Stock Story -
Real estate franchise company RE/MAX (NYSE:RMAX) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 4.8% year on year to $78.45 million. The company expects next quarter's revenue to be around $77.5 million, in line with analysts' estimates. It made a non-GAAP profit of $0.41 per share, improving from its profit of $0.40 per share in the same quarter last year.
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RE/MAX (RMAX) Q2 CY2024 Highlights:
- Revenue: $78.45 million vs analyst estimates of $77.96 million (small beat)
- EPS (non-GAAP): $0.41 vs analyst estimates of $0.35 (16.2% beat)
- Revenue Guidance for Q3 CY2024 is $77.5 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed its revenue guidance for the full year of $310 million at the midpoint
- EBITDA guidance for the full year is $95.5 million at the midpoint, above analyst estimates of $93.5 million
- Adjusted EBITDA Margin: 35.8%, up from 32.3% in the same quarter last year
- Free Cash Flow of $16.21 million, up from $4.54 million in the previous quarter
- Agents: 143,542, in line with the same quarter last year
- Market Capitalization: $158.2 million
Short for Real Estate Maximums, RE/MAX (NYSE:RMAX) operates a real estate franchise network spanning over 100 countries and territories.
Real Estate ServicesTechnology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Unfortunately, RE/MAX's 4.8% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. RE/MAX's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7% annually.
We can dig further into the company's revenue dynamics by analyzing its number of agents, which reached 143,542 in the latest quarter. Over the last two years, RE/MAX's agents were flat. Because this number is higher than its revenue growth during the same period, we can see the company's monetization has fallen.
This quarter, RE/MAX reported a rather uninspiring 4.8% year-on-year revenue decline to $78.45 million of revenue, in line with Wall Street's estimates. The company is guiding for a 4.6% year-on-year revenue decline next quarter to $77.5 million, an improvement from the 8.7% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 2.6% over the next 12 months.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
RE/MAX has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company's free cash flow margin averaged 11.2% over the last two years, slightly better than the broader consumer discretionary sector.
RE/MAX's free cash flow clocked in at $16.21 million in Q2, equivalent to a 20.7% margin. This quarter's result was nice as its cash flow turned positive after being negative in the same quarter last year, but we wouldn't read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Key Takeaways from RE/MAX's Q2 Results We enjoyed seeing RE/MAX exceed analysts' EPS expectations this quarter. The company also maintained its full year revenue guidance, which is comforting. Zooming out, we think this was a fine quarter featuring some areas of strength but also some blemishes. The stock traded up 4.2% to $9.02 immediately after reporting.
