Q4 2020 Re/Max Holdings Inc Earnings Call

Good morning, and welcome to the Remax Holdings fourth quarter, and full year, 'twenty and 'twenty earnings Conference call and webcast. My name is brandy and I will be facilitating the audio portion of today's call. At this time I would like to turn the call over to indeed, Schulz senior Vice President of Investor Relations.

And Mr Schulz.

Thank you operator, good morning, everyone and welcome to Remax Holdings fourth quarter and full year 2020 earnings conference call. Please.

Please visit the Investor Relations page of Remax Com for all earnings related materials and to access the live webcast and the replay of the call. 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 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 outlook brand expansion competition technology housing and mortgage market conditions cash.

<unk> allocation dividends strategic and operational plans and business models for.

Looking statements represent managements current estimates.

Remax Holdings assumes no obligation to update any forward looking statements and the future.

Forward looking statements address 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 fourth quarter and full year 2020 financial results press release and other SEC filings on.

Also we will refer to certain non-GAAP measures on today's 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 are Adam Contos, our Chief Executive Officer, Karri, Callahan, our Chief Financial Officer, Nick Bailey, Remax, Chief customer Officer, and Ward Morrison President of motto mortgage with that I'd like to turn the call over to Remax Holdings CEO, Adam Contos Adam.

Thank you Andy and thanks to everyone for joining our call today looking at slide three searching housing market underpinned our strong fourth quarter results and provided a fitting capstone to what was and then for <unk> year. Our employees are supporting our affiliates, while working largely from home and they will continue to do so until it is safe to return to the office on a larger scale.

Hopefully sometime later this year.

I'm proud of our team and a terrific work they did in 2020.

We remain encouraged by the trends, we are seeing and our business with a boy and housing backdrop expected contributions from our recent acquisitions and and upward progress and our legacy business. We think we are poised for meaningful growth in 2021 and beyond highlights for the fourth quarter included revenue of $72 4 million adjusted EBITDA of 23.

$8 million adjusted diluted EPS of <unk> 47.

Total remax agent count increased up over 5% year over year and finished at almost 138000 agents and motto franchise sales finished on a high note capping a record year.

Turning to slide four.

And on our third quarter call I spent some time discussing our overall M&A strategy and our exciting acquisitions that we will and Gadberry group. Since then many people have asked us to frame up our future market opportunity and in summary, we think it is sizable.

Excluding the marketing funds, we generated just over $200 million in revenue and 2020 and the vast majority came from a remax brand.

It's possible, we could double that top line figure over time from our existing opportunity set with an incremental $200 million revenue opportunity evenly split between our mortgage and real estate business lines.

And we will provide a little more color on our mortgage opportunity and a few minutes.

On the real estate side. In addition to possible acquisitions of independent regions are drivers of organic growth include growing agent count increasing agent productivity and taking market share and monetizing our technology domestically and globally pricing and much more the acquisition of Gadberry group also brings compelling incremental revenue opportunities. Additionally, as.

Part of the technological transformation of Remax, we have significantly invested in our data and analytics capabilities.

There are exciting revenue opportunities for us and the data and analytics space and as they come increasingly into focus we will provide additional details as warranted.

Lastly, M&A remains an important part of our growth strategy, we continue to explore intriguing complementary opportunities in and around our core business of franchising mortgage and real estate, which we believe would have the potential to expand our market opportunity significantly.

Turning to slide five you on.

US housing market continued to soar in January as closings grew 13, 5% from a year earlier according to the Remax National housing report.

Notably while this increase was impressive it does represent a step back from the blistering monthly sales pace, which has dominated housing since early summer.

Based on the 53 Metro surveyed january's year over year increase and home sales sold was more in line with the rate of sales increases we saw and our pre COVID-19 months of December 2019, and January 2020.

On average home sold quickly last month with days on market, averaging just 40 days nearly three weeks less and the 59 days average from January of last year.

But while the growth in sales moderated other key metrics showed the after effects of housing is 2020 record setting second half rebound for example January inventory dipped and the lowest level at any time in the 13 year history of the report and January 2021 marked the fifth consecutive month of year over year inventory declines over 30%.

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January supply of inventory totaled just $1 seven months and mirrored the report record set and match three times last year with inventory tightening sales prices continue their unrelenting March higher median sales price of 285000 was a record for the month of January and 11, 8% higher than a year ago.

Uncommonly low interest rates the ascent of the millennial homebuyer and the prospect of working from anywhere are converging to shape a housing market. Unlike any other supply and affordability issues remain the greatest threats at the moment.

For all we see the current trends and the housing market as a reason for optimism and we remain confident that our brokers agents and loan originators are positioned to take full advantage of these mostly favorable conditions with that I'll turn it over to Nick.

Thanks, Adam and good morning, everyone looking at slide six overall agent count grew and the nice clip up more than 5% year over year. We added almost 7000 agents worldwide during 2020, and especially impressive feat during a global pandemic our agent count performance outside the U S and Canada grew at a robust 16% during the year.

We saw widespread growth globally with certain countries in Europe, South America and Africa, among the standout performers were.

We also added agents during the fourth quarter throughout Canada, finishing up almost 2% for the year again, another notable performance given our leading market share as well as the events of 2020.

After a very solid third quarter agent count and the U S held steady during Q4.

Looking ahead, we remain focused on recruiting and retention and creating more opportunities for our affiliates. We expect the macro housing environment will remain robust and the coming year with strong demand outpacing supply.

That'll for listings will stay highly competitive and agents, who are experienced productive and armed with seller focused tools such as our first app should enjoy and edge in that regard. We believe our efforts will pay dividends in 2021, and we expect to grow our agent count, including the USA and Canada. This year, we've made significant investments over the past.

Few years to enhance and improve our value proposition and we continue to invest heavily to ensure we're delivering the tools resources and competitive advantages that help remax agents continue to outpace our competitors, we've looked at our fee structure and decided to make a small adjustment.

On April one 2021, and July one and New York State the monthly continuing franchise fee in the U S company owned regions will increase by $5 per agent. This investment will ensure continued expansion and the systems and services that help remax affiliates standout and their market.

Turning to slide seven over the past couple of years, we've added powerful technology and talented colleagues via our acquisitions of Boosh first and Gadberry group alongside our experienced Remax technology team are substantial organizational realignment last year to create a single unified Tech team is now complete this team of over 200 members maximizes collab.

<unk> focuses on user experience and operates with purpose passion and excellence. The goal is to harness our tremendous capabilities to deliver the best unified agent consumer experience possible.

As we build out our platform simultaneously simplified the user experience with expanding its capabilities that we solicit and received valuable feedback from our network that constant feedback loop helps us drive adoption and keep us on track with effectively servicing the needs of our highly productive network and we continue to see increasing adoption of our tools and.

<unk> with almost 22000 and websites created on our boost platform. Our enhanced digital presence continues to drive business to our network of highly productive agents, which in turn contributed to a 50% year over year increase and leads and 2020.

The first step is the best tool I've seen when it comes to helping agents identify existing contacts who are most likely to sell a home soon right now with such a narrow pool of homes being listed for sale I think the first App is an absolutely essential competitive tool we've expanded our inside sales force and design targeted marketing campaigns to help agents understand.

On the product and its capabilities. We also believe adoption will increase as agents become more familiar with the App and we look forward to sharing more and more of our agents' success stories powered by <unk>.

As Adam alluded to earlier, our investments and data and analytics capabilities have been critical to the effectiveness of our robust tech offerings fragmented data as a fundamental industry challenge driven by rules regulations and the independent nature of our industry. We have standardized this data and clean data today is in my opinion.

Oxygen the powers agents' success.

It allows for real estate agent websites to work leads to be generated and MLS is to be more abundantly available data also drives how consumers engage start to finish and the real estate process and ultimately drives more consumers to our remax agent and our ability to harmonize and standardize fragmented data from across the industry improves all efficiencies.

Within the consumer agent experience and in the process, we control our destiny and from a data and analytics standpoint, with that I will turn it over to ward.

Thanks, Nick moving to slide eight as Adam mentioned, Mato had a terrific year, our best year, yet and our short history and 2020 day motto network generated almost $2 5 billion and loan volume and help 10000 and families. Finally realize their dreams of homeownership.

Secondly, doubling in 2019 results.

And had three core areas of focus in 2020 franchise sales unit profitability and technology and we achieved major milestones in each of them. We also continued to improve innovate and mature and virtually all facets of the business during this past year.

Regarding franchise sales, we had a strong fourth quarter and fact, it was our best quarter ever with 24 franchises sold for the full year, we sold a record 71 franchises up over 35% compared to 2019, our strong performance is quite an achievement for any franchise, let alone one only and its fourth year of existence, we're making.

Progress on our lead generation and prospecting efforts and addition to expanding within the Remax network, we are selling to independent real estate companies and teams as well as brokers and teams affiliated with other national brands, we expect to add to our momentum and have established a new annual franchise sales target and expecting to sell between 60 and 80 <unk>.

<unk> this year.

Once the franchise sales completed our customer success team constantly strives to improve the support process required to assist our franchisees to get license open and operational with just over 140 open offices as of December 31, we anticipate that we should have about 200 open offices at the end of this year.

But as excited as we are about modest current momentum. It is only half of the mortgage story, we acquired green low last year in order to solve one of our franchisees primary pinpoints, finding steady dependable and economic loan processing services.

Model and we low now collectively for and what you will increasingly hear us refer to as our mortgage business and as Adam mentioned earlier, we believe this business could generate $100 million or more and an annual revenue over time. We continue to believe we can open at least 1000 model stores, eventually and perhaps many more than that generate and a 50 million.

Plus annual revenue opportunity and Furthermore, we believe we most total available market opportunity is substantial and just as large as modest potential for even larger.

This year and one of our primary areas of focus is the successful integration of Meanwhile, we are currently ramping up resources to handle processing for our anticipated motto loan volume, we have begun processing loans for a limited number of motto franchisees and look forward to expanding that to more of the network throughout the year.

And class, we low technology provides the only enterprise solution of its kind in the mortgage brokerage space, while purchase primarily to support motto franchisees, we low will continue to serve clients and marketed products throughout the mortgage brokerage industry, serving as an additional channel of growth for Remax holdings with that I'd like to turn the call over to Kerry.

Thank you Lauren good morning, everyone and thank you reviewing our fourth quarter performance I wanted to expand on Alan's earlier comments about our growth trajectory and then outline our Q1 and FY 'twenty one outlook.

Moving to slide nine increasing existing home sales and Mato growth drove strong organic revenue performance during the fourth quarter with much of that revenue flowing through to the profit line.

Our key leading indicators remax agent count and motto franchise sales continued to grow fourth quarter revenue profit and margins all exceeded our expectation.

And our cash flow generation remains solid as we converted 70% of adjusted EBITDA into free cash flow during 2020.

Total revenue was $72 4 million and increase of approximately $4 3 million or a quick point of 2% compared to the fourth quarter of 2019.

Organic revenue rose, 4%, primarily due to increased broker for you from higher existing home sales rising home prices and Mato growth, partially offset by reduced event income and due to COVID-19 restrictions and previously announced agent recruiting initiatives.

Acquisitions contributed to increased overall revenue by two one.

And 1% and FX was negligible.

Recurring revenue streams, which consist of continuing franchise fees and annual dues for virtually flat for the fourth quarter of 2019, and excluding the marketing funds accounted for 61, 8% of revenue and the fourth quarter of 2020 compared to 66, 6% and the same period and 2019.

Looking ahead, we are excited to be holding our annual agent conference next month.

Due to the fact that the majority of agents will participate virtually we anticipate that our Q1 revenue will be approximately one 5 million less than our historical run rate and should be largely offset by associated cost savings.

Also for the full year 2021, we believe the runoff of legacy revenue should decrease both revenue and adjusted EBITDA by about $2 million this year low.

On slide 10, selling operating and administrative expenses were $40 8 million and the fourth quarter of 2020 and increase of $5 6 million or 15, 9% compared for the fourth quarter and 2019 and.

And our marketing fund represented 74, 6% of revenue compared to 69, 2% and the prior year period.

Operating and administrative expenses increased primarily due to higher equity based compensation expense and personnel costs largely from acquisitions and discretionary bonuses.

These increases were partially offset by cost savings measures implemented in 2020, as well as lower bad debt expense due to strong collection.

Cost savings initiatives enacted last year has largely ended and notable exception is that our travel and events related expenses are expected to be muted at least initially and 2021.

Also we anticipate legal expenses will run about $1 million higher this year due to ongoing industry litigation.

Moving to slide 11, we have been meaningfully reinvesting in our business for future growth over the past few years.

We believe those investments will start making a positive difference and our financials beginning this year and then even more so in 2022 and <unk>.

Adam mentioned earlier, we believe we are poised for meaningful growth in 'twenty and 'twenty, one even normalizing for the Covid related fee waivers, we extended to our affiliates during the second quarter of last year, we expect to grow organically and the mid single digits and 2021 and addition to expected top line contribution from are we low and.

Barry Group acquisition.

From a profit perspective, our business model has significant leverage as we ramp up the top line, we expect margin expansion to resume likely next year.

Also as we mentioned last quarter margins will be adversely impacted initially in 2021 day to our first lien low and Gadberry acquisition.

That impacts of lessen as the year unfolds and each acquisition gets closer to breakeven. Despite an estimated net investment and first we and low and gadberry of between two and a half and three and $5 million this year and other ongoing investments and our business, we expect to grow absolute dollars of adjusted EBITDA in 2021.

We expect our new businesses from the past four years motto birth, we low.

And that very group.

Individually and collectively flipped from a net investments are positively impacting earnings over the next year.

Alongside the expected improvement and a remax business, we would be disappointed if we didn't generate at least 10 million more and adjusted EBITDA in 2022, and we anticipate for 'twenty and 'twenty one.

This assumes no additional acquisitions and of course that the housing market remains I was hoping next year as we expect it to be this year.

Our business continues to generate a healthy amount of cash flow.

We will remain disciplined and allocate capital to the best for.

For pencil value creating opportunities are.

And our capital allocation priorities remain on changes, we plan to allocate capital to acquiring independent regions reinvesting.

Reinvesting to drive future organic growth ex.

Laura and other strategic acquisitions and partnerships and returning capital to shareholders.

Turning to slide 12, the company's first quarter and full year 2021 outlook assumes no further currency movements acquisitions or divestitures.

For the first quarter on 2021, we expect agent count and increased four and a half the five 5% over first quarter 2020 revenue and a range of 71 for $75 million, including revenue from the marketing funds and the range of 18 and $19 million and adjusted EBITDA and <unk>.

And of 'twenty, one and half from $24 5 million for.

For the full year 2021, we expect agent count to increase 4% to 5% over full year 2020 revenue and a range of 300 for $310 million, including revenue from the marketing funds and the range of $71 million to $74 million and adjusted EBITDA and a range of 100.

Third three for $107 million now I'll turn it back to Adam.

Thanks, Cary moving to slide 13, we entered 2021 with positive momentum on our end markets are enjoying a nice tailwind right now we've made some targeted strategic moves to capitalize on those dynamics over the past few years, which we believe will increasingly show up on our financial results starting this year.

We believe we are poised for meaningful growth in 2021 and beyond with that operator, let's open it up for questions.

At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad again and that is stores and the number one we will pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Anthony <unk> with J P M Securities LLC.

Thanks, and good morning.

My first question revolves around just U S agent count can you maybe give a little more color as to just more broadly given the strength and housing whether youre seeing more agents and move into the market and just the general opportunity set there and they should try to reinvigorate growth I guess into 2021 on that front.

Sure Hi, Anthony this is Nick thanks for the question.

Yeah. When you look at total realtor count and the U S. The National Association of Realtors, just several months ago announced that they hit an all time high and memberships. So we have seen an increase of licensees coming into the market in general.

And that does affect some companies and protects us slightly but at the same time.

We are.

Not the destination for every single agent and we focus on more of the top producing full time associates. So a lot of those new agents are not our primary targets debt.

Being said, though obviously the pool is large and the investments that we've made and recruiting over the last year are bearing fruit and we expect those to show good results for the for the upcoming year.

Okay and then just.

Decision to increase the continuing franchise fees can you just refresh us on.

Where they stay on today.

On a monthly basis, and and then I guess.

And do the math here right. It would seem to add maybe 4 million Bucks a year to revenue is that by getting sort of the order of magnitude right.

Hey, good morning, Toni it's curious so with regards to the increase on average and the company owned regions, but for the increased average is about $128 per per agent per month and that increase is going into effect on April one so the impact for 2021 is actually closer to that.

And $2 million range.

Okay got it and then just last one.

Sticking with your carrier can you just give us some sense as to run rate stock comp.

Whether the fourth quarter is an indication or whether that was just outsized.

Yes, so the fourth quarter was a little bit outsized and you know on a go forward basis kind of looking in that $7 million a quarter range a lot of that really is tied to the incremental stock comp from the two acquisitions that we did in the third quarter of 2020, and where we use some equity as a part of that so, but I think about $7 million.

<unk> quarter run rate for 'twenty, one is a good estimate.

Okay, great. Thanks for the help.

Your next question comes from the line of Ryan Mickey <unk> with Zelman and associates.

Yes. Thank you good morning, and nice job on the quarter.

And I'm curious on the mortgage side of things with motto. So.

Is there been any shift in the last year or maybe even more recently the last six months in terms of.

And kind of the interest list of who is showing up.

For you guys and obviously very nice to see the progress with both kind of Remax franchise owners as well as other.

Layers within kind of the brokerage space with other brands, but I guess, there's a lot of discussion about the potential of just the wholesale broker channel and the mortgage market more generally and potentially getting to a point, where there's some movement on mortgage professionals out of the retail channel to the wholesale broker channel more and more directly to the broker side. So just curious maybe for award.

Are you seeing that movement.

Thus far do you expect that movement and.

Thoughts you could share there would be helpful. Thank you.

Yes, we're still very bullish on brokerage.

And.

About 74% of our sales continue to be real estate of about about 61% of the overall total are still remax, where we're continuing to grow the the other brands and the national brands whether it's.

Kw teams was ESP teams see 'twenty, one Sotheby's compass, we pretty much have started to expand across and as soon as we get into a company or an entity for instance, they just start to refer us out to their other people. So we've got an additional kw teams additional ESB teams recently.

What we're really seeing now or hope to see is that movement as the 10 year goes up we tend to have more purchase money transactions in our particular models because we are tied to a lot of real estate companies. So is the 10 year goes up and the market changes a little bit and the Refis slowdown, we think thats only bullish for brokerage and models and general that are tied to real.

Este companies. So I think we're going to see some good movement out of retail into brokerage this year.

Particularly.

The 10 year continues on its trend up that we all think it might this year a little bit more because models continue to emphasize that purchase money. So that's the key for.

Particularly our network and brokerage.

That's very helpful. Thank you.

And Adam and Nick on.

On the Canadian side of things, so you called out and in the release.

Some nice growth and the quarter and agent count.

Just curious can you can you give us an update on kind of the general macro side of things within Canada and.

Sort of what's driving that day.

A lift that you had had this quarter.

Sure when you look at Canada as a whole we definitely look at it.

Across the country and with the Toronto, Greater Toronto area, and the Ontario area, just economically has seen just incredible boom with.

No sign of slowing down and so that has worked and the favor of a tremendous growth and the market and the opportunity, which I think and turn has helped our growth as well and I'll add a little bit to that Ryan and.

And great question. Thank you.

And when you look at the the Covid.

Covid response to for that.

Covid tailwind that's been given to the housing market, we do see that just as much throughout Canada as we have in the United States.

Kind of a flight to suburbs as well as.

On the emergence of larger home buying sectors with the.

And the wealthy millennial things of that nature and that has been extremely prolific and Canada as well. It's it's a great housing market throughout North America, I guess, you could say.

When it when it comes to looking at the tailwind and they seem to be consistent throughout the continent.

That's great. Thanks, Adam.

Yeah.

Your next question comes from the line of Vikram Malhotra with Morgan Stanley.

Thanks for taking the questions and nice quarter.

I just was hoping you could expand a little bit more on the future revenue opportunity you talked about through the various businesses.

Maybe just if you could break it out and little bit more talk about potential timing and just related to that at the revenue growth can you give us a sense of how the EBITDA margin is likely to trend versus sort of the prior few years.

Hey, good morning Vikram.

Thank you.

And we're excited about the future revenue opportunities and the diversification that we're building into the business model, particularly through the data technology as well as the expansion of.

Of motto and how all of those things land and tailwind to potential remax growth and opportunity as well as the global expansion. So that we can continue to.

And fuse these different opportunities globally as they become available so.

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And we've been.

Relatively understated in and our excitement so that we could start building upon the data monetization opportunity. So.

We have started pulling back occur and a little bit more on that and our growth of that infrastructure given the.

And the acquisitions that we've made and and particularly one that we're encouraged by is the commercialization capabilities of the very experienced Gadberry group that we've acquired recently when it comes to our data and monetization skills. So with that I'll hand, it over to Kerry to dive a little bit deeper and yeah. Thanks, Adam So vikram, we really try.

To frame up for what we think the opportunity is just of our with our existing with our existing assets and really looking at the business now kind of across two segments between real estate and mortgage and on the mortgage side of the house as word was talking about we've got a lot of momentum with motto. So really trying to frame this up as aspirational and over time.

And what could be achieved and so we've talked historically about scaling motto to be a 1000 and open offices. If we could do that over time and we think there is momentum to do so that's a $50 million plus revenue opportunity. Then you layer on top of that we low award previously with talking about just momentum coming into the March.

<unk> brokerage channel and if we can capture even a portion of loans that are coming through.

On motto office footprint again, we think that on that opportunity is as significant as it would be from our legacy motto royalty fees and then flipping on to the real estate side of the house for the last several years since the IPO, we've talked about allocating capital to independent region.

And over time, if those catalysts cannot come to fruition, albeit opportunistic that's about a $50 million top line revenue contribution and then Adam was talking about other levers in terms of data monetization looking at how we monetize our global footprint, where we've had tremendous growth and continuing to look.

Leverage all of the recruiting and retention initiatives that Nick is working on pulling.

Pulling on pricing looking at just continued tailwind from a macro perspective, that's what we're really bullish about over time as we think about our existing footprint, but then I think there's even opportunities on top of that because of the leverage in the business for cash flow generation that we have in terms of expanding into.

Two other adjacencies and so that's what we're excited about you mentioned the margin as well and I think that that's and inherent strength to our business model and there is inherent leverage there and if we get the top line going which we are definitely seeing some confidence and that in 'twenty. One we think the margin can follow.

Over time, and I will just close up with just one kind of final bow on this whole thought vikram and thats debt ultimately our goal is to make the real estate agent, the franchisee and the loan originator and and loan.

Mortgage broker smarter and better capable of helping the consumer and this whole process. So when it comes to all of these things, making each other better and we feel that that entire process works to benefit each other and this and that's how we create.

Greater tailwind and that that holistic growth.

That makes sense.

Just on the on the going back to the franchise fee.

You remind us sort of.

Is this I mean, it seems like you just increase and the U S is after a long time.

Can you remind us sort of the thinking more broadly on both franchise fees and and you'll do sort of a more.

Our systematic and Greece like you have I think in Canada, and if I'm not wrong.

And.

How did you sort of think about the how much to increase that number by.

Yeah. So thanks. Thanks Vikram. Good question, you're right now we're really focused on on the.

And you mean franchise fees increase we're always looking at and evaluating the value proposition and the tools and services that we're providing to the network and we will make decisions.

With respect to pricing going forward, but right now on what we've committed to is that the increase and the continuing franchisees.

Yeah, and the one thing I would just add to that is it's been approximately five years. Since we've made an adjustment and that particular category and given the investments that we've made and where we are it seemed to make sense on timing.

That makes sense and then just last one from a branding standpoint.

And maybe down the road, but given now you have sort of multiple bogged on multiple business line.

I'm wondering sort of.

Is there a view or thought there'd be a benefit.

Putting it all under one brand and I know its motto mortgage.

And boot and others, but I'm just wondering.

From a branding perspective, do you envision sort of having these business line under different brand or eventually could it just be one remax Brad.

Yes, that's a question that we've been.

And kicking around and analyzing very very carefully however.

For our benefits to having multiple brands and there are benefits to being known as the particular and very succinct focused leader and your space. So I'm definitely considerations that we've taken a look at but we're not necessarily.

Willing to strip away some brands that we've been building is very strong at this point to combine them and we want to we want to make sure. When people here are our name they know what that name refers to and that's brand matters.

You want to add a little of that day Victor miles of something like motto gives you. The example, where if we were to call that remax mortgage we wouldn't available and so outside of our network. So by calling it motto mortgage it creates and independent nature of that allows us to expand across the whole real estate ecosphere and solve for other brands. So I think as we look at adding brands, it's trying to for.

We're out as the only real estate specific where we're going to sell and then just the remax base versus whether we're going to sell outside and if we're going to sell outside we may keep branding separate so that we can still attract those people who may not be attracted to the remax name.

At the onset so thats sort of where we're looking at.

And that's a good point and thanks, so much for the time.

Thanks.

Your next question comes from the line of Stephen Sheldon with William Blair.

Yeah.

Hi, Thanks, good morning.

When you talk about the two when and when you think about the 200 million top line opportunity.

How much of that could come from better monetization of the agent base outside of the U S and Canada, Canada.

Any updated thoughts on how you can drive better monetization there overtime.

Yeah. So I mean, I think it's really a two pronged approach because I think if you think about overall our competitive advantage is our global footprint and the 50000 plus agents that we have and over 110 countries and territories, it's absolutely a competitive advantage.

We think over time, we could double that base and that's an incremental $10 million just at the existing revenue per agent, but I think the true opportunity set there lies with enhanced value proposition and really looking at how we leverage our data and technology infrastructure and Thats a huge focus of ours right now obviously, starting and the.

U S. A deliberate focus on Canada, and the near term here in 'twenty, one, but already proactively thinking about how we expand on that over time and increase that revenue per agent.

Q2 that base outside of the U S and Canada.

Got it Thats helpful.

And then within the 'twenty and 'twenty one guidance.

And apologies if I missed it for any detail on how much of a drag for adjusted EBITDA and you've included from the recent tech acquisitions when low Gadberry first I know you said the drag should moderate through the year, but just any detail on the rough full year drag you'd expect.

Sure Yeah. So looking at the reps full year drag is kind of in the two and a half to three and a half million dollars range and that's.

And that's embedded in the guidance I think the thing that's really exciting now and and want to make sure that was captured and it wasn't included in the scripted remarks is we do think debt.

The foundation is being laid here in 'twenty, one and Youre seeing that on the top line, but we would be disappointed if that kind of collective group of.

Acquisitions didn't contribute at least call. It 10 million more in earnings in 2022, So it's kind of a $3 million drag next year and then we're expecting.

We believe that we could see some some nice earnings.

<unk> and 'twenty two.

Great. Thank you.

Okay.

Your next question comes from the line of Matthew <unk> with Compass point.

Hey, good morning, maybe just a question for Nick.

You talked about kind of the agent consumer experience and your script I was wondering if you could just kind of talk a little bit more about how booz and and your technology team is really evolving that.

And we've had some kind of increased acquisition activity and the tech space between showing time home snap. So just wondering if you view and a competitive implications there.

Yes, so first off in terms of the agent consumer experience that is twofold. One that we're looking at kind of the buyer seller experience how they utilize our assets that are public and search and how they interact with agents, how we tie consumers to agents via the tool set and that's part of the REIT.

And that now we've been cautious about a year since launch we've increased it.

<unk> by over 50% year over year to the network, partly due to how we're engaging consumers and the platform. The other piece of it as we look at pulling the platform together for a better agent experience to serve the consumer is creating essentially a single type of ecosystem. One of the biggest challenges, we have and the real estate industry or an agent has.

And as disparate systems with multiple logins and agents to their business with so as we look to solve this if we make the agent experience more seamless that allows them to connect and state tied to their database and you can see that with the example on leads that I mentioned and also with.

And the testimonials and some of the results that we're seeing out of our first App, which is all tied to how agents are staying connected to their consumers. This is really showing a or shining a light on the fact that we have such low low inventory.

And agents being connected.

AI and machine learning and a single ecosystem is really driving overall efficiency for top producers.

Got it I appreciate the thoughts there and then switching gears, maybe one for ward just on the wind low acquisition wondering what work.

There has to do on the integration side and how quickly do you think the motto.

Motto franchises can ramp up on the William low.

Platform.

Yes, I think they can ramp up pretty quickly one is licensure, we have to make sure we're licenses and all the states that the models are and so trying to get up and all 38 states that motto is currently up.

And then getting some level of compliance around disclosures in those states as well fairly simple process. So it's really just taken it we're looking at we've ranked all the states that model or in.

Which ones we have the most mottos the easiest mottos you states and we've already ranked all that and started making calls and getting those particular models up and running.

I think our intent moving forward will be any new motto, we probably will put on to the we and low platform and quicker than even existing as we sell they won't know any difference. So we can get them using that platform fairly quickly.

But then on the existing models I think we can rollout during the course of this year and half.

The opportunity for any motto and any state that we're licensed in ready to go.

And remember I think the other thing is is that we know is going to sell outside of motto and.

The mortgage broker channel probably did on average on an average year. They do about $1 2 million loans within the broker channel.

Our total addressable market and we can just pick up 5% of that that's the kind of number that Gary was talking about we're talking about $50 million at eight and $900 on file. So the upside is very very possible there and that's what we're excited about not only mottos, but outside the industry as well because we think the technology that we purchased through the acquisition.

As outstanding when it comes to processing and can be manipulated to be more like a loan brokerage system and the future as well.

Great. Thanks.

Your next question comes from the line of Tommy make joined with K B W.

Hey, good morning, guys. Thanks for taking my questions. So just to clarify would that be the $10 million change through 'twenty, one to 'twenty two the $3 million drag to a 7 million contribution did that include motto or is that just more kind of the other tech enabled solutions.

Yeah. So I guess, a couple of things to keep in mind there right. If you look at the what.

What we were really saying with that 10 million is kind of if you look at the point estimate for the earnings guidance for this year as you move ahead to 2022, we'd be disappointed if that earnings didn't grow by $10 million. So just wanted to make sure I point that out and clarify it and yes look we are looking we are or we did include.

Motto motto in that basket of other companies as well just because it's historically been on net investment and so we're kind of just packaging everything together because we're excited that we think that the net investments across all of those businesses. This year are going to turn in 'twenty and 'twenty two.

Okay got it thanks.

And then.

And as we kind of think about those businesses do you guys have like a plan and their target dates on a long term organic growth rate for those businesses and not looking at modern remax, but looking at these and these new solutions that you've acquired.

Yeah. So we haven't really broken it out that way right. We're really looking at what what initiatives and what levers can we poll to just drive overall top line organic growth. We are expecting for 2021, even excluding the fee waivers that were granted and.

In 2020 kind of that mid single digit range of organic growth.

And I think it and we're starting to see momentum here on the top line and we really look at it more and in aggregate.

Okay makes sense. Thank you.

There are no further questions at this time I would now like to turn the call back over to the speakers for any closing remarks.

Thank you operator, and thank you to everyone joining the call today that concludes today's session and have a great weekend.

This concludes today's conference call you may now disconnect.

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