Good morning, and welcome to the RE/MAX Holdings Second Quarter 2019 Earnings Conference Call and Webcast. My name is Julie and I will be facilitating the audio portion of today's call. At this time, I would like to turn the call over to Andy Schulz, Vice President of Investor Relations. Mr.

Schulz?.

Thank you, Operator. Good morning, everyone, and welcome to RE/MAX Holdings second quarter 2019 earnings conference call. 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 are participating through the webcast, please note that you will need to advance the slides as we move through the presentation. Turning to Slide 2. Our prepared remarks and answers to your questions on today's call may contain forward-looking statements.

Forward-looking statements include those related to agent count, franchise sales, financial measures and guidance, brand expansion, competition, technology, housing market conditions, dividends, strategic and operational plans, and business models. Forward-looking statements represent management's current estimates.

RE/MAX assumes no obligation to update any forward-looking statements in the future. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements.

These are discussed in our second quarter 2019 financial results press release and other SEC filings. Also, we will refer to certain non-GAAP measures on today's call. Please see the definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website.

Joining me on our call today are Adam Contos, our Chief Executive Officer; and Karri Callahan, our Chief Financial Officer, Ward Morrison, President of Motto Mortgage will join us for the Q&A. With that, I'd like to turn the call over to RE/MAX Holdings' CEO, Adam Contos.

Adam?.

ease of use, integration, profitability, productivity, and mobility. Everything about the platform is designed with ease of use in mind. From the initial contact information imports to lead cultivation to transaction management to communicating with customers our development team has always kept ease of use top of mind.

This focus facilitates an efficient and painless adoption experience and encourages agents, teams, and brokers to make the system an essential part of their business.

Perhaps its biggest selling point is how fully integrated the product suite is, our brokers, agents, and teams, currently spend too much time logging on and putting information in their own patchwork quilt of multiple third-party tech systems none of which talk to one another.

The Booj platform is fully integrated with CRM websites marketing, communications and more virtually everything our network of highly productive agents and teams needs all in one place. This should be a huge time saver for our affiliates making them more efficient and freeing them up to spend even more time helping consumers buy and sell homes.

The adoption of the Booj platform can also be a real money saver for our network. For our company-owned agents, there is no incremental cost to use the Booj platform. It's free in a sense. As the cost is included in the dues and fees our brokers and agents already pay.

In fact, the introduction of the Booj platform is arguably the single greatest increase to our value proposition in our history. Brokers, agents, and teams, should be able to displace the cost of many third-party tech vendors to whom they pay significant sums of money. Productivity improvement opportunities abound.

Our development team has been laser focused on automating just about everything. Additionally, the Booj platform allows our agents and teams to connect with consumers in new and compelling ways through features like our lead management and cultivation toolset and the ability to build one's digital brand.

These features improve the customer experience which should in turn increase lead conversion rates as well as repeat and referral opportunities. Lastly, today's consumer lives in a mobile world. One underappreciated element of Booj's history is their insightful decision years ago to retain the development of mobile software in-house.

For years the Booj design and development team has led with a mobile first mindset retrofitting Booj's powerful software for the desktop as needed. This is especially apparent in our mobile CRM app being rolled out very soon to our agents and a consumer-facing apps slated to be introduced by year's end. And this is just the beginning.

Still to come the platform will be supplemented by a richer collection set of data supporting our consumer-facing app and the re-launch of a greatly enhanced remax.com. Trading has always been an important part of our value proposition and RE/MAX University has been an industry leader and innovator for many years.

We have strategically increased our investment in training resources in advance of the launch of the Booj platform. We now have a full technology engagement team to help affiliates understand and adopt the new tools connected to the Booj platform as well as other products in our technology ecosystem.

The rollout will be a challenging logistical exercise but our team is prepared and ready to go. This has been an all consuming effort for many in our company particularly those in our tech and training functions as well as the thousands of brokers and agents who selflessly contributed their time and invaluable feedback.

We thank everyone who has participated to-date and we are confident the investment of time, effort, and resources will pay-off. The deployment of our new technology is a huge step forward for RE/MAX creating efficiencies and competitive advantages for agents, teams, and brokers alike. It's a new day for RE/MAX and we can't wait to get started.

With that, I'd like to turn the call over to Karri..

Thank you, Adam. Good morning everyone. Moving to Slide 10. Revenue increased to $71.4 million during the second quarter due to the acquisition of the Marketing Funds on January 1st. Excluding the Marketing Funds, the expansion of Motto Mortgage and healthy international RE/MAX agent growth helped offset lower revenue caused by the uneven U.S.

and Canadian housing markets. Overall, organic revenue was down just 1.4% and unfavorable foreign currency movements decreased revenue less than half a percent. While we are not immune to market pressures, we are more insulated than many others due to the diversity of our revenue streams and the recurring nature of most of our overall revenue.

Our differentiated model tends to standout during times like these. As Adam referred to earlier, both our absolute U.S. agent count, as well as our U.S. agent count mix were slightly unfavorable which weighed on top-line performance for the quarter and is expected to impact the full-year.

We are executing on multiple initiatives to help stimulate agent count growth, including the deployment of Booj, and we're optimistic these initiatives will positively influence next year's recruiting season.

Looking at Slide 11, selling, operating, and administrative expenses were $25.7 million in the second quarter of 2019, a decrease of $2.6 million or 9.1% compared to the second quarter of 2018, and represented 48.2% of revenue ex the marketing funds compared to 52.2% in the prior year period.

As O&A expenses decreased primarily due to changes in equity-based compensation expense and lower legal expenses, partially offset by increases in property taxes and bad debt expense. Moving to Slide 12. Our overall adjusted EBITDA margin excluding the marketing funds expanded about 300 basis points.

Despite muted top-line results, our margin expanded primarily due to the favorable timing of certain expenses, Motto expansion, and our judicious management of our cost structure. Notably, we are beginning to see Motto's margin improved year-over-year as its top-line grows against a flattening expense base.

Motto is a great example of a long-term investment we made just three years ago which is not only an attractive opportunity for our core customers, but it also helps the diversification of our business, our overall organic growth profile, and increasingly our margins and cash flow. Turning to Slide 13.

As Adam alluded to earlier, we have adjusted our full-year 2019 outlook primarily due to unfavorable U.S. agent count performance and overall housing market trends in both the U.S. and Canada. The adjustments represent a decrease of about 3% at the mid-point of our prior full-year revenue guidance.

The company's third quarter and full-year 2019 outlook assumes no further currency movements, acquisitions, or divestitures.

For the third quarter of 2019, we expect agent count to increase 2.25% to 3.25% over third quarter 2018, revenue in a range of $69 million to $72 million including revenue from the Marketing Funds in the range of $17 million to $18 million, and adjusted EBITDA in a range of $25.5 million to $27.5 million.

For the full-year 2019, we are adjusting our outlook, and we now expect agent count to increase 2% to 4% over full-year 2018, revenue in a range of $279.5 million to $283.5 million including revenue from the Marketing Funds in the range of $71.5 million to $73.5 million down from $287 million to $291 million, and adjusted EBITDA in a range of $101 million to $104 million down from a range of $104.5 million to $107.5 million.

Now I'll turn it back to Adam..

Thanks, Karri. Turning to Slide 14, our second quarter results once again highlighted the strengths of our differentiated business model. Our brand strength and value proposition remain as strong and as relevant today as ever.

And although we don't control the macro environment, we continue to invest heavily in our network, our value proposition, and our future growth opportunities. The imminent launch of the Booj platform marks a true milestone in the rich history of RE/MAX. And we believe it will extend our position as a global leader in residential real estate.

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

[Operator Instructions]. And your first question comes from Jason Deleeuw with Piper Jaffray..

Thanks and good morning. So just on the U.S.

agent count and the Canada agent count, could you just parse out how much of excuse me how much of the factors are just market-based and how much are this competition for agent-based?.

Hi, good morning Jason. It's Adam. I don't know that you could necessarily parse that out. I think it's a combination of both.

A lot of times during any sort of a market slowdown or changes in the market, you don't necessarily see both of the factors coming together or historically you don't necessarily see all the factors crashing into each other like what we've had over the past few years. But I think it's a combination of both.

But when you look at the historic trends of when the market feels some pressure, so does the agent count in those areas. And I think also can be looked at as the strength of the RE/MAX system, our diversification through so many markets where we do see some in the U.S. that have some lift and others that don't. So I think it's a combination of both.

But to be able to put a finger on how that's divided up I don't necessarily think that I can. I'm going to say more markets and competition..

Okay, thanks for that.

And then when we're looking at the dues and the fees per agent and the trends there, is that just simply the international agent mixing in at a lower revenue per agent level or there any other factors going on driving those trends?.

Yes, good morning Jason. It's Karri. I mean generally that's the case. I think as we look at everything that's coming out from value proposition perspective. Obviously with the rollout of Booj here imminently we're really excited about that. Right now that's not an incremental fee and it's included in the value that is provided to the RE/MAX network.

We really do think, as Adam mentioned, in the scripted remarks that that can displace cost and really help overall profitability at the agent level and at the broker level. And then in the future we'll be able to evaluate in terms of the pricing in the per agent fees..

And your next question comes from the line of Tony Paolone with JPMorgan..

Thank you. Adam, I was wondering if you can give us any sense as to why you think the U.S.

wholesale housing market isn't performing better, what do you think is happening here and what might change that?.

Good morning, Tony. That's a really good question.

I think there's just been a little bit of confusion in the rotation of the generations coming and going from the housing market, it would be just kind of instinctively what I first draw on based on my conversations with the agents out there, the housing transaction is more complex than it ever has been.

And I think people are a little more risk averse than they ever have been. So I'd kind of go with a combination of that because once you see people sit down with an expert agent, a professional who can kind of guide him through the process.

It's like a weight lifted off of their shoulders and they can go and proceed with getting done what they need to get done in order to sell or buy a house. So probably the biggest factor is the fear factor.

People stop functioning as a response to fear and 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..

Okay. And then second question maybe follows up to what Jason asked. I know it's hard to tell whether the changes or share or just the agent population in general but as you look ahead with you and others just spending a lot of time and money on making agents more efficient, do you think U.S.

needs more agents or do you think that numbers should go down with efficiency over time or how do you think about that?.

That's a great question, Tony, and thanks for asking that. Because I think what that does is it begs for us to take a hard look at the segmentation in the agent population and agent isn't an agent isn't an agent. And I think what we have is we have several different levels of agents operating in this space.

We have, when you look at the industry statistics and the average production rate of the RE/MAX agents, our agents are the highest producing agents according to the national surveys.

I think we need more highest producing agents and I think we have -- there's a place in the market for agents that are what you can call developing that are under the supervision of really good brokers or high producing agents to help them come to the level that the consumer expects.

And that's really the biggest cry that the consumer desires I believe is to have an expert representing them and an expert leading them the way through that. I think we will see a reduction or maybe an increase churn at the bottom in the marketplace which with the ebb and flow of the marketplace we typically see that accelerate at different times.

So to say that there should be a blanket statement fewer agents I think you could say yes that's probably correct.

But I think where those agents come from in the segmentation in the marketplace is really what should be noted and I think that will be those that are willing to provide the greatest level of experience to the consumer through their professionalism and the tools and resources that they have available to them..

Yes, and just building on what Adam was talking about in terms of the tools that's part of the reason why we've been investing so much in the overall value proposition.

The creation of the Booj platform is really designed to be the best technology for the best agents based on the unique culture and the highly productive workforce within the RE/MAX network. So all of those things are really a cornerstone of some of the initiatives and the investments that we have in our company going on right now..

Okay. And last question from me, in the press release you had noted bad debts ticking up.

Can you comment on what you're seeing as it relates to franchisee financial health? And also just kind of what you're hearing from them as pain points in their business right now?.

Yes, good morning Tony. It's Karri. So with regards to the bad debt expense on a year-to-date basis a couple of things to keep in mind of that increase about half of it has to do with the acquisition of the Marketing Funds which existed in the current year, but not in the prior year. So that's one piece of it.

The other piece of it, we do think it's tied to the macro environment. So as there is some unevenness and choppiness in the end market, that is impacting our franchisees as well. But brokerage profitability has been a cornerstone of things we've been focused on for multiple years now.

So going back to one of the key reasons why we created Motto was designed to help from our brokerage profitability and a cash flow perspective, we're really starting to see some traction with that as we get Motto franchisees not only open but open sooner and have that diversification of revenue and cash flow at the franchisee level.

And then the creation and the deployment of the Booj platform as well, so again designed to displace costs and we do believe that it should displace cost for both our franchisees and for our agents..

And I'll jump in a little bit, Tony; on brokerage profitability as well that's a key focus of ours. And really when we're dealing with thousands of offices operated by entrepreneurs, our goal as franchise is to help them stay focused on the growth and profitability of their office.

Typically in the entrepreneur environment when people start to get more focused outward instead of inward and then start losing that balance of running your business and growing your business that's when you see profitability come into question. So that's the strength of our new business model.

When we adjusted how we segment and service our brokerages we feel that that's going to help them keep a close eye on that and strengthen their profitability, their infrastructure, as well as not to mention Motto Mortgage which is a -- was really brought in as a boost to the brokerage profitability opportunities.

So that's a key point that we continue to focus on as well to help them out..

Your next question comes from Vikram Malhotra with Morgan Stanley..

Thanks for taking the question. Just maybe building on that Motto point.

Can you give us a bit more color on sort of how the mix is trending between existing RE/MAX office owners adopting Motto versus new independent brokers and sort of any thoughts on now sort of run rate contribution over the next 12 months?.

Good morning, Vikram. It's Adam, I'll jump in real quick and then I'll pass it off to the Motto Brand President, Ward Morrison.

I think it's -- first of all Motto is really exciting for us we continue to see Ward's team create some massive efficiencies in that, so I know that wasn't exactly part of your question but I wanted to point that out to you to show that with our franchising expertise, Ward, is doing a great job of creating the maximum efficiencies in these which increases their open rate which is a key metric that we are focusing on.

And I want to make sure that you guys are aware of. That being said to kind of dive into the rest of it all, I'll hand it over to Ward..

Sure, Vikram. The mix continues to be the LION's share being RE/MAX is little over 80% of our sales have been to RE/MAX's with the other 19% spread across independent real estate companies, investors, and loan originators looking to set up their own shop.

So it's about an 80:20 split right now still with the LION's share going to RE/MAX, obviously they're great customer base. We can call on. We know them well. We talk about profitability like Adam said earlier and Karri did. And we've been excited about those results.

We are seeing some uptick in interest from independent real estate companies as they learn more and more that this is an offering to them. It is an offering to the industry. So we hope to see increases in independent real estate companies as well. But we continue to want to sell as many RE/MAX's as possible.

So the growth trajectory is good, the pipeline is solid, and we just are excited about some of the independents that we are getting interest from..

Great. And then just on the agent, back to the agent growth question.

Do you have any sense of just looking at current attrition levels or new agents coming in, are there any changes in from where agents are coming or where agents are going if you're able to monitor that in terms of independents versus say these technology platforms any change that you've seen say over the last six to 12 months versus maybe the longer-term average?.

Hey good morning, Vikram, it's Karri. So with regards to attrition around looking at the mix between recruiting and retention numbers around retention we haven't really seen meaningful changes around retention, maybe a slight uptick, but the retention side of the House is holding steady.

I think again going back to the resiliency of the model, the quality of the RE/MAX agent who is staying with the network because the profile of the agents who are leaving is pretty consistent. So it tends to be agents who are doing less business and have lower GCI performance.

So from a net gain perspective, we're looking at that challenge just kind of being from the top end of the funnel. So again really focused on the different value proposition enhancements, the rollout of the Booj technology platform, the changes to the service model to really help accelerate that agent count growth.

And then in terms of where people are coming from and where people are going to that actually has been pretty consistent in terms of comparison to recent time periods.

And so again really just focusing back on RE/MAX and what we have going on anecdotally we're hearing very good feedback from the network on the Booj platform, the Booj rollout a lot of excitement from our franchisees saying, I'm going to release, I really am excited to get back and leverage this product from a recruiting perspective.

So all of those things provide us with some cautious optimism as we look into the back half of this year and into next year..

Okay.

And then just last clarification just on the dues and the franchise fees, I remember from historically a couple of times you sort of increased both of those modestly, I'm assuming given sort of where we are in the cycle and some of the challenges over the near-term let's say next 12 to 18 months there is no plan to alter any of those two line items?.

So with regards to -- there's not any plans for the rest of 2019. We'll continue to evaluate 2020 and beyond as part of our 2020 planning process and we'll have more information beginning of next year..

Your next question is from Stephen Sheldon with William Blair..

Hi, good morning. On the U.S. kind of going back to agent count, you noted I think on the last call the trends had stabilized year-over-year late in the first quarter and into April. So can you maybe talk about the cadence of agent decline in the U.S.

throughout the second quarter, were there any notable differences by month that you could point out?.

Yes, good morning, Stephen. So with regards to agent counts and some of the comments on the last call, a couple of things to keep in mind. As we looked at March and April the comments that were really intended to be more sequential.

So we really had had some significant pressure on from an agent count perspective sequentially as we looked at the back half of last year and the first part of the first quarter this year.

In terms of looking at it on a continued sequential basis that run rate of kind of plus or minus call it 50 to 100 agents has been pretty consistent on a sequential basis.

However when you looked at it quarter-over-quarter that's where last Q2 from a recruiting perspective, we were a little bit more aggressive because from a macro perspective, the weakness hadn't really hit in the U.S. as much. With that said, continue to see pretty resilient performance from a U.S. agent account perspective.

Year-to-date we're down less than a percent and obviously existing home sales down significantly more than that. So again really focused back in terms of the recruiting initiative, a lot closer connection with our franchisees focused on growth. And then obviously the enhancements to the value proposition that are forthcoming as well..

Okay. And then it sounds like you're seeing progress on Motto mortgage, Motto margins as that continues to ramp.

Can you talk about how much you're spending right now on Motto and maybe thoughts on timing for potentially reaching break-even margin there?.

Yes, it's a great question we continue to be really excited about Motto and what it means for the overall company. Right now, we're seeing still a net investment but margins did continue to -- we did see some benefit in the current quarter couple hundred thousand dollars.

As we look forward, depending on the pace of sales, decisions to potentially reinvest for supporting a catalyst or an inflection point of growth, we would look to do that. So near-term we could see anywhere from tens of thousands of dollars to a couple hundred thousand dollars of margin benefit.

Over the longer-term in terms of break-even, we think if we had a couple hundred Motto franchises up and paying the full complement of the monthly fees, it's at that point we would start to realize break-even from a margin perspective.

And then definitely over time especially if there is that inflection point, the margin profile for Motto should be as good if not better than the RE/MAX model..

Okay, that's helpful. And then just last one from me.

Can you walk through the factors that are leading you to lower the adjusted EBITDA guidance especially in the second half of the year? Is that almost predominantly the agent mix shifting more towards independent regions than you'd expected or has there been any broader changes in expectations for spending this year? Thanks..

Yes, no. So with regards to the guidance a couple of different factors from a top-line perspective, it's primarily driven by the U.S. agent count performance but it's also a combination in terms of just the overall macro environment as well. So it's about 50/50 split in terms of the top-line.

With respect to the bottom-line, we continue to really invest and manage the cost structure on a very judicious and prudent basis. So we're not pulling costs out of the cost structure continuing to invest.

I think it's again a testament to the overall model that even with some of the headwinds from a revenue perspective; the overall margin profile will be pretty, pretty flat if not very, very slightly compared to the prior year..

Your next question comes from Chris Gamaitoni with Compass Point..

Good morning.

Could you talk about the characteristic differences between the strong agent recruiting markets and the poor agent recruiting markets?.

Adam Contos:.

So I think more than the market itself when it comes to the characteristics of the markets obviously you need to have an opportunistic market for the agents which I think overall when you look at the -- our National Housing Report we're looking at 2019 kind of close now with probably just less than 5.3 million resale houses, so 10.5 million transaction sites.

The market's got a lot of opportunity in it. There's a great deal to be done out there. A lot of money to be made by the agents. And it's a function of finding a great broker which we pride ourselves on and having that broker help that agent achieve beyond where they're out right now and going after their goals.

So I think more than anything is the noise overriding their ability to function where they're at and do they have the leadership as well as is the market expansion enough there to not scare them out of making them move to the next level.

And I guess when you look at the market, what is the pressure that puts on it, it puts a pressure psychologically on the agent to figure out can I scale my business right now. So we're working on all those different aspects.

Obviously we don't control the market but we can -- we can help the brokers influence the agents around the opportunity that the market contains. And we need to get them listening to our brokers as opposed to listening to the noise..

And I think one thing just to build on that in terms of what Adam was talking about in terms of not being able to control the macro and that's true.

But I definitely think as you look at -- as we look at Q2 performance of 2018 versus 2019 and obviously from a macro perspective, it was -- the macro was pretty strong up into the right in terms of existing home sales performance, number of transactions et cetera last year and we did see stronger recruiting numbers last year as well as even over a five-year historical average.

Over the last nine months with us being kind of in a mini recession from a housing perspective that's definitely challenged our overall agent count and that's pretty consistent with what we've seen on the overall historical basis in terms of agent counts following the overall macro trends..

Okay. And you mentioned new initiatives to change the trajectory of agent recruitment for next year.

I know you don't want to give away your secret sauce but high level is there any way to frame kind of where you think you had been maybe less well able to compete and you feel like you are now like any specifics on those initiatives?.

I love that question because it kind of showcases the redesign, if you will, of our servicing model.

Where most organizations kind of lose their effectiveness is they become a broad-based service provider and we -- to an extent lost track of the segmentation of our customer base in the brokerages and well we have an amazing business model itself that we continue to grow.

We don't see the ability to segment that and we took a step back and met with a lot of our customers, a lot of our brokers out there, and the agents, and saw some trends of how do we maximize these different levels that the brokerages get to.

And as a result we've re-implemented the new service model that focuses the coaching in the toolsets that are showcased at a particular time to the brokers and the agents to help them more succinctly grow their offices and be more effective where they're at.

So we're creating specialists in the different segmentation of our brokerages and I think that is really kind of enlightening that we've had over the past year is taking a deeper look at how can we help each level of brokerage from maybe a new one all the way up to the big brokers that have hundreds of agents in multiple offices, how you look at the differences in what their needs are.

So I think overall customer segmentation, coaching segmentation, and value delivery based on different needs of our franchisees is the answer to that question..

The next question is John Campbell with Stephens Inc..

Good morning. I'm just curious about the launch of the consumer offering. It sounds like we're going to probably get a better look at that later this year but at a higher level if you're able to share.

How do you drive the consumer engagement, I guess in the early stages and are you leaning on your agents to drive that adoption or is there something you can do I guess from a corporate level to help trigger some of that ramp in adoption?.

Great question, John and we're super excited about this. This is a staged approach to bring the consumer into a higher level of experience interaction with the agent.

The way we start this in -- with our impending rollout here in the very near future is we get the agent to start operating their businesses within the infrastructure of the tech platform and then continue to expand that outward from there by providing really, really good tools that help them provide great outreach to the consumer.

And then we utilize a network effect as a result. So we've got 125,000 plus agents with an opportunity as we start expanding this region by region by region and getting people to bring their customers into the communication set and the experience that the agent interaction with the consumer provides.

And through the end of the year as we build these agents into experts with using the technology, they become more confident to invite more consumers to use it. So the data shows that this is a great progressive model for us. That's what the Booj platform has been built upon is a great deal of testing and data to validate this launch process.

We're following it very closely and measuring every step of the way. But we think you build the agents into great advocates and users of the platform from the foundation and you continue to add on it and add on it and they continue to progressively use it and reach out to their customers with it.

And that's how you tell you build better consumer integration is the network effect there..

John, I think the one thing that I would -- sorry the one thing that I would just add to that building on what Adam said we're really, really excited about everything that's going to come through out the back half of this year. Now with respect to remax.com it's the number one franchise or website out there.

But despite the strength of the global brand and everything that we have going on, we do think it is an asset that we can continue to really look to leverage better in the future than we have in the past.

And so given the strength of the network and the network effect that Adam was talking about, you couple that with the strength of the Booj leadership and the technology platform that that remax.com is being built upon really a data driven design and really a ton of research has been done to really enhance the overall consumer experience of working with and searching on remax.com and really leveraging remax.com to connect consumers and agents on a go-forward basis in a higher quality and consistent manner..

Got it. Really good color. I appreciate that. And then Adam I just want to get your take on Amazon and Realogy partnership.

I know that was a pretty big kind of breaking event for the industry but if you think that that's the type of arrangement that makes sense and if that's something that you guys might also explore maybe other large kind of consumer driven tech companies?.

Great question. It's been a lot of chatter in the past I guess week, week-and-a-half since they announced it. Still watching. We're obviously interested in any ebb and flow in the industry and we keep a good focus on it. Our agents are the top producers and they're looking to increase their leads.

However we pride ourselves on our referral fee free system that we provide. And we've experimented with different other sources of lead creation management things like that. I don't see us discounting other people coming to us and offering that and as well as us going to other people and discussing that.

We're always open to how can we generate more business for our agents. So excited to continue to look for that opportunity for our folks. But ultimately we'll see how it goes for them. And we have got to wish everybody the best with helping the consumer and generating business but watching I guess you could say and learning in the process..

Yes, it makes sense. One more quick one from me. If I look at just ex-Motto franchise sales or just the RE/MAX franchise sales how did that fare in the quarter.

And if you guys could provide maybe a little bit of color around the expected pace of lift from kind of a near to medium-term?.

Hi this is Ward. When it comes to Motto sales, we will continue to sort of have a -- better word is lumpy. They're always lumpy throughout the year. They sort of ebb and flow. We still believe that throughout this year and much like last year we'll be around the same pace that tens of Motto is what we believe we can continue to do.

But like I said we have been excited about the pipeline and particularly the independents that are drawing interest. So some of that could change but right now we still feel like run par to what we did last year..

Okay. Just on Core --.

And on the -- on the -- go ahead, John..

No, I just don't see on the RE/MAX Core..

Yes, on the RE/MAX Core we've been taking a look at with our redo of our service model is do we need to sell more franchises or do we need to strengthen the franchises that we sell.

And what we've come to the conclusion of is we've been hit really hard in the past few years seen this massive expansion of franchise sales and we need to find a steady pace which is a little bit less than what we've sold in the past because ultimately it's not the franchise sales numbers that grows the network, it's the quality of agents that we add to the franchises that grows to the network.

So looking at the ebb and flow, I think you'll see the core franchise sales this year a little bit less than last year overall but that is -- that's a symptom of us growing the franchises that we have sold and moving a little more focus over to that direction.

We talked about with respect to Motto, the best thing you can do is have a strong opening with your franchises.

And Motto has done a fantastic job of that and the lessons that we've learned with that is that in looking at onboarding and initial growth opportunities we wanted to turn up the heat a little bit more on the RE/MAX side and that's really been a key focus of our adapted servicing model is to accomplish that as well as to accommodate strategic growth.

You don't want to oversaturated marketplace but at the same time you want to grow it to its maximum capacity. And that's the balancing act we're engaged in..

Your next question comes from Bose George with KBW..

Hey guys this is Tommy on for Bose. Looking at the revenue guide for third quarter and then for a full-year 2019, it looks like that suggests some sharper pressure on a year-over-year basis in the third quarter and then sort of easing a bit in the fourth quarter.

Is that a matter of the comps getting easier or is that just based on your thinking that the market might improve a bit beyond third quarter?.

Yes, no I mean it's primarily looking at the comps getting better for sure in the back half of the year. With regards to the third quarter just continuing to be pragmatic a little bit in terms of our expectations around existing home sales and overall pressure. But the comp is definitely a key driver..

Okay. Thanks. And then separately you guys mentioned that you should be able to replace a lot of third-party spend on CRM et cetera. Any idea how much the average U.S.

agent spends on those third-party CRMs and other technologies that Booj could effectively replace?.

Yes, I mean that's really a range. I think on average is probably a couple hundred bucks a month but it really, really can range depending on the quality of the agent, the experience of the agent, the size of a team, and there's a very wide range that we see kind of in the network and when we evaluated the overall opportunity with Booj..

Your next question comes from Ryan McKeveny, Zelman & Associates..

Hi guys, thanks so much and good morning. So Adam you mentioned the concept of teams several times in the prepared remarks and certainly a trend spend rising in recent years, so curious a few questions on that.

I guess both for recruiting new teams; retaining agents that are forming teams I guess can you talk about the pros and cons that an agent team would be contemplating with RE/MAX if you're making any let's say changes to increase the attractiveness for team's specific needs? And then the last part of that just on kind of the economics thinking of teams, how does the fees flow like to RE/MAX in that case like if there's a team with a support staff or administrative people or does RE/MAX actually collect fees on those or those just kind of people paid at the local level.

I'm just curious how that flows. No it's multipart but on the topic of teams I think it's interesting. So I appreciate any color there..

Hey, good morning, Ryan. Yes, that's a pretty deep question let me kind of carve off the value proposition of teams at RE/MAX first.

We hear different people saying different things about teams are good here, teams are good there but ultimately the RE/MAX network is what we truly believe to be the best place for teams overall simply because we're -- we pride ourselves on being a business, it builds businesses and ultimately a team is a business.

It's a brokerage within a brokerage. And our network is set up best in order to support that with our predominantly fixed fee model. But really what a team looks for is leadership and efficiencies and that's why a team is in place.

They're generating more business which as you know, RE/MAX continues to do with our brand awareness as well as the training tools and technology that we have to offer and all of those things take away from the burden that a team leader or a team environment may have to go out and gather on its own.

We provide all those things in a neat package and that is even accentuated more by the impending launch of the Booj platform that allows team leader to explore the best ways to leverage their team environment.

So between our technology, our marketing tools, and then the training, it allows a team to go out and do what they need to do best which is integrate with the consumer and list them and sell houses.

So we truly believe ours to be the best we've seen some very, very productive teams from other companies come over and say wow I wish I'd done this earlier.

And in the process we see a lot of upward pressure in their productivity by linking their team with the brand and growing it as a business instead of operating it as a group of people in the space. So that for productivity again, we feel we're the best place to be of course.

With respect to the economics having that predictable fixed fee model and we do have a little bit of variation amongst regions throughout the system, when it comes to the economics behind that but generally it's a adapted version of the fixed fee model not much more to say on that other than we adjust a little bit of the regional fees, we had fun fees things like that in order to accommodate people who are more of a license assistance piece as opposed to a team leader or a full producing agent..

Got it, that's very helpful. Thank you, Adam. And Karri one for you as well. In the past you've mentioned some of the lead generation stats from kind of remax.com.

And along the lines of the Realogy-Amazon turnkey partnership and just other online players I'm just curious if you can update us on any stats in terms of the lead flow that you're providing to your agents and then how exactly does the Booj like should we think the Booj plays into that as well on the lead gen side in terms of improving obviously the CRM and the management but in terms of lead generation will that flow in there as well?.

Yes, good morning, Ryan. So with respect to current.com, it's been pretty consistent performance that we've seen over the last several months with the impending launch of the Booj platform and the redesigned remax.com. Absolutely without a shadow of a doubt we'd capture both for buyers as well as for sellers as a key initiative.

And as we look at our ability to really roll up lead traffic from remax.com not only from property websites but agent team, office websites all working the same under the remax.com umbrella. That's something that we're excited about from an overall lead generation perspective. Not to mention being able to capture leads from other sources as well.

We know that our agents are looking to leverage lead generation from other places. And so that's something else that we think the Booj platform will provide efficiencies for our agents, so that they can really maximize their time with clients and minimize the time that they're spending using technology..

Okay. That's all the time that we have for questioners.

Any closing remarks?.

Thank you, Julie, and thanks to all for joining the call today..

Right. Thank you again for your participation. This concludes today's conference call. You may now disconnect..