Q3 2026 Earnings Conference Call - REAL BROKERAGE INC

Financial Performance:

• Third quarter (ended Sept 30, 2026) consolidated revenue was $728 million, up 28% YoY, including ~5 weeks of REMAX contribution; pro forma revenue increased 20% YoY to ~$770 million.
• Adjusted EBITDA was $34 million (up 66% YoY); pro forma adjusted EBITDA was ~$50 million.
• Reported net loss was $67.2 million due to $78.7 million in non-recurring acquisition costs (transaction fees, severance, accelerated stock-based comp).
• Free cash flow generation is strong, with a voluntary $25 million principal debt repayment made in the quarter.
• Balance sheet holds $109 million in unrestricted cash/cash equivalents and short-term investments; outstanding term loan principal reduced to $525 million after repayment; $40 million revolving facility remains undrawn.
• Other revenues (ancillary) increased 64% YoY to $5.3 million, driven by Real Wallet and OneReal Title, partially offset by a decline in OneReal Mortgage.

Guidance and Future Outlook:

• Introduced initial 2027 full-year guidance: Revenue of $2.6B–$2.8B and Adjusted EBITDA of $175M–$190M.
• Q4 2026 guidance: Revenue of $575M–$625M and Adjusted EBITDA of $32M–$38M.
• 2027 market assumptions include 5–10% decline in US existing home sales, 3–4% decline in average home prices, and elevated agent attrition.
• Synergy targets revised upward: >$30M in annualized adjusted EBITDA synergies expected in 2027 (beat initial $30M target) and >$40M in 2028.
• Capital allocation priorities include organic growth investment, debt reduction (planning $75M debt repayment in 2027), and opportunistic share repurchases.
• Net leverage target is to reduce below 2.0x by end of 2028.
• Management projects adjusted EBITDA could reach ~$200M if the market performs flatly rather than in the forecasted downturn.

Business Segments and Product Lines:

• Real Brokerage: Agent count grew 21% YoY to 36,600 (recently adjusted to 36,200 after offboarding 1,000+ low-producing agents); closed transaction volume grew 17% YoY to ~62,700, reflecting market share gains.
• REMAX Franchise: North American agent count declined 3% YoY to 72,100; international count grew 4% to 76,000.
• Restructuring: Wind-down of underperforming Motto Mortgage and Wemo businesses; 92% of Motto network moving toward termination with 69% of offices closed in two months.
• Technology: Launched "LeoPro," an AI platform with 300+ specialized agents; over 3,000 paying subscriptions within one month, with total users at 5,600; Reason software alpha testing underway for REMAX rollout.
• Integration: Combined headcount reduced by >14% (150+ positions); consolidated technology systems and vendor relationships.
• Strategic Initiative: Joined Keller Williams and others as founding members of "Open Real Estate" to improve data sharing and listing distribution.

Market and Competitive Landscape:

• Operating in a housing market near multi-year troughs with delayed recovery due to high mortgage rates.
• Industry facing significant headwinds: agent churn, declining transaction volumes, and falling home prices.
• Real Brokerage continues to capture market share despite the downturn, while REMAX focuses on brand stabilization and franchisee economics.
• Management highlights the strength of the REMAX brand and the opportunity to leverage Real's technology to create a differentiated value proposition.

Risks and Challenges:

• Macro risks: Potential further declines in housing activity, transaction volumes, and home prices in 2027.
• Operational risks: Integration challenges between two distinct organizational cultures and operating models; managing agent attrition in the franchise segment.
• Regulatory and industry risks: Dependence on the broader real estate ecosystem; potential delays in realizing technology benefits or ancillary revenue.
• Execution risk: Successfully reinvigorating the REMAX franchise network and improving franchisee profitability.

Management Commentary and Tone:

• Tone is confident yet cautious, acknowledging significant industry headwinds while emphasizing discipline and urgency in execution.
• Management expressed "more excitement" post-closing than anticipated, citing hidden synergy opportunities and the ability to modernize the REMAX model.
• Emphasis on "financial discipline," "organic growth," and "sustainable value" for agents and shareholders.
• Leadership stressed that the combined entity is "well-positioned" to generate strong free cash flow even if the market worsens.

Analyst Questions and Answers:

• Agent Pipeline: Confirmed strong recruiting pipeline; while 1,000+ agents left due to industry churn, these were largely non-producers, and overall revenue production is maintained.
• Synergy Timing: $28M annualized EBITDA savings are already realized; savings will ramp sequentially in 2027 as contracts expire and optimizations complete.
• Tech Traction: LeoPro feedback is "overwhelmingly positive"; usage focused on marketing, social media, and CRM management, with plans to roll out to the entire REMAX network soon.
• Attach Rates: Title attach rate ~3%; mortgage attach rate <1% but growing, with new loan officer licensing initiatives underway.
• JV Participation: Title JVs showing 40–70% participation rates in specific states; leveraging REMAX.com for lead generation testing.
• Post-Merger Challenges: Cited as cultural and operational integration; focus is on simplifying operations and accelerating innovation.
• Open Real Estate: Strategic move to shape industry data standards; no immediate revenue impact expected, but long-term efficiency gains anticipated.
• Service Bundling: No single "package" mandated; tools like Reason and LeoPro will be available to the broader network with flexibility for different broker business models.

Other Key Points:

• First earnings call as a combined Real REMAX Group entity following the August 24, 2026, acquisition close.
• Introduction of "Alex Vidal" as President of REMAX, tasked with re-energizing the network and traveling to broker owners.
• Management clarified that the $40M in actioned cost savings includes $4M CapEx and $8M stock-based comp, explaining the bridge to $28M in EBITDA-impacting savings.
• $5.3M in other revenues includes growth in ancillary businesses offset by lower mortgage volumes.
• The company is proactively off-boarding low-productivity agents to improve unit economics and EBITDA margins.