Q3 2019 Earnings Call
Cash my name is Sharon and I will be facilitating the audio portion of today's call. At this time I would like to turn the call over to Andy Shoals, Vice President Investor Relations Mr. show.
Visit the Investor Relations page of remix Dot com for all these related materials.
To access the live webcast and the replay of the coal today.
You are participating through the webcast. Please note that you will need to advance the slides as we move through the presentation.
Turning to slide two.
Our prepared remarks and answers to your questions on today's call may contain forward looking statements forward. Looking statements include those related to agent count franchise sales financial measures and guidance brand expansion competition technology housing market conditions dividends strategic and operational plans in business models.
Forward looking statements represent management's current estimates remarks assumes no obligation to update any forward looking statements in the future.
Forward looking statements dress matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward looking statements.
These are discussed in our third quarter 2019 financial results press release and other FCC filings.
Also we will refer to certain non-GAAP measures on todays call. Please see the definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website.
Joining me on our call today, our Adam Kontos, our Chief Executive Officer, and carry Kelly, our Chief Financial Officer.
Word Morrison president of motto mortgage and Nick Bailey remix Chief customer Officer will join US for the Q1 day with that I'd like to turn the call over to remix Holdings CEO , Adam Kontos Adam.
Thank you Andy and thanks, everyone for joining our call today, the successful launch of our boost technology platform greater stability in our U.S. agent Count continued double digit growth in international agent Count and ongoing motto mortgage expansion all were key contributors to our third quarter results.
We're starting to see positive traction from the multiple strategic moves we made the past two years and although it's still early our recent performance coupled with the improving housing markets in both the U.S. in Canada gives us added confidence that we'll end the 2019 and entered the new year with good momentum.
How is of the quarter included global remarks agent count increased 3.5% exceeding 120000 agents for the first time in our history revenue of 71.5 million.
Adjusted EBITDA of 28.2 million adjusted EPS of 61 cents per share the successful launch of the remarks technology platform powered by Bruce with more and more agents adopting at each week and the continuing growth of the motto mortgage brand, which recently sold its 150 it franchise, let's start.
Here.
Looking at Slide four model was last three years ago with the aim of disrupting the mortgage industry by providing more options transparency and convenience for consumers model not only creates additional business for current real estate brokerage owners and teams, but also offers opportunities for mortgage professional seeking to open their own businesses as well.
As independent investors interested in financial services.
Our motto mortgage brand continues to expand at an encouraging clip and the motto teams focus on ongoing improvement continues to pay dividends recent motto franchisees are opening their stores at an accelerated rate with almost half of the 29 franchise. A sold this year through September thirtyth, having already opened their doors.
Furthermore, the average days to open is now approximately 90 days, a very quick turnaround for any franchise, regardless of industry and further evidence of how compelling the model concept. This.
With over 100 offices opened in over 30 States models presence is growing steadily we anticipate an inflection point to arrive as we build greater mass and brand awareness and each quarter of growth draws us closer to this point, having said that we've recently expanded our marketing efforts and have been more deliberate about tapping in.
Into our existing franchise base for referrals, both initiatives are showing early promise.
Interest in owning a motto franchise is high and our pipeline is fuller than it's been in a while.
Many of our current franchisees are enjoying the recent refinancing boom on top of steady purchase origination volume.
We are pleased with how well motto has grown through its first three years and we will continue to invest in its future growth and success.
Turning to slide five.
As it has every year for over a decade remarks ranks as the number one real estate franchise in the franchise times top 200, plus rankings, which ranks franchise networks by global sales system wide. This is the 11th straight year remarks has led all real estate franchise brands and the survey of this major industry report.
Across all industries remarks earn the number 15 spot. This is the seventh consecutive year remarks has been in the franchise times top 15, joining other world renowned brands, such as Mcdonald's and Marriott hotels <unk> resorts.
The ranking reinforces the enduring strength quality and recognition of the remarks brand name.
Moving to slide six we were encouraged to see the year over year improvement in September Homesales, especially given how challenge the market was a year ago. According to the most recent remarks National housing reports 2019 peak selling season ended on a high note at September home sales rose just over 8% year over year.
September 2019 also marked the third consecutive month of year over year inventory decline reversing the strongest nine months stretch of year over year inventory growth and report history from October 2018 to June 2019.
Healthy demand together with constrained supply contributed to price increases.
September's median sales price of 254500 represented a year over year increase of 4.5%, which is in line with year over year average gain of 4.9% for 2019 first nine months old.
Overall, the market still poses some challenges for buyers, namely rising prices and shrinking inventory, but we're moving into the fourth quarter on better footing than we were a year ago as we begin to lap the persistent sales declines from the end of last year. The housing markets current trajectory points to stronger year over year sales in the months ahead.
Flipping to slide seven we finished the third quarter of 2019 with over 128000 agents in our global network, a record and an increase of 3.5% year over year.
Our agent count outside the U.S. and Canada continues to grow at a robust pace.
We added almost 6000 agents in the past 12 months again of nearly 16% parts of South America, Europe , and South East Asia drove the strong international growth.
Our top global performers include Brazil, Argentina, Italy, Israel and India.
Last month I attended the 11th annual remarks European Convention held in May Orca, where the theme was bridge to the future with over 1100 attendees from 35 countries. The energy at the conference was amazing.
Our European colleagues gather to network learn exchange ideas and celebrate their individual and collective successes. It was easy to see why we have experienced several consecutive years of global double digit agent count growth. These talented motivated professionals are setting the standard for the European real estate industry and it was my privilege.
The spend the time with them.
Moving to slide eight our U.S. and Canadian agent Count showed signs of stabilization during the third quarter, which was welcome news.
After three consecutive quarters of declining year over year performance, our agent count improve slightly relative to the second quarter.
As I mentioned earlier, we believe we are starting to see positive traction from the multiple strategic moves we made in the past two years.
As shown on the right our Canadian agent Count grew by 111 agents highlighted by steady gains in Ontario, and Quebec that offset losses in the west.
Nationwide, Canada finished the third quarter on a high note with our best month of gross agent additions occurring in September .
On the left you can see or U.S. agent count was down 2.7% year over year.
However, it was almost flat when compared to the end of the second quarter, a positive development upon which we intend to build suffice to say the wall agent count is generally soft in the fourth quarter, we're seeing actual gains in the past few weeks.
We are engaging with our brokers in an unprecedented banner and reinvigorating our U.S. agent count growth is our top priority.
Top to bottom within our organization, we are focused on continuing to innovate and to bolster growth across our network.
Two of our more notable initiatives that occurred during the third quarter involve leadership and technology on the leadership front in an effort to connect even more deeply with our network. We hired an industry leader, Nick Bailey to the newly created chief customer officer role.
Next one job is to help lead the remarks network in all aspects of gross market share agent count brand presence and more to a large degree this entails helping brokers agents and teams maximize remarks tools training technology and culture to make their careers more rewarding and their lives easier.
One of the brightest minds, a real estate Nick brings with him a 23 years of industry experience, including a prior 12 year stretch at remarks. During these two decade plus career mic has been a broker a franchise or a real estate tech executive at eventually the head of a major worldwide real estate brand his strong industry routes.
Impressive credentials and successful track record have garnered the respective its peers and his arrival has been universally applauded by our network.
Nick is responsible for creating clear actionable goals and targets for everyone within the network and as of October one he has already achieved that objective.
This alignment will help ensure remarks is the number one brand in all aspects of the industry I am thrilled Nick has rejoined her team and come back home to re Max.
Turning to slide nine regarding our technology. The recent introduction of the Booz platform truly represents a landmark moment in our company's history less than two years after acquiring the award winning real estate technology firm, we launched a boost platform in early August .
By combining the world's best network with powerful technology. The boost platform can help make the most productive agents in real estate also the most efficient.
Developed by Booz engineers in collaboration with thousands of remarks affiliates. The boost platform should achieve two objectives enhancing agent productivity and delivering a better customer experience by streamlining the work of agents and driving their engagement with customers for lead generation to post close nurturing and beyond we believe the plan.
Form is built to accomplish both objectives.
Customer relationship management or CRM is that the core of the Bush platform deeply integrating additional features including digital branding lead capture client engagement and deal management.
The boost platform addresses the need for a holistic real estate technology solution as a better option to silos, one off third party solutions.
With the CRM at the core of this ecosystem. The boost platform also integrates transaction management partners that are widely adopted across the industry.
By offering deep integrations with key partners remarks ensures that agents can continue using certain products, they know and trust, while allowing data to flow back into the boost platform to keep all their information centralized and easy to access.
This is a milestone moment for our brand Wi Max agents consistently outsell other agents by more than two to one large brokerages and the boost platform should strengthen their competitive advantage.
When home buyers and sellers decide to work with the remarks agent. They can be confident that their aging comes equipped with the tools training and technology to deliver a professional efficient at smoothed home buying or selling experience.
Fundamental element of the boost platform is based on feedback driving future development. This is just the beginning now that the platform has launched it should provide more of a recruiting edge due to its agent productivity and consumer experience benefits.
Next we'll continue to invest in order to optimize and enhance the boost platform overtime.
We have an unwavering focus on winning.
The goal is to remain the pack leader keeping people engaged so that a client today remains a client tomorrow.
Core CRM has been rolled out to all of our company owned regions with the introduction of agent team and office web sites. Currently underway. The next phase of this rollout includes a new remarks, dotcom and consumer facing mobile experience that will enable remarks affiliates to deliver a more data driven efficient and improved overall home buying and selling experience.
This is Ben an all consuming effort for many in our company, particularly those in our technology and training functions as well as the thousands of brokers and agents, who selflessly contributed their time and invaluable feedback. We thank everyone who has participated to date and we are confident the investment of time effort and resources will pay off.
With that I'd like to turn the call over to carry.
Thank you Adam Good morning, everyone. Overall, we're pleased with our third quarter results a better than expected housing market contributed to stronger than anticipated broker fee revenue our solid top line results combined with lower than planned tech training expenses and other costs driven in part by favorable timing helped to deliver strong.
Profit performance moving to slide 10 revenue increased to 71.5 million during the third quarter due to the acquisition of the marketing funds on January 1st the expansion of motto healthy International remarks agent growth and an improving housing market helped offset lower revenue caused by reduced U.S. aging.
Account.
Excluding the marketing funds organic growth dip, 2.3% and adverse foreign currency movements had a negligible impact continued attrition of Boozers legacy customer base adversely affected revenue by about 400000 in the third quarter, excluding that impact organic growth would have declined just wanted.
The half percent.
Recall that at the time of purchase Boozers existing client base generated annual revenue of approximately 7 million.
We strategically elected not to grow this customer base and chose to focus on building product for Remoxy, while continuing to service those existing clients.
We expect to do just legacy client base to decrease over time because of industry consolidation and other reasons. However, it has declined more rapidly than anticipated more on that in a moment.
Looking at slide 11, selling operating and administrative expenses were 24.5 million in the third quarter of 2019, a decrease of 3 million or 10.9% compared to the third quarter of 2018.
Represented 45.7% of revenue ex the marketing funds compared to 50.1% in the prior year period.
As Tony expenses decreased primarily due to lower equity based compensation expense and other personnel expenses and professional fees.
Partially offset by increases in training expenses for the blues platform and property taxes as well as a less favorable fair value adjustment of our motto contingent consideration liability.
Despite overall professional fees decreasing legal expenses were up about 500, K year over year due to industry related litigation initiated earlier this year.
More on that in a moment.
Moving to slide 12, our business continues to generate healthy amounts of cash with over 65% of adjusted EBITDA converting to free cash flow on a trailing 12 month basis.
Generous cashflow means more capital available for those initiatives, which we expect will deliver the best returns.
Our capital allocation priorities remain unchanged, we plan to continue to allocate capital to acquiring independent regions reinvesting to drive future organic growth.
Exploring other strategic acquisitions and partnerships and returning capital to shareholders.
We recently filed a shelf registration statement with the FCC to provide increased financial flexibility and efficient access to capital to pursue and finance future business opportunities as they arise.
We have a healthy competition for capital within our company as leaders of both brands have compelling ideas as to how to energize feature growth both through organic and M&A opportunities.
Further as Adam mentioned earlier, we feel this is just the beginning for our business platform. We intend to extend the features that overtime through both organic efforts and strategic bolt on acquisitions.
Turning to slide 13, before I get into our outlook, you'll notice that we modified our full year 2019 guidance slightly by bringing up the bottom end of the ranges by 1 million.
Otherwise it remains largely unchanged despite our Q3 profit outperformance.
There are few reasons for this.
First as we have stated many times before we are focused on the long term and we will continue to invest for growth the better than expected Q3 profit performance provided additional capacity for opportunistic investment this year, helping find valuable recruiting and retention and other planned initiatives. We are currently executing on.
Second as mentioned earlier, we are experiencing faster than anticipated attrition of Bush's legacy customer base, which will impact Q4, 2019 as well as 2020 results the quicker pace of the attrition is happening for a variety of factors, including industry consolidation.
Consequently, we expect both 2020 revenue and adjusted EBITDA will be approximately $3 million lower than they will be this year because of this dynamic.
We anticipate exiting 2020 with about 2 million in annual revenue from Bush's existing customers.
Third legal expenses are increasing both in 2019 and going into 2020 due to industry related litigation initiated this year. We expect you incur an incremental 1.5 million in legal costs and 2020, we plan to provide our full year 2020 guidance as part of our Q4 Ernie.
This call in late February .
Now onto our 2019 outlook, the company's fourth quarter and full year 2019 outlook assumes no further currency movements acquisitions or divestitures for the fourth quarter of 2019, we expect agent count to increase 3% to 4% over fourth quarter 2000.
On an 18 revenue in a range of 66.5 million to 69.5 million, including revenue from the marketing funds in the range of 17.5 million to 18.5 million and adjusted EBITDA in a range of 21 million to 23 million.
For the full year 2019, we are adjusting our guidance and expect agent count increase 3% to 4% over full year 2018 changed from 2% to 4% revenue in a range of 280.5 million to 283.5 million, including revenue.
On the marketing funds in the range of 72 million to 74 million changed from 279.5 million to 283.5 million.
And adjusted EBITDA in a range of 102 million to 104 million changed from a range of 101 million to 104 million now I'll turn it back to Adam.
Thanks, Kerry moving to slide 14 with continued strength in motto mortgage stabilizing remarks agent count in the U.S. and the ongoing rollout of our landmark boost technology platform, we're starting to see positive traction because of the many strategic moves we have made over the past two years sentiment. This high within the networks of both of.
Our brands and we're looking to finish 2019 with good momentum going into 2020 with that operator, let's open it up for questions.
If you'd like to ask a question at this time. Please press Star then the number one on your telephone keypad, if you'd like to withdraw your question press the pound key any interest of time. Please limit yourself to one question and one follow up question. Your first question comes from Jason to live with Piper Jaffray.
Thanks for taking the question.
Good to see some stabilizing U.S. agent counts.
Can you just characterize the competitive environment for agents right now and regionally are there any call outs of areas that are stronger or weaker.
Hey, good morning, Jason It's Adam.
Yeah, we're really excited about talking about this because of the initiatives that we've put in place and with a spring on mix Bailey as the chief customer officer, and I'll, let him jump in on the the answer here in a moment, but.
You know ultimately what we.
What we see in what we're excited about is weve.
Implemented several new initiatives recently for brokerage gross.
And we're aggressively pursuing that really we have two key pillars that we're pursuing one is.
Obviously agent growth throughout the network.
You know obviously, particularly in the company on regions that we operate from headquarters here as well is continuing to implement.
The exciting new Buege platform, that's that's been.
Picked up so well and such excitement buyer.
Our offices throughout the region. So I'll, let me kind of jumped in and talk a little bit more about agent growth.
Thanks, Hi, Jason.
I'll tell you what is the new Guy here for two months I couldn't be more thrilled coming into this role talking about growth for a couple of reasons one.
People ask me all the time what were you surprised about the most.
The investment the organization has made to set our value proposition to have something good to grow with and so immediately as an example, we launched a growth campaign.
In October for Us in Canada, and it's early but it is safe to say that October showed.
Some of the best gains of any month, yet this far and especially looking at it being in fourth quarter.
It's too early to.
Forecast on it but at the same time, we know that.
Recruiting is a contact sport and when we take the value proposition that this organization has invested in in the last years and we partner directly with our franchise owners to help drive growth in their organizations.
There are hungry for it they're excited about it they love it and we're seeing results of it and it will be the foundation of what we not only do in this quarter, but build on it moving into 2020 as far as your question about regions in the areas. It is also more competitive out there than it's ever been but that's not surprising. We've had is approximately a 12 year run up in us.
Sellers market and when that happens you see a lot of new entrants into the industry history has proven that and there are markets as Phoenix as an example, the competitive.
Around zero test market for the U.S. and we remain very very strong their offices continue to grow and.
We see that not only their butts across the country.
That's great to hear.
Thanks for all that and then the shelf registration I'm, just looking for a little bit more color.
There was mention of strategic bolt on acquisitions.
Is this is looking at other brokerages or is this just other technology that you're looking to acquire.
Independent regions, just trying to better understand what's your thinking with the shelf.
Hey, good morning, Jason Im curious, though you know with regards to the shelf, we really looked at this as a blocking and tackling exercise with bringing on neck and really having leaders of both brands cemented in place. We wanted to make sure that the company had all of that necessary financial flexibility to allocate capital to those initiative.
That would really derive the most value and so as we look at things from a technology perspective, as Adam mentioned, we do believe that booze is truly the foundation, we think that it will be.
Okay, great product in the best product for our unique culture of highly productive agents. However, you know there maybe opportunities from a bolt on technology perspective that we could you know look to enhance that platform and potentially do you pay as you go type of model.
Create.
Better.
Service offering in a differentiated differentiated value proposition that would really satisfy.
What are some of our strategic goals are around increasing our already very strong per agent productivity and helping our agents deliver a better consumer experience.
Sounds good thank you very much.
Next question comes from Brad Berning with Craig Hallum.
Hey, good morning, and congrats team on the longer term investments are.
Starting to lead to the agent results, it's great to hear.
Wanted to follow up on the margin side of equation, you've obviously had investments and Moto and you've had a investments in buege.
You talked about a couple of the different you know kind of one off items for thier had a little bit, but maybe you could talk about your trajectory that you're starting to see from those investments and how do you think about the opportunity for margin expansion versus the opportunity to accelerate the other investments to drive future growth Heidi.
How do you think about those tradeoffs going forward on the margin outlook.
Hey, good morning, Brad It's Adam.
Yes, it it's exciting what were what we're seeing because you know long long term investments, obviously take a long time start to feel the.
On and you.
In the inpatient marketplace that a lot of times we plan.
You know you you just got to sit there and keep driving away in order to make these things happen and we've been really excited around here, we have a great team working on this with remarks motto and buege to to make sure that we maintained that that consistency.
Ultimately what we're we're looking for is providing clarity of value to our.
You know to our customer base and I think that is really shining through right now with these investments I'll, let Carrie address the margins here.
But ultimately.
I'm happy with the direction, we're seeing these things go.
You know, obviously, bringing Nick onboard has given us a second brand leader he's the remakes brand. We are ward is the motto.
Have leader and that allows us to be very focused on driving.
Towards growth in both of those verticals. So Kerry Yeah, just building on what Adam was talking about in terms of growth of both verticals you know in September and October we actually had some of the best month and strongest month for motto franchise sales and then as Nick was mentioning between you know his arrival as well as the deployment.
Deployment of the bluish platform we are seeing.
And some better performance in terms of agent count recruiting and retention. However, it is very early days. Obviously those are the two biggest drivers of the topline.
And there's a lot of golf to be played with respect to the remainder of 2019 and as we head into 2020, well definitely have more information as we get into into the end of February for it for next year, but the strength of the business model is foundational to one of our competitive advantages and there is inherent leverage.
In the model. So if we can really get acceleration in those top line drivers you know the long term possibility for margin expansion is absolutely. There. That's why we will continue to invest appropriately to help continue to differentiate the value proposition and we do have some of those headwinds that we talked about in the scripted remarks.
But overall, it's really good to see some of them momentum that we've got going right now.
Appreciate that and then maybe Nick one other a broader bigger picture follow up.
Maybe you could spend just one one or two minutes your real quickly and give you are bigger picture thesis of why you think re backs as a winner in the real changes that are going on fundamentally changing this industry.
Yeah, and obviously you came back here so help US understand you know what you see is is the real opportunity set within this changing landscape.
Brad I Love the question first and foremost I was.
Here for a while and I was on the outside and I'd tell audiences. This do you know how hard it is to compete against remarks, when you're not with them and I mean that it's true the value associated with the professionalism and the per person productivity.
Her remarks agent is unmatched.
Coming back and walking into this we talked about the investment that the organization is made I truly believe that the value proposition of this organization is the strongest that I have ever seen it since I've been in this industry and 23 years.
And.
So when I look at the long term piece of it and we're giving you examples of growth.
What we launched in October is just one piece of what we're thinking about on a much bigger scale for next year on direct growth initiatives, but we also have to look at where and have something like that in three years.
And now we can take what is such a very strong value proposition and partner with our owners in a much more direct way.
And that's what's going to lead to growth because our agent count growth comes through our owners and.
We're identifying very quickly the obstacles that they have not only for competitors, but the activities associated with what they need to do to grow their businesses and we are then going to fill the gaps and help and be right there with them as business partners, That's just focus and it's.
It's not rocket science in a way, but when you have the value proposition like this to build on its incredible we carry talks about some of the things that I see that are so important yeah. We can talk about per person productivity, but there are some fundamental things in the industry that drive agent success. Most of the successful agents have their business based on repeats and referrals.
We see it over and over again and that is the foundation of a re Max agent at the same time, we know that there are areas in which.
Agents in general Miss out on repeat and referral business and so when we talk about booz. There are pieces that we're looking at get them micro micro level to say how do we fill the gaps of what is a systemic issue for agents to move the number and close more deals and incur.
Yes that per person productivity agent.
Per person productivity number so lot of things in that answer, but I think what we have now value proposition direct growth helped with our business partners and then we are dissecting the challenges the getting the way for brokers and for agents and filling those in and I. Just believe that's a winning formula for us moving into next year.
Exciting stuff. Thank you.
Next question comes from Tony Palone with JP Morgan.
Thank you.
Just a question on the legal and stepping up the costs there it sounds like going into next year is there more to that then.
I guess, the more lawsuit and just.
Can you give us any color as to how that's all progressing or how you're looking at the stuff.
Hey, Good morning, Tony This is Gary you know it is related to industry related litigation, we don't comment on specific litigation matters that are outstanding you know what I can tell you building on what Nick was saying is the strength of the remarks network is in the quality of our agents and.
The global footprint and the overall brand recognition that the network has and given the strength. We do you believe that the company has positioned regardless of any potential outside changes that may have to it to whether that's arms.
Okay.
And then just other detail question I don't know can you provide us how many motto mortgage franchise were Russia sold in Threeq, you or how many had been sold today, it's just get a sense as to what the.
Hi point of openings looks like.
Sure. This is a word pipeline is very very robust I think some of the changes that we've made.
We're still on course for about 50 50 modest sales just like we did last year right now.
September October of into our best months, this year and I think thats tied to some initiatives that we rolled out that I think we'll continue to further growth. So we rolled out a referral program to our existing broker owners to try and get them involved in the excitement at a growth of the network also just set or.
Meet motto, which is our discovery day, where we had 25 prospects out the interesting thing about that was that only.
10% of them are remarks, the rest 90% were outside the the remarks families. So that was very exciting to see and I think that could lead to an inflection point of having four more independent real estate companies independent teams investors and even fellows.
Okay.
Closely at the product.
So we're continuing to look at same type of forecast as last year, I know tens of mottos, but starting to see some very much some great excitement around it.
Okay.
Can you give a sense like how many were sold at the end of.
Yeah.
20, I I think yes, 20 930 right around there.
In the quarter itself.
Oh, no no no sorry year to date at that time.
Got it okay. Thank you.
Next question comes from Vikram Malhotra with Morgan Stanley .
Thanks for taking the question.
Just first on the international side.
I'd I'd I'd be interested to hear kind of what Nick has the as well you got enough critical mass in some markets there and I'm wondering how do you convert more of this to higher revenue and maybe change the revenue.
On a instead of on a per office spaces to more like the U.S. and Canada were driven by the agent productivity and number of region.
Hey, good morning, Vikram its Adam.
I just got back from the European Convention, where I spoke with about 35 different countries and understood a little closer some of their different business models, and obviously 35 countries essentially we have different 35 different ways of doing real estate business or even more than that because each country also has its.
You know, it's sub areas just kind of like in the U.S., where you know real estate rule laws are traditions are different so ultimately what we're continuing to strive for is.
You know increasing our count of productive agents in those different countries and helping them build out the the real estate infrastructure, we're seeing a very effective and I don't know that.
We view that approach critical mass in most of those areas because you look at Portugal, which is one of the smaller countries evolve yet it is.
Massively one of our most populated with relax agents and continues to be.
Strong growth catalyst in Europe for us.
Well, we discussed on the.
The script.
Call before this that.
Some of the other countries that we're seeing also are showing strong growth and continue to do so and those you look at and you might take out we've got critical mass in like Israel, or you know, India or somebody's other places, but actually we continue to grow so really it's about expanding our footprint evangelize into brand because we are in a.
Global marketplace, now and we see a lot of flow of.
Purchase going across borders, which is a huge advantage of our brand with our expansive global footprint and close connectivity of our network in their ability to communicate so seamlessly with each other so.
As far as you know ancillary monetization.
We're exploring different opportunities for that you know, particularly how can you how can you monetize the technology or the data or things of that nature, but ultimately that's you know continued to be long term projection as we continue to build out the footprint and look at those opportunities.
Yes, Adam I'll jump in on that all at a couple of things in my past I have some experience with a global real estate network.
And as you know you're seeing double digit growth.
Coming from our global side and yet when you start breaking it down country by country. There are some that are completely untapped.
We have a long runway to be successful with.
And so the.
Idea that.
We we are limited in the global is not even on the table. We are just identifying very specifically what countries have the most demand.
And how do we provide our team more both is growing those countries specifically.
The next year.
So that's that's reasonable so just on the U.S.
You mentioned sort of the recent trends been more stabilization Canada.
You asked continues to see somewhat.
The negative growth and I'm wondering if you can sort of maybe.
Bifurcate or give us a bit more color on and as you look at the the attrition you've seen kind of what's driving that how much how much of that it the competition I'm going to this people not succeeding.
And then how do you how do you plan to kind of.
Is there a plan to kind of have different approaches from maybe different groups of agents in terms of hiring.
It's a it's kind of then a holistic approach for us to re Invigorates agent count when you look at what causes a business to grow or start to stall out in growth I think the leading indicator is sentiment of the people involved and the clarity of their value proposition.
And we've been focusing very heavily as as has Nick in clarify our value proposition completely defining.
How our agents can continue to grow their businesses and we see.
The the Sky just opening up with opportunity for our agents with when it comes to their individual growth and.
You know when they start seeing that understanding it putting the tools that that provide some of that assistance into place, particularly like the Bruce platform as well as are our market dominance and expertise you start to see change moving into positive direction, driven by that sentiment and attitude and daily activities. Because this is.
As an entrepreneurial contact sport, we know that and that's what we have to like the fire honor and that's what we've been doing just an amazing job with with our executive team all the way down to the.
The partners that we have in our amazing brokerages, So I'll turn the rest over to Nick kind to add a little bit more color to that but.
No I think a lot of it really starts with what's in their heart and getting up in the morning and pursuing the business and that's what we're seeing some reinvigoration him as well.
Yes, two things one thing I feel dimension, a little bit earlier, when we talked about this this early growth that we're seeing as a result of these initiatives, it's coming from us our U.S. company operated regions.
And so that's good sign because we're so directly involved in being able to monitor exactly to your question, where it's coming from and why the second thing that we're looking at though is.
Pouring fuel on utilizing data to understand geographically I more micro level of areas of opportunity.
So this is something that's been worked on that we have been focusing on.
Not only franchise sales, but agent count opportunity.
And using the data to help us drive specific.
Areas of opportunity, it's going to be a big part of our playbook going into next year.
Great that's sounds good. Thank you so much.
Next question comes from Ryan Mckenna funny with dominant associates.
Hi, Thanks, so much and good morning, and great job.
So just to clarify on on the U.S. agent count in kind of setting expectations around that for the upcoming fourth quarter. So.
The recent gains progression.
Growth initiatives, all sound sounds great.
Adam you alluded to you know the fourth quarter typically is softer just from a seasonality perspective in terms of agent count and.
It does decline in Fourq versus Threeq, you, so just as far as kind of setting expectations for the U.S. for the fourth quarter.
When we look at Threeq you in Twoq.
2.8 down 2.7 can you help us just think about the fourth quarter. I mean are we are we to expected that year over year decline should be should be lessening or could it still be in a similar ranges last couple of quarters, and then potentially the growth come through more in 2020 any any clarification there on the fourth quarter would be very helpful. Thank you.
Hey, Ryan good morning, it carry so yeah. We do you think you know the the constant be easier here as we get into the into the fourth quarter. Obviously from an overall macro perspective, you know we're on a little bit more solid footing now than we were at this time, a year ago and from an agent count perspective, and an agent you asked agent count performance perspective.
In Q4 18, it was just pretty tough.
Nick Anatomy of mentioned, we've seen some positive traction here in October contrast that to October of last year, where we were down hundreds of agents and so I think it should be some easier comps very early days so.
And so you know kind of looking or maybe align the historical trends as you know flight slight degradation in agent count, but not as bad as what we saw in Q4 of 18.
Got it that's very helpful carry and then one more maybe carrier or ward apologies if I Miss this but on the motto.
Side of things can can you frame what the contribution to revenue has been a year to date in 2019, and then secondarily with the.
I think the recent press release at 150 have been sold and versus the hundred open. So what's what's kind of the timeline for the actual kind of revenue contribution to flow in.
From the from the French from them out of franchise.
More recently sold as that is that still as a function of.
Kind of discounted fees initially and then get onboard a bit later, just any update there would be helpful. Thank you.
Yeah. So the run rate from the for those offices that are being sold were still looking at about a 12 month period of ramp up before they're paying the full complement of of monthly fees and kind of still looking at you know kind of in that mid single digits of revenue contributions on an annualized basis.
Got it thank you.
Next question comes from John Campbell with Stephens.
Hey, guys good morning.
Good.
Morning.
Congrats on a launch a boom I know that's exciting for you guys were.
And to see how the impact kind of plays out here, but I don't I don't know if the launch helped drive some that better agent kind of growth translate in the quarter. It sounds like that could have played and maybe a minor role, but maybe first if you could if you could comment on that and then staying on buege.
You guys talk to it you know kind of being geared towards agent productivity and better customer experience, but over the next few quarters. How do you guys define success around that like what are your case, you kind of established around that.
John It's Adam.
First of all obviously, the you know the best gauge of success initially with the technology launch is adoption rate. So we are.
The the boost platform is centered around the CRM and we look at a couple of things one is how many people signed up for how many people log into it and how many people were actually utilizing a putting their contacts in there and what's that volume of contact placement that we're seeing as well as you know the frequency log and things of that nature, but ultimately.
The the cool part about this having been through these different technology launches in our space before that we've done.
A few years ago. This one we find to be.
Incredibly powerful we're very excited about it because the sentiment that we're seeing in the to pick up radio adoption.
The conversation in the sentiment to going on about this.
I mean, we have a lot of raving fans now we've trained hundreds of trainers brokers agents.
Here at headquarters that.
That impact tens of thousands of agents and we're seeing a very good adoption rate.
In fact, I you know above what we expected really.
So.
That in of itself has a deep psychological impact on somebody in you know an entrepreneurial environment and sales frankly, when you can really attach yourself to a lever to grow your business. So I'm really this is this isn't efficiency.
Play for the the agents and brokers in order for them to.
You know really leverage or business to spend more time.
With their customers and more effective time with their customers through the communication through transparency through clarity and really has a.
A great deal of impact on our relationship with them and the retention that.
You know that provides us in our network. So obviously retention leads to a lever in agent growth because we're losing less we're keeping more and thus we can.
Gain more effectively so overall.
This whole thing has been.
A great success for us.
We're very excited about it the.
The interesting part as you see when something somebody has a question about something and they hop on line and ask a question a lot of times, our agents and brokers will answer the question before we answer that question. So it's kind of the we have a great deal of advocacy out there for it as well and I just haven't seen this in the past.
Real estate technology launch, so I'll pass it to Nick and let him kind of fill in any gaps that he may see as far as you know future leverage of you know this platform, but I see this has been a continued win through the future degree.
Customer experience, that's a focus of it.
You hear all the time end to end platforms are integrated we're focusing on the customer experience because quite honestly when you look at surveys in the industry and buyers and sellers after they buy or sell a house. Some view on the call may have personally dealt with this and you say would you like to go through it again.
And a lot of consumer say now and this is where we can shake technology and leverage it for the consumers, which helps empower the agent the better the DEA agents sets the more productivity the more agents that the offices have and then the second piece, we talked about productivity. We're we're early stages in launch getting people on it is step one.
Then getting them involved with their contacts and some of the.
Pieces that we have planned.
Create a world in which we have seen.
Period of seven years online leads go from approximately four and a half million to last year being 89 million. The space of leads is overwhelming agents and we need this product than to take that vary.
Full funnel and spit out and helped drive agents, who who they should be focusing on to buy and sell.
And so we're taking the landscape of what the industry's doing with leads taking getting as many people want as possible. But then also the next step is more to come on how we use it.
To drive business to the agents that they might be missing because there's so many lease flying around in their world.
Yeah. It makes sense. Thanks for all the color and then Adam. This is this a bit about more high level question, maybe somewhat loaded question, but I just want to get your view on this I mean, clearly there's a lot of industry chatter around pocket listings and some attempts to maybe snuff them out.
Where do you where do you where do you stand what does remain Stan pocket listings going forward.
It's a great question and you look at the chatter in the industry and it's interesting because you have different MLS as with different rules, we have different companies trying different things ultimately, where we're focused on transparency in our space, we think that the consumer needs to know.
You know, what's going on with their product in a good high quality agent like remarks agent.
You know transparent it upfront with OCA here the options for us to maximize the value of your investment here when it comes to the listing or when it comes to a buyer you know explain where the lifting came from and why this is a good opportunity for us to go take a look at it. So yeah I think the MLS is are very fragmented.
Fundamentally that's the foundation for a lot of this issue is we need some consistency and how the consumer see this because you can hop on line as a consumer and read an article on go Oh I see is pocket listings going on as other MLS, but I can't do this over here why not and that's confusing to the consumer.
It allows this unknown to occur within this large financial transaction for the consumer and we're not for that were for the consumer to have.
Full knowledge of what's occurring there and.
You know, it's not a it's not a binary response from us it's not a yes or no on these it say hey, let's get our act together in the industry lets become consistent with our rules and regulations and act in the best interest to the consumer with transparency. So that's that's been our stated position on it is consumers transparency for.
First.
Through consistency in the the rules and regulations in the MLS.
Okay.
Thanks, guys.
Next question comes from Bose, George with KBW.
Hey, guys as Tommy on for Doug.
Kerry I want to make sure I heard you correctly. The 2020 comps that you gave those figures I was strictly relating to the news legacy client runoff is that right.
That's correct and 3 million and then there's an incremental legal costs as well about an incremental one and Uh huh.
Okay got it.
And then you guys mentioned the possibility of bolt on acquisitions related to do.
Are those intended to produce potentially more premium offerings that could potentially be monetized with agents that are willing to pay for those.
Hey, Tom Yes, the answer short answer is yes.
He built the platform, we are creating an app store around that that has an offering of you know some additional moderate monetized product and that's the direction at that that holdings going.
Do you have any examples and mine.
Not at this time you know we're always looking in the marketplace, but we don't have anything specific to point out at this time.
Okay, and then lastly, we've seen some competitors announcing in a various partnerships in the industry.
That's something that rematches exploring kind of similar types of partnerships.
Yes, we're always looking for different partnerships that are beneficial to to our partner brokers the agents in the consumer.
You know obviously, we haven't rolled any out in recent times, but we're always you know exploring we have a lot of great friends in the industry in these different businesses and we continued our conversation with them.
Okay. Thanks, guys.
Once again, if you like ask a question. Please press star one and we have a question from Stephen Sheldon with William Blair.
Hey, good morning.
Can you provide a high level update on the timing of the booz rollout with.
One additional capabilities, including the consumer facing facing portions of the platform and then to kind of geographic available bail ability.
Hey, Steven we so throughout the fall we've been launching the CRM to the company on regions.
Which we wanted to get everybody involved with.
Utilizing platform logging and working with their customer base in there and really kind of loading up there their contacts in the CRM.
Beginning to manage any deals that haven't process and marketing that they have within that platform. So we're already deep into that in the company on regions, which is roughly two thirds of the U.S.
We just announced in Canada. The other day that we're going to be go into beta in western Canada for them to begin.
Testing the product that you know the U.S. is using and we continue to rollout consumer facing a portions of this through the next we'll call. It two to three months. If you will that you know really integrate deeper the consumer into that that process utilizing this.
Specific set of technology.
Okay. That's helpful and then sounds like you're focusing heavily on training et cetera to drive adoption and utilization of Boucher with which makes a lot of sense how much more do you need to do in that area and would you expect the training expenses related to this to to ramp up as we look out over the next year. So.
All hands on deck on training, yes, and we're looking at various options of.
In person using staff that we currently have and we're also looking at how we can deliver at virtually we know that in likely in the first half of next year, we will invest in both of those areas in person and digital and get.
The vast majority of the initial training.
To drive the initial the option done in the first half and then as we do that we'll be looking through efficiencies of training via than LMS system. The virtually there are number of ways that we'll be able to deliver ongoing training.
And personalize training.
As features continued development rollout.
Great. Thank you.
At this time I'll turn the call over to the presenters.
Thanks, Sharon Thanks to everyone for joining us on the call today that concludes the coal have agree weekend.
This concludes today's conference call. Thank you for participating you may now disconnect.