Q2 2025 The Real Brokerage Inc Earnings Call

Speaker #1: Good morning, ladies and gentlemen, and welcome to Real Brokerage second quarter earnings call. At this time, all participants are placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation.

Speaker #1: I will now turn the call over to Ms. Alix Lumpkin, Chief Legal Officer at the Real Brokerage. Ma'am, the floor is yours.

Speaker #3: Thanks and good morning. Thank you for standing by and welcome to the Real Brokerage Conference Call webcast for the second quarter ended June 30, 2025.

Speaker #3: We appreciate everyone for joining us today. With me on the call today are Tamir Poleg, our Chairman and Chief Executive Officer, Jenna Rosenblatt, our Chief Operating Officer, and Ravi Jani, our Chief Financial Officer.

Speaker #3: This morning, Real published an earnings press release, including results for the second quarter ended June 30, 2025. The press release, along with the unaudited consolidated financial statements and related management's discussion and analysis for the quarter, has been filed with the U.S. Securities and Exchange Commission on EDGAR and with the Canadian Securities Regulators on SEDAR.

Speaker #3: Before we get started, I'd like 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.

Speaker #3: 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 reports.

Speaker #3: 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 Chairman and Chief Executive Officer Tamir Poleg.

Speaker #3: Tamir, please proceed.

Speaker #4: Good morning. And thank you, Alix. I will start with an overview of our strategy and recent business highlights. Jenna will provide an update on actions we are taking to drive agent growth, improve agent experience, and enhance operational efficiency.

Speaker #4: And Ravi will provide a more in-depth discussion of our financial results. I'll then provide a few closing remarks before opening up the call for Q&A.

Speaker #4: To begin, Real is a real estate technology company that is fundamentally different in our industry. Unlike traditional real estate brokerage firms, we provide real estate agents with a compelling combination of financial incentives, a proprietary software-based technology platform, which eliminates the need for space, and a collaborative culture that we believe is unique in our industry.

Speaker #4: Our vision is to simplify life's most complex transaction, that is, a purchase or sale of a home, by empowering agents with the tools, technology, and resources they need to grow both their businesses and, individuals, all while delivering a more seamless experience for clients.

Speaker #4: In the near term, this vision includes the rollout of a consumer-facing product, which streamlines the client experience and enhances attachment of our higher-margin ancillary services.

Speaker #4: Long term, we envision our platform encompassing a holistic ecosystem of real estate services and financial technology products, providing agents with avenues to build long-term wealth.

Speaker #4: Our goal is to redefine the role of a real estate brokerage in the lives of our agents and in the broader housing industry. Importantly, just like our institutional investors, many of our agents are also shareholders in our company, that is why we will remain relentless in our focus on delivering long-term value for our agents, for their clients, and for all of our shareholders.

Speaker #4: Moving to the quarter, this morning, Real reported record second quarter results, revenue in the second quarter increased by fifty-nine percent versus the prior year to five hundred forty-one million dollars, driven by sixty-two percent increase in the number of transactions closed.

Speaker #4: This compares favorably to the total existing home sales market, where industry percent during the quarter. Importantly, all of our growth continues to be organic.

Speaker #4: Gross profit in the second quarter increased fifty percent to forty-seven point nine million dollars, and outpaced a forty-two percent increase in operating expenses, which totaled forty-six point two million dollars, I'm proud to say, that this resulted in our first-ever quarter of positive operating income, which was one transactions declined by one point seven million dollars in quarter, and positive net income of one point six million dollars.

Speaker #4: Adjusted EBITDA was positive twenty million dollars, a forty-three percent improvement from fourteen million dollars, in the second quarter of twenty twenty-four, and contributed to strong cash flow from operating activities of forty-one million dollars.

Speaker #4: Now turning to our agent community, we ended the second quarter with twenty-eight thousand agents, marking a forty-three percent increase versus the prior year, and as of this morning, our agent count exceeds twenty-nine thousand two hundred.

Speaker #4: This sustained growth underscores the compelling strength of our value proposition. During second quarter, we off-boarded over one thousand five hundred agents who had either not renewed their real estate licenses or had not paid mandatory association dues.

Speaker #4: The outcome this is clear in our performance metrics, where we saw transactions per average agent increase by seven percent year over year, significantly outpacing industry averages.

Speaker #4: Moreover, our revenue churn, which remains a key indicator of our ability to retain our most productive agents, held firm at what we believe represents a best-in-class two percent in the quarter.

Speaker #4: Beyond our core brokerage strengths, a significant part of our long-term strategy involves the growth and scalability of our ancillary business lines, which today include OneReal Mortgage, OneReal Title, and RealWallet.

Speaker #4: These segments are particularly strategic as they typically generate gross margins that are five to eight times higher than our core brokerage, representing powerful future profit drivers.

Speaker #4: In the second quarter, our ancillary business lines grew by a combined fifty cent, contributing approximately one percent of total revenue, and nearly five percent of our gross profit.

Speaker #4: OneReal Mortgage saw exceptional revenue growth of eighty percent in the quarter, with performance driven by the continued expansion of our loan officer network and successful promotional offers.

Speaker #4: For OneReal Title, revenue growth was seven cent. This deceleration was anticipated and is primarily due to the strategic shift in our title strategy that we discussed last quarter.

Speaker #4: We are purposefully transitioning from less scalable team-based joint ventures to more robust and profitable state-based JVs. In Q2, we launched the first three of our new state joint ventures, and while the revenue contribution from these JVs was minimal in the quarter given the necessary ramp-up time, we are confident in this model's long-term scalability and profitability.

Speaker #4: Lastly, RealWallet continues to onstrate strong progress across both product development and adoption, and generated Q2 revenue of two hundred fifty thousand lars. Its growth has been particularly impressive, in the US, approximately three thousand six hundred agents now use RealWallet business checking accounts.

Speaker #4: This includes eight hundred fifty agents utilizing the new tax-focused business checking accounts, which are specifically designed to help them better plan for their tax liabilities.

Speaker #4: Total RealWallet deposits now exceed fourteen million dollars, a nearly seventy percent increase since our last earnings call in May. In Canada, we've extended four million dollars in lines of credit to over two hundred fifty agents through our production-based lending program.

Speaker #4: In the third quarter, we will begin piloting our US lending product and also formally launching RealWallet Rewards Points. Given our US agent base is nearly ten times larger than our Canadian agent base, we are incredibly excited for the potential to significantly increase the size and impact of the RealWallet portfolio.

Speaker #4: Lastly, before turning it over to Jenna, I want to discuss a recent strategic move that we believe significantly accelerates our consumer roadmap. The acquisition of FlyHome's AI-powered consumer home search portal and related technology assets which we announced on July first.

Speaker #4: We believe this is a major step towards delivering an end-to-end AI-driven home buying experience. Our vision has always been to leverage technology to enhance every facet of the real estate transaction.

Speaker #4: The FlyHome's platform, with its deep MLS integrations, real-time market insights, and user-friendly interface, a perfect fit. It will be integrated into Leo for Clients, our upcoming consumer-facing product, allowing us to offer a more intelligent and personalized home search journey.

Speaker #4: This acquisition is not just about technology; it also brings a talented team of experienced engineers with deep real estate and AI expertise into Real's R&D organization, bolstering our in-house capabilities.

Speaker #4: In addition, our mortgage broker subsidiary, OneReal Mortgage, is offering FlyHome's innovative buy-before-you-sell, financing solutions to clients, providing another powerful tool for our agents and their clients in competitive markets.

Speaker #4: The acquisition and our minority equity investment in FlyHome's were funded with cash on hand, and we expect the ongoing operating expense impact to be approximately two million to three million dollars annually.

Speaker #4: We view this as a highly strategic investment that significantly strengthens our competitive position and accelerates our technology roadmap. Now, for more detail on our operational performance, I'll turn it over to our Chief Operating Officer, Jenna Rosenblatt, for an update on our growth and agent initiatives.

Speaker #3: Thank you, Tamir. Good morning, everyone. It's a pleasure to join you ay. As Real's Chief Operating Officer, I'm excited to share our progress this quarter.

Speaker #3: I'll do this in a top-five format, showing you how we're ly investing in our agents and constantly improving how we operate. Number one, boosting agent support with AI.

Speaker #3: At Real, our overarching goal is to make sure our agents have every tool they need to succeed, and that starts with great support. We're constantly asking ourselves, how can we make things easier, faster, and more seamless for our agents?

Speaker #3: This quarter was a real breakthrough as we fully integrated Leo Copilot, our proprietary AI assistant, to be the first point of contact for agent support.

Speaker #3: This means when agents use the recent apps to call our support line, Leo steps in first, providing immediate answers to their questions. Because this, Leo reduced the number of calls received by our human support team by twenty-eight percent during the second quarter.

Speaker #3: That's a huge win. It means agents get answers and solutions faster than ever before, and it frees up our expert human teams to focus on the more complex issues, truly improving the quality of our service.

Speaker #3: Number two, streamlining operations with advanced automation. Our focus on efficiency extends beyond support and is woven into every part of how we run our business.

Speaker #3: This quarter, we reached a big milestone in transaction processing. Thanks to our proprietary recent software and increased focus on automation, we have tested and proven out our ability to automate the closing and payment processing for almost fifty percent of our transactions with the oversight of only a handful of remote employees.

Speaker #3: To give you some context, for a traditional brokerage to handle the same volume of transactions, it would likely require hundreds of US-based employees working in a physical office space.

Speaker #3: As we move into the second half of the year, we're doubling down on automation, and that means standing up Real's very own in-house AI automation team.

Speaker #3: Their job is to look at every single process across all of our departments, and find even smarter ways to use AI and technology to scale our effectively and efficiently.

Speaker #3: Number three, investing in productivity for all agents. Beyond our operational improvements, we're making a significant investment in the real estate agent community. This fall, we're launching agent breakthrough, a free sixty-day virtual program designed to significantly boost agent productivity.

Speaker #3: It will cover high-impact marketing strategies, practical AI training, and so much more. It'll be kicked off by one the industry's most renowned coaches and backed by top industry and internal experts.

Speaker #3: This program represents a strategic commitment to agent success across the industry and we're ing it available to all real estate agents, no matter which brokerage they are affiliated with.

Speaker #3: Number four, building community with our further together event series. We believe that we go further together. That's why we're focused on fostering real connections and shared learnings through the new further together program.

Speaker #3: Starting in Q3, our agents will be driving a series of in-person coaching events across the country. These gatherings are designed to level up their skills and encourage deeper collaboration across teams, states, and regions.

Speaker #3: These events are agent-led, and spearheaded by many of our top growth ambassadors and local market leaders, and enabled with a full support of Real.

Speaker #3: What makes further together unique is its focus. No fluff, no pitches. Just real strategies and playbooks used by our best agents, demonstrating what's actually working to sell more homes today.

Speaker #3: It's about agents helping agents win, and elevating our collective community. Number five, enhancing our economic model for agent success. So finally, to really strengthen our value proposition, starting this month, we are rewarding agents with our recently announced revenue share model changes, which will allow agents who cap, hit a lead, and our grow large networks to unlock more revenue share tiers even faster.

Speaker #3: These changes are entirely focused on rewarding our most productive and ambitious agents and network builders. By making it possible for them to earn even more as they reach new milestones, we believe we are making Real an even more compelling and rewarding place to build a successful and lasting real estate career.

Speaker #3: This holistic approach, from AI technology and efficient operations, to our robust educational and community initiatives, is designed to help our agents excel. This is the engine driving our financial performance and for a closer look at the numbers, here is Ravi.

Speaker #5: Thank ou, Jenna, and good morning, everyone. I'm pleased to report on our financial performance for the second quarter, particularly as we achieved an important milestone in our journey with our first-ever quarter of positive net income.

Speaker #5: Our top-line growth remained impressive, with revenue in the second quarter increasing fifty-nine percent year over year to a record five hundred and forty-one million.

Speaker #5: This was primarily driven by our brokerage segment, which saw a sixty-two percent increase in the number of transactions closed, which exceeded forty-nine thousand in the quarter.

Speaker #5: Revenue from our ancillary businesses totaled three point three million during the second quarter and increased to fifty percent year over year, with growth led by OneReal Mortgage and supplemented by OneReal Title and RealWallet.

Speaker #5: As Tamir mentioned, RealWallet generated approximately two hundred and fifty thousand dollars in its second full quarter, with an annualized run rate now above one million.

Speaker #5: Gross profit also showed strong performance, increasing fifty cent year over year to forty-seven point nine million, up from thirty-one point nine million in the second quarter of twenty twenty-four.

Speaker #5: Gross margin of eight point nine percent in the second quarter compares to nine point four percent in the prior year. This year over year change reflects the growing share of revenue generated by agents who had reached their annual cap.

Speaker #5: For context, at the end of Q2, approximately fourteen percent of our total agent base had capped, up from eleven percent a year ago. These agents contributed roughly sixty percent of total commission revenue in the quarter, compared approximately fifty-four percent in Q2 twenty twenty-four.

Speaker #5: As a reminder, once an agent caps, they stop paying the standard fifteen percent commission split and instead pay a flat per transaction fee of $285, which results in a lower gross margin on those transactions.

Speaker #5: Looking ahead, we remain focused on driving gross margin expansion over time as our ancillary businesses scale. However, we do expect the trend of more revenue being generated by more productive, capped agents to continue in the second half of 2025, with this next shift partially offset by model changes we announced earlier in the year.

Speaker #5: Our total operating expenses, which include G&A, marketing, and R&D expenses, totaled forty-six point two million in the second quarter, a forty-two percent increase from thirty-two point five million in the prior year.

Speaker #5: The largest component of this increase was revenue share expense, which rose forty-one percent to seventeen point six million, up from twelve point five million in the prior year period.

Speaker #5: The remaining increase reflects investments to support our rapid growth, including expanding our operations and R&D teams and enhancing our technology platform. Total OpEx is a percentage of revenue was eight point five percent in second quarter of twenty twenty-five, a one hundred basis point improvement from nine point five percent during the second quarter of twenty twenty-four.

Speaker #5: While adjusted operating expense, which is a non-GAAP measure, was twenty-two point six million, or four point two percent of revenue, compared to four point three percent of revenue in the prior year period.

Speaker #5: On a per transaction basis, adjusted operating expense per transaction declined by five percent year over year to four hundred and fifty-nine dollars, demonstrating our ability to scale efficiently.

Speaker #5: Importantly, growth and gross profit outpaced growth in operating expenses, resulting in operating income of positive one point seven million in the second quarter, an improvement from a loss of zero point six million in the prior year.

Speaker #5: Net income was positive one point six million, an improvement from a net loss of one point one million in the prior year period. It's worth noting that our core brokerage segment generated three million dollars in operating income in quarter.

Speaker #5: However, this was partially offset by our ancillary business lines, where we are investing today to build profit drivers for the future. Adjusted EBITDA rose to twenty dollars, a forty-three percent improvement from fourteen million in the second quarter of twenty twenty-four, driven by our strong revenue and gross profit growth, which outpaced growth in our ongoing cash operating expenses.

Speaker #5: Stock-based compensation was approximately eighteen million dollars in the quarter, broken down as follows. Twelve million reflected in cost of sales, related to the agent stock purchase program.

Speaker #5: Three a half million in agent equity awards, recorded in marketing. And two million in loyee-related stock compensation. During the quarter, Real generated cash from operating activities of forty-one million dollars, including sixteen million in customer deposits, and allocated two point seven million to share repurchases.

Speaker #5: We ended the quarter with unrestricted cash and investments at an all-time high of fifty-five million dollars on our balance sheet, and we continued to have no debt.

Speaker #5: Given our strong cash position and confidence in our outlook, we expect to increase our pace of share repurchases in second half of the year, under our recently announced buy-back authorization.

Speaker #5: To close, I'll recap a few KPIs we're commonly asked about. The total value of homes transacted over our platform increased to twenty point one billion dollars in the second quarter, a sixty percent year over year increase.

Speaker #5: The median sale price of property sold by our agents was three hundred and eighty-seven thousand dollars, which represents a one percent year over year increase.

Speaker #5: And our headcount efficiency ratio, which we define as the number of full-time employees, excluding title and mortgage employees, divided by the number of agents on our platform, was 1 to 87 at the end of the second quarter.

Speaker #5: As we look ahead, while we don't provide formal guidance, it's important to provide some context for the second half the year. Consistent with typical industry seasonality, we anticipate revenue in the third quarter to decline modestly from second quarter levels, consistent with peer reports.

Speaker #5: This period also generally sees a higher mix of agents reaching their annual commission caps, which would lead to a sequentially lower gross margin percentage.

Speaker #5: From an OpEx perspective, we expect an increase in the third quarter relative to second quarter levels, reflecting headcount additions across the business, expenses related to the acquisition of FlyHome's consumer search portal, investments in AI automation efforts, and higher professional fees.

Speaker #5: As always, we will remain disciplined in managing OpEx, balancing near-term priorities with a focus on driving long-term value. More details on our results and key operating metrics can be found in the earnings press release and investor presentation that accompanied this call.

Speaker #5: I will now turn it back to Tamir.

Speaker #4: Thank you, Ravi and Jenna. I'm particularly proud of our performance this quarter, which should stand as powerful proof our model works. It's generating substantial cash flow and now profitability, even in the most challenging market environments seen in ades.

Speaker #4: We believe this should provide confidence in our ure, knowing that we are still in the early innings of transforming this industry. It's evident that the housing market today faces headwinds.

Speaker #4: Agents across the board are battling fundamental changes in how business is conducted. But it is precisely in this environment that Real's unique model shines.

Speaker #4: Our platform was built not just to navigate these challenges, but to empower our agents to truly dominate. We are more convinced than ever that a significant majority of agents in this industry are leaving substantial income on the table by affiliating with any brokerage. With volatile interest rates and, crucially, with the investments we are making in powerful AI tools, next-generation technology, and unparalleled training, we believe those operating outside of Real are also soon going to find themselves outskilled and outmaneuvered as technology fundamentally reshapes the home buying and selling experience.

Speaker #4: We understand that in life and in business, cycles never work in a straight line. The old playbooks and strategies that worked in past cycles simply no longer apply.

Speaker #4: And we know that, because we're the ones rewriting them. We remain laser-focused on building something genuinely unique. A comprehensive platform for solo agents, large teams, and independent other than Real, and brokerages to build businesses that deliver long-term wealth, manage business finances, and provide clients with unparalleled service, certainty, and a seamless offering of real estate services to make the home buying and selling journey incredible.

Speaker #4: This company and all its success is a direct result of the hard work, dedication, and entrepreneurial spirit of every agent on our platform, and employee on our team.

Speaker #4: We are confident that delivering on our mission can create significant enduring value for all of our stakeholders. We are excited about the opportunities ahead, and we look forward to updating you on our continued progress.

Speaker #4: Now, let's move to the Q&A session.

Speaker #1: Certainly. Ladies and gentlemen, the loor is now open for questions. If you have any questions or comments, please press star one on your phone at this time.

Speaker #1: Your first question is coming from Stephen Sheldon from William Blair. Your line is live.

Speaker #6: Hey, good ning. Thanks for taking my questions. First one here, just on the revenue share model enhancements. Just wanted to ask, how should investors be thinking about the potential financial impact from these changes?

Speaker #6: How could it change the financial model?

Speaker #7: hi, Stephen. Good morning. as you may recall, revenue share is capped at sixty cent of our split. And, and those changes do not impact that, so there will be no financial impact, on our financial statements.

Speaker #7: there will be some sort of a redistribution of revenue share internally within the agent community. So, the company will continue to pay the same amount in, in revenue share, but it's going to be, distributed a little bit differently within the agent community.

Speaker #6: Okay. Got it. Makes sense. And then on gross margins, I think, avi, you'd noted expecting a sequential decline, two Q to three Q. just given as more revenue comes through, capped agents.

Speaker #6: But should we be assuming, I guess, as we think about the second half of the year, as we think about year over year, I an, would it be fair to, to think that gross margins are gonna be year over year in the second half?

Speaker #8: Hey, Stephen. Yeah, thanks for the question. I, yeah, I mean, I think given the dynamic you've seen in the first half of the year, where margins were down, you would expect that to continue.

Speaker #8: And, and it's really the, you know, high-class problem of more revenue being generated by more productive agents on our platform. now, in a more normalized market, when you have some of the, you know, less productive agents contributing more revenue, we would expect that mix shift to go the other way.

Speaker #8: But I think it's, you know, a bit of a sign of the times, and ou've seen that in other reports that in the current market environment, the, the best agents are getting more, of the market share, and that's what's leading the, margin trends you ed.

Speaker #6: Got it. Yeah, that makes sense. maybe just last one for me. would it just be great to get an update on what you're eing in the agent and team recruiting pipelines?

Speaker #6: You know, how is that looking? And, again, maybe just an update there.

Speaker #7: sure. the, the pipeline is, is very strong. both with, with the solo agents and teams of various sizes, as you can see, we added, twelve around twelve hundred agents since the ning of the quarter, so in a period of about five weeks.

Speaker #7: That gives you an indication that, you know, growth is strong. I think that what happened in the second quarter was, or somewhat of a slowdown in the net agent count was because of a significant off-boarding of a large number of agents that we indicated, more than 1,500 agents, that were almost all of them non-productive, were off-boarded.

Speaker #7: So that resulted in, in somewhat of a slowdown in agent count, but at the same time, an improvement in the per agent productivity that rose seven percent.

Speaker #7: But, we're back on track, and we added, around twelve hundred agents in the past five weeks. And, and the pipeline is still, still very strong.

Speaker #6: Good to hear. And, and are, are you through kind of that, that churn process, I guess, with the, with the unproductive agents? Or will there be more?

Speaker #7: Yeah, I, I, you ow, this, this is very much, market dependent. I think that we've en that across the industry, and, and I recently read some, some quote by the, National Association of Realtors, they expect about two hundred thousand agents to leave between now and, and the same time next year.

Speaker #7: So I think that the number of agents in the industry is going down, but we are retaining the agents that actually closing deals. So, obviously, we care deeply about agents, and we care about transactions, and we're, we're very happy to retain the transactions, so this is kind a, a normal course of business in our industry when the markets are, is tough.

Speaker #7: Agents leave the industry, and when the market is good, agents join the industry. but at the same time, I think that we're pretty much the only company that is growing market share significantly at, at this point.

Speaker #7: So we're taking market share from everybody else.

Speaker #6: Sounds good. All right. Well, ank you for taking my questions. Appreciate it.

Speaker #7: Thank you.

Speaker #6: Thanks, Stephen.

Speaker #1: Thank you. Your next question is coming from Matthew Erdner from Jones Trading. Your line is live.

Speaker #9: Hey, good morning, guys. Thanks for taking the question and congrats on the continued growth. turning to the ancillary services, you know, that will drive further margin expansion.

Speaker #9: you know, you guys have touched on the productive agents. You know, what goals do you have internally to help those guys kind of cross-sell those other products?

Speaker #9: you ow, as they complete a transaction?

Speaker #7: we've been communicating, that our belief is that meaningful ancillary services adoption will come through product enhancements and not necessarily through, you know, the kind of the, the traditional way of attaching mortgage and, and title.

Speaker #7: meaning, you know, reaching out to our agent community and, and trying to persuade them to bring their deals over. Having said that, we did make a change in our title JV, and we went from, team-based JV to state-based JV, , we're getting very encouraging signs of, of that actually working and picking up.

Speaker #7: So I think that that will drive significant growth in the coming quarters. on the mortgage side, we grew eighty percent year over year. I think that there are, there's a lot of, initiatives that we can take from very simple things such as introducing you to your, lender or kind of contact person at OneReal Mortgage once an agent's onboard our platform through things that are a little bit more, complicated than, and sophisticated, which are AI-driven.

Speaker #7: So I think that a combination of what we're doing currently with the upcoming launch of, Leo for Clients is ing to drive meaningful adoption in, you know, in the next few years.

Speaker #7: But, for now, attached rates are around four percent on mortgage and about one percent on, on title, and obviously, we want this to, to get to the double-digit, as soon as we can.

Speaker #6: Right. And, and so just to clarify, it's, it's, it's, it's, four percent title and, and one percent mortgage. Got it. That's

Speaker #7: Oh, sorry.

Speaker #6: helpful.

Speaker #7: and, and by the ay, just one thing, we didn't mention, RealWallet, but RealWallet is, is growing faster than we thought. I indicated a little bit about the revenue that it's generating.

Speaker #7: we still haven't launched the lines of credit in the US, which is the most profitable product with, which we're gonna launch in, in the next few weeks.

Speaker #7: So we anticipate Wallet to, to drive meaningful revenue growth, and profitability, even in the short term.

Speaker #6: Thanks for that. and then touching on that credit piece, you know, have you guys kinda talked to the agents so far and gotten any indication of, you know, what the usage is gonna be and kinda what that initial rollout will look like?

Speaker #7: Sure. so we're gonna roll it out in stages. it's not going to, to be open in, in all states, and for all agents. I'll just for as an indication, agents in Canada used about a little bit north of four million dollars in lines of credit in the, in the past few months since we launched it.

Speaker #7: We have ten times more agents in the US compared Canada, so you can assess the ential over there. based on those numbers, but I think that the demand is, is going to be very solid.

Speaker #7: it's just about, you know, our appetite to, to lend and, and just the scale, scalability of, h, of the product itself.

Speaker #6: Got it. That's great. Thank you, guys. Thanks,

Speaker #7: Thank you.

Speaker #6: Matt.

Speaker #1: Thank you. Your next question is coming from Naveed Khan from B. Riley. Your line is live.

Speaker #10: thank you very much. on title, understand you're ing to a state, leverage JV. how many states have you launched these JVs in, and any, any sort of early learnings that you can share would be, would be great.

Speaker #10: and in terms of the transaction processing, it's, it's great to see the level of automation you're able drive. I think you shared stats about how, you don't ed hundreds of employees like in traditional brokerage.

Speaker #10: are there, are there more levels to pull hair in terms of automation that can drive it even, even higher? Just talk about that a little bit.

Speaker #10: Thank you.

Speaker #7: Sure. so the intention is, to open up about twelve, state JVs, in the near term, and some them are already set up, some of them started working, and on, on others we're actually working as we speak.

Speaker #7: and we just see great buy-in and great demand from, from agents. So we think that this is going to be super successful, and we also have initial very positive signs from, a couple of states where we already launched.

Speaker #7: but again, those, those things take a little bit of time, and we've seen a little bit of dip in, in the growth, during the second quarter due to that change in strategy.

Speaker #7: but we're very confident that we'll get back on track and, and, and get to a very meaningful growth, in title. in terms of, of efficiency, maybe I'll let Jenna touch on that.

Speaker #2: Yes, absolutely. So there are definitely more, levels of automation for us to pull. we have a roadmap that we're ing through, and we're really excited about in Q3.

Speaker #2: So we're building out an AI and automation team that's gonna be really diving in headfirst to get going even faster in the next quarter.

Speaker #2: So really excited to see the outcome of that. over the next few weeks and months, but yeah, we're just getting started, so a lot more to come.

Speaker #10: And then maybe just a quick, quick clarification on the, on the mortgage, revenue growth. you know, it's, it's, it's, it's really good to see these, these growth rates here.

Speaker #10: what a, did you ange something in the incentives, whether for the, you know, it's for the cus-customer and customers, or whether it's for the agent that kind of is, is contributing to this?

Speaker #10: How should we think about it? About this?

Speaker #7: Yeah, some of the growth was driven by, some incentive that we provided to the end client, meaning the, the buyer or the, borrower. in terms of, a rebate at, at closing, there was no incentive to the agent, but, just incentive to the client.

Speaker #7: however, we, we, we do think that we can even accelerate that growth, not necessarily with additional, promotions.

Speaker #10: Great. Thank you.

Speaker #7: Thank you.

Speaker #6: Thanks. Thanks, Naveed.

Speaker #1: Thank you. And once in, everyone, if you have any questions or comments, please press star, then one on your phone. Your next question is coming from Nick McAndrew from Zelman & Associates.

Speaker #1: Your line is live.

Speaker #11: Hey, guys. Thanks for taking my questions. I wanted to focus a bit on the agent productivity side of things. And it looks like the growth in transactions relative to agent count was very strong, and the about pace the industry really over the past two years.

Speaker #11: And so can you just give a ittle color on maybe what's driving some of that outperformance? And is it a function of high-quality teams and brokerages joining the platform, or is it the tools and tech that you're rolling out to agents that are making them more efficient?

Speaker #11: Thank ou.

Speaker #10: Yeah. Hey, Nick. Thanks for the question. you ow, I it's, it's really a combination. I think o-on the, the quality of teams joining, for sure, I think with rolling out private label and pro teams over the last, you know, eighteen to twenty-four months, we've just seen the uptick in the, with some of the most productive teams in the industry joining our platform.

Speaker #10: Really accelerate relative to, you know, twenty twenty through twenty twenty-three. And so I think the mix of agents and the teams that are joining are just really some of the top quality most productive teams in the industry.

Speaker #10: And I ink you'll see that trend continue. And, and thank ou for pointing it out that really over the last two plus years you've seen our average productivity per agent outpace the industry.

Speaker #10: That is a trend that we do expect to continue. but, to your point of the question, is it the efficiencies we're abling? I mean, we, we certainly hope so with everything we're doing on the AI side.

Speaker #10: and on the technology side that agents can spend less time doing, you know, the manual tasks that get done in an office, and more time out in the field with clients.

Speaker #10: And so I think it's, it's a combination of both of those things, and we expect, both trends to continue well into the future.

Speaker #11: Great. Thanks, Ravi. That's helpful. And maybe just one on the retention side of things. You've, you've out that notable gap between agent churn and revenue churn in the past, which suggests agents leaving are generally lower producing agents.

Speaker #11: So I guess building off of that, are you starting to see any correlation between deeper adoption of the ecosystem and retention? And I guess what I mean by that is, Wallet, for example, something that can become more of a retention lever as well in addition to that uncorrelated revenue stream?

Speaker #10: Yeah, that's, it's great estion.

Speaker #7: Sorry, go head, Ravi.

Speaker #10: yeah, I, I can address it and, Tamir can, can also weigh in. but definitely on the Wallet side, I think when we look at, adoption of Wallet and who is most, active users of Wallet, it's definitely those agents who are generating, you know, north of a hundred thousand of, of gross commission income.

Speaker #10: And so I, I think you're exactly right in that thesis, and I'm, I'm hopeful that as US lending launches, that you'll see that trend get even stronger.

Speaker #10: So, yeah, early days, but the signs are certainly pointing in that direction, which is, which is encouraging. And Tamir, anything you wanted to add?

Speaker #7: Yeah. I mean, we do expect, Wallet to drive retention of, higher producing agents because of a couple of points. Obviously, if somebody's, using the line of credit, this is something that is not available to them anywhere else, and this is a good enough reason to stay beyond everything else that we offer.

Speaker #7: Number two, with the point, slash reward system, if you will consider leaving Real, you will be leaving table. because, because of the points that you have.

Speaker #7: and I think ultimately the Wallet is going to allow you to manage all of your, our finances. So, you ow, retirement, some investment, tools as well, a better planning, and I think that this is just going , to keep people on the platform also, in addition to all of the other reasons.

Speaker #11: Great. Thank you Great. Thanks, Matthew. Well, now that we've concluded the analyst portion of the call, we will address some of the questions received from shareholders on the, say, technologies portal that was opened last week.

Speaker #11: both.

Speaker #7: Thank ou.

Speaker #6: Thanks, Nick.

Speaker #1: Thank you. There are no further questions from the analyst in

Speaker #1: Thank you. There are no further questions from the analyst in queue.

Speaker #11: We received a number of excellent questions, and so thank you to all who participated. first question for Tamir. How are you adapting operational strategies to the current macro challenges in market?

Speaker #11: And what specific actions are you preparing to take in next twelve to eighteen months?

Speaker #7: that's an interesting question, and it gets to the heart of our technology. we're working on big things at Real, and our initiatives are not designed to respond to short-term changes in the market, even though sometimes it is tempting to do so.

Speaker #7: instead, we are building a business for the long term, and so our strategic framework is to balance our continued growth with relentless focus on technology and AI to keep, our model lean and efficient.

Speaker #7: this long-term mindset is how we ensure that Real can not only, with, withstand challenging environments, but can emerge even stronger from them. And this is how we actually kind conducted ourselves since day one, and this is how we will continue to do.

Speaker #11: Great. Thanks, Tamir. Next estion for Jenna. could, could you explain how contract labor is utilized by Real and what functions or tasks are being done by contractors versus full-time employees?

Speaker #2: Sure. Absolutely. So our focus has always been to leverage technology to enable us to scale efficiently. with a relatively lean full-time employee base, and we believe that that is a significant competitive advantage that we have.

Sure. Uh so first, uh, we will continue to strengthen our core proprietary technology and our recent platform. Second we are focused on leveraging AI to drive greater efficiency across the entire company. Which you heard Jenna talk about in her remarks? Third? Um, we are making a significant investment in our consumer roadmap, specifically, with Leo for clients. Uh, we believe this will have a meaningful impact on the Asian experience. Strengthening our competitive advantage and driving higher attachment of our higher margin ancillary services. And finally, we will continue to invest heavily in the evolution of real wallet, where we believe we are creating a new

Business model for agents, by providing them with powerful Financial tools to manage their business, finance, finances and also grow their wealth.

Great.

Thanks toir. Um,

Matthew, if you could, uh, provide instructions, uh, for the replay, that would be great.

Absolutely, in order to access the replay, you need to dial 877-481-4100 with a confirmation code of 52691.

once again, the phone number is 877-481-4100 and the confirmation code 52691,

the replay will be available at 11:00 a.m. eastern today.

Ladies and gentlemen, this does conclude today's conference call, you may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.