REAX - Earnings call transcript Q2 2022

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Operator

Good morning, ladies and gentlemen and welcome to The Real Brokerage Second Quarter Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Jason Lee. Sir, the floor is yours.

Jason Lee

Good morning, everyone and thank you for joining us today for Real’s second quarter 2022 earnings call. With me on the call today are Tamir Poleg, our Chairman and Chief Executive Officer and Michelle Ressler, our Chief Financial Officer. and its analysis as ended for XX, on filed management’s as in Real XXXX and discussion the SEDAR morning, financial well results its June This EDGAR. second quarter accompanying These documents both and EDGAR. release be found SEDAR press along on can the with

that turn future everyone results call. forward-looking during company I and to over the Tamir, statements this call other I Before may like make would to remind the its about statements

factors that actual disclosure statements by risk forward-looking Our required Real law. expressly may and detailed or are these from differ documents intent except to obligation reports. continuous cause forward-looking these could in results materially SEC disclaims Canadian differences any as statements update these the our and

to please Executive Tamir Now like I with proceed. that, would and over Poleg. Officer, Chairman Tamir, to call the Chief turn

Tamir Poleg

and Jason from listeners community Thanks, the joining you everyone, including thank call many today, of agents. our to

to made XXX% that growth highlighted as productive. strong particularly incredibly look We despite more We economic a that we more by quarter, them strong year-over-year penetration value is which have we progress current we growth. With we macroeconomic X,XXX over environment headwinds. to continuing agents challenging agent in be allow will in to see agents, platforms the rapid proposition offer, for is QX are we the consider believe just to continued the believe still over agent which attractive testament excited this are market share by

in in and key decline home factors, in in mortgage other the and sharp economic transaction alert movements market. volumes cautious resulted rates, have remain are continuing sale we monitor to the However, which among recent

the on we navigating while the focused are current uncertainty, strategic Given execution economic environment.

capturing on focused market share. are we Firstly,

growth mentioned, previously phenomenal witnessed I As over the agent quarter. we

announced have that addition, to the we agent milestone. the the end exceeded X,XXX we subsequent quarter, In of

agent productivity. and industry, in our focused of quality continue agent Importantly, existing base shift as the navigate closely we our we the remain to monitor the on

we our costs such, way non-producing an have agents from continue of As filtering expenses path a for managing to the and ahead. and we is out This piece platform. as been successful identifying important pave

have common be which at industry. other witnessed voluntary productivity the end non-producing rate Similar low higher year, been our trends the to has of left the self across witnessed Additionally, or last across we agents we to a space, than platform the that have agents. churn tend have at

market, at to We operate. expect us where volume the rate, continue agent to this trend about our region the of continue agent we count net ability growth business the transaction model proposition the and the cycle. expand market given in Again, our dynamics perform we aggregate which the current to despite in optimistic leaves and shift through tremendous weighing a

Rob to startup excited already agent our pipeline, help where our business Sales, building are strong further expanding addition As new in headway managed we and strategic a real he team of part strategy, a Rob growth to VP veteran, brought estate recently XX-year Kim, a our who, in from real for Knock, BXC estate made partnerships. and footprint. being we him of has comes

the to Canadian X the front, D.C. states, quarter. Mississippi expanded we XX our and over On to footprint provinces. brings expansion total This

time option we new of on than Instant platform. to QX rather ways the executed at transaction gives monetizing launched our which In of agents paid a focused program, closing. be also are existing XXXX, Payments the is We our at

continues program to on it QX increase. small the currently remains as adoption dollar XXX% contributor a from revenue basis While from overall, a grew

and agents. capture We a to believe Chime, with future package goals. were this estate to a partnership our features offer price CRM agents’ agent assists tool renegotiated to We able at the will discount Real compelling for a retail we add real production significant upgraded appreciate to off opportunity revenue the partnership productivity for while steep value that Real. Additionally, allowing

which split mentoring excited officially our Texas expanding are that we career that to are and relaunch early our in opportunity represents Real training XX agents is well to our the field coaching. was This that are to program program. successful addition, geared during programs. new completed the during high-producing agent of as program quicker develop a line California, additional we in agents an quarter. This XX% towards top help X revenue for to their holistic while the Phase is states, those program a it bottom a launched an existing is X-month pipeline force. in important overall also the initial In elevating pilot only reboot The producing commission while the of incredible represents new on agent It receiving our career company fashion, for announce to in to addition stream to as transactions looking existing

agents experts build real program needed build community The We year, from and number real maximize take upcoming It to help we to not event an information our level, estate with connect In is support tickets, this significantly session. have to management an and to by reduce expert, sense results greater Real, We to Knowledge industry to leveraging benefit strengthen support efficiency. agents to a self-service our the support agents, June, allows touch coaching exciting Antonio, be agent will for a faster amongst and team their success also dropped estate existing and agent agents inaugural the Since In will agents Conference. giving in an and to onboarded do to the next our the portal as implementing program agent group to program more which In in success. continue agents per tool, invest in all launched new enables their the us interactive will integrate life of productive in that our our technology communication and answered more agents business. agent-focused onto path That’s plan attended affinity October a retention both support to and to their at launched revenue-generating support improve Serhant, of more on ways coaching world-renowned recently a brands. early of speaker. current it resources their a conference At will which to One with our agents for program Base, opportunity our weatherproof agent San enabled only including this but of clock. we them of ticket believe tickets and effectively. keynote creates platform agent business help quickly and we also Real establish platform and June, become this through our conference to we program, around come prospective cycle with showcase less. is potential that host points feature ultimately help resources Ryan them help training mid-career get more development, also learn of questions address new real our opportunities The Texas. them

part or features The estate in and find consumer that and We information branded descriptions, types, efforts. enable is media price, production. social MLS that want site photos create to platform including and replacing also with agents bathroom changer even in-depth In we prospects a increase Center, a bedrooms, corporate search are and amenities. our to so customizable assets. based this for consumers. rent brand of as Real the assets looking and following June, our and the directly awareness will of to home website respective that shift consumer-focused brokerage not provide buy, Agents launched assets the marketing number showcases we that portal of have late property to allows sell data, their This print users and criteria: number implemented acts integrated can clarify agents These to to been increase to can website their a This to previously directly print of consumer I areas. agents on strategy Real agents side discussing. game onereal.com, listings tool. automatically is functionality Design that real location, is properties

in are on on touch track Real at the to The Conference October. One We more strategy

The tech new think our this transformational excited agent We about technology launched back our On the end, as the represented operate software. as to enhancements moment, management. our front, in X.X replacing App to have change a Real affects innovation it to to we sea standard on are able to which how third-party industry are for need stack, we documentation SkySlope addition vendor

our transactions their transaction. ability allowing but XX tracks Real bar to is document intuitive agents to system and app, Real payment brokerage transaction have easy to not under all-in-one journey agent control also the through and over minutes. the enhanced agents sleek compliance of finish The visibility a program into and entry communication, transaction control documentation the start over document only productivity and deal updates, to Real road-to-success reconciliation. The the is more upload further software settlement. more review, software progress storage, customization. generation, into complete can allows a enhance into entry, a to process Agents enabling directly visibility the of processing, new approval, for app use, for and their streamlined enter that an agent now processes, from Our to Software proprietary have status commenting transaction enables account in

few a personally and able what user-friendly brokerage a input instructions intuitive. minutes proprietary development has was created emphasize To as I run, have in changer test No game and team without that a is our created, this an technology anything other in just close. a industry. to our deal is incredibly experience As we

launch feedback received be individual it August at us company-wide and in and a rolling have throughout we to agents, our in leading September, October. We our One extremely will from out states Conference positive Real Canadian

fulfill the of and one-stop to remain company look remainder we of experience. buying vision XXXX the assessing shop to beyond, As to home better blocks elevate focused our key we ahead building on a

step previously mortgage the we important on capabilities. have owning As the roadmap next build-out mentioned, is

Real Texas through that of attractive. to partnered with enhancements and the our at mortgage Real JV subsequent make one searching continue that Florida We as to the believe for progress a are the in inroads, criteria rolling having formed we Separately, regards increasingly with consumer-facing process app to and in end still we strategy, We as company to valuations through rates conclude drive QX in from July, to agents. my best like fits quarter, a the well remarks, continue marks would in Title, top will business I base. in be out Exchange of the which successfully graduate companies expanding And the TSXV-listed Stock the uplift. XX% that able in in next graduated According Stock This TSX increasing and that of to the I the our to visibility Venture years Exchange. do, to to important take note step those and our global future. an Toronto on before to exchange, average, Toronto X higher only investor attach we look Exchange,

having now to We average for Michelle been achieve I of able turn and a time. for are to the Michelle? accomplishing graduate in our view to listing stricter half requirements this financial more the point, results. this goal At it proud will of in-depth

Michelle Ressler

period and by Tamir will the driven assessing you, XXX% top outlined This for call. during we our the increase of some joining of quarter you second by the start XX% the I was primarily again thank growth increase Thank the everyone $XXX.X represents results a the for million, the us. which quarter. in financial quarter. same agent XXXX was Revenue first key an from strong at and once from

agent spurred from the commissions, average for the that the the Additionally, $XX,XXX was revenue over productivity over closed this and transaction productivity. on productivity the slightly dividing per quarter. closed When using growth transactions per during agent by reviewing the These the agents population by quarter. is revenue X.X agent quarter

productive X.X% them was over We late volume productivity elite we are excited agents which success are winning reached agents of in down roughly in the agent a $XX June our transactions Real it new our increase business $X.X out. shifts. continues for first agents base, total commissions, during from revenues million QX to model empowering the generated to launch and We billion quarter, from X,XXX XXX% more XX% to believe quarter. for have be will represent our per which closings onboarded even to participate to initial have over the XXXX. Furthermore, these possible only The program QX agents during our times that during as continue Of mentorship also prior drive transaction agent to program efficient and coaching of total of new homes believe be QX total increase agent of in new excited to completed as revenue real commission from were agents. even quicker in as or faster represents agents the XX% quarter. recognition quarter Notably, XX, by initiatives XXX,XXX. looking the We the alone the quarter sold the up the market solution XX,XXX for and consecutive as XX% roll

As billion QX platform we XXXX. it of total fiscal a XX% reported the a nearly on grew which point of of comparison, number year the year. to the end at this QX, since increase our XXX The of over $X.X is teams for is

account to volume quarter-over-quarter. per Additionally, our committed defined as just line group in year, highly operating teams, to platinum our of XX% improvements in over than we low million top the teams efficient growth, are make generate continuing grew the $XXX focusing sales on More transactions which model. XXX remain by that and range minimum to

per expense to operating is from in excluding which a of transaction, QX. XX% incentives core share, X,XXX in a XXX agent Our our QX revenue decline quarter-over-quarter. This component is declined

which platform XXX. this and to number and quarter have for our X grew The big the and our metrics efficiency end highest day the to of number transactions to we software May, agents advantage of full-time that QX. processed as around times of X the at processing, platform, from on ratio, team divided over transaction high of the Title Real our highlight that our a efficiency of enhance agents. fees on X,XXX. transaction reaching employees the we translated our currently payment to employees, employees, our single In was to business. define recorded believe remains We processing XXX competitive These is processing of by ratio for excluding are XX to XX Our

which $X.X our Our XX% million, to year-over-year quarter-over-quarter growth increased gross directly follows and XXX% revenue profit [Technical from high Difficulty] rate.

from increasingly a Our gross QX. Other commission as in the exceeding margin are X.X% agents result X.X% declined to are and productive caps.

commission as of new of rollout respective agents our on well Tamir focused pressure As previously XX, caps. approximately with June gross of adoption the We their the downward future higher-margin as the of offsetting remain monetization call, mentioned XX% reached centers margin ancillary services. have on the

per XXXX, for the last Our loss operating QX $X.X to $X.XX to a for share to million quarter of net the in translating was compared period of year. compared $X.X $X.XX loss million same

cash are However, flow operating cash flow and positive. free we positive

QX most to EBITDA million adjusted compensation compared provides our in XXXX. employees. loss to Our was flow free loss information flow a of $X.X XX% increase million, operating over $X.X million year-over-year useful cash non-cash We of slight $X from to excluding million, $X loss by $X.X when Adjusted recorded a increased agents while performance, in financial our and of believe cash the that importantly quarter to offer we about increased EBITDA QX that stock-based just at XX% million. for a year-over-year our

held our by sheet the continue that an position, $X.X the of balance $X.X cash that a in quarter ended cost we Real at running million we to second compared investments organization. million financial conscious way quarter to $XX.X with with and in balance began, the to a we additional the fortify strong end million Turning QX. also a $XX of securities and ended million

near-term. the debt and that no no need raise in have to We

the that We with shifts a continue to line cautiously a outweigh and transactions. plan for open remarks. We in that cost any monitor poll no we concludes the environment, in questions? our of the I to operator company. current but over-investments in one a operating to economic tough hiring up our now and in headcount remain others running In to plans puts Operator, quite have market for my a current strategic will reductions Although conscious quarters, have continue business while confident comfortable sharp technology-driven conclusion, in our position broadly can potential market market industry efficient agents you us This Q&A. greatly where ask reductions recent we and and and should announced in is financial model for as downturn please more will model layoffs. attract are be result headcount. the conditions we

Operator

first from Partners. is Your Aftahi Instructions] [Operator question Capital ROTH Darren from coming

is line live. Your

Darren Aftahi

Good quarter. quarter? then of quarter, morning. the if May, kind on guys. of maybe, can you June, just on numbers and The second you maybe are prices, work Nice and about what Hey the quarter-to-date Curious the growth in going what’s third of rates interest throughout seen maybe April, cadence impressive. talk have kind with housing the

Tamir Poleg

morning. Good Hi. Sure.

have everybody what the in – So, yes, we in home what overall the down market that’s about June sales situation I were think XX%. seen that pending – that knows

We decreases becoming more so some and are we often, – on this popular. price asking have more seen I seeing MLS, very on is prices mean

and seeing some markets reductions San price like We are Seattle, in California Jose, Washington.

than Some better markets others. much are doing

think we there so If count in rates. rising by I we previously, the is we even mid-May as in that that the are I that about growing is second change trend a think I half are decline volume really rapidly, of talking offsetting. in affected this showed market, of the quarter, the kind so interest and QX, was though June, so agent sales mentioned

we the was the fence. many rates, I shocked were the happened so coming of into buyers market. the kind interest think steep what sitting buyers back kind by But are of declining, rates that as they few weeks, seeing increase that were past in in on started

a actually increase weeks, in volume. four past, five the in transaction So, have we sharp weeks, seen

decline generally talking result in put that the are the QX little I the transactions and that on those in contract the we see a market, second is of beginning QX. transactions, closed – think half at I a of a am transactions being probably So, in of are and will bit what

I QX it agent is by second when a job in grow that again, decline by And half But great it XX% be at of if think there – is agents. that think gets volume, offset are we the XXX%, market comes count going the XXX% a to to of we of new even year-over-year, doing we when agents. I Real, more stronger. attracting addition

Darren Aftahi

just Great. kind agent growth your And really has am I strong. curious been of

have kind where growth you should had with questions And going am how from? and I kind then kind there. which expected. are you the of One, you two, two adds? some taking as then So, growth kind talked just given agent about forward puts of churn agents ramp we think just the takes the new about of of curious gross of and in churn,

Tamir Poleg

Sure.

hitting a announced of agent weeks X,XXX continuing So, couple keep agent actually right we we milestone, now. seeing and strong the ago, growth

where are you across was much are pretty all asking board, the it previously. it’s agents If from, we as taking

So, specific we point brokerage. cannot out to one

traditional I that coming agents think brokerages. most that from over the of are are

we that are every increasingly bit alternatives, little are especially keep in seeing of transaction. them allow their a income. pocket ours So, uncertain them for to looking are they alternatives now for their more about out like looking when money They

this out of lower-producing renewing. common them of will for we and even some some of just continue, to are agents or the So, coming talk market and agents even non-producing we trend market the might license are when they think their pretty not that go – When further. to period renew agents need end the the the to industry, it’s down intensify churn, if cools downturns about as market

QX who few have just four quarters, produced seen things. of a we One, past we looked we that not and three examined proactively quarters, roster in terminated and in them. the our two agents hundreds what is at are have So,

XXX growing we them. at just that It That even about means So, even higher. the agents. was makes agents offboarded our non-producing impressive, terminated growth growth XXX% actual though we more

It’s proactively happens time no-producing is are terminated the time, agents, this and same every low cyclical. just saw or that at and we licenses the very we industry, very producing giving It So, very also their and market agents that downturn. typical. for the leaving

Darren Aftahi

well XQ? me. one last the Thanks. of Could number give number for at end Got you exact quarter agents of it. completed as as in the the transactions of the One

Tamir Poleg

of number Sure. Michelle, the the exact you transactions – do handy? have number of

Michelle Ressler

around was XX,XXX, it believe. Yes, I

Tamir Poleg

the then the And believe agents, number of was I number X,XXX.

Michelle Ressler

Correct.

Darren Aftahi

Correct. Thanks That’s Congrats again. guys. helpful.

Michelle Ressler

Sure. Thanks Darren.

Tamir Poleg

you very Thank much.

Operator

you. Thank

from from coming White is question next Davidson. D.A. Tom Your

live. is line Your

Tom White

forecasting how softer of will platform agent we to brokerages, sort Great. might crystal or I be my a some part. incumbent thinking there quickly a at be And suffer indeed, of look maybe like are to like how of make slowing incumbent to growth. understand. this legacy quarters go of your kind migrate ball you think housing market to Thanks the I that if for several this curious I on move guys of just market, brokerages then a questions you do guess And are are for am a start And of what the out yours. Tamir, curious on the you increasingly independent of agents models, about a where suffering But after those? all might who a follow-up requires there in am could taking and might guess I bit may about brokerage questions. trying lag? kind guys market be is quickly type or how and they kind

Tamir Poleg

time. and too it, make they and switch. don’t questions. actually to is again they It’s alternatives have the Agents and closing good definitely serving I they think the at hot to all the deals don’t looking are capacity don’t the time Yes. much When are the have, or know, time they market are about clients, mental

have think people what to are I overnight. probably will the for will time, set long be push not button high-producing weighing acknowledge options ready over. same a a we their decisions agents and teams high-producing that making lot is and been of happen the of switch to At that time of the have that period now that

to have existing to very terms the their of have get comfortable. timing right They in process. a choose They it’s transactions, listings. their So, existing

days over of or a something it’s that So, happens couple not weeks.

change, quarters, be couple to we mean not when it’s see refer brokerages of people change. to softer ours. I will And that models if I and from the to traditional market significant think again, a the overnight. over it’s like But next going process I continues happening

Tom White

spend Michelle, maybe maybe the that. as I not build you slowing you said But kind you entering And the much not just growth marketing Curious few year reductions guess, over any whether looking sound headcount general are are or any to kind any are – like kind quarters? you thought maybe like as to I of, guys as operating what you things just doesn’t of guys or Just much expenses, the Okay. kind on share. headcount on market revenue at making headcount. curious whether of excluding kind maybe like of are capacity you you you softening might having color then next and expense think It growth thought? up there of relative OpEx anything on

Michelle Ressler

Yes. conscious. remain I we Sure. cost mean

we What to aren’t either. We staff and in this talent plan really headcount of made are through terms don’t like any top making just haven’t support in to of phase. investments we sort in – next is us we additional investing help

We way. are in to don’t that, increase But from plan we costs strategic making really aside any hires. significant

Tom White

would mentioned Payments. Okay. that are or them if hand share number out you an I a And what retaining that meant agent to update faster? maybe their participate? clarify one I enrolled, commissions been they dollar Instant value Instant Tamir, think as the revenue Just now maybe of wanted you you are one just Payments, the to then of that have paid to function checks enrolled the was but don’t a have either hadn’t on hoping guys maybe percent to Is – I just their there. bit then on, raised you have agents little what kind getting of a related know, of could And I last been

Tamir Poleg

Yes.

grew think what that if to so advanced we the total still not say, a that let’s that’s that you I Instant advances amount XXX%-something, at advance, agents commission I open Payments mentioned I all is meant. was – to the Instant look as a, the agents. number of by I Payments mean

were a and plan it we team, teams up open dev the have On we leaders. – team for to

or we this got to team the actually time provide get QX. Payments can to to little agents through didn’t We wanted get use leaders pushed their bit in that, a to Instant So, tool their that that advances agents. so to to that

I leaders, we and usage. think open Instant to team Payments in a will jump sharp the once that see we teams

nicely. all it’s agents, It’s in the open are So, nice growing. half that growing jump the I going see to do a not forecast It’s but of to year. we second

Tom White

Okay. Appreciate Thanks Nice quarter. it. guys.

Tamir Poleg

Thanks.

Operator

[Operator gentlemen. you, and This event. Instructions] concludes today’s Thank ladies

day. and this disconnect time, at for have you may participation. You wonderful a Thank your

The Real Brokerage Inc. (REAX) 14 Aug 222022 Q2 Earnings call transcript