Real Brokerage Inc Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Strategy and Business Highlights: Real is a real estate technology company differentiating through financial incentives, proprietary tech platform, and collaborative culture. Key initiatives include Leo Copilot (AI-powered agent assistant integrated, with Leo for clients to launch later), Real Wallet (fintech platform expanding with high gross margins), and scaling One Real Mortgage and One Real Title.
• Agent Growth: 2024 saw over 10,000 net agent additions, ending with ~24,140 agents, and ~26,200 agents as of early 2025. Private label program has welcomed ~40 independent brokerages with ~1,200 agents since launch in Jan 2024, including Harvest Realty adding 550 agents.
• Agent Experience: Investments in operations, training, and support. Tailored training programs for individual agents, agent teams, and enterprise teams. Real Luxury division launched in May 2024 has over 230 certified agents and over $1 billion in luxury transaction volume closed and in pipeline.

Segment Performance

• Brokerage: Fourth quarter 2024 revenue was $351 million, a 93% increase from $181 million in Q4 2023. Full year 2024 revenue reached $1.3 billion, up 84% from $689 million in 2023. Total transactions in full year 2024 were 120,601, an 81% increase from 2023.
• Ancillary Businesses: Full year 2024 Mortgage and Title grew by a combined 105%, with One Real Mortgage up 200% and One Real Title up 60%. In Q4 2024, revenue from ancillary businesses was $2.5 million, a 176% increase y/y, driven by 163% growth in Mortgage and 179% growth in Title.
• Real Wallet: Launched in late 2024, Q4 2024 contributed $42,000 in revenue. Annualized run rate revenue is over $500,000. In the US, ~2,500 agents have opened Real Wallet business checking accounts with an aggregate deposit balance of ~$7 million. In Canada, over 150 agents have accessed credit lines with over $1 million drawn.

Guidance

• While not providing formal guidance for 2025, management expects significant year-over-year improvement in revenue, gross profit, and adjusted EBITDA.
• Seasonally, Q1 is expected to be the lowest revenue and adjusted EBITDA quarter of the year, with Q3 expected to be the highest.

Risks

• Statements made in the call that are not historical facts, including forward-looking statements, may differ materially from actual results. Risk factors are detailed in Canadian continuous disclosure documents and SEC reports, and Real disclaims intent to update forward-looking statements except as required by law.

Question and Answer

Q: Good morning. Thanks for taking my questions, and nice job on the quarter. I guess that pertains to kind of seasonal trends in 4Q. Obviously, there's historically a dip sequentially, but your business in the fourth quarter didn't really see too much of a dip. I'm just curious if there's anything underlying that's anomalistic in the fourth quarter that you saw, or you're just winning more market share and that's flowing through into your business?

A: Hi, Darren. Thank you. Yeah, I think that it's attributed to the strong growth and the fact that we're taking market share. I think that we, I mean, overall, in the industry, were surprised by the performance of the market, especially in December. So I think it was a combination of our strong growth, our ability to attract more agents and take market share, and also some servable market conditions, especially towards the end of the quarter.

Q: And then just one more. As you look to 2025, can you talk about areas where, I know in past quarters, you talked about investing in some financial compliance stuff, as well as some data science areas. How impactful is that going to be, one? And then as you think about strategic initiatives and your hiring of Nancy, just about the ancillary business and really what needs to happen there in order for that to truly scale up?

A: Thanks. Sure. I can talk about the ancillary services. Michelle can probably discuss the investment in structural things. So yeah, Nancy joined us a couple of months ago with demonstrated experience in scaling title companies and attach rates in Title Forward at Redfin. Again, both Title and Mortgage grew very significantly in 2024. We thought that they can grow even faster. Mortgage grew more than 200%. Title grew about 60% year over year. We believe that Nancy will do a great job at attaching titling in the states where One Real Title is operating. Just to give you a little bit of sense, our attach rates on mortgage at the moment in states where mortgage is available is around 1%. On Title, the attach rates are roughly 4%. If we're talking about Title JVs, the most successful JVs were experiencing attach rates of about 90%. On average, it's more around 30% attach rates on JVs, which we think should be improved. I think that Nancy has a lot of work to do when it comes to level of service and just bringing the right talent into the company and scaling it. But we're very confident that you will see significant improvement this year compared to 2024. Also, that's coupled with a few product initiatives that we're rolling out that will just provide a perfect alignment between the consumer, the agent, and the company to just drive attach rates. I think we talked a little bit about that in the past, but we can elaborate a little bit later.

Q: Hey, thanks for taking my questions, and nice work in the quarter. Maybe starting with Sharran, it seems like you're tracking for about 1,000 agents added per month in the first couple months of the year, which is really good to see. So, I'm curious what you're seeing in the agent team and independent brokerage recruiting pipeline as we think about the next couple quarters, and specifically, does it seem like the momentum to start the year could continue given what you're seeing in that pipeline?

A: Yeah, good morning, John. Thank you so much for this. So, yes, we are tracking similar growth, and so not only have we done this 1,000 agents a month roughly for the last two, but I think if you average out the last kind of 12, 14 months, it's been very close to that. What Tamir always likes to call the flywheel, the flywheel is important for us to think about because the model as a whole, when you have more agents at scale, more agents are talking about Real, and the revenue share model helps folks kind of get the model discoverability and have the conversation more. So, our pipeline is the largest it's ever been. However, I do want to underscore one thing. It takes longer for teams and independent brokerages to make the move. So, even though we are talking to more agents, more teams and brokerages today, the moving a large operation, as you can imagine, is a little complex. So, one, we're super excited about the size of the pipeline overall. Two, we believe that this momentum, we're excited and hopeful that this momentum will continue, but I just want to caveat that larger teams and organizations take a little bit to move.

Q: And then, I guess you gave a little bit, I want to dig in a little bit more on mortgage in particular. How is the team thinking about how aggressively you might grow that loan officer headcount to both cover more states across the U.S.? I think you have a good slide in your presentation showing where you are right now, and then to add capacity in existing states. And just generally, how do you think about better aligning loan officers and Real agents to support those attach rates?

A: Yeah. So, we ended the year with about 90 loan officers at Real mortgage, One Real Mortgage. We started 2024 with 18, I believe. So, obviously, we're adding more loan officers, and some of them are coming with a book of business. About half of the new additions are Real agents who got licensed as loan officers just to maximize their earnings. So, obviously, that will drive attach rates. I'm a big believer in productizing things. So, we came up with a couple of initiatives. You must remember the touring agreements that we rolled out because of the NAR changes. So, in those touring agreements, we are offering an incentive to buyers that will use One Real Mortgage with the help of our agents. And we provide them or offer them a credit of $2,500 at closing, and we're starting to see that kicking in. So, a lot of transactions are coming through that. And then, as I mentioned, we are opening up an API open to all mortgage companies and title companies. And obviously, it will be used by One Real Mortgage and One Real Title. And that API will help lenders and title companies send us signals or information about how their transactions with our agents are progressing. And that will allow us to pay our agents commission advances well ahead of closing. So, I think that this is a perfect example where we can actually create some sort of an incentive for agents to use, obviously, any lender or any title company that will use this API. We will use it for sure. But I think that, that will be rolled out in about a month and a half, and that can dramatically help that rates on our side. So, again, it's a multitude of initiatives, from allowing agents to become licensed as loan officers to also implementing some sort of a revenue share model within One Real Mortgage. So, loan officers can attract their friends and then earn revenue share out of their production as well. And then, everything that we're doing on the product, there are a lot of things that are starting to scale, and we're seeing great momentum. And as I said, we're super optimistic about those two companies for 2025.

Q: Hey, good morning, guys. Congrats on another great quarter, and thanks for taking the question. I want to turn to the Real Wallet. Thanks for the kind of guidance there, the $500,000 run rate. What are you seeing there margin-wise? And then, in terms of adoption, I believe you said 2,500 agents there. How do you get from that 2,500 to 5,000? And then, eventually, scale it across the business?

A: Thanks, Matt. So, we soft-launched the wallet at the end of October 2024, so we're about four months in. We haven't really pushed it hard, and a lot of the features that are planned for the wallet are still not available. So, just as a recap, we do have checking accounts and debit cards in the U.S., and we have lines of credit in Canada. We don't have checking accounts and debit cards in Canada at the moment, but we are starting to push wallets very heavily, and very soon we will have a variation of credit lines in the U.S. So, at the moment, we have roughly $7 million in agent deposits. We are about to roll out tax accounts for agents, meaning that agents could allocate a portion of their revenue put into a separate account and just sitting there waiting for the tax season to arrive. And obviously, as we continue to scale the lines of credit and open them up in the U.S., we will see more revenue. So, we're extremely pleased with everything that we've seen on the wallet side. There's a lot of excitement amongst the agents. We haven't started marketing it heavily, but going from 2,500 agents to 5,000 agents, I think that that will happen in the next couple of months. In addition to that, we are in the process of hiring a general manager for the wallet. Up to now, it has been managed by Pritesh and Alex, our General Counsel, and myself, and now we're bringing in the resources to actually take this baby to the next level. So, again, I think that we're seeing encouraging signs. Revenue is coming in, and this has been the smoothest and probably fastest rollout of any product we ever launched.

Q: Just to touch on the margin question, it's around a 90% gross margin business. And to just further substantiate Tamir's point, wallet, as you mentioned, we really haven't made much of an effort in pushing it. We saw over $900,000 in debit card spend in February, and it's increasing rapidly. So, we're really encouraged by the early signs and super excited for where this is going.

Q: And then following up on the operating expense question, given the increase in headcount for the growth, should we expect fourth quarter to be a good run rate in terms of G&A and R&D spend as we look ahead to '25, or should we expect a little bit of an increase there, given that mortgage capacity might need to increase a little bit, and then same with the wallet?

A: Michelle?

A: Yeah, sorry. We're not looking to add too much. We've made a couple additions already to the team, and we're excited about the addition of Dominic, but it's not going to be a very cost-heavy area. OpEx overall will grow in 2025, as I mentioned earlier, but we're super focused on growing gross profit faster than OpEx, and we'll continue to drive profitability.