As revenue falls, is it time for RE/MAX to rethink its model?
Agent count has also continued to decline, and CEO Erik Carlson said they are looking at all aspects of their business in preparation for an industry rebound.
While brokerage companies across the country prepare for rule changes taking effect on August 17, RE/MAX seems to be thinking about the viability of its business model.
During the company's second-quarter earnings call, RE/MAX Holdings CEO Erik Carlson said they are leaving "no stone unturned" as they consider their position in a post-settlement environment.
His comments came as the company reported an eighth straight quarter of revenue declines and falling agent counts. RE/MAX has been losing agents in the U.S. and Canada every quarter since the beginning of 2023.
The company did have some good news for investors: While overall revenue was down, RE/MAX was able to get into positive territory with net income, gaining $3.7 million for the quarter.
On the first day of trading after Q2 earnings were released, RE/MAX stock was up 5.7%, trading around $9.18 a share late in the session.
What RE/MAX had to say
Over the decades, RE/MAX has found success with its existing business model — specifically its 95/5 commission split (coupled with monthly desk fees) — but Carlson said the company's leadership recognizes that things change.
"We're looking at everything that happens throughout the transaction," Carlson said, adding that he wouldn't offer details about any potential business model changes during the Aug. 9 earnings call but suggested more info would be coming.
Whatever changes the company decides to make, Carlson sees an opportunity to provide more services designed to help agents earn more money and scale their businesses in 2025, when he believes interest rates will be lower and more inventory will be available.
Investors asked several questions about the upcoming industry changes and what the company is seeing on the ground. Amy Lessinger, president of RE/MAX, said that RE/MAX agents haven't been reporting any big shifts in buyer agent commissions so far, which aligns with the company's internal analysis.
"We're definitely optimistic that RE/MAX agents are going to be less impacted due to their experience and their productivity," Lessinger said.
"There's a lot of confusion and uncertainty in the marketplace right now," Carlson noted. "That happens when things change; people get uncomfortable. We should be able to thrive in a little bit of uncertainty. (RE/MAX agents) are full-time, experienced professionals, they're productive and they're the most trusted agents in the business," he added.
Key numbers
Revenue: $78.5 million for the second quarter, down 4.8% from a year ago, but up slightly from Q1.
Cash and cash equivalents: RE/MAX ended the second quarter with $66 million, down from $82.6 million at the end of 2023. The company had $442.7 million in outstanding debt at the end of the second quarter, down from $443.6 million in outstanding debt at the end of the first quarter.
Net income/loss: A gain of $3.7 million for the quarter, marking a turnaround after posting a $3.4 million loss in the first quarter and a $10.9 million loss at the end of 2023. It was also an improvement over the gain of $2 million a year ago.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $28.1 million, up 5.4% year-over-year.
Agent count: Globally the company had 143,542 agents at the end of June, a loss of 968 agents from a year ago. U.S. and Canada combined agent count fell 4.4% year-over-year to 78,599. The U.S. market has 3,581 fewer agents than a year ago.
Notable moves
The company reported that Motto Mortgage, RE/MAX Holdings' lending division, has continued to grow. The mortgage provider now has 241 offices, an increase of 2.6% year-over-year.
RE/MAX is also closing its chapter in the commissions lawsuits. As one of the two brokerage companies (along with Anywhere) to settle in the buyer agent commissions cases ahead of the Sitzer/Burnett trial, RE/MAX made its final installment into the settlement fund using existing cash balances.
The company agreed to pay a total of $55 million in damages and is now working on rebuilding its cash reserves.