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RE / MAX only beats fourth quarter expectations

The company’s own growth investments held back sales, but RE / MAX CEO Adam Contos believes this will pay off in 2021.

RE / MAX beat expectations for the fourth quarter of 2020 with revenue of $ 72.4 million ahead of the consensus estimate of $ 70.49, up 6.2 percent from the fourth quarter of last year. The company’s sales excluding marketing materials rose 7.6 percent over the same period last year.

Adam Contos | Photo credit: RE / MAX

“A strong real estate market supported the strong fourth quarter results and provided a good tailwind through 2021,” said Adam Contos, CEO of RE / MAX, in a statement.

Ultimately, it was the company’s investment in overall growth – through multiple technology acquisitions in 2020 and strategic recruitment initiatives that waived certain fees for some new agents – that drove the company’s revenues to the record highs some its competitors on the back of the reached the flaming housing market.

For the full year, RE / MAX had total sales 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 by 5.3 percent to 137,792 agents, but agent counts in the US and Canada decreased slightly, by 0.5 percent year over year. Still, the company’s growth investment resulted in an increase in the number of agents in the US and Canada for two consecutive quarters, and the franchisor ended the year with 84,250 agents in the US and Canada.

The company was generally profitable for the fourth quarter, net income of $ 1.3 million for the fourth quarter and $ 11 million for the year. In 2019, the company posted net income of $ 25 million.

“Despite the pandemic, we achieved good organic growth, which resulted in better-than-expected fourth quarter sales and earnings and robust free cash flow generation,” said Contos. “The total number of RE / MAX agents and themed franchise sales continued to grow in the fourth quarter, with the number of our Canadian agents increasing significantly over the period.”

The company’s motto mortgage business continued to grow rapidly. RE / MAX sold more than 70 themed mortgage franchises in 2020, up 35 percent from 2019. At the end of the year, a total of 141 motto mortgage franchise companies were operating.

While RE / MAX’s sales gains have been much less than that of a competitor like Realogy, Contos believes the money the company spent in 2020 will pay off in 2021 as the real estate market continues to be competitive.

RE / MAX anticipates that all strategic investments – Motto Mortgage, First, Gadberry Group and wemlo – will transition from a net investment to a positive earnings impact in 2021.

The company’s initial forecast is that the number of agents will increase between 4 and 5 percent and revenue will be between $ 300 million and $ 310 million.

“We expect the macro housing environment to continue to be buoyant over the coming year as continued increased demand continues to outpace supply,” said Contos. “The battle for listings will remain fierce, and agents who are experienced, productive, and armed with sales-centric tools like our first app should enjoy an advantage in this regard.”

“We continue to support the productivity of our networks by improving our value proposition and strengthening our technology and data core,” added Contos. “At the same time, we are creating additional, highly promising sales opportunities, both organically and through strategic acquisitions such as wemlo and Gadberry Group. Overall, we believe we are poised for significant growth in 2021 and beyond. “

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