The financial support measures RE/MAX implemented in the early days of COVID-19 caused the company to report a year-over-year drop in revenue and net income according to the company’s second-quarter earnings, released Thursday.
Despite the early quarter struggles, the company saw some positive signs in the housing in the final month of the quarter, which coincided with the end of some of the financial support measures.
“The U.S. housing market began an encouraging rebound in June after COVID-19 interrupted 2020’s promising start,” RE/MAX CEO Adam Contos, said in a statement. “We’re well positioned to help our affiliates build on this positive momentum given the financial and structural strength of our business model, which to date has enabled us to keep staff intact and continue to expand our value proposition.”
“In the field, our RE/MAX and Motto professionals have adapted to the current environment exceptionally well, leveraging technology and adhering to social distancing guidelines, to expertly guide consumers in a safe and largely virtual way.”
In June, the company ended a franchise fee deferral program it put in place earlier in the quarter that allowed franchisees to defer 100 percent of the continuing franchise fees and advertising fees for April, May or both, with zero interest. They were still required to pay their broker fee at the regular time with an additional 1 percent on top of the normal 1 percent broker fee. If the franchisee deferred both months, the broker fee increased to 3 percent, until the deferred fees were repaid.
While it ended the deferral program, RE/MAX continued to offer expanded training and tech initiatives, including a free, three-month subscription to the First app for affiliates, a machine learning-powered lead nurturing tool that the company acquired late last year.
RE/MAX reported a 24.2 percent drop in revenue in the second quarter of 2020, as COVID-19 hit the housing market in the first half of the quarter. The franchisor’s total revenue was $52.2 million, but company revenue excluding the marketing fund was $40.4 million.
Despite the drop in revenue, the company was still profitable, posting a net income of $3.5 million, albeit still far below 2019 levels. In the second quarter of 2019, RE/MAX posted $71.4 million in revenue and a net income of $86 million. The company also missed on hitting its guidance, posting and adjusted earnings per share of $0.38, which fell short of the Zacks consensus estimate of an adjusted $0.43 per share.
Total agent count globally increased 3.8 percent, but agent count in the U.S. and Canada decreased 1.4 percent to 82,972 agents.
The company did report its second-best quarter for Motto Mortgage sales, and total open Motto Mortgage offices increased 25.7 percent to 127 offices.
“Our RE/MAX and Motto networks are finding opportunities to grow and build their businesses in this very demanding time. Motto posted its best second quarter of franchise sales yet, and its franchise sales on a trailing-twelve-month basis are the highest in its four-year history,” Contos said.
“Our franchisees in both brands continue to demonstrate their local leadership by bringing productive agents and loan originators into our networks — and then helping those individuals get even better at what they do,” Contos added. “Their recruiting efforts — supported by our programs and services — are critical to our ability to succeed in every kind of environment.”
RE/MAX stock closed the day trading slightly above $33 per share. The company reported a second-quarter dividend payment of $0.22 per share of class A common stock.