Q1 2024 The Real Brokerage Inc Earnings Call

Speaker Change: [music].

Operator: Good morning, ladies and gentlemen, and welcome to the Real Brokerage first quarter 2024 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. I will now turn the call over to Ravi Jani, Vice President of Investor Relations and Financial Planning and Analysis at The Real Brokerage. Sir, the floor is yours.

Good morning, ladies and gentlemen, and welcome to the real brokerage first quarter 2024 earnings call.

At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.

I will now turn the call over to Ravi, Johnny Vice President of Investor Relations and financial planning and analysis at the real brokerage.

Ravi: Sir the floor is yours.

Ravi Jani: Thanks and good morning. Thank you for standing by, and welcome to the Real Brokerage conference call and webcast for the first quarter ended March 31st, 2024. We appreciate everyone for joining us today.

Ravi: Thanks, and good morning, Thank you for standing by and welcome to the real brokerage conference call and webcast for the first quarter ended March 31, 2024, we appreciate everyone for joining us today with me on the call today are Amir Paul <unk>, Our chairman and Chief Executive Officer, John <unk>, President and Michelle Ressler, our chief.

Ravi Jani: With me on the call today are Tamir Poleg, our Chairman and Chief Executive Officer, Sharran Srivatsaa, President, and Michelle Ressler, our Chief Financial Officer. This morning, Real published an earnings press release including our results for the first quarter ended March 31st, 2024. The press release, along with the unaudited consolidated financial statements and related management discussion and analysis for the quarter, have been filed with the U.S. Securities and Exchange Commission on Edgar and with the Canadian securities regulators on Cedar.

Ravi: Officer. This morning real published an earnings press release, including our results for the first quarter ended March 31 2020 for.

Ravi: The press release, along with the unaudited consolidated financial statements and related management's discussion and analysis for the quarter. That's been filed with the U S Securities and Exchange Commission on Edgar and with the Canadian Securities regulators on Cedar.

Ravi Jani: Before we get started, I'd like to remind everyone that statements made in this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward-looking statements. Our actual results may differ materially from these forward-looking statements, and the risk factors that could cause these differences are detailed in our Canadian Continuous Disclosure Documents and SEC report. Real disclaims any intent or obligation to update these forward-looking statements, except as expressly required by law. With that, I'd like to turn the call over to our Chairman and Chief Executive Officer, Tamir Poleg. Tamir, please proceed.

Ravi: Before we get started I'd like to remind everyone that statements made in this conference call that are not historical facts, including statements about future time period may be deemed to constitute forward looking statements. Our actual results may differ materially from these forward looking statements and the risk factors that could cause. These differences are detailed in our Canadian continuous disclosure documents and SEC.

Ravi: Ports Reorders.

Ravi: <unk> disclaims any intent or obligation to update these forward looking statements, except as expressly required by law.

Speaker Change: With that I'd like to turn the call over to our chairman and Chief Executive Officer to mere Pollock Mirror. Please proceed.

Tamir Poleg: Good morning and thank you, Ravi. I will start with an overview of our strategy and some recent business highlights. Sharran will provide an update on actions we are taking to drive agent growth and improve agent experience, and Michelle will provide a more in-depth discussion of our financial results for this quarter. I'll then provide a few closing remarks before opening up the call for Q&A.

Mere Pollock: Good morning, and thank you Robby.

Mere Pollock: I will start with an overview of our strategy and some recent business highlights Sharon will provide an update on the actions we are taking to drive agent growth and improve the agent experience and Michelle will provide a more in depth discussion of our financial results this quarter.

Mere Pollock: Then provide a few closing remarks before opening up the call for Q&A.

Tamir Poleg: To begin, Rio is a real estate technology company that is differentiated in our industry. Unlike traditional real estate brokerage firms, we provide real estate agents with an unmatched combination of financial incentives, a proprietary software-based technology platform, which eliminates the need for physical office space, and a collaborative culture that we believe is unique in our industry. Our vision is to simplify life's most complex transaction, that is, the purchase or sale of a home, by providing agents with the tools, technology, and resources they need to grow both their businesses and as individuals, all while delivering a seamless experience for homebuyers and sellers. In the short term, this vision includes the rollout of our OneView consumer-facing mobile app, which streamlines the client experience and enhances the attachment of our higher-margin ancillary services.

Mere Pollock: To begin real is a real estate technology company that is differentiated in our industry.

Mere Pollock: Like traditional real estate brokerage firms, we provide real estate agents with an unmatched combination of financial incentives that proprietary software based technology platform, which eliminates the need for physical office space and the collaborative culture that we believe is unique in our industry.

Mere Pollock: Our vision is to simplify life's most complex transaction that is a purchase or sale of the home by providing agents with the tools technology and resources they need to grow about their businesses and as individuals all while delivering a seamless experience for homebuyers and sellers in.

Mere Pollock: In the short term. This vision includes the rollout of our one real consumer facing mobile app, which streamlines the client experience and enhances the attachment of our higher margin ancillary services.

Tamir Poleg: In the long term, we expect our platform to encompass a holistic ecosystem of financial technology products, payments, and investment planning tools, providing agents with an avenue to build generational wealth. Ultimately, as the platform matures, we believe homebuyers and sellers could also benefit from the breadth of services offered. Our goal is to redefine the role of a real estate brokerage in the lives of our agents and in the broader housing industry.

Mere Pollock: In the long term, we expect our class for him to encompass a holistic ecosystem of financial technology products payments and investment planning tools, providing agents with an avenue to build generational wealth.

Mere Pollock: Ultimately.

Mere Pollock: As the platform matures, we believe home buyers and sellers could also benefit from the breadth of services offerings.

Mere Pollock: Our goal is to redefine the role of a real estate brokerage in the lives of our agents and in the broader housing industry.

Tamir Poleg: Importantly, just like our institutional investors, many of our agents are also shareholders in our company. And that is why everything we do is with the intent to grow long-term shareholder value. TURNING TO THE QUARTER, This morning, Bill reported record first quarter results, with revenue in the first quarter of 2024 increasing by 86% versus the prior year to $201 million, driven by a 74% increase in the number of transactions closed, combined with a 7% increase in average revenue per transaction. This compares favorably to the 3% decline in overall industry transactions during the quarter.

Mere Pollock: Importantly, just like our institutional investors many of our agents are also shareholders in our company and that is why everything we do is with the intent to grow long term shareholder value.

Tamir Poleg: Gross profit in the first quarter of 2024 was a record $20.8 million and contributed to adjusted EBITDA of $3.6 million, also a quarterly record, and a significant improvement from negative $0.8 million of adjusted EBITDA in the first quarter of 2023. This marks our fourth straight quarter of positive adjusted EBITDA, and it's particularly encouraging given the first quarter is traditionally the lowest of the year for the industry. We ended the first quarter with 16,680 agents, up 67% versus the prior year and an increase of over 3,000 agents from the end of 2023.

Mere Pollock: Turning to the quarter.

Mere Pollock: This morning, we reported record first quarter results with revenue in the first quarter of 'twenty 'twenty, four increasing by 86% versus the prior year to 201 million driven by a 74% increase in the number of transactions closed combined with a 7% increase in average revenue per transaction.

Mere Pollock: This compares favorably to the 3% decline in the overall industry transactions during the quarter.

Mere Pollock: Gross profit in the first quarter of 2024 was a record $28 million and contributed to adjusted EBITDA of $3 $6 million also a quarterly record and a significant improvement from negative zero point $8 million of adjusted EBITDA in the first quarter of 2023.

Mere Pollock: This marks our fourth straight quarter of positive adjusted EBITDA and is particularly encouraging given the first quarter is traditionally the lowest of the year for the industry.

Mere Pollock: We ended the first quarter with 16688 agents up 67% versus the prior year and an increase of over 3000 agents from the end of 'twenty to 'twenty three.

Tamir Poleg: As Sharran will discuss, the acceleration in growth this year has been driven in part by our recently launched Private Label and Pro Teams initiatives, which make it easier than ever for high-performance teams and independent brokerages to align with Real. In addition to our impressive brokerage results, our ancillary mortgage and title business lines grew by a combined 104% versus the prior year. Notably, our mortgage business alone expanded by over 400% year-over-year, all organic.

Mere Pollock: It's Ron will discuss the acceleration in growth. This year has been driven in part by our recently launched private label and proteins initiatives, which makes it easier than ever for high performing teams and independent brokerages to align with real.

Mere Pollock: In addition to our impressive brokers results, our ancillary mortgage entitled business lines grew by a combined 104% versus the prior year, notably our mortgage business alone expanded by over 400% year over year all organic.

Tamir Poleg: These ancillary businesses typically command gross margins that are six to eight times higher than our average brokerage gross margin, and we are pleased that the growth initiatives we have implemented are becoming more apparent in our results. Importantly, based on the strength we are seeing in both business lines, we continue to expect overall ancillary revenue growth to significantly outpace growth in our core brokerage business in 2024. With respect to the broader industry backdrop, obviously, the interest rate environment remains volatile, and the timing of potential Fed rate cuts continues to be delayed.

Mere Pollock: Ancillary businesses typically command gross margins there are six to eight times higher than our average brokerage gross margin and we are pleased that the growth initiatives. We have implemented are becoming more apparent in our results.

Mere Pollock: Importantly, based on the strength, we are seeing in both business lines. We continue to expect overall ancillary revenue growth to significantly outpace growth in our core brokerage business in 2024.

Mere Pollock: With respect to broader industry backdrop, obviously, the interest rate environment remains volatile and the timing of a potential fed rate cuts continues to be delayed. However at real we are charging full steam ahead, our results this quarter and indeed over the past three years demonstrate our ability to grow rapidly.

Tamir Poleg: However, at Real, we are charging full steam ahead. Our results this quarter, and indeed over the past three years, demonstrate our ability to grow rapidly, irrespective of the broader macro environment, thanks to our differentiated business model and unique agent value proposition. As we enter the peak selling season, we remain enthusiastic about the outlook for the balance of the year based on the strong momentum we are seeing in our open transaction pipeline, which is currently at an all-time high and up over 75% versus the prior year.

Irrespective of the broader macro environment, thanks to our differentiated business model and unique agent value proposition.

Mere Pollock: As we enter the peak selling season, we remain enthusiastic about the outlook for the balance of the year.

Mere Pollock: Based on the strong momentum we are seeing in our open transaction pipeline, which is currently at an all time high and up over 75% versus the prior year.

Tamir Poleg: On the product front, we continue to make upgrades to our one real consumer-facing app, including a completely redesigned client interface, and we expect further enhancements to be rolled out in the coming quarters. Regarding the Real Wallet, although we remain on track for our initial product launch in 2024, we expect a delay in our launch as we establish the necessary regulatory and compliance protocols required for such a novel product with our primary banking partners.

Mere Pollock: On the products front, we continue to make obligates two hour, one real consumer facing app, including a completely redesigned client interface and we expect further enhancement to be rolled out in the coming quarters rig.

Mere Pollock: Regarding the real wallet, although we remain on track for initial product launching 'twenty 'twenty four we expect a delay in our launch as we establish the necessary regulatory and compliance protocols required for such a novel product with our primary banking partner with.

Tamir Poleg: We still look forward to rolling out the wallet to our agent base this year as soon as we and our partner finalize the crucial work. With that, I'll turn it over to Sharran for an update on our growth initiative.

Mere Pollock: We still look forward to rolling out the wallet to our agents base. This year as soon as we and our partner finalize the crucial work.

Mere Pollock: With that I'll turn it over to Sharon for an update on our growth initiatives.

Sharran Srivatsaa: Thank you, Tamir. Today I'm excited to try something a little different and share our age and growth updates in a simple top 5. So let's dive in. Number one, how did we do on agent growth? As Tamir mentioned, we ended the first quarter with a record 16,680 agents, an increase of 3,000 agents since the start of the year. I'm thrilled to report that this momentum has continued so far in the second quarter, and as of today, Real now supports 18,000 agents across the U.S. and Canada. So number two.

Sharon: Thank you Tim here today, I'm excited to try something a little different and share our agent growth update and a simple top five format. So let's dive in.

Sharon: Number one how did we do on agent growth as Jimmy mentioned, we ended the first quarter with a record 16680 agents an increase of 3000 agents since it started the year.

Sharon: And thrilled to report that this momentum has continued so far in the second quarter and as of today real now supports 18000 agents across U S and Canada.

Speaker Change: So number two.

Sharran Srivatsaa: So the big question is why? Why are so many agents joining Real? I spend a lot of my time speaking with our agents, and from my conversations, their reasons for joining typically fall in the following buckets. Number one: culture.

Speaker Change: So the big question is why why are so many agents joining real.

Speaker Change: I spent a lot of my time speaking with our agents and from my conversations their reasons for joining typically fall in the following buckets number one culture. They ask the question where can I go that there are no physical or cloud based silos that offers a true sense of belonging and a focus on excelling in real estate sales.

Sharran Srivatsaa: They ask the question, "where can I go where there are no physical or cloud-based silos that offers a true sense of belonging and a focus on excelling in real estate sales?" Number two, the economic model. Where can I plug into an economically efficient model that boosts my earnings potential, creates wealth, and builds a secure financial future for my family?

Speaker Change: Number two the economic model, where can I plug into an economically efficient model that boosts my earnings potential creates Walt and build a secure financial future for my family.

Sharran Srivatsaa: Number three, the platform. Where can I receive the technology, the tools, and training to power my business that I can immediately plug in and play without having a huge learning curve? In essence, how can I run my business from an easy-to-use software application?

Speaker Change: Three the platform.

Speaker Change: Where can I received the technology the tools and training to power my business that I can immediately plug and play without having a huge learning curve in essence, how can I run my business from an easy to use software application.

Sharran Srivatsaa: And number four, this is a concept I like to call time on brand. Tamir and I are fortunate to be personally connected to over 75% of the agents in North America. This network has been built over the last 15 years with some of the most successful agents, teams, and brokerages in the country. These relationships put us in a unique position and often on the receiving end of calls and messages when agents are considering a move or even just looking for help, guidance, or mentoring. This is a privilege and responsibility that we hold in high regard. It also gives Real a distinct competitive advantage, especially given the current dynamics in the housing market. Number three.

Speaker Change: And number four this is a concept that I like to call time on brand Tamara and I are fortunate to be personally connected to over 75% of the agents in North America.

Speaker Change: Either to our social media platforms, our email distribution list and through various industry events and associations.

Speaker Change: This network has been built over the last 15 years with some of the most successful agents teams and brokerages in the country. These relationships put us in a unique position and often on the receiving end of calls and messages when agents are considering a move or even just looking for help guidance or mentoring.

Speaker Change: This is a privilege and responsibility that we hold in high regard.

Speaker Change: It also gives a real a distinct competitive advantage.

Especially given the current dynamics in the housing market.

Speaker Change: Number three.

Sharran Srivatsaa: What about the Private Label and Pro Team offerings you announced in January? So, let me recap these initiatives for you. Private label allows independent brokerages to keep the brands that they have built and still partner with Real. This is a no-brainer solution for independent brokerages who have built great brands over the years and don't have to lose them when they join Real. ProTeams is a special software solution that allows brokerages and teams joining Real to port over their unique commission and agent compensation model seamlessly, whereas private label allows brokerages to keep their brands. Pro Teams allows teams or groups of agents to integrate their individual team economics onto Real's platform. It's easy to think that everyone can do this.

Speaker Change: What about private label and proteins offerings, you announced in January.

Speaker Change: So let me recap these initiatives for you.

Speaker Change: Private label allows independent brokerages to keep the brands that they have built and still partner with real. This is a no brainer solution for independent brokerages, who have built great brands over the years and don't have to lose them when they joined real.

Speaker Change: Proteins is a special software solution that allows brokerages and teams joining real to port over their unique commission agent compensation model seamlessly.

Speaker Change: Whereas private label allows brokerages to keep their brands proteins allows teams or groups of agents to integrate their individual team economics onto real platform.

Sharran Srivatsaa: But in fact, it's really hard. We know this because, in 2023, we piloted five private label groups and realized that it was incredibly challenging because each had its own unique team structure and economic model. That is why we spent an entire year building the protein software that allows for the integration and portability of these business models without affecting. While some companies may think that they can just offer a white-label solution for brokerages, there are actually a lot of complex, In essence, what I'm trying to say is that without proteins, private label is like an uncooked steak. It has potential, but it still needs further expertise and finesse to make it truly si So you must be wondering, is it working, and what is its impact?

Speaker Change: It's easy to think that everyone can do this and in fact, it's really hard we know this because in 2023 we piloted five private label groups and realized that it was incredibly challenging because each had its own unique team structure and economic model.

Speaker Change: That is why we spent an entire year building the protein software that allows for the integration and portability of these business models without affecting agents.

Speaker Change: While some companies may think that they can just offer a white label solution for brokerages, there are actually a lot of complexities.

Speaker Change: What I'm trying to say is that without proteins private label is like an uncapped steak [laughter] it has potential but it still needs for their expertise and fitness to make it truly sizzle.

Speaker Change: Number four.

Speaker Change: So he must be wondering is it working and what is the impact well.

Sharran Srivatsaa: In this launch quarter alone, over 200 agents joined Real under the Private Label Program, and we expect this number to more than double in the second quarter as more brokerages seek to capitalize on the tools, support, and opportunities that Real provides. Now, we didn't have any visibility into what the NAR settlement would mean for the industry when we were designing private labor.

Speaker Change: And this launch quarter alone over 200 agents joined real under the private label program and we expect this number to more than double in the second quarter as more brokerages seek to capitalize on the tools support and opportunities that real provides.

Speaker Change: Now we didn't have any visibility into what the any our settlement would mean for the industry. When we were designing private label.

Sharran Srivatsaa: But what we have found is that numerous independent brokerages are concerned about the potential liability and regulatory impact ahead, and many have approached us to explore conversations about coming on board. These are independent brokerages like Modern Broker, with over 200 agents in California, or Village Premier Collection, with over 400 agents across 3 states, who would never have considered Real before Private Label and Protein. Consequently, our pipeline of 100 agent-plus teams considering making the leap to real is at an all-time high.

Speaker Change: But what we've found is that numerous independent brokerages are concerned about the potential liability and regulatory impact ahead of me.

Speaker Change: Many have approached us to explore conversations about coming on board.

Speaker Change: These are independent brokerages like modern broker with over 200 agents in California or village Premier collection with over 400 agents across three states, who would have never considered real before private label and proteins.

Speaker Change: Sequentially, our pipeline of 100 agent plus teens, considering making the leap to real is at an all time high and we have high expectations for private label, along with our proteins infrastructure to be a differentiating factor in converting this pipeline.

Sharran Srivatsaa: And we have high expectations for private label, along with our pro-teams infrastructure, to be a differentiating factor in converting this pipeline. Number five, that brings me to how does the NAR settlement affect Real's outlook for agent growth and retention? The NAR settlement requires some mechanical changes to industry practices, which are entirely driven by training. And when it comes to our agents, we are a training-first company. That means we believe that a skilled agent will outperform an unskilled agent 10 to 1.

Speaker Change: Number five that brings me to how does the N E R settlement affect real outlook for agent growth and retention.

Speaker Change: The IPR settlement requires some mechanical changes to the industry practices, which are entirely driven by training.

Speaker Change: And when it comes to our agents. We are training first company that means we believe that a skilled agent will outperform and unskilled agent tend to one so.

Sharran Srivatsaa: So for over a year now, we've been training our agents on our proprietary Buyer Mastery program, equipping them with the skills, tools, and materials they need to help serve clients in the post-NAR settlement world. In fact, later today, I'm going to be hosting a special Buyer Mastery live virtual workshop where I'm going to compress a two-day seminar into four hours. We expect to have thousands of agents at the training and have opened up this training as a gift to the entire industry for free.

Speaker Change: So for over a year now we've been training our agents on our proprietary buyer mastery program equipping them with the skills tools and materials they need to help serve clients in the post any our settlement world. In fact later today I'm going to be hosting a special buyer mastery live virtual workshop, where I'm going to compress a tool.

Speaker Change: Seminar into four hours, we expect to have thousands of agents on the training and have opened up this training as a gift to the entire industry for free.

Sharran Srivatsaa: Not only am I going to be personally teaching the playbook for how to serve buyers in the shifting market, but we will also give our agents a sneak peek at a new product-based solution that we're launching for agents and their clients. So if you have four hours to spare this afternoon, we'd love to have you join us. With that, I'd like to personally thank our onboarding and operations teams who have worked tirelessly to manage the influx of new agents who have joined us, and our transactions teams, who are setting records in processing and settling transactions at a pace that is unparalleled in this industry, aided by our leading technology platform. The pipeline is robust, and we expect to welcome many more agents, brokerages, and mega teams in the quarters ahead. With that, I'll turn the call over to Michelle.

Speaker Change: Not only am I going to be personally teaching the playbook for how to serve buyers and the shifting market, but we will also give our agents a sneak peek at a new product based solution that we're launching for agents and their clients. So if you have about four hours to spare. This afternoon, we'd love to have you join us with that I'd like to personally thank.

Speaker Change: Our onboarding and operations teams, who have worked tirelessly to manage the influx of new agents, who have joined US this year and our transactions teams or setting records and processing and settling transactions at a pace that is unparalleled in this industry aided by our leading technology platform.

Speaker Change: The pipeline is robust and we expect to walk them, many more agents brokerages and Mega teams in the quarters ahead with that I'll turn the call over to Michele.

Michelle Ressler: Thank you, Sharran, and thank you, everyone, for joining us. Revenue in the first quarter of 2024 rose to $201 million, an increase of 86% versus the first quarter of 2023. This was primarily driven by an 86% increase in brokerage revenue, which saw a 74% increase in the number of transactions closed, which topped 19,000 in the quarter, and a 7% increase in average revenue per transaction. Revenue from our ancillary businesses totaled $1.5 million during the first quarter of 2024, an increase of 104% versus the first quarter of 2023, driven by 427% growth in our one real mortgage business and 33% growth in one real title revenue.

Michele: Thank you Sharon and thank you everyone for joining us.

Michele: Revenue in the first quarter of 'twenty 'twenty four rose to 201 million, an increase of 86% versus the first quarter of 'twenty 'twenty right.

Michele: This was primarily driven by an 86% increase in brokerage revenue, which saw a 74% increase in the number of transactions costs, which topped 19000 in the corner.

Michele: 7% increase in average revenue per transaction.

Michele: Revenue from our ancillary businesses totaled $1 5 million during the first quarter of 'twenty three for an increase of 100 or 40% versus the first quarter of 'twenty 'twenty right.

Michele: And by 427% growth in our one way on more niche business and 33% growth in one real title retina here.

Michele: Okay.

Michelle Ressler: Growth profit for the first quarter of 2024 was $20.8 million, an increase of 92% from $10.8 million in the first quarter of 2023, and reached a new quarterly record. Growth margin of 10.3% in the first quarter of 2024 represents a 30 basis point year-over-year improvement from the prior year. The increase is attributed to both strategic actions taken to increase margins, combined with a higher contribution from our ancillary business lines. As a reminder, our cost of goods sold includes stock-based compensation tied to our agent stock purchase program, where agents can opt to receive part of their commissions in real equity subject to certain vesting requirements.

Michele: Gross profit for the first quarter of 'twenty 'twenty four was $20 8 million an increase of 92% from $10 8 million in the first quarter of 2023 and reached a new quarterly record gross.

Michele: Gross margin kind of point to 8% in the first quarter of 2024 represents a 30 basis point year over year improvement from the prior year.

Michele: The increase is attributed to the strategic actions taken to increase margins combined with a higher contribution from our ancillary business lines.

Michele: As a reminder.

Michele: Cost of goods sold include stock based compensation tied to our agent stock purchase program.

Michele: Instead of outsourcing as part of their conditions and real equity subject to certain vesting requirements.

Michelle Ressler: This amount totaled $5.2 million in the quarter and is excluded from our adjusted IPTA calculation in the stock-based compensation line. Additionally, there is always quarterly seasonality in our growth margin percentage rates, influenced by the proportion of revenue generated by agents who have reached their annual commission cap. Typically, fewer agents reach this cap during the first quarter, with the number increasing during the second and third quarters of the year.

Michele: Our total $5 2 million in the quarter with it from our adjusted EBIDTA calculation or stock based compensation line.

Michele: Additionally, theres always quarterly seasonality in our gross margin percentage rate.

Michele: In spite of her question I'd, rather they were generated by agents or reach their annual commission costs.

Michele: Typically fewer agents rates of cap during the first quarter with the number of increasing during the second and third quarters of the year.

Michelle Ressler: With that said, we remain acutely focused on driving year-over-year growth and margin improvement on an annual basis, particularly as our ancillary business lines continue to scale. Total operating expenses, which include general and administrative, marketing, R&D, and litigation-related expenses, were $36.5 million, or 18.2% of revenue, in the first quarter of 2024, compared to $17.8 million, or 16.5% of revenue, during the first quarter of 20 Operating expenses this quarter include $9.9 million of litigation expenses incurred in connection with our recently announced class action settlement.

Michele: That said, we remain acutely focused on driving year over year gross margin improvement on an annual basis, particularly as our ancillary business lines can take yeah.

Michele: Total operating expenses, which include general and administrative marketing R&D and litigation related expenses.

Michele: $36 5 million or 18, 2% of revenue in the first quarter of 'twenty 'twenty four compared to $17 8 million or 16, 5% of revenue during the first quarter of 2020 three.

Michele: Operating expenses. This quarter included $9 9 million of litigation expenses incurred in connection with our recently announced the class action settlement.

Michelle Ressler: Excluding these litigation expenses, total operating expense as a percentage of revenue would have improved by over 300 basis points from the prior year first quarter, demonstrating the operating leverage inherent in our platform. Revenue share expense, which is included in marketing expense, was $9.1 million in the first quarter of 2024, an increase from $5.4 million in the first quarter of 2023. As a percentage of revenue, revenue share declined to 4.5% in the first quarter of 2024 from 5% in the first quarter of 2023, in part due to revenue share model changes we announced in the second half of last year.

Michele: Good evening litigation expenses total operating expense as a percentage of revenue would have improved by over 300 basis points from the prior year first quarter.

Michele: Demonstrating the operating leverage inherent in our platform.

Michele: Revenue share expense, which is included in marketing expense was $9 1 million in the first quarter of 2024, an increase from $5 4 million in the first quarter of 'twenty 'twenty. Okay.

Michele: As a percentage of revenue revenue share declined four 5% in the first quarter of 'twenty 'twenty four from 5% in the first quarter of 23 three.

Michele: Hard tissue revenue share model changes, we announced in the second half of last year.

Michelle Ressler: Note that revenue share expense is entirely variable and reflects the portion of the real commission split that is paid to agents who recruit new agents into the brokerage. Suggested operating expense, which reflects total operating expenses, less revenue share, stock-based compensation, depreciation, and other unique or non-cash items totaled $13.6 million in the first quarter of 2024, or 6.8% of revenue, a roughly 200 basis point improvement from 8.8% in the The Adjusted Operating Expense is a non-IFRS metric that is intended to help investors understand the makeup of our non-variable, ongoing fixed cash operating expenses.

Michele: Note that revenue share expense entirely variable and reflects the question of Royal Commission split that is paid to agents, who recruit new agents to the brokerage.

Michele: Adjusted operating expense, which reflects total operating expenses less revenue share stock based compensation depreciation and other unique or noncash items totaled $13 6 million in the first quarter of 'twenty 'twenty, four or six 8% of revenue.

Michele: 200 basis point improvement from eight 8% in the prior year.

Michele: Adjusted operating expense is a non I harassed or check that is intended to help investors understand the makeup of our non variable ongoing fixed cash operating expenses.

Michelle Ressler: Real's net loss was $16.1 million in the first quarter of 2024, including $9.9 million of litigation expenses, compared to a net loss of $7.4 million in the first quarter of 2023. Adjusted EBITDA improved to $3.6 million in the first quarter of 2024, a significant improvement from negative $800,000 in the first quarter of 2023. The bank base is driven by our strong revenue and gross profit growth, which outpaced growth in our cash operating expenses.

Michele: Well isn't that law school 16, 1 million in the first quarter of 2024, including $9 9 million of litigation expenses compared to a net loss of $4 million in the first quarter of 2023.

Michele: Adjusted EBITDA improved to $3 6 million in the first quarter of 'twenty 'twenty four a significant improvement from negative 800000 in the first quarter I plan for any great.

Michele: The increase was driven by our strong revenue and gross profit growth, which outpaced growth in our cash operating expenses.

Michelle Ressler: Turning to our balance sheet and cash flow, we ended the quarter with unrestricted cash and investments of approximately $34.5 million, an increase of $5.6 million from the end of 2023. Cash flow from operating activities was $21.5 million in the first quarter of 2024 compared to $9.3 million in the first quarter of 2023. During the quarter, we allocated $4.6 million to share repurchases.

Michele: Turning to our balance sheet and cash flow.

Michele: And then the quarter with unrestricted cash and investments of approximately $34 5 million an increase of $5 6 million from the end 'twenty 'twenty right.

Michele: Cash flow from operating activities was $21 5 million in the first quarter of 'twenty 'twenty four compared to $9 3 million in the first quarter of 'twenty three.

Michele: During the quarter, we allocated corporate 6 million to share repurchases, we remain well capitalized with ample liquidity to fund our continued growth while continuing to return capital to shareholders.

Michelle Ressler: We remain well capitalized with ample liquidity to fund our continued growth while continuing to return capital to shareholders. As always, we will continue to diligently manage costs and allocate capital effectively, along with a focus on long-term shareholder value creation. To close, I'll recap a few KPIs we are commonly asked about. The total value of homes transacted over our platform increased to $7.5 billion in the first quarter of 2024, an 88% year-over-year increase.

Michele: All in we will continue to diligently manage costs and allocate capital effectively.

Michele: Okay, a long term shareholder value creation.

Michele: To close I'll recap a few kpis, we are commonly asked about.

Michele: The total value of homes for that code over our platform increased to seven 5 billion in the first quarter of 'twenty, 'twenty, four and 88% year over year increase.

Michelle Ressler: The median sale price of properties sold by our agents was $372,000 in the first quarter of 2024, which represents a 6% year-over-year increase. Adjusted operating expense per transaction was $715 and declined 18% year-over-year from $870, a testament to the efficiencies enabled by our technology platform.

Michele: The median sales price of properties sold by our agent with 372000 in the first quarter of 'twenty, 'twenty, four which represents a 6% year over here right.

Michele: Adjusted operating expense per transaction were $715 and declined 18% year over year or $870, a testament to the efficiencies enabled by our technology platform.

Michelle Ressler: As of the end of the first quarter of 2024, 7.7% of agents had exceeded their annual commission cap, down slightly from 8.2% during the first quarter of 2023. This cohort represented approximately 40% of commission revenue during the quarter. Canada accounted for 13% of commission revenue in the first quarter of 2024, compared to 11% in the first quarter of 2023. Our headcount efficiency ratio, which we define as full-time employees, excluding one real title and one real mortgage employee, divided by the number of agents on our platform, reached a record 1 to 143 at the end of the first quarter.

Michele: As of the end of the first quarter of 2020, 477% in ADR had exceeded their annual commission cap down slightly from eight 2% during the first quarter of 2023.

Michele: This cohort represented approximately 40% of commission revenue during the quarter.

Michele: Canada accounted for 13% of commission revenue in the first quarter of 'twenty 'twenty four compared to 11% in the first quarter of 2023.

Michele: Our head count efficiency ratio, which we define as full time employees, including one real title and wondering I'm wondering typically is divided by the number of agents were a bottler.

Michele: A record one to 143 at the end of the first quarter a significant improvement from one to 114 at the end of the first quarter of 2023 and demonstrates our ability to add new agents to the platform without adding significant new full time headcount.

Michelle Ressler: This is a significant improvement from 1 to 114 at the end of the first quarter of 2023 and demonstrates our ability to add new agents to the platform without adding significant new full-time headcount. With that said, given the significant growth in the aging count, which has well exceeded our expectations, we are making select strategic hires for onboarding and agent experience teams to ensure all real agents receive the necessary training and support they require to be their most productive.

Michele: With that said given the significant growth in agent count.

Michele: Which has well exceeded our expectations, we are making select strategic hires for onboarding and agent experience to ensure all really here, especially the necessary training and support they require either most productive.

Michelle Ressler: Lastly, while we are not providing formal guidance, we continue to expect to deliver significant year-over-year improvements in revenue, gross profit, and digestity retail in 2024. This concludes my financial remarks. More details on our results and key operating metrics can be found in the earnings press release and investor presentation that accompany this call. I will now turn it back to Tamir.

Michele: Lastly.

Michele: Well, we are not providing formal guidance, we continue to expect to deliver significant year over year improvement revenue gross profit and adjusted EBITA in 2024.

Michele: This concludes my financial remarks, more details on our results and key operating metrics can be found in the earnings press release and Investor presentation that accompany this call I.

Speaker Change: I will now turn it back to generics.

Tamir Poleg: Michelle, In April, we entered into a settlement agreement to resolve a pending class action lawsuit, agreeing to pay $9.25 million. We believe this decision was in the best interest of our company and our shareholders, allowing us to focus our time and resources on building the future. While the impending practice changes resulting from the NAR settlement have sparked much speculation about their impact on the brokerage industry, I want to reassure everyone that we view these developments not as challenges but instead as an opportunity for Real to emerge even stronger.

Generics: Thank you Michelle.

Speaker Change: In April we entered into a settlement agreement to resolve the pending class action litigation lawsuit agreeing to pay $9.25 million we.

Speaker Change: We believe this decision was in the best interest of our company and our shareholders, allowing us to focus our time and resources on building the future.

Speaker Change: While the impending practice changes, resulting from the <unk> settlement have sparked much speculation about their impact on the brokerage industry I want to reassure everyone that we view these developments not as challenges, but instead as an opportunity for real to emerge even stronger.

Tamir Poleg: We believe this for several reasons. First and foremost, we firmly believe in the valuable role real estate agents play in the home buying and selling process, which often represents the biggest and most complex transaction in our clients' lives. We know agents will continue to play a significant role on both sides of a real estate transaction. And if less productive agents were to leave the industry, this would leave more transactions available for high-producing agents like the ones affiliated with Real. Second, Real offers best-in-class Asian economics.

Speaker Change: We believe this for several reasons first and foremost we firmly believe in the valuable role real estate agents play in the home buying and selling process, which often represents the biggest and most complex transaction in our clients' lives.

Speaker Change: We know agents will continue to play a significant role on both sides of a real estate transaction and if less productive agents were to leave the industry. This would leave more transactions available for high producing agents like the ones affiliated with real.

Speaker Change: Second real offers best in class agent economics by RMS in 2023 we paid out the highest percentage of revenue and commission splits and revenue share than any of our direct public peers.

Tamir Poleg: By our math, in 2023, we paid out the highest percentage of revenue in commission splits and revenue share than any of our direct public peers. Given that agents are economically motivated business owners, those concerned about future commission rates would find that affiliating with any brokerage other than Rio could mean missing out on significant earnings. As such, we anticipate the trend of agents migrating from traditional, high-cost brokerages to more efficient, high-value models like ours will likely accelerate in the years ahead. We're already seeing this thesis play out in our robust agent growth numbers.

Speaker Change: Given that agents are economically motivated business owners those concerned about future commission rates would find that affiliating with any brokerage other than real could be missing out on significant earnings.

Speaker Change: As such we anticipate the trend of agents migrating from traditional high cost brokerages to more efficient high value models like ours will likely accelerate in the years ahead.

Speaker Change: We're already seeing this thesis play out in a robust agent growth numbers.

Tamir Poleg: Third, our proprietary technology will continue to be a driver of competitive advantage. On the agent-facing side, our Reason software allows us to scale rapidly and efficiently by automating the vast majority of traditional transaction management processes. This provides us with a significant cost advantage over traditional brokerages who predominantly rely on physical office space and human-intensive operations and who would need to invest significant time and resources in order to catch up with our technology.

Speaker Change: Third.

Speaker Change: Our proprietary technology will continue to be a driver of competitive advantage on the agent facing side. Our recent software allows us to scale rapidly and efficiently by automating the vast majority of traditional transaction management processes.

Speaker Change: This provides us with a significant cost advantage over traditional brokerages, who predominantly rely on physical office space and human intensive operations, and who would need to invest significant time and resources in order to catch up with our technology.

Tamir Poleg: Meanwhile... On the consumer front, we have been investing in technology to enhance the client experience for years. Our One Real App was built on the principle that clients deserve a seamless modern digital experience that streamlines the transaction process and enriches the client's journey. As we complete our user interface overhaul in the coming months, we will be introducing additional digital innovations, such as automating the process of executing buyer-broker agency agreements. Moreover, in scenarios where clients are concerned about the potential of out-of-pocket costs of retaining a buy-side agent, our One Real Mortgage company is already working on programs with its lending partners that could significantly decrease the closing costs of those homebuyers who opt to use One Real Mortgage

Speaker Change: Meanwhile.

Speaker Change: On the consumer front, we have been investing in technology to enhance the client experience for years.

Speaker Change: Our one real up was built on the principle that clients deserve a seamless modern digital experience that streamlines the transaction process and enriches the client's journey.

Speaker Change: As we complete our user interface overhaul in the coming months, we will be introducing additional digital innovations such as automating the process of executing bio broker agency agreement. Moreover, <unk>.

Speaker Change: In scenarios, where clients are concerned about the potential of out of pocket cost of retaining the buy side agent or one real mortgage company is already working on programs with its lending partners that could significantly decreased closing costs of those homebuyers, who opt to use one real mortgage.

Tamir Poleg: This not only provides tangible value to clients but also drives increased adoption of this high-margin business line. Lastly, we anticipate that disruptions within traditional brokerages will drive greater consolidation across the industry. Real is ideally positioned to be a shared consolidator, either organically or via strategic M&A, rather than being consolidated. We have seen an increasing number of inbound inquiries from traditional brokerages looking to secure their future by aligning with innovative players like Real.

Speaker Change: This not only provides tangible value to clients, but also drive increased attachment of this high margin business line.

Speaker Change: Lastly, we anticipate the disruptions within traditional brokerages will drive greater consolidation across the industry.

Speaker Change: Real is ideally positioned to be a sure consolidator, either organically or via strategic M&A rather than being consolidated.

Speaker Change: We have seen an increasing number of inbound inquiries from traditional brokerage is looking to secure their future by aligning with innovative players like real.

Tamir Poleg: As always, we will be extremely disciplined in evaluating such opportunities, applying a high hurdle rate in our buy vs. build decision. In conclusion, I am extremely pleased with our results this quarter and look forward to navigating the changes ahead from a position of strength. Thank you to our agents, employees, and industry partners who continue to propel us forward on our journey. Now, we move to the Q&A session.

Speaker Change: As always we will be extremely disciplined in evaluating such opportunities applying a high hurdle rate in our buy versus build decisions.

Speaker Change: In conclusion I am extremely pleased with our results this quarter and look forward to navigating the changes ahead from a position of strength.

Speaker Change: Thank you to our agents employees and industry partners, who continue to propel us forward on our journey now, let's move to the Q&A session.

Operator: Everyone at this time will be conducting a question and answer session for analysts. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while you're posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Darren Aftahi from Roth MKM. Your line is live.

Speaker Change: Certainly everyone. At this time will be conducting a question and answer session for analysts. If you have any questions or comments. Please press star one on your phone at this time.

Speaker Change: We do Aswell posing a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.

Speaker Change: Once again, if you have any questions or comments. Please press star one on your phone.

Speaker Change: Your first question is coming from Darren <unk> from Roth M. Kim Your line is live.

Darren Paul Aftahi: Yeah, great. Thanks. Can you hear me? Yes. Great. Good morning. Nice job on the results.

Darren: Yeah, great. Thanks can you hear me.

Darren: Yes.

Darren Paul Aftahi: I have a question regarding kind of the impact on the NAR settlement. Sharran touched a little bit on just, I'm trying to kind of handicap the impact on the Perspective Pipeline of New Agents and Teams. Like, how big of an opportunity really is this? I appreciate it's very early in the cause and effect cycle, but just trying to understand what this means in terms of your conversations. You touched on that, but I would just love to give a little bit more color.

Darren: Great Good morning.

Darren: Nice job on the results I ever question regarding.

Darren: The impact on the from the M. A R settlement, Sean touched a little bit on just trying to kind of handicap the impact.

Darren: On prospective pipeline of new agents and teams like how big of an opportunity really is to say I. Appreciate it's very early in the cause and effect cycle, but just trying to understand what this means in terms of your conversations you touched a little bit on it but just love if you can give a little bit more color.

Tamir Poleg: Shavon, do you wanna take this one?

Darren: Sean you want to take this one.

Sharran Srivatsaa: Yeah, absolutely. Hi Darren. Thank you so much for that.

Sean: Yeah, absolutely hi, Darren Thank you so much for that so at.

Sean: At a very high level several of the brokerages that are seeing the headwinds are have this inbound.

Sharran Srivatsaa: So at a very high level, several of the brokerages that are seeing the headwinds have been having these inbound conversations with us on the future regulatory impact of what's happening. This is early for one main reason, Darren, because of two things. One, the exact implementation of what is happening with the NAR settlement has not been fully baked out. The NAR has given us until August 17th to have all this baked out. So I think over the next quarter, we'll have a lot more visibility into where these independent brokerages and inbound inquiries are happening.

Sean: Conversations with us on the future regulatory impact of what's happening. The if this is this is early for one main reason darrin because.

Sean: A few things one.

Sean: The exact implementation of what is happening with the N. E. R. Settlement is has not been fully baked out there no I was giving us until August 17th to have all this baked out so I think over the next quarter, we'll have a lot more visibility into where are these independent brokerages in inbound inquiries that happening, but they are all happening for one major reason which is.

Sharran Srivatsaa: But they're all happening for one major reason, which is this private label and pro teams offering. So all the independent brokerages that have built something feel like they can have a better home. So on one end, they're trying to figure out what is happening in the landscape. On the other end, we are the destination for at least the early conversations. So looking forward to kind of sharing more with you as this bakes in over the next quarter.

Sean: This private label and proteins offering so all the independents that have built something feel like they can have a better home. So on one hand, they're trying to figure out what is happening in the landscape on the other end. We are the we feel like we are the destination for at least the early conversations so looking forward to kind of sharing more with you as just baked in over the next quarter.

Darren Paul Aftahi: Great, thank you for that. There's one more if I could.

Darren Paul Aftahi: It looked like revenue churn was, I think, one of the lowest levels it's been in the last nine quarters. Obviously, you guys had a material amount of agents join and are expected to be agent-turned, but I'm just kind of curious. It seems like the highest-producing teams and agents are sticking around, and for a longer time. I'm just trying to maybe get a sense for, one, on that KPI, and then, two, if you could talk about some of the more productive teams that have been on your platform for a longer time, just trying to understand some of those cohorts with longer vintages, what they kind of look like, and what your projection is for that going forward Thanks.

Speaker Change: Great. Thank you for that there's one more if I could look like.

Revenue churn was one envelope lowest levels, it's been in the last nine quarters.

Speaker Change: Obviously, you guys had a.

Speaker Change: A material amount of agents are joining him is expected to be.

Speaker Change: Agent churn, but I'm, just kind of curious it seems like the <unk>.

Speaker Change: Highest producing teams and agents are sticking around.

Speaker Change: And for a longer time, just trying to maybe get a sense for one on that Kpis and she was if you could talk about some of the more productive teams that have been on your.

Speaker Change: Platform for a longer time to try to understand some of those cohorts with longer vintages, what they've got to kind of look like and what are your projections for that going forward. Thanks.

Tamir Poleg: Revenue churn was 1.9% for the quarter, which is extremely low. I think it's the lowest rate that we've seen in years. What we typically see is that teams rarely leave real. It's extremely rare for a team to leave. What we are seeing is that individual agents sometimes leave the platform. We are very pleased with the 1.9%. Historically, it's been a little bit higher than that.

Speaker Change: Sure. So yeah revenue churn was one 9% for the quarter, which is extremely low I think it's a it's the lowest rate that we've seen in years and what we typically sees that the teens are rarely leave real it's extremely rare for a team to leave what we are seeing is that individual agents sometimes.

Speaker Change: Leave the platform, we are very pleased with the one 9% historically, it's been a little bit higher than that we also expect that number to fluctuate in the future, but overall, we're doing a good job at retaining productive agents retaining our most productive productive teams and I think that this is a testament to the fact that the plot.

Tamir Poleg: We also expect that number to fluctuate in the future. Overall, we're doing a good job at retaining our productive agents and retaining our most productive teams. I think that this is a testament to the fact that the platform that we have built and all the embedded economics into the model really work well in the case of large teams. Bear in mind the fact that, A, there are not enough compelling alternatives out there, especially for high-performance teams.

Speaker Change: One that we have built in all the our embedded economics into the model really worked well in the case of large teams bear in mind. The fact that also a there are not enough compelling alternative out there, especially for high performing teams and second typically teams takes a while to Katrina.

Tamir Poleg: Second, typically, teams take a while to change brokerages. The ones that are here and enjoy all of the benefits of the platform would need a really compelling opportunity outside in order to make a switch. That opportunity currently does not exist, so we do a good job at retention.

Speaker Change: So the ones that are here and enjoy all of the benefits of the cloud for them would need a really compelling opportunity outside you know just to make a switch and that opportunity currently does not exist. So we do a good job at redemption.

Darren Paul Aftahi: Great, thank you, and congrats again. Thank you.

Speaker Change: Great. Thank you congrats again.

Speaker Change: Thank you.

Operator: Thank you. Your next question is coming from Stephen.

Speaker Change: Thank you. Your next question is coming from Stephen Sheldon from William Blair. Your line is live.

Stephen Hardy Sheldon: A good morning, and really nice results here. Starting with Tamir, how confident are you about the value proposition of the real wallet for your agent base? As I think you started testing it with at least a few agents back in March, it sounds like you're pushing out the full launch somewhat to ensure you're squared away on the regulatory side, but has your thinking changed at all about how impactful this could be to agent recruiting and retention, along with being another source of monetization and gross profit? How are you thinking about it?

Stephen Hardy Sheldon: Hey, good morning, and really nice results here.

Stephen Hardy Sheldon: With to mirror, how confident are you about the value proposition of the real wallet to your agent base as I I think you had started testing it at shot with at least a few agents back in March it sounds like you're pushing out the full launch some to ensure your squared away on the regulatory side, but has your thinking changed at all about how impact.

Stephen Hardy Sheldon: This can be to agent recruiting and retention along with being another source of monetization gross profit or how are you thinking about it.

Tamir Poleg: Hi Stephen. As I mentioned earlier, we have somewhat of a delay in the launching and testing of the wallet due to some delays on our banking partner's side. We do expect to start testing, maybe even at the end of this quarter, if not the beginning of the next one. Our view has not changed, maybe even strengthened. So we had more conversations with agents, more conversations with teams; a lot of the teams that are now in the pipeline, or the ones that have joined recently, are extremely excited about the wallet.

Speaker Change: Hi, Stephen as I mentioned earlier, we have a somewhat of a delay with the launching and testing of the wallet due to some delays on our banking partner side, we do expect to start testing maybe even at the end of this quarter if not the beginning of the next one.

Speaker Change: Our view has not changed maybe even reinforced so we had more conversations with agents more conversations with the teams a lot of the teams that are now in the pipeline or the ones that have joined recently.

Tamir Poleg: So we are even more bullish than before. I think that we're just scratching the surface of the possibilities that we can build around the wallet. But again, we haven't started testing it yet. It's all kind of in theory, but we do see the wallet as a huge attraction point, both for individual agents and teams, and an attraction point for teams to attract agents to their own teams. So everybody's looking forward to receiving that product and starting to use it. But it will take a couple more months.

Speaker Change: Are extremely excited about the wallet. So we are even more bullish than before I think that we're just scratching the surface of the possibility.

Speaker Change: We can we.

Speaker Change: We can build around the the wallets, but again, we haven't started testing it yet it's all kind of in theory, but we do see the wallet as a huge attraction point both for our individual.

Speaker Change: Individual agents and teams and an attraction point for teams to attract agents to their own team. So everybody is looking forward to receiving that product and starting to use it and it will take a couple more months.

Stephen Hardy Sheldon: Got it. That's helpful.

Speaker Change: Got it that's helpful.

Speaker Change: And then maybe for Sharon great to hear about the pipeline of large hunter plus teams looking enjoying real any context on how large that pipeline is and what it can take to get some of those teams to switch over and just generally you know when should we think about agent agent trends how is the team thinking about agent additions over the rest of the year given the momentum.

Stephen Hardy Sheldon: Maybe for Sharran, great to hear about the pipeline of large 100 plus teams looking to join Real. Any context on how large that pipeline is and what it could take to get some of those teams to switch over? And just generally, you know, if you think about agent trends, how is the team thinking about agent additions over the rest of the year, given the momentum you're seeing and where pipelines currently sit?

Speaker Change: You're seeing and where our pipeline is currently set.

Sharran Srivatsaa: Yeah, thank you, Stephen. These, the pipeline varies. And as Tamir was sharing, just as a fact, you have teams in real life, and the process of moving a team takes a minute. It's the same for inbound operations, especially if they are independent brokerages or teams. So the opportunities are very varied, and it is probably the highest inbound that we have seen in kind in the last two years, especially given this offering. Now, what I will say is that a big part of this offering is driven by two things. One, on the one side of private label, which is that they can keep their brands.

Speaker Change: Yeah, I think as Steven these the the the pipeline varies and is tomorrow with sharing just as the fact that you have teams at real and the process of moving a team takes a minute. It's the same for inbound operations, especially if they are independent brokerages are our teams so that.

Speaker Change:

Speaker Change: The opportunity is very varied and is probably the highest inbound that we have seen in kind of the last two years, especially given this offering now what I will say is that Ah.

Speaker Change: A big part of this offering is driven by by the two things one on the one side a private label, which is a they can keep their brands, but most importantly is this idea of getting the proteins, which is teams that have brokerages and teams that have their existing models are they can integrate them onto real so we don't I don't have exactly the the conversion.

Sharran Srivatsaa: But most importantly, is this idea, given the pro teams, which are teams that have brokerages and teams that have their existing models, they can integrate them into real. So we don't I don't have exactly the conversion metric of what's happening in the pipeline, but there are two sets of folks. One, where we've had a lot of conversations and who are extremely serious about the move. But we're just figuring out their timeline for this move.

Speaker Change: Of what's happening in the pipeline, but there's two sets of folks out one where we've had a lot of conversations and who are extremely serious about the moon, but we're just figuring out their timeline on this website I think.

Sharran Srivatsaa: So I think, as Tamir and I mentioned, the private label and pro team offerings are still super early. And by the time these teams come on board, learn the offering, figure out if it's the right fit for them, it takes a good quarter or two for it to kind of bake in. So that's where we are in this entire process.

Speaker Change: Says to me when I mentioned, the private label and proteins offerings is still super early and by the time. These teams come on board learned D offering figure out what's the right fit for them. It takes a good quarter or two for it to kind of baked in so that's where we are in this entire process.

Tamir Poleg: Hey Stephen, I also just want to mention, as you're probably aware, there's seasonality, so typically, Q4 and Q1, or the end of Q4 and Q1 are the highest, you know, agent movement quarters, and then when the busy selling season starts, the agent movements sort of slow down a bit.

Speaker Change: Hey, Stephen also just want to mention you know as you're probably aware theres seasonality. So typically Q4 and Q1 or like the end of Q4 and Q1 are the highest you know Luke win quarters, and then when the busy busy selling season start the you know the agent movement sort of.

Speaker Change: Slow down with it.

Stephen Hardy Sheldon: Got it. It makes sense. Thank you very much.

Speaker Change: Okay got it makes sense. Thank you very much.

Operator: Thank you. Once again, everyone, if you have any questions or comments, please press star and then one on your phone. Your next question is coming from Matthew Erdner from Jones Trading. Your line is live.

Speaker Change: Thank you once again, everyone. If you have any questions or comments. Please press star then one on your phone.

Speaker Change: Your next question is coming from Matthew <unk> from Jones trading your line is live.

Matthew Erdner: Hey, good morning guys. Thanks for taking the question. Following up a little bit on the pro teams and just the pipeline, and I know a lot of teams vary, but what is your average timeline from inquiry to onboarding? How long, I guess, does it take for some of these teams to switch over and fully get onboarded?

Matthew: Hey, good morning, guys. Thanks for taking the question.

Matthew: Following up a little bit on the proteins and just the pipeline you know and I know audit teams very but what is your average timeline you know from inquiry to Onboarding you know how long I guess does it take for some of these teams just switchover.

Speaker Change: All we get on boarded.

Sharran Srivatsaa: I'll take that. So, a great question, Matthew.

Speaker Change: I'll take that so a great question Matthew.

Speaker Change: It can be as fast or as slow as the teams want so.

Speaker Change: The only delay that we that we received when these teams. Moreover is.

Matthew: The private label offering which is if we have to do the regulatory things necessary in that state for them to keep their brand that is what takes time. However, when a team wants to move over to real it is probably from the time that they have made a decision. It's almost always on their end because weaken if we wanted the team to turn on today would say.

Matthew: 100, plus agents, we could turn on 100 plus agents in 24 hours. If we wanted to so most of the time, it's on the team side of getting it right and it's a good thing because what the team does is the plan are they communicated while so that'd be transition works well. So I'd say from the time, a generally when a team says, yes, and they're ready to go to the time, they're actually onboard it is.

Sharran Srivatsaa: It can be as fast or as slow as... So, um, the only delay that we see when these teams move over is. It's on the team side of getting it right, and that's a good thing because what the team does is they plan. They communicate well so that the transition works well, so I'd say from the time when a team says yes, and they're ready to go.

Sharran Srivatsaa: They're actually on board. It's probably a two week period for them, a one day period for us. So that's the that's kind of the timeline, generally speaking, but most teams from the time they start a conversation till the time they're onboarded, you're probably, depending on the size of the team, you're talking somewhere between a 45 and 90 day period. Gotcha, yeah, that's helpful.

Matthew: Robley.

Matthew: A two week period for them, a one day period for us.

Matthew: So that's the that's kind of the timeline generally speaking, but most teams from the time they start a conversation till the time they are onboard it youre probably depending on the size of the team you're talking somewhere between 45 and 90 day period.

Matthew Erdner: Gotcha, yeah, that's helpful. And then, you know, as you guys bring on additional teams, does that put you guys at risk for a further setback?

Speaker Change: Got you Yeah that's helpful.

Speaker Change: And then you know how did you guys bring on additional teams does that put you guys at risk for a further settlement charge.

Matthew Erdner: No, no. Are you related to the NAR settlement? Yeah, to the NAR. Yeah, Tamir, you could, Tamir, you could answer that one.

Speaker Change: No no you mean are you related to the NAR settlement, Yeah, It's a N a R.

Speaker Change: So maybe you could Jimmy I know they don't want.

Tamir Poleg: It does not. Whatever they did at their prior brokerage has to do with their prior brokerage and whether their prior brokerage has reached a settlement or not. That will determine whether they're covered or not. If they join Real, obviously, from that moment on, they're covered under our settlement. And obviously, the NAR settlement also covered all agents individually, regardless of their brokerage affiliation. So there's no risk in adding more agents or more teams.

Speaker Change: It it does not whatever they did at their prior brokerage has to do with their probably brokerage and whether their prime brokerage is reaching a settlement or not that will determine whether they're covered they're not if they join real obviously from from that moment on they're covered under our settlement and obviously the north settlement also.

Speaker Change: Covered all agents individually, regardless of their brokerage affiliation, so theres, no risk and adding more agents over or more teams.

Matthew Erdner: Okay, gotcha. And then turning to the mortgage business, do you guys know what percentage of the transactions you guys capture or, you know, I guess, get through to your mortgage business? And then, you know, as that capture rate grows, is there going to be a headcount lift that needs to happen there?

Speaker Change: Gotcha, and then turning to the mortgage business.

Speaker Change: Do you guys know what percentage of the transactions you guys capture or.

Speaker Change: Get through into your mortgage business and then you know as you as that capture rate grows or is there going to be a head count lift that needs to happen there.

Tamir Poleg: Yeah, so we are extremely pleased with the progress on One Real Mortgage. As I mentioned, they grew over 400% year over year, still small numbers, but we do anticipate that they will make a meaningful contribution to our gross profit this year and, obviously, next year. In terms of attached rates, they're still below 2% in the states that they're operating in.

Speaker Change: Yeah. So we are extremely pleased with the progress on one of your mortgages I mentioned it grew over 400% year over year still small numbers, but we do anticipate that they will make a meaningful contribution to our gross profit this year and obviously next year.

Speaker Change: In terms of attach rates there are still below 2% in the states that they're operating in but the numbers are going a very impressively and obviously as we scale those businesses, we will need to invest more in hiring but at the end of the day, we are looking to scale, both one real mortgage under one.

Tamir Poleg: But the numbers are growing very impressively. And obviously, as we scale those businesses, we will need to invest more in hiring. But at the end of the day, we are looking to scale both One Real Mortgage and One Real Title very responsibly. So we want both those companies to break even very, very soon and turn into profits later this year.

Speaker Change: We'll title very responsibly. So we want both of those companies to break even very very soon and turning to profit later this year.

Matthew Erdner: Atchafo, and congrats on the growth.

Speaker Change: That's helpful and congrats on the growth.

Speaker Change: Okay.

Operator: Thank you. There are no further questions from analysts in the queue.

Speaker Change: Thank you there are no further questions from analysts in the queue.

Speaker Change: Right now.

Operator: Now that we've concluded the analyst portion of the call, we will address some of the questions we received from shareholders on the Say Technologies Q&A portal that was open last week. We received a number of excellent questions, and so thank you to all who participated. First question: while attracting new agents is certainly important, what priority and efforts do you allocate towards retaining agents who are already on board?

Speaker Change: Now that we've concluded the analyst portion of the call. We will address some of the questions. We receive from shareholders on the assay technologies Q&A portal that was opened last week, we received a number of excellent questions and so thank you to all who participated.

Ravi Jani: Sharran, do you want to take that one? Oh, yeah, sure. Thank you, Ravi.

Speaker Change: First question, while attracting new agents is certainly important what priority and efforts do you allocate towards retaining agents who are already on board trying do you want to take that one.

Sharran Srivatsaa: So I would say we should probably change our broader thinking around, you know, recruiting and retention to attraction and connection because those words are important. But agent connection is obviously very important for us as an organization and for me personally, and that's why we continuously are innovating to ensure our agents feel supported and valued, and they have essentially the tools and resources that they need to succeed in the real estate business.

Ravi Jani: Oh yeah, sure. Thank you, Ravi.

Speaker Change: Oh, Yeah sure. Thank you Robby so I will say, we should probably change our broader thinking around recruiting and retention to attraction in connection because those words are important but agent connection is obviously very important for us as an organization and and for me personally and that's why we continuously are innovating to ensure our agents yield support.

Speaker Change: At and valued and they are especially the tools and resources that they need to succeed in the real estate business. Because connection is all about report on results. When we have great relationship and they get good results. They they stay with us longer.

Sharran Srivatsaa: Because connection is all about rapport and results. When we have a great relationship and they get good results, they stay with us longer. Through the investments we've made in Reason, which is our technology platform, Leo, which is our AI platform, and numerous agent education and specialized training programs like the Buyer Mastery Seminar that we're doing today, platforms like RealX, where we do the virtual summit, and our in-person events, which we've done just over the last four months, you know, hundreds of them.

Speaker Change: Through the investments we've made in reason, which is R. R technology platform, which is our AI platform and humorous agent education and specialized training programs like the buyer mastery seminar that we're doing today platforms like relax, where we're doing the virtual summit and our in person events, which we've done just over the last four months you know hundreds of them. It's we're focused on building and <unk>.

Sharran Srivatsaa: We're focused on building and strengthening and uplifting our agent community and providing all of our agents with the tools that they need to thrive in this current market. So we're really focused on both kinds of attraction and connection.

Speaker Change: Strengthening and uplifting our agent community and providing all of our agents with the tools that they need to thrive in this card markets that were really focused on both kind of attraction and the connection piece.

Speaker Change: Great.

Ravi Jani: We had several questions about our title business that I'll group together. That includes whether Sharran and Pritesh Damani, our CTO, could do a podcast about our title strategy. So, Tamir, do you want to just spend a moment discussing our title business, the growth strategy, how the JV structures work, and also the potential cost savings opportunity from automating a title service?

Speaker Change: We had several questions about our title business all grouped together that includes whether Sharon and protect the money our CTO could do a podcast that our title strategy. So to me or do you want to just spend a moment discussing our title business the growth strategy, how the JV structures work and also the potential cost savings opportunity from automating.

Speaker Change: Title title services.

Tamir Poleg: Sure. So, Tidal is a really exciting story, as we're just in the early innings of what we call Tidal 2.0 growth strategy. What it means is that we are inviting some of our most productive teams—think about those teams that are closing 300 transactions per year or more—to form Tidal joint ventures with us in the states where One Real Tidal operates. So, in each JV, One Real Tidal will hold a majority stake and provide the infrastructure, regulatory compliance, and employees required to manage the Tidal transaction flow while allowing our most productive agents to benefit from JV distributions as minority owners once the venture begins generating positive income.

Speaker Change: Sure. So title is a really exciting story is we're just in the early innings of what we call a titled 2.0 growth strategy.

Speaker Change: It means that we are inviting some of our most productive team stinks think about those teams that are closing are 300 transactions per year or more to foreign titles joint ventures with us in the states that are where one retail operates so in each JV one real title will hold a majority stake and provide the information.

Speaker Change: The structure of regulatory compliance and employees required to manage the tidal transaction flow, while allowing our most productive agents to benefit from JV distributions as manure minority owners once the eventual begins generating positive income.

Tamir Poleg: As a result, we have numerous JVs across the country, and each has a different level of earnings and distributions tied to that specific JV's income stream. As it relates to automation, we have to keep in mind the fact that Tidal is already a high-margin business with over 80% plus gross margins. So, the cost savings opportunity is likely in the range of a couple of hundreds of dollars per transaction, which is meaningful to the bottom line.

Speaker Change: As a result, we have numerous JV is across the country and each has a different level of earnings and distributions tied to that specific JV income stream as it relates to automation, we have to keep in mind. The fact that title is already a high margin business with over 80% plus gross.

Matthew Erdner: Margins, so cost savings opportunities likely in the range of a couple of hundreds of dollars per transaction, which is meaningful to our to the bottom line, but still represents I mean, it's a meaningful opportunity on a per transaction basis, especially when we're talking about large skills and and as I said previously I think.

Tamir Poleg: But still represents, I mean, it's a meaningful opportunity on a per transaction basis, especially when we're talking about large scales. And as I said previously, I think that both One Real Mortgage and One Real Tidal will provide meaningful contributions to our gross margin and our bottom line later this year and, obviously, in 2024.

Speaker Change: That's both one real mortgage and one real title.

Speaker Change: I will provide meaningful contribution to our gross margin and our bottom line later this year and obviously in 2025.

Ravi Jani: Great, similar question on the mortgage business, Michelle. Could you just talk about the impact of the expansion of One Real Mortgage and what it could mean for the bottom line?

Speaker Change: Great similar question on the mortgage business Michel could you just talk about the impact of the expansion of one real mortgage and what it can mean for our bottom line.

Michelle Ressler: Sure. So One Real Mortgage is currently operating in 20 states. Our strategy is not really focused on going nationwide, but it's focused on going deeper into the states where we already operate. So Tamir, who's the CEO of One Real Mortgage, and the team are having tremendous success, as you can tell by the 400% growth this quarter. And that's really driven by bringing on more productive loan officers and getting in front of more and more of our real estate agents to show how One Real Mortgage can add value to the client transaction experience. Similar to our title business, growth margins for mortgage are significantly higher than our company average. Today, they're around 50%. And obviously, as we close more mortgage transactions, that results in more profits for our bottom line.

Michelle Ressler: Sure one real mortgage is currently operating in 20 states our strategy hasn't really there's not really focused on going nationwide, but it's focused on going deeper into the states, where we already operate so samir who's the CEO and one where a mortgage and the team are having tremendous success as you can tell by the 400.

Ravi Jani: Great. Next question for Sharran:

Ravi Jani: Rent growth, that's correct and that's really driven by bringing on more productive loan officers and getting in front of more and more of our real agents to show how long wale mortgage can add value to the client transaction experience similar to our title business gross margins for mortgage are significantly higher than our company average.

Ravi Jani: Let's say that around 50% and you know obviously as we close more mortgage transactions that result in more profits to our bottom line.

Sharran Srivatsaa: With the customizable nature of the private label and pro teams offerings, have you identified any attractive alternative compensation structures within the private label and or pro teams sandbox?

Speaker Change: Great next question for Sharon with the customizable nature of private label and proteins offerings have you identified any attractive alternative compensation structures within the private label <unk> protein sandbox.

Sharran Srivatsaa: It's definitely interesting to see these different permutations of team dynamics and economics work their way through our private label and pro teams offerings. It's truly like an entrepreneur-centric approach because we see a lot of these offerings out there. But to be honest, we've been doing this for a long time, and so far, there's nothing that we've seen that we haven't seen before, just how to integrate it. But we will, of course, keep looking, and if we identify ways to improve our model that benefit our agents, we will certainly explore them. But for now, we're just happy with the trends, with the traction of both private label and And we are still in the early days.

Sharran Srivatsaa: It's it's definitely interesting to see these different permutations of team dynamics and economics work their way through our private label and Fourteens offerings, it's truly like an entrepreneur centric approach because we see a lot of these offerings out there but to be honest, we've been doing this for a long for a long term and so far there's nothing that we've seen that we haven't.

Sharran Srivatsaa: Seen before just how to integrate it but we will of course keep looking and if we identify ways to improve our model that benefits. Our agents, we will certainly explore them, but for now we're just happy with the trends are with the traction of both private label and pro teams and we are still in the early days.

Ravi Jani: Great. We had one question about Real Wallet that Tamir addressed in his answer to Stephen Sheldon. So we'll just go to the last question for Tamir. What are our plans to attract more institutional investors?

Sharran Srivatsaa: We had one question about real wallet that Samir addressed in his answer to Stephen Sheldon. So we'll just go to the last question for Tim here, what are our plans to attract more institutional investors.

Tamir Poleg: Well, Michelle and our IR team and myself spend a lot of time with investors, and the reality is that the key to attracting more of them is by doing exactly what we did this quarter, delivering exceptional results, significantly growing our top line and bottom line, while still investing in our agents, employees, and technology platform. So I think that as long as we continue executing our strategy to build an innovative and resilient company that sustainably increases earnings and cash flow per share, we will create substantial long-term value for our shareholders. And so that's what we're focusing on at the moment. This is what we've been focusing on for years. That's what we'll continue doing day after day, quarter after quarter.

Tamir Poleg: Ah well, Michelle and our IR team and myself spent a lot of time with investors.

Ravi Jani: Great, I think that's a great way to wrap it up. If you have any additional questions on today's earnings release, please feel free to contact me directly. Matthew, would you please give the conference call replay instructions once again? Thank you.

Tamir Poleg: The reality is that the key to attracting more of them is by doing exactly what we did this quarter delivering exceptional results significantly growing our topline and bottom line, while still investing in our agents employees and technology platform. So I think that as long as we continue executing our strategy to build an innovative and resilient company that's.

Ravi Jani: Favorably compounds earnings and cash flow per share then we will create substantial long term value for our shareholders and so that's what we're focusing on are at the moment. This is what we've been focusing on for years and.

Ravi Jani: That's what we'll consider doing good day yesterday quarter after quarter.

Speaker Change: Right I think that's a great way to wrap it up.

Ravi Jani: If you have any additional questions on today's earnings release, please feel free to contact me directly Matthew would you. Please give the conference call replay instructions once again thank you.

Operator: Certainly. Today's conference will be available for replay. The replay phone number is 877-481-4010, and the replay code is 503-22. Once again, the replay phone number is 877-481-4010, and the replay code is 503-22. May I disconnect your phone lines at this time? Thank you.

Matthew Erdner: Certainly today's conference will be available for replay the replay phone number is 8774814010. The replay code is 50322 once again the replay phone number is 870 74814010 and the replay code is five zero.

Operator: 322.

Operator: Okay.

Speaker Change: You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.