Good morning, and welcome to the RE/MAX third quarter 2013 earnings conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Peter Curl [ph], Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning everyone. Thank you for joining us today for the RE/MAX third quarter 2013 earnings conference call. With me today is our Chief Executive Officer, Margaret Kelly, and our Chief Operating Officer and Chief Financial Officer, Dave Metzger. Before I turn the call over to Margaret, I would like to touch on a few items. First, our earnings release and presentation are available on the Investor Relations page of remax.com. Second, this call is being recorded. Replays of the call and webcast will be available shortly after the call through December 6. Please visit the Investor Relations page of remax.com to access either versions of the replay. Turning to Slide 2. I would like to remind everyone that on today's call management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements may include those related to revenue, operating income, financial guidance, as well as non-GAAP financial measures. As a reminder, forward-looking statements represent management's current estimates. RE/MAX assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in our filings with the SEC, and the definitions and reconciliations of non-GAAP measures contained in the third quarter press release which is available on our website. With that I would like to turn the call over to RE/MAX's CEO, Margaret Kelly. Margaret?

Thank you and on behalf of RE/MAX I would like to welcome you to our third quarter 2013 earnings conference call. Our first as a publicly traded company marking another historic even in the 40-year history or RE/MAX. Now on this call I would like to highlight our strategic growth objective, our third quarter performance and our business model, and then I will turn it over to Dave Metzger who will provide detail on the quarterly and year-to-date operating results as well as a review of our balance sheet. After our prepared remarks we will open up the call for questions. Turning to Slide 3. We have three main growth drivers. Number one, drive agent growth. Two, sell franchises to expand our global footprint. And three, acquired independently owned RE/MAX regions. Our main growth driver is agent growth. RE/MAX agents have both an average of 13 years of experience in the industry and tenure of eight years with RE/MAX. With an average of 17.1 transactions per agent, by far the highest of the national brands reported in the 2013 Real Trends 500 survey, RE/MAX attracts and retains highly productive agents and brokers. Since the third quarter of last year, we have added 3,828 agents in the U.S., Canada, and internationally. Our 4.5% U.S. agent growth outpaces the National Associations of Realtors growth of 3.2% for the same period. We ended the quarter with total agent count of 92,731. Our second growth driver is franchise sales. Selling offices in countries to increase our global footprint. We sold 439 franchises through the end of the third quarter. We have sold franchise rights for 16 countries since the third quarter of last year. And our third growth driver is acquiring independently owned RE/MAX regions. We have used a portion of the proceeds from…

Thank you, Margaret. As Margaret noted at the beginning of the call, our IPO was a great moment for RE/MAX. We sold 11.5 million shares of Class A common stock at a price of $22 per share. The total net proceeds from the offering were approximately $225 million after deducting underwriting discounts, commissions and offering expenses. With the proceeds we were able to reacquire two of our independent regions. RE/MAX Southwest and Central Atlantic. We redeemed 100% of the preferred membership and common units from our private equity partner, Weston Presidio. We also purchased a portion of the common interest of our founding shareholders, providing them with partial liquidity. We had a plan for the IPO proceeds and we executed that plan. We are now in a great position to continue to grow the company and show positive returns to our shareholders. On the next several slides, you will see that we delivered strong results across our key operating metrics during the quarter. Turning to Slide 5. Let's start with our main driver, agent count. Looking at the graph from left to right, first you can see we increased total agent count by 4.3%, or 3,828 agents compared to prior year quarter. All of this growth is organic. We ended the quarter with 92,731 agents in our global network. Growth in the U.S. and Canada is particularly important as we drive over 90% of our revenue from these agents. Moving to the right, you can see that we added 2,325 agents in the United States. An increase of 4.5% since the third quarter last year. We ended the quarter with 54,222 agents in the U.S. In Canada, we added 129 agents since the third quarter last year. The 1% increase is on target as RE/MAX agents already account for 18%…

Thank you, Dave. So before we open the lines up for questions, I would like to give you some color on where we see the real estate industry at this time. So turning to Slide 15. You will see that housing segment is continuing an upward trajectory in 2013. Existing home sales for September reported by NAR, were down an expected 1.9% from August which had seen the highest sales since 6.5%. The annualized rate of sales in September was 5.3 million units. This represents 10.7% increase over last year. The inventory of existing homes for sales still remain a bit tight with only a five-month supply. A six-month supply of inventory represents equilibrium in the market, meaning an equal number of buyers and sellers. Existing home prices also continue to rise with the median price up 12% from a year ago. So to put that in perspective, prices nationwide are now 16% above the trough that was reached in the fourth quarter of 2011, but still remains 17.4% below the peak reached in April 2006. Most markets have not returned to pre-recession levels. Rising home prices have raised concerns about the affordability of homes. But the price increases we are seeing are being driven by low inventory and strong buyer demand. As the inventory grows prices will stabilize. Looking at the NAR's Home Affordability Index on the bottom right of Slide 15, the index is currently at 155. Now the redline or Index equilibrium of 100 marks the points where a family earning a median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20% down…

(Operator Instructions) And our first question today comes from Vikram Malhotra of Morgan Stanley.

Congrats on your first quarter post the IPO. One quick question just to start off, on the EPS adjustments. It appears that you adjusted for the IPO cost in EBITDA but you did not in the adjusted EPS. Is there a reason for that?

Vikram, this is Dave. Yes, that is correct. We did not adjust for it in the adjusted net income calculation. We talked about that internally and decided only to adjust for the debt refinancing amortization. But that’s not to say that’s how we will handle that calculation going forward, and that’s the basically the feedback from yourself and other folks. We will look that to make sure we give the most clarity on the EPS calculation. At the end of the day we had a great quarter and if we were to adjust for those IPO cost, our EPS would be about $0.05 higher, putting our basic adjusted net per share at about $0.37. There is different methodologies at play here, but again the numbers behind any calculation used are strong. It demonstrates we are delivering on our plans.

Okay. Then just on turning to the agent count. Your call for kind of agents to be flat in 4Q is probably in line with historic seasonality but if I am not wrong, last year did you see a sequential uptick from Q3 to Q4 in agent count in 2012, and so it's potentially your call for flat agent count just maybe you being a bit conservative.

Well, based on historics in Q4 of last year, we were net up about 100. So we did see some drop off in agent count growth at that time. We had two months of positive growth and one month of negative agent growth. So we are in kind of a new normal and we are waiting to see how our fourth quarter goes with respect to agent count. Historically in the fourth quarter we have seen a drop off, but it's tough to say given that '07 through '09 and even a little bit into '012 in Q4 we did lose agents. So we will have to see where that goes. Given the positive momentum of the market, we hope to be able to maintain the agent count number that we have at the end of Q3.

And then would you be able to give us, at least in the U.S., maybe what the count was at the end of October?

It was up slightly. I don’t have that exact number but it was up slightly.

Okay. That’s fine. And then just last one from me. Can you just maybe talk about post the two regions you have bought back, what's the visibility you have, what's the process in terms of conversations you are having and generally how you are feeling about kind of buying more regions in the coming say, 12 months.

So was your first question about the visibility we have with the couple of acquisitions that we did? Or you said that....

No, no, visibility about future. Just visibility about future regions that you may look to acquire.

As we have mentioned in the past, those acquisitions were very opportunistic. We continue to have great relationships and continued conversations with many of the independent region owners. So as we settle in through the end of the year, as those agency recovery, I think there's people who maybe, possibly, more inclined. But we continue to have those conversations and we will take advantage of those opportunities as they come up.

And our next question is from Sean Kim of RBC Capital Markets.

Congratulations on the IPO and the first ever earnings. I have two questions. First, on operating leverage and margins. I think on a year-over-year basis your revenues were up close to $2 million but your EBITDA was up $2.5 million or more. So it seems like you demonstrated a pretty good operating leverage. How should we think about that going forward? What's your sort of longer term margin target? I think the incremental margins should be pretty high but it seems like you are pointing to more closure to 50% going forward. So I just want a little more color on what we should expect in terms of incremental margins.

Yes. Great question. The last couple of quarters our margins have been up. We have been doing quite well and that’s a function of obviously increased agent count which is hitting primarily the continuing franchise line but also the broker fee line coming up. I think that as we had talked in the past that high 40% margins is our goal and our target, but I think as our revenue increases because of agent count increases and the broker fee continues to be strong, margins in the low to mid 50% over a time are very attainable as more of our revenue will fall to the bottom line. Because we do focus on maintaining our expenses and we will continue our focus on that, and if we can keep those expenses under control, those margins will go up.

Okay. Great. I think we clearly understand the differences between -- the economic difference between an owned region and independent region. But if I you -- I am trying to get a sense of, is there kind of a improvement in the operations, whether it's the pace that you add agents when you look at some of these regions before you reacquired them. I am just trying to get a sense of whether there is some operational improvement when you actually have ownership of a region.

Actually there is some improvement. I will give you Texas as a perfect example. When we purchase Texas they had one franchise sales person for the entire state. Our goal is to put in seven or eight franchise sales people so that we can increase that franchised office footprint. Each additional office we add adds more agents. So when we buy back a region, we really dig in to there and focus on the growth that can obtain through franchise sales. Through recruiting agents and obviously the retention of the agents we have. So it is very deliberate focus to grow those regions.

Great. Just one more question if I may. Can you give us a little more color on the sales in Japan? If you can give us any sort of color on the financial metrics? And also if you look at international, just outside of U.S. and Canada, it's only about 10% of revenues right now. Where do you see that going? I believe the economics outside the U.S. and Canada are much lower than they are here. So what do we need to sort of see in those other regions to see better economics. Thank you.

Sure. As far as Japan, we did sell the franchise rights to Japan for $1 million in October. We are excited about the opportunity of growth in that particular area. But as far as growth outside of the United States, China for example. We sold the franchise rights last year. China has a two for one rule, where two offices need to be opened for one year before they can began franchising within the country. And I believe that one year is over, I believe February '14. And so we haven't even begun to expand in China yet. The goal in country master franchise agreement says, the owner of the country will actually subdivide that country into multiple regions. They will sell the regions off. We get a portion of that fee. Each region will be owned and they will in turn sell offices and recruit agents, which fees from the office goes through the region and then we get a portion of that fee here. So we are really beginning the footprint in Asia and we haven't seen the revenue potential yet until they start to expand.

And I would just add in on that, that international part of our business, while it's a very important part of our business, over 90% of our revenue does come from the U.S. and Canada. As we expand our footprint globally and as Margaret talked about, as these regions develop and it takes a period of years for them to develop, I would see that percentage of our international revenue increasing. But I think for the foreseeable future we are thinking mid-single digit percentages of our overall revenue.

And the next question comes from Anthony Paolone of JPMorgan.

Can you spend a minute in maybe talking about the competitive landscape in recruiting agents and anything out there trend wise? Whether it's new competitors or just changes in the industry that you are seeing? And then also anything that you think you all will either change or have to change as a public company in that process going forward.

I think overall, if you go back to the National Association of Realtors, at the peak they had 1.4 million associates in their membership. And that was in like heat of the market where, quite honestly anybody thought they could sell a home and make a commission. That’s gone down to 1 million associates now. And I think people who jumped into the real estate business really didn’t understand the complexity of it. The associates that are -- that million, they are the survivors as they take this industry very seriously. They want to be able to be with a brand that will really grow their presence, grow their brand name and allow them to have more business. And so actually going forward whether we are public or private, we really look at our franchised offices, our broker/owners, to go out there and recruit agents very locally. So I don’t see a change in what the industry does as far as recruiting. And the other focus we have is on our retention of our agents. By providing the tools, the resources and the system within the RE/MAX system, increase the retention that we have with our agents.

Okay. As you look out, you have already laid out sort of the annual dues increases that you expect to make over the next couple of years. How do you think about growth from continuing franchises and what comes back to the company from that part of the system?

Well, I think there is opportunity. We have announced a fee increase in both annual dues and continuing franchise commencing in January of 2014. I think as we look forward we will see how the economy improves and our agent count improves. And I think there are opportunities for regular [ph] occurring fee increases that will basically drop rates to the bottom line. I think there is opportunity to look at those fees and we are talking about, internally about when and by how much over time.

Okay. And then just last housekeeping item, Dave. The $3 million in 4Q of items, what's the geography of that going to be on the income statement?

By geography, where is it going to hit?

Yes.

Well, I haven't looked at the nature of those expenses yet but I think that a portion of that $3 million is comp expenses related to some options that were granted at the -- about 2 million that were granted at the time of the IPO and were fully vested. And then about $1 million or so -- and probably will be -- and will be expensed. And then $1 million or so of IPO cost will probably be expenses, I am pretty sure most of that is expense that will not be capitalized.

(Operator Instructions) And our next question will come from David Ridley-Lane of Bank of America Merrill Lynch.

Just had some questions on perhaps where the agents are joining [indiscernible], which states or regions have seen the greatest area of various types of agent growth?

So in the United States the biggest area of growth so far we have seen is Texas, Florida and California. Interestingly, most of those were some of the hardest hit in the recession and we are seeing the most growth come from that. Those three areas are also company-owned.

And then overall I would just say in Canada we are generally pretty flat, in Canada. So for U.S. and Canada, the bulk of the growth right now is coming from U.S., and a large part of that’s coming from U.S. company-owned regions.

And this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

No. Thank you so much for being on our first earnings call and we will talk to you again later. Thank you.

Thank you.