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This post was updated on Nov. 4, 2022.
Declines in revenues and profits in the third quarter of the year snapped a higher-margin run for the franchise real estate giant RE/MAX as the market slowed, but the company remained profitable by the skin of its teeth.
The company tallied $88.9 million in revenue from July to September, a 3.5 percent drop from the previous quarter and 2.3 percent lower than the same period last year, according to financial filings released Thursday.
The company’s profits, meanwhile, dropped to approximately $100,000 in the third quarter of the year from $5.8 million in the second quarter.
Despite these shrinking gains, RE/MAX remained substantially more profitable from July through September than during the same period last year, when the company lost $25.1 million despite a much more active housing market.
RE/MAX Holdings interim CEO Steve Joyce said that worsening business conditions were partly offset by revenues from acquisitions, including the July 2021 purchase of the North American regions of RE/MAX Integra, an independent network of RE/MAX franchises in Canada and the U.S.
“We expect our strategic growth initiatives to provide similar benefits in the coming quarters,” Joyce said in a news release. “While not immune to the impact of shifting housing conditions, we believe our 50-year track record amply shows we are insulated far better and are more resilient than most. Simply put, our business is built to last.”
Agent count was up 2.4 percent from a year ago, reaching 144,300 as of Sept. 30.
Still, the acquisitions only partly offset steeper hits to core revenue sources.
Organic revenue was down 4.9 percent year over year in the third quarter. Lower broker fees and higher recruiting incentives were the chief culprits for the decline, according to the report. The company saw improved revenues from its Motto mortgage business, and pulled in more in events-related revenue.
The market slowdown is expected to have other consequences as well. The company anticipates it will not hit its previous goals for franchise sales in 2023. The company has also adjusting its 2022 full-year outlook for agent count growth and revenue slightly downward.
But in the meantime, executives expressed optimism on a call with investors that the company’s acquisitions would help it whether the storm.
“We continue to execute at full speed on our strategic growth initiatives laid out at the beginning of the quarter,” Joyce said Friday on a call with investors. “Frankly, it feels good to be playing offense while so many others in our space are taking a more defensive stance.”
Also announced on the call was that Joyce will stay on in his interim role through the second quarter of 2023 as the company’s board of directors continues to search for a candidate to fill that position long-term.
