Real posts net loss for 2022 but sees a turnaround coming
Despite a challenging real estate market, CEO Tamir Poleg expects the company’s EBITDA to turn positive in the second half of 2023.
The Real Brokerage reported net losses in the fourth quarter and full year in its latest earnings report, but expressed optimism about 2023 even as the overall real estate market remains challenging.
The company was on a clear growth path in 2022, with revenue increasing 214% to $381.8 million for the year, according to an earnings report released on Thursday, March 16. However, the company posted net losses of $20.6 million, up significantly from its $11.7 million loss in 2021.
With a huge jump in agent count, changes to fee structures and better-than-expected activity in the first two months of 2023, both CEO Tamir Poleg and Chief Financial Officer Michelle Ressler expressed optimism during the earnings call that the company's EBITDA will turn positive in the second half of the year.
"We continue to expect to be adjusted EBITDA profitable in the back half of the year driven by the important changes we made to our agent fee model. Looking ahead, our top priorities are building an industry-changing consumer experience, continued acceleration of platform growth and market share, and executing on additional monetization opportunities," Poleg said.
The earnings report was released prior to Thursday's stock market session. In morning trading, Real's stock was up around 3.5% to $1.31 a share.
Revenue: Revenue increased 90% year-over-year to $96.1 million in the fourth quarter. For the full year, revenue was $381.8 million, an increase of 214% year-over-year.
Cash and cash equivalents: $10.8 million at the end of 2022, down from $25.8 million at the end of 2021.
Net loss: $6.8 million for the fourth quarter, compared to a $3.8 million loss in 2021. For the year, net losses were $20.6 million, compared to a $11.7 million loss in 2021.
EBITDA (earnings before interest, taxes, depreciation and amortization): Adjusted EBITDA loss of $3 million for the fourth quarter, unchanged compared to the same period in 2021. For the full year, adjusted EBITDA loss of $8.9 million, compared to a loss of $5.1 million in 2021.
Transactions: The brokerage closed more than 37,500 transactions in 2022, a 181% increase over 2021. The number of transactions in Q4 2022 grew 85% year-over-year to 9,745.
What Real Brokerage had to say
While the company is expecting a difficult year for the market as a whole and predicts home prices will drop by 7-12%, changes to agent fees, along with continued agent growth and the expansion of its title and lending services, puts it in a good position going forward. Real's changes to its agent fee structure are expected to generate additional net profit of over $5 million in 2023 with an even more significant full-year effect in 2024, according to the company.
More agents and more transactions were continuing themes for Real over the past year. In 2022, the company surpassed 8,200 agents, an increase of 113% year over year. By Feb. 3, the company had reached 9,000 agents.
The total value of completed real estate transactions in 2022 grew 226% to $14.4 billion. That boosted commission revenue per average agent to $62,400, compared to $45,400 in 2021.
Real opened brokerage operations in seven new states and territories in 2022 and plans to keep expanding in 2023.