The franchisor’s revenue in the second quarter was boosted by Motto Mortgage franchise sales and international growth, according to RE/MAX executives.

RE/MAX reported Thursday $71.4 million in revenue and a net income of $8.6 million for the second quarter of 2019, despite an uneven housing market. The company fell right in line with revenue estimates of $71.4 million, according to financial research firm Zacks. 

RE/MAX also beat the consensus estimate of $0.59 adjusted earnings per share, per Zacks, reporting adjusted earnings per share of $0.65.

“Continued Motto Mortgage expansion and healthy international RE/MAX growth helped offset lower revenue in the second quarter driven by ongoing uneven housing market conditions in the U.S. and Canada,” RE/MAX CEO Adam Contos said in a statement.

“Against this backdrop, we continue to leverage the strength of our business model to deliver profitable growth by prudently managing our cost structure while making the necessary strategic investments in our network, our value proposition and future growth opportunities.”

The revenue and income numbers are an improvement over the first quarter of 2019, when RE/MAX posted $71.2 million in revenue and a net income of $4.4 million.

As noted by Contos, expansion of Motto Mortgage, which has grown to 98 franchise offices, and international growth, where RE/MAX added 5,666 agents year-over-year in the second quarter, were a big reason for the revenue numbers coming in higher than last quarter despite the uneven market.

“As we move through the second half of 2019, we remain cautiously optimistic that the U.S. housing market will show signs of improvement,” Contos said. “Given lower interest rates, solid demand, and increasing inventory, the ingredients are there to spur increased home sales, but supply and affordability remain overhangs.”

The franchisor’s U.S. and Canada agent count dipped 2 percent to 84,133 agents, but due to international expansion total agent count increased 3.2 percent to 127,020 agents. The decline in agent count in the U.S. is directly tied to that slower-than-expected market, Contos explained on an earnings call following the release of results.

Contos, in responding to a question from an investment analyst about the slow-down, said he believes that a combination of confusion and the “fear factor,” are leading to the decline in home sales.

“Based on conversations with the agents out there, the housing transaction is more complex than it ever has been,” Contos said. “I think people are more risk-averse than they ever have been.”

For just the second time since RE/MAX began releasing monthly housing market reports 10 years ago, the month of June had fewer home sales than the month of May. But Contos said a good agent can eliminate that “fear factor.”

“Once you see people sit down with an expert agent, a professional that can guide them through the process, It’s like a weight is lifted off their shoulders and they can go and proceed to get done what they need to get done in order to buy or sell a house,” Contos said. “Once they get the reassurance from a good agent that, ‘hey this is something you can do and now is a good time to do it,’ we do see a move forward.”

RE/MAX had a busy second quarter, furthering development and testing on its end-to-end platform, including a proprietary customer relationship management tool, as well as its revamped consumer-facing website and app. 

The large franchisor also ended its nascent exclusive referral partnership with Redfin in May, after the latter introduced a new platform that would allow consumers without buyer’s agents to place offers over the internet on Redfin-listed homes in certain markets.

Contos said in a prepared statement that the company is excited about the imminent launch and staged rollout of the next generation of RE/MAX technology.

“The release of the booj platform is truly a landmark event in the rich history of RE/MAX and one we believe will further extend our leadership position in providing highly productive agents with the very best tools, technology and training to make their businesses even more successful,” he said.

Yesterday, RE/MAX announced a cash dividend of $0.21 per share, payable on Aug. 28 to shareholders of record at the close of business on Aug. 14.

A combination of a subdued market period lasting longer than expected and a competitive industry caused the company to adjust its performance expectations for the full year.  The company now expects full-year revenue in the range of $279.5 million to $283.5 million, down from $287.0 million to $291.0 million.

RE/MAX is hosting its broker-owner conference next week in Chicago, from Aug. 4-6.

Developing…

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