Hessam Nadji: Well, first, a little bit more details on what is happening in that. We’ve gone from the pandemic to a post-pandemic, major market reversal to the upside, and then a very dramatic market shift downward because of the interest rate shock. So the last 3-year to 4-year period has provided nothing resembling a typical market environment in which we train people, we mentor people, they learn the fundamentals of brokerage underwriting, client contacts, and they basically start to develop their production and their brokerage career. This disruption, both on the way down, on the way up and on the way back down, is the primary reason that skill sets aren’t developing in the way that we’re used to saying through our excellent training and market-leading ways of mentoring new people into the business.
That’s what’s causing the disruption in that. A lot of the people that you would typically bring in after, let’s say, 2 years of this initial training and mentorship would become productive or would become standalone new additions to our sales force. And we’re still attracting at the top of the funnel a phenomenal volume of both interns, fellows, and new agent candidates. What is causing the challenge is the higher turnover rate of the people that have been through the training but are not able to function because the market challenges and headwinds and the lower transaction velocity is just making it very hard to break into the business. So that’s a little bit more color on the mechanics of what where the challenge is. We do expect this to be an obstacle we will overcome.
We’re taking a variety of different initiatives, both on the top of the funnel, to bring in more candidates. We’ve implemented a new version of a screening test and a screening process for our management team. We’ve added recruiters that are helping them with the bandwidth and available time in order to reach in, reach out to more candidates. And so, all of that, we’re confident will make a major difference. But I think the biggest difference will come from the market, essentially settling and being able to provide a somewhat of a normal operating environment for new trainees. Meanwhile, I really want to emphasize the importance of the success in bringing in experienced individuals and teams. It’s more than offsetting the disruption and the creation of new producers through our organic channel and the fact that we strongly believe in a multi-channel strategy going forward, getting back to our organic contribution to the sales force when the market really normalizes, and at the same time, continuing to build on our success of bringing in experienced people.
We make a point to only bring in experienced individuals and teams that don’t overlap with our existing sales force, in order to make sure that we’re expanding the market coverage and the segment coverage and not cannibalizing our existing sales force.
Young Ku: Okay. That’s helpful. And lastly, can you provide some thoughts on external growth opportunities that you may be pursuing, maybe in terms of what stage of negotiations that you may be in right now, and then maybe also compare those opportunities versus repurchasing shares?
Hessam Nadji: Yes. I’ll let Steve comment as well. But in general, we are always in the market with a proactive strategy in various verticals that we believe are complementary to our core business, as well as an ongoing pipeline of core business acquisitions or individual and team recruiting. It never stops. So we have explored different opportunities in appraisal and advisory services. We’ve explored a number of boutique brokerage acquisition opportunities and boutique finance acquisition opportunities in the last 12 months to 18 months, as well as considerations around the investment management vertical where we’re looking at some opportunities there. But the most important aspect of our growth strategy is the balance that we’re trying to maintain between the near-term risk in underwriting and valuation, as I mentioned in my remarks.
It’s a very tough environment in assessing that near-term risk and the timing of the market recovery versus the bid-ask spread that appears to be in the marketplace. It is narrowing. I will say, our current conversations are much more realistic that are ongoing right now than they were even 6 months to 9 months ago. But nonetheless, for us the important thing is to be in the market through our platform, developing relationships, knowing the targets that would work for us from a cultural perspective, and having more of a ground-up strategy than just trying to buy share, if you will. Steve, do you want to add some comments to that?
Steve DeGennaro: Yes. I think more broadly around capital allocation, which I think is what you were getting at, Young. It’s important to acknowledge that we are wanting to invest for long-term growth. That means investments in technology, recruiting and retention, as Hessam has talked about, as well as M&A and returning capital to shareholders. And in different environments, our priorities and our focuses can move around, can shift depending on circumstances as we evaluate the best use for deploying our capital. As it relates specifically to repurchases, which I think you mentioned, we’ve always said our repurchase program will be opportunistic. And to that end, we’ve repurchased roughly $70 million of shares over the last 18 months or so.
That is a program that we can dial up or down depending on a balancing of the various opportunities and other relative uses of our capital. So, yes, we were a little bit on the lighter side this last quarter partly, I guess you could say, a function of the fact that the business is not necessarily generating as much of the free cash flow as we do in normal time. So that’s just an example of how we balance our various priorities.
End Q&A:
Operator: Thank you. And we have reached the end of the question-and-answer session. I’ll now turn the call over to President and Chief Executive Officer, Hessam Nadji for closing remarks.
Hessam Nadji: Thank you, operator, and thank you for joining our first quarter call. We appreciate your participation and look forward to seeing many of you on the road and look forward to our next earning call. The call is adjourned.
Operator: And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
