Q2 2024 The Real Brokerage Inc Earnings Call

Operator: Thank you and good morning. Thank you for standing by, and welcome to the Real Brokerage conference call and webcast for the second quarter ending June 30th, 2024. We appreciate everyone for joining us today.

Operator: With me on the call today are Tamir Poleg, our Chairman, Chief Executive Officer, and Sharan.

Operator: Sharran Srivatsaa, President; Michelle Ressler

Operator: The Press Relief, along with the unauthorized

Operator: Today, our financial statement and related management discussion and analysis for the quarter have been filed with the U.S. Securities and Exchange Commission on Edgar this morning and with the Canadian Securities Regulators, including the results for the second quarter and June 30, 2024. 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-related management discussions and analysis for the quarter, have been filed with the U.S. Securities and Exchange Commission on Edgar and Canadian Securities Regulators on Peter.

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Operator: The risk factors that could cause these differences are detailed in our Canadian Continuous Disclosure document and SEC report. REAL does not assume any intentional obligation to update these forward-looking statements except as expressly required by law. With that, I'd like to turn the call over to you.

Tamir Poleg: Good morning, and thank you, Ravi. I would like to apologize in advance because I lost my voice.

Tamir Poleg: I'll then provide a few closing remarks before opening up the call for Q&A. I will start with an overview of our strategy and some recent business highlights. Sharran will provide an update on the action we are taking to drive 80% growth and improve agent experience. We will ensure we provide more cash and no barter for our retail customers. I'll then provide a few closing remarks before opening up the call for Q&A. Sharran will then provide an update on the action we are taking to drive 80% growth and improve agent experience. I'll then provide a few closing remarks before opening up the call for Q&A.

Unknown Speaker: Providing agents with the tools, technology, and resources they need to grow both their businesses and their careers

Speaker Change: Our short-term vision includes the roll-out of our one-wheel consumer-facing mobile app, which streamlines the client experience and enhances the attachment of our higher-margin ancillary services. In the long-term, we expect our platform to encompass the holistic ecosystem of financial technology products, payments and investment planning tools, providing agents with an avenue to build in-line to their client experience and enhance the attachment of our higher-margin ancillary services. In the long-term, we expect our platform to encompass the holistic ecosystem of financial technology products, payments and investment planning tools, providing agents with an avenue to build in-line to their client experience and enhance the attachment of our higher-margin ancillary services.

Unknown Speaker: to build generational wealth. Ultimately, as the platform matures, we believe homebuyers

Unknown Speaker: So, a quarterly record and a significant improvement from 2.6 million in the second quarter.

Speaker Change: We ended the quarter with 19,500 agents, up 70% versus the prior year, and an increase of nearly 6,000 agents since the start of the year. As of this morning, our agent count exceeds 20,500, meaning we've added over 1,000 agents since the start of the quarter. Typically, the third quarter is seasonally slower for agents versus the prior year due to agents focusing on closing deals rather than staging brokerages. As of this morning, our agent count exceeds 20,500, meaning we've added over 1,000 agents since the start of the quarter. Typically, the third quarter is seasonally slower for agents versus the prior year due to agents focusing on closing deals rather than staging brokerages.

Unknown Speaker: As of this morning, our agent count exceeds 20,500 in the second quarter of 2023. We ended the quarter with 19,500 agents, up 70% versus the prior year, and an increase of 56,000 agent brokerages since the start of the year.

Unknown Speaker: Despite this, we are encouraged by the volume and quality of agents in our recruitment pipeline, meaning we have increased our confidence in achieving robust agent growth for the remainder of this year and in 2025. In addition to our strong brokerage-persuasive yields, our ancillary mortgage-entitled business lines, despite this, we are encouraged by the volume and quality of agents in our attraction pipeline, including our confidence in achieving robust agent growth for the remainder of this year and in 2025.

Speaker Change: Despite this, we are encouraged by the volume and quality of regions that the attraction pipeline, doing more than our confident in achieving robust agent growth for the remainder of this year, in 2025. In addition to our strong brokerage program, our ancillary and mortgage entitled business lines grew by a combined 68% versus the prior year, our confident included in this regard represents a significant increase in mortgage loan officers at $1 billion. Which has grown from 18% at the end of last year to over 50%. Additionally, our new title 2.0 strategy continues to gain traction and we expect to deliver accelerating revenue growth in the back half of the year.

Unknown Speaker: In addition to our strong brokerage-persuasive yields, our ancillary mortgage-entitled business lines typically command gross margins that are 6 to 8 times higher than our average brokerage gross margin, and we expect substantial growth in these ancillary businesses throughout the remainder of the year. Our confidence is underscored by the significant increase in mortgage loan officers at the global mortgage business, which has grown from ancillary business lines typically command gross margins that are 6 to 8 times higher than our average brokerage gross margin, and we expect substantial growth in these ancillary businesses throughout the remainder of the year. Our confidence is underscored by the significant increase in mortgage loan officers at the global mortgage.

Unknown Speaker: Which has grown from 18, at the end of last year, to over 18.

Unknown Speaker: At the end of last year, existing home sales continued to decline year-over-year and remain most near historic lows, despite increased inventory and accelerating revenue growth. Our monthly survey shows that affordability is the biggest challenge for homebuyers, and economic uncertainty is growing. Given these conditions, the performance this quarter is particularly notable, and while we remain hopeful that potential rate cuts could help break the current stalemate in the housing market, we are not relying on a significant recovery, and instead, we can focus on what we can control, that is, delivering an exceptional performance and value proposition for our agents and the clients they serve. On the product front, we continue to obligate

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Speaker Change: And while we remain hopeful that potential rate cuts could help break the current stalemate in the housing market, we are not relying on a significant recovery and instead remain focused on what we can control, that is, delivering an exceptional experience and value proposition for our agents and the clients they serve.

Unknown Speaker: Regarding the Real Wallet, we are on track for an initial product launch later this year with an initial focus on debit card transactions with credit to follow-through.

Sharran Srivatsaa: Sharan for an update on our brokerage agent initiative. Thank you, Tamir, and good morning, everyone. I'm excited to share our brokerage division update again in a top five format.

Sharran Srivatsaa: 1. Making Rio a Household Name in the Industry We've been on a mission to make Rio a household name in the industry, and our aggressive media onslaught across in-person, print, video, social, podcast, you name it, has been a key driver in making this a reality. Let's dive in and discuss some of the highlights. The support of our incredibly skilled agents, our personal marketing campaigns, industry-wide training sessions, and numerous awards and accolades have all significantly increased our brand recognition and have contributed to the robust agent-peer dynamics for agenting.

Sharran Srivatsaa: We've been on a mission to make Rio a household name in the industry, and our aggressive media onslaught across in-person, print, video, social, podcast, you name it, has been a key driver in making this a reality. Let's dive in and discuss some of the highlights. The support of our incredibly skilled agents, our personal marketing campaigns, industry-wide training sessions, and numerous awards and accolades have all significantly increased our brand recognition and have contributed to the growth of our brand.

Sharran Srivatsaa: We're excited to announce that we're launching a new, free, and independent 20-week, 20-day free trial for our agents to help them learn more about the value of their brands and to be able to get the most out of their experience. If you're interested in joining Rio, they can retain their unique peer dynamics while benefiting from the breadth of our platform. I'll mention a few things.

Sharran Srivatsaa: First, this program we launched in January allows independent brokerages to join Rio and leverage our technology and resources while maintaining their established brand. This program has already attracted 20 independent brokerages to retain their unique peer dynamics. In the first quarter of 2024, 200 agents joined via Private Label, and this program we launched in January allows independent brokerages to join Rio and leverage our technology and resources.

Speaker Change: I'll mention a few. First, programming. Programming is a custom software layer we built that allows agents to anytime cut costs or economic put-downs to individual agents. Ensuring that upon joining RAIL, they can retain their new team dynamics while benefiting from any time. Second, private label. In May, we were able to launch a program that allowed independent brokerages to join RAIL and leverage our technology and resources while maintaining their established brands. In May, we were excited to launch the RAIL Luxury Division, which provides luxury teams with an elevator set of tools designed to cater to high-end markets. While RAIL has traditionally been a mass-market player, we look forward to welcoming even more independent brokers who have joined us in the recent quarter and half of the year.

Unknown Speaker: Another 500 agents joined via private cable mplg to the second quarter...

Speaker Change: We thought it was the appropriate time to establish a division that solely focused on the unique needs of luxury agents and the exclusive client's greatest set of tools designed to cater to client market. A program that offers all real agents exclusive access to preferred vendors, elevating the level of service that we can provide to their clients. We thought it was the appropriate time to establish a division that solely focused on the unique needs of luxury agents and the exclusive client's greatest set of tools. Number 3, doubling down on training and getting support. Our North Star has always been doing what's best for the agents. This year we invested significantly in Real Academy, bringing our new leadership and introducing novel training programs including the teaching skills that drive revenue and boosts per-agent productivity.

Unknown Speaker: This quarter, we also launched a real partners program, a program that offers all real agents exclusive access to preferred vendors, elevating the level of service that we can provide to their clients. We thought it was the appropriate time to do this.

Unknown Speaker: This quarter, we also launched a real partnership.

Unknown Speaker: 3. Our commitment to education ensures that our agents are always ahead of the curve, equipped with the knowledge and the tools they need to excel. Meanwhile, we have significantly expanded our agency's support teams. This expansion ensures that every agent who joins Real receives the guidance and personalized help they need to be successful. Our commitment to education ensures that our agents are always ahead of the curve, equipped with the knowledge and the tools they need to excel.

Speaker Change: Our commitment to education ensures that our agents are always ahead of the curve, equipped with the knowledge and the tools they need to excel. Meanwhile, we have significantly expanded our agent support team. This expansion ensures that every agent who joins REAL receives the guidance and personalized help they need to be successful.

Unknown Speaker: Our commitment to education ensures that our students are always ahead of the competition.

Speaker Change: 4. So what about challenges? While we've made significant strides, none of this has been easy.

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Unknown Speaker: World of Wealth Improvement www.worldofwealth.com WORLD OF WEALTH Increases Learn From World of Wealth Zoffy Ku Robapp e Zli Lo

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Unknown Speaker: our platform with the new NAR rule set to take effect in a couple of weeks.

Michelle: For instance, next week, I will personally lead an industry-wide training session to equip our agents with the tools to not only implement the NAR practice changes, but also to excel in this evolving landscape. In conclusion, we remain optimistic about our growth prospects and are committed to leading through innovation. I'd like to extend my heartfelt thanks to our team, who have worked tirelessly to manage the influx of new agents to not only implement the NAR practice changes, but also to reach out in this evolving landscape. I'll turn it over to Michelle. Thank you, Sharran, and thank you, everyone, for joining us.

Sharran Srivatsaa: Thank you, Sharran, and thank you everyone for joining us.

Sharran Srivatsaa: Thank you, Sharran, and thank you, everyone, for joining us.

Michelle: Revenue in the second quarter of 2024 rose to $341 million, an increase of 84% versus the second quarter of 2023. This was primarily driven by an 84% increase in brokerage revenue, resulting from a 73% increase in the number of transactions closed.

Unknown Speaker: Revenue in the 30,000 and the.4 rose 63%.

Michelle: which topped $30,000 in the quarter and a 6% increase in average revenue per transaction. Revenue from our ancillary businesses totaled $2.2 million during the second quarter of 2024, an increase of 68% versus the second quarter of 2023, driven by over 160% growth in our one real mortgage business and 32% growth in one real title revenue. Revenue from our ancillary businesses totaled $2.2 million during the second quarter of 2024, was $31.9 million, an increase of 79% from 17.8% driven by over 160% growth in our one real mortgage business and 32% growth in one real title revenue.

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Speaker Change: As a reminder, cost of sales includes stock-based compensation tied to our agent-approved program where agents can opt to receive part of their commissions in real estate, subject to certain vesting requirements. This amount totals $8.9 million in the quarter and is excluded from our adjusted EBITDA calculation in the stock-based compensation line. As we've noted in the past, there is seasonality in our quarterly growth margin percentage rate as a result of revenue generated by agents who have reached their annual commission vesting requirements. This amount totals $8.9 million in the quarter and is excluded from our adjusted EBITDA calculation in the stock-based compensation line. With that said, we remain focused on driving year-over-year growth margin improvement on our annual growth margin percentage rate as a result of revenue generated by agents who have reached their annual commission vesting requirements.

Speaker Change: Annual Commission Cap.

Speaker Change: Operating expenses, which is included in marketing and R&D, total $32.5 million, or 9.5% of revenue in the second quarter of 2023, compared to $21.5 million, or 11.6% of revenue during the second quarter of 2020. A 40-basis point improvement from 4.1% in the second quarter of 2023, in part due to revenue share models from $7.7 million in the second quarter of 2020. Note that revenue share expense is entirely variable and reflects a portion of real commission split that is paid to agents who attract new agents to the brokerage. A 40-basis point improvement from 4.1% in the second quarter of 2023, in part due to revenue share models from $7.7 million.

Unknown Speaker: Revenue share declined to 3.7% in the second quarter of 2024, a 40 basis point...

Unknown Speaker: Adjusted Operating Expense, which reflects total operating expenses, less revenue share, docketed compensation, depreciation, and other unique or non-cash items, totaled $14.7 million in the second quarter of 2024.

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Unknown Speaker: We're 4.3% of revenue and roughly...

Unknown Speaker: The Adjusted Operating Expense is a non-IFRS measure that has been pretty popular.

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Unknown Speaker: Operating Loss was $600,000 in Q2 2024 compared to an operating loss of $3.7 million.

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Speaker Change: As a percentage of revenue, operating loss improved by approximately 180 basis points, reaching negative 20 basis points in the second quarter of 2024, compared to negative 2% in the second quarter of 2023. Considering the significant portion of our revenue that ACCESS passed through, it's important to note that, as a percentage of gross profit, operating loss improved by 19% in 2020, from negative 21% in the second quarter of 2024, to negative 2% in the second quarter of 2024. Considering the significant portion of our revenue that ACCESS passed through, it's important to note that, as a percentage of gross profit, operating loss improved by 19% in 2020, from negative 21% in the second quarter of 2024,

Unknown Speaker: including negative derivative change, however, according to title businesses considering the significant portion of our revenue that acts as a pass through by 19%.

Unknown Attendee: Unknown Attendee, Matthew Erdner, Darren Aftahi, Jason Lee, Michelle Ressler, Tamir Poleg, Sharran Srivatsaa, Real Brokerage

Speaker Change: every quarter of 2023.

Unknown Speaker: During the quarter, Real generated cash flow from operating activities of $16 million and allocated $10.6 million to shareholding purchases. However, cash flow from operating activities would have been higher.

Unknown Speaker: Unrestricted Cash Cash Flow from Operating Activities would have been higher, if not for the $9.25 million litigation-related settlement we paid into a restricted escrow account in the quarter. From operating activities of $16 million and allocated, we remain well capitalized to share no debt, and ample liquidity to fund operating activities will continue to occur.

Speaker Change: As always, we will continue to diligently manage development and allocate capital effectively, always with a focus on long-term shareholder value creation. We remain well capitalized to close debt.

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Speaker Change: The median sale price of properties sold by our agents was $384,000 in the second quarter of 2024, which represents a 6% year-over-year increase. Adjusted operating expenses per transaction was $485 and declined 20% year-over-year from $606. The median sales price of the properties sold by our agents was $384,000 in the second quarter of 2024, which represents a 4% year-over-year increase. Adjusted operating expenses per transaction was $485 and declined 20% year-over-year from $606. Adjusted commission revenue during the second quarter of 2024 was approximately 54%.

Unknown Speaker: As of the events during the second quarter of 2023, Canada accounted for 12% of commission revenue in the second quarter of 2024, compared to 15% during the second quarter of 2023. Our headcount efficiency ratio between the finest full-time employees, excluding one regular title and one low-mortgage employee, divided by the number of agents on our platform was one to 138 at the end of the second quarter of 2024, compared to 15% in the second quarter of 2023.

Speaker Change: As on the end of the second quarter of 2023, Canada accounted for 12% of commission revenue in the second quarter of 2024, compared to 15% in the second quarter of 2023. This cohort represented approximately 54% of commission revenue during the second quarter of 2024, compared to 15% during the second quarter of 2023, divided by the number of agents on our platform, 1 to 138 at the end of the second quarter of 2024, compared to 1 to 113 at the end of the second quarter of 2023. Our headcount efficiency ratio did decline sequentially from 1 to 143 at the end of the first quarter of 2024, due to headcount additions across the organization, including additions in R&D, operations, and operations.

Unknown Speaker: Our headcount efficiency ratio, which we define as full-time, declined sequentially from one to 143 at the end of the first quarter of 2024 due to headcount additions across the organization, including additions in R&D, operations, agent support, and administrative functions. Many of these new employees joined Rail in June, and the full quarterly expense impact will be reflected in our second half result. As Tamir noted, this was an outstanding quarter, one that surpassed our own expectations. We continue to expect to deliver meaningful year-over-year growth in administrative functions for the balance of the year.

Unknown Speaker: As previously noted, there is always an outstanding quarter, one that surpasses our early revenues, similar to Q2, while Q4 revenue is typically lower. Second, while it may not look like it from our results, the housing market environment is not too run down.

Speaker Change: As earlier noted, there is always an outstanding quarter, one that would surpass our own revenues, similar to Q2, while Q4 revenue is significantly lower. Second, while it may not look like it from our results, the housing market environment is extremely challenging, evidenced by existing home sales that continue to decline year over year.

Unknown Speaker: As noted, we've increased our count during the second quarter, which will impact our cost structure in the second half of the year. Additionally, while it may not seem like a key project to support Real's evolution as a public company, as always, we remain prudent in managing these costs while positioning Real for continued success.

Michelle Ressler: Thank you, Michelle. Last month, we celebrated Real's 10-year anniversary by ringing the closing bell at NASDAQ and welcoming our 20,000 agents to the brokerage. I am incredibly proud of what we have accomplished.

Tamir Poleg: First, let's talk about what will not change. Number one, the dream of home ownership will endure.

Speaker Change: First, let's talk about what will not change. Number one, the dream of home ownership will endure.

Speaker Change: People will always be homes.

Unknown Speaker: All these three will always be critical and susceptible to economic factors such as interest rates, employee satisfaction, and consumer confidence.

Unknown Speaker: Buying a home is both a financial and deeply emotional decision and is often the most significant financial transaction in a person's life.

Unknown Speaker: Transactions are often the most significant financial transactions in a person's life. The personalized guidance, local market knowledge, transaction expertise, and trust that agents provide are irreplaceable and cannot be automated for the vast majority of transactions. Third, the industry will continue to be heavily regulated with an increasing need for collaboration with regulators to ensure market knowledge, transaction expertise, and trust that agents provide is irreplaceable. Trust that agents provide is irreplaceable and cannot be automated for the vast majority of transactions. Third, the industry will continue to be heavily regulated with an increasing need for collaboration with regulators to ensure market knowledge, transaction expertise, and trust that agents provide are irreplaceable.

Speaker Change: The industry will continue to be heavily regulated with increasing need of collaboration with personalized regulators to ensure consumer protection and transaction expertise. Real estate transactions involve substantial sums of money and have significant legal implications and therefore, regulations are essential to protect consumers. At RIO, we are committed to fostering an environment that benefits everyone involved in a transaction, ensuring our agents are well-versed in policies and best practices Real estate transactions involve substantial sums of money and have significant legal implications and therefore, regulations are essential to protect consumers. At RIO, we are committed to fostering an environment that benefits everyone involved in a transaction, ensuring our agents are well-versed in policies and best practices.

Speaker Change: Not just places to hang their licenses.

Speaker Change: They will continue to seek more favorable economic terms, diversify revenue opportunities, and superior technology, support, and resources. In short, brokerages will need to offer agents more value at a lower cost.

Unknown Speaker: In short, brokerages will need to offer agents more value in return.

Speaker Change: Traditional models may struggle to remain competitive in such an environment. Which is why we believe brokerage models like ours will continue to capture significant market share in the years to come. In short, second, the need for technology investment will only intensify.

Speaker Change: The reliance on spreadsheets or pen and paper is no longer feasible. Brokerages must develop in-house technology platforms that enhance efficiency and leverage big data and AI. Second, the need for technology investment is the only major brokerage where 100% of our agents use our in-house technology platform to process transactions.

Unknown Speaker: Oak Ridge's must-develop in-house technology platform will then enhance efficiency.

Unknown Speaker: will then enhance efficiency and leverage cheap data and AI capabilities our recent software already provides.

Unknown Speaker: Where 100% of our agents use our in-house technology platform to process transactions.

Speaker Change: We believe we are ahead of the in-house technology platform, we will share more about our in-house AI platform, LEO, at our upcoming region conference in October .

Unknown Speaker: Consumer-facing technology will also elevate the cloud experience, especially as Gen Z homebuyers enter the cloud.

Unknown Speaker: This is our in-house AI platform.

Unknown Speaker: at our upcoming Live First Experience conference in October.

Speaker Change: Brokerages can create additional revenue streams while enhancing the overall agent and client monetization.

Speaker Change: We are excited about the future and thank you for your continued support on every commitment to our agency. Now, let's move to the Q&A session. Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.

Speaker Change: We do ask that while posing your question, please... Hey, good morning, and great order here, especially given how tough the environment is. You know, the agent additions here have been really encouraging, but wanted to ask you about the age return rate.

Unknown Speaker: Focuses it on the team to bring down that turn rate.

Unknown Speaker: Transcripts provided by Transcription Outsourcing, LLC.

Unknown Speaker: How much of that did you drink at, like, eight?

Unknown Speaker: All together, especially given the slow housing market and some of the upcoming settlement changes. Yeah, absolutely. Thank you, Stephen. So the churn, as you have seen, a significant portion of that is actually based on that churn rate.

Speaker Change: So that's actually reflected, Stephen, in the general transaction count of what you've done overall. However, I will tell you that churns are a really important metric for us. And one of the things that we want to kind of track over time is how much operational support we can give our users. So that's actually reflected in the practice changes in general.

Unknown Speaker: So I think that agents are going to leave the industry because of the new practice changes. However, I will tell you that the turnaround is how much operational support we can provide agents for the new AR change coming up. We're going to see new practice changes. But we don't think that the new AR changes are going to lead the industry because of the new practice changes. We're watching both the growth numbers and the turnaround.

Unknown Speaker: If they don't want to actually have the skill level of the world, that's the only way we can do it. I just want to chime in because our revenue churn was 1.6%, which was the lowest it has been in two years.

Unknown Speaker: Oooh... Take the last two years and sort them briefly. Not very clearly so, but you can see why everything is hard to produce. And probably a lot of them have awful reputations, but that's all.

Speaker Change: The general strategy to move a tap trade higher, it seems like that's going to be really crucial to get in.

Unknown Speaker: Got it. We didn't just talk about the uptick in taxes and services, like wages and titles. And it sounds like you can expect continued strong growth there. So can you talk about... On the title side, what we've been focused on in recent months was creating JVs with some of our largest teams around the country. And we actually nailed down the...

Unknown Speaker: So, the difference between one good mortgage and one bad mortgage is because of the title size of the business for the one with the title services. If you look at our schemes around the country, we actually nailed down a significant amount of JPs that are now starting to look at the short term. I think that there are a lot of JPs and a lot of educated people who work with our agent community, and I think that their strategy is to see the fruit of that labor they've been putting in terms of one good mortgage. One thing, we're attracting more and more loan officers.

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Unknown Speaker: Those officers are coming in with a distinct focus on business, and obviously, they see the opportunity of working with our local real estate agents where they reside, so we've been focused on that. And obviously, as we said, we went from 18 loan officers with one good mortgage to

Unknown Speaker: and also from the ground up, people working with Arie Angel. I think that's amazing.

Speaker Change: We've been focused on that as well. In addition to that, we are focused heavily on making the loan application process smoother and the entire application to close with a kind of a digital experience with the one big consumer app. So, we think that long term, we will do that because of the service and the ease of use and the speed to close, making the loan application process smoother and the entire application to close.

Unknown Speaker: Making the loan application process smoother... the entire application to close was kind of a digital experience with the one real consumer app....so, on the thing that long term, have the ease of use and the speed to close, making the loan application process... smoother and the entire... working with our agents and webinars......of the digital experience.

Unknown Speaker: Working with our agents and their clients.

Speaker Change: with a kind of a digital experience. Got it. Thank you. So we think that long term, we will win because of the service. Thank you. Your next question is coming from Matthew Erdner from Jones Trading. Your line is live.

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

Unknown Attendee: Unknown Attendee, Soham Bhonsle, Ravi Jani, Darren Aftahi, Jason Lee, Michelle Ressler, Tamir Poleg, Sharran Srivatsaa, Real Brokerage, Stephen Sheldon, Darren Aftahi, Jason Lee, Matthew Erdner, Darren Aftahi, Sharran Srivatsaa, Real Brokerage, Stephen Sheldon, Unknown Attendee,

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Unknown Speaker: We think that we can do a very good job in the long term.

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Unknown Speaker: I think that, long-term, we're looking at double-digit attachment rates. Right now, we're in the low single digits. It's not an overnight success.

Dylan Under: Thank you. Your next question is coming from Darren Aftahi from Roth Capital. Your line is live. Hey, this is Dylan After, Darren. Thanks for taking my questions. Just to start on some of the pace of the quality of pages you've added year to date,

Unknown Speaker: Unknown Speaker Thanks for taking the questions. Just to start on some of the pace of the quality of the data you've added here today. I know a lot of that's coming organically. Do you think you're leaving any sort of market share on the table?

Dylan Under: I know a lot of that's coming organically. Do you think you're leaving any sort of market share on the table by not spending more aggressively with advertising or is that sort of some of the plan that's coming in the second half of the year? Just to start on some of the quality of agents you've added to your date.

Unknown Speaker: Thanks, Dylan. No, we don't think that we're leaving anything on the table. I think that we're doing a great job on Asian extraction and growth in general. I mean, if you look at all of our peeps and the state of the industry overall, we are clearly an outlier, so we're doing something.

Speaker Change: Thanks, Dylan. No, we don't think that we're leaving anything on the table. I think that we're doing a great job on agent traction and growth in general. I mean, if you look at all of our people and the state of the industry overall, we are clearly an outlier, so we're doing something

Unknown Speaker: I think that we're here for the long term, and we're building value as we go, and we believe that the more value we add...

Unknown Speaker: We think that we're doing a good job both in creating value and in driving traffic.

Unknown Speaker: I think that we're here for the long term, and we're building value as we go.

Unknown Speaker: It's a good question. We think we have the right model in place, and we're not thinking about any model optimization at this point. We do see additional opportunities to make money, again, through ancillary services, through the Real Wallet, and some other ideas we have in mind. But we think that the basic model for agents does not need to change.

Unknown Speaker: The Brokerage is profitable, and there are other ideas we have in mind, but while mortgage and title are drawing on the bottom line, we are not going to be using them.

Speaker Change: We do see additional opportunities to make money again through insular services, through W Wallet and some other ideas we have in mind, but while mortgage and title are drawing on the bottom line, we believe that our operating model is sufficient to continue.

Unknown Speaker: We believe that our operating model is sufficient to continue, you know, for as long as we can see in the foreseeable future.

Speaker Change: Unknown Attendee for as long as we can see in the foreseeable future. Thanks. Appreciate you taking my questions. Thank you. Your next question is coming from Tom White from D.A. Davidson. Your line is live.

Speaker Change: This is Wyatt on for Tom. Thanks for taking our questions. I'm sorry if I missed this in the prepared remarks, but I had one on the industry changes related to the NAR settlement.

Unknown Speaker: And do your best practices around things like fire rep agreements differ in any meaningful ways?

Unknown Speaker: So we think

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Unknown Speaker: We are, most importantly, in alignment with the settlement agreement, and we've updated our practices to make sure that each of these markets is going to be in training for the agency.

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Unknown Speaker: What are your latest thoughts on how brokerage current value problems are aging and cashed up relative to some of the other players and parts of the brokerage space?

Unknown Speaker: and Part of the Brokerage State, what would you say is the main reason that an agency is a real brokerage versus one of the others? The agency-tricity has completely changed.

Unknown Speaker: are our panelists right now. So we have a quick one to watch. So you're a solo agent.

Unknown Speaker: How can a brokerage provide tools to an agent that they can't actually build their own? And that is a huge part of the value proposition. For example, we are one of the only companies in the world where our agents use 100% 100% of our technology platform, which allows our agents to do their transactions much better. And the third thing is that it's not just a model for selling.

Unknown Speaker: Just how do we get more homes sold? It's like how you keep more money. So because of the efficiency of our business model, our agents get to keep more money. And not only in the brokerage business but also in the revenue share business, they're also getting stock. So giving agents multiple ways to create revenue and income, we call it nine ways to make money real, it gives them more than one option than the comparative model out there. So when you combine those three things in the business model,

Unknown Speaker: Unknown Speaker If I may just chime in, we recently polled our agents, and in a survey that we released, we saw that the top two reasons agents are real were, you know, obviously favorable economics, but culture was up there at 92%. So agents are really driven by the culture that we've built here. And if I may just chime in, we recently polled our agents, and in a survey that we released, we saw that the top two reasons agents are real.

Speaker Change: If I may just chime in, we recently polled our agents and in a survey that we released we saw that they have two reasons to choose real, it allows for us to be a pretty competitive and very economically efficient corporation.

Operator: Thank you. Your next question is coming from Josh Goldberg from G2 Investment Partners. Your line is live.

Speaker Change: Your line is live. The culture that we've built here. Morning, guys. And that sort of speaks to all the things Sharran just had to say. I have two questions. I guess first, for people who are newer to this story. Got it. Thank you both. I appreciate it.

Speaker Change: you know, your aging growth. Thank you. Your next question is coming from Josh Goldberg from G2 Investment Partners. Your line is live. Morning, guys.

Speaker Change: Thanks, Josh. I think that if you look at prior years, including this year, you can see that we have grown agent count both in a low-rate environment and a high-rate environment. I think that we are pretty agnostic to the macroeconomics.

Speaker Change: because we demonstrated that we can do it in spite of the market conditions. Obviously, our model relies heavily on our agents for attracting their friends, so about 85% of the agents joining us are coming to referrals from existing real agents.

Speaker Change: And the remaining 15% are inbound increases, but the model itself, just because we are so reliant on our agents, so about 85% of agents joining us, it also means that every new agent joining the community,

Unknown Speaker: You are in agency now with another 160,000 issues in Canada. So obviously, being a little bit over 20,000, you can understand.

Unknown Speaker: Canada. Canada.

Unknown Speaker: We'll get to tens of thousands of agents, and hopefully, we'll be on that stage soon.

Unknown Speaker: Okay, but when you look at that number, that you grew, you know, closer to 3...

Speaker Change: Unknown Attendee Are you in a position to change some of the pipeline in that your ability to add agents in this club can continue for a while?

Speaker Change: We have a very strong pipeline and we have added, on average, 1,000 agents per month since the beginning of the year.

Unknown Speaker: In the first quarter, we also had a very strong aging count growth of around 3,000.

Speaker Change: So, this quarter was not an anomaly. The first quarter, we also had a very strong agent count growth of around 3,000 agents. And I think that, you know, looking at our five plans, there's no reason why it couldn't have been at that pace.

Unknown Speaker: The second question was what it sounded like on the call.

Speaker Change: Yeah, I think that if we look at the past and maybe primarily 2021 when the market, when the interest rate environment was very different from now, both margins actually were a little bit higher.

Unknown Speaker: Okay, we're a little bit higher.

Unknown Speaker: be an opportunity for agents that are maybe not...

Unknown Speaker: Thank you.

Unknown Speaker: All those ancillary services. I think you said you didn't have 2.2 billion.

Unknown Speaker: It's not very far from where they are. We expect both of them to be break-even within a couple of quarters. wonderful. Thank you.

Speaker Change: It's not very far from where they are. We expect both of them to be breakeven within a couple of quarters. Wonderful. Thanks so much. Thank you.

Unknown Speaker: I was... I was... I was...

Speaker Change: We received a number of excellent questions, and so thank you to all who participated. Great. Now that we've completed the panel, of course, again, all of our commissioners,

Unknown Speaker: So, first question, obviously, this is something we've thought about a lot, and while we haven't seen any notable changes, we are, there are a couple of things to keep in mind. We offer some of the most favorable.

Speaker Change: Unknown Attendee

Speaker Change: First question. Obviously, this is something we've thought about a lot. And while we have a few notable changes, there are a couple of things to keep in mind. For us, we offer some of the most favorable agent economics in the industry. Given agents are economically motivated business owners, those who are concerned about commission rates will find that affiliating with any brokerage other than Rio could mean missing out on significant earnings. So if commissions did come under pressure, we expect the trend of agents leaving traditional brokerages to join more efficient, high-value models like ours will likely accelerate. Second, we find that affiliating with any brokerage other than Rio could mean missing out on significant earnings.

Unknown Speaker: and Time Services, which means that our agents are often better suited to join our relatively high-value

Speaker Change: Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee

Unknown Speaker: Relatively low cost

Unknown Speaker: Next question, Josh's question: can management help shareholders understand why Title I mortgages exist?

Unknown Speaker: Last question for Tamir on The Real Wallet. When will the Real Wallet arrive?

Speaker Change: And last question for Tamir on the RealWallet, when will the RealWallet thrive, what types of impacts will it make for the company?

Unknown Speaker: What type of impact will it make for the company? So, we know that these are high-margin businesses and expect those to be profit contributors in the not-too-distant future. Just to recap, the Real Wallet is a digital debit card and credit platform specifically designed for renewal. It will consolidate commission, income, revenue share payments, and equity earnings.

Speaker Change: Unknown Attendee Unknown Attendee

Operator: That wraps up the shareholder Q&A portion of the call.

Operator: During today's hearings, please feel free to contact me directly.

Speaker Change: please give the conference call replay instructions once again. Thank you.