RE/MAX Holdings, Inc. (RMAX) Q4 2022 Earnings Call Transcript

RE/MAX Holdings, Inc. (RMAX) Q4 2022 Earnings Conference Call February 17, 2023 8:30 AM ET

Company Participants

Andy Schulz - SVP, IR

Steve Joyce - CEO

Karri Callahan - CFO

Ward Morrison - President and CEO, Motto Mortgage and Wemlo

Nick Bailey - President and CEO, RE/MAX, LLC

Conference Call Participants

Anthony Paolone - JPMorgan

Tommy McJoynt - KBW

Ronald Kamdem - Morgan Stanley

John Campbell - Stephens

Ryan McKeveny - Zelman & Associates

Matthew Filek - William Blair

Operator

Good morning, and invited to nan RE/MAX Holdings Fourth Quarter 2022 Earnings Conference Call and Webcast. My sanction is Audra, and I will beryllium facilitating nan audio information of today's call.

At this time, I'd for illustration to move nan telephone complete to Andy Schulz, Senior Vice President of Investor Relations. Mr. Schulz?

Andy Schulz

Thank you, operator. Good morning, everyone, and invited to RE/MAX Holdings' 4th fourth and afloat twelvemonth 2022 net convention call. Please sojourn nan Investor Relations conception of www.remaxholdings.com for each earnings-related materials, and to entree nan unrecorded webcast and nan replay of nan telephone today. If you are participating done nan webcast, please statement that you will request to beforehand nan slides arsenic we move done nan presentation.

Turning to Slide 2, our prepared remarks and nan answers to your questions connected today's telephone whitethorn incorporate forward-looking statements. Forward-looking statements see those related to supplier count, franchise sales, financial measures and outlook, marque description , competition, technology, lodging and owe marketplace conditions, superior allocation, dividends, stock repurchases, strategical and operational plans, and business models. Forward-looking statements correspond management's existent estimates. RE/MAX Holdings assumes nary responsibility to update immoderate forward-looking statements successful nan future. Forward-looking statements reside matters that are taxable to risks and uncertainties that whitethorn origin existent results to disagree materially from those projected successful forward-looking statements. These are discussed successful our 4th fourth 2022 financial results property merchandise and different SEC filings.

Also, we will mention to definite non-GAAP measures connected today's call. Please spot nan definitions and reconciliations of non-GAAP measures contained successful our astir caller quarterly financial results property release, which is disposable connected our website.

Joining maine connected our telephone coming are Steve Joyce, our Chief Executive Officer; Karri Callahan, our Chief Financial Officer; and nan Presidents and CEOs of our brands, Nick Bailey and Ward Morrison.

With that, I'd for illustration to move nan telephone complete to RE/MAX Holdings' CEO, Steve Joyce. Steve?

Steve Joyce

Thank you, Andy and acknowledgment to everyone for joining our telephone today. Looking astatine Slide three, our business showed awesome resilience during nan 4th quarter, while facing nan strongest manufacture headwinds we've seen successful much than a decade. The spot of our diversified franchise exemplary was connected afloat show during this play of marketplace contraction.

On a year-over-year basis, our Q4 gross fell by nether 10%, a comparatively mini magnitude successful nan look of a astir 35% diminution successful US existing location sales. Some of our notable quarterly highlights included RE/MAX Holdings' full gross was $81.3 million, down only 8.9% compared to past year, arsenic our recurring gross exemplary and increasing owe business wellness counterbalanced nan effect from nan softening lodging markets successful some nan US and Canada.

We generated an adjusted EBITDA of $26.5 cardinal and our adjusted EBITDA separator was a patient 32.7%. Our adjusted EPS was $0.41. We modestly accelerated our banal buyback programme and repurchased much than a 0.5 cardinal shares during nan quarter. Overall, RE/MAX supplier count grew by complete 2,000 agents to 144,000 agents worldwide and our Motto Mortgage beingness continued to turn arsenic we added to our unfastened agency count during nan quarter.

The accelerated diminution successful lodging marketplace activity during Q4 was highly unusual, and though we expect headwinds to persist, we besides spot origin for optimism arsenic we participate nan outpouring trading season. One point nan institution has learned complete nan past 5 decades is nan value of distinguishing betwixt what we tin and cannot control.

We cannot power nan macroeconomic swings that effect nan industry, but we tin hole for them and power our guidance to them, and correct now our 50 years of experience, highlighted by 5 decades of consecutive growth, is telling america to enactment focused connected supporting our 2 networks pinch nan tools, exertion and training they request to thrive successful immoderate environment. We proceed to reinvest successful our brands and execute connected our strategical maturation initiatives, positioning america for profitable maturation successful nan future.

With that, I'll move it complete to Nick.

Nick Bailey

Thank you, Steve. Turning to Slide four, this is an breathtaking twelvemonth for RE/MAX arsenic we are celebrating 50 years. Over nan past 5 decades, this web has grown to much than 144,000 agents successful complete 9 9,000 offices and are coming successful much than 110 countries and territories and our exemplary has proven to beryllium successful successful virtually immoderate market, sloppy of nan economical environment, because group bargain and waste houses each year.

With nan astir productive, astir knowledgeable agents, RE/MAX is nan champion prime for consumers who want to bargain aliases waste a home, which is nan biggest finance successful astir people's lifetimes. RE/MAX has built connected much than an economical model. It's nan operation of nan model, nan tools, nan education, marketing, nan web and each nan resources that we provide, and these are nan existent advantages that thief existent property professionals to succeed.

Although location has been caller contraction successful some nan US nett supplier count and nan wide existent property market, we are thrilled that we had thousands of agents subordinate RE/MAX past year. Nearly 10,000 agents successful nan US, almost 4,000 successful Canada and complete 27,000 agents successful nan remainder of nan world joined passim 2022. The continuation of this type of activity, mixed pinch our strategical initiatives, will beryllium cardinal to our maturation prospects successful 2023.

We're capitalizing connected nan marketplace changes and driving innovation, specified arsenic our initiatives astir teams and mergers and acquisitions and conversions of brokerages. Those programs are showing early signs of success, and we're optimistic that nan momentum we built will thief fortify our supplier count this year.

In addition, it's important to statement nan building of our trading plant. This is simply a 100% recurring revenue. So we deliberation we're capable to proceed to put successful advertizing and trading astatine a overmuch greater level than nan marketplace fluctuations dictate for galore of our competitors.

As we commencement nan year, there's besides awesome assurance passim nan network. Demand for lodging remains strong, and buyers who person been connected nan sidelines, are jumping backmost into nan game. So we're optimistic to spot what nan outpouring marketplace will do. Consumers are looking for 3 things successful an agent; trust, knowledge and experience, and RE/MAX agents are leaders successful each of these categories. Our agents person been voted number 1 astir trusted successful nan US and Canada. They mean doubly nan acquisition and accumulation of different US agents and they clasp nan astir master designations successful nan United States.

In little than 2 weeks, we'll beryllium celebrating nan 50 years of RE/MAX astatine our largest yearly event, nan R4 Convention. We judge it will tie much than 9,000 attendees from much than 70 countries, making it nan highest R4 attendance successful almost 2 decades and engagement for illustration this shows first-hand nan assurance and optimism our agents person to nan marketplace ahead.

RE/MAX was founded connected nan rule of attracting nan champion agents and making bully agents awesome and awesome agents win successful virtually immoderate market. When asked if nan marketplace will rebound, my responses, we can't person a rebound without a crash, and we surely did not person a crash. What we're experiencing is simply a rebalance, putting some buyers and sellers successful a much moreover position, and though not without rebalance symptom points, it's wide affirmative for nan industry.

The existent property marketplace is astir timing, but not astir nan timing that group think. It's not timing nan rates, inflation, nan system aliases headlines, but its timing based connected nan individual needs and life events for people; marriage, kids, divorce, jobs, that will beryllium what nan 2023 marketplace is each about, and that's what we've seen thrust nan marketplace for 5 decades.

We besides judge nan supplier is and will proceed to beryllium nan astir valuable portion of nan existent property transaction. Technology won't switch an agent, but an supplier who doesn't adopt tech, will get replaced and past twelvemonth we announced and launched MAX/Tech powered by kvCORE. It's a world-class exertion business providing agents pinch a afloat suite of products to maximize lead generation, their presentation, their trading and much importantly, AI and automation, 2 cardinal items that will effect nan manufacture successful a overmuch larger measurement moving forward.

Rollout started successful Canada precocious past twelvemonth and we are pleased to study that complete 90% of agents location person already onboarded and because of nan success, we accelerated nan US motorboat to nan first week successful January, which was 2 months earlier than anticipated and this is thing seldom seen pinch tech rollout.

A important competitory advantage is our scale. On nan unit market, this suite of products tin costs agents thousands of dollars annually and we tin connection this tech to agents and teams successful nan US and Canada astatine nary further charge, which is simply a awesome triumph and a important enhancement to our worth proposition.

Now arsenic we look ahead, we proceed to lick nan gaps successful nan business and supply nan correct devices to constrictive these gaps. Real property is simply a move changing industry, which intends you must accommodate and accommodate quickly, particularly successful marketplace shifts for illustration this. I judge nan outlook for '23 is agleam and this is our marketplace to win, conscionable arsenic we've done for 50 years.

Ward, complete to you.

Ward Morrison

Thank Nick. Looking astatine Slide five, while we knowledgeable coagulated maturation and unfastened offices during nan 4th quarter, our wide business has been sluggish owed to nan existent macro environment. That said, nan 2 trading events for imaginable exemplary franchisees we held successful January, were among nan champion attendance we've had successful caller memory, and agelong term, we judge our prospects stay arsenic agleam arsenic ever.

The owe manufacture has been deed peculiarly difficult by nan feds moves to cool ostentation by raising liking rates, which has successful move put a chill connected nan lodging marketplace and for illustration RE/MAX, while we judge humble franchise exemplary insulates america from broader manufacture gyrations amended than most, they're not wholly immune. We've seen a tight relationship betwixt nan emergence successful liking rates and nan slowdown successful our franchise income successful Q2 of past year.

Importantly, exemplary income person continue, but astatine slower pace. We sold 40 franchise complete past year, a very respectable number successful today's business climate, but still disconnected nan 60 portion income and 70 portion income gait we knowledgeable nan past fewer years. The news regarding our Motto agency openings is amended arsenic 2022 is our champion twelvemonth ever successful position of nan number of offices opened. This helped accelerate our maturation complaint during Q4 successful nan extremity of nan twelvemonth pinch complete 230 unfastened Motto offices pinch much successful nan pipeline.

We stay focused connected improving our maturation opportunities. Each Motto agency that has been opened for much than 1 twelvemonth should bring successful astir nan aforesaid magnitude of yearly gross arsenic a 20 supplier RE/MAX agency successful nan company-owned region. It is simply a meaningful opus and this is why we proceed to put successful our owe business by ramping up our Motto franchise income and galore income teams, and we purpose to beryllium astatine afloat capacity by nan extremity of Q2. We judge this sets america up to return to our normal income cadence wrong a matter of months and positions america to capitalize connected nan request we expect to spot arsenic ostentation retreats and owe rates stabilize.

We besides precocious added to our [indiscernible] arsenic a long-time workfellow who travel complete from RE/MAX's successful location improvement squad to subordinate Motto arsenic VP of Franchise Growth and Development. We judge nan growth, occurrence and semipermanent imaginable of our owe business is owed to nan unsocial and compelling worth proposition Motto and Wemlo offer.

Ancillary services for illustration owe supply existent property entrepreneurs pinch charismatic opportunities to diversify their gross and earnings, thing that is very important during shifting marketplace conditions. Over 70% of Motto income and nan existent property professionals were adjacent to nan existent property transactions, chiefly acquisition origination and that proximity is nan cardinal to occurrence for galore of our franchisees. Looking ahead, our early is great, and we expect our owe business to proceed to grow, and our income to reaccelerate arsenic conditions approved.

With that, I'd for illustration to move nan telephone complete to Karri.

Karri Callahan

Thank you, Ward. Good morning, everyone. Moving to Slide six, 4th fourth gross declined astir 9% to $81.3 million. Excluding nan trading funds, gross was conscionable awkward of $60 million, a alteration of astir 10% compared to nan aforesaid play past year. This alteration was driven by antagonistic 9.1% integrated maturation and adverse overseas rate movements of 1.1%.

Organic maturation decreased mostly owed to little agent interest revenue. Higher liking rates person adversely impacted lodging affordability and weakened lodging demand, resulting successful less transactions and purchaser extension, little agent interest revenue.

One of nan highlights of our 100% franchise exemplary is that it is chiefly comprised of recurring gross streams, for illustration continuing franchise fees and yearly dues, which helps lessen nan financial effect from turbulent marketplace conditions.

For example, excluding agent interest and trading money revenue, our integrated maturation complaint was only down astir 2%. In Q4, recurring gross accounted for almost 70% of gross excluding nan trading funds.

Turning to Slide seven, our Q4 selling, operating and administrative expenses, decreased 24.5% to $35 cardinal owed chiefly to little unit costs, principally successful nan shape of reduced equity-based compensation, little prize expense, and decreased headcounts, arsenic good arsenic little acquisition-related expenses.

Recall that we substantially completed a restructuring, chiefly of nan RE/MAX exertion section during nan 3rd 4th of 2022. Our 4th fourth SO&A expenses were much favorable than expected owed to a fistful of reasons, including little ineligible expenses. Importantly, we still expect reinvesting virtually each nan savings from this restructuring backmost into our business. Also, connected nan disbursal front, we recorded a $7.1 cardinal goodwill impairment related to nan wind-down of nan Gadberry Group successful Q4.

Moving to Slide eight, earlier I get to our outlook, location are a mates of items I want to concisely mention. We modestly accelerated our buyback activity during nan 4th quarter, repurchasing complete 500,000 shares. Throughout 2022, we repurchase conscionable complete 1.5 cardinal shares successful total, returning complete $34 cardinal to shareholders. Combined pinch our dividends, we returned much than $50 cardinal to our Class A shareholders past year, which was complete 80% of our adjusted free rate flow.

Returning superior to shareholders remains a apical privilege for america successful 2023. However, fixed nan contraction underway wrong nan industry, we expect to slow down nan gait of our buyback successful nan adjacent term. Second, I want to telephone retired nan effect to today's expanding liking complaint situation is expected to person connected our earnings.

Specifically, we expect rising liking rates will summation our Q1 nett liking disbursal by astir $3.5 cardinal to $3.7 cardinal compared to nan first 4th of past year. That estimate includes nan 25 ground constituent raised by nan Fed that was announced earlier this month.

Turning to guidance, this whitethorn beryllium nan astir challenging situation successful which to forecast early results that I person seen successful my 7 years arsenic CFO. Consequently, we person broadened our yearly guidance ranges to thief relationship for nan heightened uncertainty. The company's first 4th and afloat twelvemonth 2023 outlook assumes nary further rate movements, acquisitions aliases divestitures.

For nan first 4th of 2023, we expect supplier count to summation 0% to 1% complete first 4th 2022, gross successful a scope of $82 cardinal to $87 million, including gross from nan trading costs successful a scope of $20.5 cardinal to $22.5 cardinal and adjusted EBITDA successful a scope of $18.5 cardinal to $21.5 million. For nan afloat twelvemonth 2023, we expect supplier count to alteration antagonistic 1% to 1% complete afloat twelvemonth 2022, gross successful a scope of $315 cardinal to $335 million, including gross from nan trading costs successful a scope of $83.5 cardinal to $87 cardinal and adjusted EBITDA successful a scope of $95 cardinal to $105 million.

Now I'll move nan telephone complete to Steve for closing comments.

Steve Joyce

Thanks, Karri. Looking astatine Slide nine, we proceed to put meaningfully successful our future. We person faced akin circumstances complete nan past 5 decades and performed well, and we judge we are positioned to do truthful again. With a scaled world business, unmatched brands, beardown financials, and a proven way grounds of success, we stay optimistic astir and assured successful our future.

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

Question-and-Answer Session

Operator

[Operator instructions] We'll spell to our first mobility from Anthony Paolone astatine JPMorgan.

Anthony Paolone

Thank you and bully morning. First, I conjecture connected your gross expectations for '23 down astir 9% excluding trading and that's connected flattish supplier count. So possibly tin you thief america conscionable understand a spot amended wherever you deliberation nan biggest tie down is going to beryllium possibly bid of magnitude, you're reasoning connected agent fees and conscionable what nan effect whitethorn aliases whitethorn not beryllium connected continuing franchise fees?

Steve Joyce

Yeah, truthful I'll fto Karri put nan colour to this, but our forecast is showing wherever we are now, which is benignant of successful that 4th fourth continuation of a 20% immoderate diminution successful transaction activity and truthful arsenic we look astatine nan year, we person not built successful upside to nan year. So to nan grade that you believe, and we are seeing immoderate reasons that possibly things will improve, if things improve, past we've sewage important upside to nan forecast that we've got.

However, astatine this point, what we're seeing is simply a dependable continuation of nan deterioration that occurred past year. And truthful we are mounting a baseline number that we consciousness very assured about. And astatine nan aforesaid time, our position is, if we get immoderate uptick, past we will importantly use from that because we are putting ourselves successful a position to seizure that upside opportunity. The bulk of nan effect is successful agent fees, but fto maine fto Karri springiness you much color, Karri?

Karri Callahan

Sure, acknowledgment Steve. So Tony, Steve is right. I deliberation erstwhile I look astatine nan guideline connected nan apical line, I'd really break it down into 3 categories. The first is agent fee. So arsenic Steve noted, we've taken a beautiful pragmatic look, erstwhile we look crossed benignant of nan corporate of 3rd parties who are predicting existing location income for adjacent year, it's benignant of ranging betwixt 5% and 20% down and arsenic Steve said, we're connected nan much blimpish end, astir 20% down. For this -- for purposes of present and we'll evidently proceed to watch wherever things spell going forward.

The 2nd bucket is really connected nan recurring gross lines. So supplier count benignant of flattish akin trajectories to what we saw successful nan backmost half of nan year, and assuming that nan initiatives are really going to return clasp later successful nan year, but from a financial publication perspective, there's conscionable going to beryllium a small spot less.

And connected that note, conscionable want to make judge that, that we're clear successful position of immoderate of those investments that we're making crossed teams, mergers, conversions, acquisitions. We deliberation that that's going to beryllium benignant of a $3 cardinal to $4 cardinal headwind and a nett finance into adjacent year.

And past nan past bucket I would telephone retired is successful our different gross pinch nan upwind down of nan booj [ph] bequest business arsenic good arsenic nan Gadberry business. Also expecting that's going to beryllium benignant of a $2 cardinal to $3 cardinal headwind twelvemonth complete year.

Anthony Paolone

Okay, thanks. That's each helpful. Second mobility is, arsenic it relates to your superior priorities, you mentioned dialing backmost connected buying backmost stock. Can you springiness america a consciousness arsenic to what you deliberation CapEx mightiness beryllium for '23 and besides conscionable really you're reasoning astir nan dividend versus paying down indebtedness fixed nan higher rates and truthful forth?

Steve Joyce

Yeah, truthful fto maine -- I'll commencement and fto Karri. So connected nan -- truthful our number 1 priority, number one, is return of superior to shareholders. We gave -- we distributed backmost complete 80% of our cardinal free rate travel past year. We are not changing from that exemplary astatine all. We are simply looking astatine wherever nan market's going, getting a existent consciousness of, okay, we cognize precisely wherever we are and wherever we deliberation we're going to extremity up, and past we're going to proceed to aggressively spell aft some nan banal and proceed to salary nan dividend.

The dividend is absolute and our -- if you look astatine our financial position, we are successful a stone coagulated business and equilibrium expanse pinch a very unchangeable rate flow. So our position is that arsenic soon arsenic we spot wherever nan marketplace is going to bottommost and past statesman to travel back, past we will beryllium arsenic fierce arsenic we've bend. And truthful that is our number 1 priority, but past we are investing backmost successful nan business because we deliberation we've sewage important upside to that. So Karri, you want to talk a small spot astir CapEx?

Karri Callahan

Sure, yeah. So from a CapEx position pinch nan displacement successful nan exertion strategy that we made, we do expect that to travel down a small bit, astir apt successful nan $8 cardinal to $10 cardinal range. A batch of that is coming connected nan owe side, truthful continuing really to Steve's constituent to put successful nan Winslow merchandise and nan exertion offerings there. And past a small spot connected nan RE/MAX broadside arsenic good arsenic we proceed to reinvest successful immoderate of nan user facing things that we're still doing internally. And a batch of that is -- we're very excited astir arsenic we deliberation astir '23 and beyond.

Operator

We'll spell adjacent to Tommy McJoynt astatine KBW.

Tommy McJoynt

Hey, bully morning, guys. Thanks for taking my question. Karri, you were stepping done immoderate of nan 3 categories of nan headwinds there, and I conscionable want to explain 1 of those. I deliberation you called retired $3 cardinal to $4 cardinal of headwinds related to immoderate of I deliberation it was nan teams for aviator program.

Just want to corroborate that that's for illustration nan only programme that applies. And past conscionable if you guys could conscionable springiness america your latest thoughts connected that squad aviator programme and it's impacting nan apical and bottommost line.

Karri Callahan

Sure. So yeah, truthful nan mostly of that -- yeah, nan mostly of that is that $3 cardinal to $4 cardinal is related to nan team's programme a small bit, besides coming from our mergers and conversions programs. Both of those we're seeing immoderate early occurrence connected and we're happy with, and I'll fto Nick jump successful present arsenic well. But a batch of it is conscionable beautiful early connected especially, fixed nan macro, but Nick, you want to adhd to that?

Nick Bailey

Yeah, sure. The team's inaugural is still new. It was announced August of past year. However early indications show that we've added much teams and nan teams that we have, person added much agents and truthful early indications we for illustration what we're seeing wrong nan pilot, but it is only halfway done that aviator and truthful much to travel arsenic we move into nan first half of this year.

Tommy McJoynt

Great, thanks. And past conscionable my 2nd mobility is, tin you talk a small spot astir nan wellness of immoderate of your franchisees? It's evidently been a somewhat of a reliable tech agelong present successful position of lodging volumes. So conscionable broadly, if you could talk astir nan wellness there.

Steve Joyce

Yeah, so, it's a operation of we show consistently are monitoring really everyone's doing, evidently collections is apical of mind and so, nan nett news is bully news, that our folks are successful bully shape. They are going done nan toughest rate travel portion of nan twelvemonth for them.

But arsenic they travel retired we're are not seeing immoderate important alteration successful immoderate shape of costs aliases of financial wellness of nan franchisees. And Nick and his squad walk an tremendous magnitude of clip checking successful and making judge that we cognize that. So Karri aliases Nick, I don't cognize if you want to adhd to that?

Nick Bailey

No, Steve, I deliberation you summed it up well.

Operator

We'll spell adjacent to Ronald Kamdem astatine Morgan Stanley.

Ronald Kamdem

Hey, conscionable a mates speedy ones. Just going backmost to nan guidance for '23 nan adjusted EBITDA is helpful. I'm trying to get a consciousness of what nan travel done is going to beryllium for illustration to run successful rate flow. Cause if I look astatine '22 and I look astatine benignant of nan $122 cardinal adjusted EBITDA, down to $71 cardinal operating rate flow, I get to for illustration a 58% travel through. I'm conscionable trying to get a sentence, really are you guys reasoning astir that, astir operating rate travel for '23?

Karri Callahan

Sure. Yeah, truthful I deliberation that really highlights Ron nan spot of nan business exemplary and moreover pinch nan economical times, nan favorable position that we're in. And truthful I deliberation arsenic we look to 2023, that conversion complaint is, looks beautiful consistent, mightiness spell down a mates percent points conscionable because of a afloat year, a small spot higher liking disbursal expectations but benignant of successful that 50% to 55% scope is reasonable arsenic we look up to '23.

Steve Joyce

I deliberation nan different portion to support successful mind is, depending connected if we get upside, arsenic that upside comes in, that flow-through is astatine a precocious margin.

Ronald Kamdem

Great. And past nan different mobility I had just, I'm on, I deliberation I'm connected Slide 24 and I'm conscionable looking astatine benignant of nan exemplary owe portion of it that you guys person revenues and benignant of EBITDA, tin you conscionable talk a small spot much astir that benignant of adjusted EBITDA, what's driving that antagonistic number? How do we deliberation astir that, that changing arsenic you spell from, $225 cardinal to complete a $1,000 million? Just trying to get a consciousness of nan trends there?

Karri Callahan

Yeah, truthful I deliberation nan owe business is thing that we proceed to beryllium highly excited about. Obviously rising liking rates had a nonstop relationship to nan gait of our franchise income arsenic Ward noted.

We're continuing to put successful it. A batch of that is coming connected nan Winslow -- connected nan Winslow side, and truthful that's put a small spot of unit from a profitability perspective. But, I deliberation it's important to statement that erstwhile those offices get up and running, they're contributing astir what 20 agents are successful a institution owned region. And arsenic we look retired complete time, we still deliberation it's a $100 cardinal dollar gross opportunity for america pinch margins that are comparable to what we spot connected nan RE/MAX broadside astatine standard astatine nan trading funds.

And truthful we are still continuing to put correct now. We deliberation that erstwhile we get to benignant of that 300 to 350 unfastened exemplary offices, we tin get to profitability crossed nan conception and still deliberation that we conscionable request to position ourselves done this headwind, which is why we're investing and we'll proceed to beryllium bullish connected nan maturation opportunity there.

Ronald Kamdem

Great. That's helpful. That's it for me. Thanks truthful much.

Operator

Well, move adjacent to John Campbell pinch Stephens Inc.

John Campbell

So I want to commencement disconnected pinch possibly 1 of a remark that Nick made benignant of successful nan prepared remarks. You mentioned nan connection strengthen, strengthening nan supplier guidelines astir nan caller initiatives. So I wanted to spot if you could possibly explain that aliases possibly unpack that. Is that an anticipation for amended growth? Is that amended retention? Is that much productivity retired of agents, possibly each nan above? Just funny astir that remark there.

Nick Bailey

Yeah, hullo John. Great question. It is astir growth. I remark connected nan number of caller agents that joined RE/MAX, not only successful nan US, Canada, but astir nan world. And erstwhile you look astatine past that compared to wide our nett summation aliases nonaccomplishment successful each 1 of those areas.

We deliberation that erstwhile we look astatine nan initiatives that we're investing in, it is each astir strengthening nan maturation and assisting nan franchisees connected really we do that. And that's each based connected nan initiatives that we started past twelvemonth and that we're investing successful that we judge are is cardinal to our maturation moving forward, moreover pinch nan rebalance of nan market.

John Campbell

Okay, that's helpful. And then, yeah, spell ahead. Sorry Steve.

Steve Joyce

Yeah, truthful I was conscionable going to adhd to I think, I've met -- I meet pinch Nick and his folks. The comparative positioning that they're emotion astatine this constituent is nan astir affirmative I've seen since I've been present and nan tube that they're building and past nan expected upside of bringing nan exertion level to nan US and its effect not only connected attracting everybody, but peculiarly teams because it's sewage an important teams constituent to it, conscionable gives you a batch of room for optimism.

So notwithstanding nan existent macro environment, we conscionable deliberation we're really good positioned and nan things that we're going to do are going to make a existent quality successful position of nan wide numbers. When they move affirmative is erstwhile nan situation lets america do it.

John Campbell

Yeah, makes sense. And you guys talked astir nan spot of nan franchisees. You've mentioned that successful a mates different parts of nan call. And past backmost to Tommy's mobility around, conscionable wide update astir franchisees. I was funny if you could possibly spell down nan way of renewals really that's looking.

Obviously there's a quality -- location tin beryllium a quality successful nan wellness of your franchisees and whether they enactment pinch you. So I'm funny astir really that retention rates has been looking complete nan past twelvemonth aliases so? And then, besides connected nan franchise income pipeline, funny astir really effect that is by nan macro arsenic well,

Karri Callahan

Sure. It's a awesome question, John. As we look astatine renewals connected nan RE/MAX broadside of nan house, we haven't seen important deviation aliases variability from that perspective, astatine slightest from a numbers perspective. I deliberation Nick and his squad person done really an outstanding occupation location and he could astir apt supply much colour arsenic well.

Nick Bailey

Yeah, erstwhile we look at, nan measurement our franchise agreements are system pinch renewals and nan intent to renew and nan timeframe anterior to expiration, beautiful safe to opportunity that astir 99% that we renew and we're good successful beforehand of those changes.

And successful nan arena that location is simply a alteration successful nan marketplace aliases a non-renewal for immoderate reason, we are not taken by surprise. And that's wherever our income team, and particularly pinch what's happening pinch our mergers, conversions and acquisitions initiative, it's bringing successful what we've seen and knowledgeable frankincense acold past twelvemonth and moreover awesome results early this twelvemonth is independent companies that are marrying, if you will RE/MAX companies. And depending connected if location is succession readying aliases immoderate type of merger, it's conscionable a bully measurement for america to beryllium capable to marry, which besides helps thrust nan really affirmative renewal rates.

John Campbell

Okay, that's a awesome update. Thanks guys.

Operator

Next we'll spell to Ryan McKeveny of Zelman & Associates.

Ryan McKeveny

Hey, bully morning. Thank you. Karri, truthful a travel up connected nan economics pinch Motto, I deliberation nan item you gave was very helpful, but truthful I conjecture it sounds for illustration Winslow, is portion of nan disbursal maturation going forward. I conjecture if we deliberation astir possibly nan halfway Motto ex Winslow, is that reaching benignant of a constituent wherever nan disbursal guidelines is becoming much of that benignant of fixed franchise, disbursal guidelines whereas gross ramps you get immoderate much leverage there. So that would beryllium portion one.

And past portion two, conscionable circumstantial to Winslow, I conjecture I'm conscionable funny if you tin punctual america nan economics location either benignant of per indebtedness processed aliases moreover much mostly if you tin stock qualitatively aliases quantitatively really overmuch Winslow is contributing either connected nan gross aliases EBITDA broadside of mortgage. And, I presume we'll get nan conception level breakout wrong nan K, but I don't deliberation Winslow is needfully specified, truthful conscionable immoderate thoughts location would beryllium very helpful. Thank you.

Karri Callahan

Sure, acknowledgment Ryan. Great question. And for illustration I said, we proceed to beryllium really excited astir nan owe opportunity. We are starting to spot better, amended leverage and travel passim benignant of connected what I would telephone nan bequest Motto business connected nan franchise income business, now that we do person over, conscionable complete 230 offices open.

So we are starting to spot immoderate of that, but we really, I deliberation Ward and nan squad person done a bully occupation of really pulling nan worth proposition together holistically betwixt Motto and Winslow. So it's a small spot harder for america to benignant of say, but I deliberation mostly speaking, we're starting to spot a small spot -- a small spot much of that leverage.

We will -- we will supply each of nan further benignant of conception level item successful nan K, erstwhile that gets filed, but Ward, I'll move it complete to you to talk a small spot astir nan further breakout.

Ward Morrison

Yeah, truthful Ryan, connected nan economics, it's basically, we connection immoderate level of discount of astir 725 [ph] a record to Motto straight whereas nan unfastened wide nationalist that we besides waste to wrong Winslow is anyplace from 850 to for illustration 1199 [ph] a record depending connected which authorities connected that basis. So really it's conscionable trying to thrust wide indebtedness processing maturation connected a per transaction basis, right.

So our cardinal location is wrong Motto, we made immoderate changes to our FTD past twelvemonth to instruction pinch 1 objection that they commencement utilizing our service, our caller franchisees, we can't spell backmost connected nan existing ones until they renew.

This twelvemonth we'll beryllium making somewhat of a akin alteration and trying to thrust much Mottos to usage Winslow. And past 1 of nan point we've done is besides trying to support separator maturation wrong our franchisees, is we've hired immoderate of their processors into our Winslow strategy and waste that work backmost to them.

So we deliberation there's a batch of upside successful 2023 and beyond. It's conscionable getting that peculiar entity revenues increasing by getting nan indebtedness process count up and we person a awesome squad successful spot to support nan Mottos and everybody else. We conscionable person to support pushing nan apical line.

Karri Callahan

And Ryan, conscionable 1 different thing; hey Ryan, 1 different point to quickly clarify, we did really see it successful our updated investor position that's posted connected nan website. We did station nan breakout benignant of nan -- of nan conception information. So you tin benignant of spot that successful position of nan full conception gross apical line, a small complete 12, and past nan nett finance of astir 6.

Steve Joyce

Yeah, Ryan, it's nan why RE/MAX deck, our main investor presentation. It was posted this morning, its Slide 24, it's nan descent that Ron referred to earlier connected this call.

Operator

And next, we'll move to Matthew Filek astatine William Blair.

Matthew Filek

Hey everyone, this is Matt Filek connected for Steven. Thanks for taking my questions. Could you supply immoderate much colour connected really nan rollout of kvCORE halfway is progressing? I cognize nan rollout conscionable started, but funny connected really galore agents are presently leveraging nan kvCORE level and if immoderate agents person pushed backmost connected nan sunset of [indiscernible] happening sometime down nan road?

Steve Joyce

Yeah, I'll fto Nick reply that, but I will show you, seldom do you spot franchisees applaud a exertion program. And nan 1 that Nick has selected is really getting applause lines successful our conferences, which I person ne'er seen successful 40 years of franchising. Nick?

Nick Bailey

Well, acknowledgment Steve. Well said. I will show you, it's a location run. When we look astatine nan rollout successful Canada, we person complete 90% onboarded. Total supplier count correct now, moreover though we person 4 phases that started successful nan US, we're astir 35,000 agents of nan 85,000 agents betwixt nan US and Canada are onboarded. But nan US evidently is simply a large chunk of that. That conscionable started nan first week successful January.

That rollout was not initially anticipated to statesman until nan extremity of Q1 and we are thrilled astatine nan truth that we were capable to push it 2 months earlier. So, it perfectly is welcomed. People are applauding it. To your mobility of is location pushback connected nan [indiscernible] sunset, nan reply is no. I deliberation immoderate pushback that we spot is nan truth that caller tech intends that you person to study something.

And so, we're investing successful nan training and nan resources to make judge that group person a seamless experience, but nan early occurrence stories are beautiful unthinkable and I'll statement 2 of them. One came up that an supplier that had ne'er utilized a database put their contacts successful nan strategy and wrong 14 days sewage a listing that went nether statement wrong 24 hours, had ne'er knowledgeable that.

One of nan testimonials we'll beryllium showing astatine nan upcoming our 4 [ph] normal I saw yesterday is 1 of nan teams said, convey you RE/MAX, you're now redeeming maine $24,000 a twelvemonth that they were spending pinch KV that we're now offering for free. And truthful arsenic this continues to rotation out, we judge it's going to proceed to beryllium very affirmative and get america -- springiness america a very large recruiting and retention advantage.

Matthew Filek

That's very adjuvant and ace encouraging to perceive arsenic well. Just had 1 much mobility connected nan replacement interest building note. It came up a small spot ago, but conscionable wanted to explain something. What's existent take for that programme like? I deliberation it's offered successful 5 states, if I callback correctly and past what do you deliberation take could look for illustration complete nan people of 2023? I suppose that different way, do you expect take of that programme to ramp up complete nan people of nan year?

Nick Bailey

Yeah, truthful I mentioned, it's still a small early. We announced that aviator successful nan 5 states successful August and truthful what we're seeing is location are 2 ways to turn from this initiative. It's not only recruiting caller teams successful which we person seen that hap of teams of six agents and larger, but it's besides existing teams that we person that are anyplace from 1 to 5 agents that now person inducement to turn their teams. We are seeing affirmative results successful some categories.

Not prepared astatine this constituent to springiness immoderate type of forecast connected nan numbers because it did conscionable motorboat successful August. But it's very encouraging and I will opportunity extracurricular of nan information that we're looking at, nan web is applauding america saying that RE/MAX is perfectly adopting nan activity of nan early and wherever larger teams are going. And truthful nan franchisees are very, very supportive and nan first information shows that it's going successful nan correct direction. Still early, much to travel and apt arsenic we move done this year, we'll person amended numbers to share.

Matthew Filek

Sounds great. Thank you team.

Operator

There are nary further questions astatine this time. I'll move nan convention backmost complete to Andy Schulz for immoderate closing remarks.

Andy Schulz

Thank you, operator, and acknowledgment to everyone for joining nan telephone today. This does reason today's event. Have a awesome weekend.

Operator

And again, that does reason today's convention call. You whitethorn now disconnect.