RE/MAX revenue down, but mortgage business is growing
The company lost $700K and saw U.S. agent count decline in Q1, but said the results met expectations and focused on opportunities for Motto Mortgage.
Similar to other major players in residential real estate, RE/MAX Holdings, the parent company of RE/MAX and Motto Mortgage, tallied losses across the board last quarter. The company announced a net loss of $700,000 on $85.4 million in revenue, which was down 6.2% from the same quarter last year.
Despite the decline in revenue, RE/MAX leadership was upbeat.
"We performed largely as expected during the first quarter, as the U.S. housing market continued to adjust to higher interest rates," said Steve Joyce, RE/MAX Holdings Chief Executive Officer in the earnings release. "Given the industry conditions, we anticipated pressure on our U.S. agent count to start the year but did see some encouraging trends toward the end of the first quarter."
For next quarter, the company is targeting revenue in the range of $79 million to $84 million and low — if any — agent attrition. For the full year, RE/MAX Holdings is aiming to generate upwards of $335 million in revenue.
Revenue: $85.4 million, a decrease of 6.2% from Q1 2022, but a slight improvement over the previous quarter's $81.3 million.
Net income/loss: A loss of $700,000, down from $1.5 million net income in the same quarter last year.
Cash and cash equivalents: $96.8 million, a reduction of $11.9 million since the end of December 2022.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $19.9 million for the quarter, a notable drop of $8 million — or 28.6% — since the same period a year prior.
Global agent count: Increased to 143,523 agents globally, or a gain of 0.8%.
U.S. and Canada agent count: 82,521 agents, a decline of 3.1% overall. Agent count was up in Canada but dropped by 5.4% in the U.S.
Total Motto Mortgage franchises: 232 offices, an increase of 23.2% year over year.
What RE/MAX had to say
The company was bullish on its mortgage business. CEO Steve Joyce told investors that the company continues to direct capital "opportunistically" into resources and channels that will help increase revenue in the coming quarters, highlighting the growth of its Motto Mortgage brand and Wemlo mortgage processing platform.
Motto Mortgage President and CEO Ward Morrison said that the growth of RE/MAX's mortgage business will also benefit real estate entrepreneurs interested in diversifying their income, "something that is very important during changing market conditions."
Between the projected growth of both Motto and Wemlo, RE/MAX stands to boost revenue by $100 million, Morrison said during the call. While the company had 232 Motto Mortgage offices by the end of March, RE/MAX is aiming to ultimately build up to 900 to 1,000 franchises, with each paying RE/MAX $4,500 per month.
The company also sees a lot of growth ahead for its mortgage processing platform, Wemlo.
"If you assume roughly 6 million mortgages annually with about 20% of those being completed by the broker channel, you arrive at 1.2 million loans, which is a reasonable proxy for Wemlo's total available market opportunity," Morrison said, adding that hitting 60,000 loans would deliver $50 million in annual revenue.
Joyce noted that RE/MAX Holdings is still on the hunt for a new CEO. Joyce was appointed interim CEO upon the departure of former CEO Adam Contos last March. RE/MAX has hired executive search firm Egon Zehnder to help with the selection process, and Joyce said that the consultant will review both internal and external candidates and would make its recommendation by the end of the summer.