Tamir Poleg: Yes, sure. And I feel like we touched on that a little bit, but thank you for the question. This is actually a great question because these businesses, both Title and Mortgage, have the opportunity to truly transform our margin profile and long-term earnings trajectory. When we look at Mortgage and Title, these are business lines that typically carry gross margins between 60% and 80%, so super high. And so when we look at the profit potential of an individual transaction that includes both Brokerage, Title and Mortgage, we can potentially see 7x the gross profit per transaction relative to just a brokerage-only transaction. So that’s meaningful. Regarding how much of an impact these businesses will have in the near future is really a function of how quickly we can scale them, which is something that we are acutely focused on, as I mentioned.
But to give you a rough order of magnitude, every 5 percentage point of attachment for Mortgage and Title would translate into approximately 2 percentage points of gross margin on a total company basis. And so that’s why when we look out over the long term, we see a path to gross margin approaching the 20% and EBITDA margin nearing 10%, as I mentioned. But to summarize, while today, those businesses are small, we expect them to have a profound impact on the value of the business in the future.
Ravi Jani: Next question, what part of the business is giving you the most trouble now?
Tamir Poleg: Well, our rapid growth over the past 3 years has certainly presented us with a variety of challenges across the company, which is common for organizations that are scaling at our pace. I wouldn’t characterize any of these as trouble per se. But because we’re actively managing these challenges with strategies in place, I wouldn’t call them trouble. That said, the main area of focus, and perhaps my greatest source of impatience, is the pace at which we can roll out our innovative ideas and technological developments. We have an exciting road map, and I’m eager to bring these advancements to fruition. We’re moving as fast as we can, but quality can be rushed. And ensuring we do things right is a priority. In essence, we’re racing against our own high expectations to deliver exceptional value, and that’s kind of a good challenge to have.
Ravi Jani: Next question, for Michelle, how much of the company’s stock is owned by agents?
Michelle Ressler: So we don’t know how many shares agents hold in their personal trading account. But based on the shares that we attribute to agents, we estimate it to be around 15% of our company. And for us, this is important because agents are truly aligned with our management and our shareholders in making sure the company is profitable. They’re partners of the business, and so this way they’re invested in helping it continue to grow.
Ravi Jani: Great. One question was about the app, and Tamir, you addressed this a little bit earlier in the future of the app. But can agents have an app that clients can use to see if they’ve completed certain tasks for their buy-sell process and what next steps are?
Tamir Poleg: Sure. And I touched on that briefly, but the One Real app, which is our first consumer-facing app, is really our initial product to address just that. While One Real today is built for homebuyers to get preapproved and have greater certainty of closing, over time, this app will be the solution, including everything from a closing checklist that you just mentioned, to an entire mobile home management system. So yes, it’s in the pipeline and in the works, just stay tuned as the product evolves, but rest assured that we are working to give agents the tools to make sure that their clients receive the best and most differentiated experience.
Ravi Jani: Sharran, next question, what can agent do successfully today that can change their business 12 months from now?
Sharran Srivatsaa: Ravi, thank you for this. I think this goes to the heart of how we actually run the real estate business because this has been a quite challenging market environment where most agents’ businesses, where you are in the marketplace, North America is down about, on average, 30-ish percent. But there’s something super important to note here, right, because just in the last 3 years, we’ve moved from what I like to call a momentum-based market to a skills-based market, meaning during the time when we were in and coming out of the pandemic, the market was moving so fast and the agents and consumers are just managing momentum of the transactions that were happening. But over the last 12 months, the skill of an individual agent is setting each of them apart.
So if we think about kind of the focus of what agents should do, I think there’s 3 things that I’ve been sharing with all our agents to position themselves to win over the next 12 months. And let me walk you through what those 3 things are. So number one is to capture attention. Agents who have a massive focus on what I call the front end of the funnel, with the idea of building the interest risk list, will win as market conditions change because most consumers are in the waiting and watching to pull the trigger. Even on the interest rate environment, we had seven consecutive periods of interest rates increasing. And the consumer was actually getting used to what the new normal was. And as soon as they see a one-term pullback, now they’re like, wait a minute, I’m just going to wait.
So that’s actually caused more disruption because now it’s changed the way of this watching and waiting. So for us, it is capturing and building the interest list on the front end of the funnel. The second is the days of kind of churning and burning are over because we need to implement what I call lifetime nurture. This means that building the interest list is not enough, we have to both build the list and serve the list, meaning agents who take a lifetime nurture approach as opposed to a churn and burn approach, we’ll win in this market because a lifetime nurture approach says, hey, I’m always in the right place. Mr./Mrs. Client, I’ll wait for your right time to happen. And the last but not least, I really hope that everybody in our industry learns this is that today is the time where an upgraded skill will completely set us apart.
So consumers need sound advice now more than ever. Over the last 20-ish years, the utilization of working with an agent is up 31%, even though there’s more data and more tools available to the consumer. So I’d say this is because the transaction is becoming more and more complex. So understanding new contracts, understanding pricing strategies, understanding negotiation skills with all that’s happening in our landscape is what’s going to be important for agents to win. So I’d say capture attention on the front end of the funnel, implement lifetime nurture and really work on upgrading skills.
Ravi Jani: Thanks, Sharran. Tamir, next question, what are the current projections as an overall percentage of profit that the venture into fintech is expected to make? Specifically, how much of an impact are you expecting the rollout of the real credit card to make as a percentage of overall profits?
Tamir Poleg: I have to say that we’re incredibly excited about the Real Wallet and its potential to really transform the role of brokerage within an agent’s life and in the financial ecosystem. The Real Wallet allows agents to monetize all of their assets accumulated at Real. While it’s really too early to give specific financial projections, we’ve clearly studied the impact of loyalty card programs on other industries, whether it’s the Costco card program or any of the major airline programs. And that’s why we’re so excited about how transformative it could be for Real and our agents given it gives agents a unique opportunity to monetize their wealth and earn rewards from spending that they would have done otherwise on someone else’s platform, which they can now use to reinvest into their business.
