Despite hot market and revenue growth, RE/MAX loses $25M
Third-quarter revenue jumped, but so did expenses; eXp transactions double
Just because the third quarter was rich in revenue for some brokerages doesn’t mean profits were something to brag about.
RE/MAX revenue and the somewhat dubious metric of “adjusted EBITDA” reached all-time highs last quarter but its net profits and agent growth fell short of expectations, its holding company announced.
RE/MAX’s net income in the third quarter swung to a loss of $21.5 million from a profit of $3.6 million a year ago. Revenue rose by 28 percent to $91 million from a year earlier but was more than offset by a jump in expenses, which totaled $51 million.
The brokerage’s adjusted EBITDA reached $35 million and its adjusted earnings per diluted share was $0.71.
RE/MAX attributed the growth to the RE/MAX INTEGRA North American regions acquisition, fewer agent recruiting initiatives and increased broker fees stemming from rising home prices.
Agent count growth was 4.6 percent, just south of RE/MAX’s expectations of 5 to 6 percent in the quarter. The gain did result in a record agent count of 140,936.
Some of the brokerage’s franchisees in three of its markets — California, Indiana and New Jersey — were filled with underperformers and were ultimately terminated during the quarter, RE/MAX president Nick Bailey said.
“We had some unexpected terminations coming into Q3 that we don’t expect as much moving forward,” Bailey said. He added that pandemic lockdowns in certain countries contributed to the failure to meet growth targets.
For other brokerages, a boost in agent growth did some good. In its earnings call early last month, eXp World Holdings announced that its brokerage’s revenue had reached another all-time high of $1.1 billion.
Such gains were largely driven by agent growth, which increased 82 percent to 65,269 from the third quarter of 2020. Closed residential transactions increased 72 percent to 130,029 and transaction volume nearly doubled, rising 97 percent to $46.6 billion.
Net income for eXp increased 60 percent to $23.8 million, and gross profit increased 70 percent to $79.5 million. The adjusted EBITDA increased 6 percent to $23.1 million.