our global agent count grew by over 10% in Q1. MaxRefer will help elevate the customer experience and help us further enhance our global competitive advantage. Which brings us to our innovative new onboarding program designed to help shape the next generation of top-producing REMAX agents, Aspire. This strategic program combines world-class education, the advanced technology solutions in MaxTech, and financial incentives to support agents who are driven to greatness. We're very excited about Aspire for a host of reasons. It combines many of the foundational pieces we put in place last year, including improved technology, an expansive customer feedback loop, enhanced analytics, and leveraging the power of the network scale. Aspire has been specifically designed to attract promising recruits, increase agent productivity, and through both recruiting and retention, have a positive impact on agent count. Enhanced recruiting represents one of the greatest opportunities to grow agent count. The fact is, RE-MAX broker owners have not recruited as many agents in recent years as they did in the past. Many have told us their recruiting efforts would be more effective if RE-MAX could provide more assistance in onboarding and share more of the economic risk in recruiting new agents to the brand. These recruits could need a little more time to build their skills and increase their productivity to RE-MAX levels or transition their book of business. We know we can help those agents who want to be more productive achieve their goals. As a result, the educational component of the Aspire program, which is integrated into Max Tech, is critically important and valuable. According to Buffini and Company, agents who complete its 100 Days to Greatness course average seven closed transaction sides, $75,000 in gross commission income, and a handful of referrals during their first year. retention is much higher when agents reach that level of earnings. Later in the second part of the year, agents in the Aspire program will also benefit from the certified full-service professional course, which will help them to become trusted professionals in virtually every aspect of the business. The technology piece is very impactful because agents who use MaxTech are nearly twice as productive as those who don't. Plus, agents in the Aspire program will be learning the MaxTech platform as they build their sales skills, multiplying the retention factor. Early responses and reactions by the network have been quite positive, and we look forward to sharing more on our next earnings call. We've intentionally picked up the pace of change at REMAX as we see many opportunities, opportunities to improve the customer experience, to expand and elevate our value proposition, and diversify and generate more revenue. With recent exciting additions to our leadership team in both Canada and the U.S., It continued maturation over lead concierge, REMAX media network, and conversions, mergers, and acquisition programs, alongside the slew of recently announced initiatives. Look, it's a new day here at REMAX, and we are open for business. Now, I'll turn it over to Carrie.

Thank you, Eric. Good morning, everyone. Our first quarter results were a continuation of a trend we have consistently seen over the past year, driving better-than-expected expense management to deliver positive margin and profit performance. Our top line performance was also solid this quarter, thanks to healthy broker fee revenue. Moreover, strong operational focus and execution helped produce lower than anticipated expenses despite the macro conditions. Some of our notable quarterly financial highlights included total revenue of $74.5 million, adjusted EBITDA of $19.3 million, up 1.5% over Q1 of last year, adjusted EBITDA margin of 25.9%, an increase of 164 basis points over the first quarter of 2024, and adjusted diluted EPS of 24 cents. Looking closer at revenue, excluding the marketing funds, revenue was 55.6 million, a decrease of 4.3% compared to the same period last year, driven by negative organic growth of 3.2%, and adverse foreign currency movements of 1.1%. The decline in organic growth was principally due to lower US agent count, mortgage segment revenue, and revenue from previous acquisitions, partially offset by higher broker fees. The challenging mortgage market continues to impact our mortgage segment, and it may take a few more quarters to return to consistent revenue growth. However, there are some positive signs. In FY 2024, network-wide transactions and volume increased compared to 2023. Recently, we also experienced a flurry of franchise renewals with long-term motto owners recommitting for another seven years. Lastly, our annual broker and loan originator conference saw its highest attendance since 2019. These developments are encouraging indicators of the mortgage sector's resiliency and highlights the enduring value and opportunity of being a motto affiliate. For the fourth consecutive quarter, margin performance improved thanks to our focus on ongoing operational efficiencies. First quarter selling, operating, and administrative expenses decreased 2.7 million, or 5.9%, to 43 million. There were many modest puts and takes, but the cost reductions were primarily driven by a decrease in professional fees, and certain personnel and events-related expenses, partially offset by higher equity-based compensation and other technology investments. We continue to generate positive operating cash flow. However, our first quarter cash generation tends to be a little lower given the seasonality of our industry and our annual investment in R4. Consequently, our total leverage ratio was 3.61 to 1 as of March 31st, almost the same as it was at year end. We expect our TLR to decrease as we get into the back half of the year as we benefit from stronger seasonal business trends, which should produce higher amounts of free cash flow. We continue to believe our patience from a capital allocation perspective has been prudent. Our priorities remain unchanged and we are strategically reinvesting in the business and building our cash reserves as we work to lower our TLR below three and a half times. Now, On to our guidance. Given the uncertainty in the current macro environment, coupled with the challenging real estate market, we have a tougher than usual task when it comes to forecasting future results. However, we are excited about all of our ongoing initiatives and the momentum we are building. Our second quarter and full year 2025 outlook assumes no further currency movements, acquisitions, or divestitures. For the second quarter of 2025, we expect Agent count to increase 1.5% to 2.5% over second quarter 2024, revenue in a range of $70 to $75 million, including revenue from the marketing funds in a range of $17 to $19 million, and adjusted EBITDA in a range of $22.5 to $25.5 million. For the full year 2025, we still expect Agent count in a range from 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, I'll turn it back to Eric for closing comments.