Karri Callahan: Sure. So, you know, we disclosed a lot of information with respect to that in our 10-K. Based on how we look at the TLR calculation in accordance with the credit agreement, as of the end of the year, we’re looking at a ratio of 7.8. One of the things that’s really important there, though, that I wanted to stress, is that we do anticipate being below that 4.5 times by the end of the third quarter. And I think the thing that we always just have to keep in mind is the overall strength of the model, right? The 100% franchise business, the asset light model. As Erik mentioned in the scripted remarks, we think the settlement is an investment that is having an adverse, obviously, impact on the TLR right now. But we’ll get past that here in 2024 and move forward with the operational and financial strengths and characteristics of the business.
Soham Bhonsle: Okay, great. Thanks a lot for the color.
Operator: Your next question comes from the line of Anthony Paolone from JPMorgan. Please go ahead.
Anthony Paolone: Great, thanks. Welcome, Erik, and congratulations, Amy. My first question is, can you maybe step back? Because it sounds like maybe you learned some lessons with the teams rollout and the broker rollout. And just refresh us on just what exactly the value proposition and what RE/MAX is offering for teams to come over. I just want to try to bridge sort of that financial impact and kind of what exactly the incentives are.
Karri Callahan: Hey, good morning, Tony. It’s Karri. I’ll go ahead and start. And then if there’s anything that I’ve missed, the team can jump in. So I think when we look at the overall team’s offering, we’re looking at it kind of across three different verticals. One is from kind of an education perspective. We’ve got a lot of initiatives with various partners in terms of how do we help our brokerages and our team leaders not only build and scale their businesses at a brokerage level or at a team level. The second piece is around technology. So the launch of the KB Core platform was instrumental in terms of providing a team-specific instance to help teams more effectively and efficiently manage their business. Because at RE/MAX, whether you’re an individual or a team, productivity is key to us.
And everything we do to enable our network from a technology perspective is important. And then lastly, looking at how can we really be competitive in the marketplace from an economics perspective. And so I think those first two pillars are things over the course of the last 18 months as the pilot has been in place that we’ve really focused on. From an economics perspective, the changes that we’ve made is in the initial five-state rollout, we had — there was not a growth component. And so it was basically entirely foregone revenue. When we announced that program back in 2022, we said it was going to be an annualized impact of kind of $3 to $4 million just for those five states. Now what we’ve learned is we really want to partner with the network, and that’s important from a growth perspective and make sure that they’ve got some skin in the game.
And so now there is the growth requirement where offices, franchisees have to recruit six new team members or team leaders into their office. And at that point, they’ll be eligible for the competitive fee program. And that’s why the financial impact is a little bit less for the rest of the rollout.
Anthony Paolone: Okay. So then just to understand, though, there’s some financial impact with this, but if you all deem it successful and it’s working and it gets fully rolled out, like should we expect just a continued financial headwind until the whole thing is, I guess, kind of dialed into the system? Like is that a couple years process or just trying to play that out?
Karri Callahan: No. I mean, because we’re rolling it out effective 4.1, there could be a little bit of a trickle into Q1 of 2025, but it probably is a 12-month investment, and then we should have tailwind after that.
Anthony Paolone: Okay. And then just my follow-up is just a bit more bigger picture on just U.S. agent count. Do you think there’s a lot more to go in terms of agents leaving the industry given just the muted level of activity now for a decent amount of time? Like is there a lag there? And I understand the RE/MAX agents are more productive and likely to push through all this. But just trying to get your view on kind of where we are in terms of just the overall industry and how much more there might need to be in terms of shrinking agents.
Amy Lessinger: I think a couple of thoughts there. First of all, you know, this time of year, we always see a purging of nonproductive agents just across the industry as a whole. But given our agents are more professional and more productive, you know, we tend to be a little bit more insulated from that. So, you know, and in addition, I think we anticipate more transactions this year than last year. So actually that should be, you know, to our favor given our model and our structure.
Anthony Paolone: Okay. Thank you.
Operator: Your next question comes from the line of Tommy McJoynt from KBW. Please go ahead.
Thomas McJoynt: Hey, good morning, guys. Thanks for taking my questions and welcome to everyone new on the call here. I wanted to see if we could dig into a little bit on the agent count guidance that you guys did provide just for the total agent count. If we were able to kind of break it down by geography, maybe at least directionally, that’d be helpful. So, you know, relative to last year, we saw the U.S. down 6% and Canada flat and then international up 7%. Just directionally, you know, relative to those figures, do you envision, you know, acceleration or deceleration of those last year’s trends in each of those regions?
