In addition to results for the fourth-quarter and full-year 2017, the earnings report included financial highlights for the third quarter, which have been delayed since November when the company announced it was conducting an internal investigation into Liniger and Contos, who at the time were serving as co-CEOs, for possible business and ethics violations. That investigation concluded yesterday, the company said during the earnings conference call Friday morning.
Real estate franchisor Re/Max posted an 11.1 percent year-over-year increase in 2017 revenue to $195.9 million due to agent count growth and rising home prices, resulting in a net income of $12.8 million for the year, according to the company’s latest preliminary earnings report, which were posted on the afternoon of Thursday, Feb. 22.
The company reported a 6.4 percent increase in agent count for the year to 119,041 agents worldwide, and a 2.3 percent increase in agents in the U.S. in Canada, to 84,274.
“The real strength of our business resides in our world-class network of brokers and highly productive agents,” said Re/Max CEO Adam Contos, who this month took the reins from Re/Max co-founder Dave Liniger upon his retirement. “During the past year we made investments in training, innovation and technology, which we expect to help our network become even more productive and connect more effectively with today’s home buyers and sellers. Our foundation has never been stronger, our business continues to perform well, and I believe our best days are in front of us.”
In addition to results for the fourth-quarter and full-year 2017, the earnings report included financial highlights for the third quarter, which have been delayed since November when the company announced it was conducting an internal investigation into Liniger and Contos, who at the time were serving as co-CEOs, for possible business and ethics violations. That investigation concluded yesterday, the company said during the earnings conference call Friday morning. Re/Max VP of investor relations Andy Schulz told listeners:
“Our Q3 2017 earnings announcement was delayed pending a conclusion of an investigation by the special committee of the board. We announced the conclusion of the special committee’s investigation yesterday as well as certain related matters in a press release in form 8K. Beyond these disclosures, we do not have additional information to provide on this topic to today’s call. We will keep our comments and focused on our business and financial performance.”
The investigation centered on a $2.38 million loan Liniger gave to Contos “at a below-market interest rate” in addition to the exchange of other non-cash gifts. The transactions did not involve any funds from the company, but Liniger and Contos’ failure to disclose the loan to the board was a violation of the company’s code of ethics, according to the 8k form. Although the non-disclosure was deemed unintentional by the special committee, the code of ethics violations have not been waived, which leaves the door open for future disciplinary action, brokerage industry expert Russ Cofano told Inman.
Regarding the company’s financials, expenses for 2017 were up $19.6 million or 22.4 percent for several reasons, including a $2.6 million loss incurred by the special committee’s internal investigation of Contos and Liniger, and another $2.6 million hit due to a legal settlement related to the company’s purchase of Tails, Inc., a regional franchisee, according to the earnings report. Fee waivers granted to associates in hurricane-impacted regions also reduced revenue by approximately $2 million.
In the fourth quarter, Re/Max booked $49.5 million in revenue, an 11.4 percent increase for a net loss of $3.5 million, in line with its third-quarter results, when the company booked $49.4 million in revenue, an 8.4 percent increase over third-quarter 2016.
Motto Mortgage, the company’s mortgage brokerage franchise launched in 2016, also picked up steam.
“Motto franchise sales accelerated during the last three months of 2017 and we now have over 70 franchises sold since Motto was launched 16 months ago,” said Contos.
Editor’s note: An earlier version of this story noted that Re/Max had released its earnings late Thursday evening. The earnings were posted at 3:41 MDT on Thursday, Feb. 22.