Q4 2024 RE/MAX Holdings Inc Earnings Call
Speaker Change: Good morning and welcome to the RE-MAX Holdings 4th Quarter 2024 Earnings Conference Call-In Webcast.
Krista: My name is Krista, and I will be facilitating the audio portion of today's call. At this time, I would like to turn the call over to Andy Schulz, Senior Vice President of Investor Relations. Mr. Schulz?
Andy Schulz: Thank you, Operator. Good morning, everyone, and welcome to REMAX Holdings' 4th Quarter 2024 Earnings Conference Call.
Andy Schulz: Please visit the Investor Relations section of www.remaxholdings.com for all earnings-related materials, including our standard earnings presentation, and to access the live webcast and the replay of the call today.
Andy Schulz: Our prepared remarks and answers to your questions on today's call may contain forward-looking statements.
Andy Schulz: Forward-looking statements include those related to agent count, franchise sales, and open offices.
Andy Schulz: Financial Measures and Outlook, Brand Expansion, Competition, Technology, Housing and Mortgage Market Conditions.
Capital Allocation, Credit Facilities, Dividends
Sherry purchases
Andy Schulz: litigation settlement, strategic and operational plans, and business models. Forward-looking statements represent management's current estimates. REMAX Holdings assumes no obligation to update any forward-looking statements in the future.
Andy Schulz: Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements. These are discussed in our fourth quarter 2024 financial results press release and other SEC filings.
Andy Schulz: Also, we will refer to certain non-GAAP measures on today's call. Please see the definitions and reconciliations of our non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website.
Andy Schulz: Joining me on our call today are Eric Carlson, our Chief Executive Officer, and Karri Callahan, our Chief Financial Officer. Ward Morrison will join us for Q&A. With that, I'd like to turn the call over to REMAX Holdings CEO Eric Carlson. Eric?
Eric Carlson: Thank you Andy and thanks to everyone for joining us this morning. There were many positives in our fourth quarter results which were headlined by better than anticipated profit performance for the third consecutive quarter.
Eric Carlson: Operational efficiency remains a focal point for our team and that effort continues to contribute to our strong margin and bottom line results.
Eric Carlson: The housing macro environment remains in a state of transition. There are a lot of variables, inventory, interest rates, and moves by the current administration, to name a few.
Eric Carlson: However, change and uncertainty bring opportunity, and our networks are built for times like these. They have proven they can succeed in almost any market.
Eric Carlson: The resilience of our company coupled with the confidence we have in our growth strategy alongside our proven ability to execute on operational efficiency sets us up for future success. Although we still have more work to do, it's encouraging to see our efforts reflected in our financial performance.
Eric Carlson: Regarding agent count, our international agent count accelerated during the fourth quarter, increasing almost 9% over last year's Q4.
Eric Carlson: In fact, we've more than doubled our international agent count since 2017, ending 2024 with over 70,000 agents outside the U.S. and Canada for the first time.
Eric Carlson: In Canada, where the RE-MAX brand and network is the industry leader, we had over 25,000 agents as of year-end. One important side note, in order to protect the company and RE-MAX network in Canada,
Eric Carlson: We have substantially agreed on monetary terms and to make certain business practice changes to settle two industry class action lawsuits, including one on a nationwide basis.
Eric Carlson: We still have some work to do on the final settlement agreement and we believe this is absolutely the best decision for all of our stakeholders affiliates, employees, shareholders, and debt holders alike.
Eric Carlson: We very much appreciate our Canadian network and believe this is in the best interest and shows strong support for what they do on a day-in day-out basis.
Karri will provide some additional details in just a bit.
Eric Carlson: Here in the U.S. we experience some agent decline, which is typical at year-end. We remain laser-focused on enhancing our overall value proposition and delivering innovative new products and services designed to bend the trend and stabilize and grow agent count.
Eric Carlson: Now when we look back at this past quarter and 2024 overall, in addition to operational efficiency, we directed much of our effort on building or improving upon foundational elements universal to every successful business, culture, leadership, and systems.
Eric Carlson: These critical areas will continue to be points of emphasis throughout 2025 and over the long term.
Eric Carlson: Embedded in our culture is the focus on improving the customer experience at every opportunity.
Eric Carlson: One key to that objective is our Voice of the Customer program, through which we solicit, measure, manage, and respond to customer feedback. We're leaning into the power of our networks for insights and using that important information to shape our strategy and our operational plans.
Eric Carlson: Our strategy is straightforward continue to strengthen and enhance our existing business develop new products and services to help our networks and evaluate other growth opportunities. These are exciting times at <unk> and we're open for business.
Eric Carlson: From a leadership perspective, we started the year off strong with two impactful additions to our team.
Eric Carlson: Chris Lim joined Remax earlier, this month as executive Vice President and Chief growth Officer.
Eric Carlson: With over 22 years of experience in real estate franchise.
Eric Carlson: Franchise development brokerage operations and strategic growth, Chris brings a wealth of expertise to the role.
Eric Carlson: As a seasoned real estate executive his proven track record of leadership and innovation will help remax attract the industry's best talent, while elevating the affiliate experience and in turn the home buyer and seller experience.
Eric Carlson: Chris oversees the teams dedicated to supporting franchise growth and strength in the U S company owned regions.
Eric Carlson: Sure franchises receive customized support that aligns with their needs and driving the company's objectives of increasing agent count and expanding market presence.
Speaker Change: <unk> also recently joined the company as executive Vice President strategy <unk> brings over two decades of expertise in residential real estate technology digital marketing and management consulting.
Speaker Change: Throughout his career Travis has held executive positions, where he has helped elevate technology solutions and content strategies to improve business outcomes.
Speaker Change: Travis has worked closely with leading real estate brokerage across the U S and Canada, including many of the Remax networks largest and most successful affiliates, helping them refine innovate and leverage business systems for growth and efficiency.
Speaker Change: In his new role Travis guys real estate strategy and innovation with a focus on integrating solutions to optimize operations and support affiliate growth Chris Travis in the rest of our outstanding team will continue to work toward improving our value proposition. So our network can win more listings make more money and save time, while doing so all while helping brokerages.
Speaker Change: Improve their profitability.
Speaker Change: Regarding our mortgage segment, we see positive developments amid the current industry conditions, which are impacting our overall performance.
Speaker Change: Motto continues to sell franchises consistently adding capable entrepreneurs to our network. There is a steady interest in the opportunity and that is reflected in the fact that despite the sluggish macro environment motto sales last year were roughly on par with 2023.
Speaker Change: Regarding <unk> other industry players are taking notice of our growing market presence and we're fielding more inquiries from third parties looking to explore partnership opportunities.
Speaker Change: For example, last month, a leader in the wholesale mortgage lending space announced we low as a process partner and exclusive concierge service designed to enhance the loan processing support for its customers.
Speaker Change: We continue to lean in and be curious and to challenge everything we're striving to improve and the best we currently have to offer while simultaneously innovating and improving our value proposition and advancing our position as the leader in the industry beginning with our for our annual agent Convention next week you should expect.
Speaker Change: To see a steady stream of compelling announcements and initiatives to come out. This year, we've got exciting opportunities involving referrals artificial intelligence marketing branding social networks and more <unk>.
Speaker Change: <unk> 2025 is shaping up to be important year for Remax holdings and its brands a year of transition continued building innovation and evolution and we look forward to sharing our progress with you.
Kerry: With that I'll turn it over to Kerry.
Kerry: Thank you Eric Good morning, everyone. We finished the year positively and delivered strong margin and profit performance continuing a trend we started in the second quarter.
Kerry: Diligent expense management and strong collections were the primary drivers for the better than expected results across these metrics.
Kerry: Some of our notable quarterly financial highlights included total revenue of $72 5 million adjusted EBITDA of $23 3 million up almost 2% over Q4 of last year.
Kerry: Adjusted EBITDA margin of 32, 2% an increase of 220 basis points over the fourth quarter of 2023, and adjusted diluted EPS of <unk> 37.
Kerry: Looking closer at revenue, excluding the marketing funds.
Kerry: Revenue was $53 8 million a decrease of three 9% compared to the same period last year, driven by negative organic growth of three 5% and adverse foreign currency movements of 4%.
Kerry: Negative organic growth was principally driven due to U S agent count and reduced revenue from previous acquisition.
Kerry: Once again margin performance improved thanks to strong cost management and encouraging collection.
Kerry: Throughout the year, we implemented process improvements and added additional resources, which contributed to improved collections activity.
Kerry: Fourth quarter, selling operating and administrative expenses decreased $3 4 million or eight 6% to $35 8 million. The cost reductions were primarily driven by a decrease in bad debt and investments in events, partially offset by certain higher personnel costs.
Kerry: Improved collections and enhance operational efficiency drove strong cash flow generation in the corner as two thirds of our adjusted EBITDA and nearly one third of our revenue converted to adjusted free cash flow.
Eric Carlson: As Eric mentioned, we have reached agreement on monetary terms to settle to industry class action lawsuits in Canada for approximately $5 5 million U S dollars.
Eric Carlson: Execution of the final settlement agreement is subject to the parties, reaching an agreement on all terms.
Eric Carlson: These cases are comparable to the one that we have settled here in the U S.
Eric Carlson: Upon finalizing the formal settlement agreement the company its subsidiaries and affiliates.
Eric Carlson: And Remax sub franchise owners franchisees and their sales associates in Canada would be released from all claims on a nationwide basis.
Eric Carlson: Similar to the U S. The final settlement agreement will require court approval.
Eric Carlson: We continue to deny the allegations made in the complaint and in no way acknowledge any wrongdoing.
Eric Carlson: We believe that protecting our Canadian network from the risk of potential damages and the uncertainty of litigation makes this decision the right course of action as industry leaders Remax affiliates understand the value of transparency clarity and fully informed buyers and sellers.
Eric Carlson: These are key elements to the foundation of repeat and referral business the basis of top producing agents.
Eric Carlson: As a result of the strategic decision to settle the Canadian litigation, our total leverage ratio ticked up slightly to 357% to one as of the end of the year.
Eric Carlson: Given the cash generative nature of our business, we believe our cash reserves will continue to grow and enable us to delever as we move throughout 2025.
Eric Carlson: We are prioritizing strategically reinvesting in the business and believe we are assuming a modest level of stock repurchases given the current price is attractive.
Eric Carlson: However, as always we remain judicious regarding capital allocation decisions.
Eric Carlson: Our first quarter and full year 2025 outlook assumes no further currency movements acquisitions or divestitures.
Eric Carlson: For the first quarter of 2025, we expect agent count to increase 1% to 2% over first quarter 2024.
Eric Carlson: Revenue in a range of $71 million to $76 million, including revenue from the marketing funds in a range of $18 million to $20 million and adjusted EBITDA in a range of 16 to $18 5 million and for the full year 2025, we expect agent count to.
James: James negative 1% to positive 1% over full year 2020 for revenue in a range of $290 million to $310 million, including revenue from the marketing funds in a range of $71 million to $75 million and adjusted EBITDA in a range of 90 to 100.
Speaker Change: With that operator, let's open it up for questions.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue and if you'd like to withdraw that question again press star one.
Speaker Change: So ask that you limit yourself to one question and one follow up for any additional questions. Please re queue. Your first question comes from the line of Anthony <unk> with Jpmorgan. Please go ahead.
Anthony: Thanks, and good morning.
Anthony: First question is with regards to some.
Anthony: Some of the personnel changes you've made in some of the initiatives you've talked about like lead cost shares and the media efforts like what are the sort of additional revenue opportunities that you see you do any of them rise to say the size of our motto just trying to understand how much of the effort here is around new revenue.
Anthony: Streams versus.
Anthony: Just the overall customer experience around what you have currently.
Anthony: Yes, Tony this is Eric Thanks for the question.
Anthony: If you look at.
Speaker Change: I've been here almost I guess 15 months now and.
And really working on kind of turn it over.
Speaker Change: Every stone and looking for not only opportunities to kind of improve the.
Speaker Change: Stabilizing improve the current business, but also increase additional rubbished revenue streams for the existing business. So we are optimistic and I know that.
Speaker Change: It's not totally reflected to the outside but in the inside we are quite excited.
Speaker Change: And.
Speaker Change: Unfortunately this call is just two days before our large agent event, our four which starts.
Speaker Change: Sunday night.
Speaker Change: Where we've got a number of initiatives that we'll be talking about with the network in order to help kind of improve the overall value proposition that we bring to agents and brokerages that.
Speaker Change: That are in the worldwide Remax community and so youre going to have to kind of wait to see there I made a promise to the network that I talked to the network first.
Speaker Change: So youll have to look at the press releases there but.
Speaker Change: Bit more serious note I mean like lead times here is not only good for consumers and agents, but it will.
Speaker Change: Drive drive the bottom line now.
Speaker Change: As we are also optimistic about motto cross.
Speaker Change: I don't think that <unk> itself would ever kind of catch that from a top line revenue perspective, if ward's doing this job and you can ask worried about that in a minute but.
I think that we're already seeing thousands of agents opted into that program.
Speaker Change: Moving through hundreds of leads customer.
Speaker Change: Customers.
Speaker Change: Our agents are closing conversions and like it's not really about what's happening right now other than that we have the plumbing in place and so now that we have the plumbing in place and we're contacting customers within a few minutes and we're cycling those leads to opted in agents who are responding quickly.
We can start to analyze whether or not we want to continue to.
Speaker Change: Generate additional sources.
Speaker Change: And additional dollars et cetera, because we close the loop on the marketing right and so that's kind of an important factor.
Speaker Change: I want to be clear like our website definitely generates high intent traffic 50 years in the business.
Speaker Change: Good traffic Thats really not paid for we are not in the portal business.
Speaker Change: We're not going to spend like the portals, but because of the brand and the high end high intensity of customers looking for the Remax name, we see traffic. So we're just trying to optimize that asset.
Speaker Change: That's positive.
Speaker Change: In addition, we've talked about the Remax media network.
Speaker Change: We launched that in Q4 that is ramping nicely.
Speaker Change: I think that we're seeing good.
Quality advertisements that cannot only improve the consumer experience and make the site.
Speaker Change: More.
Speaker Change: Energetic attractive.
Speaker Change: Attractive and spend a bit more time, there, but also it is generating some topline revenue.
Speaker Change: We will have more on that probably in Q2, I would say that we're still kind of in the early phases.
Speaker Change: We're talking to a lot of advertisers and agencies, we've built good inventory positions, we need to build out more.
Speaker Change: But we've got the plumbing in place and it's working so well.
We're kind of stepping on the gas a bit too to sell now so we're like I said in my opening comments I mean, we're optimistic that that's going to create a <unk>.
Speaker Change: Seven digit revenue opportunity for us.
Speaker Change: Most of that you'll start to see ramp in the back half of the year.
Speaker Change: And then.
Speaker Change: Our biggest opportunity is still with <unk>.
Speaker Change: How we're going to stabilize U S agent count.
And continue to.
Speaker Change: Generate revenue from those fees and it really comes down to.
Speaker Change: Improving our value proposition and so I'm excited about.
Speaker Change: The handful of.
Speaker Change: Things that we'll talk about next week in order to kind of re.
Speaker Change: Introduce our brand to the network and improve that value proposition.
Speaker Change: We've been leaning in and really providing more support to the network.
Speaker Change: We're excited to strengthen our swagger next week and by the way like we are in the business of helping agents and brokers win listings make more money do it in less time and get brokers brought back to some level of profitability. So that's what we'll be talking about at a high level next week and we're excited about it so hopefully that helps.
Speaker Change: Yes, that's great.
Speaker Change: Look out for the headlines I guess.
Speaker Change: And then just my follow up is really on.
Speaker Change: Broker commissions can you give us just your thoughts on what Youre seeing in the system right now in terms of how buyers are approaching the new rules and any change in rates Youre seeing.
We will let Cary take that one Toni.
Speaker Change: Hey, good morning, Tony So from a from a rate perspective, it's actually been remarkably consistent.
Speaker Change: 2024, especially kind of as the activity happens post settlement, while we've seen internally is very a very consistent trend from a rate perspective, I think when you think about just the <unk> network and the hallmarks of our competitive advantages around trust professionalism and productivity.
Speaker Change: Our network has adapted very well, obviously continue to represent buyers and sellers in the highest quality manner, just given the competitive advantages and what it stands.
Speaker Change: Worked for with a Remax agent and we haven't really seen much impact in terms of the overall economics I think if anything it has put us in a stronger position just given the two to one productivity.
Speaker Change: What the brand stands for from a trust perspective with consumers.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. Your next your next question comes from the line of Nick Mcandrew with Zelman. Please go ahead.
Speaker Change: Hey, guys. This is Nick on for Ryan Thanks for taking my questions.
Gary maybe one for you just to start obviously being very diligent on the cost side of things I'm wondering if you can just touch on some of the major buckets that you've been able to strip out costs from over the last year, but also how youre thinking about any incremental opportunity into 2025 for further savings.
Speaker Change: Yes, that's a great question, Nick I think obviously the entire team really pulled together as we went through 2024 large focus area was just around our operational efficiency. So not taking anything for granted not leaving any stone unturned and making sure that we were very purposeful and thoughtful in terms of every.
Speaker Change: All of that was spun and making sure that we could maximize.
Speaker Change: The returns on those investments obviously, if you just look at the overall cost structure personnel continues to be a large piece of the of.
Speaker Change: The picture, but if you look at kind of our Q4 2024 run rate Youre looking at total also in a kind of around $36 million. Obviously, we always have a bump in Q1, Eric mentioned earlier, our four annual agent conference are also and I always picks up a little bit Q1 of 'twenty five.
Speaker Change: Looking kind of comparable to 2024, and then as we get into Q2 Q3 Q4 of this year looking at trying to maintain that <unk> run rate. So I think we've done a really nice job looking across the cost structure to really optimize where we can to be able to just offset any other insular.
Speaker Change: <unk> pressures that might be happening and so as we get into Q2, Q3, and Q4 kind of looking at a reasonable kind of Q4 dollars 24 run rate in that kind of $36 million to $37 million range as the run rate in the back half of the year.
Speaker Change: Got it that's helpful. Thank you and then maybe switching gears for a follow up on the U S agent side of things are there any trends to call out kind of beneath the headline numbers, whether thats by geography or agent segments of at least kind of are you seeing any shift in the demographic of patients joining the network are there.
Speaker Change: Are they newer agents do they come over as teams are independent brokerages, just any any color to add there. Thanks.
Speaker Change: Yes, thanks, Nick.
Speaker Change: We got to ask Ryan take today off.
Speaker Change: He is around here somewhere.
Speaker Change: Alright, alright.
Speaker Change: I guess, where we stand now with you guys alright. So.
It's a joy to have you Nick don't get me wrong, but.
Speaker Change: Okay.
Speaker Change: From an agent perspective.
Speaker Change: It's a bit.
Speaker Change: More of the same like I mean, I think that there is.
Speaker Change: There are there are new agents and I'll talk just a little bit broadly there are new agents coming into the business that are still struggling to find their way.
Speaker Change: We're not seeing kind of <unk> or.
Speaker Change: Our highly tenured professional.
Speaker Change: <unk> leave us.
Speaker Change: At a high churn cliff that's been fairly stable.
Speaker Change: And I think that one of our one of our ideas and goals is to actually be able to attract more of those so when I talked earlier about improving our value proposition part of that is to be able to bring all sorts of agents in Q.
Speaker Change: Network and get them to that professional productive.
Speaker Change: Trusted level.
Speaker Change: Regardless of whether they come in and that matter or not.
Speaker Change: So I think that we have a little bit more work still to do.
Speaker Change: Helping brokers onboard agents and make them productive and so generally thats, where youre seeing most of the churn lower tenure lower productivity.
Andy Schulz: Great. Thanks, Eric.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Ronald Camden with Morgan Stanley. Please go ahead.
Ronald Camden: Hey, just two quick ones. One is just on the both on the U S agent count and the international or the outside of the U S agent count.
Ronald Camden: Just curious if you could provide just a little bit more color on sort of what's driving the attrition is it is there anything new versus the past 12 months, that's driving some of the downside on the U S and the actually the upside on the international.
Ronald Camden: And is there a sort of a different tack just strategy that you guys have taken or plan to take.
Ronald Camden: To continue the trends outside of the U S and sort of.
Ronald Camden: The trends in the U S. If that makes sense.
Ronald Camden: I think so Ron I mean, I'll, just I'll talk in general about U S agent count through the different kind of geographies I mean, Canada.
Ronald Camden: Canada is still strong over 25000 agents, we put down just just a couple of 100 or so off of Q4, which is an all time high for us I do think that.
Ronald Camden: There is.
Ronald Camden: In Canada, obviously, we've got <unk>.
Ronald Camden: Primary market presence right I mean, we've got 30% 28% market share.
Ronald Camden: The market leader, a great brand different market up there.
Ronald Camden: As we noted in our.
Ronald Camden: Our remarks on the front of the call I mean, obviously, we felt it was important strategically to settle the Canadian law cases lawsuits in order to provide.
Ronald Camden: Some additional air cover and remove some variables from from Canada. So I think it's a little bit more maybe top of the funnel there on the international side look I mean 70000 is at all time high for us so.
Ronald Camden: Just under 10% year over year seeing good.
Ronald Camden: The brand is strong internationally right over 110 countries.
Ronald Camden: We've got just awesome entrepreneurs that are running our regions and brokerages that are hungry.
Ronald Camden: There's just huge opportunity internationally not only to grow our agent base spot to monetize that and so we've got strategies against that although I'll come back to U S agent count that's probably that's the.
The primary focus for us today, and I do think I talked a little bit about churn with Nick I think that it's a top of the funnel issue and I think it's the top of the funnel issue for not only the industry.
Ronald Camden: But also for us and I believe in some of the items that were going to rollout next week at improving the value proposition building a good foundation focusing on the customer experience the agent experience and the broker experience and if we do those things and stay true to who we have been and who we want to be we will be in a good position and I am very optimistic.
Ronald Camden: About our ability to lean in and support the network and return us to USAID and stability.
Ronald Camden: Growth and.
Ronald Camden: We will have monetization opportunities along the way.
Ronald Camden: Okay.
Ronald Camden: Great and then just just another quick update on I think there was the Canadian a substantial agreement in Canada seek the company still waiting on the appeals process of the $55 million settlement. Just curious is after sort of those two does that address sort of all the litigation that's.
Ronald Camden: I mentioned in the 10-K or are there other sort of.
Ronald Camden: Stuff that we're waiting on.
Yeah, Good morning, Ron Ron I think.
Ronald Camden: We're really happy with where we are just with respect to the work that's been done from both a U S perspective, as well as a Canadian perspective.
Ronald Camden: It really it <unk>.
Ronald Camden: There was a lot of uncertainty and we absolutely think that it's in the best interest.
Ronald Camden: All of our stakeholders and.
With respect to any of the other litigation we did file the 10-K last night and everything else is outlined.
Ronald Camden: Those disclosures.
Speaker Change: Great. That's it for me thanks, so much.
Speaker Change: Your next question comes from the line of John Campbell with Stephens. Please go ahead.
John Campbell: Hey, guys good morning.
Speaker Change: Good morning, gentlemen.
Speaker Change: Good morning.
Speaker Change: Maybe let's just start with <unk>, you've got that around the corner I appreciate you've got a hold the line a little bit on the commentary around some of the upcoming changes sounds like you guys have some stuff up asleep there but.
Speaker Change: It sounded like you kind of hinted at Remax dot com and maybe.
Speaker Change: And visiting a different way to maybe present that to consumers but.
Speaker Change: Just kind of tying this back to CCP that's obviously.
Speaker Change: Big Battleground topic. These days one of your public competitors.
Speaker Change: As kind of a leading public figure on the anti CCP sizing they've gotten honestly investors onboard with their strategy, they're kind of getting people on board with a view that they can compete with zillow and realtor com and whatnot and kind of be a portal.
Speaker Change: Stock it looks like it's doubled over the last month I am hoping you could maybe refresh us on <unk> latest stance and CCP and then what extent you can.
Speaker Change: Maybe talk about how youre envisioning.
Speaker Change: That kind of direct consumer access over time.
Speaker Change: Well John Thanks for the question I was waiting for it from you.
Speaker Change: I appreciate you being patient about our four network announcements because I know that you sell also so you know what it means to <unk>.
Speaker Change: Well our tailored your customers whats on the table for them first so we're excited about next week.
Speaker Change: It's just not.
Speaker Change: Not great timing for you guys today, but look.
Speaker Change: I don't think our position on CCP is changed necessarily since last quarter I.
Speaker Change: I do think that there is kind of like an anti in our profile.
Speaker Change: Happening.
Speaker Change: I think that there is a lot of middle ground there to explore.
Speaker Change: Look we're in a great position with our brand.
Speaker Change: With our with our market share with our global presence.
Speaker Change: And the agent Count I mean look it nobody in the world sells more real estate than <unk> and so.
Speaker Change: I think that we're prepared.
Speaker Change: Either way so let me talk about that first so like if.
Speaker Change: If that other public competitor.
Speaker Change: Got their wishes.
Speaker Change: We would be ready.
Speaker Change: Pete.
Speaker Change: Meaning that we've thought about our business practices and our technology.
Speaker Change: And how we would go to market potentially in a different way now what it exactly D.
Speaker Change: At anti approach is probably not.
Speaker Change: Generally we believe in like transparency.
Speaker Change: And what's in the best interest of the customer so as you know.
Speaker Change: There are obviously pockets of customers that feel that they get a better price.
Speaker Change: From being kind of awful listing.
Speaker Change: And doing things in a private way and in some cases that may work for certain.
Speaker Change: Unique individuals I think overall, though what the data shows us that.
Speaker Change: When you have transparency and you get more people to see.
Speaker Change: Our property.
Speaker Change: Whether that's within your community.
Speaker Change: Within your state.
Speaker Change: Within your country or worldwide Youre going to see.
Speaker Change: Potentially.
Speaker Change: The.
Speaker Change: The price.
Speaker Change: Better than what you could have gotten otherwise.
But I think what's most important is what we're going to try to do and what we're going to try to focus on is what is best for buyers and sellers.
Speaker Change: And really take that customer experience to heart, because I think if you really.
Speaker Change: About that customer experience and their wants and needs that will went out in the long term.
Speaker Change: And that doesn't mean that you can't do certain things and make a better profit in the short term, but were not short term players. We've been in business 52 years, we expect to be in business. Another 52.
Speaker Change: And so we're going to focus really on that buyer and seller experience followed very closely by.
Speaker Change: The agent.
Speaker Change: Experience.
Speaker Change: And we've got 140000 agents that are doing unbelievable work every day to bring.
Speaker Change: The experience of buying or selling a home and that emotional and financial decision to life.
Speaker Change: So we're going to lean in.
Speaker Change: And support our great network with a better value proposition and tools. So they can win more listings and make more money and save some time doing it and provide a great customer experience because we have like this unbelievable trusted professional and productive group so do we.
Speaker Change: I think that.
Speaker Change: There are another public company out there that would be more in the Prost UCB camp with some flexibility that's probably a little bit more where we end up then on the anti camp today John.
Speaker Change: Okay, that's great response, and sorry to position that with our four around the corner I know, it's kind of difficult to answer but.
Speaker Change: Okay. So Carrie, let's let's talk about the appetite for buybacks.
You mentioned the stock dislocation, hoping we can revisit that commentary I guess just first what are your what are your limitations from a covenant standpoint, and then how much capacity do you have it back where you can buy back can be for you guys.
John Campbell: Yes, So I think John as we said in the scripted remarks.
John Campbell: The franchise nature of our business is fantastic and obviously, we had strong free cash flow generation this year.
John Campbell: Quarter about two thirds of our earnings generated it turned into a free cash flow and on the year, a little more than a half so as we move into 2025. The first priority right now is just maintaining and getting our leverage down a little bit it did tick up a little bit with the settlement of the Canadian lawsuits, which as I said earlier.
Speaker Change: <unk> was absolutely.
John Campbell: We think the right thing to do and to remove some uncertainty in it but.
John Campbell: But with the dislocation in the stock if we can get that under the three five times, which we're close right now we're looking at about $3 57 as of the end of the year.
John Campbell: Looking at things from a buyback perspective, we would have we would.
John Campbell: Remove all restrictions.
Speaker Change: Credit agreement perspective, so really focused on as Eric said the value proposition reinvesting back into the business allocating capital to drive the top line and then with the dislocation from a stock price perspective.
John Campbell: I think that.
John Campbell: Buying back the shares is a is a very good we've got a very good return on that.
John Campbell: <unk>.
John Campbell: Look to look to do that here in 'twenty five as we as we continue to Delever.
John Campbell: Okay. That's helpful and then maybe just.
John Campbell: In fact us on priorities right now reinvestments in the business buybacks and then eventually potentially the dividend.
John Campbell: So I think John with everything we're always looking and having conversations from that perspective as it relates to return of capital.
John Campbell: King.
Speaker Change: From a strategic perspective, and as Eric said in his scripted remarks.
Speaker Change: Looking at our strategy is pretty simple right now in terms of.
Eric Carlson: Enhancing what we have from a current perspective developing new products and then looking at other opportunities and then those other opportunities could relate to return of capital as well.
Speaker Change: Okay excellent. Thanks Kara.
Speaker Change: Your next question comes from the line of Tommy Mcveigh link with BW. Please go ahead.
Tommy Mcveigh: Hey, good morning, guys. Thanks for taking my questions.
Speaker Change: Just a couple questions around the guidance.
So first off looking at the revenue excluding the marketing funds it looks like the guidance points to.
Speaker Change: Anywhere from down 4% to up 3%.
Speaker Change: Could you help us maybe think about what's contemplated in there for the more volume sensitive brokerage fees versus the recurring revenue in that guidance number.
Speaker Change: Okay.
Tommy Mcveigh: Sure Good morning, Tommy So as we think about as.
Tommy Mcveigh: As we think about just kind of agent count and what's kind of implied from an agent count perspective that would be more driven which would be more impactful as it relates to kind of the more recurring fees and like breaking that out by geography.
Tommy Mcveigh: From a global perspective, obviously in 2024, we had outsized performance and we were up about 9% that we're looking at that to be a little bit more muted for next year kind of mid single digit growth from a Canadian perspective, we are flat in 'twenty floor, just given some of the uncertainty from a housing perspective up they're looking for is kind of similar trends.
Tommy Mcveigh: Just given the overall strength of the network and the brand and the market share that we have up in Canada, and then from a U S perspective, we're really excited about the path and the trajectory that we're on right now.
Tommy Mcveigh: Still seeing some pressure.
Tommy Mcveigh: Little bit of a decline, but do you expect to see some improvement so some improvement from a U S agent count perspective next year.
Tommy Mcveigh: But it's still a little bit a little bit negative and then from a broker fee perspective, obviously, it's early in the year a lot of golf left to be played across all geographies.
Tommy Mcveigh: But looking at broker fee.
Tommy Mcveigh: Kind of low single digits on a percentage basis year over year right now.
Speaker Change: Great I appreciate that.
Speaker Change: And then separately are there any one off costs or margin headwinds that are associated with some of these new product and program build outs that we should keep in mind that are contemplated in the 2025 EBIT number.
Tommy Mcveigh: Tommy It's a great question and I think one of the things that we're focused on from a revenue diversification perspective is really looking at those opportunities, where we think we can really move the needle in terms of creating value for our network, but not taking a lot of risk from a financial perspective.
Not.
Tommy Mcveigh: A significant kind of one time items that we haven't been able to otherwise cover because as we said we've really tried to lay the foundation and I think the fourth quarter is a testament to that because it is the third quarter in a row, where we've seen.
Tommy Mcveigh: We have seen some over performance from a profit perspective, just given the focus and how judicious judiciously have been on the cost structure side.
Tommy Mcveigh: And so I think that that.
Tommy Mcveigh: That's something of consequence, the other thing I think that we just think about from an industry trend perspective is just around consolidation one of the initiatives that we've talked about over the course of the last couple of years is our conversions mergers and acquisition initiatives.
Tommy Mcveigh: And so that's another area just as we think about is not necessarily a one time cost, but as we think about just allocating capital to growth initiatives in the future.
Tommy Mcveigh: Now that we're that we're focused on just given that overall industry trend.
Tommy Mcveigh: Makes sense. Thanks.
Andy Schulz: Ladies and gentlemen that does conclude our question and answer session and I will now turn the conference back over to Andy <unk> for closing comments.
Andy Schulz: Thank you operator, and thanks to everyone for joining our call today. This concludes.
Speaker Change: Events have a great weekend.
Speaker Change: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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