The Real Brokerage Inc. (NASDAQ:REAX) Q4 2022 Earnings Call Transcript

Tamir Poleg: LemonBrew is licensed as a mortgage brokerage in 20 states and is operating in 20 states. And as a mortgage lender in 12 states, we currently operate only as a mortgage broker. We concluded the acquisition just a couple of months ago. We are now immersing LemonBrew into our business. They’re doing a lot of work with our agents, so it’ll take a little bit of a ramp up time to get meaningful revenue from them. But we are working on a few very interesting offerings to our agents. Aside from everything that we’re building on the consumer facing gap, we are working on a concept that will enable LemonBrew to guarantee closing and guarantee the date of closing within 14 days of loan application for our agent’s clients. So we believe that with the — with this program, we will see much more engagement from our agents and their clients. But again, it takes a little bit of time to ramp up ancillary services revenue.

Chris Sakai: Okay. Thanks. And last, what’s your general tenor of the real estate market with rising rates and especially with recent bank sellers?

Tamir Poleg: I think what we’ve witnessed in the past nine months is the fastest space of increasing interest rates in history and at the same time, the most leverage economy ever. So debt to GDP is at all-time high. And what we’re now starting to see is that things are starting to break what we’ve witnessed with the banking industry in the past week or 10 days. I believe that there’s a chance that lending standards will tighten because of everything that’s going on. On the other hand, we are seeing very robust job market and very solid demand for housing. So I think that there are a lot of conflicting trends right now within market. We are very optimistic about housing. I can tell you that at the beginning of this year, we’ve seen the same type of phenomenon that, that we have seen in the first half of 2022, meaning bidding wars and people who bidding over asking price on homes.

And when rates went again above 6.5%, that subsided a little bit, but we are seeing, and we are hearing our agents reporting a lot of activity with buyers. So I think that as long as the economy will not break drastically, we are very optimistic about the real estate market. And regardless of that, I think that us as a company, we are definitely an outlier just because of our fast growth and the fact that we are adding agents so rapidly our performance is not going to be very connected to the market performance. We are going to do much, much, much better.

Operator: Thank you. . Your next question is coming from Brian Kinstlinger from Alliance Global Partners. Your line is live.

Brian Kinstlinger: Great. Thanks. Two questions. First is a follow-up from the bank crisis question. I just want to understand from your answer, your goal of $480 million to $490 million in revenue that does not include a negative impact from the bank crisis on volumes. Is that how I read that answer?

Tamir Poleg: Hi Brian, not exactly, what we said is that our assumptions for the year is that transaction volume will drop 15% to 20% and home prices will drop 7% to 12%. And even with those assumptions that are quite severe we expect to be adjusted EBITDA positive in the second half of the year. And in order to achieve that, we need to have about $480 million to $490 million in top-line revenue, which we believe we will do much, much better than those figures, so I think that’s — yes.

Brian Kinstlinger: And then my follow-up is, can you touch on and maybe I missed it, your M&A plans. I know the goal long-term is to add ancillary services, and you’ve got a few to your business, so maybe talk about that given they’ll probably have higher contribution margins.