Good afternoon. And welcome to the Re/Max Second Quarter 2014 Earnings Conference Call. All participants will be in listen only mode. (Operator Instructions). Please note that this event is being recorded. I would now like to turn the conference over to Peter Crowe, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone. And welcome to Re/Max's second quarter 2014 earnings conference call. Joining me today are our Chief Executive Officer Margaret Kelly and our Chief Operating Officer and Chief Financial Officer, Dave Metzger. Please visit the Investor Relations page at www.remax.com 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, 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. Forward -looking statements address matter 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 agent count, revenue, operating expenses, financial guidance, housing market conditions as well as non-GAAP financial measures. As a reminder, forward- looking statements represents management's current estimate, Re/Max assumes no obligation to update any forward looking statements in the future. We encourage listeners to review the more detailed discussion related to these forward looking statements contained in our filing with the SEC and the definitions and reconciliations of non-GAAP measures contained in the second quarter earnings press release which is available on our website. With that, I'd like to turn the call over to Re/Max's CEO Margaret Kelly. Margaret?

Thank you, Pete. And thanks to everyone for joining our call today. Now I want to highlight two key points about our second quarter performance. First, we continue to grow despite mixed housing data. And second we are very proud that RISMedia Power Broker report and the Real Trends 500 survey have once again identified Re/Max agents as the most productive agents of all national brands in the industry. Now let me take you through the highlights on Slide 3. We delivered strong agent growth as we grew total agent count by 4.7% adding 4,280 agents to our global network since the second quarter of 2013. Our recurring fee-based model continued to drive revenue growth with solid margins and strong cash flow in the second quarter as compared to the second quarter of 2013. Revenue increased 7.8% to $42.3 million. Our recurring revenue stream of annual dues, continuing franchise fees accounted for 60.7% of our total revenue. Our adjusted EBITDA was up 13.7% to $24.2 million. Our adjusted EBITDA margin was 57.2% compared to 54.2% in Q2 of 2013. For the six months ended June 30, our adjusted EBITDA margin was 48% compared to 46.9% in the same period last year. Our efforts to grow agent count while managing our expenses is delivering margin expansion. We delivered adjusted basic and diluted earnings per share of $0.46 and $0.45 respectively. And finally we are well positioned to return capital to shareholders. On August 6, we were pleased to announce that dividends of $0.0625 per share. Turning to Slide 4, you will see we continue to recruit agents to our network, ending the second quarter with 96,089 up 4.7% for the second quarter of 2013. As we discussed on our first quarter call, the content we created our national advertising and recruiting…

Thank you, Margaret. Turning to Slide 7. You will find a breakdown of our revenue streams. Overall, our second quarter 2014 revenue increased 7.8% or $3.1 million compared to the same period in 2013. Our recurring revenue streams, continuing franchise fees and annual dues accounted for 60.7% of our revenue for the quarter compared to 58.3% in the prior year quarter demonstrating the stability of our overall revenue. Continuing franchise fees were $18 million in Q2, an increase of 13.8% or $2.2 million over the same period last year largely driven by incremental contributions from the Southwest and Central Atlantic regions which we acquired in Q4 of last year and organic agent growth in the U.S. Annual dues were $7.6 million in Q2, an increase of $600,000 over Q2 of 2013, in part due to agent growth and annual dues fee increase. Moving to our third revenue stream, broker fee revenue increased 17.4% or $1.2 million compared to Q2 of 2013, mainly due to increased agent count and incremental contributions from the acquired Southwest and Central Atlantic regions. Broker fee revenue is the only portion of our revenue that is directly tied to transaction volume. Franchise sales and other franchise revenue was in line with the prior year quarter at $4.6 million. Finally, brokerage revenue for our 21 company owned brokerage offices was $4.1 million in Q2, down $875,000 from the prior year quarter as result of reduced management fee revenue recognized by our owned brokerage offices and reduction in a number of closed transaction size and home sales volume in the owned brokerage offices. Looking at Slide 8. Selling, operating and administrative expenses were 46% of revenue in Q2 and decreased by $2.5 million compared to Q2 of last year. Personnel cost were generally in line with Q2 of…

All right. Thanks, Dave. Turning to Slide 12, housing data continues to be mixed but on a positive note. We've seen existing home sales follow a normal upward seasonal trends in the spring and summer month. Looking at the graph on the top half of the slide which represents NAR's monthly existing home sales that are not seasonally adjusted, we had a slow start to this year compared to last year. But we did gain positive momentum in the last three months. Actual June sales were even slightly higher than during the strong selling season of June 2013. The graph at the bottom half of the slide highlights monthly existing home sales going back to 2011. You will note that recovery took hold in 2012 and jumped to heighten levels in 2013. In June of this year, existing home sales trended above the high of 2012 and just below the high of 2013 demonstrating a positive trend for the housing recovery. Coming into the quarter, the housing market was affected by constrained inventory and tight lending standard. Inventory rose during the quarter and in June the inventory was at its highest level in over a year. Additionally, price appreciation is beginning to slow. So moderate price appreciation and increased affordability are positive signs for both buyers and sellers in this market. Tight lending standards are still impacting the housing market as banks and other lenders start to ease some of their restrictive lending standards, we will see a positive effect on the housing market. But as we said before, making credit more available will take time to unfold. We are still encouraged that this topic is a main point of focus for the Fed reserve and for the Federal Housing Finance agency and we will continue to work with NAR…

(Operator Instructions) Our first question comes from Vikram Malhotra at Morgan Stanley.

Hi, thank you. Hi, Margaret. Congrats on the strong results this quarter. Could you just give us a bit more color on the SG&A? Kind of what drove the lower than anticipated SG&A and is there going to be kind of catch up in the back half that would keep the SG&A outlook the same for the full year?

Yes. Vikram, this is Dave. Yes, there are -- there were some expenses across multiple categories and departments that really just timing and they have been pushed out, we think into Q3, Q4 we have adjusted--we've looked at those and it hasn't changed our guidance. We think it is just more of timing on when those expenses were hit. And I think when you look at our full year guidance; we've taken all that into account.

Okay. And then just on the organic agent growth trend. It seems like in the company owned regions you had -- was it kind of 6% growth in the U.S. And then in the independent regions-- and the agent growth was 2% and this trend is probably been there for few quarters. Can you maybe just remind us of some of the -- what are you seeing or what are you doing in the company owned versus what's not being done in the independent regions for the growth to be so wide -- the difference to be wide?

Sure. We've created recruiting programs out there, Open Your Eyes to Re/Max campaign called Missing You which is attract back some of our former Re/Max agents to come back into our offices. We offer to all of the regions across the board. Obviously, we implemented very strongly within the company owned regions. And the lots of our independent regions have their own recruiting programs or some programs that they have in order to attract agents in. And they all just work it different rates and to get the agents back in. But all-in-all, we are all focused on growing our regions but we definitely push it very hard in the company owned regions.

Okay. And then just last one Dave for me. I mean can you just kind of give us your updated thoughts on just cash utilization? I see you paid down debt, but just kind of the puts and takes between visibility on buying back regions versus thoughts on maybe just being kind of -- either upping the dividend or giving maybe one time special dividend given the cash you have on the balance sheet.

Yes. I mean the way we are thinking about our cash position and we do have about $84 million in cash on the balance sheet, is consistent what we have been talking about. I think we are going to remain be consistent with that throughout this year. The first use is to acquire independent regions and I'll come back to that in more detail on the second. Reinvestment technology, we have some technology initiatives that we are considering for next year. And then we will assess other acquisitions opportunities as they come up. And then just increasing our dividend probably that's not going to happen at this time. We consistently say our dividend I think going forward a lot we'll have to see what we do but right now we -- they are going to stay at the $0.0625 I believe. As far as the independent region, Margaret and I are constantly in contact and discussion with independent region owners and that dialogue will continue.

Our next question comes from Sean Kim at RBC Capital Markets.

Hi, good afternoon. So it seems like internationally your agent count has actually -- the additions internationally have actually accelerated in the second quarter. Can you give us some color on where you are seeing growth internationally? What regions are strong? Are you -- is China beginning to impact numbers more?

Actually no, China has not begun to impact quite yet. They are still working to create their infrastructure. And actually we are anticipating we probably won't have any regional sales within China this year. We originally thought we would, we are looking at that more towards the first part of next year. But some areas, we've tremendous growth is Mexico, Argentina, Brazil are really starting to show increase agent count in those areas.

And Sean, this is Dave. Just keep in mind while we are pretty impressed with our agent count growth internationally that are still fairly insignificant amount of our revenue. It is about 5%. So while we have those big gains there, it won't translate into big revenue in the near term. Maybe over time, especially as China develop it but not right now.

Got you, okay. And one question on Canada. Something like two thirds of the agents in Canada are independent. Is there any possibility for you to buying the regional rights there as well or is that really out of the question? Not possible?

They are independent.

It is, I am sorry, yes, independent regions.

In Canada.

Yes, in Canada because there are three regions out there. We own one and two are independent. Just like we look in the United States, we looked to see who might be interested at whatever time to possibly sell their region. The regions up there well run and they continue to have 17% of the overall agents in the area. So they are good job.

Our next question from Brandon Dobell, William Blair & Company. Brandon Dobell - William Blair & Company: Thanks. Want to focus back on the agents for a second. Looking back over history, what's been a seasonality of the agent recruitment and should we expect that to be different this year than the past and I guess couple of years given the pace of the housing recovery has slowed a bit.

We used to see that towards the end of the year sometime first to the year recruitment was a little bit slower. But to be honest with you, if you look back over since the recession started over the last five or six years, it's really hard to look what the new trend is going to be. But a lot of agents are so incredibly busy in the spring and summer months that for them looking to go somewhere isn't necessary what their focus is. And it just all depends on what's going on in their market and in their office at the time. So what we've got to look at right now is what is going to be the trending in the years to come over the different months. Brandon Dobell - William Blair & Company: Okay. And then shifting I guess to inventory trends a little bit. How much visibility do you have across I guess across the entire Re/Max brand or franchise as well as company owned in terms of I guess listing inventory, changes in listing inventory? And then probably one step further, I guess traffic or tours that the agents are setting, I guess I am trying to get a sense of the trends that you can see in your business or maybe predictors of September, October, November going back to your comments Margaret about seasonal and non-seasonal factors around housing sales.

Yes. What our agents are seeing is the biggest difficulty they have right now is obviously low inventory despite the fact it's starting to grow again. What we see within those inventory levels is there are still a lot of homes that, I hate to say are undesirable, and so when you take those out it makes the inventory even tighter. And tight lending standards are also making it difficult for some first time home buyers to get into the market. The other areas that are of concern to our agents are the availability of credit for them. So anecdotally what we are hearing from our membership is it's been busy. Things have picked up in the recent months. They are looking to see would that continue into the fall or will we go back into the normal trends where fall slows down into the winter months. Brandon Dobell - William Blair & Company: Okay. And then final one for me. Focusing on the first time buyers and that was still pretty tough part of the market. And I would imagine more so given the average age of your agents but is it anything specific you guys are doing in terms of recruitment or technology advancement that kind of thing to focus a little bit more on those younger potential buyers out there. As we think about when that part of the market starts to come back, if you I guess grab outsize market share?

Yes. So what we do is we obviously focus on all buyers. It is a very unique time that there are four specific generations out there right now with four very specific and different need. And the interesting thing that we see is normally first time home buyers are 40% of the market. And right now there is only 28% of the market. And the biggest problems that they are having are credit challenges. You add on top of that low inventory. And many of them have student debt and all of that really does have an impact on the first time home buyers that are coming into the market. We are really hoping that FHA and some of the other government agency will be able to loosen up some of the standards, not make them too loose but make it so it is much more conducive for first time home buyers to get into the market.

(Operator Instructions) And our next question comes from David Ridley-Lane at BofA Merrill Lynch.

So there has been a pretty market decline and foreclosures and short sales for this year. On the other hand, it's healthy development on the -- for the housing market. On the other it is fewer transactions. So and my question is, how much of this decline in foreclosures really impact agent recruiting, agent growth as perhaps a lot of those sales weren’t being brokered anyway.

Well, so distressed properties now are about 11% of the market. They were obviously much higher in the heat of the recession. What we are seeing there is shift of the buyers, so many of the buyers at the time who bought the foreclosed distressed properties in the short sales were investors who were turning those into rental properties. And what we are seeing now is the investor population is actually gone down significantly only about 16% of the buyers out there are investors. And what they are doing is they are actually fixing up the properties and then reselling them. And so it's just an interesting time even though the distressed property percentage has gone down, the number of existing home sales is still estimated to be around $5 million or little over $5 million. So it's just a change in the mix versus really a change in the number. Our agents actually know how to fluctuate with the market. And help in all forms of sales out there.

Got it. And then I know there are some other things in the franchise sales revenue line. I was just kind of curious how the actual franchise sales themselves for this quarter?

All right. Let me grab some numbers. The franchise sales are actually right in line with the way they were last year. Really the only changes were seen is in previous year we had more master franchise or country sales in the revenue line. And we won't see that this year. We have China and Japan in the previous two years. Dave anything?

Yes. So franchise sales were strong. The guys delivered and what they did. They've done really well in this market. And like Margaret said the revenue was also little bit by, that for quarter-over-quarter comparison was we didn't have some of the master country franchise sales in Q2. And then we have a little bit of pick up in some approved supplier income. So all of it balances out to make it about pretty stable and rate in line where we thought would be. And keep it in mind that line items are about 15% of our overall revenue. It will always be very stable and consistent.

Got it and then just a numbers questions. What's your estimate for 2014 CapEx?

Right now I think we spent about $700,000 so far year-to-date. I think it will probably be in $1 million range right now, absent any other initiative that nothing is necessary on the board right now. So I think we will be about where we have always been about a million bucks or so.

Great. And then the last one for me. How is the competitive landscape for agent recruiting right now? Are you seeing any changes around that? Thanks.

Not seen change, same as pretty much as it has been all year. NAR is growing so for this year about 2.1%. We've obviously outgrown that. But we are seeing slow movement within the overall realtor population. But as we look at our own recruiting. It's kind of interesting. We are seeing that about 15% of the agents that we are recruiting are actually former Re/Max agents coming back to Re/Max. And we are seeing in the low 20% range, a lot of new people, not in real estate before coming in to the market. And that number actually, it's first kind of surprised us so we dug deeper into it and we were realizing that just like in the down turn when we had team leaders who had very large team as they started to have a decrease in their business. They didn't keep the team as biggest they have. And that's where a lot of our agent loss came from. What we are seeing now is that those teams begin to grow again; we are getting new people into the business.

This concludes the question-and-answer session. I would like to turn the conference back over to Margaret Kelly for any closing remarks.

That is it. Thank you all for joining us on the call today.