Stock Story -
Real estate technology company The Real Brokerage (NASDAQ:REAX) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 83.9% year on year to $340.8 million. It made a GAAP loss of $0.01 per share, improving from its loss of $0.02 per share in the same quarter last year.
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The Real Brokerage (REAX) Q2 CY2024 Highlights:
- Revenue: $340.8 million vs analyst estimates of $264.5 million (28.9% beat)
- EPS: -$0.01 vs analyst estimates of -$0.02 (50% beat)
- Gross Margin (GAAP): 9.4%, in line with the same quarter last year
- EBITDA Margin: 4.1%, up from -1.9% in the same quarter last year
- Free Cash Flow of $15.47 million, down 27.7% from the previous quarter
- Market Capitalization: $1.03 billion
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ:REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
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 indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Thankfully, The Real Brokerage's 131% annualized revenue growth over the last five years was incredible. This shows it expanded quickly, a useful 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. The Real Brokerage's annualized revenue growth of 88.7% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong.
This quarter, The Real Brokerage reported magnificent year-on-year revenue growth of 83.9%, and its $340.8 million of revenue beat Wall Street's estimates by 28.9%. Looking ahead, Wall Street expects sales to grow 21.9% over the next 12 months, a deceleration from this quarter.
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.
The Real Brokerage has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.3%, lousy for a consumer discretionary business.
The Real Brokerage's free cash flow clocked in at $15.47 million in Q2, equivalent to a 4.5% margin. The company's cash profitability regressed as it was 8.1 percentage points lower than in the same quarter last year, but it's still above its two-year average. We wouldn't read too much into this quarter's decline because investment needs can be seasonal, leading to short-term swings. Long-term trends trump temporary fluctuations.
Key Takeaways from The Real Brokerage's Q2 Results We were impressed by how significantly The Real Brokerage blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock traded up 2.6% to $5.59 immediately after reporting.
