The future is bright, but the second quarter won’t be.
That was the mix of cautious optimism and realism offered by RE/MAX CEO Adam Contos in an earnings call Thursday as he explained that while the housing market would probably rally sooner than expected, the worst of the pandemic’s economic fallout remains to be seen.
The company recorded $2.6 million in net income in the first quarter, down from $4.4 million in the same period last year, according to a quarterly report. Revenue dipped to $70.3 million from $71.2 million.
The company blamed the revenue decrease primarily on agent recruiting initiatives that reduced continuing franchise fees and marketing funds fees. The drop was partially offset by an increase in broker fees and the growth of the company’s Motto Mortgage franchise, according to the earnings report.
Still, Contos said he was confident the company would come out of the crisis “in a position of strength,” noting that RE/MAX had weathered six recessions since it was founded almost 50 years ago.
“Although second-quarter results are likely to reflect the full brunt of the coronavirus, some leading indicators for housing have already started to turn and we remain optimistic that housing will return sooner than many industries,” he said.
Staff at the company have been working from home since March 16, which the company plans to continue until June 1. The total agent count increased by 4 percent in the quarter to 131,134.
While the number of housing transactions has slowed across the country, the company said it was seeing an uptick in showings as some states and municipalities loosened stay-home orders.
To cope with the immediate downturn, RE/MAX has taken steps to cut costs, including implementing a hiring freeze, halting 401(k) matches and cutting the 2020 corporate bonus.
Karri Callahan, the company’s CFO, added that by reallocating advertising dollars, the company saved money and expects to reduce second-quarter marketing fund expenses by $5 million to $5.5 million.
For its franchisees, the company has offered an option to defer fees for up to two months, in a bid to limit the financial pressure they were under.
Despite advancing a message of strength and resilience, Callahan ended the call with a nod to the uncertain times.
“Because of the Covid-19 crisis, near-term housing results are anticipated to decline materially, which is expected to negatively expect the company’s financial and operating performance for at least the second quarter,” she said.
“The magnitude and duration of the impact from Covid-19 — especially on consumer behavior — are unknown, and therefore cannot be reasonably estimated at this time.”
Write to Sylvia Varnham O’Regan at [email protected]