RE/MAX ‘s Q3 2020 total revenue declined 0.7 percent annually to $71.1 million as the company bounces back from a decline in dues and franchise fees.
RE/MAX is still on the rebound after a troublesome second quarter marred by the coronavirus and slowed home sales activity due to lockdown measures. The company’s COVID-19 financial assistance program for franchisees coupled with intensified agent recruiting pushed its total revenue down 0.7 percent year-over-year to $71.1 million, according to a third-quarter earnings brief released Thursday.
Despite the annual decline in revenue, RE/MAX remained profitable with a $3.6 million in net revenue — an improvement from the previous quarter in which the company reported a 24.2 percent annual revenue decline and $3.5 million in net revenue.
“The continued execution of our strategy, coupled with the U.S. housing market’s remarkable run, drove our very encouraging results for the third quarter,” RE/MAX Holdings CEO Adam Contos said in a statement. “The agent count in both the U.S. and Canada increased sequentially on a month-to-month basis during the third quarter, particularly in Company-owned regions, after stabilizing at the end of the second quarter.”
“Agent count outside the U.S. and Canada surpassed the 50,000 mark during the quarter, and has now doubled in just five years,” Contos added. “Many of our RE/MAX agents and brokers are reporting their best years ever, and our Motto Mortgage business also continues to show impressive growth, as its franchise sales through the first nine months of 2020 nearly matched the full-year total for 2019.”
Much like Q2, RE/MAX pointed to its franchise fee deferral program as a reason for the decline in revenue, which excluding marketing funds, totaled at $53.8 million. The program allowed franchisees to defer 100 percent of their franchising and marketing for April and May.
“They were still required to pay their broker fee at the regular time with an additional 1 percent on top of the normal 1 percent broker fee,” a previous Inman article explained. “If the franchisee deferred both months, the broker fee increased to 3 percent, until the deferred fees were repaid.”
Revenue generated from franchise fees and annual dues represented 61.3 percent of RE/MAX’s revenues during Q3, which translated to a $1 million decrease from Q3 2019. However, a bump in home sales during the summer helped offset some of the franchise fees and annual due losses due to an increase in broker fees.
Total agent count globally increased 5.1 percent, but agent count in the U.S. and Canada decreased for a second consecutive quarter from 82,972 agents to 83,802 agents. Once again, Motto Mortgage performed well with total open Motto Mortgage offices increasing 27.9 percent to 133 offices.
Looking forward, RE/MAX expects to continue its upward march with a Q4 2020 revenue of at least $69 million, including revenue from marketing funds totaling at least $17.5 million. For FY 2020, the company expects a total revenue of between $262.5 million to $265.5 million with a 5.25 percent annual increase in agent count.