REAX.TO - Earnings call transcript Q3 2022

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Operator

Good morning, ladies and gentlemen and welcome to The Real Brokerage Third Quarter Earnings Call. At this time, all participants have been placed on a listen-only mode, and we’ll open the floor for your questions and comments after the presentation. I will now turn the call over to Jason Lee, Vice President of Capital Markets and Investor Relations at Real Brokerage. Sir, the floor is yours.

Jason Lee

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

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

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

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

Tamir Poleg

and market period QX thank was Good Jason. challenging broadly. a you, morning, housing the for

and we quarter, this in by the transaction have revenue, the Against XXX% median home mortgage During time of which peers which continue a significant the respectively, believe is XXXX, decline volumes. rates and in in compared market. approximately since which moderated in weighing of X% offering by model market Canada, first fell price to affordability to resiliency quarter. growth XX%, exceeding fell we in growth, the quarter, and number tough X% current US and prior for demonstrates see of year-over-year our the new October in a transactions which the year-over-year, competitive reported price Meanwhile, on posted we our 'XX. backdrop, XX% sales many XX% In by of and to residential QX compared volumes the the throughout climbed

During our processed. transactions base quarter, total gain both market growing agent continued share, number we to the and of

were increase XX% platform, reached XXX year-over-year Subsequent X,XXX the had the quarter-over-quarter to agents agent surge. on of represents our September the the growth from an of we a of basis. and represents over which we X.X% Canada in up X.X% XX, US XXXX, from in XX% announced we Currently, end marginally Canadian and milestone, where the We increase agents, As our year. XXX% agent beginning we quarter, both experienced QX. at our of

commission QX. However, our since the quarter, of Canadian fastest-growing Ontario growth XX% XX% across made represents transaction and revenue agents our footprint to up region with the over of

Group, to quarter, growth our XXXX one to Estate joined Our Canada's country. into with the our British and provinces foundation Columbia Subsequent that we presence our Florida, cementing in end of other Arizona. October brokerage we include revenue the in are the top Bell announced for expansion Washington highest as further team serve and Redline the states leveraging Real and of Minnesota, relationships existing

and our XXXX. While BC Canadian Redline's to of not provinces, province. a count operate acquisition Saskatchewan Manitoba first license to acquiring gives next the brokerage firms in across targeting us acquire estate was open are and continue half the we BC grow and real in to strong is nominal to agent strategy, our part conducted as this a method of to target in foothold territory look of to expand the We consists which

of quarter exciting our several Real the about we One announcements Over at made and October, in Conference our business. development the

our UX states include our our and over In the in our the XX including transaction be buying agreement a is our instant title app pre-approval consumer acquire in of the This is version first will California, US, have launching feature and of which a design an provide app announced to the details we experience and situation. foothold one-stop we seamless XXXX, initial will of half LemonBrew step experience on consumer-facing important and more vision, portal loan first bringing integration consumers. traditional Texas, services Florida. through consumer-facing which full title early home in buying mark concrete to an a and be LemonBrew foremost, block mortgage represents make suite acquisition we The home Lending, crystallizing and services to the excited shop we a expand guide time. expect selection. and First to signed expected to processes providing close acquisition delivering continue version of platform, plan licensed iterate will legal provide of for we in have to the QX, get to a major the The frictionless will to tech-enabled in to will the space. after to conversational across complex consumer September, The building buyer business. to mortgage the and are in step our first mortgage an this of on strategy an

into we Title Regarding our continue launch previous in completed with to which of January of Georgia and the year, QX. this Florida JVs progress in see we acquisition,

out the is is While and it ancillary XX began the California, revenue states first or and signed side space. our us QX mortgage within to experiences app. app progress non-Real and consumer partnership including the We Brokerage's are integrate ventures growth for this M&A still others. one-stop already the expand Subsequent strategy licensed for of we laying on we gain groundwork the continued our as to consumer we Minnesota, continue plans forward one going to more with contribution front, Overall, the in services a to now businesses key significant engine operations these our Utah, with to of Title to from the tool small, development opportunities agent broadly, states, Title exploring our pursuing building momentum within strategy. key to block our approach remains as as this business on to Title Tennessee for while consumer our provide home XXXX. quarter, excited several deal in have services shop current end to build focus as half on and and respect we in look the joint app corporate insurance well

However, that and are we adaptive. strategic to I stress want

this are favorable in front, so at announced always One position to make looking we Real attractive remain So, we including technology experience to is greater control technology and need full new better we a we Elsewhere do operating with acquisitions will the to to see our unlocking if transaction and X.X is opportunistic our US targets. transactions, on own [ph] the briefly touched Canada-based to which and Lease-In app consumer now is key that leverage transaction scale. and last we drives our the to integrate Conference on and quarter. moment launched the our has develop agents as us This efficiency Real's productivity technology agents. longer means third-party gives that us system processing This What been proprietary a for platform for of efficiency agents. a no Real the is backbone we as software continue all allows

built more support it for Importantly, an Real, platform, And strong to automation and costs of processes heavy flexibility operational integration. and control have we provides scaling. which lower of provides open

agents program targeted helping focuses industry. expanded have specifically our agents. our new last We that experienced on productivity to of coaching the announced the announced increase to we new quarter This more coaching at that also the mentorship include program agent supplements

programs quickly agents coaching empower while agent profitability start of and enter we suite improve Our new allowing growing the our increased can closing large coaching market. productivity to transactions for more as and

strategic brings marketplace, across our announced part will awareness, implementing experience, Madden. hosting brand the include, company's Dre growing existing which we with in-person on amongst other visibility focus and digital Marketing our development resources presence driving scale and the of addition to of base, of for our will As to agent agents and XX be Chief over increasing corporate responsible attraction. years events the our a help new and Officer, of roadmap Dre initiatives, brand the

growing beyond, maintaining Michelle building in top update. for As structure priorities and experience, to will for cash out industry strong turn to I cost-effective we opportunities the that, plan our financial on year it further an platform And the look and our on with XXXX a remain executing management. chain monetization consumer close over with and

Michelle Ressler

you, and us. key I'll we market Despite of as continue see to the joining growth everyone, share. third financial platform thank gain we the start for our results quarter. by you, strong reviewing our some for Thank on the industry, Tamir, headwinds to continue to

X,XXX at the During the with the for agents, have over joined the quarter, quarter, the at quarter. of to our one end we addition year. a X,XXX agents bringing over us of been now least Approximately of net total XX% during XX% witnessed nearly while new

surpassed October the continues and of increasingly agent the in times. model we market end of our Tamir as take continue challenging we to Additionally, as the in announced are attractive resiliency in we the XX, business to on XXXX, mentioned, underscores fact, as where our that milestone struggling. a to This, platform quarter, share more become others economic power subsequent X,XXX

revenue X.X. to the QX of which result the over Turning XXXX. productivity volumes, $XXX,XXX $XXX,XXX represents to moderating core million, quarter, prices. which unchanged transactions was This while largely XX,XXX flat impact seen The prices, lower median as transaction lower in agent in quarter was this Canada. prior Commission the indices. offset lower $XXX,XXX results. during platform and productivity to QX to XX,XXX with number closed in Driving of transaction overall moderated our and on in sale of is same and from X% well closed the X.X by from to in per volumes the the market-level particularly $XXX,XXX Revenue from quarter, increase this one second relative agent sales our $XXX financial as change price QX, the data transaction to from quarter-over-quarter X.X% attributable agent on declined that cohort higher in by of growth completed XXX% declined line in our our declined from from slightly transactions average housing primarily is the is the measures the the market broadly growth the in during from home period QX

looking efficient continues as booked and was we agents accounts QX, in commission of increase, in quarter the of transactions year-to-date earning agents did agents steady commissions, the of in decline the revenue agency highest new $XX elite our year-over-year year-over-year transaction referrals, The to approximately does buy the $XX.X generated some sold gain solution market not which the homes by in a include QX, represented up represented of provide billion. sell be jump, We side, over continue productivity our transaction $X.X for as Furthermore, XXX% generated end QX aggregate Our insight only related bringing our was believe at business million Real a change a To not at XX,XXX was represents quarter. the that transactions we completed XX% X% Real as and to XX% record commission total. be was was a distribution value during base, XX% from traction of side, agent of quarter X% the downshift. in total real the elite value revenue even dual XX% commission revenue of quarterly materially productive but Average per winning additional approximately total our agent the quarter-over-quarter platform into to there. XX% agent This X% slight during which Canada to setting for a on of QX for over agents representation. by sides, XXX,XXX. representing possible revenue to quarter-over-quarter total the platform. XXX% billion, generated

X.X% caps. increased in profit increasingly are from agents our as XXX% gross are margin QX but year-over-year, a gross the eased commission result productive Our and exceeding as X.X%

QX. XX.X% XX% commission represented of their $XX caps million. or of our have in from approximately Capped As commission XX.X% September our revenue XX, reached agents of up agents respective

during we our these ancillary of leaving large. current To churn, the we focus essentially less the Meanwhile, of margin in that at businesses. churn our revenue the over agents agents Our quarter that the operate, consumer adoption higher prior the on The as agent resiliency vision differential us revenue building across the of during fact at X.X%. share between the platform, underline is two the our that unchanged while our numbers the market markets on driven significantly generated gaining is steady define is quarter held at of than average, as remained gross X.X%. by with which the relatively quarters out lost coming are, cohort leave platform, in quarter-over-quarter, a productive result which agent-based

real ability to end sample X% less the at I'll two-thirds are our the as over past significant agents XX% the top agents very our the small of experienced agents. in down majority of four operate percentage, survey Meanwhile, with year least Additionally, our quarter, with of incredibly a years the sell-through a of including a know-how cycles. our than XX reported industry, survey of over agents to producing The note cycles. experience experience estate have having with have that, conducted in Based agents one at on of of through years experience.

we As we expect market. ideal segment the before, of this have to platform agents, attract the productive we experienced continue are said to for and

While operated. is we of noting the this foundation now and cost our many efficiency, of their are competitors always on have focus how originated

maintaining remain committed on improving to we our However, operating lean and model.

a incentives share, from agent declined QX. operating Total revenue million, a our excluding Our expense largest $XX.X cost share expense. component declined which including drop our quarter-over-quarter, in program, which XXX in quarter-over-quarter G&A is our by operating per to of X.X% XXX X.X% is quarter-over-quarter decline related XX% an core and in highlighted to XX.X% single expense to revenue transaction, the operating

payment to X on the as the we scalability to rising prior divided The the of efficiency employees, our to real employees, ratio on significantly number tallied our to processing X QX. times the from quarter efficiency and from enhanced to currently over our agents This by from the ultimately is to headcount agents that ratio over the of as XX, our XXX define support platform lastly, believe highlight continued are X of for transaction excluding and employees We of full-time advantages business. to team of of improve, for platform X X X,XXX the to in transactions processing number of XX competitive Our which translated big improved our processed And have X,XXX to to ratio, around to and to one fees QX. employees best quarter. agents. staff X,XXX metrics X these title

$X.X to $X.XX provides per quarter period loss was $X.XX for We to most same Our $X importantly, non-cash recorded the to per for of loss million net EBITDA share QX share loss the translating of in year. loss compared compared XXXX, quarter for million, our employees. the $X.X to this a the loss last about was Adjusted that that adjusted a useful financial $X improvement information compensation at slight of believe from agents our excluding year. stock-based million in offer and performance, EBITDA QX we by million

the slowdown cash housing Declines Canadian operating of held taking Turning and a in September declined change in to quarter-over-quarter. of After for into as our held region. our respectively, effect in true $XXX,XXX million the We $XX.X June million, million moderating XX, transaction balance in XXXX. result that escrow investment short-term by the financial growth to of position. million, which $X.X cash were and accounts This sale position XXXX. $X.X in on compares escrow, additional $X.X the an in $XX.X fell securities the and XX, had sheet cash market as of million

in agents and share a is our market near in poised Lastly, in we raise debt remain is a while build the to continue we have one company. incumbents we we In are current important running which to continue We to take continue and future. to business market while no the monitor debt to shifts model will confident attract term, as highlight cautiously need economic no cost-conscious for as business market. an navigate that investing that our the downturn conclusion, from

industry-changing building monetization the the up cost-effective to maintaining our top focus as management. year close Q&A. As Tamir with our and platform will poll ask mentioned, my XXXX, open the the please operator cash a an structure strong line sharply experience, questions? now concludes remarks. I for can you look with on a remain growing focusing out consumer priorities Operator, of on This financial for to we

Operator

gentlemen, the floor Aftahi [Operator ROTH first questions is question Instruction]Your coming Capital Ladies Darren open now Partners. Certainly. for and from is from

Your line is live

Darren Aftahi

speak of bit going just my position have for to to to more agents I Could that, little unproductive Thanks a would result. X.X those that guys. the X.X, productivity agents last maybe fallen just would more there? Hi, thought guess, and have terminate in you of turn what's a questions you taking cohort? kind in And speak the you did on quarter to I any Thanks. or did like from quarter?

Tamir Poleg

Sure.

the for thanks and Darren, Hi, – So question.

high-performing market. agents still as seeing in I is performing slowdown almost we're the that they think the before what have are the that

experienced on in QX is is anywhere will just I what just drop in XX% So interesting minor in to we to agents. firing see we're consensus cohort transaction happens going that teams seeing be productivity the all drop the that a to is It because volume think cylinders. high-performing market why This amongst of QX between XX%.

agents the weathering question close on sorry, keeping terminating well. second of I'm agents. we're it they're I eye this like pretty that highest So forgot our and about downturn And as now, productivity seems of had teams. performing non-productive you the

roster not did quarter. non-productive in we proactively So from the agents the cleaned third

As was churn Michelle was revenue agent The in mentioned, quarter overall our X.X%. X.X%. churn the

sub-performing non-productive we a agents the numbers, So we're non-performing obviously, churn agents leave. terminated/chose with proactive were very that didn't pleased in but there anything quarter. do to But were the to terminate of lot or

Darren Aftahi

far? maybe And how that you how October you October done, kind down a of that like thus Great. some you of have made and Thanks, Could speak July, August about just number, and transaction September more, trended is cadence fourth the XXX% just kind seen comments year-on-year? of Tamir. the of that's given kind trended may. in growth to then Two step if -- quarter, I

Tamir Poleg

great believe I we're And new us agents helped What believe we're for guidance. very the to providing say and favorable I us. momentum downturn what know, can it that be will As that is in in the I QX, market XXXX. joining not this in QX in and throughout offset seeing is you us that

lot as Conference I the a and think in to One doing. we're created awareness the that industry agents we're our really and energized Real of building what what

engaging conversations interested joining. the lot we're right now agents teams -- a that about So are and of with in

count, So strong an also for that have number. agent will our impact will that quarter a believe QX I be and on

Darren Aftahi

have impact for maybe escrow mention And may the cash one last you know flow. Michelle. of just one I on

So that in the like flow in statement that when that impact is kind million Red, the of by is business $X cash something payables going I'm and foresee And forward? you impacting the plus other at ops, is looking most the escrow? of

Michelle Ressler

Hey, for Darren. Thanks question. your

cash is in So and payables. in assets to flow the decrease and the the due other funds held decline escrow the

position, which escrow by payments, cash $XXX,XXX. operating our So decreased backs only out

drop plays flow. really what's portion that such the the have QX. the in decrease transactions. market escrow Canadian it just out see And is our there However, of driving happening what's obviously, But to how in in we'll the cash

Darren Aftahi

Thanks you. clarity. for the Thank

Operator

Thank you.

Marsh next Research. Your from from coming question Singular David is

line live. is Your

David Marsh

Congrats the impressive in conditions economic morning. the estate real of and Good conditions guys. in It's overall growth. Hey, light on revenue really market.

So the year-over-year really revenue growth impressive. is

as over to just their normally caps kind year margin, the about this, in a the kind of a caps due to are Just down earn-outs? And will agents? just earning with is agents hit a higher get of bit decline a largely how of question and I'm gross around X.X% calculating the quick the quarter. It than work course sequentially sense, I I margin may. gross was if more wanted

Tamir Poleg

you for Yes. question. David, thank the

that quarter. who margin main revenue was in things. gross two One the the agents capped was to impacted the contributed by fact more So

was we the cases just collect So is sides. And a fee. many in We fact revenue collect in Canada, the the we two way collected that of booked not a the full we is second as did that the brokerage, transaction split. XX% the commission

pay sale. -- and agents that cost the So and And we as we the broker, of our cooperating then broker. put a cooperating

the of book Canada they and is the in how in that revenue margin. overall total gross the gross was lower significant Canada portion are because impacted margins quarter a because and revenue, significantly Now this

more an not anniversary your a year. year cap. agents calendar to question reset on caps year As Agents about progresses, the on

largely So revenue improve the it's agents of affected But of do that in terms keep margins capping certain cap will the cap put believe in and going are and gross all QX throughout speaking, effect their agents because of we're time place. method. what that year. booking to We Canadian to the gross resetting the measures margin,

David Marsh

That's really to so much. you me. helpful Thank

to think kind but statement could with understand EBITDA quarter, figure that you Just million for comp of flow runs the that how the bit help you going if number forward. the have stock-based reconcile $X.X in just regard a to is of another housekeeping $X question. I then to and reconciliation, just cash your was guys wanted little through there million. me that wondering about I

Michelle Ressler

Sure.

are there marketing, was million increased which sales and based and so off So, there reclass $X.X a between P&L classification -- results. just G&A quarter the

relatively portion comp a of going couple impacted is through our flow of -- stock-based stock-based a of a I our forward And portion by Additionally, is things. equity. mean, cash compensation looked

by number impacted agents by agents So fluctuations. it's program, purchase into impacted to the value the by opt cap, of also the fair stock it's and who its market number impacted of

some the So to as see we'll company continue progresses. there fluctuations

David Marsh

I that. helpful. That's appreciate Okay.

the US Again, one more of transaction and growth. don't volumes market comment, moment. impressive. It's in, Actually, that's the revenue think in to-date? Could you mind. for have Canada just the state if the all broadly terms on about the fourth congrats me I of quarter Tamir speak you I let in

Tamir Poleg

hearing what going our we business. we're see the I to what in that collecting. we're not data say we're I'm market overall and discuss seeing what in the and can

about So XX% that a mortgage mortgage two weeks and sales to eventually. this if I don't year-over-year, indicator leading dropped is following know think applications, we but applications you're ago

volume said, drop XXXX. the that fourth is of XX%, quarter So XX% I compared consensus as the to in to will I transaction think US that

severely is it. -- think was I but was than think US Canada. following that we're situation the the kind now third I seeing of in quarter Canada more US, the impacted a in similar

be if, will the surprised drop. numbers So again, XX%, wouldn't around again, those will in -- be industry, XX% transaction yes, volume I

David Marsh

I That's Thanks, time. really guys. the appreciate helpful. really

Tamir Poleg

you. Thank

Operator

Thank you.

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

Your live. line is

Tom White

for hear, questions. guys want and don't you give Two I to or just first guess just a you're I agent I off, thinking growth? Hi, of Great. taking have Thank But of you XXXX, feeling ball. a end curious guys. realize could. about guys be on you Obviously, my to more to would slug don't how guidance subsequent if quarter, the Tamir, added I crystal agents. the

platform Over guess, you had kind next about like last to other even it the or few sustain increasingly the of one you've or your few think weeks, to several adds I the -- don't are of growth way about potentially know, appealing in that like a the ability for is feeling of Just you increase I kind are kind quarters the trying either agent last over quarters. agents maybe agent if downturn? more of over the pace

Tamir Poleg

Tom. Hi, Sure.

momentum and in great agents joining the it weeks us. seeing few when about is that I we're conversations comes past teams what think to with

So in I'm very general. more bullish fourth of year and the in agents on our to XXXX attract in the quarter ability

is see a our the lot I'm model agents that offering and happy I sense much think just that our and model acknowledging that. today, makes of only to pretty

agents part our a really become saw that shares conference, with to really said, of of I have and the it. in which social all people one to coming media in conversations wanted the agents there energized real lot their As of go impact and was on from market and an a off

be So that with strong for I that bullish more say of terms probably a I amount and having. of I aging never is we're think us XXXX been year can in And to the that traction. conversations going very now have

Tom White

Redfin one for bolster I kind splits Maybe and if earnings that's raised how on thinking for Curious, and rid home pricing, caps thoughts couple effectively that. rebate last about fees a way? or night for appreciate and traded on have consideration the brokerages consumer could. over specifically follow-up your or that the caps have that that sort generally. for Just I splits, of advance by to season, curious feeling the your of set about level guys publicly a agents there I fees this their in agents something they in announced you're getting prices you the pricing agents. buyer either of increased Is been of great. That's finances other of of guess any downturn. customers, offer raising prices in

Tamir Poleg

Sure.

while still model. looking into that split and our to not are our the multiple $XX,XXX any model, XX-XX We do need and business the model there offering ways to of We believe and are make our we we optimize to cap. core that do changes the

Aside from that, achieve we future. in about profitable too are not and company become as to mindful that we to gross wanted margins the distant the fact a

more millions the bottom dollars plan a a will a same on not of generate working optimizing model at but are to our we the couple of So, in way line. will that agents, time, hurt the

conversations But the us be that So, beginning to the year. agents we the to roll out XX-XX having conclusions again, and split will those our driving intend of cap. on at changes come then the are and there and no change with

Tom White

and the color really on for yes, quarter. Thanks nice Great. a Okay. congrats

Tamir Poleg

Thank you.

Operator

[Operator coming question you. Sidoti Your is Steve from instructions] Thank next & Sidoti Company. from

live. is line Your

Peter Sidoti

Peter but Quick Sidoti, Hi. that's It's fine. question.

it like quarter. that much hit Just pretty a on point even looks about them your overhead at you expect that $X where Have Is critical of to stabilize? you cost, mass? they down million

Michelle Ressler

that the think and volume market way Peter. headcount. in that I show And agent we to line that beginning making transaction we're top Thanks is to terms incredibly for in without model joining. additional how one of have count, is efficient. growing investments revenue designed Hi, of operating we're growing significant our The we're how

cost, G&A our decreased actually we've mentioned, we As over quarter. X% the

look don't those the anytime see continually ways additional need significant We in future. we optimize. the to expense investments make for any lines to So, in further

to agents, processing continue what at, without scale We in we times the is the and XXX,XXX cost to fastest burden. ability the platform industry have to significant have the any

Peter Sidoti

needs you structure Okay. your be -- to near And for where one need cash sheet, balance a be the need term? looking are just additional it at the that flow now capital comfortable will question, the any capital there statement, in other not and is

Michelle Ressler

Thank question. Yes. That's great a you.

So as by minimal only in I to large the of mentioned, the amount, operations. use year-to-date acquisition other for capital of decreased $XXX,XXX our to Title. operating was held Canadian due fluctuation cash quarter-over-quarter. of The business position a cost in The is large relation which was Real normal course escrow,

we So, funds need incredibly We're raise any to anytime don't the soon. see efficient.

the to for last many years have We to capital come.

additional we time progresses market order we capital more then However, growth be for some that. fund to would, opportunities continue likely look to time, to the increase and for acquisitions looking in in obviously, our point to company as at for or

Peter Sidoti

Okay. Thank be gentlemen. Thank Q&A number will is conference. That is The or code replay. you ladies concludes you, our for The XXX-XXX-XXXX replay session XXX-XXX-XXXX. much. phone conference today's available replay very and Today's XXXXX. and

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

The Real Brokerage Inc. (REAX) 11 Nov 222022 Q3 Earnings call transcript