Tamir Poleg: Yes. I think that longer term, if we think about our Title business and Mortgage business and some of the fintech product that we will be rolling out next year, I think that our kind of longer-term gross margin target would be at around 20% and EBITDA margins at around 10%. It will probably take 5 years or so to get there, but that’s our plan.
Operator: Your next question is coming from David Marsh from Singular Research.
David Marsh: Hey, guys. Congratulations on the quarter, really impressive, especially with what’s going on with mortgage rates at this time. Just wanted to start by touching on the finance expense line, really, really low in the quarter. Could you talk about what changed there? And is that a sustainable level going forward? Have you made some kind of a change there that you’re just not going to require any kind of payments for financing expenses?
Michelle Ressler: Finance expenses is generally related to foreign currency translation. So that will fluctuate as we see fluctuations in the strengthening or weakening of our foreign operations.
David Marsh: Got it. And I know you guys aren’t really in the business of providing guidance and there’s a lot of moving parts here, but especially in light of market conditions. But as we think about seasonal patterns in real estate, in residential real estate transactions, typically, we see a dip towards the end of the year and in the first quarter and then kind of strength in the second and third quarter. But obviously you’re still growing agents pretty rapidly. I mean we kind of are in the business of modeling. So can you give us some idea of how to think about things. I mean, a good solid halfway through the fourth quarter here. I mean, should we think about a sequential decline? Or is the agent growth still such that you’re going to have some immediate effect of that seasonal factors?
Tamir Poleg: Sure. I can take this one, David. So typically, Q4 is a decline of 20% to 30% over Q3 just because of seasonality. I think that what we have seen in the third quarter is interest mortgage rates reaching 8%, which probably will affect the backlog of transactions that are scheduled to close in the fourth quarter in the industry, in general, and it will probably apply additional pressure on the volume of transactions closed in the fourth quarter. We think that given the fact that we are continuing to grow our agent count, the fourth quarter will obviously be a much higher one compared to the fourth quarter of 2022, but we do think that seasonality plays a role here. So sequentially, over the third quarter, the fourth quarter will probably be weaker in terms of transactions and revenue.
Internally, we also think that the first quarter is going to be challenging. Obviously, it’s very interest rate dependent, but we do think that the spring will probably bring some energy and a lot of new transactions into the market. So we’re optimistic as to March and on, but we do think that it’s going to be quite a cold winter for real estate.
David Marsh: Well, the good news is, if we do actually get a pause or a flat-out stop in rate hikes, that could really help things. I mean, the 10-year as we sit here today is down to 4.56%, and I think I start to see some headlines of mortgage rates dipping back down into the 7.5% ballpark. So that should probably help a little bit. I guess just lastly for me, it’s kind of like my favorite thing to talk about because I think it’s kind of the most exciting part of your story, just the vertical integration opportunity that you have with Title and Mortgage. I mean could you just let us know on the Mortgage side, it sounds like things are really picking up. Could you just talk about how many states you’re doing Mortgage business in and kind of what that looks like in terms of rollout?
Tamir Poleg: Sure. I think that one thing that is starting to change here is that we’re trying to focus on fewer markets and create a playbook that we can then duplicate to additional markets instead of just chasing a transaction here and a transaction there. So that’s part of the strategy for the remainder of the year and for 2024. We’re now really doing business in, I would say, less than 10 states, and I mean significant volume. And I think that we will continue to focus on those less than 10 states on the Mortgage side. And once we have like a model that works and we know exactly how to started a business in that state and getting momentum going and engage all of our agents, we can duplicate that to additional territories.
So that’s currently the plan. As Michelle said, Real Mortgage is up about 100% year-over-year. This is still small numbers. So we do expect those businesses, both Mortgage and Title to grow at a faster pace. Even though 100% is impressive, we have much bigger plans for both of those businesses.
David Marsh: That sounds like a very, very fiscally and operationally responsible path forward there. And I think that speaks very highly of your stewardship of the company, Tamir. So yes, I wish you guys the best and just hang in there. Hopefully, rates will come down and things are really going to take off.
Operator: Your next question is coming from Tom White from D.A. Davidson.
Wyatt Swanson: Hey this is Wyatt on for Tom. Thanks for taking our questions. So I have one. There’s been some chatter about some of the smaller independent brokerages out there faced with the prospect that another year of low total sales turnover who may finally decide to move their businesses over to some of the virtual or lower-cost offerings like Real and others. So how do you guys make sure that Real Brokerage maximizes its capture of these smaller independents or teams if, in fact, this does happen?
Tamir Poleg: Thank you, Wyatt. We are in constant conversations with a lot of existing smaller brokerages as well as large teams in the country. I think that we are becoming a household name in the industry and more and more people hear about us, and it’s all about execution at the end of the day. If they see that we provide value, and we also build products that are a little bit more tailored to what they need, which is something that we’re doing right now, by the way, we’re trying to build our systems in a way that will provide more flexibility to teams and brokerages and coming over and not changing their entire backbone system or the way they interact with their agents from a financial perspective, it will just make the transition smoother for them.
So this is something that we’re now building, and we will communicate that to them. But I think that it’s all about creating more and more conversations and also educating our agents on how to have those conversations because at the end of the day, there is so much we can do as a company, but we can also rely on our agents to go and attract and just put the word out there about the company. But yes, I agree with you that if the current conditions will remain, a lot of smaller brokerages, independent brokerages, will not be able to sustain that, and they will be looking to make some sort of a change. And obviously, I mean, as the only company in the industry that’s currently growing, I think that we will be able to attract many of them just based on the fact that they see that there is momentum happening here, and they will want to be a part of it.
Operator: Mr. Jani, there are no further questions.
Ravi Jani: Great. Now that we’ve concluded the analyst portion of the call, we wanted to address some of the questions received from shareholders on the Say Technologies Q&A platform that was launched last week. We received a number of excellent questions, and so thank you to all who participated. So the first question, which kind of dovetails with David’s question is, how impactful of an effect do ancillary services such as One Real Mortgage, Real Title and, in the near future, Real Insurance have on the value of Real Brokerage? Tamir, do you want to take that one?
