00:02 Good morning, ladies and gentlemen, and welcome to the Real Brokerage third Quarter Earnings Call. At this time, all participants are on a listen only mode and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, James Carbonara with Hayden Investor Relations. Sir, the floor is yours.

00:23 Thank you. And once again, welcome to Real’s third Quarter twenty twenty one earnings call. With me on the call are Tamir Poleg, Chief Executive Officer; and Michelle Ressler, Chief Financial Officer. This morning Real filed its financial results and management discussion and analysis for its third quarter ended September thirty, twenty twenty one on SEDAR. These documents along with the accompanying news release can be found on SEDAR. 00:51 The content of this conference call should be considered in conjunction with and is qualified in its entirety by reference to such documents. I'll now read the forward looking safe harbor statement. This statement is made pursuant to the safe harbor for forward looking statements described in the Private Securities Litigation Reform Act of nineteen ninety five. 01:10 All statements made on this call with the exception of historical facts may be considered forward looking statements within the meaning of Section 27a of securities act of nineteen thirty three and Section twenty one (a) of the Securities Exchange Act of nineteen thirty four. 01:24 Although the company believes that expectations and assumptions reflected in these forward looking statements are reasonable it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in the forward looking statements due to various risks and uncertainties. 01:41 For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward looking statements, please see risk factors detailed in the company's annual report, which contains subsequent filed quarterly reports, as well as in other reports that the company files from time to time with SEDAR. 01:59 Any forward looking statements included in this earnings call are made only as of the date…

03:34 Thanks, James, and thanks everyone for joining today. I would like to start by thanking the hundreds of agents who joined Real in the past few months and to our community of agents who have contributed to the growth we are experiencing. I will now continue by highlighting some top level financial results, then I will provide some operational updates before turning it over to our Chief Financial Officer, Michelle Ressler to dive deeper to our financials. After that, we will open up the call for a Q and A. 04:03 Let's start with the financial results. Q3 revenue was thirty nine million, an increase of eight eighty five percent year over year. Driving that growth was one hundred and thirty two percent increase in real estate agents joining Real, as well as a three twenty five percent increase in the revenue per agent to thirteen thousand dollars. 04:03 Now, turning to operating highlights. When we consider what is supporting our growth, it is based on a number of operational factors and strategies, mainly geographical expansion, agent referral, retention, product focus, the amazing culture that attracts more and more agents, and the efficiency of our team, beginning with geographical expansion. 04:47 During the third quarter, we announced Real’s expansion into Canada with the launch of Real Brokerage in Alberta. We also expanded into Indiana, North Dakota, Minnesota, and Montana. After the quarter ended, we announced expansion to Iowa and Michigan, bringing our tally to thirty eight states, the district of Colombia and the Province of Alberta in Canada. 05:09 We look forward to growing our business in Canada, and in each of our operating states. Our focus closing out the year and for twenty twenty two will be North America. The intention is to go deeper in the U.S.…

13:33 Thank you, Tamir. So, I'll start by assessing some of our key financial results for the quarter. Our Q3 revenues grew eight eighty five percent year over year to thirty nine million, compared to three point nine million last year in the same quarter. This increase was mostly driven by agent growth, which was up one hundred and thirty two percent and revenue per agent, which grew three hundred and twenty five percent year over year. This growth is further supported by our proprietary technology platforms, which allows us to continue expanding our agent count and geographic footprint at an accelerated pace. 14:07 If we look at gross profit, our gross profit grew three forty eight percent to three million in Q3 twenty twenty one versus seven hundred and forty one thousand in Q3 twenty twenty. Our margins are affected by the increase of number of agency cap and the increase in volume and rising unit prices, resulting in downward pressure as we continue to attract high producing agents. 14:29 We expect the release of instant payments which Tamir touched on previously to help offset this pressure, as well as the future projects in our products focus. Our net loss for the quarter was one million dollars compared to four hundred and twenty two thousand last year. This change was primarily result of investments in building our team of agents, key management, employee personnel, as well as our technology infrastructure. 14:52 We placed great importance on our management team and on hiring top talent all across the board and look forward to the enormous value Kat, Raj and the rest of those who have joined us this quarter will add. We view each and every one of a hires and investments and infrastructure as key contributors to our growth…

18:16 Certainly. [Operator Instructions] Your first question is coming from Darren Aftahi with Roth Capital Partners. Your line is live.

18:51 Good morning guys. Thanks for taking my questions and nice job on the quarter. I have a few technical and maybe bigger picture after that. So, in the quarter, could you be what the average kind of home price was and the transactions you guys concentrated on your platform?

19:09 Sure. Hi, Darren and thanks. The average home price was around three hundred and thirty thousand dollars.

19:19 Great. And then, I appreciate you bringing on fairly large levels of books of businesses. And so, maybe looking at agent productivity over twenty twenty one is the right metric, but I know a lot of investors focus on it. That metric was zero point nine. It was one point three in the second quarter. So, two question, just one, is that a timing thing of ramping agents and so the denominator is getting bigger and maybe the productivity of that denominator is not fully exploited yet. And then as you think about your goal longer term years from now, like what would you like to see that transaction per agent really be on a run rate basis?

20:05 Sure. Good question. First of all, there is zero point nine figure was a typo and we are now correcting it. The correct number was one point five. So it's actually an improvement from one point three. We apologize for that typo. 20:19 Longer-term, I think what we're seeing is that within our – currently, we're close to three thousand five hundred agents on our team and within them, we have about one thousand historic agents that had a lower than average productivity, but the agents that we've been attracting in the past twelve months are higher than average in terms of production. 20:43 So, I think that long term, we should be looking at around two point five to three transactions per agent per quarter. That's the long term goal. We're getting there, but I mean, still there are some ways those historic agents that we had with us that had lower than average productivity.

21:06 Great. That's helpful. And thanks for that correction. On the gross margin, I know Michelle, you spoke to kind of the capping and there's been downward pressure and you've spoken about in the past. So, a couple of questions, one, kind of, I know that resets in the beginning of the year, but how do we think about gross margins on kind of a run rate basis? And then you spoke of instant payments, how will that positively impact your gross margin and then on Instant Payments there’s a second question, since you’ve announced that, have you seen a tick-up in interest from agents on your platform just given it's kind of a unique product out there right now?

21:52 Sure. So, on the gross margin, we first have to understand what's impacting that. And we've had a higher number of high performing teams joining us compared to what we previously thought would happen. So, our financial and economics with, excuse me, high performing teams is such that their agents cap have lower caps. So, our gross margin on their transactions are actually lower and there was some downward pressure on gross margin. 22:28 We have to remember that we are still in this early growth phase. And we're starting to grow and funnel as much GMV to the top of the funnel, and then the next step would be trying to monetize as much as possible. Currently, we're only monetizing through real estate brokerage services, but very soon we will add additional services such as ancillary services. 22:48 Instant Payments was designed to do basically two things. One, benefit with our agents and actually provide them better visibility or better ability to plan and better cash flow. Two, every time an agent requests an Instant Payment, does the processing fee involved. So that will enable us to have a positive impact on gross margins. 23:11 We launched it just a couple of weeks ago initially just to a group of about one hundred and twenty agents. We are now starting to expand and expand. What we've been hearing from agent is at the beginning it took a little bit of education on what exactly does it mean and how does it work? But we think that there's definitely a positive impact when it comes to attracting agents to the company. 23:11 I will also say that it's a great tool for team leaders to attract agents to their teams. So, currently, we did not enable it to leaders, but I think that once we open it up to teams that will probably attract more agents that are coming through teams as well – as well as enable us to make a better gross margin on team members. 23:59 So, Darren, hopefully that answers the question.

24:03 Yes. It's helpful. Just if I could squeeze one more in. So, I mean you have a fairly large cash balance, you're not a cash burning business, it's super capital intensive. And I know you're increasing and your hiring people, but this as you think kind of big picture. I mean, where is that cash going to be deployed, if you think about kind of twenty twenty initiative beyond just kind of hiring and growing your agent phase?

24:29 I would state too many things. One is product. We have set an ambitious goal of changing the way people buy and sell homes in this country. And that will require massive investment in product. So, that's one thing. And the second is, acquisitions. We're constantly monitoring for acquisitions. Right now we're focusing on early stage startups in topics that deal with things such as agent productivity, mortgage in title. We have some targets that we're talking to and some of that forty five million dollars will be attributed to acquisitions.

25:12 Sorry, just on that last point. I mean things like mortgage and title, are you more thinking you want to JV these things or you want to run them as owned and operated entities under Real’s platform?

25:26 Long term, we want to operate independently under our platform and actually own the entire food chain. Initially, we saw that the, kind of fastest and easiest way would be to JV. I think that we might be able to make an acquisition that at least on one of those ancillary services will help us kind of own the entire food chain from the very beginning without needing to go to a JV first. 25:58 So, long term, it should be owning it, in the short term probably on the mortgage side, it will be a JV and maybe on the title side, it will start with us just owning it from day one.

26:14 Great. Thanks. I'll pass it on. Appreciate it.

26:16 Thanks Darren.

26:19 [Operator Instructions] Your next question is coming from Tom White with D.A Davidson. Your line is live.

26:32 Great. Thanks so much. This is [Tervis] [ph] on for Tom. Just two questions if I may? First on agent growth. So clearly, your combination at the low fees and proprietary is resonating with your agents. So, we're curious to see whether you see your value proposition changing over time. Do you anticipate having the changes or lowering your foot or fees or at what level your agents cap maybe be introducing new financial benefit to stay in line or stay ahead of your competitors? And then I have a follow-up.

27:06 Thank you. So, our core offering to agents in terms of economics has not changed since twenty fourteen. We sometimes make some small adjustments and most of the adjustments that we've made along years were actually for the benefit of the agents. So, we do not anticipate changing anything in the basic model. We do think that right now, we're at that phase where we need to be attracting as many agents as possible and just generate that momentum, which is already happening. 27:40 And at some point, maybe we'll need to optimize a few things that will not have a significant impact on the vast majority of agents, but the way we look at it is that at the end of the day, around a real estate transaction, there's so much money changing hands in so many ways that you can monetize a single transaction and we're just right now at the beginning. The only service that we're now selling to our agents is real estate broker services and that will change over time and we will be offering more and more services. 28:15 So, at the end of the day, out of a single transaction, let's take three hundred thousand home for example that our agents sell and the commission on that is nine thousand dollars and we keep roughly nine hundred dollars out of that or so. I think that in the future, it will be quite easy to double triple and quadruple that amount if we build the right experience around those services that we want to offer directly to the consumer. 28:45 So, the way we think about it is let's funnel as many transactions to the top of the funnel right now. And then over time, just monetize it in a better way.

28:58 Great, thank you. And then I understand that you are probably not in position to provide formal guidance for twenty twenty two right now, but I was wondering if you could maybe talk about the range of outcomes you are anticipating on aging additions in twenty twenty two?

29:14 Sure. We do not provide any formal guidance, but as you can see, we're growing [agent pound] [ph] by around one hundred and twenty percent to one hundred and forty percent year over year. We don't see that slowing down. We actually – back in May or June, we were trying to hit the brakes a little bit because we were growing so fast and we wanted to make sure that we continue and service and serve our agents the right way. So, this tremendous growth of close to nine hundred percent happened organically without us even having a single salesperson in the company. 29:53 So, we think that we need to become a little bit more structured in our sales approach, a little bit more structured in our marketing and Kat would be extremely valuable in that. But at the end of the day, I think that we could expect to see somewhat of a similar agent growth if not even kind of stronger growth in agent count in terms of percentage year over year. And I mean, that, you can draw your own conclusions out of that.

30:31 Thank you.

30:37 We have no further questions from the lines at this time. Thank you ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.