Q2 2021 Re/Max Holdings Inc Earnings Call
Good morning, and welcome to the Remax Holdings second quarter 2021 earnings Conference call and webcast. My name is Tabitha and I'll be facilitating the audio portion of today's call.
At this time I'd like to turn the call over to any shelf financing senior.
Senior Vice President of Investor Relations Mr. Sal.
Thank you operator, good morning, everyone and welcome to Remax Holdings second quarter, 2021 earnings conference call.
Please visit the Investor Relations page of Remax Holdings Dot 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.
Income acquisitions.
Continued execution on our strategy and the benefits of investments. We've made in recent years are having an impact with the recently closed acquisition of the Remax Integra North American regions were driving economies of scale on delivering a consistent high quality value proposition.
And are greater size brings more opportunities and create shareholder value.
We remain encouraged by trends in our key leading indicators remax agent account growth as well as motto franchise sales and open offices, we believe our strategy and investments set us up nicely for continued profitable growth I'm very excited about where we are and where we are headed.
Highlights of the second quarter include record revenue of 77.2 million and record adjusted EBITDA of $30.5 million adjusted diluted EPS of 63 cents, a net increase of over 8000, Remax agents year over year highlighted by growth across the board and the U S and <unk>.
Canada and internationally and Ah nearly 30 per cent year over year increase in Mato open offices.
Turning to slide for the landmark acquisition of Remax Integrys, North American regions bring over 19000 agents and 1100 offices into a company owned operations on on February earnings call. We said, we believed we could double the size of our revenue excluding the marketing funds and profit through executing on previously identified.
Both opportunities Integra acquisition was 1 of those opportunities and gets us roughly 20% to 25% of the way toward achieving that goal a great start.
This acquisition the most significant in our history, given its size and cross border market presence is the latest step and the transformation we've been undergoing over the past 5 years.
This time, we have challenged reinvented and or transform nearly every aspect of the company from a branding to our executive leadership team.
We've upgraded people processes and platforms at almost every level, we launched a new franchise brand ramped up our tech capabilities to expand and diversify our product lines modernized our marketing and strengthen our core business.
As a result, or a larger more formidable enterprise with greater opportunities for growth all while staying true to the principal's embraced by Dave and Gail <unk> when they founded the company nearly 50 years ago.
Much of our transformation has occurred through strategic M&A activity. Looking ahead, we plan to focus on integrating acquired integra regions and paying down our debt at the same time with over $100 million of cash on our balance sheet, we can and will take advantage of strategic opportunities to expand even more.
Acquiring independent Remax regions and extending our company owned footprint remains a top priority for capital allocation at the same time also look for complementary acquisitions and the franchising in real estate channels with an eye toward adding value across the entire on buying lifecycle.
Moving to fly 5 June presented on ideal trifecta for a hot housing market record home sales and prices as indicated in a remax National housing report and an increase in inventory for the first time in 15 months.
June typically the biggest month of the year for home sales soft sales soar more than 14 per cent over a strong may in fact June sales topped every other month and a 13 year history of our National housing report, which spans fifty-three Metro markets median sales price of $336000 was also a <unk>.
Record eclipsing the previous record of 320000 set this April and tightened may by 4.9%.
Meanwhile, and welcome news for frustrated buyers the number of homes listed for sale grew 1.9 per cent over the first increase since March 2020th inventory. However was still down 37.5 per cent from June 2020.
The fact that sales are up an inventory is increasing at the same time indicates that more sellers are coming into the market to list their homes and buyers are lined up at the door still hungry. Despite depend demick record high prices unlimited inventory Byers continued to take advantage of historically low interest rates and fight for a chance to become homeowners.
A milestone that seemingly still appeals to every generation.
Although some tenants are now forecasting a lower number of U S existing home sales and they were earlier 2021 is still shaping up to be a strong housing market 1 of the better ones, we've seen in the past decade.
The return of more sellers as a positive sign that may represent a small step toward a more balance market, which would be good news for all.
With that I'll turn it over to Nick.
Thanks, Adam Good morning, everyone looking at slides 6 overall agent count increased more than 6 per cent year over year. We added over 8000 agents worldwide. Since June 2020 with growth in each major geography in fact, our combined U S and Canadian agent Count is the highest it has been in nearly 3 years since Q3 of <unk>.
<unk>, despite the immense competition and the unusual circumstances of the past year. The strong housing markets in the U S and Canada are both an attraction and a confidence builder for agents.
In the U S are age account increase over 750 agents up over 1 per cent compared to last year in Canada are growth accelerated and we added almost 1800 agents up more than 8 per cent year over year.
Our growth in Canada is particularly notable given our position as a market leader there. We believe the events of the past year have increased agent awareness on the importance of having a strong brand.
Our national market share of more than 30 per cent in Canada is a difference maker, especially during times of uncertainty.
It is also 1 of the many reasons. We're excited about the acquisition of integrity North American regions. These regions have experienced outsized growth in recent years and should be a positive driver and accelerating our overall organic growth rate right now our focus is on integrating these regions as quickly and seamlessly as possible the process, which began right after club.
<unk> is off to a terrific start we're leveraging our experienced with previous acquisitions to help these brokers and agents maximize the advantages of our company owned regional operations.
There's tremendous amount of enthusiasm among the brokers and agents in these acquired regions and their excitement to share by everyone in the Remax corporate organization, and we say welcome aboard to all of them.
Turning to slide 7 we continue to make good progress on the technology front, receiving a claim for the efforts, while we innovate and see increased adoption of our offerings..1 of the highlights from 2.2 wars that are proprietary first App wanted Distinguished Innovation Award from franchise update media. Our first App was a first place winner in the annual.
[noise] franchise innovation awards, which recognize franchise wars that are creating and implementing the most original strategies for their franchisees.
The first App uses machine learning to analyze and agents friends family and acquaintances and then identify those most likely to list their home in the coming months. It has been a real difference maker. For example in terms of transaction sides Remax agents, who began using first prior to April 2020 increase the productivity by 9 per cent on.
On average versus the same period in 2019 the.
The remax value proposition includes new ways for busy agents to automate and streamline task, creating more time for them to focus on helping customers.
The first App helps agents grow their business by helping them refine their contactless predict those most likely to list their homes and masters strategic follow up activities. In this low inventory market first as a game changing tool exclusive to Remax agents.
When we initially encountered the first app, we saw possibilities to leverage optimize and innovate on top of its unique agent productivity suites, we thought to ourselves can we repurpose as powerful software to help our brokers recruit and retain highly productive agents and our team embrace this challenge and I'm happy to announce the answer to our question is a resounding.
Yes, we will be unveiling the new recruiting capabilities of the first half that our annual broker on a conference to be held in Austin, Texas next week. We're excited about this extension of the first capabilities and believe this is best in class first to market product that is truly unique to the industry.
This new offering is available only to the U S right now and like most technologies. It's a work in progress and will be growing and refining the functionality overtime. The recruiting functionality is free and exclusive to Remax franchisees.
It's 1 more worthy addition to our leading value proposition with that I will turn it over to ward.
Thanks, Nick looking at slide H U S mortgage market continues to enjoy a tremendous fear.
It is cortez on the U S will do over 4 trillion dollars of mortgage originations of 2021 likely the second best year on record.
This is good news for all mortgage market participants, including our motto franchisees many of whom are enjoying a strong year to day.
That momentum is carried over into our franchise sales were selling at a brisk great. Just a touch under last year's record pace is a continuation of the successful franchise sales track record we have consistently achieve since day 1.
We will celebrate our 5 year anniversary. This October and during that time, we will have average better than 1 franchise sale per week, we're trending towards selling between 60 and 80 franchises in 2021.
Assistant with last year and in line with our expectations office openings have accelerated as expected we're experiencing the echo effect of last year's inflection in franchise sales and are now witnessing a similar dynamic in office openings, which grew nearly 30 per cent year over year in queue to the.
The motto team does a terrific job of helping our franchisees navigate the licensing process in the multiple steps needed to get their motto offices open we.
We make it as simple as possible and it is a core part of the motto value proposition.
I'm proud of the great work. So many of our motto colleagues do behind the scenes I know our franchisees certainly appreciate their efforts and it shows in our results now.
I'll have 164 open motto franchises and we are within shouting distance of having 200 open officers by year end.
A big area of organizational focus for US is the successful integration of email <unk>.
We acquired we moved last year in order to solve 1 of our franchisees primary pinpoints, finding study dependable and economic loan process on services since acquiring Rainbow last fall, we have built out our marketing strategy sales journey project management and business operations structure, we continue to get licensed in.
More states with the goal of being license and as many of the 50 states as possible by the end of the year.
We're also ramping up resources to handle processing for anticipated motto loan buttons reprocessing, an increasing number of loans for a growing portion of the motto network each month and our training in the right direction the.
The best in class moving though technology provides the only enterprise solution on this time in the mortgage brokerage space. Although was purchase primarily to support motto franchisees. We mow will continue to serve clients and market his products throughout the mortgage brokerage industry, providing additional channel of growth per Remax holdings with that I'd <unk>.
To turn the call over to care.
Thank you Lauren good morning, everyone moving to 5.9 healthy housing market momentum in our core businesses. They continued impact of our investment and strong collection. Despite the pandemic Hum generate records financial performance during the second quarter, our financial results exceeded our expectations in those categories and we converted almost 70 per.
Your scent I've ingested EBITDA into free cash flow during the past 12 months.
With the recent clothing of the entire original acquisition the corresponding refinancing of our credit facility anarchy, leading indicators pointing in the right direction I believe we are positioned well for continued profitable growth.
Total revenue was 77.2 million and all time quarterly Hi, X, putting the marketing fine revenue was almost 60 million.
<unk> increase overall revenue by nearly 3 per cent as we are seeing year over year growth for both Lima and Cadbury.
F X lifted revenue by just over 1 per cent are organic revenue growth with up significantly given the pandemic and the fee waivers me employed a year ago and your over your comparisons are not particularly meaningful.
But I do think is noteworthy is the momentum we see in our core business, even after normalizing for the temporary COVID-19 fee waivers extended into 2 of last year and setting aside broker fee, we still generated a mid single digit organic growth rate as many of our organic growth drivers contributed the top line during <unk> you too.
Including agent account growth pricing motto first more targeted use an agent recruiting incentive to name. The most notable line if you X going on the burgers legacy run on our organic growth improvements by nearly another hundred based on point.
The magnitude of our top line growth isn't that drives on margin and we saw that in here too. We believe will see continued mid single digit organic growth for the foreseeable future.
Looking at 510, selling operating an administrative expenses were 38.8 million in the second quarter of 2021.
Significantly over the prior year similar to revenue the year over your comparisons for S. O N a or not meaningful due to the pandemic, while our staff travel is picking up in response to the importance of in person events and training that our customers are now eager to participate in our spending levels remain while behind our prepandemic level and 20th.
19.
On the acquisition friend, we continue to see margins from her acquisitions trending in the right direction. In fact Cadbury has already started to generate a monthly profit ahead of our expectation.
First and our mortgage business, which represents the combination Ah leen low and mono are both moving toward breakeven and we expect each to start generating a monthly profit likely sometime in the first half of 2022.
Turning to sign 11, we took advantage of favourable market conditions and recently I'm, sorry credit facility last month we.
We increase our capacity reduced interest huh and generally improved the terms of day agreement, we raise 460 million in term loan, which allowed us to pay off our existing indebtedness and find that $235 million acquisition of the Remax Integra region plus.
Plus we expanded our resolving facility to 50 million from the previous 10 million dollar cap.
We also pushed out the time frame of the agreement the new term loan facility is for 7 years, while the revolver has a 5 year term.
Financing the Integra acquisition exclusively with that made the most financial sense in light of the attractive conditions on that that market and should give us a more efficient capital structure going forward.
After adding the expected EBITDA contributions from the acquired region, we expect our leverage to increase to a still comfortable level of approximately 3 times on on that basis and approximately 4 times on a graph day Sir.
Moving to slide 12, the company's third quarter and for your 20th 21 outlook includes the financial results of the acquired Integra on North American region and assumes no further currency movements acquisition or does that teacher for.
For the third quarter of 2021, we expect agent account increased 5 to 6 per cent over third quarter 2020 revs.
Revenue in a range of 86, and a half to 91 and a half million, including revenue from the marketing funds in a range of 21, and a half to 23 and a half million and adjusted EBITDA in a range of 29 and a half to 33 million.
For the full year 2021, we are increasing our revenue guidance due to the Remax Integra North American acquisition. We are also increasing our adjusted EBITDA guidance is stronger than expected second quarter results and the Remax on Tiger acquisition for F. Y 21, we expect agent account to increased 5 to 6 per cent.
[noise] Overfull your 2020 revenue in a range of 321 to 336.9 including revenue from the marketing funds in a range of 80, and a half to 83 and a half million.
Up from 300 to 310 million and adjusted EBITDA and a range of 113 to 118 million from 103 to 107 million now I'll turn it back to Adam.
Thank you Kerry looking a slide 12, we ended the first half of the you're on a strong note with record financial results encouraging trends on our business and the most significant regional acquisition on our history. We believe we have real momentum right now and we were looking forward to an even better second half of 2021 does that operator, that's open it up for questions.
At this time, if you'd like to ask a question simply press star 1 on your telephone keypad.
Our first question comes from the line of John Campbell was Stevens.
Hey, Good morning. This is James Hall stepping in for John Campbell.
On Ah so on the on the Integra deal can you talk about how much was factored into the guidance from the back is it just the annualized run right and then taking 5 months worth of that for the remainder of the year.
Yeah. Good morning, that's a that's a very good way to look at it so very consistent in terms of how we love to add guidance. When we have to call back in June on the biggest thing that we've really updated in terms of our expectations in terms of the you know the initial 12 months of contribution has to do with a successful refinance on the credit facility I'm so into.
Cost of calmed down a little bit the biggest changes just looking at that adjusted EPS contribution. So we're looking at about 5 to 6 cents of improvement compared to the range that we gave back in June, but otherwise pretty consistent and just taking them annualize run rate is a good way to look at it.
Okay. Thank you that's helpful. And then switching gears a little bit I was just hoping that you could touch on the international agent count, although you're over here was still up we did see a sequential decline for the first time. There do you think that's a product of that side of the business maturing and could we expect a pricing leather being pulled on the international stage on it forward just looking for some updates.
On the side of the business.
Yeah, Hi, James It's Nick when we look at global the 1 thing that we have been considering a short answer no. We don't believe that it's hit and maturity point that that's impacting overall growth.
But when we look at last year, and we look at Covid. Many of the countries still to this day are experiencing uhm continuation of severe lockdowns that we believe is impacting growth overall, but we do anticipate a strong second half in that category and like you mentioned the growth the growth is there and so we believe some of.
It is just a temporary pass.
Alright, Thank you for that sounds good I appreciate it.
Thanks.
Your next question comes from the line of it come childhood with Morgan Stanley.
Taxing the questions. Good morning, maybe a cat carrier just to start with you. If you could just help with help break out in the quarter. What the contribution was specifically from Mark on some of the you know the newer businesses, you've you've added to the company and and and just going forward.
You plan to break that out separately or or create a new line item.
Yeah. Good morning, Vectra on things you know it's a good question in terms of how we break things that externally. We do show motto separately, the very happy with how the mortgage segment in general per farm. This quarter, we've really combine both the operations of motto and Meanwhile into that mortgage segment and I think 1 of the things that the big differentiation in.
The business right now and part of the transformation interest of multiple different levers that we can pull so mortgage contributed a little over 1 per cent in terms of our overall top line uhm organic growth from growth for the quarter. So really happy to to see that in terms of you know <unk>, obviously still a little bit of investment in that segment, both legacy motto as well as <unk>.
I'm continuing to to ramp up the the wind low business and and happy about the performance. There you know in terms of some of the other.
Pieces on the business again mid single digit organic growth across the business, excluding excluding the impact of the fee waivers last year as well as broker fee and some of the other businesses in terms of first and Gadberry. They're still you know relatively small uhm. So just given that the contribution that looking to break though.
Was out, but but contributing definitely to the overall organic growth profile.
Just to clarify so in the guidance can you give us sort of a a dollar amount arrange for you know just maybe motto combined with the other businesses.
Yeah. So in terms of in terms of the the full year kind of looking in you know high high single digit range in terms of annual contribution.
Okay. So what if that's how slow and then just building upon sort of the the the potential doubling of the revenue you've called out like a couple of different theaters, all set and I was wondering if you can just update us specifically on you know fees that you made a charge for the suite of services now that you can you know.
Agents can leverage off up and how you see that playing out specifically and then then secondarily on that bridge with the motto accelerating any any updates to that bridge in terms of motto contribution or growth.
Yeah. So what are we friends not the opportunity with respect to doubling the size of the revenue back in February really split that between the real estate business in the mortgage business on the real estate side of the house you know very excited about the acquisition of Remax Integra, you know that gets us a good you know kind of a quarter of the way in terms of that you know.
Have that could come from the the real estate side of the house, obviously other independent region acquisitions as well as monetization within on the existing network as we think about continuing to leverage of products like first I'm continuing to ramp the gadberry business, which we've seen.
I'm, a little bit of acceleration and just this quarter in other opportunities really provide some excitement on that side of the business. That's specific to your question on the mortgage side of the business and do we think that there's a tremendous opportunity. There. We've said you know since the beginning of motto that we think about a third of the remax franchisees in the <unk>.
Lots of roughly a thousand is our total addressable market, but we've seen some acceleration recently in terms of motto franchise sales to other real estate company participants so other national brand independent real estate companies N team keep in mind, there's 80000 other independent.
And franchise brand teams and companies out there. So if you even just add another a thousand potential from a tan perspective for some auto and then that doesn't even consider the capture from Ah Leen low perspective. So we do think that other $100 million on the mortgage sided isn't that is an exciting opportunity for us.
We look to grow the business over time.
Great. Thank you so much and then maybe for Adam or Nick If I heard you correctly I think you said, obviously you've grown the business through a lot of external acquisition, but it. It correct me if I'm wrong, but I think you said that you're you're still thinking or or you could still potentially look at other areas that are adjacent to the business.
To grow and just given where the Leverages I'm. Just wondering if you can just give us a little bit more color kind of are we done with the with the external growth or the as a bolt on acquisitions or is there more to come from here.
Very good morning, Uhm, we're always keeping our eyes on the market with respect to anything into homeownership lifecycle that could better provide a greater customer experienced or agents relationships that they have 1 of the really exciting and important parts of our network is the fact that our agents help so many people each year.
Did you such a great amount of business comparatively speaking to other agents and as a result, they're looked at as the expert and the provider of that council to their customers very very closely. So uhm, we do look at other opportunities to provide our agents on our franchisees the ability to provide additional.
Additional types of service to the consumer and as a resolved yes. We are exploring other opportunities do we have anything to eat up right now no. We do we don't at this point, but our eyes are open and we're always looking for how do we continue to enhance the the transactional process and no homeownership lifecycle.
Great. Thanks, so much.
Your next question comes on on a line of Fry and my Cat's name with feminine associates.
Hey, good morning Us. Thank you for taking the question on the on the Integra piece can you just remind us whether any identified cost synergies are baked into that that 12 month run rate EBITDA contribution and.
If if if not I guess or whether they are not how do you think about this cost synergies you know beyond beyond you see you're 1 of the initial integration.
Yeah. Good morning ran to those on your 1 cost synergies are are included and I think 1 of the things that we have I have learned already has it that integration is going well and will continue to you know optimize the cost structure and make sure that we're doing everything that we can to support our franchisees on our agents and continue to look at additional.
Levers that we can pull over time as those operations really do get combine in both the U as in Canada.
Got it thank you and on the for ward on the on the mortgage side Uhm. So within the wholesale channel the the price war going on and obviously from the wholesaler perspective, getting on sale margins compressing pretty meaningfully and and I guess, it's I think it's fair to assume that that's creating a pretty attractive value prop per mortgage brokers.
<unk> to pass along pretty good rates to the customer. So I guess I'm curious if you're if you're seeing that directly within your within your mortgage broker network and and also on this point in terms of the interest list are are you seeing new folks explore the broker channel either given what's going on or just you know regardless of what's going on.
When you look at kind of the interest list of who might be exploring the idea of amount of franchise today versus let's say your or 2 ago. Thank you very much.
Yep. Thanks rug, yes, all of the above I think you know the broker channel continues to grow are bullish on it I think some of it is the price wars out there, which makes it that password for our motto franchisees. They are using that tool of pricing to gain business you know year over year, our volumes up almost 70.72 per.
<unk>. So we're seeing great increases in I tie that a lot to the right. The right war that was going on but we continue to try to emphasize that I think oh, the wholesalers or trying to emphasize brokerage in general so they're supporting us as matos selling more bottles. They they love. The fact that we're tied to real estate Cup is where the purchase.
Money referrals happening because they all know revise are gonna go away soon and the question is you know who's going to add a purchase on we're seeing models had the purchase just an example, we sold to some national other brand teams and they're having great success, great catcher and it's exciting for them to participate in a lucrative nature more.
<unk> and they're sharing that they're being becoming Validators force and we think it's just a testament to the overall broker channel.
Great. Thanks very much.
Your next question comes from the line of time in a joint with K B W.
Hey, good morning, guys. Thanks for taking my questions.
C C note about cadbury's as profitable on from the other recent talk on acquisitions are getting close to profitability could you just remind me of the the business models. There are those Ala carte options for agents are they a recurring recurring monthly subscription to more transaction based in and what are the orange ones look like they're a longer time.
Sure. So from I'm from my first perspective, that's a subscription model. So I think the exciting thing there in terms of revenue contribution per agent is that it takes off our revenue contribution per agent by about 20 per cent uhm, it's about $500 of incremental revenue per agent to the top line on entirely recur.
Bring revenue base model.
In terms of of Gadberry also uhm generally recurring those are contractual terms and recurring in nature. They rolled through our franchise sales on other revenue line item.
And then on a whim on the <unk> side the thing from that perspective. It is well it is more transactional in very much balance is out the motto revenue, which is 100 per cent recurring so the we low revenue is tied to the number of loans that are processed through the wind little platform and so that is.
A fee per transaction file cough, so anywhere kind of between 700 and $1100 per file and and that.
Hi to transaction so as we look at them as we look at scale over the long term you know again with motto and we mow being combined we think that that business over the long term has the same margin characteristics.
As as the Remax brand Uhm as we look over time and scale consistent with what I was talking about earlier and then from my first and on a Gadberry perspective, you know there's still very excited about the opportunity is there a little bit earlier in the pipeline uhm, but definitely contributing to the overall value proposition.
That's great detail. Thanks, Sir are you guys see any it or expecting any on fries detrition of agents from the conversion from Integra to the on franchise I don't know if you've looked at previous acquisitions and kind of what's normal on how integra is progressing so far.
No overall, we don't because keep in mind, we have the same franchisees that were part of the Remax system and we have a number of the key leaders that will remain in in those positions moving forward. So more about this the synergies of scale of bringing them all under our umbrella, but still independently operating as.
They were prior to so no.
Great. Thanks, and then this last 1 is the is the incremental margin on broker fees. The the 1 per cent on commission that that flows up for the owned regions does that come on at nearly like 100 per cent margin or are there any actual opex. There in terms of crossing are supporting those transactions.
Does the vast majority of that does flow through uhm, but obviously you know we look at just how we need to support the business on the franchisees that we're collecting that money from it's all kind of tied through the you know from that perspective as well.
Great. Thank you.
Your next question comes from the line of Stephen Sheldon was William Blair.
Hey, Thanks to morning.
Yeah, it's been 2 quarters of strong sequential agent growth in Canada, and you Gotta go for a thousand net new agents. There. So far this year and I know the strongbark position that was helping but is there anything notable that you're doing a drive the increase recruiting traction in Canada.
Uhm, Yeah similar to the U S. Obviously, we have a focus on a lot of the programs that has been been rolled out over the past several quarters that are impacting it but I think the key thing in in Canada that as as you note. It is a very strong real estate market, but what really helps us drive that growth during a strong market is the amount of market share that.
We have across the country I mean on average it's over 30 per cent and so to have that strong of a market share position, we see that in markets. Even here through the U S. Those markets, where we have the highest percentage of overall market share make it easier to recruit and grow in strong markets.
All around.
Okay.
Got it okay.
And then I guess for Kerry I think a couple of quarters ago, you talked about the the technology acquisitions mean, a drag to earnings this year, and then becoming a tailwind to earnings and 2022, I think if I remember correctly by close to to maybe 10 million any updates on how.
<unk>.
<unk>, there, especially with the better than expected bottom line performance you talk about for this asset so far this year.
[noise], yeah, so a great <unk> great question, Steven and I think we're very excited spell about all of the acquisition you know some of them you know as I noted with Gadberry seeing some shifts the profitability a little bit sooner continuing to still invest across the board and not only gadberry, but personally I'm low as well.
We said that back in February that you know assuming that the housing market hangs in there and that there's no disruption from a macro perspective, yeah, we'd be disappointed next year. If we didn't see kind of an incremental 10 million dollar increase in profit holistically across the organization and we still you know at this point he'll he'll.
Excited about that and think that that's doable. That's obviously you know if it doesn't include Integra uhm at any contributions French either I mean, obviously, we're not providing guidance for 22 at this point in time, but still feel good about that initial 10 million and then and then an additional 10 million on top of that uhm as we look.
<unk> you know the the first 6 months of contribution 6 and a half months of contribution from Tiger next year as well.
Great. Thank you.
Your next question comes on on line of Magic I S that with Compass point.
Hey, good morning, and thanks for taking my question, maybe 1 for you Nick on the first App and the the recruitment piece of that would be great to just here what your envision day for that what capabilities that brings to the franchise owners from just to clarify did you say that that would be offered for free to franchise owners.
Yep.
Yes to answer the question about cost is going to be free to our franchisees at least the recruiting functionality piece of it. We're just leveraging the complete stack of first by taking what we have within G 73, and being able to connected in a way that we can create a mobile push in.
<unk> for recruiting so when we get specific to the functionality franchisee can determine which agents they would like to quote follow in their market and they'll see activities when they're recruits get new listings or clothes listings there'll be notified within an average of 7 and a half.
8 minutes from the time those changes are made within the MLS. So that they can increased communication and drive the recruiting process and so it's it's really kind of a first first to market in the industry. The way that this has been developed to keep the activities of the potential recruits and to make 1 to 2.
Touch communication available to the franchisees and we believe that it is a winning formula to the first 2 out of 5 steps of recruiting.
Got it that's helpful and will be exciting to see how that shapes up maybe 1 on capital allocation. Terry just wondering with you taking a leverage ratio up do you have any kind of target leverage ratio or or other target metric day, you're in a foreign how quickly do you expect to pay pay that debt down.
Yeah. So great question you have historically, we've said from from a leverage perspective 4 times on a gruff based on 3 times on on that basis, I've kind of where we're sitting now uhm, but obviously still have the hundred million dollars of cash on the balance sheet and then the strong free cash flow generation nature of the business. You know you add integra on to that.
And it just further strengthens the cash flow generation of the business. So I think you know from from a debt perspective, no pretty happy with where we are right. Now we think we <unk>, we have really optimize the balance sheet a little bit in the success that we had in terms of the refinance with good just given the ability to bring that some of the interest costs down.
[noise] diversify our investor based on that that time and improve the terms of the facility as well and so I think from our leverage perspective, we're pretty happy with where we are would look at cash generation in another avenue pet used for allocation going forward.
That's helpful.
At this time there are no further questions on turn it back over to Andy shops were closing comments.
Well, thank you operator, and thanks to everyone for joining us on the call today have a great week. This concludes the call.
Thank you ladies and Gents May you may now disconnect.
[music].