Good morning, and welcome to the RE/MAX Holdings First Quarter 2016 Earnings Conference Call and Webcast. My name is Melissa, and I will be facilitating the audio portion of today's call. .

At this time, I would like to turn the call over to Peter Crowe, Senior Vice President of Communications and Marketing. Mr.

Crowe?.

Thank you, operator. Good morning, everyone, and welcome to RE/MAX's First Quarter 2016 Earnings Conference Call. .

Joining me today are our Chief Executive Office and Co-Founder, Dave Liniger; and our Chief Financial Officer, Karri Callahan. .

Please visit the Investor Relations page of remax.com for all earnings-related materials and to access the live webcast and the replay of the call today. If you're participating through the webcast, please note that you will need to advance the slides as we move through the presentation. .

Turning to Slide 2. I would like to remind everyone that on today's call, our prepared remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.

Examples of forward-looking statements may include those related to agent count, revenue, operating expenses, financial guidance, housing market conditions as well as non-GAAP financial measures. .

As a reminder, forward-looking statements represent management's current estimates. RE/MAX assumes no obligation to update any forward-looking statements in the future.

We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in our filings with the SEC and definitions and reconciliations of non-GAAP measures contained in the first quarter earnings press release, which is available on our website. .

With that, I would like to turn the call over to RE/MAX CEO, Dave Liniger.

Dave?.

Thank you, Pete, and thanks to everyone for joining our call today. .

organic growth, acquisition and investment catalysts and return of capital to shareholders. .

Since the beginning of the year, we have made substantial progress across all 3 fronts. Agent count, our key measure of organic growth, increased by almost 7% year-over-year in the first quarter, surpassing our expectations. We acquired the master franchise rights to both New York and Alaska.

We also continued to strategically reinvest in our business, most notably evidenced by the recent launch of the redesigned remax.com. And yesterday, we announced our quarterly dividend of $0.15 per share. All this, combined with the gradually improving housing market, lays a strong foundation on which to build in 2016. .

first, on average, RE/MAX agents complete double the number of transaction sides of competitors and RE/MAX has held #1 market share in the United States and Canada every year since 1999, an impressive 17 years in a row based on industry-wide residential transaction sides.

While we are not surprised, we are extremely proud that the RE/MAX network has the most productive agents in the business. I want to thank the entire RE/MAX network for their continued hard work and great results. .

We continue to provide productive agents with world-class tools, technology and training to enable and promote their success. Whether it's our momentum, broker and agent development program or remax.com, we will continue to strategically reinvest in our business. .

We are excited about the launch of the new remax.com. Already the most visited real estate franchise website, the redesigned remax.com features of fresh, dynamic design, a much improved search and mobile experience and personalized features such as mapping, sharing, social and alerts.

For the benefit of our agents, we increased calls to action on the site to improve lead generation. Our updated website is a key element in the company's overall technology strategy. Remax.com will continue to evolve based on consumer behavior with the ultimate goal of connecting active consumers with RE/MAX agents. .

increasing agent count, acquiring independent regions, growing recurring revenues, expanding margins and generating strong free cash flow. .

Existing home sales are traditionally slow in the first quarter, but during this time, our brokers are busy recruiting agents. .

The past 3 months were no exception as international agent growth propelled us to another strong quarter of agent growth. .

During the first quarter, we had solid organic revenue growth, and our adjusted EBITDA margin expanded a bit more than anticipated as the result of a more favorable FX environment as well as the timing of expected investments. .

Turning to Slide 5. We ended the first quarter with 106,708 agents in our global network. We grew our total agent network by 6.8% compared to the first quarter of 2015. Agent gain in the U.S. was in line with what we forecasted, growing 4.1% and driven by strong additions in California, Texas and Florida.

In Canada, we increased our agent network by 658 agents or 3.4% over Q1 2015. Agent growth was driven by gains in British Columbia and Ontario. Finally, agent growth outside the United States and Canada increased 3,723 or 16.3% over Q1 2015. The growth was driven by strong gains in Argentina, Portugal, Turkey and Spain. .

Slide 6 shows the breakdown of RE/MAX agents in the United States and Canada. The graph on the left highlights our agent growth of 7.3% in United States company-owned regions as well as the decrease of 1.1% in U.S. independent regions. .

Our recent acquisition of the New York region figured prominently in both of these changes. After adjusting for the purchase of New York, organic agent growth was 4.9% in U.S. company-owned regions and 2.8% in the independent regions.

We are currently setting the foundation for growth in New York and expect our New York agent count to remain flat in 2016. We expect to grow the region in 2017 and beyond. .

The graph on the right shows agent growth in Canada. In the first quarter, Western Canada, which is a company owned, increased by 253 agents or 4% compared to the prior year quarter. Eastern Canada, which is comprised of 2 independent regions, added 405 agents or 3.2% compared to Q1 2015, driven by agent gains in both Québec and Ontario. .

Slide 7 shows our year-to-date agent growth through March 31, 2016. During Q1, we grew total agent count by almost 2% since of the end of 2015. Looking at first quarter agent growth by geography, United States results were in line with our expectations while agent growth in Canada and outside the United States and Canada were better than we expected. .

With that, I would turn the call over to our CFO, Karri Callahan. .

Thank you, Dave. Turning to Slide 8, you will find a breakdown of our revenue streams. Overall, first quarter 2016 revenue decreased 2.9% to $42.9 million, in line with our outlook. The decrease in revenue was due to the sale of all of the company-owned brokerages between April 2015 and January of this year.

After adjusting for those sales, revenue would have increased $2.1 million or 4.7% compared to Q1 2015. .

Recurring revenue, which includes continuing franchise fees and annual dues, increased $1.3 million or 5.3% over Q1 of last year. Recurring revenue accounted for 62.5% of total revenue in the first quarter of 2016, up from 57.6% last year, primarily due to the sale of our company-owned brokerages.

Revenue from continuing franchise fees was $18.9 million, an increase of $1.2 million or 7.1% compared to first quarter 2015, primarily due to agent count growth. Revenue from annual dues was $7.9 million, up slightly from Q1 2015 due to agent count growth, largely offset by the impact of the strong U.S. dollar against the Canadian dollar.

Revenue from broker fees was $7.2 million, an increase of approximately $800,000 or 12.2% over last year, driven by higher agent count and greater sales volume, due in part to improving market conditions.

Franchise sales and other franchise revenue was $8.8 million, up $400,000 or 4.4% compared to the prior year quarter, stemming from increased approved supplier revenue as well as higher registration income due to greater attendance at our annual convention held in March. The increase was partially offset by lower revenue from global franchise sales.

Brokerage revenue was $100,000, a decrease of $3.8 million or 97.1% from the prior year quarter. The decrease was entirely attributable to the sale of the company-owned brokerage offices, which began in April of 2015. And as of January 20, 2016, RE/MAX became 100% franchised across our nearly 7,000 office global footprint. .

Looking at Slide 9, selling, operating and administrative expenses were $23.2 million for the first quarter of 2016, down $1.8 million or 7.3% versus the first quarter of 2015 primarily due to the sale of our previously owned brokerages, partially offset by increased compliance fees and technology infrastructure investments. .

Also, our first quarter expenses were lower than our original guidance provided in February mainly due to the timing of project-related investments. More on that in a moment when we discuss outlook. .

first, organic growth contributed 130 basis points; second, the sale of our company-owned brokerages added 300 basis points; and lastly, net FX impact accounted for 310 basis points of improvement. .

Turning to Slide 11. The graph on the left shows adjusted net income of $11.7 million for the first quarter, an increase of $2 million or 21.1% over the prior year period. Adjusted basic and diluted earnings per share were both $0.39 for the first quarter of 2016 compared to $0.33 and $0.32, respectively, for the first quarter of 2015. .

Turning to Slide 12. Our cash position as of March 31, 2016, was $95.7 million, a decrease of $14.5 million since year-end.

Notable cash outflows during the quarter included the aggregate payment of approximately $4.5 million in dividends, $8.5 million for the acquisition of the New York region and a $12.7 million excess cash flow principal payment on our term loan as required by its covenants. .

Yesterday, our Board of Directors approved our regular quarterly dividend of $0.15 per share. The quarterly dividend is payable on June 2, 2016, to shareholders of record at the close of business on May 19, 2016. We generated $11.1 million of free cash flow during the quarter.

We continue to deploy our capital thoughtfully in accordance with our strategic priorities. We are focused primarily on reacquiring independent regions, reinvesting in the business and returning capital to our shareholders in the form of dividend. .

Now I'd like to turn it back over to Dave to discuss the housing market. .

Thanks, Karri. Turning to Slide 13. We see that even with the usual seasonal fluctuations, improvement in existing home sales continues. As the market gradually expands, we're carefully monitoring several key drivers and constraints that will influence future growth.

This year began, as most years typically do, with fewer home sales in January and February. Then just as we would expect, March home sales jumped up significantly. Therefore, it looks like the spring season is off to a normal start.

National Association of Realtors data shows that actual sales this March were 3.7% above last March and year-to-date existing home sales through March were up 5.6% compared to the first quarter last year. And prices in the U.S. are currently about 6% higher than last year, depending on the geographic region. .

The short supply of inventory has carried over into 2016, with the number of homes for sale remaining tight in many markets across the country. One way to look at inventory is the month's supply. A 6-month supply indicates a market balanced equally between buyers and sellers.

Based on data from 53 metro areas in our RE/MAX National Housing Report, the number of metros with less than a 2-month supply was 4 in January, 6 in February and then grew to 11 metros in March. This indicates that it's still very much a seller's market. .

We're watching the spring season closely to see if slightly higher prices and low inventory would encourage more sellers to enter this market. We also continue to monitor the homebuilders to see if the home starts are increasing to improve inventory.

As inventory remains challenged, entry-level buyers will continue to have difficulty finding the right home at their price point. Nevertheless, we expect to see continued improvement in the market during 2016, mainly due to better jobs outlook, rising household formations, increased new home construction and below interest rate environment. .

Now I'll turn it back to Karri to walk through our financial outlook. .

Thanks, Dave. On Slides 14 and 15, I would like to share our outlook for the second quarter and for the full year 2016. The company's second quarter and full year 2016 outlook reflects the acquisition of the New York and Alaska regions, the impact of the strong U.S. dollar against the Canadian dollar as well as the sale of the company-owned brokerages.

Revenue, selling, operating and administrative expenses and adjusted EBITDA margin are subject to currency exchange rate fluctuations, principally related to changes in the U.S. dollar to Canadian dollar exchange rate. The company's outlook reflects an estimated exchange rate of USD 0.74 for every Canadian dollar. .

For the second quarter of 2016, agent count is estimated to increase by 5.5% to 6% over second quarter 2015, driven by strong agent growth outside the U.S. and Canada. Revenue is estimated to decrease by 3.5% to 4.5% from second quarter 2015.

Revenue would have been estimated to increase by 2.5% to 3.5% over 2015 after adjusting for the sale of the brokerage offices, the negative impact of FX and the incremental contribution of the acquired New York and Alaska regions. .

Selling, operating and administrative expenses are estimated to be 44% to 45% of Q2 2016 revenue. Project-related operating expenses are estimated to be $1 million to $1.25 million. Adjusted EBITDA margin is estimated to be between 55% and 56%.

Our adjusted EBITDA margin was markedly higher in Q2 of last year due to a handful of onetime dynamics, most notably strong global franchise sales. .

Capital expenditures are estimated to be $1.5 million to $2 million, which includes estimated project-related capital expenditures of $750,000 to $1 million. .

Turning to Slide 15. We are reiterating our full year 2016 outlook and updating our foreign exchange guidance. Agent count is estimated to increase by 4% to 5% over 2015. Revenue is estimated to decrease by 3% to 4% compared to 2015.

Revenue would have been estimated to increase by 3.25% to 3.75% over 2015 after adjusting for the sale of the brokerage offices, the negative impact of FX and the incremental contribution of the acquired New York and Alaska regions.

FX is estimated to negatively impact full year revenue by $1 million to $1.5 million, down from $2 million to $2.5 million on a constant currency basis. As a result, we are trending to the top end of our revenue outlook. .

Selling, operating and administrative expenses are estimated to be 48% to 49% of 2016 revenue. Included in selling, operating and administrative expenses are project-related operating expenditures of approximately $4 million to $4.5 million. .

As we discussed earlier, our Q1 selling, operating and administrative expenses came in better than the outlook we provided on our February call, largely due to the timing of project-related investments. The remaining $3.5 million to $4 million of project-related operating expenses will be spread fairly evenly over the remaining quarters.

Historically, selling, operating and administrative expenses have been around 45% of revenue in Q2 and Q3. Adjusted EBITDA margin is estimated to be in the 51.5% to 53% range. Total capital expenditures are expected to be $3.5 million to $4 million, including project-related CapEx of $2 million to $2.5 million, up from $1.5 million to $2 million. .

Now I'll turn it back over to Dave. .

Turning to Slide 16. We are off to an encouraging start this year with our core business fundamentals and growth pillars firmly intact. A strong brand, the most productive network, a steadily improving housing market and continued execution of our strategic plan makes us optimistic about both our near-term and long-term growth prospects. .

With that, operator, let's open it up for questions. .

[Operator Instructions] Your first question comes from the line of Ryan McKeveny from Zelman & Associates. .

When I look at the cash flow generation, which has been solid, and think about just the capital structure and such, maybe just to revisit how you think about the opportunity to do things like the special dividend you did last year. I know you want to weigh that against the opportunity for the regional reacquisitions.

But any update on the thought process there with the balance sheet and net debt-to-EBITDA at roughly 1x? Just trying to grasp how you weigh those factors. .

Ryan, we continue to take a long-term and prudent approach to our business and our use of capital. You did mention some of the levers that we use to generate shareholder value. And in Q1, we did both in terms of the regional acquisitions of New York and then, subsequently, Alaska and also raised our quarterly dividend.

And so on a quarterly basis, we continue to analyze all the pertinent facts and circumstances with our board and make decisions in terms of driving shareholder value in the long term. .

And I guess, just to follow up.

As far as the leverage goes, is there any opportunity to take on more leverage or would that be maybe associated with a larger acquisition? I guess, where do you anticipate longer term that, that leverage ratio potentially shaking out?.

Yes, absolutely. For the right deal and the right opportunity, in terms of funding that would increase our shareholder value, we would absolutely consider that.

We have had a long-term philosophy in terms of what those rates look like in terms of 4x on a growth basis and 3x on a net basis, and that continues to be our approach from a leverage perspective. .

Okay. That's very helpful. And second question, just on the international, it's been very strong.

I'm just wondering, is there any opportunity there as far as increasing the economics that flow back to you guys? Or is the international growth mainly to be thought of as terms of -- in terms of the benefit, just of brand name and recognition in these international markets? Any thoughts there?.

It's very difficult to make additional revenues in these foreign countries. Basically, we do not provide a great deal of services or costs. It's more trademark protection and getting the brand expansion through a big footprint. Most of the countries that we're in have a much lower commission rate.

Very unsophisticated multiple listing services, if at all. Very low barriers to entry, no license laws to speak of and very, very low average sale prices. So very difficult to ramp up and equal what we make in places like Canada and the United States. .

Your next question comes from the line of Vikram Malhotra from Morgan Stanley. .

Just to clarify on the EBITDA margin for the quarter, the positive and negative drivers, FX was a negative driver, correct?.

That's correct, in comparison to the first quarter of 2015. On the operating income line, it was about a $500,000 negative. However, in the first quarter of 2015, we did make a decision to eliminate some of the volatility from a mark-to-market perspective. So we moved $26 million of our Canadian cash.

But prior to doing that, we incurred a transaction loss of about $1.4 million. So we actually have a net positive on a year-over-year basis of about $1.1 million or 310 basis points. So that -- we're continuing to see the headwind on the operating income line, which will continue prospectively.

However, the volatility below the line has been eliminated. So that's the puts and takes. .

Okay.

And then the elimination of the brokerage revenue, that, you said, contributed about 300 basis points?.

Yes, that's correct. The one thing to remember is we did sell about 1/3 of those brokerages in early April of 2015. And as a result, the impact going forward goes down a little bit, around the 200 basis points mark. .

Okay, okay. And then following New York, you also purchased the Alaska region. Wondering if you can just maybe share some thoughts on what's were differences and how those 2 processes played out and maybe any color on pricing. .

It's actually 2 very different transactions. The New York region has been an underperforming region for its entire time. We feel that we can turn that region around very rapidly. That the state -- we only have about 2% of the real estate agents in the state compared to almost 6% average in the United States.

So the opportunity there is very, very great to sell franchises when we get through the registration process and dramatically change the number of agents. In Alaska, they're pretty well saturated up there. We've got somewhere around 13% or 14% of all the real estate agents in the state of Alaska.

Basically, we had a regional owner that was ready to retire and we were able to just add that to our Northwest region and service it fairly inexpensively, but very little opportunity up there for additional sales associate growth. So New York, very important. Alaska, nice to have but not much that we can do to grow it. .

And Vikram, with respect to the purchase price for Alaska, the $1.5 million purchase multiple, very much in line with previous acquisitions. And although a smaller purchase price, still excited about it in terms of being able to execute on our strategy. .

Okay. And then just going back, last one, just on the cash, now you guys have close to $100 million in cash. And I'm just sort of -- I know you're all constantly looking at dividends versus other opportunities.

But can you just maybe elaborate, given where we are in the cycle, sort of what are those other opportunities you're considering?.

Well, obviously, the most important opportunity is the ongoing conversations that we have with the independent regional owners. And as the market is recovering and they're not selling at the bottom of the market, I think that Alaska and, obviously, New York were examples of getting people off of dead center.

So those opportunities are the most important ones that we look at. In addition, we obviously look at special dividends and increasing our dividend.

We've been able to do the acquisitions and the dividends and then, finally, looking at something that's very, very close to what our business model is right now to make as an acquisition that would benefit the agents and broker owners and also give us a good return on capital. So we look at that constantly.

And we just finished our board meeting yesterday, and obviously, the excess cash was brought up. And so we continue to look at it at every single meeting and will make the appropriate decision when the appropriate time is. .

I mean, when you think about other businesses that are somewhat similar, I guess, it's hard to find businesses that are producing 50%-plus margins.

I'm just wondering, are these sort of just not really brokerage, but are they just complementary businesses? Are there any color you can give there?.

They would have to be complementing businesses. When you start looking at maybe acquiring a commercial real estate network or acquiring residential brokerages, the margins just aren't there.

And so if we could find other similar franchisors that have great growth opportunities, most franchisors work on very good margins like we do, and so those are the type of businesses that we're constantly looking for. .

Your next question comes from the line of John Campbell from Stephens Inc. .

So you guys did a pretty good job explaining the New York region buyout last quarter. And then, Dave, you gave a little bit more color. Just a second ago, it does sound like this can be kind of more of a 2017 impact.

But I think one of those delays was you guys having to wait maybe 3 months or so to get kind of active selling franchise in the state and so I guess you'll be passing that in about 2 weeks.

So any update how you're thinking about growing out that region, how aggressive you'll be maybe in some of those franchise sales?.

Well, I think we'll be very aggressive. We already have a franchise sales team that is starting to work the market. Our problem of selling franchises is we can't have a serious negotiation until our registration documents are accepted by the New York regulators.

We filed for those several weeks ago and we should be right about within 3 or 4 weeks of getting out of the dark period. And so we're already prospecting, doing our sales calls and so on. So we're very excited. The problem you get into on making money off of that is that when we do sell the franchises, most are start-ups.

And so at that time, they have to rent office space, come to Denver for training and so on. So even if we make 3 or 4 or 5 sales or whatever it is reasonably fast, by the time that they open their offices, is usually 4 to 6 months.

So what we'll concentrate on this year is a flat agent count but increasing our franchise sales over the next 6 or 7 months, which will be reflected then in a steady stream of office openings next year as we continue to sell franchises. So we're excited about the opportunity. It certainly has the most opportunity of any region out to sell franchises. .

Okay, great. And then just back to capital allocation, I mean, you guys are, I think, 1x or so net debt to trailing 12-month adjusted EBITDA. But just curious if you guys would be comfortable taking a little bit more debt, maybe simultaneously playing -- paying a special dividend and reacquiring some of those larger independent regions.

If so, what would be a kind of max leverage range we should be thinking about?.

Well, John, just to take on the debt to pay a special dividend is not attractive to us at all. However, we do know that we're underlevered and that the cost of these last 2 acquisitions was very small. We just paid it out of our cash. But if we were having the opportunity to pick up 1 or 2 of our larger regions, we would probably do so through debt.

We certainly have lines of credit that we can extend upwards of $50 million or $100 million in debt very quick. But the thing that's really interesting is we still have the ability to do both things. We can go ahead and pay a special dividend and lever up. And so the opportunities are there, we're just waiting for the right opportunity. .

Okay, that's helpful. And then last one for me. I saw the RealtyTrac deal announcement, the partnership you guys have with them.

Can you kind of explain what that is and if that's going to be impactful for you guys?.

Yes, John, I think that we can catch up off-line on that, if you don't mind?.

Okay, sure. .

Your next question comes from the line of David Ridley-Lane from Bank of America Merrill Lynch. .

Sure. So wanted to dig in a bit on the cost savings that you were able to get in the first quarter. I think you expected 3 quarters to $1 million of project-related expense in the first quarter.

How much of that shifted out into the rest of the year?.

It's about $1 million, David, that's shifting pretty evenly between Q3 and Q4. Total expenses is pushing out about $1 million between Q3 and Q4. Project related is about half of that. .

Okay.

So the project-related operating expense in the first quarter was roughly in line with what you were expecting?.

Yes, yes, roughly in line. And then we've got, call it, $3 million to $3.5 million that's going to be spread evenly throughout the remaining 3 quarters. .

Okay. And then on a year-over-year basis, can you remind us of what project-based operating expense was in 2015? Just trying to get a sense of the year-over-year impact versus the $4 million to $4.5 million you're expecting this year. .

Yes, yes. So the increase on a year-over-year basis is in the $2 million range. .

Got it. And then I know the -- your overall adjusted EBITDA margin is pretty high.

But were the -- was the greater-than-expected conference attendance-related revenue very high incremental margins? Or maybe the supplier-related revenue that you got in the first quarter?.

The registration income was up, about in the $500,000 range. We just had a very successful annual convention with our agents and the agents continue to be excited within the network. So that was a positive for the first quarter. .

Got it.

And are you still expecting franchise and other revenues to decline a bit in 2016?.

We're actually ahead of schedule on franchise sales in the United States, which basically we find a little bit surprising because we didn't think we could maintain the momentum we had from last year. Still thinking that it is going to slow down by the end of the year in the U.S.

However, our global franchise sales are down especially in Brazil and parts of Asia. So definitely, it will slow down as we have predicted. .

Okay, got it. And last one for me.

Do you have a rough sense of what the incremental EBITDA you will receive from the Alaska franchise buy-in?.

Yes, it's in the $150,000 to $200,000 range. .

[Operator Instructions] Your next question comes from the line of Bose George from KBW. .

This is actually Chas Tyson on for Bose. First question was on the 2016 guidance that you're reiterating. I just want to make sure I understand it fully. So you bumped up the conversion from the Canadian dollar to U.S. dollar from -- to $0.74 from $0.70. And I know you highlighted that, that might push up to the upper end of the range.

But I just wanted to make sure that there wasn't something else that's offsetting that within the guidance and why it has caused you to maybe bump up the guidance overall. .

Yes. I mean, at this point, you're right. We are trending towards the high end of the range on revenue. With respect to the flow-through from an EBITDA perspective, probably turning towards the high end of the range there as well. However, it is the first quarter, and just due to the seasonality of our business, it's early in the year.

So we'll watch Q2 pretty closely and then evaluate if we do that at the end of the second quarter. .

Okay, yes. And then, on the agent growth, I mean, obviously, healthy agent growth this quarter year-over-year and projecting pretty healthy growth in 2Q. But full year, it's on the 4% range. So I'm wondering kind of what you guys are thinking for the back half and how you're thinking about the trends there over the full year. .

Well, our first quarter and fourth quarter are our lowest recruiting months. Second and third quarter are the ones that we get superior results in. I think the guidance we've given is probably going to say where it's at.

However, we'll have to wait until the end of the second quarter to see if it continues to do as well since we did better in the first quarter than we anticipated. However, a big part of that was international or global growth, which, of course, is not nearly as profitable to us.

We've just opened so many countries in the last few years that they're getting their feet on the ground and opening offices and starting to recruit. So percentage-wise, global will definitely be higher than what we can do in the U.S. And then in Canada, surprisingly, we're still gaining agents and we're very saturated up there.

We think the Canadian growth will have to stay relatively flat. .

Okay. And then last one, I know you guys have talked about getting the New York brokerage franchise on its feet and hopefully increasing it to a similar share that you have nationally.

But I just wanted to ask if you think that the kind of the overall national share that RE/MAX has is the right comp or if there is -- if maybe neighboring states like Pennsylvania, where you own the franchise, is it better comp and if the market share is higher there or maybe other kind of major real estate states like Florida or California, if there was another comp that might be more useful?.

Sure. No, there really isn't. Selling franchises is a lengthy process and the offices start with 1 or 2 agents and then they continue to grow. If you look at Pennsylvania, we're much higher than the 6% average. If you look at New Jersey, we're closer to a 7% average. But this is a high probability. We can get to 6% to 10%.

It's not going to happen in 1 or 2 years, and we just have to sell dozens and dozens of franchises. .

Your next question comes from the line of Tony Paolone from JPMorgan. .

Just one question on my end on that market share idea. Target of 4% or so that you're running in the U.S. and then 3% or so in Canada.

Can you give us a sense as to how that's comparing with whether it's the NAR data or some other sort of broader data on agents?.

Well, we're growing in the U.S. between 4% and 5% a year, which has been pretty steady for the last couple of years. In Canada, our growth is slowing. It's surprising that we're still growing. But we're at 18%, 19% of the market up there, so we're reaching a saturation point. When you look at NAR statistics, we lag NAR because of quality agents.

What's happening with NAR right now is a lot of marginal agents are coming back into the business that are not qualified to work for RE/MAX. So we lag when the market turns down because our agents are better and last longer, and we lag when the NAR starts to increase numbers again because so many of the members are not qualified for our company. .

There are no further questions at this time. Mr. Crowe, I turn the call back over to you. .

Okay, operator. I'd like to say thank you and everybody else that joined us today. Have a great day. .

This concludes today's conference call. You may now disconnect..