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RE/MAX posted another quarter of declines in total revenue and U.S. agent count in the second quarter as agents and consumers adjusted to rocky market conditions and high mortgage rates, according to an earnings call Wednesday.
Total revenue fell 10.6 percent year over year to $82.4 million while revenue excluding marketing funds collected from RE/MAX affiliates dropped 11.4 percent to $61.4 million, according to Q2 earnings data. Despite the decline, revenue still beat analysts’ expectations of $82 million, according to Zacks.
RE/MAX’s net income hit $2 million, a reversal from the $700,000 loss it posted in the first quarter of 2023, while adjusted earnings before income, taxes, depreciation and amortization (EBITDA) fell 24.2 percent, to $26.6 million.
“The decrease in revenue excluding the marketing funds was attributable to negative organic revenue growth of 10.5 percent and adverse foreign-currency movements of 0.9 percent,” RE/MAX said in a statement. “Organic growth decreased primarily due to lower broker fee revenue and a reduction in U.S. agent count, partially offset by growth in our mortgage segment.”
Nick Bailey | Credit: RE/MAX
While total RE/MAX agent count increased modestly by 0.4 percent to 144,510 agents, U.S. agent count continued to decline, falling 6.3 percent year over year to 56,987. However, RE/MAX Holdings CEO Steve Joyce said in an investor call Thursday that U.S. agent count losses slowed quarter over quarter while foreign housing markets continued to grow.
“Canada continues to be an amazing growth story,” RE/MAX President and CEO Nick Bailey said during the investors call. Canada’s agent count has grown every month since the start of 2023, he added, in part due to “boomerang” agents returning to the brokerage after moving elsewhere, resulting in a year-over-year 1.5 percent bump, to 25,218 agents.
Steve Joyce | Credit: RE/MAX Holdings
“We were pleased to see continued RE/MAX agent count growth in Canada and our global regions during the second quarter,” Joyce said. “Despite industry headwinds, agent count in Canada has increased each month since February, and our overall international agent growth also accelerated in the second quarter.”
“In the U.S., we remain focused on our growth initiatives, and we continue to build our related pipelines,” he added. “The combination of higher interest rates and tight inventory has made for a challenging housing market and agent-recruiting-and-retention environment. On a positive note, the pace of our U.S. agent count losses slowed quarter over quarter — which is encouraging, given the market conditions.”
Despite the tighter mortgage rate landscape, Motto Mortgage grew its office count during the second quarter, with franchises increasing by 17.5 percent to 235 total offices. The previous quarter, Motto Mortgage franchises increased 23.2 percent on an annual basis to 234 offices.
RE/MAX noted that it continues to invest in wemlo, its third-party mortgage loan processing service, to boost the mortgage side of its services.
“On the mortgage side, wemlo is ramping up, and we continue to expand our Motto franchise sales operation,” Joyce said. “The addition of experienced personnel with in-depth franchise experience to our inside sales team is just one reason we are optimistic about increasing the pace of Motto franchise sales in the second half of 2023 and beyond.”
During the first quarter of the year, RE/MAX suffered a 6.2 percent year over year drop in revenue, and a decline of 5.4 percent of its U.S. agent count. The results came at a time when brokerages were really starting to see the effects that rising mortgage rates and an overall tougher economic climate had taken on the industry.
At the time, Joyce said the results were “largely as expected” due to “industry conditions.”
For its third quarter outlook, RE/MAX expects agent count to change between 0 percent to 1.0 percent, and revenue to hit a range of $78.5 million to $83.5 million, including marketing funds.
For the full year, RE/MAX tightened its forecast, changing its agent count expectations from previous forecasts of -1.0 percent to 1.0 percent growth to 0 percent to 1.0 percent growth. Likewise, the real estate company changed its full-year revenue forecast from $315 million to $335 million (including marketing funds) to $320.0 million to $332.0 million.
