Q2 2020 Re/Max Holdings Inc Earnings Call
Ladies and gentlemen, this is the operator todays conference is scheduled to begin momentarily until that time your lines will be again, please don't need musical thanks for your patience.
[music].
Good morning, and welcome to the remarks Holdings second quarter 2020 earnings Conference call and webcast. My name is James and I'll be facilitating the audio portion of today's call.
At this time I'd like to turn the call over to Andy show.
Vice President of Investor Relations.
Mr Shore.
Right.
Thank you operator, good morning, everyone and welcome to Remapped Holdings second quarter 2020 earnings Conference call. Please.
Please visit the Investor Relations page of remix Dot Com for all earnings related materials and to access the live webcast a replay of the cold today.
If 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 to our prepared remarks and answers to your questions on today's call may contain forward looking statements.
Looking statements include those related to agent count franchise sales financial measures and outlook brand expansion competition technology housing and mortgage market conditions and include statements about recovery of those markets capital allocation dividends strategic and operational plans.
Business models.
Forward looking statements represent managements current estimates.
We met holdings assumes no obligation to update any forward looking statements in the future.
Looking statements drugs 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 the second quarter 2020 financial results press release.
And other up do you see filings.
We will refer to certain non-GAAP measures on todays call.
Do you 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 or coal today, or Adam talked to our Chief Executive Officer, Karri Callahan, Our Chief Financial Officer Ward Morrison President of motto mortgage and Nick Bailey remix Chief customer officer with that I'd like to turn the call over to remix holdings CEO, Adam Toronto's Adam.
Thank you Randy and thanks, everyone for joining our call today.
Looking at slide three the Corona virus pandemic up 2020 has been the business stress test that no one could have imagined and well. This year has certainly been challenging. There's also reconfirmed the many strengths of our company brand and networks. The brought the resiliency of our model and clear focus and reinforced our confidence in our systems.
Networks are people overall I'm very pleased with the results to date I'd like to thank our entire team for their hard work dedication and perseverance bid these extreme conditions.
I went to the second quarter included revenue of 52.2 million adjusted EBITDA of 18.9 million adjusted EPS of 38 cents.
Total remarks agent count continued to grow up almost 4% and finishing at almost 132000 agents.
Remarks affiliates increasingly adopted remarks technology tools and took advantage of our trainee during the locked down and perhaps most notably bottled franchise sales accelerated and we have a real chance to have our best year of motto franchise sales ever in 2020.
We view our performance thus far in 2020 as an affirmation of our business model, our multi your investments in technology, our financial discipline and our overall strategy.
Ward, Nick Kerry will elaborate more on that in a moment.
In the field, a remodel professionals have adapted to the environment exceptionally well leveraging technology and adhering to social discussing guidelines expertly guy consumers in a safe and largely virtual way.
Networks are finding opportunities to grow and build their businesses in this demanding time in fact monocytes sales increased during the second quarter and posted its best second quarter of franchise sales yet.
On the re backside global agent Count continue to rise well agent count in the U.S. in Canada stabilized the June or July. We also saw continued uptake of our booth platform as many brokers agents and teams added contacts built the web sites and position themselves to maximize the technology advantages they have at their disposal during.
Her stay at home time.
Our franchisees in both brands continue to demonstrate their local leadership by bringing productive agents and loan originators into our networks and then helping those individuals get even better or what they do their recruiting efforts supported by our programs and services are critical to our ability to succeed in every kind of environment. We're grateful.
For the memberships of both networks for their contributions and we appreciate their trust in our strategy and vision.
Turning to slide for the second quarter was once the record books for U.S. housing as the market whipsawed in an unprecedented manner.
We discussed at our last earnings call in May we saw a promising signs in the leading indicators, we watch closely like showings and new listings. We believe back then that consumer sentiment was leaning toward transacting and we're optimistic housing with snap back our views have since been validated.
Despite a record low and must supplies inventory June home sales posted a month to month gain of 37%. According to the rematch National housing report based on June Nevertheless, data up 53 Metro surveyed this gain was in Stark contrast to the significant reduction seen in April and May when many states had stay at home.
Orders in place.
With historically low interest rates favorable demographics and increased mobility tied to working remotely buyer demand remains high in most areas of the country.
My name, leading indicators, such as showings pending sales and mortgage applications continued to be positive.
A potential headwind. However is available housing supply inventory dropped to 27.9% year over year in June pushing that much supply of inventory to a new report low the number of homes for sale at June 30 is that low levels not consistently seen since 2018.
In addition to monitoring inventory levels, we're also carefully watching employment trends as well as the effects of the ongoing pandemic.
That said the best agents tend to stand out in times of is shifting market and many of the best agents Hagner licenses at remarks in fact for the sixth consecutive year remarks placed more aegis mid teens than any other brand in the Americas Best real estate professionals rankings and this your survey one in five.
For 20% of America's Best our remarks agents and teams we're hearing from many of them in our network that they're having their best year ever during this unforgettable 2020.
We believe we're well positioned to help our affiliates build on the existing positive housenbold minutes, given the financial and structural strength of our business model, which has enabled us to continue expanding our value proposition.
Looking ahead, we're focused on driving increased adoption of our technology across both brands.
I think our recruiting and retention efforts in culture and strategically investing for future growth.
With that I'll turn it over to ward.
Thanks, Adam moving to slide five mottos, three big areas of focus for 2020, our franchise sales growth technology and enhancing broker profitability, we made meaningful strides on all these fronts during the second quarter. Despite the pandemic.
The headlines for the quarter was accelerating franchise sales as Adam mentioned earlier, we had our best stretch of annual franchise sales ever exceeding 60 sales during the trailing 12 month period ended June thirtyth.
This momentum is particularly notable because we transition or franchise sales efforts through a largely virtual experienced during the second quarter franchise sales have continued to be strong for the month of July and we recently sold our 200 franchise a huge accomplishment a major milestone for any franchise brand regardless of industry, but especially when you consider it took.
It is less than four years to achieve.
We anticipated last fall that inflection point in franchise sales was nearing and the number. Since then suggest we were correct. We believe a combination of several factors is helping to drive increased sales.
<unk> increased brand awareness and I'm going to advertising has produced growing lead generation, which has enhanced our candidate pipeline.
Next with potential franchisees and locked down during much of the second quarter. The counter cyclical nature of our business model was on full display for our various customer types existing real estate brokerage owners and teams reflected on the strategic and financial importance of ancillary business opportunities and how it could help them diversify their revenue stream.
Investors in existing mortgage professional saw the strength of the <unk> mortgage market and viewed motto is the right opportunity to support them delving into the financial services industry.
Furthermore, as interest rates reached historic lows current model owners are enjoying a meaningful increase in refinance business and we're willing to share their experiences with others.
Yes, no toward the end of last year, we expanded our marketing efforts and have been more deliberate about leveraging our existing franchise base for referrals.
Both initiatives continue to yield positive results. Our market presence also continues increase the word of mouth about many of our successful franchisees, which is contributing to our momentum.
Motto is still the first and only national mortgage brokers franchise or in the U.S. and we believe our consultative support model is unlike anything in the industry further differentiating us from other mortgage organizations, our technology and our overall corporate strategy or line concerning unit profitability ran adoption franchise sales.
Support and the ability to adapt quickly during unexpected events like cobot 19.
With more than 125 open offices in over 30 States mottos presence is growing at a nice pace in terms of the total available market opportunity. We believe having over 1000 open motto franchises and perhaps many more than that is achievable overtime current interest and only d'amato franchise remains strong and the status of our pipeline.
And is encouraging we're very excited about how well not who is currently expanding and we plan to continue to invest in its future growth and success.
With that I'd like to turn the call over dinner.
Zwart good morning, everyone looking at slide six the impacted the pandemic on residential real estate during past few months was historic as the market stalled in late March into early April and then came Roaring back in June and July when buyers and sellers appeared ready to transact a year's worth of activity in just nine months.
Of the mini conclusions, we can draw from recent events I think the one that's most apparent is that the real estate agent remains the most important part of the transaction will continue to be for long time to calm buying and selling home is a massive complicated undertaking and importantly, consumers and millennials in particular are increasingly using agents as they want to professor.
Actual advisor to offer guidance explain options and validate their decisions. This is especially true during challenging times like these when clarity can be elusive secondly, we knew from our nearly five decades of experience at the most important thing we could do during a changing market was to expand our service offerings to our franchisees and agents.
We moved very quickly to make sure our brokers agents and teams had the tools training and technology they needed to shift into a more virtual business environment and expandable. We believe is the industry's leading value proposition.
We also were able to offer meaningful financial support providing critical relief when it was needed. The most the amount of goodwill we generated was enormous.
Turning to slide seven perhaps the most important takeaway from this past quarter is that it really accelerated our technology transformation, we pivoted from a company launching products to one that is moving toward creating the very best agent consumer digital experience possible over.
Over the past couple of years, we've leveraged our numerous competitive advantages like our brand and the productivity of our agents to significantly expand our digital presence. We have the number one brand in unaided brand awareness in the U.S. in Canada. According to a survey by MMR group and we are known as being the home of the top producer or.
As aspiring to become one.
Consumers care about brand and reputation and this translates into the success of our digital assets, we're beginning to see the results in our hard work in the numbers.
For example, we see continued momentum in the adoption of our mobile apps that was released earlier this year with almost 90% user growth quarter over quarter. Additionally, we saw increased engagement from agents and teams logging into the booz platform during the second quarter, even as the market. It's picked up and they are becoming busier every day.
During Q2, Remax agents and teams created over 5000 websites, adding more daily and now about one third of agents in U.S. company owned regions have a lives publish website on or Booz platform at this point.
Our enhanced web presence and mobile App usage. In addition to enhance Remax dot com experience are beginning to drive business to our network of highly productive agents. We saw leads continue to increase year over year by 33% May 2020, and by 80% in June 2020, EBIT admits that helps crisis. We are excited about the increased uptake of the platform and.
Thats functionality.
In addition to the meaningful expansion, we have seen with respect to our web site App and Booz platform. Our network continues to see the value in our proprietary first app. This is a powerful tool that we believe unlike anything in the market today.
We made the strategic decision to offer a 90 day trial of the product earlier this year because of cobot, 19th and we believe that that was the rightmove under the circumstances. We are working now to convert as many agents who took advantage of the trial as possible. It is a potential career changing tool for an ambitious agent and we continue to hear very positive feedback from our network about how it has.
Resulted in additional business for them.
Looking ahead, we received tremendous feedback from our network concerning our technology during the lock down our brokers and agents ours passionate as they are professional we appreciate all of their input and right now we're acting on that feedback with our current functionality, while continuing to drive further adoption of the tools that are end game increasing agent.
Productivity and improving the agent consumer experience across all digital assets with that I'll turn it over to carry.
Thank you Nick good morning, everyone turning to slide eight our franchise business model strong balance sheet and overall financial discipline enabled us to successfully navigate the challenging environment during the second quarter.
Our franchise model with both of our brands, 100% franchise had many attractive financial characteristics, including being accurately and having a comparatively fixed cost structure.
Combining the strength of the franchise model with our unique business model. One that is attractive to full time highly entrepreneurial professionals due to its primarily recurring revenues based on doosan fee in.
Generate relatively high margin and strong free cash flow.
Level pandemic move swiftly and we believe we were able to respond justice likely due to the attractive financial characteristics of our business model and the financial flexibility that it provides.
Adjusted our cost structure rapidly to align with the environment without resorting to date to layoffs or for alone.
Simultaneously, we expanded our service offering extended our networks meaningful financial support and maintained our dividend.
By the extraordinary circumstances of the second quarter, we generated an adjusted EBITDA margin of almost 37% and kindred at almost 70% of adjusted EBITDA to free cash flow on a trailing 12 month basis through June Thirtyth.
Strong cash generative nature of our business was on full display as our cash balance excluding the marketing funds has increased one and a half million to 84 and a half million during 2020, despite a pandemic.
Turning to slide nine looking at our second quarter performance total revenue was 52.2 million a decrease of approximately 19 million or 27 per cent compared to the second quarter 2019 total revenue decreased primarily due to temporary pandemic related financial support initiatives introduced in April that reduce both continuing.
Franchisees and marketing been fees for two months during the quarter as well the decline in broker fees, principally due to lower existing homesale.
Franchise sales and other revenue decreased 1.6 million of which almost 1 million was due to the previously disclosed attrition of loses legacy customer base.
Turning revenue stream, which consist of continuing franchise fees and annual dues decreased 8.2 million compared to the second quarter of 2019, but still accounted for 63% revenue excluding the marketing funds in the second quarter of 2020, essentially flat compared to Q2 last year.
Looking at slide 10, selling operating and administrative expenses were 25.3 million in the second quarter of Tony Tony.
Decrease of 400000 or 1.4% compared to the second quarter of 2019, and excluding the marketing fun represented 62.7% of revenue compared to 48.2% in the prior year period.
Selling operating and administrative expenses decreased primarily due to cost saving measures implemented in 2020, including the elimination of the 2020 company bonus and the temporary suspension of the company's for one came ads as well as a reduction in traveling haven't been largely offset by increased legal fees due to ongoing.
Industry litigation and higher equity based compensation expense.
Moving to slide 11 early in the pandemic, we implemented a program designed to reduce expenses and how conserve cash.
Overall, our goal was to preserve job as much as possible to support the continued expansion of our value proposition and reduced discretionary spend.
We believe we achieved our objectives in Q2 you.
Looking ahead, our ability to accurately forecast continues to be impaired by the ongoing global health crisis. So we're not providing third quarter. Our full year 2020 guide at this time.
However on the revenue side, although we saw stabilization in U.S. and Canada agent Count in June and July lower average agent count performance will remain a slight headwind.
As announced in late June we don't plan to extend additional financial support beyond the initial options offered but we expect to continue to support our affiliates with the technology and other solutions they need to succeed and it's ever evolving environment.
Lastly, we expect the attrition of the dues legacy customer base to negatively impact Q3 by approximately half a million compared to Q3 2019.
Similar year over year impact in Q4.
On your son side, the bulk of our cost saving measures from Q2 are expected to remain in place through the third quarter. Additionally, we expect about a half million legal expenses in Q3, this year compared to last year and wanting to have millions of 2 million more in asked why 2020 compared to ask why 19 because.
Ongoing industry litigation lastly, the impact from the pandemic and our strategic decisions offer a 90 day trial for the first half back in March has pushed back our financial expectations for the product.
We now think first will be accretive beginning in 2022 and will be a headwind to 2020 adjusted EBITDA of three to 4 million.
Our capital allocation priorities remain unchanged. We believe we have taken prudent steps in the current environment. We continue to evaluate investment opportunities with the same rigor we have always employed and we believe we can continue to strategically invest just for future growth.
Focuses on diversifying our revenue base and accelerating organic revenue growth.
Our business model has significant leverage once we get the topline ramping then we expect margin expansion can't move them now I'll turn it back that.
Thanks Kerry.
Slide 12, as we surpassed the halfway point of the year, we've done a great job at adapting to the current challenges just like we have for almost 30 years on we're confident we have the brands the business model the financial strength and the networks to endure and thrive we remain focused motivated any cost in touch with our membership.
Flexibility leased a productivity, which builds longevity, even in times of uncertainty.
Oh, we talked to and care for our customers has always been a hallmark of our success, we've gotten closer to our customers that I think we've been in a long time and I'm Super proud of everyone for this because this builds trust as a business that builds businesses Trust is everything it builds community it keeps everyone tightly together without.
Operator, let's open it up for questions.
Hi, this time I'd like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.
We'll pause for a moment, what we've compiled the Q in a roster.
[laughter]. Our first question comes from the line of Ryan Mckeveny from Zelman <unk> Associates go ahead. Please your line is open.
Hey, Thanks, so much and good morning, Adam So there's a lot been made in the industry around this kind of urban and suburban dynamic and of course, you guys are very nationally diversified and even I'd say somewhat less exposed to markets like New York City.
But just just curious given given the breadth of your footprint.
How are you thinking about this this kind of suburban boom, that's going on how much do you think is.
Sustainable versus sort of temporary I'm, just curious how you're thinking about this pieces and maybe what you're seeing real time across your network. Thank you.
Hey, Good morning, Ryan you know, it's it's interesting I get this question a fair amount and it's not really a buy in aerie question in this industry, but it's a combination question, where you know what we're seeing is happening.
You know, where we are seeing people move to the suburbs, but there. There's more you know the factors are just kind of the current situation going on with respect to co bidder or anything going on in cities that people are moving from I mean really there's this is kind of the perfect storm in real estate.
I believe it's a it's a combination of things obviously the foundation of which is a interest rates are amazing I was talking to somebody yesterday, who got who alone for 2.5%.
On a 30 year. So you know it's just it's fascinating. So when you look at that there's there's a interest.
That people immediately have but ultimately when you start looking at what are the other factors in this there are many many out there and we're very excited about this because obviously we are very much a suburban based franchise organization as well the majority of our franchise is do exist in Oh out in the outlying name.
Overheads in in Middle America. So you know ultimately what it boils down to is you've got a just several handfuls of factors, including the fact that the largest purchasing of a amount of the millennial generation has just entered the first time homebuyer.
You know that age range and everything is lining up to be really well set for that not to mention the fact that people have experienced life changing.
Circumstances, where they look around their home they've spent nearly six months in their home way more critically than before as well as they're looking at where do I want My kids to go to school are we starting a family.
All those other mitigating factors, but Dave I'm, Dave Kinda culminated altogether at once right now and we're seeing a a great deal of activity that being said and I know Nick a addresses this regularly and I'll pass us off to him to put any final thoughts in it but we do have a shortage of inventory and we need that so the homebuilders.
Are out there like crazy building or maybe the perfect time for them as well because there's definitely no shortage of buyers and a lot of interest so Nick do anything that that.
Yeah, I think that the combination of interest rates in the desire and the ability to live in a larger property has driven part of this and of course people being permitted to work from home.
Over the past number of decades, we have seen the population get closer and closer to urban areas and a lot of that was just driven by location of weather job is and so you see that when those prices rise people have to increase their commutes because they can get a bigger house for less money, if they're willing to go a little farther.
From the city and with increased job flexibility of being able to work from home. It allows them to maybe get a property that better fits.
Their lifestyle or their family.
Thank you guys I appreciate that color and of course mentioning the low interest rates I guess a question for ward.
A lot Smith and made in the in the mortgage industry under Sperry tight capacity you know many lenders trying to kind of higher as quickly as they as they can I'm curious how just a kind of bloom going on in the mortgage market is plays into either at the competitive strength of of motto as kind of them. So.
The broker channel I'm, just curious kind of how you think big picture about you know what's going on from a mortgage industry standpoint, and you know is that actually you know given how robust things are and how busy people or is that actually maybe holding back you know some some some amount of activity. Even obviously you know you're definitely making very nice.
There, but I'm just curious how you kind of frame your business in the mortgage space kind of relative to what's going on and sort of what are the.
Key areas to really push that even even further forward.
Yeah, Ryan we're bullish on brokerage or the broker channel continues to grow the last summer I saw was about 20% marketshare prior to the.
Great recession, we were about 40% so I still think real plenty of upside left to go but brokerage continues to provide options to people, particularly in this time I guess I'm, saying you know our brokers are out there shopping across our wholesalers and provide them and consumers options.
Instead of just going to your local bank and getting one option you're going to a broker who is getting your multiple options. So we continue to be like I said bullish on brokerage and the growth of this particular channel and we see that motto models growing <unk> through for seven months were almost exactly what we did an all volume last year. So we're excited about that the growth on year.
Every year and volumes gonna be fantastic a lot of that is due to the revised but as lot of its due just to the growth of our network in the success of the network and sales have been doing fantastic in the last quarter you wouldn't think during this particular pandemic, we'd be crushing it but we're doing a great job in sales, even though our staff has moved virtually there continue to be success.
S. One filing the candidates. So Ah I think mortgages is obviously with the rates being as low as there's going to be hot for the next few months if not a years. So we're excited to ride that train.
That's great. Thanks, so much.
Our next question comes from the line of Anthony Paolone with JP. Morgan Go ahead. Please your line is open.
Great. Thank you and good morning, So I I have a a question about motto is well I'm just trying to understand since you're not going to participate necessarily in the volume of a given a store like how do you think about just how many of those you could sell Ken a motto office do mortgages.
Two towns away the state over I, just trying to think about the addressable market and how many of these you can really Sal.
Yeah, Great question from our perspective, you know originally we were looking at sort of just a reminder, space where we have in over 3000 franchise in U.S. than we thought about a third of those where our addressable market, but now that we you know expanded outside to bellows investors and other real estate brands, we think sort of this guy the limit we believe that getting to without.
And our even more than a thousand is doable.
Overtime and you know would still have the same types of scale at margin margins at scale that we would have on the remarks out in a franchise system. So although we don't participate in the transaction you know increasing the sales an increase in our office count will produce you know topline revenue and produce margins that are consistent with what we you see.
On the re Mac side. So we believe that the addressable market is very large and that we can get you know a thousand plus franchises out there I get compared to my Big brother, all the time, so I got to compete and Ah well get there it's going to take some time, but we're we're seeing an inflection in the increase in sales. So we hope we can get to that number you know sooner rather than later.
Got it so there's no there's no geographic boundaries like I shouldn't think about it. So so physically like so if a team at some other from this thinks that this would be really helpful. They could they could open a motto.
You know office and just go at it.
Yes, absolutely and the biggest thing about mortgages that it's not localize like real estate mortgage once your license and let's say the state of Florida, you can do it from the Panhandle down to the keys you can do alone. So even if you're a team there in Tampa Bay and a buyer motto and are concentrating on a lot of the volume coming through your team you could still do a revised throughout the state.
We also allow ours to expand virtually into two other states as long as the state allows reciprocity and we're seeing success, where somebody might have a license and a motto and Michigan, but they're doing loans in Florida, because a lot of their client base or snowbirds or go down there. So we do give them opportunity to be successful they want to be and so that's sort of how we.
Do it so we we limit a little bit of their footprint, because we want to sell more franchises, but we don't make it detrimental to them.
Got it. Thank you and then the second question I. It in this environment does this create any change in your appetite for acquisitions or any sort of other capital investments or or.
Does it open up any opportunities.
Hey, good morning, Tony its carry so you know as we stated our capital allocation priorities remain unchanged and I think despite the pandemic the strength of our business model in the financial flexibility instability that it provides were really highlighted and so we're always looking at opportunities to really diversify our revenue stream and drive our top line from an organic.
Growth perspective, and I think we're very fortunate with the strength of the business model on the free cash flow that is generated to be able to think about strategic capital allocation opportunity.
Okay. Thank you.
Our next question comes from the line of Stephen Sheldon with William Blair Go ahead. Please your line is open.
Hi, Thanks, Nick you gave some details on agent I take a boots that I didn't catch can you go through that again and then just beyond general uptake of Booz how much engagement. We have you seen but then it how much are you seeing agents incorporating it into their their day to day operations.
Yeah, Great question, we talked about that the increase for example, just in websites at over 5000, we continue to increase our digital footprint.
Fairly significantly and so from there we not only look at total adoption, but then when we think of engagement.
Daily users and we've seen that increase as well as activities within the system and that has turned into the number of leads we saw that go up by over 30% in March and over or in may rather and over 80% in June.
So that's direct leads that are going to our top producing agents and that continues to increase.
Got it that's helpful.
You know just good to hear the U.S. agent, a U.S. and Canada agent count stabilize in June and July so down a touch in the quarter overall cuts. So can you talk about kind of moving pieces, there gross adds and retention.
And what impact did you see from some of the growth initiatives to promote the technology offerings and May and June.
Hi, Stephen as Adam I'll, I'll give a little bit a front end of this and I'll pass it back to Nick.
I'm I'm really excited about how we are seeing the agent count stabilize Nick and his team have been doing just a fantastic job of really really increasing engagement with our our franchisees in the recruiting a spectrum, there, which I'm you know as you know our organization is.
Membership based organization, where we we opened in support our our franchisee business owners and help them grow their businesses, where business that grows businesses and Nick has implemented some great new programs I'll pass it back to him for but I have to tell you.
I'm very pleased with the engagement level and the activity level of our franchisees at this point and I think that's part of the results that you're seeing a our communication with them and everybody moving in the same direction with that Nick what would you like that yeah. I think overall when we came off of fourth quarter last year, we had some tremendous momentum one of the best fourth quarters and growth that weve.
Scene, and 17 years and that momentum carried into the first of the year and obviously endemic.
Created a quick shift however, the one thing to note, though we are not the home for every real estate license, we're known for having top producing full time real estate agents and so we're not known just a warehouse non producing agents and so as the level of uncertainty.
In especially the first part of the second quarter affected the decisions of where people were agents hung their real estate licenses were thrilled at the fact that now how we're executing.
On all of the recruiting strategies is showing that as the certainty returns at some level to the real estate industry. We're seeing that stabilization that we can move forward on from June July.
Great. Thank you.
Our next question comes in line of Vikram Malhotra with Morgan Stanley Go ahead. Please your line is open.
Thanks for taking the questions. So just maybe first stick to get some additional color on on model just curious to see how the mix of Ceos has trended between you know the Max owners versus non and kind of what do you what do you expect going forward.
If there from yeah, I mean, we've decreased obviously the amount to re Max's so they're now make up less than 70% of our overall sales.
So the other 30% or dusters loan originators or independent real estate brands.
Real estate still combined does more than about.
Just about 70, 580% just shy, 80% is still real estate touting remixes.
We continue to believe that re massively you know a lion share, but other brands are stepping up and jumping into the Fray and we've had some recent sales to some other brands and are excited about supporting them in that and I'm still trying to expand across all the brands out there and we'll get them. It just takes some time, but we recently you know sold two.
As he 21 in a marketplace and we're excited about the opportunity for them.
And expanded across it so I still think will decrease remarks, but they'll still be the lion share and the other types are having you know equal if not better success than even the root access so everybody is doing well of all the customer types.
Okay, Great and then just on the U.S. agent trend, obviously, a agreed it's good to see it stabilized.
I'm just wondering in this environment you tend to see more of a shake out where I'm, assuming higher producers or you know are more secure a and then maybe there's some distress than some of the smaller brokerage is a you know <unk> smaller competitors of yours I'm just I wanted to just get a sense of if you go out to try to recruit.
Maybe give us a bit more color on how your segmenting the fields. So to say a is there any any any region any areas where you. You think you are you can have better success in the U.S. or Canada.
Yeah. So overall I think you're correct there in terms of there are.
Companies that have cracks.
And shifts in market bring out the best in the worst in some of those models and the one thing that we look at that we're very fortunate as.
This is the seventh recession that remarks has experienced and being around nearly 50 years. We have the experience to know that the model has been so strong on any side of the market, whether it's going up or whether it's going down and then how we look at recruiting on that.
Is our offices now are looking for potential opportunities that exist now that maybe didnt four or five months ago, which includes rowlands or possible acquisitions of companies.
And so there are now likely more opportunities not just to recruit one by one, but possibly role and smaller companies.
That may be did not have the wherewithal to sustain even a short temporary shift like we've experienced.
Okay, Great and then just last one on the international front you know knowledge. Obviously, it's been you know why that we've seen pretty depend as growth.
You know in agent internationally I'm, just wondering how should we think about sort of the very near term, but maybe even the medium term three year outlook for international when when could that good this start to become a more meaningful.
Contributor or other specific regions, you're targeting you know to maybe change and I know the model. There is more based on offices that's versus agents in terms of fee revenues, but but any any additional color would be helpful.
Yeah, we see the global side of it is being.
Continuing to be tremendous opportunity because when you look at.
The footprint that we have just in the U.S. in Canada and compare that to where we are globally. There is still a lot of runway in many many countries.
That have the early on in their growth and so we believe that moving forward the global side has upside to it.
Yeah and Vikram. This is carried the other thing that I would add two to that as part of the reasons that we've been so excited about the investments that we meet we've made from a technology perspective is really thinking about how we can leverage those competitive advantages both in terms of the global footprint as well as the technology blueprint and so really combining all of those things and really leverage.
During all of those strength, if something that we're really excited about as we think about the medium and long term.
Great. Thank you so much.
[noise] again as a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad. Our next question comes from the line of Tommy Mic Joint with K. BW go ahead. Please your line is open.
Hey, good morning, Thanks, guys for taking my question.
One das again and that might have looked like there were no new openings in July we're guessing functional perhaps no sales back and kind of March April away.
With that kind of peak uncertainty here and just get normal for kind of one month and not having any of them.
Yes, I mean, obviously, we're trying to always decrease the days to open and are focused on that but some of the things that we did have continued to be the states. We can't control always home state is going to process a new applications. So some of that is relative to the states still getting back into this.
When you're things so as they do that I think we have over 40 plus that are in licensing right now so I would expect that to.
Open up very soon as the stays approve those licenses, but some states take 20 days some take 45 days review application.
So as the state's reviewed goes I think we'll see a lot more opens moving forward.
Got it thanks, and teaching do you guys called out some higher legal expenses that we've been saying maybe at least one or two quarters is that just decent industry litigation or is there any other thing and I know there must be aware.
Hi, good morning timing it is related to the ongoing industry litigation. So it is some noise that we knew about I'm heading into 220 20, and we're just continuing to see that impact the piano.
Okay got it Okay for me thanks.
Our next question comes from the line of John Campbell with Stephens, Inc. Go ahead. Please your line is open.
Hey, guys good morning.
Well thing.
It doesn't get some pretty encouraging I guess tech trends across the App usage and that's in the agents are kind of launching the new personalized website I might have missed a settlement you guys ride. This what was the traffic growth because they're going to overhaul and remarks dot com I know a lot to the portals in the space, obviously saw pretty meaningful traffic growth as you guys can experience the same thing in the quarter.
Oh, we did.
Month over month traffic increased.
And [noise].
It is approximately 125% that we saw out of the first month within the within the pandemic in a continued to increase hence the reason that we saw the increase in Leeds and made by over 30% and then of course, 80% in June.
Okay. That's helpful.
And then you guys had talked about I guess expectations for U.S. agents to be up kind of the hundreds of agents. This year and just kind of getting back. Thank you guys said the U.S. agent growth at some point this year, we still feel like that's pretty achievable goal.
Yeah, that's what we're excited about it we look at the recruiting initiatives that are firing on all cylinders from every angle that we started to implement at the end of last year, we continue to refine that and we've seen the engagement level from our membership increased dramatically Ed how many people are.
Taking advantage of all the offerings and to what we've done to.
Completely refreshed the assets of Arbor, Rudy recruiting materials and our training.
I believe we'll continue to bear Creek fruit as we continue throughout the year Hey, John its carry the one thing that I would add to that is unique is absolutely right. There has been tremendous initiative and momentum going in terms of everything that we're seeing from an agent count perspective in the stabilization that we've seen in in June and July is it's really encouraging and we're really excited about that obviously the.
Pandemic did up and things and it is causing a little bit of noise, just because of some of the headwinds that we saw on in April. So just want to make sure that we do you called that out on that there's going to be a little bit a headwind in Q3 because of that.
Okay, and then Kerry.
You know with the degree of recurring revenue I was little surprised you guys didn't provide not an official could kind of threeq guidance I missed some of your commentary but.
Why do you guys holding off is that is that mainly just kind of a macro thing are you reserving the right because maybe the for fees again.
No I mean look the decision we made in June to not to not offer any additional financial support we feel very solid about you know the green shoots that we're seeing in terms of the macro our strong. It is more of a macro decision that we decided to pull back on that when some of that macro uncertainty wins I will get back to to providing kind of formal guidance.
Yeah and care, if I can add one thing to that I mean, the one thing that we're hearing over the past several weeks when we engaged with many agents and our offices. The number that have said that this has historically some of the best months. The offices have had in decades or agents that are having their very best years ever.
That is not what most people were thinking three months ago. So some of the recoveries that will that we're seeing would indicate that those decisions were made and we don't believe we'll have to.
Provide that again anytime throughout the rest of the year.
Okay, great. Thank you guys.
And there are no further questions in queue at this time I'd like to turn the call back over to Mr. Sean.
Oh, Thank you operator, and thanks to everyone for joining us on the call today have a great weekend that concludes the coal.
This concludes todays conference call you may now disconnect.
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