Denver-based franchisor Re/Max grew its agent count 4.3 percent from a year ago, to 92,731, and posted a $7.7 million third-quarter profit as revenue grew 5 percent from a year ago, to $40.3 million, the company said in reporting quarterly earnings for the first time since completing an initial public offering in October that netted $225 million.
Re/Max added a net of 2,325 agents in the U.S. and 129 in Canada during the 12 months ending Sept. 30, bringing the total number of agents in the two countries that account for approximately 90 percent of the company’s revenue to 73,245.
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The firm is also accelerating its international growth, where it has 19,486 affiliated agents, Re/Max CEO Margaret Kelly said. Re/Max gets a portion of the fees generated when a master franchise affiliate sells off regions in its country and additional revenue when those regions sell offices.
In addition to the overseas focus, Re/Max also has plans to raise the dues and franchise fees that make up the bulk of its revenue.
As Re/Max grows, its primary goal is to build its agent count, Kelly told investors on an earnings call. Re/Max makes most of its money on annual dues, fixed fees paid by agents, and franchise fees paid by affiliated brokers, which helps buffer the company from the whims of the housing market.
Together, annual dues and franchise fees accounted for 58 percent of Re/Max’s revenue for the quarter. Annual dues paid by agents were up 3 percent from a year ago, to $7.5 million, and franchise fees were up 12 percent, to $16.1 million.
The company also benefited from the improving housing market, with broker fees paid on agent-generated transactions growing 27 percent from a year ago, to $7.2 million — 18 percent of total revenue.
“These results highlight our ability to attract and retain talented agents and generate revenue growth with consistently high margins through our franchise model,” Kelly said in a statement. “With the completion of our initial public offering and the acquisition of two regional franchises in October 2013, we remain well-positioned to capitalize on current real estate market conditions by leveraging our deep industry knowledge and our premier market presence to grow our agent count and franchise network in the coming years.”
On the earnings call, Kelly said Re/Max is focused on its franchise business model. Of the approximate 6,300 Re/Max-affiliated offices worldwide, just 20 are company-owned, she said.
Re/Max used a portion of its IPO cash to reacquire two independent U.S. master franchise regions — the Southwest and Central Atlantic regions, which will allow it to generate more revenue as it focuses on building them out. The firm now owns 12 of the 32 master franchise regions in the U.S. and Canada, and it’s actively looking to reacquire more, Kelly said.