Being a household name only offers a business so much protection during market low points.
During first and second quarter reports in 2023, RE/MAX Holdings reported declining revenue year-over-year. The company’s third quarter report, released Thurs., Nov. 2, continues this downward trend.
RE/MAX reports total revenue of $81.2 million during Q3 2023, or $7.7 million/8.7% less than in Q3 2022. Reported revenue excluding marketing funds was $60.4 million, or a year-over-year decline of $5.8 million (8.8%).
Total operating costs were $102.2 million, 22.1% higher than in Q3 2022. However, RE/MAX’s selling, operating and administrative expenses actually decreased in Q3 2023. These costs came out to $43.1 million, or $6.6 million/13.3% less year-over-year.
These combined figures totaled out to a net loss of $59.5 million for RE/MAX during the quarter, or $3.28 per share.
On an earnings call to shareholders, RE/MAX Chief Financial Officer Karri Callahan attributed the revenue decline to lower organic growth (-8.2%) and declining value of foreign currency (-0.6%). As for the higher operating cost increases? A good chunk of that comes down to a settlement fee of $55 million in a class-action lawsuit.
However, in light of the recent decision against the National Association of REALTORS® (NAR) in the Sitzer/Burnett case, the RE/MAX C-suite remains confident that settling was the right move, lest they went to trial and wound up having to pay even more. RE/MAX Holdings CEO Stephen Joyce said as much during the call to shareholders:
“While it came at a significant financial cost, we believe it was absolutely the best decision for all of our stakeholders, affiliates, employees, shareholders and debt holders alike.”
As for the company’s residential sector, RE/MAX shows mixed results on recruitment. Total agent count increased year-over-year by 0.7%, coming in at 145,309 agents. However, RE/MAX agent count in the U.S. and Canada decreased by 3.9% to 81,782.
The company also shows some promising signs in the mortgage sector, despite increasing rates making it a suboptimal time for buyers to take out a mortgage. Even so, Motto Mortgage (RE/MAX Holdings’ mortgage branch) increased its franchise holdings by 14.7%, for a total of 242 offices.
Due to these results, it’s not surprising that Joyce says agent recruitment and further growing Motto Mortgage are some of RE/MAX’s goals. As RE/MAX President and CEO Nick Bailey noted during the earnings call, RE/MAX-affiliated real estate professionals are no longer required to be NAR members in the wake of the settlement, which is sure to impact agent recruitment, both in raw numbers and who is being recruited as RE/MAX affiliates.
We’ll have to wait for Q4 results to see how these growth initiatives panned out.
For the full RE/MAX Q3 2023 earnings call, click here.