RE/MAX losses soar following payout in commissions cases
While revenue dipped slightly, net losses totaled more than $59 million, but CEO Steve Joyce said the company continued to make progress in a tough market.
One of two brokerage firms to settle in major commissions lawsuits, RE/MAX reported a net loss in Q3, which it largely attributed to the $55 million the company agreed to pay in the Sitzer/Burnett and Moehrl class action cases.
Citing losses of more than $59 million — the company's largest quarterly loss in at least 10 years, according to available earnings statements — RE/MAX narrowed its full-year revenue guidance.
Still, the company's revenue remained fairly steady from Q2 and declined 8.7% over the past year, during a time when mortgage interest rates soared and inventory levels around the country stayed persistently low.
"We continue to make progress driving forward our core strategic initiatives amid the toughest real estate market in a decade," RE/MAX Holdings CEO Steve Joyce said in a press release.
Global agent count was relatively flat, increasing just 0.7% compared to the same period last year, but Joyce emphasized that the company is focused on growing its Canadian agent headcount to help offset some of the pain being felt in the U.S. market. He said RE/MAX is "aggressively" pursuing growth opportunities through conversions, mergers and acquisitions.
Revenue: $81.2 million, down from nearly $89 million a year ago and off slightly from $82.4 million in Q2.
Net income/loss: Loss of $59.5 million compared to the $2 million of income the company posted in Q2.
Cash and cash equivalents: $89.8 million, a decrease of $18.8 million since the end of 2022.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $26.7 million in Q3 compared to $26.6 million in Q2. On a year-over-year basis, the company's Adjusted EBITDA has declined by 15%, or $4.7 million.
Global agent count: 145,309, an increase from the 144,510 agents reported last quarter.
U.S. and Canada agent count: RE/MAX had 56,494 agents in the U.S. as of Q3 compared to 56,987 agents in Q2. In Canada, RE/MAX reported 25,288 agents in Q3 compared to 25,218 last quarter. Combined U.S. and Canada agent count was down 3.9% year-over-year.
Motto Mortgage franchises: Added 7 offices in Q3, bringing the franchise total to 242 offices, an increase of nearly 15% from a year ago.
What RE/MAX had to say
Joyce noted that the settlement in the commissions cases and the challenges in the housing and mortgage markets were factors in the Board of Directors' decision to suspend the company's quarterly dividend.
"We strongly support returning capital to shareholders," Joyce said. "However, given current circumstances and out of an abundance of caution, we believe this decision is optimal for shareholders as we determine how to best position the Company to take advantage of those opportunities that we believe will yield the best long-term returns."
In addition to its monetary payout in the Sitzer/Burnett and Moehrl commissions lawsuits, RE/MAX also agreed to policy changes, including eliminating NAR membership requirements and minimum commission requirements. And last month, the brokerage company also reached an agreement with plaintiffs in a separate Massachusetts-based commissions case.
The company has touted its recent franchise growth, announcing in October that RE/MAX opened 15 new offices during the last two months of the summer, which accounted for roughly 350 new affiliates.
At the same time, the company cut full-time employees. In late August, RE/MAX trimmed its workforce by around 7%, citing the challenging economic environment.