RE/MAX Holdings, Inc. Q2 FY2024 earnings call

• Had a good quarter with stronger-than-expected financial performance and notable conversions of real estate brokerages and teams. Decisions over the past year to right-size operations, settle lawsuits, strengthen leadership, replenish cash were prudent. - Notable industry business practice changes on August 17, continue to prepare affiliates. - CM&A program added brokerages and agents, e.g., added a 60-agent office in Utah, and two Canadian brokerages converted adding nearly 400 agents. - Launched MAX/Tech Lead Concierge, an optional program delivering vetted leads. - International agent count rebounded in Q2; Canada agent count flat in Q2 but strong start in July; US agent count not yet stabilized. - Motto nearing 400th sale lifetime, opened 45th franchise in New Hampshire; franchise sales distribution: 50% to RE/MAX affiliates, etc. - Wemlo processed 6,000th loan to clear to close status.

Total revenue was $78.5 million. Adjusted EBITDA was $28.1 million, up 5.4% over Q2 of last year. Adjusted EBITDA margin was 35.8%, an increase of 350 basis points over Q2 2023. Adjusted diluted EPS was $0.41. Excluding marketing funds, revenue was $58.4 million, a decrease of 4.8% compared to the same period last year, driven by negative organic growth of 4.5% and adverse foreign currency movements of 0.3%. Selling, general and administrative expenses decreased 13.3% to $34.9 million due to lower personnel expenses, improved collections, favorable property tax expense, and reduced legal and IT-related expenses.

• Third quarter 2024: Expect agent count to change negative 1.5% to 0% over Q3 2023, revenue in range of $75 million to $80 million (including marketing funds $19 million to $21 million), adjusted EBITDA in range of $24.5 million to $27.5 million. - Full year 2024: Slightly reduce agent count guidance to negative 1% to positive 1% over full year 2023, revenue in range of $305 million to $315 million (including marketing funds $78 million to $82 million), adjusted EBITDA in range of $93 million to $98 million.

• Industry class action settlement is currently being appealed. - Macro environment and industry uncertainties may impact business performance.

Q: Soham Bhonsle asked about involving pricing model to take more economics on transaction rather than just agent count.

A: Erik Carlson and Amy Lessinger responded about considering different economic models, focusing on supporting agents, and transparency.

Q: Soham Bhonsle asked about EBITDA guide for Q3.

A: Karri Callahan explained about onetime items in Q2 not repeating in Q3.

Q: Anthony Paolone asked about pressure on agent count.

A: Erik Carlson and Amy Lessinger discussed agent count pressure from macro and changes, and agent experience helping.

Q: Tommy McJoynt-Griffith asked about buyer agent agreements.

A: Amy Lessinger and Erik Carlson talked about education, transparency, and templates.

Q: Stephen Sheldon asked about international agent growth.

A: Amy Lessinger discussed international hot spots and trends.

Q: Matthew Erdner asked about Motto franchise sales and open offices.

A: Erik Carlson talked about market dynamics and terminations.

Q: Ryan McKeveny asked about cost management.

A: Karri Callahan explained personnel expense, onetime benefits, and collections.

Q: Ronald Kamdem asked about litigation updates and dividend.

A: Karri Callahan talked about appeals process and capital allocation focus.

Q: John Campbell asked about RE/MAX website and broker fee.

A: Karri Callahan and Erik Carlson discussed website and broker fee drivers.