Re/Max reported a 6.8-percent year-over-year growth in agent count for the first quarter of 2016, and the company’s operating income was boosted by 3.5 percent to $15.9 million — but it reported that its revenue decreased 2.9 percent year-over-year to $42.9 million.
“Revenue would have increased 4.7 percent after adjusting for the sale of the Company-owned brokerage office,” wrote the company in a press release.
And despite that revenue dip, the company’s operating expenses were also lower ($27.1 million, a decrease of $1.8 million), reporting $10.4 million in net income.
The revenue came from:
- Continuing franchise fees, $18.9 million, an increase of $1.2 million or 7.1 percent, up primarily due to agent count growth.
- Annual dues, $7.9 million, up $0.1 million or 1.3 percent compared to the first quarter 2015, primarily due to increased agent count growth.
- Broker fees, $7.2 million, an increase of $0.8 million or 12.2 percent compared to the prior-year quarter. The increase was driven by increased agent count and home-sales volume.
- Franchise sales and other franchise revenue, $8.8 million, up $0.4 million or 4.4 percent.
Brokerage revenue was $0.1 million, a decrease of $3.8 million or 97.1 percent year-over-year. “The decrease was attributable to the sale of the Company-owned brokerage offices to existing Re/Max franchisees,” said Re/Max in its release.
“Our first quarter results demonstrate the strength of the Re/Max model and our continued ability to execute on its most attractive features, which are increasing agent count, acquiring independent regions, growing recurring revenues, expanding margins and generating strong free cash flow,” said Dave Liniger, CEO and co-founder of Re/Max, in a statement. “Our consistent focus on effectively implementing our strategic plan combined with a gradually improving housing market resulted in an encouraging start to 2016 for Re/Max, establishing a solid foundation for the balance of the year.”
RE/MAX World Headquarters
“We continue to deploy our capital in accordance with our strategic priorities. We recently acquired the New York and Alaska regions, reinvested in our business and returned capital to our shareholders,” said Karri Callahan, CFO, in the same statement. “In April, we launched the new remax.com, providing the most-visited real estate franchise website with a greatly enhanced consumer experience. We are committed to providing our network of the most-productive agents with world-class tools, technology and training.”
The company will hosted an earnings call for investors this morning May 6.
Speaking to the impact of the redesigned website during the earnings report, Re/Max CEO and co-founder said: “We are excited about the launch of the new remax.com, already the most visited real estate franchise website.
“The redesigned remax.com features a fresh, dynamic design, a much-improved search and mobile experience and personalized features such as mapping, sharing, social and alerts. For the benefit of our agents, we increased calls-to-action on the site to improve lead generation. Our updated website is a key element in the company’s overall technology strategy.”
“Re/Max.com will continue to evolve based on consumer behavior with the ultimate goal of connecting active consumers with Re/Max agents.”
Second quarter 2016 outlook:
- Agent count is estimated to increase by 5.5 percent to 6.0 percent over second quarter 2015 driven by strong agent growth outside the U.S. and Canada
- Revenue is estimated to decrease by 3.5 percent to 4.5 percent from second quarter 2015
- Revenue would have been estimated to increase by 2.5 percent to 3.5 percent over 2015 after adjusting for the sale of the brokerage offices, the negative impact of foreign exchange, and the incremental contribution from the acquired New York and Alaska regions
- Selling, operating and administrative expenses are estimated to be 44.0 percent to 45.0 percent of second quarter 2016 revenue
- Project-related operating expenditures are estimated to be $1.0 to $1.25 million
- Adjusted EBITDA margin is estimated to be in the 55.0 percent to 56.0 percent range
- Capital expenditures estimated to be between $1.5 to $2.0 million
Re/Max is reiterating its full-year 2016 outlook:
- Agent count is estimated to increase by 4.0 percent to 5.0 percent over 2015
- Revenue is estimated to decrease by 3.0 percent to 4.0 percent compared to 2015
- Revenue would have been estimated to increase by 3.25 percent to 3.75 percent over 2015 after adjusting for the sale of the brokerage offices, the negative impact of foreign exchange, and the incremental contribution from the acquired New York and Alaska regions
- Foreign exchange is estimated to negatively impact full-year revenue by $1.0 to $1.5 million, down from $2.0 to $2.5 million, on a constant currency basis
- Selling, operating and administrative expenses are estimated to be 48.0 percent to 49.0 percent of 2016 revenue
- Project-related operating expenditures is estimated to be $4.0 to $4.5 million
- Adjusted EBITDA margin is estimated to be in the 51.5 percent to 53.0 percent range
- Capital expenditures estimated to be between $3.5 to $4.0 million
Fielding a question about the Re/Max market share in the U.S. and Canada and how it relates to broader trends, Liniger touched on agent quality.
“We’re growing in the U.S. between 4 or 5 percent a year, which has been pretty steady for the last couple years. In Canada … it’s surprising that we’re still growing, but we’re at 18-19 percent of the market up there, so we’re reaching a saturation point.
“When you look at NAR’s statistics, we lag NAR because of quality agents. What’s happening with NAR right now is a lot of marginal agents are coming back into the business who are not qualified to work for Re/Max, so we lag when the market turns down because our agents are better and last longer. When NAR starts to increase members again … so many of the members are not qualified for our company.”
