RE/MAX just beats Q4 expectations
The company’s own growth investments held the top-line numbers back, but RE/MAX CEO Adam Contos believes it’ll see the payoff in 2021.
By the hair of its chin, RE/MAX beat expectations in the fourth quarter of 2020, posting $72.4 million in revenue ahead of the consensus estimate of $70.49 and up 6.2 percent from the prior year’s fourth quarter. The company’s revenue, excluding marketing funds, increased 7.6 percent from the same period in 2020.
“A surging housing market underpinned strong fourth-quarter results and provided a nice tailwind heading into 2021,” RE/MAX CEO Adam Contos said in a statement.
Ultimately it was the company’s investment in overall growth — through multiple technology acquisitions in 2020 and strategic recruiting initiatives that waived certain fees for some new agents — that held the company’s revenue from soaring to the record heights hit by some of its competitors on the back of the blazing housing market.
For the full year, RE/MAX posted total revenue of $266 million. Revenue excluding the company’s marketing funds decreased 4 percent year over year to $201.6 million.
The company increased its global agent count 5.3 percent to 137,792 agents, but U.S. and Canada agent count dipped 0.5 percent slightly year over year. Still, the company’s growth investment led to two sequential quarters of U.S. and Canada agent count increase and the franchisor ended the year with 84,250 agents in the U.S. and Canada.
The company was profitable in the fourth quarter and on the whole, posting a net income of $1.3 million in the fourth quarter and $11 million for the entire year In 2019 the company generated $25 million in net income.
“Despite the pandemic, we delivered good organic growth, resulting in better-than-expected fourth-quarter revenue and profit, as well as robust free cash flow generation,” Contos said. “Overall RE/MAX agent count and Motto franchise sales continued to grow in the fourth quarter, with our Canadian agent count increasing nicely during the period.”
The company’s Motto Mortgage business continued to grow rapidly, with RE/MAX selling more than 70 Motto Mortgage franchises during 2020, which was 35 percent higher than in 2019. At the end of the year, there were a total of 141 Motto Mortgage franchises operating.
While RE/MAX’s top-line number gains were much lower than a competitor like Realogy, Contos believes the money the company spent in 2020 will pay off in 2021 as the housing market continues to be competitive.
RE/MAX believes all of its strategic investments — Motto Mortgage, First, Gadberry Group and wemlo — will flip from being a net investment to positively impacting earnings in 2021.
The company’s initial projection forecasts agent count to grow between 4 percent and 5 percent and revenue in the range of $300 million to $310 million.
“We expect the macro housing environment will remain buoyant in the coming year with ongoing amplified demand continuing to outpace supply,” Contos said. “The battle for listings will stay highly competitive, and agents who are experienced, productive and armed with seller-focused tools, such as our First app, should enjoy an edge in that regard.”
“We continue to support the productivity of our networks by enhancing our value proposition and strengthening our technology and data core,” Contos added. “At the same time, we are also creating additional promising revenue possibilities, both by organic means and through strategic acquisitions, such as wemlo and Gadberry Group. Overall, we believe we are poised for meaningful growth in 2021 and beyond.”