RE/MAX more than doubles net income

In the franchisor's third quarter 2018 earnings report, CEO Adam Contos said RE/MAX is ready to succeed even amid a market slowdown

RE/MAX generated total revenue of $54.9 million in the third quarter of 2018, a year-over-year increase of 11.8 percent and just slightly over last quarter’s revenue, according to the company’s Thursday earnings release. The real estate franchisor also posted a net income of $8.1 million for the third quarter of 2018, more than double last year’s third-quarter net income of $3.7 million.

The company reported earnings per share value of $0.65, ahead of the Zacks Consensus Estimate of $0.63 per share (adjusted for non-recurring items), better than the analyst estimate of $0.62. Revenue for the quarter came in at $54.9 million versus the consensus estimate of $55.02 million.

Despite a market slowdown, RE/MAX CEO Adam Contos believes the company’s value proposition will allow it to continue to be successful.

“Fortunately, in times like these, our differentiated model and competitive advantages stand out,” Contos said, in a release. “For one thing, the quality and experience of our agents should help them adapt to current market conditions; many have seen and performed well in similar markets in the past.”

He added, “Second, we believe our agent-centric model is more insulated and resilient to sudden dips in transactions than more traditional broker-centric businesses.”

Contos believes, despite witnessing a larger-than-expected slowdown in home sales this fall, it’s just a temporary transition and not a lasting trend.

“We believe market participants are adjusting to the changing market conditions – price appreciation, low inventory, and rising interest rates – and therefore this recalibration likely represents a temporary transition rather than a lasting trend,” said Contos.

“It varies by market, but our network is reporting more instances of homes taking longer to sell than in the recent past,” Contos added. “It has generally been a seller’s market for a while so we think a move toward greater equilibrium will be healthy for housing over the long run.”

RE/MAX’s agent count increased 5.5 percent to 123,905 agents and 85,698 in the United States and Canada. Its biggest growth came outside the United States, where it posted a 16.3 percent increase in agent count.

Most of RE/MAX’s revenue stems from its franchising fees, which increased $3.0 million or 9.4 percent over the third quarter of 2017 and accounted for 63.1 percent of total revenue.

The company’s operating expenses also dipped to $33.1 million for the third quarter of 2018, a 9.6 percent decrease, year-over-year. The decline was mostly due to lower selling, operating and administrative expenses.

Looking ahead, RE/MAX expects agent count to further increase by 4.25 to 5.25 percent, year-over-year, in the fourth quarter and revenue in a range of $48 to $51 million.

Due to the slowdown in home sales, it’s also adjusted its yearly expectations for agent count, projecting an annual increase of 4.25 percent to 5.25 percent over 2017, and revenue in the range of $210 to $213 million, down from $213 million to $216 million.

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