Q3 2025 RE/MAX Holdings Inc Earnings Call

Speaker #1: Good morning, and welcome to the Re/Max Holdings 3rd Quarter 2025 earnings conference call and webcast. My name is Colby, and I'll be facilitating the audio portion of today's call.

Speaker #1: At this time, I would like to turn the call over to Joe Schwartz, Senior Vice President of Finance and Investor Relations. Mr. Schwartz,

And while existing home sales, have yet to show sustained signs of recovery, our networks, continue to perform resiliently.

From a macro perspective. The trends we saw in our Remax National Housing report earlier. In the year continued in September as inventory. Increased 20% over September 2024 marking the 21st consecutive month of year-over-year growth.

additionally new listings, which had slowed some over the summer rebounded, in September growing 4.5% over August

We believe these sustained increases are constructive for housing and will help support increased transaction activity.

However, affordability remains a challenge, particularly at the lower price points.

Further downward movement in mortgage rates would be welcome news.

From an industry perspective, this year has seen consolidation activity on both a large and small scale, give an existing industry Dynamics. We leave the current state of change creates exciting opportunities for our company and networks.

We continue to have a robust franchise sales and conversion Pipeline and our building on the momentum of recent additions including Remax Hawaii, which catapulted Remax to a number 2 market share position in the state.

This momentum is bolstered by our Innovations and ongoing enhancements to our value proposition.

Which has spurred a lot of excitement throughout our networks and the industry. I've never felt more positive about what lies ahead for our company. I'm going to continue to evaluate all opportunities to drive enhanced value for all of our stakeholders.

As of September 30th, our worldwide agent count of over 147,500 agents was another record high, and the U.S. agent count reached its best third quarter in three years.

Although we're not where we want to be the underlying agent, fundamentals are encouraging.

June marked the first two months of the year where our agent rate increased year-over-year.

In the Q3.

Where the recruitment rate for each month of the quarter was higher than last year. Producing agents, continue to be drawn to ReMax and the quality of our network was reflected in. The recently released, 2025 real Trends, verified City rankings where we had more agents represented than any other brand.

Although Canadian agent, count was down slightly year-over-year. We saw modest sequential growth. Despite a continued challenging housing backdrop,

We appreciate that being a broker and an agent is difficult in this market. And historically we know that the number of producing agents in the industry tends to correlate with the level of existing home sales.

We're encouraged by the results in both, the US and Canada given the current state of the markets and our International agent, count continues to be a bright spot surpassing 73,000 agents

Momentum and agent recruiting have been fueled by many of our ongoing initiatives. Our Aspire program continues to be a success, with approximately 1,500 agents benefiting from the program. Although it's still early, Aspirants are performing as intended, with an uptick in the recruitment of newer agents and a higher retention rate. This builds on the strong reception and feedback from the network on Aspire, leveraging our voice of customer capabilities. We introduced the Ascend and Appreciate programs in September.

these optional economic models offer greater flexibility with respect to how and when a franchisee pays us,

Further supporting their ability to attract and retain quality agents.

Will these programs are new the feedback from the network has been very positive.

in addition to providing flexibility with respect to our economic models, we continue to lean heavily into Innovation to deliver an elevated experience to all of our Affiliates and the consumers, they serve

Many of our new offerings, like the recently launched RE/MAX marketing as a service platform, leverage the strengths of our scale to create new competitive advantages.

The platform is a data driven AI powered system that simplifies marketing for all of our affiliates.

The offerings include automated listing packages, complimentary and paid campaign options, real time analytics and property videos created to seamlessly with AI.

We'll continue to add Innovative products to the platform. All of which are designed to help agents save time when more listings and grow their business.

This marketing approach is a strategic shift as we're consolidating fragmented efforts into 1 seamless experience. Although we're just getting started, the initial click-through rates and engagement results are very promising. We're seeing both the number of orders and users, increase each week and the current weekly order value is indicative of a low. 7 figure annual run rate

Notably, we are planning to expand the platform into some International geographies outside of the US and Canada marking. A tangible step to capitalize on the scale of our worldwide footprint, enhance the value proposition globally and diversify our revenue streams

In addition, we continue to innovate on the exciting initiatives. We launched last year leveraging, our digital assets, our lead County are program. Has been outperforming expectations this year and we continue to evaluate and add new lead sources.

The RE/MAX media network is on track with our advised expectations.

We anticipate it will have a $7 million revenue contribution by the end of 2025. We remain optimistic about the long-term potential of these initiatives.

Our story is being told loudly and proudly through the voices of our franchises and agents, both online and offline. Whether agents are leveraging our Max engage platform or other mediums. Our momentum continues to build

Throughout our many events over the past several months, excitement and a feeling that something is different about RE/MAX has emerged as a constant theme.

And that excitement is carrying forward in our ability to recruit top industry talent. To our executive team, we're thrilled to have Vick Lombardo on board as our new President of Mortgage Services.

In his role, Vic will oversee the growth over a mortgage business, including motto, mortgage, weelo, and future Evolutions designed to grow our mortgage offerings.

In Vic's, first few months, he's rolled up the sleeves, dug into the operations surfacing, a number of innovative ideas to drive growth and add additional revenue streams and increase the operational efficiency.

We're already putting foundational pieces in place and we look forward to sharing more details on our strategy in February.

In addition to Vic, Tom planned again. Our new Chief Digital Information Officer joined us at the end of September. Tom, a member of the 2025 SWAP Pool Power 200, is a great cultural fit, and his impressive track record includes 20 years as a real estate innovator and executive in leadership roles covering both technology and marketing.

Tom is leading in to the potential of AI, both to improve the customer experience and to make us more efficient in our day-to-day operations. Not only is he an industry-leading technology but is experienced in ancillary businesses. Also, be a great asset as we continue to explore future growth strategies.

As we look to the future, we continue to lean on our networks and build on our momentum. We're focused on the tremendous opportunities that lie ahead for us, and with a world-class leadership team now in place, we believe we're well positioned for growth in the current environment.

We're focused on what matters continuing to grow. Our Remax agent count, especially in the US and Canada enhance and expand our value. Proposition, focus on improving our customer experience, grow our mortgage business. And can currently diversify our Topline drivers, as we execute with Excellence across our brands.

As we move into the last couple of months of the year and prepare for 2026, I want to emphasize that we're in a new era when defined by Clarity purpose and action with that. I'll hand it over to Carrie. Thank you Eric. Good morning everyone. As Eric mentioned we are pleased with our third quarter, operational results and overall financial performance.

Performance. Our third quarter profit came in at the high end of our expectations and our Top Line. Results were solid. Despite a housing market that continues to be slower than anticipated highlighting. The resilience of our financial model.

Some of our notable quarterly financial highlights included total revenue of $73.3 million.

Adjusted ibida of 25.8 million.

Adjusted ibida margin of 35.2% and increase of 40 basis points over the third quarter of 2024 and adjusted diluted EPS of 37 cents.

Looking closer at Revenue, excluding the marketing funds.

Revenue was 55.1 million, a decrease of 5.6% compared to the same period last year. Driven by a decline in organic revenue of 5.4%, and adverse foreign currency movements of 0.2%.

The decline in organic growth was principally due to lower us aging count, and to a lesser degree certain incentives related to modifications to the company's standard fee models including our Aspire program.

This decrease was partially offset by contributions from our marketing services, including our lead, concierge, and Remax Media Network initiatives.

As mentioned, margin performance improved, thanks to our focus on ongoing operational efficiencies.

Third quarter selling, operating, and administrative expenses decreased by $3.5 million, or 9.7%, to $32.5 million. This reduction was primarily due to lower personnel and events expenses, partially offset by higher investments in technology and our flagship websites, as well as increased bad debt and legal fees.

Despite the challenging broader macro and housing environments. Our ongoing evaluation of every aspect of our business is paying off.

The cash generative nature of our business converted approximately 60% of adjusted EBITDA to adjusted free cash flow this quarter, and our total leverage ratio decreased to 3.41 times as of September 30th.

Importantly, our total leverage ratio is now below the 3 and a half times level at, which we are afforded greater flexibility from a capital allocation perspective, and we expect to remain below the 3 and a half times level at the end of the year.

From a capital allocation perspective, our priorities remain unchanged. We are strategically reinvesting in the business and will continue to build our cash reserves. We also believe that we can now evaluate returning Capital to shareholders because of the current price repurchasing. Our shares is an attractive use of capital.

now, on to our guidance,

we are pleased with our Q3 financial performance and are encouraged by the growing excitement from our Network and early returns from our initiatives. However, we remain pragmatic about the realities of the current housing market and continued uncertainties in the broader macro environment. As a result, we are tightening the top end of our full year revenue and adjusted ibido ranges.

Our fourth quarter and full year 2025 Outlook assumes. No further currency movements Acquisitions or divestitures

Funds in a range of 17 to 19 million and adjusted ibida in a range of 19 to 23 million. And for the full year 2025, we now expect agent count to increase, 0, to 1 and a half percent over full year, 2024 revenue and a range of 290 to 294 million including revenue from the marketing funds. In a range of 72 to 74 million. A change from 290 to 296 million and adjusted ibida. In a range of 90 to 94 million. A change from 90 to 95 million with that operator. Let's open it up for questions.

Thank you. We will now begin the question and answer session and if you'd like to ask a question, please press star. Then the number 1 on your telephone keypad, to raise your hand and enter the queue.

If you'd like to withdraw your question at any time, simply press star 1 again.

Thank you.

Your first question comes from the line of Anthony pallone for with JP Morgan. Your line is open.

Uh, great thanks. Good morning. Um, just Eric I think you mentioned there were, there were 2 Programs. You talked about 7 figure contributions potentially I think it was marketing and maybe it was Aspire, but I was wondering if maybe you can give a little bit more color around, you know, can we expect to see that level of incremental Revenue in 2026 and maybe what with the margin perhaps look like, or just

A bit more detail on what that trajectory might be.

Yeah, certainly Tony. Uh thanks for being on today. Uh a couple things uh uh we're we're talking about is uh as you know, over the past uh 4 6 quarters, we've really been talking about um you know, bringing more value to the network and helping them.

You know, win more business, do it in less time and, uh, you know, bring some profitability back to brokerages and help agents make a little bit more money part of that is, um, you know, our marketing efforts that we rolled out about, I don't know, 10 weeks ago, and we're seeing really good engagement, uh, on our marketing as a service platform. So, that's 1 of the platforms that we talked about, uh, being a, uh, you know, a 7 digit Revenue opportunity. Um, that certainly is continuing to grow. We're seeing great response, uh, engagement usage. And I think the most important thing Tony is it's actually working.

Right? So when you think about um the uh you know, marketing a listing or an open house uh or just Marketing in general, it's good to see that engagement and that return. So we're seeing customers come to our site, we're seeing a higher engagement with properties, um, you know, we're seeing, uh, you know, more customers wanting to, you know, uh, you know, click through and, uh, and grab an agent, all these things are good to help our, our folks kind of win listings and really it's a spend that's happening kind of in the market, but in in a uh this aggregated way. And so what we've done is created a platform uh through uh process technology and AI.

To help uh that spend 1 to uh lower the cost for agents but also to be more effective in the marketplace. So we think that's a big opportunity. Not only in the US and Canada where it's deployed today but also internationally and we're working on several markets um in the fourth quarter uh to start that roll out to help monetize that uh International uh opportunity uh that uh you all have. So politely pointed out to me. Uh, many times in the past. Uh, in addition, we have the Remax media Network

We've spoken about um, a bit in the past and part of, you know, obviously marketing as a service, has helped driving traffic to the uh, to the website. Um, you know I will tell you that you know, we are we're building the plumbing, we've got good infrastructure in place, I think um, closer to, you know, the end of the year, you'll see uh, you know, kind of a new approach for us on uh, on.com and.ca. Um, but advertisers are, you know, are liking what? They're seeing. Uh, we've worked to do. Um, but you know, they are they're seeing, uh, good engagement with their products. Um, we're seeing good engagement from consumers. When they have an ad kind of, on a site that, uh, you know, helps, uh, helps our brand helps their experience. So, you know, we're working through kind of the foundational aspects of the program, but that definitely is, uh, it's a 7 digit figure in, uh, 2025 and we'll continue to grow in 2026 and Beyond.

Customers, um, who have interacted with the product over the last couple of months.

Okay, on the rmn side, the the margin profile will be different too.

It'll be higher than our normal margin profile. Yeah.

I see. Okay and then just uh 1 other 1 just on m&a and the sector in general can you give us any uh thoughts on on where you stand there? And also whether or not that that has any implications on just you mentioned your recruitment rate. And whether you're seeing, um, you know, people move around as a result of m&a in the space.

Yeah, great question. Um,

You know, look at I think last time we talked about us building momentum within our Network and really being focused kind of our our strategy and uh our value proposition. We're seeing great enthusiasm from the network right now. Uh, my opening remarks, we talked about uh, a little bit, the um, you know, some of the events, the last uh, 5 6 events since the last time we spoke have been kind of, uh, categorized from the network as best event ever, which is, uh, really encouraging, uh, meeting the way. We're showing up, um, the tools, the services, um, the engagement we're providing, is resonating, uh, with the network that along with some of the, uh, the programs. Whether it's a marketing, as a service, or some of the new economic models, whether that's Aspire or send or appreciate, uh, the resonating. And so, we're seeing a good engagement levels there. And we're seeing good recruitment rates through the Aspire program, with all that being said,

That um, you know there, there will be continued consolidation in the market. Obviously since the last time we spoke there's big uh big announcement. We think that that just brings additional opportunity for us and could help accelerate our strategy but um, obviously, you know, we are, um, we're open for business. Um, we are seeing a lot of, uh, you know, inbound requests,

Uh, meaning, hey, something's happening over at Remax. What is that? I want to talk more about that. Uh, maybe I've got a contract up, maybe I'm independent feeling pressure, but, uh, we are definitely seeing a lot more inbound activity here, which is very encouraged for our franchise sales, uh, and our, and our Network, um, to capitalize on maybe some of the, uh, you know, the, the market conditions, but also, just the opportunity on what we've built to join, kind of this uh, this momentum that we've got on the market right now.

Okay, thank you.

Your next question comes from the line of Nick mcandrew with zuman. Your line is open.

Hey guys, thanks for taking my questions. Um, Eric, maybe 1 for you to start. I think just with Aspire Ascend and appreciate now live. Could you maybe just walk through? What type of agent you're trying to attract with kind of each of those models and maybe just how franchisees are thinking about those optional models in practice and I mean, our most rolling them out selectively for recruiting. And for the existing agent base, they already have, or maybe if you could just add any color there that

Helpful. Thank you.

Yeah sure thing. Thanks for the question. Um a couple things 1 is uh you know, as I just just mentioned, I think that the the models and just the idea that there's choice is resonating with the network. Um obviously

You know, brokerages and and agents, uh, you know, independent operators, and they have to make the best decision for themselves. I think, in the last call, we talked about um, a little, an Aspire, you know, about 2/3 of the folks, um, have uh, have joined, uh, or participating. But I think the important thing that what we're seeing and, and by the way, it's it's, it's still a little bit new. Um, but there are some positive green shoots meaning, you know, Aspire has not, um, it has, it has not, um, taken away from any of the existing recruitment that we were doing. Organically for kind of Highly, professional productive, more tenured agents. And so Aspire generally has been seen as kind of incremental. The other great thing that we're seeing is Aspire is uh, definitely coming with higher retention rates. Um, than what we previously saw. Um, so I think the idea that we've coupled, um, education,

so we've got a, uh, you know, um, real estate agents

Uh, enjoy retirement, uh, through this profession, we want to make sure that there's a place where they can stay, um, at an affordable rate, um, and still capitalize on their book of business. But no, they may not be as productive as they once were kind of in their Heyday. And so we're seeing, uh, we're seeing some adoption of of appreciate, um, obviously that's a program that takes a little bit more time, uh, for the funnel to fill as, uh, folks, uh, you know, design, you know, 10 to 10, uh, you know, have a desire to roll off. Um, and then on a send, um, you know, we're seeing decent adoption on a send for those folks that want to take advantage of, uh, you know, a model which provides a lower fixed fee and a higher variable rate. And I think, you know, part of a send for me, is also kind of putting, you know, uh, our money where I'm up to meaning, like we have to be in the business of helping folks win business, uh, that can be leads generated from our website that can be other sources that can be on our.com. I mean, a whole different variety. And so,

What we're now showing to the network is that we're in it with you, right? We'll take some risk on the financial side.

But we're going to help you as an agent and a brokerage build your business. And I think that, um, that stands alone has really resonated with a lot of the network, um, and it's just really a philosophy of us leaning in to help support their business.

Got it? Yeah, that makes a lot of sense. Thanks Eric. And I guess just to follow up, I think just given all of the investment in digital tools and marketing capabilities, this year, whether its lead concierge or the new marketing as a service platform. Do you have any sense for just whether you're seeing any tangible uptick in productivity of Agents or offices that are more actively engaged with these platforms versus those that aren't

Look, I think, um, you know, it's a long sales cycle.

Uh, you know, some days, you wish you were kind of like a consumer goods, uh, company and just selling a bar of soap, but that's not the case. Uh, so what I said before, Nick and I think is helpful is like, we're seeing additional engagement on listings, right? And so, when you see that type of an activity that will lend itself to, I think our team winning more business and that will help improve productivity. So, you know, when you roll out a programs like these, like, you know, increase marketing or lead consear, um, with our sales cycle, it takes a while.

To actually see the results. But when you set out um and you say hey these are a few things that I'd like to see initially to make sure that the, the program is kickstarted in the right way. We're seeing all those green green shoots and we're seeing it actually exceed our expectations. So we're really optimistic on, you know, the work that we've done which is very purposeful Investments 1. Um, not only to, you know, help our agents, and our Brokers, but also to, uh, start to tell a different story about Revenue diversification, um, for our Enterprise. And so we're really happy with the, uh, the progress we've made and we're excited about the, uh, you know, the reaction from the network and the usage of the tools.

Great. Thanks guys.

Your next question comes from the line of Matthew ner with Jones trading. Your line is open.

Hey, good morning guys. Thanks for taking the question. Um, I'd like to kind of shift gears and talk about motto, a little bit. Uh, you guys touched on some of the initiatives that you're doing there. But um, you know, I kind of like to get your guys sense uh a little more in depth of kind of the changes you're making there um and get an idea of of the profitability. And if it's not profitable, you know, kind of that Outlook towards profitability. Thanks.

Yeah, great question. Um,

I think I, I think I led you down a path, uh, with my opening remarks that we talk more about it in February, but let me give you a little bit of a color right now. Um, 1 is, uh, We've we've, uh, you know, over the past, uh, 6 to 10 weeks since Vic arrived, we've really taken a, a new view of the mortgage opportunity. Um, so that includes not only motto and our processing Group which we think that there's uh, you know, opportunities there to do a little bit about what we've done in in real estate quite honestly and changed the model to be a little bit less fixed and more variable. Um, we've got to be in a position to help our Network.

New outlook, uh, not only on the franchise business, but just capitalizing on the mortgage opportunity in general based on the number of, uh, transactions connections, uh, with both consumers agents Brokers uh, and the footprint um, that we have both kind of a, you know, in uh, the US Canada. Um, Etc. So we're really excited about some of the, um,

The items that we're working on right now but it's just a bit early to talk through the uh to talk through the strategy with y'all.

Got it. Yeah, I I appreciate that. And then you know it kind of has a follow-up to that, you know. How do you guys uh, you know, plan on leveraging, you know that agent Network that you guys do have um, you know, given that, you know, you guys are up there pretty much every year in terms of transaction size. So the opportunity opportunity there is is pretty large.

Yeah. I mean I think you're you're seeing us lean in in a in a variety of different places. So

Whether that's, uh, providing services like the, the marketing as a service platform, which not only kind of improves agent execution on marketing at, you know, at a lower price point. Uh, but also helps us to obviously, uh, improve the monetization event, uh, through either the, uh, the agent or the consumer. Um, you know, the Remax media network is a perfect example, lead consear as an example and obviously, you know, um, some of the high

Level hints that I provided to you on mortgage are also examples. So you're just seeing a Clean Indoor business and really think about um, what else can happen through the uh, the agent or the consumer transaction.

And I think that the uh you know, the other item we're really working on is what happens post, close. Um, you know, I come from a place where we were, uh, Dead Set focused on the consumer experience. And we are focused here on the customer experience for Brokers agents, and that and buyers seller. Uh, to improve that not only, uh, before the transaction. And when they're shopping, um, or researching, uh, particular property, uh, or an agent, um, or a brokerage, but also during the transaction to make it as easy as possible to do business with us and our Network. And then also to make sure that we're nurturing, those folks post close in a uh, an a value added way.

Um, so not just, uh, you're not just an email once a month, but making sure that it's meaningful to help them with the, their home buying and Home Ownership experience.

Got it. That's very helpful. Thank you guys.

Your next question comes from the line of Tommy MC, joined with KBW. The line is open.

Hey, good morning guys. Thanks for taking a questions. Um, the first 1 is just around. Um, you guys called out the organic Revenue impacts. Um, as you know casing some uh, impact from the modifications to the standard fee model. Do you guys have any able to put some, uh, magnitude around that number? Um, and then should we think about that as uh, sort of, you know, run rating or does it lap after a year? How how do we think about that?

Hey, good morning Tommy. So you know,

Um, it's really driving the benefits that we had hoped for, in terms of increased recruitment rates, um, for newer agents and also, we're seeing, uh, you know, turn decline in that cohort as well. And we knew kind of from the very beginning, that there would be a little bit of an upfront investment. As those agents came on board, got trained up and then uh, started to produce transactions. And so we do think it is a little bit of a short term, um investment cycle because as those agents continue to, you know, get ingrained in our tools and services, you know, start leveraging marketing as a service, really lean into our education and become the trusted professional. That is the Hallmark of the Remax brand. Um, you know, we think that that will dissipate over time. It was just a little bit of a of a near-term, um, headwind as they're onboarded. So Eric mentioned, it's about

1500 agents. Um, and so that's kind of the, the quantification. Um, but we think it is, um, you know, near-term in nature and we absolutely think it's a. You know, it was a it was The Prudent Choice. Um, because as Eric said, we're really trying to partner with our franchises help them build their businesses and help us. Um really kind of create that flywheel um for agents to participate in the other tools and services that we're offering holistically from a brand perspective.

For a while now, um, I guess, is there anything different now that, you know, would make you guys, uh, you know, more interested in buying back shares? Should we expect to see some buybacks by year-end? Um, any more commentary around that?

Yeah. It's, you know, it's a great question. I think the, you know, the biggest thing from our perspective right now that was great to see this quarter as we, you know, you know, we've done a very good job from a de-lever perspective. You know, our our tlr is now below that 3 and a half times level. Um, so we do have some more flexibility. Um, so from a capital allocation perspective, you know, we're continuing to, you know, allocate all or evaluate all of those options um where we think that we're going to allocate Capital to the areas where uh we'll get the highest returns. Um so there's a lot of things going on right now from a strategic perspective, in terms of the additional value uh and services, um, and initiatives that are ongoing. Um, but obviously now with that de-lever,

Um, we'd like to get down a little lower. Um, but you know, below that 3 and a half times and given where we're trading. Um, you know, we think that returning Capital uh is is is a, is a great use of uh, capital and and more to come.

Thanks.

Thank you with no further questions in queue. I'd like to turn the conference back over to Joe Schwarz for any closing comments.

Thank you, operator that concludes today's call. Thank you all for joining us today.

this concludes today's conference call, you may now disconnect