RE/MAX Holdings Inc. Q1 2023 Earnings Call
My name is Abby and I will be facilitating the audio portion of today's call.
At this time I would like to turn the call over to Andy Schulz Senior Vice President of Investor Relations Mr. Schulz.
Thank you operator, good morning, everyone and welcome to Remax Holdings first quarter 2023 earnings Conference call.
Please visit the Investor Relations section of Www Dot Remax holdings Dot com for all earnings related materials and to access the live webcast and replay of the call today. If you are participating.
Paging 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 and open offices financial measures and outlook brand expansion competition technology housing and mortgage market conditions capital allocation.
Forward looking statements represent managements current estimates Remax holdings assumes no obligation to update any forward looking statements in 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 first quarter 2023 financial results press release and other SEC filings 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 Steve Joyce, our Chief Executive Officer, Karri, Callahan, our Chief Financial Officer, and the Presidents and Ceos of our brands Ward Morrison and Nick Bailey with that I'd like to turn the call over to Remax holding CEO , Steve Joyce deep.
Thank you Andy and thanks to everyone for joining our call today looking at slide three we performed largely as expected during the first quarter as the housing market continued to adjust to higher interest rates and existing macro economic conditions.
Given these factors, we anticipated pressure on our U S agent count growth to start the year. However, we saw some encouraging trends begin to emerge towards the end of the quarter as the all important spring selling season gets underway.
The first quarter had several operational highlights including agent count growth in Canada, and the global regions regained momentum in motto franchise sales and a continued ramp in windlass business. We remain squarely focused on growth and we believe we're positioned for improved U S agent count performance.
In the near term.
We are executing on our strategic growth initiatives, we put in place last year and we remain confident in the upside that they can deliver in the long run.
We are also continuing to invest in critical growth related activities, such as our annual Remax and motto conventions, both of which had robust attendance demonstrating the value our affiliates continue to derive from coming together to share ideas.
We are directing our capital Opportunistically, so that we're best positioned to grow profitably as market conditions improve.
Some of our notable quarterly financial highlights included.
Remax Holdings total revenue was $85 4 million down only six 2% compared to last year.
We generated adjusted EBITDA of $19 9 million and our adjusted EBITDA margin was 23, 3%.
Terry will address what impacted margins during the quarter later on.
Adjusted EPS was <unk> 26.
And we continue to execute on our stock buyback program.
Regarding the CEO transition our board has hired Egon Zehnder, a global leadership advisory firm to aid in the selection of the company's next leader.
Vendors robust a comprehensive process will include an evaluation of both internal and external candidates and is expected to be completed this summer.
With that I'll turn it over to ward.
Thanks, Steve turning to slide four our franchise sales regained momentum as Q1 unfolded and we finished the quarter on a strong note. We sold 10 franchises in the first quarter. This first quarter sales paces in line with prior years. When we ended with 60% to 70 franchise sales. So it's too early to say we're back at pace.
We are encouraged by the solid start to 2023 and the interest we see in the marketplace. We noted last quarter that we witnessed a tight correlation between the rising interest rates and a slowdown in our franchise sales since Q2 of last year. As a result, it's positive to see franchise sales accelerate as interest rates began to stabilize in the back half of the quarter our pipe.
Your line looks good and we expect more encouraging results, especially if the macro environment continues to cooperate.
We're continuing to support the growth of our mortgage business by investing in our sales resources in terms of our progress on the motto side. We have hired Additionally, highly qualified sales professionals, but we've also experienced some attrition. The good news is we're trending in the right direction and we expect to be fully staffed later this summer.
It's an even better story on the window side, we have successfully doubled the size of windows Salesforce and the results had been measurable we saw windows business increased month over month throughout the first quarter as we met or exceeded our expectations in terms of both the monthly number of loans submitted and loans cleared the close there are multiple reasons for when those increase.
<unk> success, including a full sales team with a mature sales process and built in accountability.
Creasing enthusiasm for Windows services by both our motto networks as well as the broader industry more motto franchises using the Willow loan brokerage system that is integrated with wingo processing services and a larger motto network.
Recall that our long term goal is to generate $100 million of annual mortgage related revenue with half of that coming from motto and half from wingo for motto do we achieve its $50 million annual revenue target, we need to have between 901000 franchises open and pain is the full $4500 per month continuing franchise fee.
We believe we are well on our way towards achieving that goal and the expansion of our sales team should help us get there even faster.
On the wheel side. The masses are also fairly straightforward. If you assume roughly 6 million mortgages annually with about 20% of those being completed by the broker channel you arrive at $1 2 million loans, which is a reasonable proxy for when those current total available market opportunity. If we can capture a process just 60.
Thousands of those loans, then wingo should it's $50 million annual revenue target.
We believe the growth success and long term potential of our mortgage business is due to the unique and compelling value proposition motto Nemo each offer.
Ancillary services like mortgage provide real estate entrepreneurs with attractive opportunities to diversify their revenue and earnings something that is very important during changing market conditions over 70% of motto sales have been a real estate professionals, who are close to the real estate transactions, namely purchase originations and <unk>.
Proximity is the key to success for many of our franchisees with that I'd like to turn the call over to Nick.
Thank you ward moving to slide five as many of you know this is the time of year. When several major industry rankings are released and once again. These reports confirmed a leading productivity of Remax agents. It's a good reminder, that remax agents are far more productive than their competitors in terms of closing sales a cornerstone of our value proposition. According.
To the data in the 2023 real trends 500 survey Remax agents continue to outperform the competition in both transaction sides and sales volume on average when compared to the country's largest real estate brokerages.
According to the rankings. This is the 13th straight year that Remax agents outsold competitors by more than two to one in terms of transaction sides.
Max agents averaged $13 six transaction sides, whereas all other agents at participating brokerages averaged six two sides and remax agents sales volume averaged 67% more than our competitors.
Remax also led all brands and brokerages qualify them for the 2023 real trends Nations Best list a related ranking to the real trends 500, the performance of the Remax brokerages on this prestigious list confirms what we know to be true Remax affiliates are a top choice for consumers, who want to buy or sell a home, especially as the market <unk>.
Balances.
Turning to slide six.
After 50 years in business and more than a decade of maintaining the two to one productivity advantage, we've seen a wide range of economic and housing cycles, and we know how to navigate them. While many others are currently cutting back we're strategically investing in our network to better position us as the market regains momentum.
We are directing investments to support future growth through our team's initiatives our focus on conversions mergers and acquisitions and our ongoing technology launch and the April launch of Max recruit the most comprehensive growth program, we believe we've ever developed.
Because of the extra crews the most recent announced effort, let's talk about it first Max recruited as a combination of education coaching accountability and resources with the prime focus on building the skills of local affiliates to grow their own brokerages or teams and then coaching them to take consistent action.
We rolled it out to U S affiliates and the initial response confirmed a significant amount of interest all across the country and learning how to improve the growth of their remax brokerage or team.
For us the takeaways clear remax broker owners managers and team leaders are eager to grow their offices are willing to invest in the new skilled strategies and systems to support them collectively their agent count growth drives the networks agent count growth, so by helping them build their business, we're building hours as well.
And the larger network with greater market presence benefits everyone involved we're very excited about the potential impact <unk> could have on our agent count numbers, both short and long term.
In my remarks about Max recruit you may have noticed I mentioned team leaders as well as broker owners with teams playing such a huge role in the industry now we absolutely view them as potential catalysts for growth. So Max recruit includes team leaders alongside our franchisee it all fits together larger teams larger brokerages larger network.
Speaking of larger teams. The teams pilot program. We launched last August is beginning to drive some additional desired outcomes in the five pilot States of California, Florida, Maryland, New Jersey, and Texas, we've added or grown larger teams at a higher rate than we had before.
If you recall the program includes a package of training technology and attractive economics for teams of six or more whether it's remax to ensuring to six members large teams joining the network or retaining existing teams at a higher rate. This initiative has compelling potential this spring and summer is the primary recruiting season progresses.
Additionally, with respect to our program around brokerage conversions mergers and acquisitions, both the numbers of closings and the pipeline continues to grow.
We successfully converted or help some of our existing affiliates merge or acquire many smaller brokerages and we have more sizable transactions, whose announcements are imminent. In fact, one example, most recently would be a conversion, we just announced yesterday of an independent 70, plus agent office in long Beach, California, very exciting news and more to come we are.
Also believe once we announce them publicize additional larger additions that proof of concept will help build on our momentum, especially for the larger opportunities.
The rollout of our new technology offering Max Tech powered by <unk> is continuing at a better than expected pace. We started in Canada late last year and because of its success, we accelerated the U S launch to the first week in January which was two months earlier than anticipated.
In the U S rollout is progressing nicely, but we continue to hear very positive feedback from our network to date more than 62000, remax agents across the U S and Canada have onboard it or are actively in the process of doing so giving them access to the enhanced capabilities of this industry leading technology.
Max Tech powered by Kv core is being provided at no additional cost to affiliates. So it represents another major recruiting advantages to brokerages and teams alike.
It also represents another remax resource that can help agents and teams be even more productive than they are now so it's an optimal fit with our network and results oriented culture.
One last noteworthy highlight is that we celebrated the 15th anniversary of Remax at this year's <unk> Conference in February with nearly 10000 agents from 74 countries in attendance. It was the largest conference in 17 years, demonstrating the strong network engagement that exist currently.
Back from attendees confirms the investments into strategic direction, we're making are both welcomed and creating great excitement within the network with that I will turn it over to Kerry.
Thank you Nick good morning, everyone moving to slide seven first quarter revenue declined approximately 6% to $85 4 million. Excluding the marketing fund revenue was just over $64 million a decrease of approximately 6% compared to the same period last year.
This decrease was driven by negative, 5% organic growth and adverse foreign currency movements of 1%.
Organic growth decreased primarily due to lower broker fees and to a lesser extent a reduction in U S agent count, partially offset by higher revenue from the annual Remax season convention hiring.
Higher interest rates continued to adversely impact housing affordability and weaken housing demand, resulting in fewer transaction and by extension our broker fee revenue.
Good news is that overall transaction value appears to be trending a little bit better than many expected and there are reasons for cautious optimism for the spring selling season.
Turning to slide eight Q1, selling operating and administrative expenses increased two 7%.
$9 1 million due primarily to an increase in expenses associated with our annual Remax agent Convention and bad debt expense, partially offset by lower personnel expenses and lower professional team a.
A fantastic attendance at both our Remax and motto convention during the first quarter reinforced the importance of in person education and networking opportunities to our affiliates. However, given the robust participation related expense that was ran a little higher than I expected.
Additionally, while we believe the overall health of both our Remax and motto franchisees remains strong we have seen a modest decline in collection activity, which negatively impacted bad debt expense during the quarter.
This is not surprising given the rebalancing housing market and its consistent with what we have experienced during other periods of macroeconomic uncertainty throughout our 50 year history.
We recognize that some small business owners might require a bit of temporary assistance to help them bridge through a rough patch and thats, what we are experiencing right now.
Moving to slide nine before I get to our outlook. There are a couple of items I want to briefly mention.
Returning capital to shareholders remains a top priority for us in 2023, while we have slowed the pace of our buyback for the time being as we carefully monitor our performance and cash flow we plan to be more active as conditions warrant. It we still believe our buyback is an excellent allocation of capital given our current valuation.
Turning to guidance last quarter I noted this may be the most challenging environment in which to forecast future results that I've seen in my seven years, as CFO and I still feel that way today.
There are reasons to be more optimistic about the housing market for the balance of 2023, there is still a fair amount of uncertainty and we remain guarded from a forecasting standpoint. We believe we are currently trending under the midpoint of our full year adjusted EBITDA guidance range.
Company's second quarter and full year 2023 outlook assumes no further currency movements acquisition or divestiture.
For the second quarter of 2023, we expect agent count to change negative a half percent.
<unk>, 5% over second quarter 2022 revenue in a range of $79 million to 84 million, including revenue from the marketing funds in a range of 20 million to $22 million and adjusted EBITDA in a range of $24 5 million to $27 5 million.
For the full year 2023, we expect agent count to change negative 1% to 1% over full year 2022 revenue in a range of 315 million to $335 million, including revenue from the marketing funds in the range of $83 5 million to $87 5 million and <unk>.
First of EBITDA in a range of 95 million to $105 million.
Now I'll turn the call over to Steve for closing comments.
Thanks, Gary looking at Slide 10, we remain focused on our long term strategic objectives, and we are continuing to invest in our ability to grow profitably in the future.
Our priorities are to reinvigorate our U S agent count growth and accelerate the expansion of our promising mortgage business. We are executing on our strategic initiatives announced last year. We believe each of our initiatives has the prospect of boosting our organic growth rates and driving meaningful value.
Over the longer term.
So the macroeconomic climate has dampened their near term impact we believe our initiatives will pay increasing dividends when the housing industry resumed growing again.
With that operator, let's open it up for questions.
Thank you.
As a reminder, if you would like to ask a question press star one on your telephone keypad, and we will pause for just a moment to compile the Q&A roster.
We will take our first question from Anthony <unk> with Jpmorgan. Your line is open.
Okay, Thanks, and good morning.
Just carry on the bad debt.
Matter can you talk about just maybe historically how long it takes.
For this stuff to play out because you mentioned it shouldnt be a big surprise given what's happening in the markets I'm wondering if you can maybe dimensionalize like historically like.
What you are reserving for dollar wise or what's on the watch list or just how you approach it.
Sure. So good morning, Toni Thanks for the question when we look at bad debt expense that we have looked at it on a historical basis I think there's a couple of things to keep in mind first when you look at it year over year and if you look at the last couple of years since the pandemic, we've really had very strong collections.
And really kind of abnormally positive.
Consistent with our historical trends, if we go back and look kind of pre pandemic first quarter of 2019 bad debt expense levels were very comparable to where they are now on a smaller base because that was prior to the acquisition of Integra. So we're kind of getting back to business as usual given what's happening in the end market a little bit of volatility but.
We have seen actually even some encouraging trends in collections in April activity as well. So it wasn't something that really caught us by surprise, we know that the.
Obviously, the end market is a little bit challenging, but we are encouraged with some of the activity that we've even seen from a collections perspective in April .
So the anticipation is that this level is not one thats going to.
It should deteriorate further.
Youre kind of where you think you would normally be in this environment.
Yes, So we think based on where we were in Q1 and based on a little bit what we've seen in April we expect actually Q2, and the rest of the year to come down just a little bit from what we saw in the first quarter.
Getting down to that maybe that three quarters of $1 million run rate basis on a quarterly basis for the rest of the year.
Okay got it.
Then.
Do you have a view on just where you think rates might need to go to see a bit more of a move up in existing home sales I mean, just given you all have a lot of data and experience.
What would you think would be.
Our level that we'd see a real pickup in existing home sales.
Nick once you take that.
Sure.
I think what we're seeing is part of the rebalance with rates overall, as we're seeing a little bit better consumer confidence as we come into the spring market of kind of rates stabilizing a bit and even though we believe this year that we'll see them bounce around somewhat.
We're still when you look at the overall say average over the last 10 years rates are not that high they're just still in comparison to what they were two years ago.
So what we've seen historically over the past just short term quarter or two is even when rates are.
Dropping $25 50 basis points, we see.
Rush of activity to the market, we see showings increase pending start to go up so I don't think it's a very big number that's going to drive additional activity.
Okay, great. Thank you ward.
Or any additional thoughts.
No I think just the stabilization is the key so far this year.
By getting sort of in a stable range that the consumer.
It really is having to decide is now the right time.
And I think they are I think they're starting to move off the science I think the spring selling season is starting to go and I think some of that is tied to the interest rate stability in the market today.
And we will take on next question from John Campbell with Stephens. Your line is open.
Hey, guys good morning.
Good morning, maybe just one hey, good morning, maybe one for Nick but Im hoping you guys can provide an update on the competitive landscape kind of what youre seeing and hearing also from agents. The surveys rerun tell us that agents are increasingly willing to stay with where theyre at Im curious if your retention levels or rate of attrition is nearing that and then additionally, if.
If you could speak to any changes you might be seeing in the market from a competitive standpoint.
Well, John we're watching your rewards.
We're clear here, Nick why don't you take a shot at it.
Sure.
In terms of competitive landscape I think we're seeing a couple of things first and foremost we're not seeing competitors write large checks is signing pluses to agents. There are several competitors that use that as their sole recruiting tool and so that seems to slow considerably.
Considerably and almost become nonexistent. The other thing that we're seeing is.
When you see contraction in the market just like the total agent count numbers of <unk> Youre, starting to see the contraction, especially after the first of the year after licenses renew.
Do see agents based on their 24 to 36 months renewal cycle.
If they are in a a company that is quote free to just hang your license regardless of productivity those agents typically stay parked.
Where you look at just differences with our organization as we were not known for somewhere just to park a license if youre not productive and so those companies that are maybe see people that stay but where we're seeing the most movement is we've moved from say two years ago agents trying to maybe save $100 a month to now aged.
You are saying I need another closing and this is where our productivity comes in and has maintained we've maintained the course, even last year. Despite the changes of the two to one that I mentioned in the scripted remarks on productivity, but that's where we're seeing the most activity in our recruiting numbers right now is.
Agents need more deals and that's where.
That's where our competitive advantages, we believe that will shine this year.
Okay. That's helpful and Steve Thanks for reading, our reports I don't know anybody actually read those.
And we're getting better.
And work that off your annual guidance Youre, assuming a 5% lower back half revenue, but an 18% lift in EBITDA, so pretty pretty meaningful step up in margin.
You spoke to the lower margin <unk> revenue you also talked to some of the challenges with the collections and I'm thinking that explains.
A good portion of the lift from the front half, but if I look at your implied back half guidance versus last year.
Are you assuming that EBITDA drops at basically the same rate as revenues that would be.
We think that'd be a very good outcome for you guys, just given how heavily youre cost base ways towards fixed cost.
So is there a looming cost action.
Offset that revenue decline or I'm missing something else, that's worth calling out.
No I think youre right as you looked at kind of the front half of the year John in terms of what really kind of weighed on margins in the first quarter with respect to increased costs associated with the convention as well as bad debt expense.
If we look at bad debt expense on the back half of the year, Although we expect it to moderate a little bit it's still going to be up a little bit year over year I think the best way to maybe think about it is on.
On a kind of an <unk> on a run rate basis for the rest of the year, we're kind of looking in that $40 million range and so maybe that helps our $40 million per quarter.
Maybe that helps kind of triangulate what youre looking at.
Okay, we'll take a look at that thank you so much.
And we will take our next question is from Tommy Nick joined with <unk>. Your line is open.
Hey, good morning, guys. Thanks for taking questions.
Could you give a little more details on the team's initiatives and perhaps just start off just rehashing kind of how long it's been live in each geography, and if you could give any more numbers kind of him.
Pick up in my company teams, you've seen whether it's just smaller remax teams for me up to the larger teams or its actually recruitment of teams from other brokerages and then ultimately what would you say has been sort of net revenue and earnings or margin impact from the formation of those teams.
So the so the results are sort of now starting to build which is whats been really encouraging Nick why don't you go through that.
Sort of what we've experienced and then what we're hearing and looking at for the for the next couple of months.
Sure. Thanks, Steve So we started and announced the pilot August of last year and it was intended to be a 12 month pilot, which we're still looking at we're looking at the results of it in three categories and although we're not prepared to share specific numbers. It was do we have current teams expanding to six plus so getting larger or we recruiting team.
<unk> at a higher rate of six plus and are we retaining our teams of six plus those are the three categories that we're using to benchmark. We can just say at this point that we're still just over midway in the pilots. So there'll be more to report later this year.
And I mentioned the five states that it includes currently we're going to continue to watch those results over the next quarter.
Or two and determine what our final course of action is for teams across the entire U S. But I can tell you that we're seeing in all three of the categories that we're measuring.
And uptake and positive signs in all three so more to come.
Yes, and I think from our standpoint, we talked about this when we launched it.
Our view was.
We need to do something significant to to reduce the amount of defections, we were getting in <unk>.
Our larger teams and.
Our view is we came out with a very aggressive program that.
Bob.
Then well received the conversations are very positive and in the three categories that Nick mentioned, particularly the retention category.
We've done something that has shifted the tide of what was occurring and then the real question crosses into shared numbers with you would be and how much have we shifted it and so partly it was defensive because we wanted to retain the teams that we had but we also put in a significant component after going after competitive teams as well and that seems to be worse.
And so we'll see how well.
Got it thanks, and then on a different topic.
Number is kind of baked into the guidance.
Terry.
Yes, so with respect to the guidance from that perspective. It doesn't include an artist ongoing professional fees to defend the company with regards to any litigation matters that are outstanding but that is all of that is included at this time.
Hello.
Got it thanks Darren.
As a reminder, the star one if you would like to ask a question and we will take our next question from Ronald Camden with Morgan Stanley . Your line is open.
Hey, Good morning, just a couple quick ones from me.
Starting with the guidance on the.
The adjusted EBITDA.
I think you talked about maybe trending a little bit below.
Sort of the midpoint, if I heard that correctly, maybe can you talk about what are some of the moving pieces as it agent count isn't margin.
The bad debt.
Maybe can you talk a little bit about the move.
Pieces there.
Sure.
Yes sure so.
We're very happy with obviously, how the company is performing in light of things.
So it's a difficult time to forecast on obviously on the full year.
As I mentioned earlier bad debt expense and some of the headwinds that we had in the first quarter as part of that.
And then we're just kind of being pragmatic in terms of.
You see the top line as well so it's a little bit of combination in terms of the ongoing investments in the bad debt expense and a little bit of volatility on the top line.
Yeah, and then I think when we look at it.
We started the quarter.
With a question Mark as to Okay. We are.
Forecast to be sort of at the rate we were at the end of the year.
And that sort of played out during the quarter. The interesting thing and the encouraging thing I think and I wouldn't read too much into it but in March things look like they were turning up motto had a nice turnaround in March that looks like that momentum will continue after.
Pretty shaky end of the year.
Beginning of the year and so and so we're encouraged by that and then on the.
Clearly, we're making a lot of progress Nick's team has the ROE the most robust.
Set of companies that we've been working with in a long time set up in a lot of those deals are beginning to come in.
And then we already talked about the team's initiative and so.
We'll see how the year goes and see what the macro environment is we've got a lot of upside because we did not bake any yet as we were very clear and so if we get any uptick at all and thats going to be very positive.
For us in particular as it relates to brokerage fees.
That is is that as a strong flow through so that will help margins if that picks up as well. So our view is we're.
We're doing what we said we're going to do we're investing in the business, we're continuing to return capital to shareholders, particularly through the dividend and we are and we're looking at what could be an improving environment and if that environment improves that's not baked into our numbers and so our sense is.
We're we're seeing some positive signs and we'll see if they if that continues through the rest of the year.
Great. That's helpful and just switching gears to the castle statement I see $3 million of operating cash flow in the quarter.
Which seems like a pretty low conversion versus the adjusted EBITDA. Maybe can you talk about are there any sort of timing or one timers.
And how do we think about that EBITDA conversion to cash.
<unk> flow for the full year.
Okay.
Sure. So the first quarter is always seasonally low for us as we look at earnings to free cash flow conversion.
Our four convention this year was a little bit.
<unk> given the 50th anniversary celebration and that was also contributing just under the pressure that we saw in the first quarter from a margin first and Thats also flowing through to the full year.
So expect the seasonality of the industry and as a business to pick up and as we look at it on a full year basis kind of looking at earnings to free cash flow on an adjusted EBITDA basis kind of in that 50% to 55% range.
So getting back and really kind of being a hallmark of the business.
I think that that could be sale, but it is there any updates on that on how that's going and how you guys are thinking about that or do I have that wrong.
No no no we updated so we've hired.
And they're there.
Well known recruiting firm, particularly as it relates to CEO searches and part of the reason we hired them is they have a very thorough.
And analytical approach to vetting candidates were vetting candidates, both internally and externally.
Program.
Progress that we would fully expect to be bringing in.
Permanent leader.
Sometime this summer.
Okay, and Thats still on target.
Yes.
Hey, good morning, first one here on U S agent count trends ticked down sequentially here for three quarters, but I think you also noted some more positive trends. There later in the first quarter. So can you provide some more detail on what youre seeing there what specifically drove the more positive trends later in the quarter and just gen.
I guess, how youre thinking about U S agent count over the rest of the year.
Thank you want to take that.
Sure. So starting in Q1, when we look at January what we believed that we see and have seen their typically in January as we see our brokers kind of do a roster cleanup. If you will based on our model I mentioned earlier, we're not known for a place to hang licenses for non productive and so after the first of the year, we do see that I think that all.
<unk> is combined with the fact that there was seasonality roster cleanup and rebalancing of the market kind of all took place simultaneously through the end of Q4 and the beginning of Q1, but as we finished through or went through Q1.
We saw those losses or was that improvements to the agent count overall, and we're walking into Q2, which is kind of that prime recruiting season.
And that combined with the initiatives and master crews that we mentioned we are optimistic of how that'll continue to reverse the trend of the first of the year for many reasons, but also.
Continue to hopefully drive growth throughout the rest of the year.
Got it that's helpful. And then maybe for reward on motto franchise sales picking back up I guess anything to call out there in terms of who is opening up new franchisees are franchises between existing remax franchisees versus maybe those not previously affiliated with Remax.
So it sounds like sales productivity has been good there even with some higher attrition so.
I guess have you have you had to make any changes there to stand that to get I think you talked about getting getting to full sales capacity. This summer so just any detail there.
Sure I think the biggest thing is we continue to sell a majority over 70% of real estate companies and real estate teams. There has been an uptick I would say an independent real estate companies and real estate teams recently.
And I think that just comes from when rates of change when things slow down a little bit in the real estate industry. They realize they need to get in the ancillary services and so we are.
The right connection to get into that particularly in the mortgage segment. So I think thats, where we've seen the most of our interest is from real estate companies, who saw a little bit of a slowdown in the real estate side said, Hey, we need to make sure we're going across the transaction mortgage title insurance et cetera.
Motto has been a good fit so as our salespeople got out they really are concentrated on those real estate companies that have purchase originations.
That's where we're seeing the most.
Pack right now so we're feeling positive about it until the rest of the year.
We'll see what the macro dictates, but is that rate stabilized I think it really did bring the pipeline back up.
Great. Thank you.
And we will take our last question from Ryan Mckenna with Zelman and Associates. Your line is open.
Hey, good morning, Thank you for taking the question.
Just one on Canada.
I guess im hoping maybe you can give us just an update generally on Mac.
Macro.
How things are trending directionally, maybe maybe relative to the U S housing market.
And then on the on the agent count side of things obviously candidates.
<unk> seen very strong growth the last couple of years good year over year numbers.
On a sequential basis, there was a little tick down and I think Thats fair.
First time, we've seen that in maybe 10 quarters.
So I guess I'm just curious is that a function of maybe kind of broader macro dynamics within Canada or is that.
Maybe a function of just having that really strong growth. The last couple of years on top of really good penetration that you already have in Canada.
Any thoughts there would be helpful. Thank you.
Yes, I'll, let Nick cover this in detail, but in general.
It's still positive signs.
Canadian market weakened.
Not as much as the U S market, but it is partly that is driving some of those results but.
From the standpoint of.
Particularly in the agent count growth, we still see it as a very strong positive which made the acquisition, we made a year and a half ago all that much more positive for us and so Nick do you want to cover off kind of the broader market and then how we're doing.
Sure well speaking of Canada, I think we experienced some similarities in both Canada and the U S with the timing of interest rate changes some rebalancing of the market, Canada was a little unique and they had a couple of things happened with the announcement of their three year immigration plan.
Combined and that was partly to fill the need for new construction and housing labor, but it was also combined with the fact that they put somewhat of a moratorium on.
International buyers and so we've seen this before in Canada, and usually when those announcements are made we see the market react which I think is what we did over about 90 days.
But the good news is in looking at Canada. The number one driver that I think contributes to the ongoing growth there is the amount of market share.
There are areas in Canada on average we have number one market share in a vast majority of the markets, where we're located and it's not just number one but its upwards of in many cases, 30% in some markets, even higher and so carrying that type of market share consistently across the country contributes to.
Driving a lot of continued growth and since then, especially since the first of the year, we did see Canada decline a little bit, but we've already seen that rebound even faster than what we've experienced in the U S. And so we continue to have some really positive signs as we move through 'twenty three in Canada.
Great very helpful. Thank you.
And with no further questions I will now turn the call back to Andy <unk> for closing remarks.
Thank you operator that concludes today's call. Thank you to everyone for joining us have a great weekend.
And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
Sure.
[music].
Okay.
Sure.
[music].
Understood.
Yes.
Yes.
Okay.
[music].
Sure.
Thanks.
[music].
Yes.
[music] first.