Q4 2023 RE/MAX Holdings Inc Earnings Call

Operator: Good morning and welcome to the Re-Max Holdings fourth quarter and full year earnings conference call and webcast. My name is Krista, 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, you may begin.

Good morning, and welcome to the Remax Holdings fourth quarter and full year earnings once you're twenty-three earnings conference call and webcast. My name is Krista 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.

Andy Schulz: Thank you, operator. Good morning, everyone, and welcome to Re-Max Holdings' fourth quarter and full year 2023 earnings conference call. Please visit the investor relations section of www.remaxholdings.com for all earnings-related materials, including our standard earnings presentation, and to access the live webcast and the replay of the call today. 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, credit facility, dividends, share repurchases, litigation settlement, strategic and operational plans, and business models. Forward-looking statements represent management's current efforts. Re-Max Holdings assumes no obligation to update any forward-looking statements in the future.

You may begin.

Thank you operator, good morning, everyone and welcome to <unk> Holdings fourth quarter and full year 2023 earnings conference call.

Please visit the Investor Relations section of Www Dot Remax, holding <unk> dot com for all earnings related materials, including our standard earnings presentation and to access the live webcast and the replay of the call today.

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 credit facility.

Share repurchases litigation settlement strategic and operational plans and business models.

Forward looking statements represent managements current estimates Remax holdings assumes no obligation to update any forward looking statements in the future.

Andy Schulz: 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 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.

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 2023 financial results press release and other SEC filings also we will refer to certain non-GAAP measures on today's call.

The definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website.

Andy Schulz: Joining me on our call today are Eric Carlson, our Chief Executive Officer, and Karri Callahan, our Chief Financial Officer. Our brand leaders, Ward Morrison and Amy Lessinger, are here and will join us for Q&A. With that, I'd like to turn the call over to Re-Max Holdings CEO, Eric Carlson.

Joining me on our call today are Eric Carlson, our Chief Executive Officer, and Karri Callahan, Our Chief Financial Officer, Our brand leaders Ward Morrison and the email singer are here and will join us for Q&A.

I'd like to turn the call over to <unk> Holdings, CEO Erik Karlsson Erik.

Eric Carlson: Thank you, Andy, and thanks to everyone for joining our call today. I'm very excited to be with you on my first earnings call and to be leading the company during this pivotal time for our team and the broader housing market. Our industry-leading brand, attractive financial model, and unique competitive advantage create substantial opportunities in today's real estate landscape. As many of you know, I'm relatively new to this position, having joined the company in mid-November, and I continue to be bullish about our future. Today, I'm going to share some initial observations from my first 100 days, and Karri is going to discuss our fourth quarter performance in more detail and give you our Q1 and full year 2024 outlook. And, as Andy mentioned, Ward and Amy are also here for what we think will be an informative Q&A session.

Thank you Andy and thanks to everyone for joining our call today I'm very excited to be with you on my first earnings call and to be leading the company. During this pivotal time for our team and the broader housing market, our industry, leading brand attractive financial model and unique competitive advantage and create substantial opportunity in today's real estate landscape.

As many of you know I'm relatively new to this position having joined the company in mid November and I continue to be bullish about our future.

Today I'm going to share some initial observations from my first 100 days.

And then Terry is going to discuss our fourth quarter performance in more detail and give you our Q1 and full year 2020 for outlook.

And as Andy mentioned <unk> are also here, we think will be an informative QA session.

Since my arrival on one of my highest priorities is focusing on our people and our leadership team having the right people in the right position is absolutely vital to our future success.

Eric Carlson: Since my arrival, among my highest priorities has been focusing on our people and our leadership team. Having the right people in the right positions is absolutely vital to our future success. And that's why I'm delighted to announce the promotions of three of our senior leaders: Amy Leffinger, Abby Lee, and Susie Winders.

And that's why I'm delighted to announce the promotion of three of our senior leaders and the lessons, you're adding Lee and Susie winters.

Eric Carlson: AIM is a passionate member of the Re-Max organization for over 25 years as an agent, a team leader, a franchise owner, and now a member of our executive leadership team. She's being promoted to president of Re-Max LLP, where she will lead the Re-Max brand and network. She succeeds Nick Bailey, who is leaving the company. Abby Lee is being promoted to Executive Vice President of Marketing, Communications, and Events.

Amy is a passionate member of the Remax organization for over 25 years as an agent a team leader a franchise owner and now a member of our executive leadership team. She is being promoted to president of Remax LLP, where she will lead the Remax brand and network.

She succeeds with Bailey, who is leaving the company.

<unk> has been promoted to executive Vice President of marketing Communications.

Eric Carlson: She will continue to lead Advertising, Marketing, Communications, and Public Relations, in addition to now managing the company's events team. Amy, Abby, and Susie will all report directly to me. But these are well-deserved and positive changes that I believe will help us navigate the road ahead and realize our full potential. During my first 100 days, I spent a considerable amount of time listening, learning, and leading, meeting with hundreds of stakeholders. I met a lot of great people and heard a lot of innovative ideas, which I know we can leverage. It's been a bit of a drinking from the fire hose sort of experience, immersing myself in our business, covering everything from high-level strategy to the details of various processes, systems, and structures.

We'll continue to lead advertising marketing communications and public relations. In addition to now managing the Companys events.

And Suzie winter is being promoted to executive Vice President General Counsel, Chief compliance Officer and Secretary.

Amy Abbvie and Judy will all report directly to me.

But these are well deserved and positive changes that I believe will help us navigate the road ahead and realize our full potential.

During my first 100 days I spent a considerable amount of time listening learning and leading <unk>.

Meeting with hundreds of stakeholders I've met a lot of great people and heard a lot of innovative ideas, which I know we can leverage it.

It's been a bit of a drinking from a fire hose sort of experienced immersing myself into our business.

Covering everything from high level strategy to the details of various processes systems and structures.

Eric Carlson: During these conversations, I'm often asked, Eric, what attracted you to the company? Why did you take this job? Well, initially, I was drawn to the company's purpose, helping people realize their dream of home ownership. You know, for many of us, buying or selling a home is almost one of the most important decisions that we make and one of the most joyful days that we'll experience in our lifetime.

During these conversations I'm often asked.

What attracted you to the company why did you take this job.

Well initially I was drawn by the company's purpose, helping people realize their dream of home ownership.

For many of us buying or selling a home it's almost one of the most important decision that we make and one of the most joyful days that we'll experience in our lifetime.

Also I was equally energized about joining the company because of what I knew about Remax and iconic brand the number one worldwide on residential real estate side.

Eric Carlson: Also, I was equally energized about joining the company because of what I knew about Re-Max, an iconic brand that's number one worldwide in the residential real estate sector. Re-Max has a brand people know, an unmatched global presence, a unique value proposition of services and competitive advantages, and, most importantly, the most dynamic, most productive, and most trusted agents and brokers in the business. Known for being skilled, experienced, and very good at what they do, Re-Max agents have made Re-Max the world's most productive real estate network. And in the U.S. and Canada, consumers have voted them the most trusted agents for several years straight. Look, Re-Max agents are simply the gold standard.

Remax has a brand people know and unmatched global present, a unique value proposition of services and competitive advantages and most importantly, the most dynamic most productive and most trusted agents and brokers in the business.

No one for beating skill experience and very good at what they do Remax agents have made remap the world's most productive real estate network and in the U S and Canada consumers have voted the most trusted agent for several years great.

Look relaxed agent are simply the gold standard.

Eric Carlson: The original Re-Max business model, which gives entrepreneurs a way to maximize their careers, is still thriving around the globe. Over 140,000 Re-Max agents in more than 110 countries and territories deliver positive outcomes to buyers and sellers every single day, and we believe Re-Max still has a lot of room to grow. I'm also enthusiastic about the mortgage side of our business. Both Motto and Wemlo have unique product offerings that have shown great promise in the marketplace, with Better End Market Conditions and a continued focus and effort. We have confidence that, with time, our mortgage segment can grow into a meaningful revenue business. The bottom line is, I'm here because I believe I can make a difference.

The original Remax business model, which gives us a printer is the way to maximize their careers is still driving around the globe over 140000, Remax agents in more than 110 countries and territories deliver positive outcomes to buyers and sellers every single day.

And we believe Remax still has a lot of room to grow.

I'm also enthusiastic about the mortgage side of our business model and we will have unique product offerings that have shown great promise in the marketplace.

With better end market conditions, and our continued focus and effort.

We are confident that with time, our mortgage segment can grow into a meaningful revenue business.

The bottom line I'm here, because I believe I can make a difference.

Eric Carlson: While we're motivated by and confident in our competitive advantages and those enticing potential growth opportunities, we are acutely aware of what we need to do to improve our performance. Two of our top priorities in the playbook are clear. We need to stabilize and grow U.S. agent counts and expand the mortgage business. Posting gains in those two areas would build market share, increase revenue, and earnings. Each will create momentum for additional growth. That won't be easy, but we know how important those two objectives are in both the short and the long term.

While we are motivated by and confident in our competitive advantages and those in pricing potential growth opportunity. We are acutely aware of what we need to do to improve our performance.

Two of our priorities in the playbook are clear, we need to stabilize and grow U S agent count and expand the mortgage business.

Posting gains in those two areas would build market share increased revenue and earnings.

Each will create momentum for additional growth and it won't be easy, but we know how important those two objectives are in both the short and long term.

Eric Carlson: The better news from what we've done in 2023 is encouraging interest rate trends. Improving customer sentiment and ongoing pent-up demand bode well for progressively better housing market performance moving forward, one that should get incrementally better as the year goes on. As it relates to our business, our team continues to see plenty of opportunity. Throughout my career, I've been focused on continually improving the customer experience, delivering distinctive products and services that meet customers' needs.

The better news from what we saw in 2023 is encouraging interest rate trends.

Proving customer sediment and ongoing pent up demand bode well for a progressively better housing market performance moving forward, one that should get incrementally better as the year goes on.

As it relates to our business our team continues to see plenty of opportunities.

Throughout my career I've been focused on continually improving the customer experience.

Delivering distinctive products and services that meet customers' needs.

Eric Carlson: Diversified Financial Performance and leveraging best-in-class capabilities that enable teams to win. So, utilizing my sales, marketing, operations, and leadership background, our playbook will concentrate on operating your business as effectively and efficiently as possible, having a growth mindset, and focusing on delivering the absolute best customer service. We've got a great foundation to build on, team, and our affiliates. They're passionate about our brand, about each other, and about innovating, growing, and Simply Getting Better Each and Every Day.

Diversified financial performance and leveraging best in class capability that enables teams to win.

So utilizing my sales marketing operations and leadership background, our playbook will concentrate on operating our business.

As effectively and efficiently as possible, having a growth mindset and focusing on delivering the absolute best customer service.

We've got a great foundation to build on.

<unk> our affiliate they are passionate about our brand.

About each other and about innovating growing.

And simply getting better each and every day.

Eric Carlson: Since mid-November, we've spent time assessing what programs to accelerate, what programs to expand, and which to discontinue. This allows us to be more effective and will enhance our ability to fast-track programs that make a difference. And that's why we believe our current strategic growth initiatives provide us with the best opportunity for improved performance this year and build on the foundation for the long term. We continue to see measurable progress and positive results from our programs. Current market conditions have certainly overshadowed the desired results.

Since mid November we've spent time assessing what programs to accelerate what programs to expand and which to discontinue.

This allows us to be more effective and will enhance our ability to fast track program that make a difference.

And that's why we believe our current strategic growth initiatives provide us with the best opportunity for improved performance this year and build on the foundation for the long term.

We continue to see measurable progress and positive results from our programs.

Current market conditions as certainly overshadowed the desired results. However were eager to see how our initiatives perform in an improving market and we are optimistic that we can deliver better outcomes.

Eric Carlson: However, we're eager to see how our initiatives perform in an improving market, and we are optimistic that we can deliver better outcomes. When our growth programs were announced in mid-2022, the team knew the conversions, mergers, and acquisitions, or CM&A, and their effort, in particular, would require some time to communicate, gain traction, and build momentum. And that's proven to be the case.

Our growth programs were announced in mid 2022, the team knew the convergence mergers and acquisition or M&A and the team's effort in particular will require some time to communicate to gain traction and build momentum and that's proven to be the case.

Eric Carlson: Now, when we look back at the original cohort of brokerages that joined us in 2022 via the CMNA program, our one-year returns were in line with expectations, and the number of completed transactions more than doubled year over year in 2023. On the team front, the original pilot program launched in 2022, was expanded last summer in a modified version and has continued to help broker owners bring more agents and teams into the network while incentivizing smaller teams to grow. As a result of the program's impact and our lessons learned, we're expanding the modified version of the program to encourage team recruitment and growth across much of the U.S. You know, from our perspective, this is prudent. A prudent investment that will help franchises grow their offices and help team leaders build larger teams. And simultaneously, it sends a message across the industry that teams have yet another reason to affiliate with Re-Max.

Now when we look back at the original cohort of brokerages that joined US in 2022 via the M&A program are one year returns were in line with expectations.

And the number of completed transactions more than doubled year over year and 2023.

On a team truck the original pilot program launched in 2022.

Was expanded last summer and a modified version and has continued to help broker owners bring more agents and team into the network, while incentivizing smaller teams to grow <unk>.

As a result of the program's impact and our lessons learned we're expanding the modified version of the program to encourage team recruitment and growth across much of the U S.

From our perspective this is prudent.

Prudent investment that will help franchises grow their offices health team leaders build larger team.

Simultaneously it sends a message across the industry. The teams have yet another reason to affiliate with Remax.

Eric Carlson: Our full value proposition for teams is compelling, and we have third-party validation that Re-Max teams are more productive than the norm. In many respects, the investment illustrates our commitment, a commitment to the growing U.S. aging population. And we believe growth initiatives like this, over time, will help us regain crucial upward momentum in that regard. Now, on the mortgage side, we remain confident in our mortgage-in-a-box product offering, the growth prospects of our two brands, and the investments we've made in the respective sales organizations over the past year. In 2023, during one of the most challenging and difficult conditions the mortgage industry has faced in recent history, we nonetheless grew our mortgage business, which when you think about it, is a remarkable achievement and one that not too many other companies can claim.

Our full value proposition for teams is compelling.

And we have third party validation that remax themes are more productive than the norm.

In many respects the investment illustrates our commitment.

Our commitment to growing U S agent count, while we believe growth initiatives like this over time will help us regain crucial upward momentum in that regard.

Now on the mortgage side, we remain confident in our mortgage in a box product offerings growth prospects of our two brands and the investments we've made in the respective sales organizations over the past year from.

In 2023 during one of the most challenging end market condition. The mortgage industry has faced in recent history. We nonetheless grew our mortgage business.

Which when you think about it that's a remarkable achievement and one that not too many other companies can claim.

Eric Carlson: Now, having said that, our group was muted, and our model churn rate did pick up. But even in a rebounding market like the one we expect to see in 2024, our overall open model office count will continue to face macro headwinds. It's likely going to be flat, but slightly up for the year. Now, we expect to steadily improve our franchise sales as the market stabilizes or we rebuild our pipeline. Lastly, in September, Re-Max LLC entered into a nationwide settlement associated with costly industry litigation. We did so to protect our U.S. agents, franchisees, and the company from multiple fast-action lawsuits. The proposed settlement is subject to final court approval, slated for early May.

Having said that our growth was muted.

And our motto churn rate did tick up.

Even in a rebounding market like the one we expect to see in 2024, our overall open motto office count will continue to face macro headwinds.

And so we're likely going to be flat to slightly up for the year.

Now, we expect to steadily improve our franchise sales as the market stabilizes and we rebuild our pipeline.

Lastly in September <unk> entered into a nationwide settlement associated with costly industry litigation.

We did so to protect our U S agent franchisees and the company for multiple class action lawsuits.

The proposed settlement is subject to final court approval slated for early May.

Eric Carlson: And while the settlement came at a significant financial cost, we believe it was the right decision for all of our stakeholders, affiliates, employees, shareholders, and debt holders alike. We view it as an investment in the brand, the network, the franchisees, and, most importantly, the agency. Many people have suggested the proposed settlement is a differentiator and could actually create a new competitive advantage. We certainly hope so and think it can. With that, I'll turn it over to Karri. Thank you, Eric. Good morning, everyone.

While the settlement came at a significant financial cost. We believe was the right decision for all of our stakeholders affiliate employees shareholders and debt holders alike.

We view it as an investment in the brand the network the franchisees.

And most importantly, the agents.

Many people have suggested the proposed settlement that differentiator could actually create a new competitive advantage, we certainly hope so and think it can be.

With that I'll turn it over to Kerry.

Eric Good morning, everyone better than expected margins from effective expense management highlighted our fourth quarter performance driven by deliberate moves we made last summer to right size, our cost structure, Amit a very challenging housing market.

Karri R. Callahan: Better-than-expected margins from effective expense management highlighted our fourth quarter performance, driven by deliberate moves we made last summer to right-size our cost structure amidst a very challenging housing market. Some of the notable quarterly financial highlights included total revenue of $76.6 million, adjusted EBITDA of $23 million with an adjusted EBITDA margin of 30%, and adjusted diluted EPS of $0.30. Looking closer at revenue, excluding marketing funds, revenue was $56 million, a decrease of 5.8% compared to the same period last year. This decrease was driven by negative 5.6% organic growth and adverse foreign currency movements of 0.2%. Organic growth decreased principally due to a reduction in the U.S. aging population count and lower broker activity.

Some of the notable quarterly financial highlights included.

<unk> revenue of $76 6 million adjusted EBITDA of $23 million with an adjusted EBITDA margin of 30%.

And adjusted diluted EPS of <unk> 30.

Looking closer at revenue.

Leading the marketing fund revenue was $56 million a decrease of five 8% compared to the same period last year.

This decrease was driven by negative five 6% organic growth and adverse foreign currency movement of 2%.

Organic growth decreased principally due to a reduction in U S agent count and lower broker fees, partially offset by higher mortgage segment revenue.

Karri R. Callahan: Partially offset by higher mortgage segment revenue. Notably, while our organic growth rate remained negative, the pace of the decline did slow since Q3 as we started to lap the tougher comparable quarter. Q4 selling, operating, and administrative expenses increased 9.6% to $39.1 million, primarily due to changes in the fair value of contingent consideration liability.

Notably, while our organic growth rate remained negative the pace.

So the decline disclosed in Q3, as we started to lap the tougher comparable coronary.

Q4, selling operating and administrative expenses increased nine 6% to $39 1 million, primarily due to changes in the fair value of contingent consideration liabilities.

Karri R. Callahan: During the fourth quarter, given the continued macroeconomic pressures which caused mortgage rates to reach multi-decade highs, we revised the mortgage segment's near-term franchise sales forecast for the next three years. This, along with fewer-than-expected franchise sales in 2023, caused a decline in our mortgage segment's projected future cash flow. The reduction in our near-term franchise sales outlook was the principal driver of the non-cash goodwill impairment charge of $18.6 million. Despite the current headwinds, we remain bullish on our mortgage opportunity. And believe we can meaningfully accelerate our franchise sales pace over the medium and long term, given the compelling value proposition offered by both Motto and us. From a capital allocation perspective, our priorities are unchanged since last quarter, while we are pleased to have been granted preliminary approval of our settlement and are seeing some reasons for optimism from a macro perspective, although uncertainty with respect to 2024.

During the fourth quarter, given the continued macroeconomic pressures, which caused mortgage rates to reach multi decade highs we are.

Revise the mortgage segment near term franchise sales forecast for the next three years.

This along with fewer than expected franchise sales in 2023 caused a decline in our mortgage segment projected future cash flows the.

The reduction in our near term franchise sales outlook was the principal driver of the noncash goodwill impairment charge of $18 6 million.

Brian the current headwinds we remain bullish on our mortgage opportunity and believe we can meaningfully accelerate our franchise sales pace over the medium and long term given the compelling value proposition offered by both mono and Meanwhile.

From a capital allocation perspective, our priorities are unchanged since last quarter.

We are pleased to have been granted preliminary approval of our settlement and are seeing some reason for optimism from a macro perspective.

Uncertainty with respect to 2024 remain.

Karri R. Callahan: As a result, we continue to be responsible stewards of capital and think it's best to focus on replenishing our cash in the near future. That said, we believe we still have the financial flexibility to pursue those growth opportunities where we see the greatest potential. Before I get to our Outlook, I wanted to mention a few things impacting year-over-year comparisons. First, last year was the Re-Max 50th anniversary celebration, and our annual agent convention had the highest attendance in more than 15 years.

As a result, we continue to be responsible stewards of capital and think it's back to focus on replenishing our cash in the near term.

That said, we believe we still have the financial flexibility to pursue those growth opportunities, where we see the greatest potential.

Before I get to our outlook I wanted to mention a few items impacting year over year comparison.

First last year was the Remax, 50th anniversary celebration and our annual agent convention at the highest attendance and more than 15 years.

Karri R. Callahan: We do expect a smaller crowd this year, resulting in a reduction to other revenue in Q1 of between three and three and a half. In addition, given the winding down of our Booge, First, and Gadbury operations, we expect a year-over-year decline of approximately $3 million in revenue and $1 million in adjusted EBITDA in FY20. Of this amount, we expect the Q1 impact to be a year-over-year reduction of approximately $1 million in revenue and $0.5 million in revenue. Last, as a follow-up to what Eric mentioned related to teams, the Modified and Expanded Teams program offers an alternative fee structure that is designed to support and encourage the growth of medium to large-sized teams. To activate the program's financial incentives, which include reduced recurring fees and a broker fee cap, a brokerage in an eligible state must first add any combination of six new team leaders or members from outside of the network.

We do expect a smaller crowd this year, resulting in a reduction to other revenue in Q1 of between three and $3 5 million.

In addition, given the wind down of our theaters and Gadberry operation, we expect a year over year decline of approximately $3 million in revenue and $1 million and adjusted EBITDA in FY 'twenty four.

Of this amount we expect the Q1 impact to be a year over year reduction of approximately $1 million in revenue and a $5 million in earnings.

<unk>.

As a follow up to what Eric mentioned related to team a modified and extended teams program offers an alternative fee structure that is designed to support and encourage the growth of medium to large size team.

To activate the program financial incentive which include reduced recurring fees and broker fee cap.

Brokerage and an eligible state must first add any combination of six new team leaders remember outside of the network.

Karri R. Callahan: As a result of this growth requirement, we expect to incur less than a million dollars of foregone revenue in 2024 related to the expansion of this program. We included additional details about the initiative in our Form 10-K, and are happy to answer any questions you might have regarding the program. Our first quarter and full year 2024 outlook assumes no further currency movements, acquisitions, or divestiture. For the first quarter of 2024, we expect aging counts to change from a negative half a percent to a positive half a percent over the first quarter of 2023. Revenue in a range of $75 million to $80 million, including revenue from the marketing funds in a range of $19 million to $21 million, and adjusted EBITDA in a range of $16.5 million to $19.5 million.

As a result of this growth requirement, we expect to incur less $10 million of foregone revenue in 2024 related to the expansion of this program. We included additional details about the initiative in our Form 10-K and are happy to answer any questions you might have regarding the program.

Our first quarter and full year 2024 outlook assumes no further currency movements acquisitions or divestitures.

For the first quarter of 2024, we expect agent count to change from a negative half a percent to our positive half a percent over first quarter 2023.

Revenue in a range of 75 million to $80 million, including revenue from the marketing funds in a range of 19 million to $21 million and adjusted EBITDA in a range of $16 5 million to $19 5 million.

Karri R. Callahan: For the full year 2024, we expect agent count to change from a negative half percent to a positive one and a half percent over the full year 2023. Revenue in a range of 300M to 320M, including revenue from the marketing funds in a range of 78M to 82M, and adjusted EBITDA in a range of 90M to 100M. With that, Operator, let's open it up for questions. Thank you. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad.

For the full year 2024, we expect agent count to change from a negative half a percent to a positive one 5% over full year 2023.

Revenue in a range of $300 million to $320 million, including revenue from the marketing funds in the range of 78 million to 82 million and adjusted EBITDA in a range of 90 million to $100 million.

With that operator, let's open it up for questions.

Thank you as a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question again Crestar. One we also ask that you limit yourself to one question and one follow up and for any additional questions. Please re queue.

Operator: If you would like to withdraw your question, again, press star one. We also ask that you limit yourself to one question and one follow-up, and for any additional questions, please re-queue. Your first question comes from the line of Soham Bonsal from BTIG. Please go ahead. Hey, everyone. Good morning. Hope you're doing well.

Your first question comes from the line of <unk> Bansal from BTG. Please go ahead.

Hey, everyone, good morning pocket and well.

Eric Welcome welcome to the fold.

Eric Carlson: Eric, welcome to The Fold. I guess you've had some time to sit back and assess the whole situation, and it sounds like what you're saying is the current programs that you have in place are sort of where you want to go going forward. So I just want to hone in on that for a little bit and maybe just provide us with some quantification around what benefits you're seeing from these programs versus, you know, folks that are not in this program just to give us confidence around, you know, age and count growth and things of that sort. Yeah, sure. I mean, I think I'll let Amy talk a little bit about some of the benefits that she's hearing specifically from the network. But look, I mean, I've been here just over 3 months now.

I guess, thank you you've had some time to sit back and assess the whole situation and it sounds like.

What youre, saying is the current programs that you have in place are sort of where you want to go going forward. So just wanted to hone in that holding to that for a little bit and maybe just provide us some quantification around.

What benefits you're seeing from these programs versus you know.

Folks that are not in this program just to give us confidence around agent count growth and things and things of that sort.

Yes, sure I mean, I think I'll, let maybe Amy talk little bit about some of the benefits that she's hearing specifically from a network, but look I mean.

Just over three months now.

Eric Carlson: I appreciate the welcome. I am, as I stated earlier, drinking a little bit from a fire hose, and I've been on a bit of a tour of duty. And I think, you know, from a high-level perspective, there are definitely opportunities. I mean, I'm not trying to hide the fact that 2023 was definitely a rough year for the industry and for the team. But I think what the team's done a good job of, and we'll continue to build on this because the foundation is there, is to continue to focus on some things that are working and, you know, discontinue some things that may not be as effective. And so, as we pointed out, not only in the 10K, but in the opening remarks, there are opportunities still for franchise sales. TM&A is a good program for us. And the team's initiative, although, you know, my personal feeling is it was in pilot way too long, is, you know, we have to get that out, and we have to get that out in an improvement investment type manner, right? So, but we are hearing good feedback from the channel.

I appreciate the the welcome.

I am as I stated earlier drinking a little bit from a fire hose and I have been on a bit of a tour of duty.

I think from a from a high level perspective.

There is definitely opportunities.

I'm not I'm not trying to hide the fact that 2023 was definitely a rough year for the industry and for the team, but I think what the team has done a good job of and we will continue to build on this because the foundation is there is to continue to focus on things that are working in.

Discontinued some things that may not be as effective and so as we pointed out not only in the 10-K, but in the opening remarks, there are opportunities still with our franchise sales Q&A is a good program for us and the team's initiative although.

My personal feeling is that was in pilot way too long as we have we have to get that out and we have to get that out in a prudent investment type matter right. So.

We are hearing good feedback from the channel I'll, let Amy maybe dip into that a little bit more to provide you. Some color and then I'm happy to take a follow up on that sure.

Amy Lessinger: I'll let Amy maybe dip into that a little bit more to provide you with some color, and then I'm happy to take a follow-up on that somehow. Sure. Good morning.

Sure Good morning, Greg.

Amy Lessinger: You know, it's important. Our initiatives are really driving the desired behaviors and outcomes. You know, that's evident from the CMNA results, given that they doubled.

Our initiatives are really driving the desired behaviors and outcome.

Evident from this the M&A result.

Given that they doubled so we intend to put our foot on the gas there and continue forward.

Amy Lessinger: So, we intend to put our foot on the gas there and continue forward. You know, an example is that we added hundreds of agents in Q4 as a result of that. In addition, with teams expanding, we've seen great results, and we've now launched it to our additional U.S. core states. And so we anticipate good results from that. Hey Soham, it's Karri.

An example is we added hundreds of agents in Q4 as a result of that in addition, with teams expanding we've seen great results.

And we've now launched it.

Two our additional U S core state and.

So we anticipate good results from that.

Hey, so harmless Gary just a couple of things that I would now more from a financial perspective, because I agree with what Eric and Amy have commented on one as it relates to M&A, we have done some look back analysis.

Karri R. Callahan: Just a couple of things that I would know more from a financial perspective because I agree with what Eric and Amy have commented on. One is it relates to CM&A. We have done some look-back analyses, and the returns on those are really consistent with what our expectations are. So we're really doing everything we can to meet our customers and the marketplace with different innovative solutions and bringing those to Re-Max, given the strength of the brand. And then from a team's perspective, also just wanted to highlight some of the differences there in terms of the rollout. When we announced the modification, there's a different component there, and it's really some lessons learned as we've iterated and gone through this program, where we're requiring our franchisees to actually bring on new agents to be eligible for the fee concessions.

The returns on those are really consistent with what our expectations are so we are really doing everything we can to meet our customers in the marketplace with different innovative solutions and bringing those two remarks, given the strength of the brand and then from a team perspective also just wanted to highlight some of the differences there in terms of the rollout when we.

The modification Theres a different component there is really some lessons learned that we are iterating and gone through the program, where we have that we're requiring our franchisees, it's actually bring on new agents to be eligible for the fee compression. So they have to bring in six additional agents into their brokerage.

Karri R. Callahan: So they have to bring in six additional agents into their brokerage before they're eligible to participate in the program. And so, as I mentioned in the scripted remark, it's about a $1 million investment that we expect currently this year, which is a lot less than the investment was when we launched in the initial five states in the summer of 2020. Okay, great. Thanks a lot for the color.

And before they are eligible to participate in the program and so as I mentioned in his scripted remarks, it's about a 1 million dollar investment that we expect currently this year, which is a lot less than the investment was when we launched and the initial data in the summer of 2022.

Okay, great. Thanks, a lot for the color and then carry on their revenue guide, it's coming a little lighter than we were expecting but then if I sort of marry that way, just where you are sort of forecasting agent count to be it looks like you're expecting some sort of a lift in the back half and so should we take that to mean that the lower revenue.

Karri R. Callahan: And then, Karri, on the revenue guide, you know, it's coming a little lighter than we were expecting, but then if I sort of marry that with just where you are sort of forecasting the agent count to be, looks like, you know, we're expecting some sort of lift in the back half. And so, should we take that to mean that, you know, the lower revenue, really the biggest piece here is the motto piece, and then everything else is sort of smaller? Just any, yeah, any, sort of level of impact would be helpful.

Really the biggest piece here is the motto piece and then everything else just sort of smaller just any yes.

Sort of level of impact it would be helpful.

Sure Yeah, So I guess I would highlight kind of three things.

Karri R. Callahan: Sure, yeah, so I guess I would highlight three things there. One, keep in mind, and I mentioned this in the scripted remarks, that in Q1, we are expecting headwinds of $3 to $3.5 million because of our annual agent conference. Last year, the 50th anniversary had the highest attendance we've seen in about 15 years, and we do expect lower attendance this year.

Sure.

Keep in.

Mind and I mentioned this in the scripted remarks that in Q1, we are expecting headwinds of three to $3 5 million because of our annual agent conference last year. The 50th anniversary just had the highest attendance we've seen in about 15 years and we do expect lower attendance this year.

Karri R. Callahan: We also have some year-over-year headwinds, just with the winding down of our legacy tech business. So on a full-year basis, that's another, call it roughly $3 million, and then the million that I mentioned on the Teams initiative. And then we've got puts and takes throughout the course of the rest of the business. On the mortgage side, we were pleased to see, obviously, in a very, very difficult end market. We did eke out a little bit of organic growth in 2023.

Well also have some year over year headwinds just with the wind down of our legacy <unk> business and.

So on a full year basis, that's another call it roughly $3 million and then the 1 million that I mentioned on the team's initiative and then we've got puts and takes throughout the course of the rest of the business.

On the on the mortgage side, we were pleased to see.

And a very very difficult end market and we did eke out a little bit of organic growth in 2023.

Karri R. Callahan: As we look ahead to 2024, I still think that there's a lot of optimism around that business, but the growth rate looks probably comparable, if not just a little stronger. Okay, great. And then just carry on with the TLR.

As we look ahead to 2024.

I still think that there is a lot of optimism.

Around that business, but the growth rate looks probably.

Comparable if not just a lot stronger.

Okay, Great and then just quickly on the <unk>.

Karri R. Callahan: If there's an update on that, that would be helpful. Sure. So, you know, we disclosed a lot of information with respect to that in our 10-K based on how we look at the TLR calculation in accordance with the credit agreement. As of the end of the year, we're looking at a ratio of 7.8.

Update there that'd be helpful too.

Sure.

We disclosed a lot of information with respect to that in our in our 10-K.

Based on how we look at the <unk> calculation in accordance with the credit agreement as of the end of the year. We're looking at a ratio of 781 of the things Thats really important there, though that I wanted to stress is that we do anticipate being below that four five times by the end of the third quarter and I think the thing that we always just have to keep.

Karri R. Callahan: One of the things that's really important there, though, that I wanted to stress is that we do anticipate being below that four-and-a-half times by the end of the third quarter. And I think the thing that we always just have to keep in mind is the overall strength of the model, right?

In mind is the overall strength of the model right, the 100% franchise business the asset light model.

Karri R. Callahan: The 100% franchise business, the asset-light model. As Eric mentioned in the scripted remarks, we think the settlement is an investment that is having an adverse, obviously, impact on the TLR right now. But we'll get past that here in 2024 and move forward with the operational and financial strengths and characteristics of the business. Okay, great. Thanks a lot for the call. Your next question comes from the line of Anthony Paolone from J.P. Morgan. Please go ahead.

As Eric mentioned in his scripted remarks, we think the settlement is an investment that is having an adverse obviously impact on the DLR right now, but we will get past that here in 2024 and move forward with the operational and financial strengths and characteristics of the business.

Okay, great. Thanks, a lot for the color.

Your next question comes from the line of Anthony <unk> from Jpmorgan. Please go ahead.

Karri R. Callahan: Great, thanks. Welcome, Eric, and congratulations, Amy. My first question is, can you maybe step back, because it sounds like maybe you learned some lessons with the Teams rollout and the Broker rollout, and just refresh us on just what exactly the value proposition and what Re-Max is offering for Teams to come over. I just want to try to bridge sort of that financial impact and kind of what exactly the incentives are. Hey, good morning, Tony. It's Karri.

Great. Thanks, welcome Eric and congratulations Amy.

My first question is maybe can you maybe step back because it sounds like maybe learn some lessons with the teams rollout in the broker rollout and just refresh us on just what exactly the value proposition and what <unk> is offering for teams to.

To come over and just want to try to bridge sort of that financial impact and kind of what that.

What exactly the incentives are.

Hey, good morning, Tony It's Karri I'll go ahead and start and then if there's anything that ive unless the team can jump in so I think when we look at the overall teams offering we're looking at it kind of across three different verticals.

Karri R. Callahan: I'll go ahead and start, and then if there's anything that I've missed, the team can jump in. So I think when we look at the overall team's offering, we're looking at it kind of across three different verticals. One is from kind of an education perspective; we've got a lot of initiatives with various partners in terms of how do we help our brokerages and our team leaders not only build and scale their businesses at a brokerage level or at a team level, but the second piece is around technology. So the launch of the KB Core platform was instrumental in terms of providing a team-specific instance to help teams more effectively and efficiently manage their business because, at Re-Max, whether you're an individual or a team, productivity is key to us, and everything we do to enable our network from a technology perspective is important.

One is from kind of an education perspective, we've got a lot of initiatives with various partners in terms of how do we help our brokerages and our team leader is not only build and scale their businesses out of brokers level or at a team level. The second piece is around technology. So the launch of the cave core platform.

Was instrumental in terms of providing a team specific.

Instance to help teams more effectively and efficiently manage their business because every Mac, whether an individual or team productivity is key.

To us in everything we do to enable our network from a technology perspective is important and then lastly, looking at how can we really be competitive in the marketplace from an economics perspective.

Karri R. Callahan: And then lastly, looking at how we can really be competitive in the marketplace from an economics perspective. And so I think those first two pillars are things that, over the course of the last, you know, 18 months since the pilot has been in place, we've really focused on. From an economics perspective, the changes that we've made are in the initial five-state rollout, we had, There was not a growth component, and so it was basically entirely foregone revenue. When we announced that program back in 2022, we said it was going to have an annualized impact of kind of $3 to $4 million, just for those five states.

So I think those first two pillars are things over the course of the last 18 months as the pilot has been in place that we've really focused on from an economic perspective. The changes that we've made is in the initial five state rollout.

We had.

There was not a growth component until it was basically entirely forgone revenue when we announced that program back in 2022, we said it was going to be an annualized impact of kind of $3 million to $4 million just for those five states.

Karri R. Callahan: Now, what we've learned is, you know, we really want to partner with the network, and that's important from a growth perspective and make sure that they've got some skin in the game. And so now there is a growth requirement where offices or franchisees have to recruit six new team members or team leaders into their offices. And at that point, they'll be eligible for the competitive fee program.

Now what we've learned is we really want to partner with the network and that's important from a health perspective, and make sure that they've got some skin in the game and so now there is the growth requirement where.

Our offices are franchisees have to recruit six new team members our team leaders into their office and at that point there'll be eligible.

For the competitive.

D C program and Thats why the financial impact is a little bit less for the rest of the rollout.

Karri R. Callahan: And that's why the financial impact is a little bit less for the rest of the rollout. Okay, so just to understand, though, there's some financial impact with this, but if you all deem it successful, and it's working, and it gets fully rolled out, should we expect just a continued financial headwind until the whole thing is, I guess, kind of dialed into the system? Like, is that a couple of years process or just trying to play that out? No, I mean, it might, because we're rolling it out effectively for one. There could be a little bit of a trickle into Q1 of 2025.

Okay. So then just to understand though theres some financial impact with this but if you or David successful and it's working and it gets fully rolled out like should we expect just.

Continued.

<unk> headwind until the whole thing is I guess kind of dialed into the system like is that a couple of years processor.

Trying to play that out.

No I mean, it might because we're rolling it out effective.

For one there could be a little bit of a trickle into Q1 of 2025, but it probably is.

Karri R. Callahan: But you know, it probably is a, you know, a 12 month investment, and then you should have tailwinds afterward. Okay. And then just my follow-up is just a bit bigger picture on just the US agent count. Do you think there's a lot more to go in terms of agents leaving the industry given just, you know, the muted level of activity now for a decent amount of time? Like, is there a lag there?

At 12 months investment and then you should have a tailwind after that.

Okay and then just my follow up is just a bit more bigger picture on just U S agent Count do you think there is a lot more to go in terms of agents, leaving the industry given just.

The muted level of activity of activity now for a decent amount of time like is there a lag there and I understand the remax agents are more productive and likely to.

Karri R. Callahan: And I understand the Re-Max agents are more productive and likely to, you know, push through all this. I'm trying to get your view on kind of where we are in terms of just the overall industry and how much more there might need to be in terms of shrinking agents. I have a couple of thoughts there. First of all, you know, this time of year, we always see a purging of nonproductive agents just across the industry as a whole. But given our agents are more professional and more productive, you know, we tend to be a little bit more insulated from that. So, you know, and, in addition, I think we anticipate more transactions this year than last year. So actually, that should be in our favor, given our model and our structure. Okay, thank you. Your next question comes from the line of Tommy McJoint from KBW. Please go ahead. Hey, good morning guys.

Pushed through all of this but just.

I'm trying to get your view on kind of where we are in terms of just the overall industry and how much more they might need to be in terms of shrinking agents.

I think a couple of thoughts there first of all this time of year, we always see a hurricane of nonproductive agents just across the industry as a whole, but given our agents are more professional and more productive.

We tend to be a little bit more insulated from that.

So.

And in addition, I think we anticipate more transactions this year than last year, so actually that should be.

To our favor given our model and our structure.

Okay. Thank you.

Your next question comes from the line of Tommy Mick joins from K B W. Please go ahead.

Yes.

Yes.

Hey, good morning, guys. Thanks for taking my questions and welcome to everyone on the call here.

Karri R. Callahan: Thanks for taking my questions and welcome to everyone new on the call here. I wanted to see if we could dig into a little bit on the agent count guidance that you guys did provide just for the total agent count. If we were able to kind of break it down by geography, maybe at least directionally, that'd be helpful.

I wanted to see if we could dig into a little bit on the agent count guidance that you guys.

We did provide just for the total agent count.

If we were able to kind of break it down by geography, maybe at least directionally that'd be helpful. So relative to last year, we saw in the U S down, 6% and Canada flat and international up 7%.

Karri R. Callahan: So relative to last year, we saw the U.S. down 6% and Canada flat, and international up 7%. Just directionally, relative to those figures, do you anticipate acceleration or deceleration of last year's trends in each of those regions? Hey, good morning, Tommy. It's Karri.

Just directionally relative to those figures do you envision no acceleration or deceleration of those last year as trends in each of those regions.

Hey, good morning, Tammi I'm curious so yes, I think the.

Karri R. Callahan: So yeah, I think, you know, the trends are going to be, I think, similar, but hopefully, some improvement. So, still expecting kind of a relatively flat performance in Canada. Obviously, it's been a tough end market there, but I think it really does highlight the strength of the brand up in Canada. Still expecting to see growth in international markets. Again, the hallmark of the Re-Max brand is just the global footprint. And then in the US, we are still expecting to see some pressure, but hopefully, a little bit less of a decline than what we saw in 2020.

The trends are going to be I think similar but hopefully some improvement so still expecting kind of relatively flat performance in Canada. Obviously, it's been a tough end market there, but I think it really does highlight the strength of the brand.

Up in Canada still expecting to see growth in international again Hallmark of the <unk> brand is just the global footprint and then in the U S still expecting to see some pressure, but hopefully a little bit less of a decline than what we saw in 2023.

Okay.

Okay got it thank you and then.

Karri R. Callahan: Okay, got it. Thank you. And then the next question, you mentioned the revenue headwinds related to the convention and then the legacy tech revenue headwinds. What's the impact on earnings or EBITDA from those two items? So yeah, the impact on the convention is kind of half to a million bucks in Q1. And then on the others, it's about a million bucks for the full year.

The next question you mentioned the revenue headwinds related to the convention and then the legacy Tech revenue headwinds.

What's the impact on earnings or EBITDA from those two items.

So yes.

The impact.

The convention is kind of half a million.

And in Q1, and then on the others, it's about 1 million Bucks.

For the full year.

Karri R. Callahan: Perfect. I've got it. Okay. And then just my last question, you know, with Re-Max agents, obviously, representing such a broad base of the market, naturally, you kind of see lots of data on how your agents are transacting. With all the headlines around the settlement and the class action litigation in the industry, have you noticed any increase in the use of buyer-agent agreements or more buyers paying their buyer agents directly or any new commission models that have gained traction like, you know, flat fee models or just kind of what are you seeing in the past few months now that, you know, some of these news headlines have become more prominent? Hey, Tommy, it's Eric.

Okay.

Perfect got it okay.

And then just my last question.

With with Remax agents, obviously, representing such a broad base in the market.

Naturally you kind of see lots of data on how your agents are transacting.

With all the headlines around the settlement and the class action litigation in the industry.

Have you noticed any increase in the use of buyer agent agreements or more buyers paid paying their buyer agents directly or any new commission model that are gaining traction and a flat fee models or just kind of what are you seeing in the past few months now that some of these headlines have become more pronounced.

Hey, Tom it's Eric I'm going to comment on that at all or any kind of dig into some of the details, but I think one of the things from the investment there and a differentiated basis as we're getting a lot of positive feedback from our network right and feedback about that.

Eric Carlson: I'm going to comment on that, and I'll let Amy kind of dig into some of the details. But I think, you know, one of the things from the investment there on a differentiated basis is that we're getting a lot of positive feedback from the network, right? And feedback on that, you know, for 50 years, really, we've cared about agents. And agents feel like with us leading with Anywhere on the settlement, they appreciate that leadership position, and they appreciate us making an investment in helping them through a very tough time. On the agreement side, I'll let Amy comment on a few more details that she's hearing specifically from the network. Yeah, I think, first of all, I think that this shows that we care about our agents. And without a doubt, the sentiment is terrific. One of, you know, our big things is education. And, for example, we, at Re-Max University, offer something called the Accredited Buyer Representative Designation, which gives our agents education on exactly how to articulate their value proposition, et cetera.

For 50 years really we've cared about agents and the agents feel like with us leading with anywhere on the settlement.

They appreciate that leadership position and then I appreciate us, making the investment and helping them through a very tough time.

The agreement side I'll, let Andy comment on a few more details a few here and specifically from the network yes.

Yes, I think.

First of all I think that this shows that we care about our agent and without a doubt the sentiment is terrific.

Our big things is education and for example, we in Remax University, we offer something called the accredited by a representative designation, which give our agents education on exactly how to articulate the value proposition et cetera. So we anticipate that.

Amy Lessinger: So, you know, we anticipate that, you know, there will be more demand for that as we move through. But as far as, you know, varied models, et cetera, that are out there, I think it's too soon to really highlight those. And Tommy, I would add in there on the mortgage side of the house, they're continuing to be ahead of the curve as well. So they're talking to different groups, talking to Fannie, Freddie, FHA, and VA to understand whether we can potentially put the Buyer's Agency Commission into the transaction in some form or fashion. So even the mortgage side of the house is trying to figure out if changes happen in the industry, how can we support those changes? Yeah, I agree. Thank you. It'll be interesting to watch how that develops. Thanks. Thanks for the question. Your next question comes from the line of Ryan McKeveny from Bellman. Please go ahead. Hey, good morning. Welcome. Eric.

There will be more demand for that as we move through but as far as varied models et cetera that are out there I think it's too soon to really highlight those.

I mean, I would add in there on the mortgage side of the house. They are continuing to be ahead of the curve as well.

Talking to different groups talking to the Fannie Freddie FHA VA to understand can we potentially put the buyers agency commission into the transaction in some form or fashion. So even the mortgage side of the house is trying to figure out if changes out in the industry. How can we support those changes.

Yes, I agree you think it'll be interesting to watch how that develops.

Thanks for the responses.

Your next question comes from the line of Ryan Mckinney from Zelman. Please go ahead.

Hey, good morning welcome.

Eric and Amy.

Eric Carlson: A bit of a high-level question for Amy, pretty ingrained and visible and respected, obviously, on the network for a long time. So I guess anything you can share on maybe what you're, You know, what should franchises... ®MD-BO Nick and that's. You know, and just kind of big picture, um,... Hey Ryan, it's Eric.

A bit of a high level question.

Amy.

So I think pretty ingrained in visible and respected obviously across the network for a long time. So I guess anything you can share on maybe what your strategic approach will be whats your franchise owners and agents think about that's maybe.

Maybe you're going to be the same or different than that.

Nick in that seat.

And just kind of big picture opportunities you see.

Eric Carlson: I mean, it's just day one, right off the bat. What is the overall strategy? So I appreciate the pressure. And Amy, she's got a good response to that.

To kind of move the needle going forward would be great. Thank you very much.

Hey, Ryan it's Erik I mean, it's just day, one right off the bat what is the overall strategy.

I appreciate the pressure.

Amy as she has got a good response for that.

Amy Lessinger: You know, having been in the business for a very long time as an agent, a team leader, a broker, you know, I do see things from an entrepreneurial standpoint, from their standpoint. And, you know, I've used that experience in the last, almost the last four years that I've been on this side to help drive the initiatives forward to provide our network with what they need to excel. And so, you know, of course, I echo Eric's sentiments with respect to, we've got to stabilize agent counts and grow agent counts in the U.S. That will be the first and foremost priority that I have. Hey look, Ryan, I think we do that a bit by, you know, obviously leaning in.

Yes, having been in the business for a very long time as an agent a team leader a broker I do see things from an entrepreneurial standpoint from their standpoint.

And I would use that experienced in the last almost the last four years that I've been on this side to help drive the initiatives forward to provide our network with what they need to excel in so.

First I Echo Eric's sentiments with respect to we've got a stabilized agent count and grow agent count in the U S that will be the first and foremost priority that I have.

Look Ryan I think we do that a bit by obviously leaning in.

Eric Carlson: You know, it's been a tough year, like I stated, but the great thing, and one of the reasons that I stated about why I love this network is just the passion, not only the passion from the people here at HQ or the folks in the field that are supporting our Re-Max brokers and agents, but the network itself has an unbelievable passion for the brand, for what they do on a daily basis, for being curious about how they can get better at And so, you know, from a corporate perspective. We also have a few agents that are leaving the network who might want to stay. And you can understand this. I mean, people don't necessarily leave a brand or a company. They leave without a manager.

It's been it's been a tough year like like I stated, but the great thing and one of the reasons that I stated iwai.

I Love. This network is just the passion not only the passion from the people here at HQ or the folks in the field that are supporting a remax brokers and agents, but the network itself has an unbelievable passion for the brand for what they do on a daily basis.

For being curious about how they can get better about innovating and so from a from a corporate perspective.

Franchise or perspective, theres opportunities for us to lean in and to educate.

In a different way to use technology to help enable.

Effectiveness and efficiency don't be confused I mean, we are people focused technology enabled.

Eric Carlson: And so the same holds true for agents. And you'll see us continue with differentiated programs over the course of 2024 to help agents find a home where they can be productive and feel welcomed and continue to do the great work that they do with consumers every single day. Thank you very much. That's really helpful commentary from both of you. Karri, just one final question on the international agent count.

We'll lean into that but there's there's areas of opportunity for us and what Youll see us do here over the course of 2020 for us to continue to lean into the details and start to bend the trend.

Some of our efforts whether its M&A our teams are showing positive results.

We also have a few agents that are leaving the network.

Might want to say and you can understand this I mean people don't necessarily leave a brand or a company.

We've a manager and so.

The same the same holds true.

For agents and Youll see us continue with differ.

<unk> differentiated programs.

Over the course of 2024 to help agents.

Karri R. Callahan: Great. Paolo, we just look at January's Operating Stats. For Q, it looks like. I think at least through January, there's a step lower internationally.

A home, where they can be productive and feel welcomed.

Continued due to the great work that they do with consumers every single day.

Yes. Thanks, so much that's really helpful commentary from both of you.

Kerry just one final one.

On the international agent Count, obviously, it's been a big big growth component of things.

Karri R. Callahan: I guess I'm curious if there's anything to call out there. I know you already made the comment, that'll be a growth driver going on near term. Yeah, I mean, you're right. We did see a little bit of pressure in January.

If we just look at the January 2024.

Operating stats against for Q, It looks like it looks like at least through January there was a bit of a step lower internationally I guess im curious if theres anything to call out call out there I know you already made the comment that Big picture do you think that will remain.

The growth driver, but.

Karri R. Callahan: A lot of times, our global regions kind of evaluate quotas, non-performing agents, and offices throughout the year, and we have some volatility just in terms of how that activity is reported. And that just happened to be reported in January.

Anything going on near term to call out there.

Yeah.

We did see a little bit of pressure in January a lot of times, our global regions kind of evaluate quota of nonperforming agents and offices throughout the year.

And we have some volatility just in terms of how that activity is reported and that just happened to be reported in January the thing I would note is what we're seeing in February so far is that the international agent count is off to a solid start and as I mentioned earlier, we expect to kind of see that healthy growth rate continue as we progress through.

Karri R. Callahan: The thing I would note is that what we're seeing in February so far is that the international agent count is off to a solid start. And as I mentioned earlier, we expect to kind of see that healthy growth rate continue as we progress through 2024. Okay, perfect.

Through 2024.

Yeah.

Perfect. Thank you so much.

Your next question comes from the line of Ronald Camden from Morgan Stanley. Please go ahead.

Karri R. Callahan: Your next question comes from the line of Ronald Camden from Morgan Stanley. Please go ahead. Great. Hey, welcome, Eric, and congratulations to everyone. Just a couple quick ones.

Great Hey, welcome American Congrats everyone.

A couple a couple of quick ones just looking at the 10-K.

Karri R. Callahan: Just looking at the 10K regarding sort of the settlement agreement, I think you mentioned that sort of May 9th is a final approval hearing, but I guess I was surprised to see that, you know, there was... www.thevenusproject.com So on February 15th, it looks like the DOJ filed a statement here denying approval of another settlement. Looks like there are some additional... ®MD-BO So, I guess the question is, are those additional disclosures, are we supposed to... How are we supposed to think about them? Are they completely irrelevant, not related to the May 9th situation?

Regarding sort of the settlement agreement I think you mentioned that sort of main knife.

Final approval hearing, but I guess I was surprised to see that there was some additional disclosures.

So on February 15, it looked like the Doj.

While the statement here denying approval over another settlement it looks like there were some additional litigation litigation claims that were also disclose this quarter versus last so I guess the question is are those additional disclosures are we supposed to.

How are we supposed to think about those or are they completely irrelevant and not related to the may 9th situation.

Karri R. Callahan: They have an impact and sort of affect the bigger picture. As you sort of take a step back, how does that impact just how long this litigation... settlement could be an overhang. Hey, good morning, Ron. It's Kari.

Have an impact and sort of bigger picture.

You sort of take a step back how does that impact just how long this litigation settlement.

Settlement could be an overhang for the company.

Hey, good morning, Ron it's Gary So I.

Karri R. Callahan: So I think there are a couple of things that I want to stress about the settlement. First and foremost, we, as Eric mentioned, are extremely happy with the decisions that we made to settle the cases on behalf of our network, our franchisees, our agents, and really all of our stakeholders. As relates to a lot of the additional disclosures, those relate to some copycat cases that have subsequently been filed after the October 31st verdict. Importantly, to note, our settlement does cover and release us from all claims by home sellers on a nationwide basis.

Thank a couple of things that I want to stress about the settlement first and foremost we as Eric mentioned are extremely happy with the decision that we made two to settle the cases.

On behalf of our network, our franchisees, our agent and really all of our stakeholders.

As it relates to a lot of the additional disclosures those relate to some copycat cases that have subsequently been filed after the October 31 verdict.

Importantly to note our settlement does cover.

And releases us on all claims for home sellers on a nationwide basis, so once mainline jets.

Karri R. Callahan: So once May 9th gets here, we are cautiously optimistic about final approval, and we expect those copycat cases to go away and be subsumed. We obviously just had to disclose the fact that they did exist as it relates to the copycat cases.

Yet here, we are cautiously optimistic about final approval.

And we expect those general copycat cases.

Would go away and be subsumed, obviously, just had to disclose the fact, but that they but they didn't exist as it relates to.

To the company.

Got it.

Your next question comes from the line of John Campbell from Stephens. Please go ahead.

Karri R. Callahan: Your next question comes from the line of John Campbell from Stevens, please go ahead. Hey, guys. Good morning.

Hey, guys good morning.

Good morning, John I wanted to Hey, guys I wanted to zoom out and maybe talk.

Eric Carlson: I wanted to, hey guys, I wanted to zoom out and maybe talk about overall strategy. It sounds like you guys are remaining laser focused on, you know, better domestic growth. You've rolled out a ton of new initiatives that, you know, some of those appear pretty promising on our end. You've pivoted away from, you know, in the past you had a philosophy around kind of owning the technology. Obviously, you've outsourced that and kind of partnered, so that was a pretty big pivot, but I'm curious about whether you're considering if all things are on the table. Like I'm thinking more about legacy items, maybe the foundation of the business, so things like the continuing franchise fees and then annual dues and then, you know, also the minimum agent count. I know that's here and there is called a little bit of strife with some owners, so I'm wondering if you're considering changing some of those items and, maybe, if you could talk. Hey John, it's Eric. How are you doing?

Overall strategy. It sounds like you guys are remaining laser focused on the better domestic growth you've rolled out.

A ton of new initiatives that some of those appear pretty promising on our end.

You've pivoted away in the past you had a philosophy around kind of owning the technology, obviously, you outsource that and kind of partnered so that was a pretty big pivot but.

I'm curious about whether you are considering all things are on the table.

Thinking more about like the legacy items, maybe the foundation of the business. So think of things like the continuing franchise fees and annual dues and then also the minimum agent agent Count I know that's here and there is call it deliberate strike with some owners so I'm wondering.

If you are considering changing some of those items and maybe if you could talk to us.

Hey, John It's Eric How're you doing.

Good Yeah look I think yes, I think that.

Eric Carlson: Good, good, good. Look, I think, yeah, I think that... You know, we've got a great foundation in place. And so, a few things here. One is... In my opening remarks, I hinted at it, but, you know, just from a baseline perspective, we're not necessarily going to throw the baby out with the bathwater, right?

We've got a great foundation in place and so a few things here what is.

In my opening remarks, I hinted towards that but just from a baseline perspective.

We're not go through necessarily the baby out with the Bath water right. So you've got a good foundation in place, we're going to operate as effectively and as efficiently as is.

Eric Carlson: So you've got a good foundation in place. We're going to operate as effectively and as efficiently as we can, right?

We can right so that may be a bit more sales rigor that maybe discipline around a few other items, but.

Eric Carlson: So that may be a bit more sales rigor, or that may be just to point out a few other items. But, you know, I come from an operations background, and I'll bring a little bit of that obviously to re, max and to help also franchisees in their local communities run better businesses and be more effective and efficient on your technology front. I said it earlier, but I'll reinforce it. I mean, we are a people-focused business. Right, so I still, you know, I feel like the transaction is about the agent, and they can provide more success. Consumers want that. And so that doesn't mean we ignore technology, but we enable effectiveness and customer experience with technology. So people-focused, technology-enabled, definitely. There's no doubt here that there's a curiosity, especially in the channel.

I come from obviously, the operations background and he'll bring a little bit of that obviously, the remax and to help also franchisees in their local communities run better businesses and be more effective and efficient.

On your technology front.

Said it earlier, but I'll reinforce it I mean, we are a people focused business.

So I still.

Feel like the the transaction is about the agents.

And they can provide more success consumers want that and so that doesn't mean, we ignore technology.

Table.

This in customer experience with technology, So people focus technology enabled definitely.

There is no doubt here theres, a curiosity, especially in the channel and with.

Eric Carlson: You know, with our network and our agents are brokers and folks here. So we will, you know, explore a growth mindset. And that's about curiosity.

With our network on our agents, our brokers and folks here. So we will explore a growth mindset and that's about curiosity thats about innovation, that's about leaning in to the model and.

Eric Carlson: That's about innovation. That's about leaning in right to the model and, you know, discovering new things where we can help, and we will be laser focused on improving the customer experience and being the absolute best there. I'm very passionate about that, but at the same time, you know, it is a clean sheet of paper. I'm coming in brand new. I've been here just over 3 months. So, you know, I like to wake up every day and think about, you know, whether it's the example of day 0 or day 1, you can't make a clean sheet or a blank whiteboard.

Discovering new things, where we can help and we will be laser focused on improving the customer experience and be the absolute best there I'm very passionate about that but at the same time. It is a clean sheet of paper I'm coming in brand new I'm here just over three months so.

<unk>.

They wake up every day and think about whether it's the.

These US example of zero day one.

You can think clean sheet or.

Whiteboard, so we will be.

Eric Carlson: And so we will be open-minded. We'll also be opportunistic. I know you'd love to hear exactly what our strategy is going to be, but we're not going to lay that out quite yet.

Open minded royalties I'll also be opportunistic.

Yes.

I know you'd love to hear exactly what our strategy is going to be.

We're not going to lay that out quite yet but.

Eric Carlson: But, you know, we are working on it. And so there's more and more to come there. But, you know, there's nothing really closed off, I guess I'd say, John.

We are working on it and so more to come there, but theres nothing really closed off I guess I would say John and so if it's if it's a different way to think about health.

Eric Carlson: And so, you know, if it's a different way to think about helping brokers and owners be successful in the market or helping agents, that could be fields that could be tools that could be programs like teams. All those things are on the table. So a long answer with no answer for you. No, that's that's helpful. That's helpful. I think you have said enough there. Kari, I was a little surprised to hear about the model impairment charge. It seems like you guys have obviously performed well there. I mean,

Helping brokers and owners be successful in the market.

Or helping agents that could be field.

Is that could be tools.

That could be programs like teams all of those things are on the table.

So long answer with no answer for you.

No. That's helpful. That's helpful. I think you said enough there.

Gary I was a little surprised to hear about the motto impairment charge. It seems like you guys have obviously performed well there I mean.

Karri R. Callahan: Obviously, the mortgage market is very difficult, housing's difficult, but then you've got the refi impact on mortgages that has added another layer of complexity. But I'm curious if that impairment is more of a markdown from maybe like an ultra bullish outlook and just kind of taking that down a bit, or is there something structural where maybe the current base is at risk? I know you guys have mentioned the word churn, which you haven't really mentioned much about Mono in the past. I'm curious about whether that.

Obviously, the mortgage market is very difficult housing difficult, but then you've got the refi impact on mortgage debt.

Another layer of complexity, but.

I'm curious if that impairment if thats more of a markdown from a maybe like an ultra bullish outlook and just kind of taking that down a bit or is there something structural that maybe the current basis. It Rick I know you guys mentioned the word churn, which you haven't really mentioned much about model in the past and I'm curious about.

Karri R. Callahan: You know, again, taking that down from a very bullish long-term forecast versus, Yeah, hey, it's a great and it's a valid question, John. I think, you know, as I said in the scripted remarks, we continue to be very, very bullish on the opportunity for the mortgage segment. Both the motto business from a franchise sales perspective, obviously, sales are down, but we're still selling franchises in the mortgage space in a, you know, historically difficult mortgage environment. And then on the Wien Low side, we continue to see strong growth there. And given how the service there is included and mandated in the franchise agreement, you know, still continue to be very bullish on the opportunity there. Unfortunately, it's really tied up kind of in the accounting rules.

Whether that's.

No again.

Taking that down from a very bullish long term forecast versus.

Stomach.

Yeah, Hey.

It's a great and its a valid question John I think as I said in his scripted remarks, we continue to be very very bullish on the opportunity for the mortgage segment. Both the motto business from a franchise sales perspective, obviously sales are down.

But there were still selling franchises in the mortgage space and a historically difficult mortgage environment and then on the <unk> side continue to see strong growth there and given how the service. There is included and mandated in the franchise agreement.

We will continue to be very bullish on the opportunity. There. Unfortunately really tied up kind of in the accounting rules, we really had to just really put our best foot forward in terms of what the projected near term cash flows were related to that business and it's really because of the macro environment and that reduction in near term cash flow.

Karri R. Callahan: We really had to really put our best foot forward in terms of what the projected near-term cash flows were related to that business. And it's really because of the macro environment and that reduction in near-term cash flow that caused the impairment, but nothing structural or how we see the long-term opportunity associated with that business. And John, maybe Ward can comment on churn. That also might be a legacy term that I've used from my old pay TV days. So, but I'll let Ward comment on that. Yeah, I mean, obviously, 23 was a tough year in the mortgage industry.

The impairment, but nothing structural or how we see the long term opportunity.

Associated with that business and John Maybe award can comment on.

Churn that also might be a legacy term that I've used for my for my own pay TV days, so, but I'll, let <unk> comment on that.

Obviously 23 was a tough year in the mortgage industry. So we did have some terminations.

Ward Morrison: So we did have some terminations that stepped up a little bit. We feel like with any kind of change in interest rates, we can improve that. Additionally, we started to really focus on recruiting LOs to try and benefit our owners, get them more LOs into the office or loan originators, so that they can do more business and make sure that they can weather the storm. Because all that matters in mortgage is volume, and so really just trying to drive that volume in those locations so that those offices remain strong and sound in the near future. Okay, that's helpful. And then maybe I could squeeze in one more here, and it's related to the motto, but I mean, it's clear to see the decline in the number of franchises, the signed franchises over the last couple of years.

That stepped up a little bit, but we feel like with any kind of change in interest rates.

Can improve that additionally, we started to really focus on recruiting hello to try and benefit our owners get them more of those into the office or loan originators. So that they can do more business and make sure that they can weather the storm because all that matters and mortgages volume and so it really just trying to drive that volume in those locations so that those.

Offices remain strong and sound.

In the near future.

Okay. That's helpful. And then maybe if I could squeeze in one more here and this related to the motto, but I mean.

It's clear to see that the decline in the franchise.

Signed franchises over the last couple of years, I think you're doing maybe a little bit less than half of what you did probably two or three years ago.

Ward Morrison: I think you're doing maybe a little bit less than half of what you did probably two or three years ago. You know, as you took this impairment charge, you're having to forecast out what you're assuming for franchise sales here. I don't know if you can try a little bit of color there, any kind of indication of what that might look like this year. Do you expect that?

As you took this impairment charge.

Having to forecast out what you're assuming for franchise itself here I don't know if you can probably a little bit of color there any kind of indication of what that might look like this year do you expect that to bounce.

Karri R. Callahan: of bounce back as the overall mortgage market bounces back, just kind of in a certain direction. Sure. So, you know, I think as we look at, you know, that forecast that's embedded kind of in, in, in that cash flow analysis, we're kind of ramping from tens of sales up to hundreds in the outer years, near term, as we look at 2024, you know, looking to have some growth. Last year, we did 27, kind of looking, you know, maybe in that 40 to 50-ish range. This year, that's obviously dependent on what happens from a macro perspective and what happens with rates.

Bounce back as the overall mortgage market bounces back just kind of any kind of direction on that.

Sure. So I think as we look at that forecast that's embedded kind of in that cash flow analysis were kind of ramping from tens of sales up 200, and the outer in the outer years near term as we look at 2020.

Four.

Looking to have some growth last year, we did 27 kind of looking maybe in that 40 to 50 ish range. This year, that's obviously dependent on what happens from a from a macro perspective, and what happens with rates.

Karri R. Callahan: But as I said, Ward and the team have really done a great job even, you know, selling a mortgage product in a really difficult end market. Okay, that's part of what I was looking for. Thank you guys, and that does conclude our question and answer session. I will now turn the conference over to Andy Schulz for closing remarks. Thank you, Operator, and thanks to everyone for joining our call today. If you have any additional questions, please reach out to Investor Relations. Otherwise, have a terrific weekend! This concludes today's conference call. Thank you for your participation, and you may now disconnect.

As I said, where does the team have really done a great job still even selling a mortgage product in a really difficult end market.

Okay. That's perfect I was looking for thank you guys.

And that does conclude our question and answer session I will now turn the conference over to Andy Schulz for closing remarks.

Thank you operator, and thanks to everyone for joining our call today. If you have any additional questions. Please reach out to Investor relations otherwise have a terrific weekend.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Yeah.

Okay.

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