The number of active, brick-and-mortar Motto Mortgage broker franchises and U.S. real estate agents contributing to Remax Holdings' earnings dropped in the fourth quarter, hurting revenue, but the company's bottom-line far exceeded estimates due to cost-cutting and international growth.
The number of Motto franchises fell 8.3% to 225 during the year and U.S. agents declined by 7% or 3,845, according to the company, which recorded $72.47 million in revenue, underperforming the consensus by 2.52%. Net earnings almost quadrupled estimates at $5.81 million in part due to a net agent gain of 1.2% globally in addition to efficiency initiatives. The company earned $990,000
Company-wide revenue was down 5.4% compared to the same quarter in 2023, and declined 5.5% for the full year at $307.7 million, underperforming Standard & Poor's Capital IQ estimates by 0.74%. Full-year earnings of $7.12 million topped consensus by 185%, returning the company to profitability after a loss a year earlier.
The results suggest that although challenges persist in the mortgage and housing markets Motto and Remax serve, there has been some relative improvement in their ability to manage the risks and market conditions. Instances include numbers in Remax's 10-K filing that show Motto stabilized average monthly fee revenue per franchise in 2024 at $3,800 after a drop to that number in 2023 from $4,050
"Regarding our mortgage segment, we see positive developments amid the current industry conditions, which are impacting our overall performance," Remax CEO Erik Carlson said during the company's earnings call.
Interest in Wemlo, a technology subsidiary the company has that offers
"Other industry players are taking notice of our growing market presence, and we're fielding more inquiries from third parties looking to explore partnership opportunities," he said. "For example, last month a leader in the wholesale mortgage lending space announced Wemlo as a process partner."
Carlson did not identify the wholesale mortgage player involved. Wemlo has gained some momentum with lenders through a partnership with the National Association of Mortgage Brokers.
The company increased its fixed processing fee for Wemlo when used in the Motto Network to $825 per loan in 2024 from $725 the previous year, according to the company's 10-K. It charges external users $995 per loan.
Another technology initiative that Remax has been working on bolster revenue is an effort to "provide high-quality advertisements on our heavily trafficked websites," Carlson said.
"We believe it could eventually generate a seven-digit revenue figure annually," he said.
When asked about competitors in this space, Carlson said he's not looking to invest as heavily as they do in it.
"We are not in the portal business," he said. "We're not going to spend like the portals, but because of the brand and the high intensity of customers looking for the Remax name, we see traffic. So we're just trying to optimize that asset."
The company also has other plans to improve its revenue it plans to roll out shortly at its upcoming agent conference.
Carlson also said the company has reached tentative settlements in a couple Canadian class-action lawsuits in which there have been price-fixing allegations similar to those seen in the United States.
The agreed-upon settlement amount was $5.5 million, according to Chief Financial Officer Karri Callahan.
"The final settlement agreement will require court approval. We continue to deny the allegations made in the complaints and in no way acknowledge any wrongdoing," she said.
Also during the earnings call analysts asked about the impact of Clear Cooperation Policy, which would call for real estate agents to put properties on multiple listing services within a day after marketing them. Some oppose CCP as a means of stultifying competition.
Carlson reiterated a neutral stance he's had on the topic, noting he sees "middle ground to explore" when it comes to CCP.
"I think that we're prepared either way," he said.
