Good morning and welcome to RE/MAX Holdings First Quarter 2021 Earnings Conference Call and Webcast. My name is Megan 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 first quarter 2021 earnings conference call. Please visit the Investor Relations page of remax.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 2. Our prepared remarks and 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 including sticking to [ph] bond recovery of those markets, capital allocation, dividends, 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 first quarter 2021 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 Adam Contos, our Chief Executive Officer; Karri Callahan, our Chief Financial Officer; Nick Bailey RE/MAX Chief Customer Officer; and Ward Morrison, the President of Motto Mortgage. With that, I'd like to turn the call over to RE/MAX Holdings CEO, Adam Contos. Adam?

Thank you, Andy, and thanks to everyone for joining our call today. Looking at Slide 3. We continue to grow with the robust housing market and record Motto growth that help drive strong financial results for the first quarter. Ongoing execution of our strategy and the benefits of investments we've made in recent years are having an impact. We're seeing strength in our key leading indicators. RE/MAX agent growth as well as Motto franchise sales and open offices alongside improving financial performance. During the first quarter, we increased and enhanced our value proposition for both of our franchise networks. At our recent RE/MAX convention, we introduced innovative programs and new tools, technology and educational resources for the exclusive benefit of our affiliates. At the same time, within our mortgage business we continue to ramp up our Wemlo acquisition, offering affordable, dependable loan process and services to more of our Motto franchisees each week. Highlights of the first quarter included revenue of $72.3 million, up 3%, adjusted EBITDA of $23.2 million, up 19%, adjusted diluted earnings per share of $0.46, up 18%, although RE/MAX agent count increase significantly, reaching a new all-time high and Motto franchise sales continued at a record pace. Turning to Slide 4. April is generally when prominent industry publications announce their survey results from the prior year. So, both RE/MAX and Motto recognition of our track record of outstanding annual performance and consistent industry leadership continues. In fact, the high bar we set each year remains way above the industry norms. Case in point. RE/MAX agents productivity. REAL Trends recently announced the result of its 2020 annual survey of large US brokerages. One of the most widely followed reports in real estate. The REAL Trends 500 links brokerages by total residential real estate transaction sites issued a…

Thanks, Adam, Good morning, everyone. Looking at Slide 6, overall 18 agent count increased significantly, growing more than 6% year-over-year. We added over 8,000 agents worldwide since March 2020. In fact, we added more agents in the past year than we had in any 12-month period over a decade. Our agent count performance outside the US and Canada accelerated and we grew more than 16% year-over-year. We experienced widespread growth globally with countries in Europe, South America and Africa among the better performers. Canada enjoyed similar success as we extended our leading market position up north. Agent growth accelerated to almost 5% year-over-year as we added nearly 1,000 agents. It was our largest number of agent additions in four years. We saw growth across the country with the Ontario Atlantic region leading the way. In the US we're encouraged that our agent count has virtually recovered from the pandemic-related losses we experienced a year ago. Moreover, we're seeing an uplift in agent count company-owned regions in the past few weeks. Many of our affiliates enjoy a banner [ph] year in sales last year and are expecting similar results this year. Armed within unrivaled strength of our brand and what we believe are the industry's best collection of tool, technology and education, we continue to see impressive agent productivity as evidenced by the industry survey Adam referenced earlier. Turning to Slide 7. RE/MAX held our Annual Convention in Orlando, Florida in March. For the first time ever, we hosted our conference in a hybrid format, featuring a virtual option as well as an in-person experience. We had a tremendous response with more than 6,000 attendees both live and virtual from over 60 countries. During that event, we announced several important additions to our value proposition and perhaps the most notable, we…

Thanks, Nick. Looking at Slide 8, we continue selling franchises at a record pace through the first quarter, setting a new annual high for the trailing 12-month period ended March 31. We've sold more than 70 franchises during the past year. Furthermore, since inception to-date, we have now sold over 250 franchises, an impressive milestone for any franchise concept, let alone one under five years old. The accelerating growth of the Motto Mortgage network as well as the diversification of Motto ownership across a variety of leading real estate brands is exciting and building. We're gaining market share in the broker channel right now as more real estate brokers and teams realize the value of having an ancillary mortgage business and embrace the benefits of the franchise model. Interest in owning a Motto office remains high. We are currently running ahead of last year's franchise sales pace. We still anticipate selling between 60 and 80 Motto franchises for the full year 2021. Equally exciting is the growing number of Motto offices that are open and operate. We now have over 150 open Motto stores in almost 40 states and we're aiming to have 200 offices open by the end of 2021. At Motto, we set our goals high, challenges is part of our culture. One of the many reasons we've achieved so much success so quickly. We're coming off a record 2020 during which time Motto network closed nearly $2.5 billion in loan volume, more than doubling our 2019 total. Our goal in 2021 is to double loan volume again. Although many industry pundits are forecasting a slower 2021 as a refi boom phase, we believe we have a good chance to achieve our goal of doubling last year's volume in part, because of Motto's unique position in the purchase…

Thank you, Ward. Good morning, everyone. Moving to Slide 9, a healthy housing market and ongoing Motto expansion help drive strong financial performance during the first quarter. Our key leading indicators are trending well and we generated revenue, earning and margin growth during Q1, while converting more than 70% of adjusted EBITDA into free cash flow during the past 12 months. Total revenue was $72.3 million, an increase of approximately $2 million or 2.9% compared to the first quarter of 2020. Acquisitions increased overall revenue by 2.3% and FX impact was negligible. Organic revenue was virtually flat for the quarter, but we believe that metric does not capture the improving performance in our core businesses. Further to that point, recurring revenue stream which consist of continuing franchise fees and annual dues grew 3% compared to the first quarter of 2020. Broker fees also were up over 26% due to the strong housing market. In contrast, franchise sales and other revenue was down more than expected, primarily due to lower revenue from our annual agent conference, a function of COVID-19 and declining booj legacy revenue. Excluding these two items and the marketing fund, organic revenue growth from our core businesses was approximately 4% in line with our mid-single digit organic growth expectation for the full year 2021. Our organic growth expectations exclude any anticipated benefits from lapping the COVID-related fee waivers we extended to our affiliates during the second quarter of last year. Looking ahead to the remainder of 2021, we expect our organic growth to benefit from multiple drivers, more revenue from broker fees due to the healthy housing market, increasing agent count, pricing, Motto expansion and growth from acquisitions once Gadberry and Wemlo lap their one-year anniversary and fall into the organic bucket. Looking at Slide 10, selling, operating…

Thanks, Karri. Moving to Slide 12, we began the year in a strong position and look forward to continued growth as the year unfolds. We're focused on expanding our value proposition for networks and helping our affiliates succeed in the marketplace. We believe we have a winning strategy, winning brands and winning networks and look forward to seeing our recent investments continue to make a positive impact on our future results. With that, operator, let's open it up for questions.

[Operator Instructions] Your first question is from Ryan McKeveny with Zelman & Associates. Your line is open.

Hey, good morning and thank you. Two questions for me. So first question, I'm curious if you can just share some thoughts around the adoption of some of the tech products, services, booj first etc. and maybe how that's been trending relative to your expectations? And the second question will be, so you mentioned, Adam, 70% - I think sort of 70% year-over-year increase in leads or maybe this was Nick, sorry, leads to agents and I guess the question is are you or is there opportunity to more directly monetize that lead flow orders that embedded within kind of the RE/MAX value proposition and I guess what I'm thinking about is some brokerages generate a more favorable split to the company on company-driven leads versus let's say agent-driven business. So, I guess I'm just curious on your approach with the leads being generated and thinking about kind of the economic benefits, RE/MAX is that more around just the general value proposition in the agent count dynamics or is there opportunity to further directly monetize those leads that you're generating? Thank you so much.

Yes. Great. Hi, Ryan. It's Nick. Thanks for the question. First off, on tech adoption, that continues to grow between booj and First. And mentioned in First that we've had an uptick, there were nearing 10% of our membership on a paid product. Very pleased there and statistically we've released that the average user of the first platform is 50% more productive than a non-user. So we're seeing very strong results. As far as booj, we mentioned the number of websites publish, that continues to increase month-over-month as do active users that we're tracking as do lead. So the platform is continuing not only with adoption, but we've had a lot of that driven by the feature releases and the expansion of the product. It's been around just over a year since we launched and so, those will continue. In terms of lead monetization, historically, when you rewind back to the mid-2000s when we launched the new.com LeadStreet, one of our competitive advantages has been that we send referral fee-free leads to the agents and so that has just been part of our culture. Now in terms of the opportunity to monetize what those leads look like, I think that there is some opportunity for that, we have had discussions around that, because the idea of leads going into an environment to be incubated to be one, to a level that they're more purchase-ready, we're seeing a tolerance from agents to say, they're willing to pay for that incubation type of service versus just monetize off of the cold lead. But, for the time being right now, the leads are referral fee-free and increasing to agents.

That makes sense. Very helpful, Nick. Thank you.

Your next question is from Vikram Malhotra with Morgan Stanley. Your line is open.

Thanks for taking the question. Good morning, everyone. Just maybe given the strength of the housing market. I'm wondering if you can give us update specifically on the US and your expectations for agent count in the balance of the year. One would think in a very strong market you have new folks coming into the brokerage business just trying it out on their own. I'm just wondering if you can give us an update on potential share gains what you may be doing in the second half to kind of maybe ramp the agents up even more?

Hey, hi, good morning Vikram, it's Adam. So I'll start and then I'll hand it off here for a deeper dive into it, but we look at agent count and the dynamics in this marketplace, first of all, it's very high velocity marketplace, a lot of activity going on, but really what we're finding is the agents who are best prepared to deal with that activity, with the best backing in the brokerage, in the tools and technology available to them are performing at the highest level, take the first asset for instance that somebody walks into RE/MAX and got access to that in the US. So, our goal internally here is to continue to build the excitement and the reliance upon the tools to give you the most time with the customers in order to do the best job possible. The marketplace though is obviously challenging from a perspective of the fact that it is very noisy there, just so many new agents doing very little business out there, and it's not doing that a substantial benefit to the consumer as a result. So, that's why we continue to lean on our average agent productivity but we see some good excitement in the recruitment occurring in our industry. We see a lot of focus by the brokers and growing their business. We also continue to see great interest in the franchise model, and in the purchase and expansion of our franchise footprint as a result. So, that's a positive tailwind for the recruitment. I'll pass it over Nick to put a bow on anything else here that I might have missed.

Sure. Yes, I think just in general that a strong market and an increase in the total agent count increases the overall TAM of the industry and that's going to help us in any form or fashion with growth. However, we always continue to say though, it's known that RE/MAX is not home of the brand new agents. Now, it doesn't mean we have had new agents that have joined us. I know we have new agents that are joining us now and we have some of our brokerages that have very strong training programs as do we and they can take advantage of it. But, based on the average production of a RE/MAX agent, they generally have twice as much experience in the business and do twice as many transactions and therefore, when we see the velocity of just licensees in general in the industry increase at the rate that it has, we're not going to be directly tied to that since we're going after more of a seasoned top producer.

That makes sense. Two more quick ones. Just first on the margins, maybe just give us an update as you - it's for the balance of the year with Motto increasing and contribution from the newer businesses, how should we think about the margin ramp for the balance of the year?

Hey, good morning, Vikram. Great question. So I think we're really trending - we're really happy with the performance that we're seeing across the key leading indicators, so obviously access some of the non-recurring stuff that hit in the first quarter, organic revenue kind of in that 4% and really trending towards that, mid-single-digit organic revenue growth. Assuming we continue to see the ramp in the top line that just given the strength of the business model, the franchise characteristics should see the margin pickup in the back half of the year. So, with regards to some of the investment, still looking at about a $2.5 million to $3.5 million of kind of headwind to adjusted EBITDA from those this year, looking to kind of scale and improve on the margin performance in the back half. So, really kind of targeting the midpoint of the ranges and some margin improvement in the back half of the year.

Okay, that makes sense. And just last one, you mentioned in your prepared remarks, as prospects for work from anywhere you've seen a clear demand increase. I'm just wondering, off the top of your head, are there a couple of markets that you can sight where you're just seeing demand relatively just be very strong specifically because of this phenomenon, I'm just wondering, if there's a real pick up in certain markets with its migration has occurred.

I don't think there is any market with - and when you talk about migration, are you talking agent count or just home sales in general?

No, home sale, these fifty as you mentioned, buyers are now looking at work from anywhere So, you are seeing this translate into demand for homes. I'm just wondering are there any markets that stand out?

I don't think there is any to stand out specifically - last year I think we saw high density population areas, specifically the bay area, New York City that you saw individuals moving to suburbs, you saw South Florida population increase and overall now we're starting to see some of those high-density areas as they open up in general, people are coming back. So I don't think there is one specific area to point to.

Okay, great. Thanks so much.

Your next question is from Stephen Sheldon with William Blair. Your line is open.

Good morning. Thanks for taking my question. Yes, first, the healthcare offering sounds really interesting. I guess, can you just give some more detail on when that will be rolling out and the kind of structure of the offering?

Yes, hi, Stephen. Very excited about the healthcare offering. We just announced that at our conference a few weeks ago, and it was welcomed with open arms. Obviously, going to challenge for 1099 independent contractors to secure healthcare if they don't have, spouse or partner within the household. And so we found the company that structures this on an individual basis, and what that means is the entire brokerage doesn't have to be part of the healthcare program, it is up to each individual agent to have the opportunity to opt in for coverage, which is somewhat unique. So, that's advantage, number one. The second part of it is the way in which it's structured, it is backed by one of the big four, but it also is outlined in a manner of which family or individual plus family coverage, very similar to the way corporate type of healthcare offering would be given to employees and so the structure marries that of employees which is what makes it so attractive. So the rates are extremely competitive, the options are competitive, it includes dental and vision and all the goodies that most employees get. And so that's why we believe it's been welcomed with open arms. So, we believe, not only is it going to help on retention side, but it is a great recruiting tool for those that needed.

Got it. That's good to hear. And then we did see the pickup in agent growth especially in Canada. Can you talk some about the divergent agent trend between own and independent operations in the US and Canada? It seems like a lot of sequential growth in the last few quarters this company in independent agents. So is there anything the independent regional owners are doing differently, I guess?

Yes, I'll start with Canada, I mean, there is not one button that we push when it comes to growth, I think it comes down to three things overall; one, recruiting firms that are available to everyone and the engagement was strong last year and continues to strengthen. The second part is, like we mentioned in the scripted remarks with the value proposition, the new offerings that we have, the announcement of taking technology to Canada has created a nice tech segment, that it helps with brokers going to the market. But, let me give you Canadian specifically and then we'll talk about operating regions versus independent. Canada's market a couple of years ago was not as strong as the US. Canada overall, especially in the western side Ontario or Toronto specifically has been strong economically for the past couple of years, but overall the market in Canada was bumping along. The pandemic unfortunately was very gracious to the Canadian real estate market and it's very strong and so they've seen great confidence come back, brokers are confident about the market which that confidence leads to an increase in recruiting. So not all just one button. In terms of looking at operating regions versus independent, of course, we have to look at geographies, total counts, etc. and we are working together with the independent regions collectively on recruiting programs and systems. And so we are seeing pockets of growth even in the owned regions, tracking by state, by market and so there are a lot of bright spots in both operated and independent. We have the opportunity to go through some cleansing of some underperformers in the operated regions last year which impacted some of our terminations - which office count termination was up because of the cleanse of the non-performers which we believe in turn and we show that it directly impacts our ability to re-grow in a market when we remove an underperformer. So, I believe in the operating regions, we were more aggressive with cleansing the underperformers in general than the independents.

Very helpful. Thank you.

Your next question is from Tom McJoynt from KBW. Your line is open.

Hey, good morning guys, Thanks for taking my question. So as we think over the next couple of quarters in terms of looking at broker deals, the line on income statement, obviously, you're growing up against some pretty easy comps in 2020, so perhaps better looking against 2019, do you've an outlook for how strong this housing might translate to increase in broker deals relative to 2019?

Hey, good morning, Tommy. So, great question. Definitely to strengthen overall housing is obviously a tailwind to broker fee obviously [indiscernible] relatively small portion of our revenue. And so obviously RE/MAX tends to be a proxy for the overall US housing market both in terms of average home price and then just our participation with this market in general. And so I think if you just look at whatever your estimates are for just housing transactions as well as volume growth, we should track pretty closely with the market because we tend to really be a proxy for just median home price and overall on transaction.

Okay, great, it's helpful. And then switching over to Motto, obviously, there has been a lot of headlines about competition in the broker channel, a lot of interest now shift to a purchase marketing, to expect a demand there to remain strong. Have you noticed any of those headline competition kind of spilling over to even stronger kind of interesting in Motto?

Yes, I think as the broker channel just gives its due, we're seeing more and more interest in it for sure, in particularly our models we typically do sell real estate companies, that's our large majority right now and they have that purchase money transaction. So we continue to see great interest from real estate companies who want to monetize that particular portion of their referral base and broker channel continues to be one that not only our wholesalers are pushing, we're pushing, everybody is pushing to try and grow that channel, because we think it offers consumers great choice, transparency and we're excited about.

Thanks. And has there been any new competitors to Motto or these kind of still think about outstanding and seven [ph] classes already on national mortgage franchise?

Yes, there is no real national mortgage franchise out there, obviously, there're some larger brokerages out there that we consider some of our competition, but we continue to emphasize sort of our pathway and all the tools and services that we provide to our people. So, we're just focusing on model, we really don't see a competitor on [indiscernible].

Great. Thanks, Ward.

Your next question is from Mathew Gaudioso with Compass Point. Your line is open.

Hey, good morning, Maybe just following up on Canada and the announcement of booj to roll out there this year. I was wondering if you can share what the kind of technology environment looks like up there, are a lot of the same vendors in the US, do they also have platforms out there or do you see booj as maybe being an even bigger differentiator for agents and brokerages in Canada?

Yes, good question. There are a number of providers that do offer services both in Canada and the US. I think in terms of overall, the systems are disparate in Canada and so what we will be bringing with the booj platform is that one ecosystem, the idea of utilizing G73 to pull all of the fragmented data across the country together on the front end is very advantageous and once we go live with a similar set of products with CRM, website, things of that nature, it will be a competitive advantage to have kind of one system. But, similar to the US, I think Canada experiences the same thing that the average agent is using multiple systems to conduct their business those of which do not speak to one another. And so to bring a solution that's all encompassed in a single ecosystem, we believe it's going to be a competitive advantage.

That's helpful. And then looking at international, another strong quarter there on agent growth. Wondering if you have any latest thoughts on monetization efforts on the international piece and what the - I guess ramp looks like to get technology offering in place for international events?

Hey, good morning. It's Adam. So we're taking a hard look at really the holistic monetization of the home ownership life cycle both in the US, North America and an outward from there. So we don't have anything to announce at this point with respect to that; however, it is a key strategic focus of the organization to determine how the implementation of technology, data, infrastructure, given obviously just a myriad of different data and privacy laws, the year encounter by doing so, but ultimately that is one of the long-term goals is how do we roll out our technology data platforms and the home ownership life cycle throughout the global infrastructure that RE/MAX build.

Great, thanks so much.

Your final question is from John Campbell with Stephens. Your line is open.

Hey guys, good morning. This is James Hall stepping in for John Campbell. I just had a few specific questions around the regions. Are there any that you would call out as kind of the specifics around the resurgency you've seen?

Region specifically - I don't think there is a specific region, the market as a whole, generally has been - you can point to the coast lines at least in the US have always been where the vast majority of the market lies. The Midwest in the center of the country is generally kind of a steady-eddy but they are experiencing very similar things, the rest of the country was extremely low inventory and bidding wars and double-digit price appreciation. In some of those markets. So it's fairly consistent, but I think it's just a matter of lot of people want to live in more in climates around the coastal areas and that's something that's always been part of the industry, and we're not seeing anything different.

Okay. And then, just a separate question here. So - and then, could you provide a bit of an update on maybe some of the recent acquisitions and integrations going on like such as Gadberry?

So with regards to the recent acquisitions, a huge focus of ours this year has been around the successful integration and I think the team has done a really nice job really on all fronts. So really integrating from a technology perspective, Gadberry with our legacy data platform combining that and launching that externally to our customer base that are probably agent convention and then also really harmonizing technology between, first on the booj platform there, and then on the mortgage side. Obviously, the integration of Wemlo into the Motto network and really expanding there. And that's really kind of from a front-end customer service perspective and a technology perspective. And then I think from just a shared services and back-office perspective, all of those integrations are substantially complete. So definitely a focus this year as we look to invest in those and really then propel ourselves into 2022 for outsized profit contribution coming from those acquisition.

All right, thank you. Appreciate it.

We have no further questions at this time. I turn the call back to presenters for closing remarks.

Thank you, operator, and thank you to everyone for joining our call today. Have a great weekend.

This concludes today's conference. You may now disconnect.