RE/MAX Holdings, Inc. Aktie

Good morning, and welcome to the Real Brokerage, Inc. conference call to discuss the proposed acquisition of RE/MAX Holdings. [Operator Instructions]

I would now like to turn the call over to Ms. Alix Lumpkin, Chief Legal Officer at Real. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us on short notice. With me on the call today is Tamir Poleg, Chairman and Chief Executive Officer of Real; and Ravi Jani, our Chief Financial Officer. Following our prepared remarks, we'll open the line for questions.

Please note that this call may contain forward-looking statements within the meaning of applicable securities laws. These statements reflect our current expectations but involve known and unknown risks and uncertainties. Actual results could differ materially from those anticipated. I'd encourage everyone to review this full disclaimer in our press release, investor presentation and the risk factors in our public filings.

Please note that this call is not an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. We urge investors and security holders to read the management information circular and the registration statement on Form S-4, including the proxy statement prospectus that will be contained therein and all other relevant documents filed with the SEC on EDGAR and with the Canadian securities regulators on SEDAR+ or sent to shareholders as they become available because they will contain important information about the proposed transaction.

In addition, Real, RE/MAX and their respective directors and executive officers may be deemed to be participants in any solicitation of proxies in connection with this transaction. Information regarding their interest of these participants can be found in Real and RE/MAX's most recent management information circular or a proxy statement filed with the SEC on EDGAR and with the Canadian securities regulators on SEDAR+. In addition, there is an accompanying slide presentation for today's call, which along with our press release and filings with the SEC and on SEDAR+ may be obtained from our website at onereal.com.

With that, I'll turn it over to Tamir.

Thank you, Alix, and good morning, everyone. This morning, we announced that Real has entered into a definitive agreement to acquire RE/MAX. This is a transformational combination. One that unites the most iconic brand and largest franchise network in real estate with the most innovative technology and fastest-growing major public real estate brokerage. Together, the Real RE/MAX group will be a leading technology-enabled global real estate platform. This is the moment Real has been working towards since our inception.

Real was built on a simple conviction. The technology can fundamentally change the economics of real estate for agents, for franchisees and for consumers. RE/MAX was built on a different but equally powerful conviction that a trusted brand and an entrepreneurial franchise model can deliver superior results for agents and clients around the world. 50 years of RE/MAX history validates that model. And we believe that the combination of these two platforms creates something meaningfully differentiated against anything else in the market with significant upside potential.

On a pro forma 2025 basis, the Real RE/MAX group would be the fastest-growing publicly traded brokerage in the industry with approximately $2.3 billion in revenue and $157 million in adjusted EBITDA. The combined company's powerful technology, scale and iconic brand power will drive more value to agents, franchisees, consumers and shareholders than either company could do alone.

Turning to Slide 5. Let me walk through the transaction terms on this slide. We are acquiring RE/MAX for an enterprise value of $880 million. For Real the transaction multiple reflects approximately 9.4x RE/MAX 2025 adjusted EBITDA before cost synergies and 7.1x after taking into account an expected $30 million of annual run rate cost synergies. Importantly, this transaction is happening in a market environment that remains [indiscernible] a historical trough for existing wholesales, meaning RE/MAX earnings today do not reflect a normalized housing environment. This gives us conviction that this is a compelling entry point with significant earnings upside potential as the market recovers.

The transaction structure provides RE/MAX shareholders with the benefit and optionality of both value upside and value certainty. RE/MAX shareholders can elect to receive 5.15 shares of Real RE/MAX group for each RE/MAX share they own. Alternatively, RE/MAX shareholders may elect to receive $13.80 per share in cash, subject to proration such that the aggregate cash proceeds for RE/MAX shareholders will be no less than $60 million and no greater than $80 million. Existing Real shareholders will receive 1 share of the new Real RE/MAX group for each real share owned.

The transaction is expected to close in the second half of 2026, subject to regulatory and shareholder approvals from both companies as well as the approval of the British Columbia Court, Real's current home jurisdiction. This enthusiasm we and RE/MAX have for the transaction is clear with some of the largest shareholders of both companies having already agreed to vote for it. RE/MAX founders, Dave and Gail Liniger have inspired and grown an extraordinary company. And their excitement about the combination gives us even greater confidence in the upside we can create together.

On this point, I want to say one thing clearly. The RE/MAX brand is not changing. RE/MAX is an iconic, globally recognized franchise, and it is an important part of this combined company. We will operate RE/MAX and Real as distinct businesses under one platform. That is the operating philosophy we are committed to.

Moving to Slide 6. Slide 6 lists the 5 strategic pillars that underpin the combination. Let me dive into more details on each.

Slide 7. First and most fundamentally, this is a combination of 2 highly complementary businesses, Real brings the growth velocity of a modern AI-enabled asset-light brokerage as well as proprietary technology, a vibrant agent community and a scalable operating model. RE/MAX brings a global franchise network significant brand equity and the recurring revenue and compelling margin profile of the Capital Life franchisor. These models do not compete, they complement. Real RE/MAX Group will be the only major real estate company offering both cloud-based brokerage and global franchise office network, and it will benefit from two of the industry's strongest agent cultures on one platform. Agents who drive in the in-office franchise environment can continue to do so under the RE/MAX brand and agents who prefer the flexibility and economics of a cloud-based model can continue to do so under Real. Let me share more.

Turning to Slide 8. The combination will create a compelling and differentiated value proposition for every stakeholder in the ecosystem. For agents, this is about choice and better tools. RE/MAX agents will keep their brands, their franchise model and their existing economics. Real agents will keep their model too. What changes is that both aging groups will now have the support of a significant larger platform. Both will have access to advanced technology, expanded product offering and ancillary income streams, including mortgage, title and fintech services. We are not asking agents to change what works for them. We are adding to it. And we believe that, that makes agents value proposition more.

For franchisees, we will provide access to our proprietary technology platform, reZEN, to serve as the system of record to manage their back office brokerage operations. This includes streamlining transaction management processes, reducing manual labor-intensive tasks and ultimately lowering the cost to operate. we will also provide access to our ancillary services, including mortgage and title to unlock new revenue streams and supplement their existing operations. 2 distinct models, 1 platform, each made stronger by the other. Put simply, the combined platform gives agents and franchisees more reasons to join and more reasons to stay.

On Slide 9, I want to spend a moment discussing our proprietary technology platform, reZEN, and why we think agents and franchisees across the RE/MAX network should be excited about the opportunity to leverage this technology in their business. Today, reZEN is used by 100% of Real agents, over 33,000 agents in 50 states and 5 Canadian provinces, providing the foundation for potential future international expansion and long-term value creation. By automating workflows, leveraging AI and replacing many capabilities that today are often sourced across several third-party platforms, reZEN offers the ability to significantly reduce franchise operating costs while simultaneously improving and standardizing transaction and team management workflows.

To give some perspective on what this means in application, we'll operate the most efficient brokerage in the public markets with 94 agents per full-time brokerage employee. The next closest public competitor manages 45 and the industry's largest public player is at 12. That is the game-changing difference. It's directly derived from the power of the platform we've built over the past decade. We've proven it can operate at scale, and we're eager to grow and reach -- and grow that reach meaningfully.

On to Slide 10. For consumers, this combination makes one of life's most complex transactions even simpler. We will continue to roll out HeyLeo, our AI-powered home search portal and AI relationship management platform to franchisees across the RE/MAX network over time. This will empower home sellers and homebuyers, giving them a smarter, more responsive experience from the very first search. Additionally, through One Real Title, One Real Mortgage, [ Motto Mortgage ] and [indiscernible], we will bring more integrated ancillary services under one roof. That matters because it gives agents and their clients more control over each transaction with fewer handoffs, faster closings and a better experience end-to-end.

On Slide 11, you can see from a financial standpoint, RE/MAX will possess one diversified and durable financial model with increased exposure to high-margin franchise revenue and the opportunity to grow to growing higher-margin ancillary services. Today, Real's revenue is predominantly generated from transaction-based commissions, RE/MAX, by contrast, generates nearly 2/3 of its revenue from recurring franchise fees and annual dues and high margins. The combination lifts our blended EBITDA margins from approximately 3% today to approximately 7% pro forma, and that's before synergies. That is a meaningful structural improvement.

With that, let me hand it to Ravi to discuss the financial in various details.

Thanks, Tamir, and good morning, everyone. Moving to Slide 12. We expect the transaction to be accretive to Real's earnings and adjusted EBITDA margin within the first full fiscal year following close excluding merger and integration-related expenses. With respect to our balance sheet, we've received a $550 million financing commitment arranged by Morgan Stanley and Apollo Global Funding. We would expect to term this out in the debt or capital markets prior to closing with the proceeds to be used to refinance RE/MAX's existing term loans and to fund the cash portion of the transaction and related costs. On capital allocation, our first priority post close will be deleveraging. We anticipate reaching our target 2x net debt to adjusted EBITDA leverage ratio by the end of the second fiscal year following closing, supported by the strong cash conversion of both companies. As we deleverage, we will continue to reinvest in technology and growth while returning capital to shareholders via share repurchases to offset dilution, obviously subject to leverage and covenant capacity.

Moving to Slide 13. On synergies, we expect to realize approximately $30 million of annual run rate cost synergies with the majority realized within calendar year 2027. The key areas for synergy realization come from shared services consolidation, corporate and public company costs and technology and vendor efficiencies. At run rate, that translates to approximately 100 basis points of consolidated margin expansion.

Now it's important to note that our plan is grounded and clearly identified synergy opportunities and informed by what we have already demonstrated at Real. For context, over the past 3 years, Real has reduced operating expenses as a percentage of revenue by 470 basis points and expanded adjusted EBITDA margins by 340 basis points. In short, we know how to run a lean scalable platform, and we intend to bring that operating discipline to the combined organization.

Moving to Slide 14. We also believe there is a compelling revenue growth opportunity from leveraging the combined platform, not just from stronger agent and franchisee growth, but across our higher-margin mortgage title and Real Wallet businesses. We also see significant opportunity to utilize our AI-powered consumer home search portal, HeyLeo, to further nurture and monetize the 1 million annual leads generated across remax.com and remax.ca. I want to emphasize that the accretion and value we've articulated today are not dependent on these revenue synergies. These opportunities represent additional potential upside.

With that, I'll hand it back to Tamir.

Thank you, Ravi. On to Slide 15. As Ravi said, we know how to run a lean, scalable platform, and we intend to bring that discipline through the integration process and to the combined organization. Our plan is well defined and set across 4 phases. Jenna Rozenblat, our Chief Operating Officer, has been appointed Chief Integration Officer for this transaction. She will lead a joint [indiscernible] team working to execute with discipline to bring our organizations together. Importantly, the pro forma leadership team will draw the best athletes from both organizations. Nobody understands the franchise business like the team who has built it and run it at RE/MAX. And we intend to leverage that institutional knowledge.

On Slide 16, let me close by stepping back to the bigger picture. Real estate is one of the largest markets in the world, and it is in the early stages of technology-driven transformation. We built Real to be the center of that transformation as a platform that serves agents, consumers and our franchisees. The reZEN platform, Leo AI, Real Wallet and HeyLeo, these are not just features, they are an operating system purpose-built for real estate professionals and their clients. What RE/MAX adds is brand equity, a renowned franchise network and a global footprint to deploy that operating system at scale and we could not built organically -- we cannot build it organically in the near term. Together, the combined company will have over 180,000 agents, approximately $2.3 billion in revenue, and we believe a fundamentally more compelling long-term earnings story. We expect to grow rapidly operate more efficiently and deliver more value to every participant in the home buying and selling process and thereby delivering value to our shareholders. We are excited about what comes next and we are committed to executing this integration with discipline, transparency and a focus on long-term value creation.

Before I close, I want to take a moment to acknowledge Dave and Gail Liniger. Dave and Gail founded RE/MAX 53 years ago with a simple but radical idea that agents deserve more. That idea became the most iconic real estate brand in the world. the fact that Dave and Gail support this transaction is not something we take lightly. It tells us that they see in this combination what we see: a path to carry RE/MAX' legacy forward for the next 50 years on a stronger foundation with better tools and with greater reach. We are honored by their confidence, and we are committed to delivering on our promises.

With that, I'd like to open the line for questions.

[Operator Instructions] And the first question today is coming from Ryan McKeveny from Zelman.

Congrats to you on the Real side and congrats to the team on the RE/MAX side, exciting news today. So a question for me. So Tamir, I think you discussed agent economics and kind of on the RE/MAX side, things stay as they are on the Real side things stay as they are. I guess, just thinking through the agent value proposition, I know on the RE/MAX side, they've made some transitions and adjustments in different type of plans, including Aspire, with regard to bringing new agents on. So how should we think about whether the franchisee sees a different go-to-market plan? Or different possibilities in terms of what they can present to agents on the RE/MAX side of things. Maybe you can just dig into that a bit from the viewpoint of what changes, what stays the same from the point of view of , let's say, an agent on the Real side and the agent on the RE/MAX side.

Sure. Great question. And it's a big one as well. I think that's, first and foremost, I think that the RE/MAX leadership in the past couple of years have done a great job making sure that they're strengthening the value proposition and positioning RE/MAX to go back to growth in North America. What we will try to do is make sure that we're operating two individual brands in parallel. So nothing changes for RE/MAX, nothing changes for Real in terms of branding and how agents and franchisees and team leaders operate on a day-to-day basis. What we're trying to do is add on top of that. So the economics for them remains the same. But what we plan on doing is offering the Real technology to all of the RE/MAX agents and franchisees so that they can leverage that technology in order to run their businesses more efficiently, have a better value proposition for their buyers and sellers and overall strengthening the value proposition that RE/MAX has for agents and franchisees. So all in all, I think that this combination is the winning one because we are complementing each other and Real brings to RE/MAX what RE/MAX was trying to build on their own, and we've been successfully building for the past decade. And I think that, that technology is going to play a significant role in how RE/MAX attract new franchisees and how franchisees and operators attract agents through their offices.

In terms of branding, two separate brands, but the value proposition is just going to become stronger just because they will be able to offer more tools, more technology, bigger community, more lead exchange possibilities and just better monetization of their business.

The next question will be from Stephen Sheldon from William Blair.

You have Matthew Filek on for Stephen Sheldon. Congrats on the announcement this morning. As you think about the integration, where do you see the greatest execution risk? And how are you planning to mitigate those? And related to integration, how quickly can RE/MAX agents be onboarded to Real's tech stack?

I think that it's very important for both management teams to make sure that agents are behind that move and they understand that we're coming to provide additional value versus taking anything away. So in the short term, we want to provide stability and make sure that both on the RE/MAX side, on Real side, everybody understand that it's business as usual, and everything remains the same for them.

In addition to that, once we close the transaction, there will be a team at Real that will be demonstrating and pitching our technology to the franchisees, and they will be able to elect whether they want to use it or not. So it's not mandatory. We're not going to dictate anything. We're just going to present them the multiple offers and tools that we have. And if they choose to elect, we will integrate them. So that will be done pretty much on day one. We will actually start the communication prior to closing, I think just to get them to be a little bit more familiar with the Real technology but franchisees that will be interested and agents that will be interested in adopting Real's technology. We'll be able to do that from day one.

Great. And then just as a quick follow-up, could you briefly touch on timing of the announcement? What made you feel like now is the right time for something like this?

I think that when you look at the two companies, we've been obviously, very impressed with RE/MAX. I've known that brand since I was a kid, and I always admired it. I think that the two companies are now at a point where our technology has reached the maturity that enables it to go and be rolled out through network of 150,000 agents worldwide. So we feel very confident in our ability to actually execute. Real on its side also matured to be a company that is operating at scale, we're at all 50 states and 5 Canadian provinces. And once we look deeper into the two companies, we understood that they're just complementary. RE/MAX brings the brand recognition and the iconic brand, the scale, the global presence. We bring the technology, the growth. So it was a point in time where we understood that we have what they need and they have what we need, and it's a good point in time to join forces and build an amazing company together.

The next question will be from Matthew Erdner from JonesTrading.

Congrats to both parties in this transaction. What do you guys envision happening with the noncontrolling interest over at RE/MAX? Obviously, Dave's behind the transaction, he's voting for it. But could you speak a little bit about that? And as a little more about the structure as you go forward?

Yes. Thanks for the question, Matt. And all the details will be filed in our filings, in the agreement and the proxy that Alix mentioned. So happy to get into some of the technical details off-line, but the noncontrolling interest will be converted into RE/MAX shareholders and then ultimately merged into the [indiscernible]. So that's more of -- the technical mechanics are a little bit more nuanced than that, but yes, you won't see that noncontrolling interest line in the combined company.

The next question will be from Naved Khan from B. Riley.

Great. Just curious about maybe the retention rates of the RE/MAX franchisees. How does that look like? And is it possible to use in Real maybe the retention mechanism where people franchisees who want to move over, maybe can be on the Real brokerage economics and Real brokerage model? So that's the first part of my question.

The second question is around just the potential for maybe tuck-in M&A? And what's the -- does this current transaction restrain you from engaging in any sort of tuck-in M&A maybe in the [indiscernible] space or mortgage space or such?

Thanks for the question, Naved. So I can take the retention rates and M&A and Tamir, you can address some of the mechanics or post-close [ vision ]. But RE/MAX has had incredibly strong retention rates. As you know, it's a franchise model where every year, a certain percentage of franchisees are up for renewal, and we've been very impressed with the renewal rates in recent years, both in the U.S. and Canada. So I think given the visibility in the franchisee, the renewal schedule, we're pretty excited about the recent track record and the go-forward opportunity to retain our most productive franchisees.

On the M&A side, look, I think the initial priority will be deleveraging, but we expect to do that quite rapidly. And at the same time, we'll have the flexibility to return capital, buy back stock and also explore tuck-in M&A should opportunities arise. But first order of business is getting the transaction closed and financed and then reducing leverage post close.

And just to add on that, Naved. Real has been taking market share from pretty much all of the players in the industry in recent years. We want to make sure that we protect the hard work that RE/MAX franchisees have put into building their businesses. So there will be measures that we will put in place to make sure that we protect their businesses and Real does not take agents from RE/MAX. So we want to make sure that they understand that. We want to make sure that they understand that we want to protect and grow their businesses. And at the same time, we also want to make sure that we have a very compelling offering for any agent who is not currently with Real or RE/MAX and is looking for a change, so they find the right model for them under that umbrella of the combined company.

The next question is coming from Tom White from D.A. Davidson.

Congrats on the deal. Just two quick ones, I guess. Maybe just a follow-up on the last question, existing franchise agreements at RE/MAX. I'm just curious if like any of them have like change in control provisions or how -- and if so, kind of how you expect that might play out with the deal? And then also, I was maybe just hoping for a little bit more background on how the deal came together? Or was it just sort of the result of the organic kind of ad hoc discussions? Or was there sort of more of a structured process?

Yes. So there's no change of control out or anything in the franchise agreements. So hopefully, that helps on the first question. On the second question, I appreciate the question. I think we'll defer to the proxy when all the details will come out. But needless to say, both companies are very excited about the opportunity ahead to operate and deliver value as a combined company for all of our stakeholders.

That concludes today's Q&A session. And this also concludes today's conference call. A replay will be available on the Investor Relations section of both company websites. Thank you for your participation, and have a good morning.

Good morning, and welcome to the RE/MAX Holdings Fourth Quarter 2025 Earnings Conference Call and Webcast. My name is Tracy, and I will be facilitating the audio portion of today's call.

At this time, I would like to turn the call over to Joe Schwartz, Senior Vice President of Finance and Investor Relations. Mr. Schwartz, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to RE/MAX Holdings Fourth Quarter 2025 Earnings Conference Call. Please visit the Investor Relations section of www.remaxholdings.com for all earnings-related materials, including our standard earnings presentation and to access the live webcast and replay of the call today. .

Our prepared remarks and answers to your questions in today's call may contain forward-looking statements. Forward-looking statements include those related to agent count, franchise sales and open offices, financial measures and outlook, brand expansion, competition, technology, housing and mortgage market conditions, capital allocation, credit facility, dividends, share repurchases, litigation settlements, strategic and operational plans and business models. Forward-looking statements represent management's current estimates. RE/MAX Holdings assumes no obligation to update any forward-looking statements in the future.

Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements. These are discussed in our fourth quarter 2025 financial results press release and other SEC filings.

Also, we will refer to certain non-GAAP measures in today's call. Please see the definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website. Joining me on our call today are Erik Carlson, our Chief Executive Officer; and Karri Callahan, our Chief Financial Officer. With that, I'd like to turn the call over to them. Erik?

Thank you, Joe, and thanks to all of you who have joined us today. In 2025, we built a strong strategic foundation, and we're beginning to see the payoff. We've made great progress in enhancing our brand and our overall value proposition and we view 2026 as a year of tremendous opportunity for our company.

Our franchisees, our agents and our loan originators. We accomplished all of this despite 2025 being third consecutive year of a historically slow housing market. began with a major win. As in January, we had the largest brokerage conversion in RE/MAX history, an Ontario family of visionary entrepreneurs and their nearly 1,200 agents joined RE/MAX Canada adding to the market-leading presence we enjoy from coast to coast.

Engagement throughout the RE/MAX network reflects growing enthusiasm for our strategic investments in the brand, reaffirming the strength of our overall direction. At the same time, we continue to operate the business with discipline as evidenced by our fourth quarter profit and margin performance, which came in at the high end of our expectations.

Given the productivity and professionalism of our network and the resilience of our model, we believe we're well positioned to capitalize on a recovering market. We're continuing to support our affiliates in growing their business and increasing their profitability.

In terms of housing data and consumer insights, despite a typically slow start of the year in January, we continue to see the housing market normalizing in various ways, and that is a healthy development. According to our latest RE/MAX National Housing Report, inventory and new listings remain higher than a year ago, and the overall fundamentals suggest we'll have a more balanced market this year.

Across many markets, we're seeing early signs of a more even playing field. Seller concessions are becoming more common. The negotiations are more thoughtful. And interest rates are trending downward which helps support buyer activity. We also believe some recent policy proposals could prove to be constructive to housing if effectively implemented, including those aimed at increasing the inventory of single-family homes available to individual homebuyers as well as those that aim to lower the 30-year mortgage rate. Over time, we should also see the lock-in effect of low mortgage rates continue to ease. And the results of our recently published consumer survey show that despite delays caused by affordability and broader economic uncertainty, 88% of prospective buyers still say they're likely to purchase a home in 2026.

Market conditions have slowed time lines, but not the underlying demand. Also, buyers said they're looking for more than a house. They want a sense of community, too. That plays directly to our strengths as the most trusted real estate brand in the United States and Canada. RE/MAX agents are local experts who skillfully help consumers navigate complexity evaluate trade-offs and make confident long-term decisions.

Turning to our operational performance. As of December 31, our overall worldwide agent count hit another all-time high at over 148,500 agents. The growth of RE/MAX agent base outside the U.S. and Canada continues to fuel new records. And now continue to make progress in stabilizing agent count, as evidenced by our best fourth quarter performance since 2021. In a difficult market, Canadian agent count finished the year relatively flat to 2024, but we started the year with tremendous momentum.

It's also worth noting that the reach of our global network enables us to serve an unparalleled number of consumers. In this decade alone, since January 1, 2020, RE/MAX agents have closed over 10 million transaction sides worldwide. It's an incredible achievement. And as we continue to evolve our strategies, we're exploring new ways to lean into the tremendous opportunity this global sales power presents.

As I mentioned earlier, in mid-January, we announced the largest conversion and history of our company. A family of visionary entrepreneurial real estate leaders, Vivian Risi and her children, Michelle and Justin chose RE/MAX for their 17 office Toronto-based operation, largely to deliver a wider range of tools and opportunities to their nearly 1,200 agents, both for now and into the future.

We're thrilled to welcome the Risi's and their talented agents to our network. The Risi also chose RE/MAX for our global footprint, robust referral network and powerful marketing and technology platforms. These advantages should reinforce their agent's productivity and growth potential in a dynamic real estate landscape.

This conversion demonstrates that the enhancements to our overall value proposition are working. As brokers both in and beyond our network recognize the power of our current competitive advantages and the momentum that we're building. This landmark conversion is just the beginning.

We're increasingly encouraged by our pipeline of conversion, merger and acquisition candidates across the U.S. and Canada. We have a strong slate of sizable opportunities we plan to close and announce in the months ahead. We believe much of the excitement surrounding the RE/MAX brand is driven by the tremendous team effort that has reinvigorated our value proposition.

Our innovations are centered on enhancing our competitive advantages and helping agents win more business save time and make more money, which in turn helps increase broker profitability. The new economic models we launched last year, Aspire Ascend and Appreciate continue to provide brokers with greater flexibility and a wider framework for recruiting and retention.

While Q4 is always seasonally challenging, our Q4 recruitment rate outpaced last year's building on the positive trends from late Q2 and Q3. The benefits of developing and launching these new options last year should continue to emerge over time. Notably, adoption of Aspire is already over 2,000 agents and the program's educational and technology elements position these newly recruited agents for sustained careers with the network.

Announced several months later, Ascend and Appreciate continue to see increasing adoption as word grows about the value they offer. Less than a year after launch, both are still trending upward. We also continue to invest in our digital marketing assets.

Our 6-month Marketing as a Service platform continues to gain traction, and the results are very encouraging. For example, listings that are promoted through our platform are delivering 3x more views, 6x more active users and 5x more actions compared to similar listings that have not been promoted on remax.com.

These are just some of the initial findings, but they underscore of the product's ROI and value to RE/MAX agents. Overall, the platform is scaling in line with expectations, showing resilient demand, rising paid adoption and strong effectiveness, all of which positions us for continued growth throughout the year ahead.

And we've launched a newly designed remax.com and are launching a redesigned remax.ca in Canada. They both incorporate personalized content, AI capabilities that deliver better consumer engagement. Making stronger connections to agents while also furthering our monetization strategies.

For example, agents can now turn listings into AI-generated videos with the click of a button. Additionally, consumers can leverage AI to redesign home exteriors and interiors of property photos on our websites, improving engagement and extending the amount of time they spend on site.

Our RE/MAX Media Network continues to build meaningful momentum with a healthy mix of programmatic and direct sourcing Revenue this year is pacing ahead of forecast, which is an encouraging sign. Brands are clearly interested in taking part. So there's an ample reason to expect advertising revenue from the RE/MAX Media Network to increase significantly this year.

Additionally, our lead top tier curation program continues to deliver a better agent and consumer experience as conversion rates and corresponding revenue contributions are exceeding our initial expectations. Also from a lead source perspective, we're introducing a golf lifestyle designation. This program will enable RE/MAX agents to be certified as a real estate professionals who understand club, course and real estate dynamics unique to golf properties.

Our new program will include training, certification and real estate lease that position participating RE/MAX agents as trusted advisers for golfers looking to find new homes and new communities. Let me now spend a moment on important developments within our mortgage business.

As we look across the broader housing and mortgage landscape, one of the consistent themes we see is the need for flexibility, particularly in how independent operators structure their business in these changing market conditions. With that in mind, we rolled out a new franchise royalty fee model earlier this year across the Motto network. The goal here is simple. To better align our economic structure with the realities of today's market was supporting long-term growth with our franchisees and the model brand.

This new model reduces fixed cost through a lower flat feet and introduces a transaction-based component that scales with performance. It's designed to provide more flexibility, encourage operational excellence and support sustainable growth over time. This is not a force transition. Existing offices can opt into the new new model if they believe it benefits their business, while new franchisees will follow the updated structure moving forward. That optionality is intentional. Different stages, and we want to meet them where they are.

From a strategic standpoint, this approach mirrors the thinking behind our RE/MAX fee model options, aspire send and appreciate which were designed to give RE/MAX affiliates more choice, more control and better alignment with how they choose to grow their business.

As part of our continued focus on strengthening the long-term health and competitiveness of the Motto brand,we deliberately chose to terminate a number of franchisees during the fourth quarter. These decisions were rooted in our responsibility to maintain a high-quality system that reflects the standards and expectations required to deliver a consistent borrower experience.

We continue to see significant opportunities within our mortgage business. These include leveraging the new fee model to grow the Motto base, drive greater adoption of wemlo processing, both from inside and beyond our motto network as well as exploring additional ways to capitalize on the hundreds of thousands of transactions RE/MAX agents close annually in the United States and Canada.

We're also exploring possibilities around the thousands of leads that flow through our digital platforms. Applying both the real estate and mortgage, our fourth quarter achievements and enhancements reflect a concerted focus on strategic growth network strength and a differentiated value for franchisees, agents and loan originators alike.

As we look across both industries, the pace of change requires brands to offer scale without sacrificing local expertise. All we're providing that constant support and value to our customers. And we continue to lean into our RE/MAX and Motto networks and the enthusiasm we see is very real.

That enthusiasm has been fueled by the energy of new leaders who have recently joined the team. One of those inspirational leaders is Chris Lim who we just promoted to President and Chief Growth Officer of RE/MAX. Over the past 13 months, Chris has helped to modernize operations, increase support services, expand our value proposition and elevate the way consumers perceive this global brand, especially on our digital platforms.

He brings a creative upscale mindset to every project and played a direct role in several major brokerage conversions, most notably in Hawaii and Ontario. Chris, congratulations.

As we look toward the rest of 2026, we remain focused on executing our comprehensive growth and revenue strategy. Last year, we brought a new leadership, launched new products and services develop new economic models and strengthened the foundation for our future. This year, we're focused on driving adoption, managing outcomes and ensuring that our company and networks continue to win. With that, I'll hand it over to Karri.

Thank you, Erik. Good morning, everyone. As Erik said, we are encouraged by our fourth quarter operating results and overall financial performance. Profits for the quarter landed at the high end of our expectations, and our revenue performance was solid despite a challenging housing market.

Some of our notable quarterly financial highlights included total revenue of $71.1 million adjusted EBITDA of $22.4 million, adjusted EBITDA margin of 31.5% and adjusted diluted EPS of $0.30.

Looking closer at revenue, excluding the marketing funds, revenue was $53.6 million, a decrease of 0.4% compared to the same period last year, driven by a decline in organic revenue of 0.4% and flat foreign currency movements. The decline in organic revenue was driven mainly by a reduction in U.S. agent count and the impact of recently introduced incentives, including the Aspire program partially offset by an increase in broker fees and revenue contributions from our new initiatives, including marketing as a service and from the monetization strategies from our flagship website.

Fourth quarter selling, operating and administrative expenses increased $1.6 million or 4.4% to $37.3 million. This increase was primarily due to losses on sale and disposal of assets an increase in expenses from the timing of other events, partially offset by a reduction in certain personnel-related expenses. The resilience of our franchise economic model and our ongoing evaluation of every aspect of our business, has resulted in our ability to continue to delever despite a challenging macro and housing environment.

Our total leverage ratio decreased to 3.12x as of December 31. A continuation from last quarter, our total leverage ratio remains below the 3.5x level, affording us greater flexibility from a capital allocation perspective. And importantly, we currently expect to remain below that 3.5x level throughout the year.

From a capital allocation perspective, our priorities remain unchanged. We're strategically reinvesting in the business, and we'll continue to build our cash reserves. Now on to our guidance. Our first quarter and full year 2026 outlook assumes no further currency movements, acquisitions or divestitures. For the first quarter of 2026, we expect agent count increased 1.5% to 2.5% over first quarter 2025, revenue in a range of $69 million to $74 million, including revenue from the marketing funds in a range of $16 million to $18 million and adjusted EBITDA in a range of $14 million to $17 million.

And for the full year 2026, we expect agent count to increase 1.5% to 3.5% over full year 2025, revenue in a range of $285 million to $305 million, including revenue from the marketing funds in a range of $66 million to $70 million and adjusted EBITDA in a range of $90 million to $100 million.

With that, operator, let's open it up for questions.

[Operator Instructions] Your first question comes from the line of Nick McAndrew with Zelman & Associates. Your line is open. Please go ahead.

Questions. Maybe just to start, I think as the earlier Aspire cohorts moved beyond kind of the onboarding phase, can you just talk about what you're seeing with those earlier cohorts just in terms of agent developments or productivity as some of those agents move through the program?

Sure. Nick, we continue to be really excited about the Aspire program. We know that we see significant reduction in the churn of our agents as we move them up the productivity cohort. .

And as we've seen in the -- it's really early that, that cohort is very small. But as those agents have gone through, we are seeing some upticks in productivity as they go through and they do the training and they get engaged with our tools, we are seeing some improvement in productivity, and we're also seeing improvement in retention within that cohort.

I think importantly, as Erik said in the scripted remarks, in addition, the ASPIRE program in and of itself is really spurring recruiting activity for our brokerages. So the optionality that the program offers, I think, is another thing that has really been beneficial as we've seen the continued stabilization from a U.S. agent count perspective here in the fourth quarter, best fourth quarter since 2021 and a continued trend from Q2 and Q3.

Got it. And I guess, second, just a follow-up. Congrats on the 1,200 agent Canadian addition. And I'm just curious on whether it's the new comp structures, brand positioning or tech offerings, like anything to call out on just what's resonating with that agent base that's coming through RE/MAX and just any factors that might have led them to end up choosing remote.

Yes, Nick, this is Erik. And I appreciate you saying choosing RE/MAX because that's actually the way we look at it. And I think it's a combination of all of the above, to be quite frank. I mean, about a year ago, obviously, we launched the brand modernization. We've done a lot of really hard work on our value proposition.

We've showed up with different people from a leadership perspective. we're really leaning in to the network. And as we're talking to prospective clients about the RE/MAX opportunity, it's not only just about tech and our education and the community, it's our global footprint, right?

So 148,000 plus agents in 120 countries. -- real estate today, although it's still very local, it is worldwide. And so we're really proud of, obviously, the footprint that we have, but the tools and processes that we're putting in place to help agents and consumers find great agents around the world, right?

So our MAX referral program is continuing to see improvements and additional transactions, which is very healthy. So I think the RECs are just such a tremendous family and well respected, obviously, in real estate, we're super excited that they chose RE/MAX as the next partner for [indiscernible] tomorrow. There's simply an outstanding group, and we're seeing very high retention rates right now with agents which tells us, one is Vivian and her team have a lot of respect, but also agency value in our brand and what it represents today and in the future.

Your next question comes from the line of Dae Lee with JPMorgan/please go ahead.

Great. I guess my first one is on -- there's a lot of talk about the tutor AI-driven automation to change the industry. I'm curious like how like what are franchises in redefining optimistic about AI? And how are they responding to the automation derive. .

Yes. Dave, it's Erik. I'll give you a little bit of context on how we think about it and some of the feedback that we're getting from our network. I think AI for the sake of is a mistake. And I think that we're trying to be very purposeful on how we deploy automation technology, and obviously, some of that is our network, and I think just real estate agents and/or brokerages in the industry are very curious about it. there's a sense of, hey, I need to lean in.

There's a sense of I'm scared of it. What we try to do here at RE/MAX is be purposeful in our approach. And so you're seeing us deploy tools and services like Max AI which resides on remax.com and CA, which helps nurture leads and helps consumers find the right real estate agent within the RE/MAX network. You're seeing us use tools from our partners at old trail like [indiscernible] which helps to really automate workflow within the e-mail system. You'd be surprised how many agents still use e-mail as a primary method to correspond with consumers, whether on the buy side or the sell side and get business done.

So automate some of that work. At a very high level day, like our purpose here is to help agents win listings and win more business, do it in less time and make more money. And so when we think about AI, we think about how we can deploy AI to help achieve those 3 goals. So you're seeing us deploy whether it's through kind of our CRM and symptom and helping folks nurture their contacts, whether it's in back-office-type operations, to help automate and take cost out of the business or whether it's with consumers to help engage and find the right property, the right listing, the right agent for them to be successful.

So we're -- I would chalk it up as we're taking a very purposeful approach here, but really leaning into our North Star to help agents be more successful in the market.

Got it. Helpful. And then as a follow-up, I'm encouraged to see momentum into 2026. I'm just curious, what are the key swing factors in the high versus the low end of your guide you're 20x revenue guide? And which KPI should we be tracking to see revenue tilt to the high and that is just positive growth for the year? And does that include U.S. business returning to positive growth as well.

Yes. Great question. It's Karri. So I think we've been -- as Erik said, we try to take a purposeful approach to everything. I think that there's definitely some opportunity to push to the higher end.

Obviously, we're in the -- we just finished the third straight year of a pretty depressed housing cycle. -- anything from a macro perspective would definitely be a tailwind and pushing us up to the higher end of that guide. We obviously can't control what's happening from a macro perspective.

But I think we've done a great job really reinforcing the value proposition and really focusing on what we can control. So further stabilization and kind of growth from a U.S. agent count perspective.

Erik mentioned in the scripted remarks, some momentum in the pipeline on the coming months in terms of additional conversions mergers and acquisition activity, that would be a tailwind in terms of acceleration beyond what we see today. And then with respect to some of our new monetization initiative, marketing as a service as well as our digital channels monetization opportunities. we're seeing significant growth year-over-year.

But if that outpaces kind of our current forecast, which we're already pleased with the growth that we've included, that those are other levers that could push us to the high end of the range. .

Your next question comes from the line of Tommy Mcjoint with KBW. Please go ahead.

Question on the Aspire program and the impact on the broker fee revenue line. Just wanted to get a sense of the magnitude of how much it impacted it this quarter. And then secondly, it seems like you're going to recognize that ratably throughout the year. So is there a chance for a major kind of true-up at year-end if volumes end up drastically different than you're expecting? Or how could that impact that? .

Yes. Tommy, it's a great question. As Erik mentioned on the scripted remarks, we do have about 2,000 agents now that are on that and so we're seeing good adoption. And as I mentioned earlier, I think importantly, more than anything, we're also just the program offer optionality.

In terms of the broker fee impact to it was not that significant, kind of a couple of hundred thousand dollars, maybe $0.5 million. With respect to just kind of how the activity will get recognized, it's just going to smooth things out a little bit over time.

So we're going to start to see a little bit less seasonality in the broker fee line. To the extent that participation in that program grows. So as there's more participation, we can provide more guidance. So there's a little bit of impact in Q4, but it really wasn't that pronounced.

Okay. Got it. And given RE/MAX's sort of vast network and a number of agents, .

Your next question comes from the line of [ Valentin Alvar ] with Jones Trading.

So just regarding your disclosure on the earnings release relating to selling, operating and admin expenses, can you give us some idea of ongoing versus onetime cost pressures, just to gather an idea of the run rate.

Sure. also, it's Karri. So with respect to kind of what was in the information. There was a couple of things that were a little bit unusual and onetime in nature. We did have about $1 million charge with respect to some sale and disposal of assets. That won't continue into the future.

And so as we think about what that kind of looks like going forward, the year-end kind of Q4 run rate of SONA looks actually to be pretty consistent into Q2, Q3 and Q4 of this year once you normalize for that. Keep in mind that Q1 is always a little bit higher for us.

We're really excited for next week, which is our annual agent convention in Las Vegas. We've got over 60 countries represented and a lot of agents coming from all over the world to really experience the momentum that we're building from a RE/MAX perspective. But that does result in a little bit of increased investment in Q1, and that should look pretty consistent to Q1 of '24 and Q1 of '25.

Got it. for the additional info there. Switching gears a little bit. With where the stock is at today and the mortgage rates remaining near the 6% mark, are you more likely to engage in additional share repurchases versus Q4 also?

Yes, Valentin, it's a great question. I think when you look at our model from a recurring fee perspective as well as the significant earnings to free cash flow generation that the franchise model is able to generate -- we're really pleased with the fact that we're from a leverage perspective below that 3.5x level for a couple of quarters now.

So we do have some increased flexibility now as it relates to return of capital. So I think we're taking -- just given what's happening from a macro perspective, we're taking a prudent approach to capital allocation. But given where we are from a leverage perspective, I think capital allocation is definitely more back on the table than it's been, and we're looking to balance that with reinvesting back into the business and making sure that we can allocate capital to growing the business in a smart way that will generate the highest return.

[Operator Instructions]

Operator, if I may, this is Erik. And Tommy, I know you got cut off on your question. I think we heard a little bit about private listings, happy to address. With the private listing discussion, our view really has not changed. We feel like transparency, broadest distribution for listings gives buyers and sellers the best outcome. As we've talked about a little bit before, obviously, we do have a vast network around the world.

If there was a case where we had to participate in a broader private listing type network. I mean we'd be well prepared to do that. But philosophically, we think that the consumer comes first. It is the ultimate North Star not only for our brand but for our agents and our brokers serving buyers and sellers. And so we like the idea of transparency and the broadest distribution of listings. So sorry, you got cut off, Tommy, but I hope that helps.

There are no further questions at this time. I will now hand the call back to Joe Schwartz, Senior Vice President of Finance and Investor Relations. Mr. Schwartz, please go ahead.

Thank you, operator, and thank you, everyone, for joining the call today. We hope everyone has a great weekend.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, and welcome to the RE/MAX Holdings Third Quarter 2025 Earnings Conference Call and Webcast. My name is Colby, and I'll be facilitating the audio portion of today's call.

At this time, I would like to turn the call over to Joe Schwartz, Senior Vice President of Finance and Investor Relations. Mr. Schwartz?

Thank you, operator. Good morning, everyone, and welcome to RE/MAX Holdings Third Quarter 2025 Earnings Conference Call. Please visit the Investor Relations section of www.remaxholdings.com for all earnings-related materials, including our standard earnings presentation and to access the live webcast and replay of the call today.

Our prepared remarks and answers to your questions in today's call may contain forward-looking statements. Forward-looking statements include those related to agent count, franchise sales and open offices, financial measures and outlook, brand expansion, competition, technology, housing and mortgage market conditions, capital allocation, credit facility, dividends, share repurchases, litigation settlements, strategic and operational plans and business models. Forward-looking statements represent management's current estimates. RE/MAX Holdings assumes no obligation to update any forward-looking statements in the future.

Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements. These are discussed in our third quarter 2025 financial results press release and other SEC filings. Also, we will refer to certain non-GAAP measures in today's call. Please see the definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website.

Joining me on our call today are Erik Carlson, our Chief Executive Officer; and Karri Callahan, our Chief Financial Officer. With that, I'd like to turn the call over to them.

Erik?

Thank you, Joe, and thanks to everyone for joining us this morning. We're pleased that the momentum we've built in the first half of the year continued into the third quarter. Our total RE/MAX agent count reached another all-time high, fueled by steady global growth and our best third quarter U.S. agent count performance in 3 years. Based on feedback from the membership, we believe our mix of new ideas and products, along with our reinvigorated recent network events are enhancing our value proposition and generating great energy. At the same time, our constant focus on operational excellence, again, drove profitability and margin performance that exceeded our expectations. And while existing home sales have yet to show sustained signs of recovery, our networks continue to perform resiliently.

From a macro perspective, the trends we saw in our RE/MAX National Housing Report earlier in the year continued in September as inventory increased 20% over September 2024, marking the 21st consecutive month of year-over-year growth. Additionally, new listings, which has slowed some over the summer, rebounded in September, growing 4.5% over August. We believe these sustained increases are constructive for housing and will help support increased transaction activity. However, affordability remains a challenge, particularly at the lower price points. Further downward movement in mortgage rates would be welcome news.

From an industry perspective, this year has seen consolidation activity on both the large and small scale. Given existing industry dynamics, we believe the current state of change creates exciting opportunities for our company and networks. We continue to have a robust franchise sales and conversion pipeline and are building on the momentum of recent additions, including RE/MAX Hawaii, which catapulted RE/MAX to a #2 market share position in the state. This momentum is bolstered by our innovations and ongoing enhancements to our value proposition, which has spurred a lot of excitement throughout our networks and the industry. I've never felt more positive about what lies ahead for our company, and we're going to continue to evaluate all opportunities to drive enhanced value for all of our stakeholders.

As of September 30, our worldwide agent count of over 147,500 agents was another record high, and U.S. agent count had its best third quarter in 3 years. Although we're not where we want to be, the underlying agent fundamentals are encouraging. We said last quarter that May and June were the first 2 months of the year where our agent recruitment rate increased year-over-year. This positive momentum carried into Q3, where the recruitment rate for each month of the quarter was higher than last year. Producing agents continue to be drawn to RE/MAX and the quality of our network was reflected in the recently released 2025 REAL Trends Verified City rankings, where we had more agents represented than any other brand.

Although Canadian agent count was down slightly year-over-year, we saw modest sequential growth despite a continued challenging housing backdrop. We appreciate that being a broker and an agent is difficult in this market. And historically, we know that the number of producing agents in the industry tends to correlate with the level of existing home sales. We're encouraged by the results in both the U.S. and Canada given the current state of the markets, and our international agent count continues to be a bright spot, surpassing 73,000 agents.

Momentum in agent recruiting has been fueled by many of our ongoing initiatives. Our Aspire program continues to be a success with approximately 1,500 agents benefiting from the program. Although it's still early, Aspire is performing as intended with an uptick in the recruitment of newer agents and a higher retention rate. Building on the strong reception and feedback from the network on Aspire and leveraging our voice of customer capabilities, we've introduced the Ascend and appreciate programs in September. These optional economic models offer greater flexibility with respect to how and when a franchisee pays us, further supporting their ability to attract and retain quality agents.

While these programs are new, the feedback from the network has been very positive. In addition to providing flexibility with respect to our economic models, we continue to lean heavily into innovation to deliver an elevated experience to all of our affiliates and the consumers they serve. Many of our new offerings like the recently launched RE/MAX Marketing as a Service platform, leverage the strength of our scale to create new competitive advantages. The platform is a data-driven, AI-powered system that simplifies marketing for all of our affiliates. The offerings include automated listing packages, complementary and paid campaign options, real-time analytics and property videos created seamlessly with AI. We'll continue to add innovative products to the platform, all of which are designed to help agents save time, win more listings and grow their business.

This marketing approach is a strategic shift as we're consolidating fragmented efforts into one seamless experience. Although we're just getting started, the initial click-through rates and engagement results are very promising. We're seeing both the number of orders and users increase each week, and the current weekly order value is indicative of a low 7-figure annual run rate. Notably, we are planning to expand the platform into some international geographies outside of the U.S. and Canada, marking a tangible step to capitalize on the scale of our worldwide footprint, enhance the value proposition globally and diversify our revenue streams.

In addition, we continue to innovate on the exciting initiatives we launched last year, leveraging our digital assets. Our Lead Concierge program has been outperforming expectations this year, and we continue to evaluate and add new lead sources. The RE/MAX Media Network is on track with our revised expectations, and we anticipate it will have a 7-digit revenue contribution by the end of 2025. We remain optimistic about the long-term potential of these initiatives.

Our story is being told loudly and proudly through the voices of our franchisees and agents, both online and offline. Whether agents are leveraging our MAXEngage platform or other mediums, our momentum continues to build. Throughout our many events over the past several months, excitement and a feeling that something is different about RE/MAX has emerged as a constant theme. And that excitement is carrying forward in our ability to recruit top industry talent to our executive team.

We're thrilled to have Vic Lombardo on board as our new President of Mortgage Services. In his role, Vic will oversee the growth of our mortgage business, including Motto Mortgage, wemlo and future evolutions designed to grow our mortgage offerings. In Vic's first 2 months, he's rolled at the sleeves, dug into the operations, surfacing a number of innovative ideas to drive growth and add additional revenue streams and increase the operational efficiency. We're already putting foundational pieces in place, and we look forward to sharing more details on our strategy in February. While the mortgage market remains challenging, we've seen a modest uptick in refi volumes in the last couple of months. Our franchisees and LOs continue to persevere, and we're optimistic about the growth potential for our mortgage business.

In addition to Vic, Tom Flanagan, our new Chief Digital Information Officer, joined us at the end of September. Tom, a member of the 2025 Swanepoel Power 200 is a great cultural fit and his impressive track record includes 20 years as a real estate innovator and executive and leadership roles covering both technology and marketing. Tom is leading in to the potential of AI both to improve the customer experience and to make us more efficient in our day-to-day operations. Not only is he an industry-leading technologist but is experienced in ancillary businesses will also be a great asset as we continue to explore future growth strategies.

As we look to the future, we continue to lead in our networks and build on our momentum. We're focused on the tremendous opportunities that lie ahead for us. And with a world-class leadership team now in place, we believe we're well positioned for growth in the current environment. We're focused on what matters, continuing to grow our RE/MAX agent count, especially in the U.S. and Canada, enhance and expand our value proposition, focused on improving our customer experience, grow our mortgage business and concurrently diversify our top line drivers as we execute with excellence across our brands. As we move into the last couple of months of the year and prepare for 2026, I want to emphasize that we're in a new era when defined by clarity, purpose and action.

With that, I'll hand it over to Karri.

Thank you, Erik. Good morning, everyone. As Erik mentioned, we are pleased with our third quarter operational results and overall financial performance. Our third quarter profit came in at the high end of our expectations and our top line results were solid despite a housing market that continues to be slower than anticipated, highlighting the resilience of our financial model. Some of our notable quarterly financial highlights included total revenue of $73.3 million, adjusted EBITDA of $25.8 million adjusted EBITDA margin of 35.2%, an increase of 40 basis points over the third quarter of 2024 and adjusted diluted EPS of $0.37.

Looking closer at revenue, excluding the marketing funds, revenue was $55.1 million, a decrease of 5.6% compared to the same period last year, driven by a decline in organic revenue of 5.4% and adverse foreign currency movements of 0.2%. The decline in organic growth was principally due to lower U.S. agent count and to a lesser degree, certain incentives related to modifications to the company's standard fee models, including our Aspire program. This decrease was partially offset by contributions from our marketing services, including our Lead Concierge and RE/MAX Media Network initiatives. As mentioned, margin performance improved, thanks to our focus on ongoing operational efficiencies. Third quarter selling, operating and administrative expenses decreased $3.5 million or 9.7% to $32.5 million. This reduction was primarily due to certain lower personnel and events expenses, partially offset by higher investments in technology in our flagship website and increased bad debt and legal fees.

Despite the challenging broader macro and housing environment, our ongoing evaluation of every aspect of our business is paying off. The cash-generative nature of our business converted approximately 60% of adjusted EBITDA to adjusted free cash flow this quarter, and our total leverage ratio decreased to 3.41x as of September 30. Importantly, our total leverage ratio is now below the 3.5x level, at which we are afforded greater flexibility from a capital allocation perspective. And we expect to remain below the 3.5x level at the end of the year.

From a capital allocation perspective, our priorities remain unchanged. We are strategically reinvesting in the business, and we'll continue to build our cash reserves. We also believe that we can now evaluate returning capital to shareholders because at the current price, repurchasing our shares is an attractive use of capital.

Now on to our guidance. We are pleased with our Q3 financial performance and are encouraged by the growing excitement from our network and early returns from our initiatives. However, we remain pragmatic about the realities of the current housing market and continued uncertainties in the broader macro environment. As a result, we are tightening the top end of our full year revenue and adjusted EBITDA ranges. Our fourth quarter and full year 2025 outlook assumes no further currency movements, acquisitions or divestitures.

For the fourth quarter of 2025, we expect agent count to increase 0% to 1.5% over fourth quarter 2024, revenue in a range of $69.5 million to $73.5 million, including revenue from the marketing funds in a range of $17 million to $19 million and adjusted EBITDA in a range of $19 million to $23 million. And for the full year 2025, we now expect agent count increase 0% to 1.5% over full year 2024, revenue in a range of $290 million to $294 million, including revenue from the marketing funds in a range of $72 million to $74 million, a change from $290 million to $296 million, and adjusted EBITDA in a range of $90 million to $94 million, a change from $90 million to $95 million.

With that, operator, let's open it up for questions.

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Anthony Paolone with JPMorgan.

Just, Erik, I think you mentioned there were 2 programs. You talked about 7-figure contributions potentially. I think it was marketing and maybe it was Aspire. But I was wondering if maybe you can give a little bit more color around can we expect to see that level of incremental revenue in 2026? And maybe what would the margin perhaps look like? Or just a bit more detail on what that trajectory might be.

Yes. Certainly, Tony. Thanks for being on today. A couple of things we're talking about is, as you know, over the past 4, 6 quarters, we really have been talking about bringing more value to the network and helping them win more business, do it in less time and bring some profitability back to brokerages and help agents make a little bit more money. Part of that is our marketing efforts that we rolled out, I don't know, 8 or 10 weeks ago. And we're seeing really good engagement on our Marketing as a Service platform. So that's one of the platforms that we talked about being a 7-digit revenue opportunity. That certainly is continuing to grow. We're seeing great response engagement, usage.

And I think the most important thing, Tony, is it's actually working, right? So when you think about the marketing and listing or an open house or just marketing in general, it's good to see that engagement and their returns. So we're seeing customers come to our site. We're seeing higher engagement with properties. We're seeing more customers wanting to click through and grab an agent. All these things are good to help our folks kind of win listings. And really, it's a spend that's happening kind of in the market but in a disaggregated way. And so what we've done is created a platform through process technology and AI to help that spend, one, to lower the cost for agents, but also to be more effective in the marketplace. So we think that's a big opportunity, not only in the U.S. and Canada, where it's deployed today, but also internationally, and we're working on several markets in the fourth quarter to start that rollout to help monetize that international opportunity that you all have so politely pointed out to me many times in the past.

In addition, we have the RE/MAX Media network. We've spoken about a bit in the past and part of, obviously, Marketing as a Service has helped driving traffic to the website. I will tell you that we're building the plumbing. We've got good infrastructure in place. I think closer to the end of the year, you'll see kind of a new approach for us on dot-com and [ dot-ca ] but advertisers are liking what they're seeing. We have work to do, but they're seeing good engagement with their products. We're seeing good engagement from consumers when they have an ad kind of on a site that helps our brand, helps their experience. So we're working through kind of the foundational aspects of the program, but that definitely is -- it's a 7-digit figure in 2025 and will continue to grow in 2026 and beyond.

Yes. Tony, 1 thing that I would add in addition to everything that Erik said from a strategic perspective because we are really excited about the engagement that we're seeing from a Marketing as a Service perspective. The margin profile from just a financial standpoint, it does look a little bit different than our core business. So kind of looking in that kind of high single-digit, low double-digit margin contribution perspective.

But with all of that said, we just think there's tremendous opportunity in terms of driving the top line from that perspective, just given the engagement we've seen from the network and the overall performance with consumers who have interacted with the product over the last couple of months.

Tony, on the [ RMN ] side, the margin profile will be different too. It will be higher than our normal margin profile.

Okay. And then just 1 other one. Just on M&A in the sector in general. Can you give us any thoughts on where you stand there? And also whether or not that has any implications on just -- you mentioned your recruitment rate and whether you're seeing people move around as a result of M&A in the space.

Yes, great question. Look at -- I think last time, we talked about us building momentum within our network and really being focused kind of our strategy and our value proposition. We're seeing great enthusiasm from the network right now. In my opening remarks, we talked about a little bit the -- some of the events, the last 5, 6 events since the last time we spoke, have been kind of categorized from the network as best as best [ event ] ever, which is really encouraging, meaning the way we're showing up the tools, the services, the engagement we're providing is resonating with the network.

That, along with some of the programs, whether it's a Marketing as a Service or some of the new economic models, whether that's Aspire, Ascend or Appreciate, they're resonating. And so we're seeing good engagement levels there, and we're seeing good recruitment rates through the Aspire program.

With all that being said, there will be continued consolidation in the market. Obviously, since the last time we spoke, there was a big announcement. We think that, that just brings additional opportunity for us and could help accelerate our strategy. But obviously, we're open for business. We are seeing a lot of inbound requests meaning, hey, something is happening over at RE/MAX. What is that? I want to talk more about that. Maybe I've got a contract up maybe on independent feeling pressure. But we are definitely seeing a lot more inbound activity here, which is very encouraged for our franchise sales and our network to capitalize on maybe some of the market conditions but also just the opportunity on what we've built to join kind of this momentum that we've got on the market right now.

Your next question comes from the line of Nick McAndrew with Zelman.

Erik, maybe 1 for you to start. I think just with Aspire, Ascend and Appreciate now live, could you maybe just walk through what type of agent you're trying to attract with kind of each of those models? And maybe just how franchisees are thinking about those optional models in practice? I mean, are most rolling them out selectively for recruiting and for the existing agent base they already have? Or maybe if you could just add any color there, that would be helpful.

Yes. Sure thing, Nick. Thanks for the question. A couple of things. One is, as I just mentioned, I think that the models and just the idea that there's choice is resonating with the network. Obviously, brokerages and agents, independent operators, and they have to make the best decision for themselves. I think on the last call, we talked about a little on Aspire, about 2/3 of the folks have joined or participating. I think the important thing that we're seeing -- and by the way, it's still a little bit new. But there are some positive green shoots, meaning Aspire has not -- it has not taken away from any of the existing recruitment that we are doing organically for kind of highly professional, productive, more tenured agents. And so Aspire generally has been seen as kind of incremental.

The other great thing that we're seeing is Aspire is definitely coming with higher retention rates than what we previously saw. So I think the idea that we've coupled education, kind of a formalized program and learning technology in order to become a productive professional agent and take some burden off the broker is really helping with that retention rate for agents. We're hoping here in the next 2 quarters that we'll see that productivity follow. We've got a tried and true partnership with the Buffini Group on 100 days to Greatness. And so if those averages play out, we certainly think that will have additional productive agents kind of in that network within that 12-month time frame.

Appreciate is a little bit different. Appreciate is really about retirement. So obviously, we've got a real estate agents enjoy retirement through this profession. We want to make sure that there is a place where they can stay at an affordable rate and still capitalize on their book of business. But no, they may not be as productive as they once were kind of in their heyday. And so we're seeing some adoption of Appreciate. Obviously, that's a program that takes a little bit more time for the funnel to fill as folks have a desire to roll off.

And then on Ascend, we're seeing decent adoption on Ascend for those folks that want to take advantage of a model, which provides a lower fixed fee and a higher variable rate. And I think part of Ascend for me is also kind of putting our money where our mouth is, meaning like we have to be in the business of helping folks win business. That can be leads generated from our website, that can be other sources, that can be on our dot-com. I mean, a whole different variety. And so what we're now showing to the network is we're in it with you, right? We'll take some risk on the financial side, but we're going to help you as an agent and a brokerage build your business. And I think that stance alone has really resonated with a lot of the network. And it's just really a philosophy of us leaning in to help support their business.

Got it. Yes, that makes a lot of sense. And I guess just a follow-up. I think just given all of the investment in digital tools and marketing capabilities this year, whether it's Lead Concierge or the new Marketing as a Service platform, do you have any sense for just whether you're seeing any tangible uptick in productivity of agents or offices that are more actively engaged with these platforms versus those that aren't?

Look, I think it's a long sales cycle. Some days, you wish you were kind of like a consumer goods company and just selling a bar soap, but that's not the case. So what I said before, Nick, and I think is helpful is like we're seeing additional engagement on listings, right? And so when you see that type of activity, that will lend itself to, I think, our team winning more business, and that will help improve productivity.

So when you roll out programs like these, like increased marketing or Lead Concierge, with our sales cycle, it takes a while to actually see the results. But when you set out and you say, hey, these are a few things that I'd like to see initially to make sure that the program has kickedstarted in the right way. We're seeing all those green shoots, and we're seeing it actually exceed our expectations. So we're really optimistic on the work that we've done, which is very purposeful investments. One, not only to help our agents and our brokers but also to start to tell a different story about revenue diversification for our enterprise. And so we're really happy with the progress we've made, and we're excited about the reaction from the network and the usage of the tools.

Your next question comes from the line of Matthew Erdner with Jones Trading.

I'd like to kind of shift gears and talk about Motto a little bit. You guys touched on some of the initiatives that you're doing there. But I'd kind of like to get your guys' sense a little more in depth of kind of the changes you're making there and get an idea of the profitability. And if it's not profitable, kind of that outlook towards profitability?

Yes, great question. I think I led you down a path with my opening remarks that we talk more about it in February, but let me give you a little bit of color right now. One is we've -- over the past 6 to 10 weeks since Vic arrived, we've really taken a new view of the mortgage opportunity. So that includes not only Motto, and our processing group, which we think that there's opportunities there to do a little bit about what we've done in real estate, quite honestly, and change the model to be a little bit less fixed and more variable. We've got to be in a position to help our network and our LOs really find business and capitalize on business, which not only helps the profitability of their business, but the value of owning a Motto franchise and our value proposition, quite frankly.

So it's a little early, Matt, to actually kind of go through some of the specifics. But what I would tell you is we've got a new outlook, not only in the franchise business, but just capitalizing on the mortgage opportunity in general, based on the number of transactions, connections, with both consumers, agents, brokers and the footprint that we have, both kind of in the U.S., Canada, et cetera. So we're really excited about some of the the items that we're working on right now, but it's just a bit early to talk through the strategy with you all.

Got it. Yes. I appreciate that. And then kind of as a follow-up to that. How do you guys plan on leveraging that agent network that you guys do have, given that you guys are up there pretty much every year in terms of transaction size so the opportunity there is pretty large.

Yes. I mean, I think you're seeing us lean in, in a variety of different places. So whether that's providing services like the Marketing as a Service platform, which not only kind of improves agent execution on marketing at a lower price point, but also helps us to obviously improve the monetization event through either the agent or the consumer. The RE/MAX Media Network is a perfect example, Lead Concierge as an example. And obviously, some of the high-level hints that I provided to you on mortgage are also examples. So you're just seeing us lean into our business and really think about what else can happen through the agent or the consumer transaction. And I think that the other item we're really working on is what happens post close.

I come from a place where we were dead set focused on the consumer experience. And we are focused here on the customer experience for brokers, agents and that end buyer seller to improve that, not only before the transaction and when they're shopping or researching a particular property or an agent or a brokerage, but also during the transaction to make it as easy as possible to do business with us and our network and then also to make sure that we're nurturing those folks post close in a value-added way. So not just an e-mail once a month, but making sure that it's meaningful to help them with their home buying and home ownership experience.

Got it. That's very helpful.

Your next question comes from the line of Tommy McJoynt with KBW.

The first one is just around -- you guys called out the organic revenue impact as taking some impact from the modifications to the standard fee model. Are you guys able to put some magnitude around that number? And then should we think about that as sort of run rating or does it lap after a year? How should we think about that?

So great question. I think, as Erik said, we're really excited about the Aspire program. It's really driving the benefits that we had hoped for in terms of increased recruitment rates for newer agents. And also, we're seeing churn decline in that cohort as well. And we knew kind of from the very beginning that there would be a little bit of an upfront investment as those agents came on board, got trained up and then started to produce transactions.

And so we do think it is a little bit of a short-term investment cycle because as those agents continue to get ingrained in our tools and services, start leveraging Marketing as a Service, really lean into our education and become the trusted professional that is the hallmark of the RE/MAX brand, we think that, that will dissipate over time. It was just a little bit of a near-term headwind as they're onboarded.

So Erik mentioned it's about 1,500 agents. And so that's kind of the quantification, but we think it is near term in nature, and we absolutely think it's -- it was a prudent choice because, as Erik said, we're really trying to partner with our franchisees, help them build their businesses and help us really kind of create that flywheel for agents to participate in the other tools and services that we're offering holistically from a brand perspective.

Okay. And then in the sort of capital allocation priorities, returning capital through buybacks has been on the list but for the lower end for a while now. I guess, is anything different now that would make you guys more interested in buying back shares now? Should we expect to see some buybacks by year-end? Any more commentary around that?

Yes, it's a great question. I think the biggest thing from our perspective right now, that was great to see this quarter is -- we've done a very good job from a deleverage perspective. Our TLR is now below that 3.5x level. So we do have some more flexibility.

So from a capital allocation perspective, we're continuing to allocate or evaluate all of those options where we think that we're going to allocate capital to the areas where we get the highest returns. So there's a lot of things going on right now from a strategic perspective, in terms of the additional value and services and initiatives that are ongoing. But obviously, now with that deleverage, we'd like to get down a little lower, but below that 3.5x and given where we're trading, we think that returning capital is a great use of capital and more to come.

Thank you. So with no further questions in queue, I'd like to turn the conference back over to Joe Schwartz for any closing comments.

Thank you, operator. That concludes today's call. Thank you all for joining us today.

This concludes today's conference call. You may now disconnect.

Good morning, and welcome to the RE/MAX Holdings Second Quarter 2025 Earnings Conference Call and Webcast. My name is [ Tiffany ], and I will be facilitating the audio portion of today's call. At this time, I would like to turn the call over to Joe Schwartz, Senior Vice President of Finance. Mr. Schwartz?

Thank you, operator. Good morning, everyone, and welcome to RE/MAX Holdings Second Quarter 2025 Earnings Conference Call. Please visit the Investor Relations section of www.remaxholdings.com for all earnings-related materials, including our standard earnings presentation and to access the live webcast and the replay of the call today. Our prepared remarks and answers to your questions on today's call may contain forward-looking statements.

Forward-looking statements include those related to agent count, franchise sales and open offices, financial measures and outlook, brand expansion, competition, technology, housing and mortgage market conditions, capital allocation, credit facility, dividends, share repurchases, litigation settlements, strategic and operational plans and business models. Forward-looking statements represent management's current estimates.

RE/MAX Holdings assumes no obligation to update any forward-looking statements in the future. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements. These are discussed in our second quarter 2025 financial results press release and other SEC filings. Also, we will refer to certain non-GAAP measures on today's call. Please see the definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website.

Joining me on our call today are Erik Carlson, our Chief Executive Officer; and Karri Callahan, our Chief Financial Officer. With that, I'd like to turn the call over to them. Erik?

Thank you, Joe, and thanks to everyone for joining us this morning. We're entering the second half of 2025 with solid momentum. We ended Q2 with over 147,000 agents in our global network, an all-time high. We saw signs of stabilization in our U.S. agent count, and our profit and margin performance exceeded expectations once again. Our entire team remains focused on the customer experience and operational excellence. Despite the sluggish housing and macro backdrop, our business model continues to support solid top line performance.

While U.S. existing home sales have been slow to recover, we've seen some green shoots in the form of rising inventory levels and new listings. The June RE/MAX National Housing Report showed inventory levels up 30% versus June of 2024, while new listings grew year-over-year for the 16th straight month. However, uncertainty around tariffs, inflation and consumer confidence, coupled with affordability challenges, including persistently high mortgage rates have caused us to temper our expectations around a potential housing rebound in the latter half of the year.

For now, we remain laser-focused, focused on the things we can control, and our Q2 results are a testament to our efforts and to the resilience of our network and team. Within the industry, The National Association of Realtors clear cooperation policy continues to be a topic of debate and our stance remains unchanged. We're focused on driving positive outcomes for consumers, and we continue to believe that promoting listings to the broadest audience serves the best interest of buyers and sellers.

Our ongoing pursuit to deliver the best experience to consumers as well as to RE/MAX agents and franchisees has fueled countless competitive advantages. It's why we have the most trusted real estate agents in the U.S. and Canada. We also have the most productive network in the world as evidenced by the results in the 2025 RealTrends Verified rankings, one of the industry's top independent surveys. For the 17th straight year, RE/MAX agents at large brokerages outperformed their competitors by a margin of more than 2:1. This significant advantage in the U.S. per agent productivity represents a clear differentiator, benefiting all RE/MAX affiliates in multiple ways.

Another major advantage is the scale of our unmatched global footprint. Our worldwide agent count hit a record high as of June 30, and the second quarter marked our best U.S. agent count performance since Q2 of 2022. As we shared on our last earnings call, April was our strongest month for U.S. agent count in 3 years, and that momentum continued in May and June. Our continued focus on enhancing our value proposition is driving strong demand for the RE/MAX brand, and we're seeing early signs of U.S. agent count stabilization.

Now this demand is showing up in our CM&A efforts as well, and we've closed several deals this year and are increasingly excited about the pipeline our new leaders are building. And as we just announced this morning, I would like to welcome RE/MAX Hawaii to our team. We are thrilled about this conversion that will soon add over 170 highly productive and professional agents to our network. This strategic move strengthens our market share in Hawaii, adds a strong and well-regarded operator to our system and reinforces that influential brokers continue to see real value in what we're building at RE/MAX.

We're leaning in, investing in tools, technology, new programs, products and talent to empower our agents to win more listings, save time and build more profitable businesses for themselves, which in turn fuels brokerage profitability. As I mentioned earlier, we're making many bold moves to elevate and to expand our value proposition. Last quarter, for instance, we introduced Aspire, our innovative onboarding program designed to attract and develop the next generation of RE/MAX agents.

As a reminder, Aspire combines world-class education, our advanced technology platform and a unique financial model that gives newer agents time to build a book of business. We're excited by the network's reception to Aspire. Nearly 60% of our brokerages in the U.S. and Canada have already signed up and hundreds of agents are enjoying the benefits. Aspire launched in April and May and June were the first 2 months of 2025 with a higher U.S. recruitment rate than the same period in 2024. This trend should continue as Aspire becomes even more integrated into the DNA of our network.

Several other benefits of affiliation are also adding to our momentum. Our lead concierge program is continuing to build and contribute to the top line by connecting consumers with agents and converting curated leads into sales. And we recently launched our new AI-powered global referral system, a powerful real-time data platform that simplifies and scales the exchange of referrals across our unmatched global footprint of over 110 countries and territories. These new innovations are strategically tapping into the power of the RE/MAX community.

After all, the network effect works best at scale, and no one does scale like RE/MAX. In addition, our RE/MAX Media Network is also beginning to contribute to the top line. While we remain confident in its long-term monetization opportunity, the launch has been slower than anticipated, in part due to challenging macro environment that also has impacted advertising spend. Nonetheless, infrastructure is in place with partners starting to come on board who are seeing the power of our brand and the value of our digital assets. Now on the mortgage side, the environment remains challenging, but our resilient operators continue to navigate it successfully.

We're supporting them with new tools, including a recently launched pricing engine within our loan brokerage system. It's designed to boost productivity and help originators find the best loan options for consumers. We've made great progress in the search for the next leader of our mortgage business, and we'll make an announcement in the coming weeks. Mortgage continues to be an important component of our growth story, and we expect our next leader will help us continue to grow Motto and Wemlo while exploring additional avenues to grow our mortgage opportunity.

As we look ahead, our focus remains clear: continue to grow the global RE/MAX agent network, especially in the U.S. and Canada, further enhance our value proposition and execute with the excellence across our brands. With the right people, platforms and programs in place, we're on the right path, and we're very optimistic about our future. Now I'll turn it over to Karri.

Thank you, Erik. Good morning, everyone. We are excited about the second quarter operational trends Erik discussed and are pleased with our financial performance. Our second quarter results were a continuation of a consistent trend driven by better-than-expected expense management that resulted in solid profit and improved margin performance for the fifth consecutive quarter.

Our top line results were right in line with our expectations this quarter despite a sluggish spring housing market, highlighting the resilience of our financial model. Some of our notable quarterly financial highlights included total revenue of $72.8 million, adjusted EBITDA of $26.3 million, adjusted EBITDA margin of 36.1%, an increase of 30 basis points over the second quarter of 2024 and adjusted diluted EPS of $0.39. Looking closer at revenue, excluding the marketing funds, revenue was $54.5 million, a decrease of 6.8% compared to the same period last year, driven by negative organic growth of 5.7% and adverse foreign currency movements of 1.1%.

The decline in organic growth was principally due to lower U.S. agent count, broker fees and revenue from previous acquisitions, partially offset by new revenue streams, including contributions from our RE/MAX Media Network and lead concierge initiatives. As mentioned, margin performance improved, thanks to our focus on ongoing operational efficiencies. Second quarter selling, operating and administrative expenses decreased $1 million or 2.8% to $33.9 million. This reduction was primarily due to certain lower personnel expenses, partially offset by severance expenses from a restructuring in the current year and some investments in our flagship websites

We continue to strategically evaluate every aspect of our business and leave no stone unturned. However, the broader macro and housing environment continues to be challenging, impacting our total leverage ratio, which was 3.58:1 as of June 30, roughly consistent with March 31. That said, we still expect our TLR to decrease as we get into the back half of the year. From a capital allocation perspective, our priorities remain unchanged. We are strategically reinvesting in the business and building our cash reserves as we work to lower our TLR below 3.5: 1.

Now on to our guidance. We are excited about all of our ongoing initiatives and the momentum we are building. However, the existing uncertainty in the current macro environment has made forecasting future results increasingly difficult. It has also caused some of our initiatives, like our RE/MAX Media Network, in particular, to take longer to ramp up. As a result, we are tightening our revenue and profit range expectations for the rest of the year, but also increasing our agent count expectations, primarily due to the strength of our international agent count growth in the first half of the year.

Our third quarter and full year 2025 outlook assumes no further currency movements, acquisitions or divestitures. For the third quarter of 2025, we expect agent count to increase 1% to 2% over third quarter 2024, revenue in a range of $71 million to $76 million, including revenue from the marketing funds in a range of $17 million to $19 million and adjusted EBITDA in a range of $23.5 million to $26.5 million.

And for the full year 2025, we now expect agent count in a range from 0 to positive 1.5% over full year 2024, a change from negative 1% to positive 1%, revenue in a range of $290 million to $296 million, including revenue from the marketing funds in a range of $72 million to $74 million, a change from $290 million to $310 million, including revenue from the marketing funds in a range of $71 million to $75 million and adjusted EBITDA in a range of $90 million to $95 million, a change from $90 million to $100 million. With that, operator, let's open it up for questions.

[Operator Instructions] Your first question comes from Tommy McJoynt with KBW.

The first one, Karri, I just want to zoom in a little bit on the reduced guidance range. Just want to be clear, how much of that is driven by lower, what I'll call variable sort of brokerage fee-driven volumes versus just lower more recurring fees driven by the agent count?

Tommy, so great question. I think I'd highlight a couple of things just with respect to our second quarter. I think we saw some good momentum in the second quarter with respect to the agent count performance and some of the revenue contributions from the differentiated revenue streams from some of our new revenue streams. The reduced guidance, as we think about that in the back half of the year, I would really kind of point to 3 things that's impacting the top line that's then flowing through to the profit line.

The first is just kind of a little bit of a delay in the ramp-up of our RE/MAX Media network. So we did see some contribution in the first half of the year, but that ramp-up is just a little bit slower than we expected. So that's the first thing really kind of coming in that franchise sales and other franchise revenue line item. The second thing -- the second component is a little bit more of a tempered outlook on broker fee. And so again, a little bit more on the variable side. And then I think the third component, as we think about it, is really more of a near-term impact kind of in the back half of this year is something that's impacting us related to Aspire.

So Aspire has really been a fantastic, we've seen fantastic results from a business perspective and from an adoption standpoint as it really accelerated recruiting. As Erik said, April and when we launched it in April, May and June were the best months of recruiting we've seen in the U.S. But from a revenue perspective, near term, it's going to take a little while for us to see the revenue contribution. At scale, we think that the revenue per agent is on par or even a little bit better than what we see today. But on a near-term basis in the back half of the year, there's a little bit of pressure as those things ramp up.

So it's really all 3 of those things. It's just causing a little bit of pressure on the top line, and that's what's rolling through to the bottom line that's contributed to that change.

Got it. Thanks for walking through on those pieces. And then also on the guidance front, it was good to see the agent count guide for the full year get raised that range. When you break apart sort of what's changed directionally since we got the guidance about 3 months ago between the different geographies of U.S., Canada and then the international side, which sort of could you rank order which of those geographies was most incremental toward that change in the agent count?

Yes. So I think we continue to see the global footprint and the international expansion as a key competitive advantage. We pointed not only to the agent count expansion, but what we're doing from a value delivery perspective with respect to our MAX referral program and really leveraging the power of the global footprint. And the strength that we've seen in our international agent count is really kind of probably the biggest driver to the guidance range like agent count. However, I really do want to stress the importance and the momentum of what we're seeing in the U.S.

And as Erik mentioned in the scripted remarks, exciting announcement this morning with respect to a large-scale conversion in Hawaii, bringing some very high-quality productive agents and a really strong operator into the network. And the pipeline that we have new leaders, both in the U.S. and Canada are building is exciting as well.

Your next question comes from Nick McAndrew with Zelman.

Maybe just to start, it's really encouraging to see all the progress with Aspire. And now that it's been live for about a full quarter, I'm just wondering, has your perspective evolved on which types of agents the program is resonating with? And are you able to share any just updated feedback from franchisees on how they're utilizing the program? Is it something that they're actively embracing as a core part of their recruiting strategy? Or is it still kind of more of a complementary tool at this point? Just curious.

Yes. This is Erik. I think the comments and our thoughts on Aspire continue to hold true, right? So we're seeing really positive adoption. Almost 2/3 of the brokerage that are eligible are participating in the program. Folks that are participating in the program are seeing higher recruitment rates over those that are not year-over-year, which is encouraging. I think the agent mix, although Aspire comes with a technology component to help folks understand how to use a CRM and start to nurture leads and get invested in the platform that we deploy, it also comes with a large educational component to make sure that we can help them to be productive sooner rather than later.

And that helps with onboarding from a brokerage perspective also. And so we are seeing agents that are younger in tenure entering the program. We're also seeing some agents that are using it to transfer a book of business. So it's another tool kind of in the tool belt that a broker can use in order to attract new unlicensed agents, new lower tenured licensed agents that need an additional boost from a great brand and a great onboarding program. And then also it can help with obviously transferring a book of business with more mature, more productive agents that also want to be a part of our great brand.

So we're seeing kind of all those components, Nick. And as you can imagine, the middle one is probably the biggest driver, and it's really helping us to bring kind of the next generation of agents to RE/MAX.

Yes, that makes a lot of sense. And I guess following up off of that, you've launched several agent-facing tools over the last few quarters, whether it's obviously Aspire, lead concierge, MaxRefer. I'm just curious, do you have any visibility into how many agents are actively using maybe just 1, 2, 3 or more tools? Because I'm trying to wonder if you're seeing a higher level of stickiness when agents are fully integrated with all of the tools in the toolkit at your disposal versus an agent that maybe isn't fully ingrained yet?

Yes. I think that's a great question regarding kind of retention and engagement. I think it's a little too early to tell to quite answer the tool on like the multiple tool engagement versus kind of single tool. Obviously, it's something we're laser-focused on based on especially on my prior experience. However, we are seeing good adoption on the tools that we have deployed. So folks are excited about our global referral platform and MAXEngage. We're seeing referrals flow through there. We're seeing closed deals flow through there. Lead concierge, we're seeing great conversion from an upper funnel to mid-funnel to lower funnel.

We've got really nice adoption from a lot of agents who have to opt into the program. And if you recall on lead concierge, it was not only about delivering kind of an agent, a curated warmed lead, so to speak, but also really improving the consumer experience for either a buyer or a seller. And so we're continuing to make improvements in that program. And we've got a variety of other things that we've launched since R4. Our Marketing as a Service is in beta right now, and we'll go live here in the next couple of weeks, and we're seeing good adoption and good performance from a marketing perspective for agents.

So we're really excited about some of the new things on how we've leaned into the network to help agents by improving the value proposition. We're all about just helping them win listings, do it in less time and make a little more money. And then obviously, that transfers to improved brokerage profitability. So the building blocks are in place. We're seeing good adoption. Now it's time to move into the execution phase.

That concludes our question-and-answer session. And I will now turn the call back over to Joe Schwartz for closing remarks.

Thank you, operator, and thank you all for joining the call today.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.