Good afternoon and welcome to the Re/Max Third Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Peter Crowe Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone and welcome to Re/Max's third quarter 2014 earnings conference call. Joining me today are our Chief Executive Officer Margaret Kelly and our Vice President and Corporate Controller, Karri Callahan. Our Chief Operating Officer and Chief Financial Officer, Dave Metzger regrets that he is not able to be on the call today. As we stated in the 8-K filed on Monday due to the illness of a family member, Dave has taken a temporary leave of absence. Karri Callahan and I are stepping in for Dave on the call today. Please visit the Investor Relations page at remax.com for all earnings related materials and to access the live webcast and a 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, our prepared remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially 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 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 filing with the SEC and the definitions and reconciliations of non-GAAP measures contained in the third 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. We are pleased witho our overall results this quarter as we delivered solid year-over-year growth in agent count, revenue and adjusted EBITDA. Turning to Slide 3, we continue to deliver strong agent growth from metrics that drives our business. Even with a mixed housing market we grew agent count by 5.3% adding 4,916 agents to our global network since the third quarter of 2013. This reinforces the strength and resilience of our recurring fee base business model. We continue to drive revenue with solid margins in the third quarter of 2014 as compared to the third quarter of 2013. Revenue increased 9.7% to $44.2 million. Our recurring revenue streams of continuing franchisees and annual dues accounted for nearly 60% of our total revenue. Adjusted EBITDA was up 5.9% to $23.4 million and our adjusted EBITDA margin was 52.8% compared to 54.8% in Q3 of 2013. For the nine months ended September 30, our adjusted EBITDA margin was 49.4% compared to 49.5% in the same period last year. We delivered adjusted basic and diluted earnings per share of $0.44 and $0.43 respectively and finally we continue to return capital to shareholders as we announced a dividend of $0.0625 per share on November 06. Turning to Slide 4, through our continued efforts to help Re/Max brokers effectively communicate the Re/Max value proposition we attracted additional agents to Re/Max ending the third quarter with 97,647 agents up 5.3% from the third quarter of 2013. In the United States we continue to expand our agent network. We ended the quarter with 57,181 agents an increase of 2,959 agents or 5.5% over Q3 of 2013. In Canada we ended Q3 with 19,107 agents an increase of 84 agents from Q3 of 2013 and…

Thank you, Margaret. Turning to Slide 7, you'll find a breakdown of our revenue streams. Overall our third quarter 2014 revenue increased 9.7% or $3.9 million compared to the same period in 2013. Revenue from continuing franchise fees was $18.5 million in Q3 an increase of 15.1% or $2.4 million over the same period last year largely driven by organic agent growth in the U.S. and incremental contributions from the Southwest and Central Atlantic regions which were acquired in Q4 of last year. Annual dues revenue was $7.7 million in Q3 an increase of $200,000 over Q3 2013 due to agent growth and the annual dues fee increase. Moving to our third revenue stream, broker fee revenue increased 14.9% or $1.1 million compared to Q3 of 2013 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 $5.5 million an increase of 400,000 or 7.8% over the prior year quarter. Finally, brokerage revenue for our 21 company-owned brokerage offices was $4.3 million in Q3 down $200,000 from the prior year quarter primarily as a result of a reduction in the number of closed transaction sides and home sales volume in the owned brokerage offices. Looking at Slide 8, selling, operating and administrative expenses decreased 1.5 million compared to Q3 of last year and were 46.5% of Q3 revenue. Professional fees decreased $1.5 million in Q3 primarily due to higher professional fees in the prior year quarter related to our IPO. The decrease in professional fees was partially offset by an increase in expenses related to ongoing public company costs in Q3 of this year. Other selling, operating, and administrative expenses…

Thanks Pete. Turn to slide 12, we'll try and give a bit of perspective on 2014 home sales. At the beginning of the year we believed moderate price appreciation and steady markets rates would create a positive environment for buyers and sellers. We also saw tight credit as a constraint on the housing market. With markets rate holding in the 4 to 4.5% range annual price appreciation of 5% and high lending standards still in place all three points have proven true and have had both positive and negative impacts on the housing market. Looking at the graph on the top half of the slide we see NARs 2013 and 2014 actual monthly existing home sales. 2014 sales started off slowly, but the gap between last year and this year has narrowed considerably. In fact existing home sales in June and again in September were actually slightly above 2013 levels. We believe that 2014 home sales have been following predictable seasonal trends while growing at a more sustainable rate. The graph on the bottom half of the slide highlights monthly existing home sales going back to 2011. Sales this year have risen above 2011 and 2012 levels and are essentially in line with 2013 despite some constraints on the housing market. This was important as it shows that housing was able to transition from an investor driven market to a market supported by traditional buyers and sellers. This also speaks to positive momentum for the housing recovery and some of the constraints such as availability of credit are now being addressed. Stiff lending standards continue to constrain the housing market, but recent comments by Federal Housing Finance Agency Director Mel Watt regarding near-term steps to improve access to credit are encouraging. We support increased efforts to make responsible loans to…

[Operator Instructions] And our first question will come from Vikram Malhotra of Morgan Stanley.

Thank you, hi Margaret. Could you may be just give us a sense of the SG&A level that you saw this quarter, what should we be using as kind of a good run rate? I imagine as you increase the agents and potentially expand into more opts the SG&A shouldn’t really go up that much. So I’m wondering kind of heading into 2015 what a good run rate is?

Hey, Vikram this is Pete and I'll start that. In different terms of the run rate outfit this quarter was overall pretty clean to going forward it’s obviously the, as we estimated at the beginning of this year about $4 million and in public company costs over the course of the entire year and that’s proven to be pretty true. A little heavier in Q1 and Q2 had been a little lighter, we had about $800,000 of public company cost this quarter, so that run rate should remain pretty clean going forward.

Okay, so that’s…

And Vikram, I’m sorry, just to that to that you’re absolutely right as we do add more agents we really don’t see that expense increasing, but again we are dealing with some public company costs that we’re settling now.

So, but is that the number we've basically seen in the third quarter the $20.5 million is that kind of a good number to use?

Yeah, I mean obviously, you know as personnel is a big percentage of our selling and operating, I feel we'll have some increases there in terms of annual increases, benefits and things of the like potentially goes up incrementally year-over-year but yes, I mean that's…

Okay.

But yes, I mean that’s a pretty clean run rate.

Okay, and then just it seems again this quarter the difference between the organic agent growth range between kind of the owned versus the franchise regions is a decent gap. I’m just kind of wondering can you maybe just remind us kind of what are some of the challenges or some of the difference that you’re seeing between the two regions and why there is such a big gap between the two?

Sure Vikram, you know in the owned regions, our regional team they’re incentivized and we measure their performance in their region. One of the nice things about having so many different regions actually run out of our headquarters here, is we’re able to share best practices with each other and we have a lot of commonalities that we can't run through all of the owned regions that we have. We also have a very high touch model which allows us to go out into the regions into the offices meeting the agents and it just does wonders for our recruiting and our retention. We’ve also started a new recruiting program called Momentum, we’re very excited about it. We made a big investment into that and it’s a three-day long program actually over three months. One day a month day long program that we are taking our brokers through starting day one, why are you in business? What’s your mission statement? What’s your value statement all the way through recruiting and running the business? It is a phenomenal reminder for some of our brokers that have been with us longer and it’s great for some of our new ones and we've already seen some success in that.

Thank you, and then just last one from my side. I guess on the balance sheet you now have close to $100 million in cash and I guess buying back the independent regions is probably just going to be lumpy and I’m not sure if you can, if you could give us an update on kind of just a visibility you have there, but absent buying back a region, I’m just kind of wondering if you can may be just walk us through how you’re thinking about the dividend because you seem to have a lot more cash than you would need to say buy back a large region which probably in the $50 million to $60 million range. So I’m just kind of wondering how you’re thinking about the dividend going forward in the end and just a use of cash if you don’t have the opportunity to buy back a region in 2015?

Sure, so obviously buying back regions is still a very top priority, but you're right it is lumpy. It’s very opportunistic, when they come up. The fact is when they do come, we want to be ready. For instance when the opportunity to buy Texas came up, we actually from the phone call that they had to say we're interested in selling, we closed it in six weeks. So it can be a very quick turnaround which we’d like to keep some cash on the balance Sheet. Second we’re going to reinvest in our business as we talked about with some of the CapEx we’re going to do. And then obviously dividends, our goal is to bring it to get through the first year and let things settle out, see what our cash position looks like, I know the board evaluates it on a quarterly basis and we’ll continue to do so.

Okay, just because the CapEx seems like it’s just a couple of million dollars that you'd probably be putting in so it just feels like even if you say Texas like opportunity came which certainly is not $100 million investment, it just seems like you have a lot more cash that you could potentially either use for either for some bolt-on acquisition or you know even just return to shareholders. I’m just kind of wondering are these options kind of, is there something you, are there multiple options or strategy that you may be discussing with the board?

Actually, we are constantly looking at different acquisition opportunities that may not be an independent region, but as you said are bolt-on, we’ve at it, we want to make sure that whatever we look at makes sense for our franchise model and fits and actually brings value not only to Re/Max but to our brokers and to our agents. So we are constantly looking to see what we could do out there, so far something just hasn’t come up yet.

Okay, thanks guys.

Thanks, Vikram.

And our next question comes from David Ridley-Lane of Merrill Lynch.

Hi, David.

Hello, so franchise sales in the third quarter looked pretty nicely, anything large and or chunky in the quarter or whether just you know blocking and tackling?

Go ahead.

Hey, David this is Pete. Just in terms of franchise sales, you know franchise sales and renewals were up about $300,000 in the quarter. We have seen some increased franchise sales in the U.S. and Canada specifically in the U.S. this year, pretty strong push by the franchise sales group and it has seen some strong result through the first nine months. You know we do see that it potentially slows down in the fourth quarter just due to some seasonality there. We still think we’ll end up on a franchise sale at or above last year. On the global side, it's offset by the global franchise sales. You know we did sell five countries in Q3 of last year and we have sold two countries in Q2 of this year. And we’ll see that as you know kind of persuasive throughout the year, where we sold a number more countries last year than we will this year. So global overall will be down this year.

Got it, and then can we get a little bit more color on the types of things that you’re going to be reinvesting back into the business in 2015?

Yeah, so we are looking at a couple tech CapEx, one is actually to work on our .com sites. We’re always out there looking at technology as it improves and how can we utilise that actually generate more leads for our agents and so one of the things will be investing in is our .com site. And then the other really is to upgrade our financial and our membership systems within our headquarters here.

Got it okay, and then you, historically has agent retention for you gone up or gone down when you see a year where existing home sales are treading water, are kind of flattish like we’re wrapping up are likely to see in 2014? Is this is a time where your agent retention goes up, stays the same, any thoughts around that?

David are you talking to certainly about Q4 or where we are in terms of…

I’m telling you that, once you got a year where you're kind of treading water for the next year do you see agent retention potentially go down or does it really not really change on how the prior year’s existing home sales?

It depends on the market, obviously market conditions you know can help agent recruiting just in terms of our model making more sense for more agents, but over time, historically our agent turnover rate has stayed about the same obviously with the exception of the during the recessionary period there. But we've come back to our historic norm in terms of turnover and it’s all pretty steady. So we’ll see what it looks like going into next year, but right now it seems to be holding pretty steady at its historic level.

Okay and just one last numbers question from me. Did you give the FX impact on EPS?

It was about $0.02.

Okay, thank you very much.

Thanks.

And our next question will come from Brandon Dobell of William Blair. Brandon Dobell - William Blair & Company: Thanks, Margaret given your comments about credit availability and the encouraging signs you are seeing on a number of fronts, how do you think about the NAR forecast in terms of volumes for next year, how much do you think those assumptions are building in on improvement because of the things that are happening from the FHFA or other regulatory bodies?

You know I do think that there is a little bit of built in optimism. 7.7%, honestly it seems a little bit high to me, I've seen some other forecasts talking more like 5% which makes sense. But based the year we have now, we have flat transactions for the most part in a 5% to 6% price. Next year what we’re seeing is an increase in the transactions and left price increase, which to me is encouraging. It will allow us to keep some good affordability out there, especially as credit loosens up and first time home buyers can then get into the market. Brandon Dobell - William Blair & Company: Okay, maybe that’s a good segue that the first time buyers, do you think the things that are going on legislatively or regulatory wise are enough to get a little momentum with that cohort of the market or is that just more about jobs being the primary driver?

Well, obviously jobs and especially wages that are a very big driver, but I think it’s also a perception issue with first-time homebuyers. I can't tell you how many thought that they had a 20% down payment and the reality is they only needed a 3% down payment. So to a certain degree we need some good PR out there to really educate the first time home buyer that what they can get is truly affordable and then when you layer on top of that, loosen some credit, not to lose, but you know common sense credit lending. I think you’re going to see an opening up of first-time homebuyers definitely next year. Brandon Dobell - William Blair & Company: Okay. And I don’t think you guys have talked in the past about having agent surveys or agent rankings. I know some firms in tech firms in the space have talked about the opportunity, the potential for that you know for buyers and sellers to rank the agency or work with, how do you guys think about that as part of your kind of go-to-market strategy and have you had potential agents ask about that in recruiting process?

Yeah, actually we’ve been a proponent for rating of agents because we look at the quality of our agents and we know how well we will do at that. The only problem with some of the rating is, it really has to be objective and not subjective. You can't rate an agent low because the garbage disposal does not work. So as long as they can come up with a rating that is objective and fair across I think it would be a great idea. Brandon Dobell - William Blair & Company: Okay, and then final one from me is, as you think about the technology improvements to remax.com if you guys have set or maybe how do we think about metrics or goals around lead conversions, I mean do you think your lead conversions from that site can improve a lot are the technology improvements designed to do that or is it just more about efficiencies rather than improving conversion rates?

Well it's kind of yes. What we want to do is we want to enhance lead generation. We also are investing to improve our mobile capability because what we're seeing is consumers do most of their searching on mobile devices any more versus a desktop. And then obviously search engine optimization and all the good techs stuff that they throw at us. So we're really trying to get better leads, get more leads and make it easier for consumers to use. Brandon Dobell - William Blair & Company: Okay, great, thanks a lot.

[Operator Instructions] And showing no further questions, I would like to turn the conference back over to Margaret Kelly for any closing remarks.

All right, thank you operator and thank you all for joining us on the call today.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.