RE/MAX, one of the biggest household names of the real estate industry, suffered losses in Q2 2023 due to market challenges, but executives remain optimistic thanks to a growing agent count.
RE/MAX saw losses across the board when it came to the financial numbers in Q2. In its Q2 earnings call this week, the company reported that their revenue dropped 10.6% to $82.4 million compared to Q2 2022. Revenue excluding marketing funds decreased 11.4% to $61.4 million compared to last year, which executives stated was driven by -10.5% organic growth and adverse foreign currency movements of 0.9%. The streams of recurring revenue, meaning franchise fees and annual dues, saw a 5.7% drop from 2022 to $2.5 million, and accounted for 66.3% of revenue excluding the marketing funds (compared to 62.3% in 2022). In addition, adjusted EBITDA decreased 24.2% from last year to $26.6 million, with the company reporting an adjusted EBITDA margin of 32.3% and adjusted earnings per diluted share (adjusted EPS) of $0.40.
RE/MAX President and CEO Nick Bailey feels that the market has been too slow as of late to foster financial growth for the company. “I think the spring market was a little bit lackluster because the move-up buyer didn’t come to the market like they historically have. People are in love with their rates, and statistically, 90% of homeowners with a mortgage have a rate under 5% and of that, 50% are under 3.5%. Those are historic numbers and so that move-up buyer is in love with their rates and not super excited to come to the market.”
Despite these losses, the company’s main focus is that their agent count continues to grow, representing a positive future in the industry. As of the end of July, the company has seen a 0.4% increase from 2022, to 144,510 agents. Although the agent count within the U.S. and Canada saw a 4.1% drop year-over-year, executives state that this decrease was narrower than Q1. Additionally, agent growth outside of North America—including countries such as Turkey, Peru, Brazil and South Africa—grew 7% compared to last year.
The company attributes agent growth to initiatives such as the team push, mergers and acquisitions, MAXTECH and MAXRECRUIT.
“We were pleased to see continued RE/MAX agent count growth in Canada and our global regions during Q2. Despite industry headwinds, agent count in Canada has increased each month since February, and our overall international agent growth also accelerated in Q2,” said RE/MAX Holdings Chief Executive Officer Steve Joyce. “In the U.S., we remain focused on our growth initiatives, and we continue to build our related pipelines. The combination of higher interest rates and tight inventory has made for a challenging housing market and agent-recruiting-and-retention environment. On a positive note, the pace of our U.S. agent count losses slowed quarter-over-quarter—which is encouraging, given the market conditions.”
RE/MAX agents aren’t just growing, but flourishing, according to executives. “It’s well documented that RE/MAX agents outsell competing agents by more than two to one at large brokerages,” explained Bailey.
The mortgage side of business is also seeing definite growth. Total open Motto Mortgage franchises grew 17.5% to 235 offices compared to 2022. Executives also stated that for wemlo, they either met or succeeded their expectations for both the number of submitted and clear-to-close.
“On the mortgage side, wemlo is ramping up, and we continue to expand our Motto franchise sales operation,” Joyce added. “The addition of experienced personnel with in-depth franchise experience to our inside sales team is just one reason we are optimistic about increasing the pace of Motto franchise sales in the second half of 2023 and beyond.”
Looking forward to Q3, RE/MAX expects their agent count to either stay the same or grow by 1%, revenue to grow $78.5 million to $83.5 million and the adjusted EBITDA to fall in the range of $23.5 million to $26.5 million.
As for the full year 2023, RE/MAX stated that they are tightening their guidance ranges. They expect agent count to remain unchanged or grow 1% over 2022, revenue in a range of $320 – $332 million (changed from $315 – $335 million) and the adjusted EBITDA in a range of $92 – $98 million (changed from $95 – $105 million).
