In a recent earnings call, Bridgemarq Real Estate Services Inc. (TSE: BRE) reported substantial growth in its second-quarter revenue, which soared to $110.1 million from $12.8 million in the previous year. The significant increase is attributed to the inclusion of gross commission income from newly acquired brokerage operations and a rise in franchise fee rates.
The company also announced a consistent dividend, maintaining the previous year's level, and expressed optimism about the market's outlook for the remainder of the year.
Despite a modest decline in Canada's residential resale housing market compared to the same period last year, Bridgemarq's expansion has positioned it for potential growth and market share capture in the Canadian real estate market.
Key Takeaways
- Bridgemarq's Q2 revenue jumped to $110.1 million, reflecting new acquisitions and increased franchise fees.
- The company declared a dividend of $0.1125 per share, consistent with the previous year.
- The number of realtors in Bridgemarq's network grew to 20,570, including those from newly acquired brokerages.
- Net earnings for Q2 were $10.6 million, significantly up from $1.1 million in the prior year.
- The Canadian residential real estate market saw a modest year-over-year decline but increased quarter-over-quarter.
Company Outlook
- Bridgemarq remains optimistic about the housing market for the second half of the year, aligning with the Canadian Real Estate Association's forecast of a 6% increase in home sale activity.
- The company's recent acquisitions have broadened its operations, offering a more diverse revenue base and growth opportunities.
Bearish Highlights
- Canada's residential resale housing market recorded a modest decline year-over-year.
- The average selling price and unit sales both saw decreases compared to the previous year.
Bullish Highlights
- Quarter-over-quarter, the average selling price and unit sales showed healthy increases.
- The Greater Montreal Area market recorded a 15% increase compared to the previous year.
Misses
- The Greater Toronto Area and Greater Vancouver real estate markets experienced year-over-year declines, though they showed improvements on a quarterly basis.
Q&A Highlights
- The impact of exchangeable units on earnings will continue to be reported in the future as their valuation changes quarterly.
- No further questions were posed through the online platform during the call.
Bridgemarq Real Estate Services Inc. delivered a strong performance in the second quarter of 2024, with a substantial increase in revenue and net earnings. The company's growth was fueled by strategic acquisitions and a rise in franchise fee rates. Despite a modest year-over-year decline in the Canadian residential real estate market, the company is optimistic about the market's outlook, supported by recent policy rate drops and a forecasted increase in home sale activity. Bridgemarq's expanded operations and focus on innovation position it well to capitalize on growth opportunities in the evolving real estate industry.
InvestingPro Insights
Bridgemarq Real Estate Services Inc. (TSE: BRE) has shown a remarkable performance in the second quarter, which is further illuminated by key metrics and insights from InvestingPro. As a company that pays significant attention to shareholder returns, Bridgemarq has maintained dividend payments for 22 consecutive years, demonstrating a strong commitment to its investors. Notably, the dividend yield as of late July 2024 stands at an impressive 10.81%, which is a substantial return for shareholders.
From a valuation standpoint, the company is trading at a low P/E ratio relative to near-term earnings growth, with an adjusted P/E ratio of 15.26 for the last twelve months as of Q1 2024. This suggests that the stock may be undervalued considering its earnings potential. Additionally, Bridgemarq's EBITDA for the same period is $18.55M, which, when coupled with its low EBITDA valuation multiple, indicates that the company is being valued attractively in terms of its earnings before interest, taxes, depreciation, and amortization.
InvestingPro Tips highlight that Bridgemarq is also trading at a low revenue valuation multiple, suggesting that the market may not be fully recognizing the company's revenue generation capability. This could present an opportunity for investors looking for companies with undervalued sales figures.
It's worth noting that there are 6 additional InvestingPro Tips available for Bridgemarq, offering deeper insights into the company's financial health and investment potential. For investors and analysts seeking to make informed decisions, these tips can be accessed at https://www.investing.com/pro/BREUF.
InvestingPro Data Metrics:
- Market Cap (Adjusted): $150.44M USD
- Dividend Yield as of late July 2024: 10.81%
- Adjusted P/E Ratio (LTM Q1 2024): 15.26
The combination of strong dividend returns, low valuation multiples, and a robust market cap provides a compelling picture of Bridgemarq's financial situation. These insights are instrumental for investors considering Bridgemarq Real Estate Services Inc. as part of their investment portfolio.
Full transcript - Bridgemarq Real Estate Services Inc (BREUF) Q2 2024:
Operator: Good morning. My name is Sylvie, and I would like to welcome everyone to the Bridgemarq Real Estate Services, Inc. 2024 Second Quarter Results Conference Call. Note that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remark, there will be a question-and-answer session. [Operator Instructions] I would like to introduce Mr. Spencer Enright, Chief Executive Officer of Bridgemarq Real Estate Services Inc. Please go ahead, sir.
Spencer Enright: Well, thank you, operator. Good morning, everyone, and thanks for joining us on the call today. With me today is our Chief Financial Officer, Glen McMillan. I will begin with a brief overview of our company's second quarter results and provide an update on our newly expanded business operations. Glen will then discuss our financial results in more detail and I'll conclude by providing some remarks on operational highlights, company update and market developments. Following our remarks, Glen and I would be happy to take your questions. I want to remind you that some of the remarks expressed during this call may contain forward-looking statements. You should not place reliance on these forward-looking statements because they involve known and unknown risks and uncertainties that may cause the actual results and performance of the company to differ materially from the anticipated future results expressed or implied by such forward-looking statements. I encourage everyone to review the cautionary language found in our news release and on all our regulatory filings. These can be found on our website and on SEDAR+. Starting with the market. In the second quarter, Canada's residential resale housing market recorded modest decline compared to the same period last year. On a quarter-over-quarter basis, however, the average selling price rose slightly and unit sales showed a healthy seasonal increase of approximately 40%. We are very pleased with our performance in the second quarter, the first full quarter since the closing of the transaction. Revenue for the second quarter was $110.1 million compared to $12.8 million last year. Now this reflects the inclusion of gross commission income and other revenues in the acquired businesses as well as franchise fee rate increases, which were implemented at the start of 2024. At its meeting yesterday, our Board of Directors approved a dividend payable on September 30 of $0.1125 per share to shareholders of record on August 30. This indicates an annualized dividend of $1.35 per share, which is consistent with 2023. And with that, I'll turn the call over to Glen for a closer look at our second quarter financial performance.
Glen McMillan: Thank you, Spencer, and good morning, everyone. Revenue during the first six months of the year was $122 million, a significant increase over the $24.8 million recorded in 2023. The year-over-year improvements in the quarterly and year-to-date numbers include $92 million in gross commission income from the brokerage operations we acquired at the beginning of the quarter. The number of realtors in our franchise network currently sits at 20,570, a net increase of 41 agents since the start of the year. This includes 2,055 agents operating at the Royal LePage and Via Capitale brokerages we recently acquired. Including the Proprio Direct brokerage, which operates throughout Quebec, our corporately owned brokerages are comprised of 2,751 realtors operating in the GTA, the Greater Vancouver Area, in the province of Quebec. In the second quarter, the company generated net earnings of $10.6 million compared to $1.1 million in 2023. The higher earnings are largely driven by a gain of $10.6 million on the valuation of the exchangeable units in the second quarter compared to a loss of $0.5 million in the same quarter last year. During the quarter, cash provided by operating activities amounted to $10.5 million compared to $3.7 million in 2023. The increase of $6.8 million is partly due to an increase of approximately $4.8 million in cash received that will ultimately be paid to sales representative. The remaining increase in cash flow is due to positive cash flow generated by the acquired businesses, lower overall working capital balances, partly offset by higher interest costs. Canadian residential real estate market contracted modestly in the second quarter of 2024, closing at $102 billion, a decline of 4% compared to 2023 driven by a 3% decrease in average selling price and a 2% decline in unit sales. Compared to the previous quarter, however, the average selling price posted an increase of 2% and as Spencer mentioned, total unit sales were up 40%. The Greater Toronto Area real estate market saw a year-over-year increase of 17% closing at $23.5 billion in the second quarter of 2024, driven by a 15% drop in unit sales and a modest 1% decline in average selling prices. However, again, on a quarter-over-quarter basis, total transactional dollar volume was up 32%, driven by a 24% increase in unit sales and a 6% increase in average selling price. The Greater Vancouver real estate market was down 11% year-over-year, closing at $10.6 billion in the second quarter, driven by a 13% decrease in unit sales partly offset by a 3% increase in average selling price. Again, on a quarter-over-quarter basis, total transactional dollar volume was up by 39% driven by a 35% increase in unit sales. The Greater Montreal Area market recorded an increase of 15% to $7.9 billion in the second quarter compared to the previous year. This reflects a 10% increase in unit sales and a 4% increase in average selling price. Spencer will now provide additional insights into the market and an update on our operations.
Spencer Enright: Great. Thanks, Glen. We're not surprised that buyer activity and home prices in Canada's real estate market were modestly below last year's second quarter levels. As you may recall, last year, we experienced a very strong spring market rise in resale activity, partially driven by the signals received by the Bank of Canada's pausing of policy rate increases in the early part of 2023. More recently, in June and July of this year, we have seen the policy rate drop by a total of 50 basis points. However, given the timing of the changes, they didn't materially boost market activity in the second quarter. Regardless, we're optimistic that these changes have begun to signal to homebuyers that conditions will be more attractive for them as we progress through the back half of this year, which aligns with the Canadian Real Estate Association's latest annual forecast for home sale activity in 2024, which calls for a full year increase of approximately 6% versus the prior year. For us at Bridgemarq, this quarter has been an exciting time. As I've said now on numerous occasions, we recently completed a landmark transaction, which included the acquisition of certain real estate brokerages and the internalization of the management company. Our operations are now quite significantly broader than before, with a more diverse and dynamic revenue base. The addition of brokerage operations complements our well-established and successful franchise business and strengthens our ability to capture more growth across a broader spectrum of the real estate industry, both through organic growth and potential acquisition opportunity. This exciting development also provides Bridgemarq with the opportunity to capture a larger percentage of market share in the Canadian real estate market. We now offer several diverse, innovative and technology-forward solutions for real estate professionals and Canadians, setting ourselves apart as a progressive industry innovator, focused on meeting Canadians home-related needs in this ever-evolving market. We can immediately see the benefit in our quarterly results with a much larger revenue base and several more operational growth paths through an expanded portfolio of brands and business models. Our brand portfolio, led by our 110 year strong flagship national brand, Royal LePage continues to attract and retain top real estate agents across the country and we remain committed to investing in leading tech -- industry-leading technology platforms, including lead-generating and nurturing tools and best-in-class training and coaching program. For example, during the second quarter, we made progress in driving adoption amongst our Royal LePage network of realtors of our AI driven digital platform rlpSPHERE and offered a comprehensive AI training series, which included advice and best practices on the use of tools such as ChatGPT as well as other AI tools. Under our Proprio Direct brand, we continue to drive improved lead generating traffic to our website, propriodirect.com and unveiled a new insurance referral partnership, which offers a suite of comprehensive financial protection products, giving our team of real estate professionals within Proprio a competitive edge in offering better value to their clients. These and other exciting developments will allow us to deliver value for shareholders and enable growth opportunities for our industry-leading brands, which ultimately translates into more value for shareholders. This quarter may be the first one in which includes the results of our newly expanded business, but it's only the beginning in our journey to build meaningfully on our past success. Together with Glen and the entire Bridgemarq team, I look forward to continuing to share news of our growth with you moving forward. With that, I'll turn the call back to our operator and open the call to questions.
Operator: [Operator Instructions] And at this time, sir, we have no questions from the phone lines.
A - Spencer Enright: All right. Thanks, operator. I'd like to thank everyone once again for joining us on today's call. Sorry, we did just get a question via the online. Okay, so Glen, do you want to read the question?
Glen McMillan: Yes. I'll read the question out loud. Will this be the last we hear of changes in the value of the exchangeable units affecting earnings? Thank you for your question. The answer to the question is no, this will not be the last time you hear of that. As part of the acquisition, we issued additional exchangeable units as compensation or as proceeds to the company that we bought those businesses from. And so the number of exchangeable units that's outstanding has actually increased. As people may recall, those exchangeable units are exchangeable into restricted voting shares of the company. And they, under IFRS, are required to be revalued on a quarterly basis, and the value will be driven off of the underlying value of the restricted voting shares. So there will be gains and losses recorded on those securities going forward.
Spencer Enright: All right. Thanks, Glen. Yes, I don't see any other questions through the website. So I'd like to thank everyone again for joining us on today's call. We look forward to speaking with you, again, after we release our third quarter results in November. Thank you. Thank you, operator.
Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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