Good morning, and welcome to the RE/MAX Holdings Second Quarter 2022 Earnings Conference Call and Webcast. My name is Dennis, 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, Senior Vice President of Investor Relations. Mr.

Schulz?.

Thank you, operator. Good morning everyone and welcome to RE/MAX Holdings second quarter 2022 earnings conference call. Please visit the Investor Relations section of www.remaxholdings.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 two, our prepared remarks and the 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 outlook, brand expansion, competition, technology, housing and mortgage market conditions, capital allocation, dividends, share repurchases, strategic and operational plans, and business models.

Forward-looking statements represent management’s current estimates. RE/MAX Holdings 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 2022 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 Steve Joyce, our Chief Executive Officer; Karri Callahan, our Chief Financial Officer; and the Presidents and CEOs of our brands, Nick Bailey and Ward Morrison. With that, I’d like to turn the call over to RE/MAX Holdings CEO, Steve Joyce.

Steve?.

Thank you, Andy and thanks to everyone for joining our call today. Looking at slide three, our strong second quarter results demonstrates the strength and resilience of our 100% franchise Motto, particularly amid shifting housing market conditions.

Our acquisition of RE/MAX Integra’s North America regions continues to perform well, again contributing meaningfully to both our topline and bottom-line performance.

We recently announced certain strategic growth initiatives which we believe will enhance our ability to grow profitably over the long-term and should further mitigate the impact of additional market volatility.

Some of our notable quarterly highlights include overall RE/MAX holdings revenue was $92.2 million, up almost 20% driven by last year's acquisition of Integra, which comprise nearly 16% of our growth as well as almost 2% organic growth. We generated an adjusted EBITDA of $35.1 million, up 14.4% and our adjusted EBITDA margin was a strong 38.1%.

Adjusted EPS increased 6% to $0.68. Total RE/MAX agent count grew by almost 4,000 agents to nearly 144,000 agents in total, a new record. And both Motto franchise sales and Motto open offices continue to grow with the number of open offices hitting 200 during the second quarter.

Ward and Nick will provide additional details on their respective business slides in a moment. First, I'd like to spend a minute discussing our recently announced strategic growth initiatives. Our focus remains on increasing RE/MAX U.S. agent count and continuing to fuel the growth of our expanding mortgage business.

Our team has done a terrific job identifying and implementing those growth opportunities that we believe will yield the best results and contribute to near-term and long-term profitable growth. These initiatives are closely aligned with our current strategy.

We think we can make a measurable difference to smart strategic moves, essentially bolstering our growth prospects through institutional focus, accountability, and proper allocation of resources.

Our 100% franchise model demonstrates its strength and differentiation during times of change, which is borne out over the past five decades since our founding.

Today, we have two industry leading brands, networks of experienced and productive real estate professionals, a strong balance sheet, and a fantastic ability to generate cash flow, all of which will continue to serve us well, in virtually any kind of market.

We intend to leverage these strengths to actively seek the best opportunities that will support our future growth. With that, I'll turn it over to Nick..

Thanks Steve. Good morning, everyone. Moving to slide four, halfway through the peak summer buying season, signs of a more balance in the market are becoming increasingly apparent, according to the most recent RE/MAX national housing report.

Although June posted the most home sales of any month thus far in 2022, topping may by 4.7%, they fell short of last June's total down almost 18% across the 53 metros survey. The period of the last few years has been one of the most competitive and challenging times ever for buyers.

And we're finally seeing conditions eased up highlighted by inventory gains and the slowing of price appreciation. For example, inventory grew in June for a third consecutive month, a 34.1% increase over May and 27.5% year-over-year. The median sales price of $428,000 for June, while 11% higher year-over-year, inched up less than 1% above May.

Perhaps more notable is the increase in listing after several years of instant sales and low inventory. Markets like Nashville and Phoenix saw an increase in new listings of over 20% in June, bringing new options for buyers who may have sidelined themselves in the heated frenzy of last year.

The changing market conditions are being impacted by the rise in interest rates, but many buyers are still finding solutions and alternatives in ARMs, FHA products and other financing. Regardless of the macro environment, the reality is homes are bought and sold every year, and good agents and loan originators make a difference in times like these.

Overall, household formation remains strong and favorable demographics still exist. With inventory rising prices seemingly top topping out and competition decreasing, there are reasons to be optimistic and most notably for buyers.

Moving to slide five last month, we announced the latest step in the evolution of RE/MAX technology, unveiling a new enterprise relationship with Inside Real Estate, the developers of kvCORE. In today's highly competitive market, much of the agent facing technology like CRM, websites, et cetera, has become table stakes.

Partnering with a leading real estate software firm like Inside Real Estate, which has the size, scale, and expertise to develop world-class agent tech tools gives us more firepower to deliver value to our affiliates. The focus of this tech is to drive leads and identify transaction ready consumers for our agents.

The use of AI and the power of data is likely going to have a big impact in the way in which agents market to consumers and we believe this initiative puts our agents at the forefront of the industry. Through a phased rollout beginning later in 2022 and continuing into next year, RE/MAX affiliates and company-owned regions across the U.S.

and Canada will get no cost access to the state-of-the-art kvCORE platform along with several add-ons, including a module specifically for teams. The kvCORE platform was chosen because RE/MAX affiliates deserve an industry leading complete technology solution.

We believe the kvCORE's platform is that solution and based on the feedback we have received from our affiliates, they agree. With the RE/MAX branded version of the platform, agents will have a seamless new way to automate virtually every aspect of their business, from contact management to digital marketing to data analysis and more.

They'll have high quality customizable IDX websites that attract traffic and drive transaction-ready leads, best-in-class market analysis and presentation tools to win listings, and a marketing center designed to maximize exposure and connect more consumers directly to RE/MAX agents.

Eventually the platform will integrate the key RE/MAX technology offerings, like the First app, which is a first of its kind tool within the industry. The combination of kvCORE and the best existing RE/MAX tools will give affiliates a premier technology solution along with the number one brand and most productive global network.

There's nothing like it in the marketplace today. Because of the powerful and comprehensive functionality of the kvCORE platform, some of the boost products developed in house over the past few years are expected to sunset in mid-2023.

Bottom-line this partnership is about taking the best parts of our tech acquisitions completed in recent years and combining those strengths with an industry-leading vendor and we believe this is the best of both worlds.

Looking at slide six, overall agent count increased almost 4,000 agents year-over-year and reached a new high of close to 144,000 agents highlighted by nearly 8% growth in Canada and continued growth globally. In the U.S., we continue to see slightly depressed results, driven primarily by the uncertain housing market. That said, increasing our U.S.

agent count remains a top company priority and we expect our growth initiatives announced last month to make a difference. For two years, RE/MAX has been an industry leader and the preferred destination for many of the most productive teams in real estate.

However, the data shows we have a sizable growth opportunity when it comes to teams of six agents or more. That's why I'm excited about the recent launch of our teams focused initiative.

We believe that our aggressive offering that combines education, technology, and attractive economics can help mid to large sized teams optimize their productivity and maximize their earnings. This growth initiative is a five state pilot program that modifies the fee structure for teams of six or more licensees.

The pilot is designed to incentivize the growth of existing RE/MAX teams, strengthen retention, and especially to help broker owners recruit teams of that size. The pilot is set to run for one year and is available for those brokers who opt in within the states of California, Florida, Maryland, New Jersey, and Texas.

These states were selected for the pilot because they have a relatively high number of teams, represent a significant growth opportunity, and give the program an excellent chance of being successful enough to expand to other states.

We also recently launched initiatives to help interested brokerages convert to the RE/MAX network or combine forces with an existing RE/MAX franchise.

With changing market conditions, many independent offices are interested in increasing their value proposition and are looking for competitive advantages like brand name awareness, technology, tools, and support, and ultimately, higher per agent productivity. All of these are crucial areas of focus needed to drive success in the market ahead.

Our data shows that agents who joined RE/MAX and stick with us typically increase their sales over time. These figures address a chief concern about agent productivity that has held back many potential mergers or conversions in the past.

This is an important message for us to continue to reiterate across the industry, especially now as the market is fluctuating and we see many seasoned successful brokers looking to transition their business. With that I will turn it over to Ward..

Thanks Nick. Looking at slide seven, Motto has sold over 300 franchises to-date and we now have more than 200 open offices. We believe we can eventually grow that number to more than 1,000 open franchises. Motto has a unique and attractive value proposition and we would like to accelerate our timeline to this milestone.

Similarly, we believe our Wemlo mortgage processing business has tremendous potential. We recently announced that future Motto franchisees will be required in most instances to use Wemlo services, which should help accelerate Wemlo's growth.

We also recently hired some of our larger Motto owners, former loan processors, as these franchisees now utilize Wemlo services. We view this as a win-win scenario. For Wemlo, we gained proven processors and immediately add to our volume of business.

For Motto owners, they retained access to desired loan processors and steady reliable loan processing services in a much more cost-efficient manner. We have been evaluating how to accelerate the growth of our mortgage business.

Given our current momentum, we believe this is the right time to invest in additional sales resources for both Motto and Wemlo. Each sales professional on our team currently covers a large territory and we think more personnel will increase our ability to capitalize on incremental opportunities.

Currently, we have just over 100 colleagues who work within our mortgage segment, but by the end of the year, we expect to add another 15 to 20 team members. We believe this investment can measurably accelerate our ability to reach our goal of $100 million in annual mortgage-related revenue, perhaps achieving this milestone as early as 2028.

We sold just over 60 Motto franchises last year and we're tracking to meet and hopefully exceed that number in 2022. We believe by doubling our salesforce, we should be able to double our annual franchise sales total starting next year.

We expect to provide official guidance next February when we usually introduced our outlook for the forthcoming year. However, at this point, we expect to sell at least 120 model franchises in 2023. Our mortgage segment continues to expand and we accelerated our franchise sales during the last downturn at the start of the pandemic.

Slower times in real estate often caused brokers and team leaders to reflect on the importance of ancillary businesses when they have the time to invest in their futures. We are hopeful many will take this time to take advantage of what a terrific opportunity Motto presents. With that, I'd like to turn the call over to Karri..

Thank you, Ward. Good morning everyone. Moving to slide eight, second quarter revenue grew almost 20% to $92.2 million. Excluding the marketing funds, revenue was nearly $70 million, an increase of 17%. This increase was comprised of 15.9% acquisitive growth and 1.7% organic growth. FX decreased revenue by about a half a point.

All acquisitive growth came from last year's Integra acquisition, which continues to perform well. We locked the first anniversary of the Integra acquisition in July, so it will start contributing to our organic growth beginning in the third quarter.

While our organic revenue growth, ex the marketing fund, fell short of our mid-single-digit expectations for the first time in over a year due to the shifting real estate market, we were still able to grow almost 2% organically. Motto continues to expand and was a notable contributor to our organic growth.

With a recent change requiring most new Motto franchisees to use our Wemlo processing services, we expect Wemlo will also start to measurably contribute to our organic growth in the coming quarters. Looking at slide nine, our Q2 selling, operating, and administrative expenses increased 5.1% to $40.8 million.

Second quarter 2022 SO&A expenses increased primarily due to estimated increases in the fair value of contingent consideration liabilities, higher travel and events expenses, and increase investments in technology, partially offset by a reduction in professional fees due to lower costs associated with acquiring and integrating new companies.

Looking ahead, our recent decision to partner with kvCORE is expected to reduce our overall workforce by approximately 17% by the end of this year. This reduction does not include personnel, that we expect to hire because of our additional planned investment in our mortgage segments discussed earlier.

As a result of this reduction, we expect to incur a pre-tax cash charged for one-time termination benefits, which consists of severance and related costs between approximately $5.75 million and $6.75 million in the third quarter of 2022. This one-time charge will be added back to adjusted EBITDA.

Additionally, beginning in 2023, the reduction in-force should reduce our annual operating expense run rate by approximately $13 million, roughly split two-thirds, SO&A and one-third marketing fund expenses. Importantly, we anticipate most of the savings will be reinvested back into the business.

Moving to slide 10, before I get to our outlook, there are a couple of items I want to briefly mention. First, regarding our $100 million share repurchase program announced in January, we significantly ramped up our buyback activities during the second quarter.

We opportunistically utilized approximately $6 million to acquire just over 250,000 shares in a single block. We hope to capitalize on similar opportunities in the future. We continue to believe that repurchasing our stock at its current valuation is an excellent allocation of capital and shareholder value creation mechanism.

Through June 30th, we have allocated almost $12 million to repurchase nearly 500,000 shares. Second, it is important to note the impact that today's increasing interest rate environment has on our earnings. Specifically, we expect rising interest rates will decrease our adjusted EPS by $0.10 to $0.11 over the last two quarters of this year.

Lastly, our strategic growth initiatives announced last month are expected to ramp up in the back half of this year and start to benefit our results in 2023 and beyond. Now, onto our updated guidance, the company's third quarter and full year 2022 outlook.

Since no further currency movements, acquisitions or divestitures, for the third quarter of 2022, we expect agent count to increase 1.5% to 2.5% over third quarter 2021, revenue in a range of $87 million to $91 million, including revenue from the marketing funds in a range of $22 million to $24 million and adjusted EBITDA in a range of $30.5 million to $33 million.

For the full year 2022, we are reducing our guidance to reflect current housing market conditions and other related macroeconomic trends.

We now expect agent count to increase 1% to 2.5% over a full year 2021, down from 2% to 4%; revenue in a range of $354 million to $364 million, including revenue from the marketing funds in a range of $90 million to $93 million, down from $366 million to $376 million; and adjusted EBITDA in a range of $123 million to $128 million, down from $130 million to $135 million.

Now, I'll turn the call over to Steve for closing comments..

Thanks, Karri. Looking at slide 11, our franchise model is built to succeed in virtually every market condition. With our strong brands, healthy balance sheet, and proven ability to generate robust cash flow, we intend to leverage these strengths to actively seek the best opportunities that will support our future growth.

We believe we are well-positioned to grow profitably over the long-term. With that, let's give it up for questions..

[Operator Instructions] Your first question is from the line of Anthony Paolone with JPMorgan. Please go ahead..

Thank you. Good morning. My first question -- thanks.

My first question relates to Motto and you outlined the path to about 1,000 offices, I was just wondering if you just go into how you get to that number like? What kind of hit rate that would mean for your existing, I guess, franchisees? And just any costs you can outline to kind of get there?.

So, the environment in which we're selling, obviously, our franchisees are the number one target, but we're also looking at selling model to other brokerage firms independents and other branded, if they're interested. So, the market we view is pretty broad.

We view the opportunity and part of the reason we're doubling down now, we view the opportunity going forward, particularly in the rate environment we're in, which is obviously curtailing refinancing for the time being.

But because we are primarily purchase mortgage effort that puts us I think in a good position and in addition, it's a great ancillary revenue for brokerage firms, which are more than likely as this downturn continues are going to struggle with some margin issues. So, we think the timing is good for the effort.

Ward, do you want to talk a little bit more about hit rate and sort of how you're seeing that all environment?.

Sure, I would jump. We always thought about a third of the RE/MAX franchise in the U.S. were our cohort. So, that's an easy thousands there, technically, that we would go after. But like Steve said, we will be attacking and we have been attacking still, about 20% of our sales have been outside the brand, but still real estate.

So, we'll continue to grow that. Our goal is to grow our salesforce, basically doubling it from about eight to about 16 around that area. Why? Because we feel like we have almost to larger territories for franchise salespeople to fully focus in those areas. And we think we're missing the incremental opportunities.

So, by growing that sales force on the Motto side, we think we can double our sales by doubling the salesforce. So, we look in 2023 to hit sort of like that 120 number was our goal. We'll have more guidance as we get closer to 2023, but the key there would be growing that and within five years adding another 500, 600 franchises out there.

So, getting closer to that overall 1,000 number as quick as we can. So, we think there's plenty of upside. We think teams is the untapped market that we can grow.

So, it's not like we're adding a tremendous amount of costs, really adding salespeople sort of paying them on the basis of commission, plus base, but we feel like that salesforce can grow the number of sales that we have, and we can get towards that 1,000 and open franchises..

Got it. Okay, thank you for that. And then my follow-up, I guess would just tie in to some of the costs and Karri your comments.

It sounded like some of the costs coming out of the system you'll replace with these initiatives just talked about, but it seems like on net, you could be going into 2023 with a lower OpEx run rate, was that -- did I catch that right or just trying to tie that together?.

Karri, you want to cover that?.

Sure. So thanks, Tony. So, as we look at kind of at least OpEx run rate for the rest of the year, this this quarter SG&A ex any kind of acquisition cost or stock comp, or any other add backs was kind of in that $36 million range.

If you exclude the add back associated with a reduction in force itself, looking like the run rate for Q3 and Q4 of this year is going to come down a couple million dollars.

But again that's going to be reinvested back into the business at the earnings level as we allocate capital to all initiative, both teams conversions, some of the investments on the mortgage side, that Ward was just talking about as well.

And so that's -- we got to look at it on a balanced basis and in terms of just holistically at the earnings level, looking to reinvest it back into the business for the rest of this year. And we'll obviously have more to say, as we look further ahead and 2023 later down the line.

But right now, we're really committed to just reinvesting back into the business..

Okay, if I'm -- just make sure I'm getting this right, though. It sounds like we'll see some of the costs that are coming out in the next couple quarters. But then there might be some lag until you get that fully reinvested into the business.

Is that fair?.

I don't think, so not at the earnings level. So, I think on the cost side, we'll see some of that coming out in the in the subsequent quarters, but at the earnings level, looking to really reinvest a lot back into the business..

Okay. Thank you..

Your next question is from Ryan McKeveny with Zelman & Associates. Please go ahead..

Hey, thank you and nice job on the quarter. This one's probably for Nick. So, on the team's initiative, it seems like just the concept of teams has been a pretty notable trend in the industry and I think it makes a lot of sense for you guys to somewhat stake your claim in competing against others with team-based offerings.

So, Nick, recognizing there's a lot of different approaches to recruitment and retention, whether it's individual agents or teams, I was hoping you can maybe dig in a little on, on what you view are the most differentiated aspects of the approach you guys are taking or the teams offering that you guys have versus what others in the market are doing? Thank you..

Yes, you bet. We look at it that teams come in kind of a three-pronged area, one of them is education and others the economics, and the third is the technology.

And so the announcement of the technology moves that includes a team platform that sells out of the kv system for around $1,500 a month that we're including at no charge for any teams of two or more that in addition to what we announced earlier, our four convention about education on how to build out a team. Teams are really kind of a small business.

So, we think putting the three components together, which we've been able to do over the last two months is where it's all going to come together, although a really strong offering that may be somewhat different from how our competitors approach it..

Got it. That’s helpful.

And I guess in terms of this being initially a pilot in some of the bigger markets versus a broader rollout, is the thought process there that the pilot allows you to assumingly, optimize that offering, kind of, figure out what aspects are maybe working with others can be tweaked or just any thoughts on kind of why start with a pilot as opposed to something just more widespread out of the gate? Thank you..

Yes, first of all, we spent a lot of time putting this together and what we think is the best form to go-to-market. But we also realized that the way that we've structured the economics with six plus, allows us the biggest opportunity to grow an agent count.

And there may be some tweaks to it and so we want to make sure that we're taking the states that one has the largest opportunity for growth, but two, also have the biggest TAM of teams of six or more, and that -- those items combined together give us the opportunity to test the market and make some adjustments before it rolls out to other states..

Perfect. Okay. Thank you very much..

Your next question is from the line of Tommy McJoynt with KBW. Please go ahead..

Hi. Thanks. Good morning. I just want to ask about -- again about the team's pilot program.

I want to get a sense of how much of the market this applies to? Do you know what percentage of agents are part of those kind of six-plus member teams? And if you could speak to that for either RE/MAX specifically or just for the industry more broadly?.

Nick?.

Sure. I don't have a number that just applies universally across the U.S. It differs greatly by state. And so you see in your major MSAs and your coastline states, those are going to be higher percentages. When you get more to the Midwest that gets much, much lower.

So, the spread on it is so different state-by-state, I don’t know the number across the entire country, we look more market by market..

Okay. And it does seem like there are some pretty solid discounts for agents in this pilot program, especially for the some of the higher producing agents.

Have you done an estimate to see what the impact on the revenue per agent from those reduced fees would be for some of these agents in the pilot program?.

So yes, we've obviously done the analysis. But the net-net, well, it is a different pricing program designed to attract folks. And one of the things I was going to add to Nick's point was, while it varies across the country, a significant portion of the growth recently in agents has come through teams. So, that's why you see us targeting this.

And so while we are providing a different pricing program, which in sense, the formation of teams with potentially a lower overall cost as they grow, the relative number of new teams, we need to add, we think we can easily achieve, which would then offset any price increases.

And so our net-net view of this is that, it'll be positive program, but partly why we're piloting. And so the overall reception so far has been strong.

Nick, you want to talk a little bit more about sort of our expectations about when it starts kicking in?.

Yes, we actually set it up to go live August 1st is when the brokers can start to take advantage of it. And so we plan that this will ramp up through Q3 and Q4. So it will take some time to ramp on it. But it officially goes live August 1.

When we look at each one of the markets and the five states, it's accounts for 1000s and 1000s of agents associated with teams of six plus. So we think the market segment is fairly sizable and will continue to be as teams are not going anywhere, and especially the large ones become more and more efficient.

And they are exponential in their growth on volume and transaction count. And hence the reason that it's such a large focus..

Make sense. Thanks, guys..

Your next question is from the line of John Campbell with Stephens. Please go ahead..

Hey, guys, Good morning. Thanks. July you can kind of update, looks like US and Canada. Maybe it was down modestly not so much.

Can you unpack that and maybe talk to what you’ve seen in each market in July?.

I'm having a hard time.

Can you repeat that question? There was some background noise?.

Yes, just curious about your July agent update.

The US and Canada combined down a little bit last month to maybe break out the trends by reason?.

Karri, you want to cover that?.

Sue, sure. Hey, John. So it was a little hard to hear. But just making sure you're looking at July agent count, and kind of unpacking that a little bit between the US and Canada..

That's right..

So I'll start this and then Nick definitely jump in. So as we look at that we've seen continued strength in Canada.

We highlighted the strong continued strong performance of the Integra acquisition, which should definitely not be overlooked the importance of Canadian agents and their contributions to both the topline and the bottom line continued into July.

That was offset as the macro just got a little bit shakier, I think a little bit sooner and maybe a little bit more abruptly in the US.

It's only a couple of hundred agents, we continue to get very positive feedback on some of the other initiatives that we have the team's pilot program that, we were just talking about, as well as some momentum on some of the other initiatives around the mergers and conversion.

So, we are excited that that positions us well to be a little bit more aggressive. As Nick said in the back half of the year, but did have a little bit of weakness in the US in July..

Okay. That's helpful. And then maybe two more kind of follow-up questions, I know you guys get a lot of questions on the team incentive in the growth plans, but I want to better understand, I guess from the team's approach. You guys talked to the three pillars.

Mainly I'm interested in kind of better understanding what that one year program looks like and maybe specifically what that incentive looks like I guess, monetarily wise?.

Nick?.

Sure. So in terms of the team structure we have set this up to where our fee structures, two parts, one the reoccurring revenue, and of course, then the broker fee being variable. And it is structured in a manner that the team leader continues with their full continuing or reoccurring revenue, as is today.

And with each team leader or team member, for those teams, six plus, there's a 50% reduction on the monthly reoccurring revenue. And then there is a cap on the broker fee revenue, up to $100,000 in GCI that runs for each, each team member and it's an aggregate of the team total..

I don't know I mean, it sounds like you guys, obviously carefully crafted to spend time and pilots and whatnot.

But I'm curious, is it is it that you're trying to align? When it's all said and done for the agent net take? Because I think we can see across the industry, there's lots of different kinds of ways to skin the cat, I guess, are you trying to get down to a certain number or was just based on conversations and kind of feedback, you are aiming, what they thought might be a little more attractive?.

It's a little bit of both when we look at the analysis as they are per agent, revenue that we've stated in the past, because of the level of productivity that some of these large teams have. Some of the contribution to us is somewhat of a hockey stick when their production level gets to a certain to a certain spot in volume.

And so we just looked at the services that we're providing for teams, the education for teams, and where did it feel in the right way to maximize their earnings ours as well. But make sure that, we didn't have that hockey stick type of revenue impact to the teams at a certain production level..

Last one for me and this obviously might be a better question for inside real estate. But any sense for how penetrated kvCORE is just broadly, like Steve mentioned, there's obviously a real monthly expense incurred by this team. So you guys providing that new charges, it has got to be a pretty nice incentive..

Nick?.

Yes. Inside real estate, the number that they have most recently stated is that they currently support over 300,000 agents. And so while will be their largest enterprise clients, they do have a fairly significant footprint all across the US and Canada..

Okay.

And I guess, just given the ongoing development of teams and trends towards being prepared to do three out of the 300,000, there's probably a large chunk of those kind of factored in teams?.

They do, they do have a significant number of teams. And that was part of the reasoning that they came to the top of our choice on who to partner with, because of not only the platform, the add-ons with the different modules that we're including, but also their focus on their team product.

Whether it's teams of 2 or 200, it's a unique offering that is extremely competitive in the market..

Okay. Thanks for taking my 20 questions. Appreciate it..

You bet..

Your next question is from the line of Ronald Kamdem with Morgan Stanley. Please go ahead..

Hey, just a couple quick ones, started back with sort of the model mortgage and sort of the expansion there. Maybe can you talked about, as you're thinking of getting into sort of 1,000 offices and so forth.

How you're strategizing by market, by region and so forth, trying to get a sense of like, what's the adoption curve look like? And where's the highest opportunities?.

Sure, I can jump in there. Obviously, our business development consultants who are out there selling the franchise offering are in different segments. We basically want to get to the size where each is having basically two major metros. So it's still in the major metros, where we tend to focus.

But our, our look -- when we look at potential opportunities, whether it's a brokerage, if they have 2025 more agents, they are a target for us. If you look at a team, they're doing about, $40 million in production they probably feed our fit our model as well. So when we look at it, it's broadly across the United States.

We're heavily concentrated right now in Texas and Florida. However, we believe the opportunity exists everywhere. I mean, we're in -- we've sold in 44 states we're open and 39. So, we still have a few more to get, but we're trying to have broad coverage across the nation and feel like those 33 metros will be our main emphasis.

Right.

And then just sticking on model, I think, you talked about sort of the synergies with the sort of the real estate brokerage businesses, 200 offices? And is there a way to sort of quantify that whether it's profitability or recruitment or anything? Is there a way to put some numbers around sort of the synergies that you're seeing?.

Yes. From the perspective, we know, for a fact, if somebody's doing $100 million in mortgage production, we can gather what they're making in profitability, right, which is something they didn't have before, if they had Motto.

So, right away, anybody who has a Motto and is doing any type of volume, typically, they're probably netting about 1%, this part where I have to say, all franchises are not created equal. But that's typically what we see out there in the marketplace.

So with that, we know that they're adding additional incremental revenue that they didn't typically have before, they didn't have a mortgage entity.

So from that perspective, we are very excited that they pick up this ancillary revenue or unable to benefit from the mortgage/real estate relationship that they have, particularly in a market like this, where purchases the emphasis, what 73% of our sales are real estate companies, they still have purchase.

So yes, refi is going away hurt a little bit, but not as much as it does to the broader mortgage market..

Right. And then my last one was just on the guidance, the agent count growth policies that she said already, but can you just sort of clarify what that assumes for the US and, and how you're thinking about that? Thanks..

Karri?.

Sure. So in terms of how that unpack, we are assuming kind of flat to slightly down for the US, and then that's being offset by strength in Canada and continued growth globally..

Great. Many thanks..

Your next question is from the line of Jason Stewart with JonesTrading. Please go ahead..

Hey, guys, this is Matthew filling in for Jason.

So how many independent agents do you guys expect to convert to company-owned? And I guess what are the initiatives around that to try and get them to convert over?.

Nick?.

Yes. The market itself with the number of independent agencies is quite large, there are well over 80,000 brokerages. When you look at the number that are 20 agents or less, that's literally in the 10s of 1,000s, you get into the 50 to 100, which we believe is somewhat of the sweet spot for where we'll focus. Those are also in the 1,000s.

But when you talk to the brokers that are involved in not only the valuations, but actually brokering these deals between agencies, one of them had indicated recently on a panel that we had him on that in his 40 plus years of doing this, he has never seen the demand as high.

And so I think given the macro of what's happening in the market, combined with the TAM that's out there and the demand, the focus of this is going to yield great results for us. We've already had. We started this first of the year. And we've already had a number of successes with this.

But we believe that the more we do, we'll get better at it and especially with the larger ones can increase that velocity between now and year-end..

Awesome.

And then following up on that, given the, I guess, slowed down somewhat in the market in terms of prices, do you guys look at this as an opportunity to gain more market share in terms of Motto and agents?.

Steve, I can jump in for Motto. Yes, for the Motto side, we hope to continue to grow our base and grow the open footprint. So far this year, with the mortgage market being down a tremendous amount, Motto is only down about 3% of volume. So compared to the industry, we're doing fantastic right now, with refis dropping off as much as we have.

So we still think there's continued opportunity for gaining market share, growing the number of open offices, growing the number of sales, and growing Motto in general. So, very, very positive about Motto for this year..

And on the RE/MAX side, this is where we do get pretty excited about the fact that productivity becomes the number one value proposition in the marketplace and that's something that as we out produce our next closest competitor on a per agent, productivity two-to-one.

When you take someone that does on average 16, 17, 18 sales a year if the market contracts, were by a couple of sales, those people are still in the real estate business year-over-year.

If you are in the single-digits, mid-single-digits and your business contracts by a couple of transactions, that's the difference of whether you can stay in this business or not.

And so we do believe that this is a time to gain market share, because the most productive agents and we average 15 years of experience where the National Association of Realtors is right about half of that, most of our agents have seen market changes in the past. And so they're not afraid of them and they know how to adjust.

And so this is where we lean into these market changes, and use our production to grow share..

Thanks. Yes..

From an overall standpoint, I think the ideas and partly why you seen us do what we do is we think this environment creates an opportunity for us to take share on both sides of the business, because in the case where we've got both brokerages coming under pressure, from a margin standpoint, they're going to be looking for ancillary revenues.

So that's where the Motto, Wemlo piece comes into play. And then on the RE/MAX side, people that feel uncomfortable or uncertain about the coming environment are going to look for what they view as the most productive brand out there. And that's where we think we shot.

So, from an overall perspective, the reason that you see us making the investments we're making is we think this environment will provide us incremental market share in a significant opportunity, growth opportunity..

Awesome. That's helpful. Thanks. I got one more.

Is there a certain price point in the market where you guys are seeing the most stress or falling prices in terms of demand and just that kind of situation?.

Nick?.

I don't believe we've seen any major fall in prices. We did believe that most of the price appreciation based on the demand and short inventory was going to be in the first half of the year. So we continue to believe that that is the case.

And we're seeing with increases of inventory prices are flattening, but the major pressure still sits in the first time homebuyer price range. The demand is extremely high and will continue to be just with the population and household formation over the next few years.

And that inventory is the lowest, surprisingly, usually the very high end starts to kind of dip first, but we're not quite seeing that yet. But still most of the pressure at the entry level price..

Awesome. Thank you..

Your next question is from the line of Stephen Sheldon with William Blair. Please go ahead..

Hey, good morning, everyone. This is actually Matt Filek on for Stephen. Thanks for taking my questions. I was wondering if you could talk some about the capabilities of the kvCORE platform from the agents perspective, seems to be a very robust platform with a variety of capabilities.

So on the insights on those capabilities, and then how they compare to what booj offered, that would be great..

Nick?.

So it is a pretty robust platform. And what's great about it is, we've got some proven results from it. We have 1,000s of our agents and brokers in Canada and the US that have had this product for a number of years. And so we have been able to lean on those brokers and agents for what the results look like.

And the product is designed not only from the base platform with CRM and IDX agent website, similar to the booj platform. But there are some differences in terms of AI, how it's connected to their digital marketing center.

And we were relying on the use of a number of APIs with our different systems between booj and Megaphone and some of our other offerings to work together. Where I think the power of this platform is all designed around lead generation conversion and automation. And so there are pieces that overlap the booj product.

And there are other pieces, like the AI on the buyer side that we didn't have, we have AI on the seller side with our first app that we'll be looking to integrate. And so there were just some nuances throughout the product that were a little different.

But certainly the ecosystem, if you will, of being a single platform with the different components have their core present product, which we've included, plus the team product, plus the design center, all of that working in one ecosystem, I believe brings the strength of their platform at the forefront of the market versus having somewhat disparate systems like we had before that is stitch together.

And I think that's the biggest advantage and the difference..

That's great to hear. And thank you for that color. And then switching gears a little bit here, just curious on what agent reception has been like to the recent shift in strategic priorities..

Nick?.

Well, I can give you a real one. I was at an industry event yesterday and this, I think, encapsulates the positive response from our network. We had a broker come up and said that the network is just a buzz, that the competition is nervous, but asked if he could give me a hug based on our direction.

So, kind of, a silly example, but it's been overwhelmingly positive, believe that it sets us up to go in the right direction. And according to many of our brokers, that these are some of the most ambitious moves headed to where the market where we're matching where the market is going.

And we have our Broker Owner Conference coming up in just about a week and we believe we're on target to hit record attendance and people are people are excited about it. So, we're thrilled..

Awesome, great to hear the feedback is positive. That's it for me. Thank you..

And at this time, there are no further questions. I will turn the call over to Mr. Schulz for any closing remarks..

Thank you, operator and thanks to everyone for joining the call today. This concludes the call. Please have a great weekend..

Ladies and gentlemen, thank you for joining today's calls. You may now disconnect..