Q3 2026 Earnings Conference Call - REAL BROKERAGE INC

Explicit Guidance:

• Q4 2026 Revenue: $575 million – $625 million.
• Q4 2026 Adjusted EBITDA: $32 million – $38 million.
• FY 2027 Revenue: $2.6 billion – $2.8 billion.
• FY 2027 Adjusted EBITDA: $175 million – $190 million (up from $34 million in Q3 2026).
• FY 2027 Non-GAAP Assumptions:
  • Stock-based compensation: ~$100 million.
  • Depreciation and amortization: $40 million – $50 million.
  • Interest expense: ~$50 million.
  • Debt repayment: ~$75 million.
• FY 2027 Synergy Realization: Expect over $30 million in annualized adjusted EBITDA synergies realized by 2027, with >$40 million targeted for 2028.
• Leverage Target: Projecting net leverage reduction below 2.0x by end of 2028.
• Sensitivity: If U.S. existing home sales were flat (contrary to forecast), FY 2027 Adjusted EBITDA would likely reach ~$200 million.

Business-Segment Outlook:

• Brokerage (Real): Expects high single-digit to low double-digit year-over-year decline in transactions per agent in Q4 2026; pipeline remains strong with agent intake matching or exceeding 2026 levels in 2027 despite industry churn.
• Franchise (RE-MAX): Expects low to mid-single-digit year-over-year agent count decline in North America for Q4 2026; anticipates no immediate reversal in agent attrition in 2027 but plans to reinvigorate growth via technology.
• Ancillary Businesses: Expects growth in Real Wallet and OneReal Title; OneReal Mortgage faces headwinds from higher rates but is expanding lead generation via REMAX.com.
• Technology (LeoPro): Currently 3,500 paying agents; plan to roll out to entire RE-MAX network "very soon" and open to broader network in coming months.
• Technology (Reason): Operating platform for broker-owners scheduled for phase rollout in Q1 2027.
• Agent Count Targets: RE-MAX U.S./Canada count ~72,100; International ~76,000; Real count ~36,200 (as of week of call).
• Underperforming Assets: Momentum in closing Motto Mortgage offices (69% closed; 92% moving toward termination) to eliminate legacy $5M EBITDA loss.

Market and Competitive Outlook:

• Housing Market: Forecasts U.S. existing home sales to decline 5%–10% in 2027 (lowest volume in 30+ years) with average home prices falling 3%–4%.
• Market Share: Real expects continued market share gains despite challenging environment; RE-MAX plans to capture share via improved economics and tech adoption.
• Competitive Dynamics: Anticipates industry-wide agent attrition to remain elevated; strategy focuses on off-boarding non-producers to protect EBITDA.
• Industry Infrastructure: As founding member of "Open Real Estate," aims to reduce reliance on fragmented listing systems and increase data accessibility, potentially boosting ancillary revenue and listing exposure over time.

Macro / Industry Outlook:

• Economic Environment: Housing market expected to remain near trough levels; mortgage rates anticipated to keep recovery delayed.
• Demand Trends: Expecting a high volume of agent attrition (industry-wide), with Real proactively managing headcount to align with productivity.
• Rates & FX: Mentioned higher mortgage rates negatively impacting mortgage attach rates in the recent quarter; no specific FX guidance provided.
• Pricing: Anticipates average home price declines of 3%–4% in 2027.

Strategic Initiatives:

• Integration & Cost Synergies: Actioned $40M in annualized gross cost savings (including $28M in EBITDA synergies) within two months; targeting >$30M synergies in 2027 and >$40M in 2028.
• M&A Integration: Completed acquisition of RE-MAX (closed Aug 24, 2026); integrating tech stacks (LeoPro, Reason) and consolidating vendor relationships.
• Tech Rollouts:
  • LeoPro: Next-gen AI platform launched with 300+ specialized agents; expanding to RE-MAX network shortly.
  • Reason: Proprietary operating platform for broker-owners launching in Q1 2027.
• M&A/Restructuring: Wind-down of Motto Mortgage and Wemo; potential for future "reinvigorating growth" initiatives in RE-MAX franchise model.
• Capital Allocation: Prioritizing organic growth, debt reduction ($25M voluntary repayment in Q3, $75M planned for 2027), and opportunistic share repurchases.

Risks and Headwinds to Outlook:

• Market Volatility: Continued pressure on housing activity, including potential for deeper declines in transactions and prices than forecasted.
• Agent Churn: Industry-wide exodus of agents; specifically, off-boarding 1,000+ non-producers in Q3, with 300–400 more identified for removal.
• Integration Complexity: Cultural and operational differences between Real and RE-MAX; risk of execution delays in technology rollout and synergy capture.
• Regulatory/Data: Participation in Open Real Estate is early-stage; specific revenue impacts and product economics not yet defined.
• Leverage: Net leverage target of <2.0x by end of 2028 depends on achieving projected EBITDA and debt repayment schedules.
• Macro Sensitivity: Outlook is based on a "no recovery" assumption; upside potential exists if the market remains flat or improves, but downside risk remains if the downturn deepens.

Management Tone on the Future:

• Confidence: "Cautiously optimistic" on financial discipline and synergy capture despite a "very challenging year" ahead; expresses "encouraged" sentiment regarding early tech traction and integration speed.
• Hedges: Explicitly states they are "not planning for a recovery" and bases guidance on housing market deterioration.
• Strategic Shift: Emphasizes urgency in modernizing RE-MAX, moving from "savings alone" to "improving economics" and "sustainable growth."
• Agent Sentiment: Reports "amazing energy" and "overwhelmingly positive" feedback on LeoPro from agents at recent conferences.

Miscellaneous:

• Capital Structure: $109M unrestricted cash; $550M senior secured term loan (reduced to $525M net); $40M undrawn revolver.
• Non-GAAP Metrics: Adjusted EBITDA margin and synergies highlighted as key performance indicators; $78.7M one-time acquisition costs excluded from Q3 Adjusted EBITDA.
• Timeline: RISE (Real conference) held recently; R4 (RE-MAX conference) scheduled for February 2027.