Re/Max Holdings Inc (RMAX) 2017 Q2 法說會逐字稿

Good morning, and welcome to the RE/MAX Holdings Second Quarter 2017 Earnings Conference Call and Webcast. My name is Lisa, and I will be facilitating the audio portion of today's call.

At this time, I would like to turn the call over to Andy Schulz, Vice President of Investor Relations. Mr. Schulz, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to RE/MAX Holdings Second Quarter 2017 Earnings Conference Call. Please visit the Investor Relations page of remax.com for all earnings-related videos and to access the live webcast and the replay of the call today. If you are participating through the webcast, please note that you will need to advance the slides as we move through the presentation.

Turning to Slide 2. I would like to remind everyone that on today's call, our prepared remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Examples of forward-looking statements may include those related to agent count, revenue, operating expenses, financial guidance, housing market conditions as well as non-GAAP financial measures. As a reminder, forward-looking statements represent management's current estimates. RE/MAX assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in our filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the second quarter earnings press release, which is available on our website.

Joining me today are our co-CEO and Cofounder, Dave Liniger; our co-CEO, Adam Contos; and our Chief Financial Officer, Karri Callahan. We will conduct a Q&A session immediately following our prepared remarks.

With that, I would like to turn the call over to RE/MAX co-CEO, Dave Liniger. Dave?

Thank you, Andy, and thanks to everyone for joining our call today.

Turning to Slide 3. Our momentum from the beginning of the year continued into the second quarter. Our total agent count increased nearly 6% year-over-year, and we surpassed 115,000 agents worldwide. In the U.S. and Canada combined, we increased our agent count almost 3% compared to the second quarter of last year, adding over 2,300 agents. In the 2017 REAL Trends 500 annual survey, RE/MAX agents were twice as productive on average compared to agents at other large brokerages, and our overall revenue increased more than 12% year-over-year as we continue to see the benefits from our 2016 regional acquisitions, the incremental contributions from Motto and solid organic revenue growth from RE/MAX.

Moving to Slide 4. For the third year in a row, RE/MAX has more agents and teams named America's Best Real Estate Agents than any other brand according to REAL Trends. One out of every 5 agents included in this year's survey is a member of our network. Our agents are incredibly dedicated to their clients, and this ranking confirms that many of the industry's best are affiliated with RE/MAX. Additionally, the National Association of Hispanic Real Estate Professionals annually recognizes the industry's leading Hispanic real estate agents and brokers from across the country. For the third year in a row, the number of RE/MAX agents included in the ranking far surpassed the number of agents of any other national real estate brand. RE/MAX continues to attract and retain agents who are highly productive and those who aspire to be highly productive because of our multiple competitive advantages, including our unique agent-centric high commission model, the most productive agents of any national brand, #1 market share and unmatched global footprint and the #1 name in real estate. These are a few of the many reasons why nobody in the world sells more real estate than RE/MAX based on residential transaction size.

Turning to Slide 5. Motto Mortgage continues to build momentum as more offices open their doors. Many Motto franchises sold during our first 4 months of operation are now open, loan originators have been hired, and loan applications are being processed. Our initial group of Motto franchisees is a successful group of entrepreneurs representing the full spectrum of real estate brokers, large and small, new and experienced, city and suburban. As we expected, the concept is a potential fit for all types of franchisees. Interest in owning a Motto franchise remains high and we feel good about our prospects. The last 3 months have been focused on rebuilding our sales pipeline after a successful initial sales effort. From inception to date, we have sold 43 Motto franchises and we expect to sell more franchises this year. As we discussed on our last call, the pace of sales may be uneven at times, and ultimately, we expect the number of franchises sold in 2017 will be measured in the tens of units.

We have several major marketing events in the back half of the year, where current Motto owners will appear and have the chance to speak with their peers. We believe first-hand validation by early adopters should help us grow the Motto brand with prospective franchisees. Our excitement about Motto continues to build, and we're looking forward to updating you on our future successes in the coming months and years.

Now I'd like to turn the call over to Adam Contos, co-CEO.

Thanks, Dave. Good morning, everybody.

Turning to Slide 6. According to the July edition of the RE/MAX National Housing Report, which is based on MLS data from 53 metro areas, monthly home sales have increased over 2016 in 4 of the last 6 months. As a result, we believe the U.S. housing market is on pace for a strong year. The prevailing theme remains the same. Sellers are benefiting from limited inventory and getting top dollar for their homes, while buyer demand remains strong and home sales continue to grow. Our National Housing Report shows actual June sales were 1.4% above last year, and the National Association of Realtors is predicting solid continued growth in existing home sales for 2017. The combination of robust demand and record-low inventory resulted in higher sales prices. The estimated median sales price of $245,000, up 7.5% over June of last year, set a RE/MAX National Housing Report record. In fact, prices increased in 50 of the report's 53 markets, with 10 metro areas increasing by double-digit percentages.

Inventory remains constrained, although it improved slightly since May. The number of homes for sale in June 2017 was down 15.2% year-over-year. Based on the rate of home sales in June, the supply of inventory was 2.8 months compared to 3.2 months in June 2016. Additionally, 52 of the 53 metro areas surveyed reported a supply of less than 6 months, illustrating a decidedly sellers' market right now. Homes continue to sell at a brisk pace with the average days on market dropping to 47 compared to 54 days in June of last year. Days on market is the number of days when a home is first listed in an MLS and the sales contract is signed.

Although the market favors sellers currently, buyers should not be discouraged. Mortgage rates are still very attractive. Supply pressures eased from May to June, and we're seeing encouraging trends in both entry-level home starts and new home sales. Overall, housing sentiment remains at a healthy level.

Moving to Slide 7. We ended the second quarter with 116,270 agents in our global network, an increase of 5.7% compared to the second quarter of 2016. We are excited and proud to have surpassed 115,000 agents worldwide, a noteworthy milestone. Agent count growth in the U.S. and Canada combined was close to 3% with growth in almost every region. Agent count outside the U.S. and Canada increased by nearly 4,000 agents or 14.2% over the second quarter of 2016. The growth was led by strong gains in Portugal, Brazil and Turkey.

Slide 8 shows the breakdown of RE/MAX agents in the U.S. and Canada. The graph on the left highlights U.S. agent growth of 2.6%, driven by gains in many states, including California and Florida. Notably, the performance of acquired regions has been solid with the 6 regions collectively enjoying 3.3% agent growth year-over-year, most of which has been added since the beginning of 2017. The graph on the right shows Canadian agent growth of over 700 agents or 3.5%. Western Canada increased almost 3% and Eastern Canada grew almost 4% compared to Q2 2016, driven by agent gains in both Quebec and Ontario.

With that, I will turn the call over to Karri.

Thanks, Adam. Good morning, everyone.

Turning to Slide 9. Our agent-centric model and unique 100%-franchised business delivered strong financial results during the second quarter. Overall, second quarter 2017 revenue increased $5.4 million or 12.5% to $48.8 million. We continue to execute on each of the core business drivers that propel our organic revenue growth, increasing our global agent network, expanding Motto Mortgage, pricing and franchise sales. Our focus on these levers led to organic growth of 5.2% over the prior year quarter. The remaining growth was driven by the acquired regions, demonstrating our ability to successfully acquire, integrate and grow former independent regions. The inherent leverage in our business model was again apparent this quarter as double-digit revenue growth drove double-digit earnings growth with margin expansion from the second quarter of last year.

Earnings growth was driven by the acquired regions, agent count growth and fee increases, partially offset by investment in Motto and a decrease in revenue from preferred marketing arrangements. Lastly, the positive cash flow characteristics of our business model are evident as we generated nearly $32 million in free cash flow during the first half of 2017, an increase of 27% over the comparable period of 2016.

Turning to Slide 10. You will find a breakdown of our revenue streams. Recurring revenue, which includes continuing franchise fees and annual dues, accounted for 64.7% of total revenue in the second quarter of 2017, essentially the same as last year. Revenue from continuing franchise fees was $23.3 million, an increase of $3.4 million or 17.3% compared to second quarter 2016, primarily due to contributions from the acquired regions, fee increases in the company-owned regions and agent count growth.

Revenue from annual dues was $8.3 million, up 3.4% over Q2 2016 due to agent count growth. Revenue from broker fees was $12.6 million, an increase of approximately $2.2 million or 20.9% over last year, principally due to contributions from the acquired regions, agent count growth and rising home prices.

Franchise sales and other franchise revenue was $4.7 million, down $0.5 million compared to the prior year quarter. Increases from the acquired regions and Motto franchise sales were more than offset by a decrease in revenue from our preferred marketing arrangements.

Looking at Slide 11. Selling, operating and administrative expenses were $20.6 million for the second quarter of 2017, up $1.8 million or 9.5% compared to the second quarter of 2016. Expenses increased largely due to continued investments in Motto, our operations to support the acquired regions and our technology infrastructure, as well as higher professional fees, including increased legal costs. It is important to note that our second quarter selling, operating and administrative expenses were lower than we anticipated due to the favorable timing of certain planned expenditures. We currently expect $1 million to $1.5 million of expense originally planned for Q2 will shift to the back half of the year and this is reflected in our Q3 and full year 2017 guidance. More on that in a moment.

Depreciation and amortization expense increased $1.5 million or 39.4%, primarily due to amortization expense related to the franchise agreements from the acquired regions.

Turning to Slide 12. Adjusted EBITDA was $29.2 million for the quarter, growth of 15.3% year-over-year. Additionally, our Q2 adjusted EBITDA margin of 59.7% continued to be near best in class among our franchise peers. Adjusted EBITDA increased over the second quarter of last year, largely due to contributions from the 2016 acquired regions, agent count growth and the fee increases instituted on July 1 of last year. This growth was partially offset by investments in Motto and a decrease in revenue recognized from preferred marketing arrangements.

Turning to Slide 13. Our cash position as of June 30, 2017 was $70.3 million, an increase of $12.7 million since year-end. Earlier this week, our Board of Directors approved our regular quarterly dividend of $0.18 per share. The quarterly dividend is payable on August 30, 2017 to shareholders of record at the close of business on August 16, 2017.

In our scaled business model, a good portion of each incremental dollar of revenue translates into profit and cash flow. This allows us to allocate capital to all 3 pillars of shareholder value creation. We reinvest to drive future organic growth, we reacquire independent regions and explore other strategic acquisitions and return capital to shareholders.

On Slides 14 and 15, I would like to share our outlook for the third quarter and for the full year 2017. The company's third quarter and full year 2017 outlook assumes no further currency movements, acquisitions or divestitures. For the third quarter of 2017, we expect agent count to increase 4.5% to 5.5% over third quarter 2016; revenue in a range of $49 million to $50.5 million; selling, operating and administrative expenses in a range of 46% to 47.5% of third quarter 2017 revenue; and adjusted EBITDA margin in a range of 54% to 55.5%.

Turning to Slide 15. We are raising our full year agent count guidance and reiterating our full year 2017 financial outlook. We expect agent count to increase by 4.5% to 5.5% over 2016, up from 4% to 5%, driven by agent count growth outside of the U.S. and Canada; revenue in a range of $194 million to $197 million; selling, operating and administrative expenses in a range of 48% to 49.5% of 2017 revenue; and adjusted EBITDA margin in a range of 52.5% to 54%.

Now I'll turn it back over to Dave.

Turning to Slide 16. Execution on our core business drivers coupled with a robust housing market led to increasing agent count and double-digit revenue growth in the quarter. Our ability to expand our network, reacquire independent regions and grow Motto Mortgage provides us with multiple levers of growth. We are focused on expanding the industry's most productive network and strengthening the value proposition of our brands, which will ultimately drive our business forward.

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

(Operator Instructions) Our first question comes from the line of Ryan McKeveny from Zelman & Associates.

Quick question on the domestic agent count, the growth of 2.6% this quarter. When thinking about that going forward in the context of total guidance, which a lot of the growth is being driven outside of the U.S. How do you think about that in terms of potential reacceleration to back towards the 3% to 4% agent count growth? Is it a function of things like inventory being so low that it's maybe somewhat limiting the growth in agents in the industry? Anything to give context on the kind of cause of the deceleration there and the outlook going forward?

This is Adam. It's something that, obviously, that we keep an eye on. We always look at agent count as something that's going to happen between 3% and 4%. We're obviously closer to 3% than 4% now, but it is -- it does have a lot of factors, it has to do with the marketplace as well as the seasonality. So midyear, the agents are working hard, they're trying as much as they can and they're focused heavily on the market, especially this market. It's a challenging market at this point, but it is growing. And we do see -- with the growth in the market, we see new people entering the market. That's a variable that we have to deal with, having the experienced agents that we have, getting newer people trained up as they do rotate through the marketplace as well as dealing with them on both sides of the transaction. So a lot of variables. There's not a single thing that you could put your finger on when it comes to actively participating in the movement of agents and -- but it's a daily task that our agents go through, and we work with them every day and are excited about what we can do with them. So not concerned about it, but we certainly keep an eye on it and are working with our brokers every day to continue the acceleration of the agent growth.

Great. And one bigger-picture topic, certainly the debate around technology in the industry and what brokers and different companies are providing to their agents or doing on their own in terms of their websites, lead generation, things of that sort, could you maybe just give us a refresher on what you guys have done? The investments you've made in technology, just given such an intense focus from the industry on that topic?

Ryan, this is Dave. We've always had a open attitude about technology. It's pretty hard for us to dictate to our agents and say, as a company, we want everybody to use iPhones. Our people are very independent and there's certainly a large group that would say, "I don't want to do that. I want to use Android." So the main things we've done in the last year or 2 has been enhance the remax.com site, which has done extremely well. We're in the top 10 most-visited real estate sites. As a matter of fact, we're the only traditional real estate company that's even in the top 15. So right now, we've increased our back-office program, we've invested heavily in that and the dot-com. However, we look at every technology offering that comes out. To be quite honest with you, we have to rely on a lot of vendors, and often, the vendors are not quite as responsive to our needs as if we had something in-house. So we continue to investigate, is there possibility of doing better by doing things, more of it, in-house, hosting our own dot-com sites instead of relying on somebody. No decision yet. We just keep studying the situation. If we find a good idea, we'll certainly adopt it.

And Ryan, this is Karri. Just to add on to what Dave was talking about with respect to our recent investments in remax.com. We're really seeing some good return on that investment right now. If you look at 2016 compared to 2015, obviously keep in mind that one of the key competitive advantages for RE/MAX is the fact that we provide our agents with free leads. And because of our investments in remax.com, we're actually seeing leads in 2016 up close to 10% from the prior year. And then also, we've made a concerted effort in terms of a complete and comprehensive redesign of our agent websites, really designed to drive SEO and more leads to our agents. And leads coming from those redesigned agent sites in 2016 were also up over 200%. So from a return on it, the recent investments that Dave was talking about, we feel really good about the progress we've made there. And as Dave said, we continue to evaluate how we're going to evolve not only technology but the broader value proposition around marketing and training and just overall tools we provide to the network.

Your next question comes from the line of John Campbell from Stephens Inc.

Just looking for a little bit more color on Motto. How many have you guys signed up to date? And how much of an incremental investment is that in the back half? Is that the $1 million to $1.5 million you guys called out?

Yes. So in terms of Motto, sales to date, as we mentioned in the scripted remarks, was 43. We're really, really still excited about Motto. It continues to perform right in line with our expectations. As we said, we expected the sales would be uneven and in the second quarter, we were really focused on making sure that the current cohort of franchisees got up and operational, and that's exactly what's happened. We've got about 20 of them up and running right now, and we're really excited about it. From a financial perspective, in terms of the impact on the rest of 2017, continue to believe that revenue is going to be in the low single-digit millions of dollars with the net investment on the expense side. And all of that's reflected in the Q3 and full year outlook.

Okay. And then you guys called out a 14 to, I think, 17 month kind of delay before you see the full ramp of revenue. Is that a little bit extended from what you guys originally were calling for? I think it was maybe 12 months or so?

It's really pretty consistent. I mean, it's going to range a little bit, but it's in the ballpark and pretty consistent.

Okay. And then Karri, I think it's helpful as you guys kind of break out the impact from the recently acquired regions. Can you run back through that? I want to make sure I get that down right. And then, maybe give us any kind of expectations as far as impact over the next couple of quarters, whether you see that accelerating or decelerating?

Sure. I mean, in terms of -- if you look at the revenue growth for the second quarter, up about 12.5%. Close to 8% of that is from the acquired regions and a little over 5% of that is good strong organic growth just because of the multiple levers that we have from an organic growth perspective now around agent count growth as well as Motto. So we've got about a full year for the big independent regions. They weren't acquired until December of last year, and so we're going to see that trend materially continue through the back half of 2017.

Okay. And then last one for me, just a follow-up to that. I mean, obviously, you guys get the natural impact as you acquire that region over, I guess, over 1 year. But just curious about kind of the reaccelerating the organic trends within those regions. So I -- obviously, you guys will try to spruce up the recruiting a little bit. And then -- mainly just curious about franchise sales. I know, once you guys get into those regions, you'll push hard to grow out the franchise sales as well.

It's Adam, I'll hop on that question there. The -- we're really excited about what we do with respect to the consistency we create in the regions that we acquire and how we integrate those into the existing regions. That's where we see a great deal of the benefit out of this, obviously, in addition to the cash flow there. But ultimately, we've got an amazing franchise sales department that is operating at very high speed, including a call center and outside sales force and things like that. And they get it, they do a great job. They're very strategic in their operation. And that's what [licensees for the] organic agent growth throughout those new regions. That moves it into the onboarding and the servicing, where we've really done a great job recently of reevaluating and making sure that those are operating at a high efficiency and are helping to grow those new offices throughout the regions. So it's a full machine that kind of works together, but it's something that we've proven out in the franchising and works very well for us. So we've accomplished those transitions in the newer regions with respect to implementing our systems and processes, and now it's getting that flywheel moving and keeping it at velocity at this point.

Yes, and just to add on to what Adam was talking about. This is Karri. We did see really strong initial franchise sales in the acquired regions. And then also, keep in mind, from an agent count perspective, the acquired regions are up about 3.5% from the end of the second quarter last year, but the vast majority of that agent count growth is coming in the first 6 months of 2017. So that really demonstrates the ability to execute that Adam was just talking about.

Okay. And just 1 small follow-up. So you're running your franchise sales and, I guess, other franchise revenue at about $25 million, pretty flat over last -- if my model is right, over the last 3 years. Do you expect that to maybe accelerate a little bit into 2018? Or is that $25 million a kind of good run rate to think about?

Yes, I mean, you got to keep in mind, John, right? That, that is one of the variable components of our revenue structure, and so it's going to be variable. We did talk about some headwinds in that line item in the fourth quarter of last year that we saw play out exactly as we thought, again, just because of the variability in that line item through the first 6 months of this year. So obviously, the multiple levers that we have right now from an organic growth perspective with Motto, we hope, over the long term, can help accelerate that line item. But that's a long-term play.

Our next question comes from the line of Vikram Malhotra from Morgan Stanley.

So just wanted to check on the overall U.S. agent growth. Where are we versus the prior peak both at a NAR level and versus RE/MAX?

I think we're well over 60,000 U.S. agents right now. And I believe at the height of our market 10 years ago, we were probably 25,000 more. And so we've made very good progress in the last 4 years of starting to bridge that gap again.

Okay. And then just going back to some of the regions that you've acquired over the last 5 years. Can you maybe get -- share some statistics with us? Where are -- where is RE/MAX as a percent of NAR in terms of penetration? And then, maybe some of the key markets, like Texas for example, what's the progress been in increasing that penetration for the regions you've acquired?

So I mean -- I can give you a little bit of context on that, Vikram. So if you look at the recent acquisitions, New Jersey was about 6% of NAR, and we continue, as I just mentioned, to grow that region. The other recent regions had very strong penetration in both Kentucky and Tennessee, but we see a lot of good growth opportunity in Georgia as well. So we've really focused on continuing our strategy and executing on it in terms of recruiting and retention and franchise sales. And that's what we focus on in terms of recruiting the most productive and the most professional agents in the industry. We always know that we're going to lag NAR a little bit and we're focused on executing our strategy and recruiting the right agents into the RE/MAX network that are going to take market share over time.

Okay. And then just a last one. Any update on maybe institutionalizing sort of an increase in either the fees or dues? I remember we've had a couple of increases the last few years, but any thoughts on sort of institutionalizing, I think, like you have in Canada?

Yes, so one of the things that we always look at is using pricing power judiciously. And as we roll out enhanced value to the network, so last year was significant investments from a technology perspective, and as a result, we did increase the continuing franchise fees on regions, $5 per agent per month. This year, we are increasing annual dues effective July 1, 2017, up to $410 per month. And again, that's consistent with what we've said in the past in terms of our evaluation of looking at the tools and services that we provide to the network and using pricing power judiciously but also strategically to move the business forward.

Our next question comes from the line of David Ridley-Lane from Bank of America Merrill Lynch.

Sure. Within the franchise sales and other revenue line, just so we can get an apples-to-apples comparison, what was the impact from the loss of the preferred marketing arrangement?

Yes, it's roughly about $0.5 million in the quarter.

Okay. And I heard you that the benefit from the Motto franchise sales and recurring fees is tracking in line to get to this low single-digit millions for the full year. Would the benefit from Motto also in the quarter be somewhere in the $0.5 million range?

I mean, again, that -- it's probably a little bit less than that. Again, what I mentioned earlier is that we were really focused in the quarter in terms of the operational aspect of Motto and getting this initial cohort of franchisees up and running, but did have good strength in terms of franchise sales in the RE/MAX network as well.

Got it. And then have you seen an increase in competition for agents so far in 2017? And any thoughts about your own agent retention?

It's Adam. I mean, there's always a great deal of competition for agents, particularly in the accelerated markets and when there's a lot of attention paid to the industry particularly, and we see a lot of that lately. So there is a -- it's not easy to get agents to move companies. It's something that brokers work on every day, and it's a process of them courting the relationship with the agents and demonstrating the value and that's what we focus on delivering to them constantly. So it's going to always be the key driver of our business, is recruiting and retaining agents, selling franchises and organic growth. So we focus daily on delivering the value to help the quality agents in the marketplace see us as the long-term home for their business. So it's hard to quantify if it's harder or easier. It's always harder every day is the way we look at it, and that's what we work on every day is to deliver that value proposition.

Our next question comes from the line of Bose George from KBW.

So all of my questions have been answered, but just wanted to see if you wanted to give an opinion on the Redfin idea of just -- whether you think that has any impact on the market?

This is Dave. I don't see any impact in the relatively short-term period. In the industry, over the last couple of years, there's been dozens and dozens of companies that are trying to break in, get a piece of the action or whatever it might be. We don't really comment on our competitors. We try to build our own story. There's plenty of market out there for everybody. It's up to us to make sure we keep our portion of it and grow our portion of it, and we'll let other people fight over the rest.

Our next question comes from the line of Brandon Dobell from William Blair.

Maybe if you could provide your thoughts on whether it's Zillow [has sent some] offers or Redfin now, just that kind of instant offer. I wouldn't call it a craze, but seems like a relatively new phenomenon, at least for this cycle, offering the opportunity for consumers to sell in a relatively short amount of time. How do you guys think about that as an alternative product? Or a risk? An opportunity? And what your strategy might be around it?

Brandon, it's Adam. It's -- as the markets change, we see different entrants come into them and leave them systematically. And this is a good market to be trying new ideas. There's a lot of money sitting there that is being pushed into our marketplace. That's an exciting indicator for us because it shows that people have a lot of interest in real estate. It's a good place to be operating. So if you remember, we buy ugly houses and getting off at the off ramps on the highway and seeing those signs around throughout the different housing cycles. It's quite similar to that, however, it's a new take on those things. Zillow is doing a great job of testing that in the marketplace. And in fact, they've generated some business for a lot of our agents and brokers by doing so, by generating seller leads or seller -- or listings. So we're watching all of these different companies come and go in the marketplace. Again, it's exciting to see people experimenting with different things. And if it's something we want to try out, then we will venture into it. But at this point, we're going to sit and watch and continue to grow our business and help our agents take advantage of those shifts in the marketplace.

And I guess, one more would be, as you think about the -- if you have visibility into the mix of the type of business that the agents are doing or that your franchisees are doing on the listing side versus buy side or any trends you can talk about from its productivity going year-on-year for the first half of the year. Just trying to get a better sense of how you view the agents' performance, or what you hear from the franchise operators about mix of business, productivity, et cetera, et cetera. It would be helpful.

This is Dave. The mix is staying pretty much the same thing with a base of 100-and-some-thousand agents around the world. They continue to do business almost identical way as a year ago, not much has changed. Some of our agents do more listings than sales and vice versa, but no change in the mix at all. The biggest problem, of course, is multiple offers when a well-priced listing comes on the market. Anything in the lower to midrange of properties is selling very fast any place in the country. If you get into the luxury market, it is getting a little better. But those listings just stay in on the market as they always have 1 year, 1.5 years or 2 years, so not much difference. Productivity of our agents is right in line with what it was 1 year ago. Our agents are averaging about 17 or 18 transaction sides a year, which is more than twice most of our other competitors. So -- but no acceleration there. It would accelerate if we had more inventory. It would certainly accelerate if the builders would build more single-family houses in the lower price ranges. That is coming. They're increasing that volume. Apartments are overbuilt in many places now, so the builders are going back to looking at the single-family. But not much of a change from 1 year ago.

Our next question comes from the line of Anthony Paolone from JP Morgan.

Appreciate the comments about the RE/MAX system and your agent competitiveness in the marketplace, but if we think about just the top line at your franchisees and that driving the revenue ultimately back to you, how do you think about just commission rates and the potential of those maybe coming down over time? And I think that you guys have been around for a long time and it moved from like 6% to 5% in the '90s. Like, anything to glean from that? And perhaps where that goes going forward?

This is Dave. I've watched the cycle of commission rates up and down for quite some time. And every time the market gets really hot, the competition from discounters or people who want to work for a little bit less certainly popped its head. There are a couple of factors that are interesting in this cycle versus, say, 5 or 10 years ago, and that is that the number of for-sale by owners has declined dramatically. If you go back 10 years ago, for-sale by owners were close to 18%, 19% of the market. And today, that's probably only 7% or so, and that's despite a lack of inventory. You would think it would be easy for them to sell by owner, it isn't. The real estate industry has gotten much more complex. The litigation, the disclosure, the inspections that are required, and so it's more difficult than ever for for-sale by owners to succeed. So we're actually picking up that portion of the market we didn't used to have. So all in all, I think our market is going to stay about what it is for another year or 2.

Okay. And can you remind us how many RE/MAX franchisees do you have at this time?

It's right around 7,000 globally and about 3,700 domestically in the U.S.

Okay. And as we think about Motto, is the addressable universe, does that kind of line up with that 3,700? Or is the scope of Motto franchise different from the scope of a typical RE/MAX franchise? Just trying to understand the universe there.

Yes, it's quite a bit different. For an office to produce enough transaction sides to justify the investment and a good return on the investment, we feel that our office size needs to be 15 to 20 agents or more. And so if you look at that, that means there's probably 1/3 of our offices in the United States would be qualified to open a Motto franchise right now if they wanted to. But as the offices open and grow and 2 or 3 years later, they get to 15 or 20 agents, those then also will be eligible. What's happened is that our first people that got in are the risk takers. We've now got 20 of those offices open. And obviously, a lot of people standing by and waiting to ask them their questions of, is it working for you? Is it profitable? How hard was it to do? And so one of the things we'll be doing is some panels with these existing people that have already opened at our Summer Managers' Conference here 3 weeks from now in San Francisco. We'll again have a opportunity with our biggest brokers who we'll meet in November, which is 200 to 300 of our best brokers that get together annually for a private meeting. And then, of course, the convention at NAR. We will be opening Motto up to competitors who have well-run companies. And so at that time, I think we'll start seeing outsiders buying into the system.

Okay. So then to think about in terms of like your penetration rate thus far. Early days though, take like about 1/3 of the 3,700 and you signed up 43, as you mentioned, so call it 3% or something like that. Is that kind of a fair way to think about it, just within your system so far?

Yes, definitely.

And there are no further questions at this time. Mr. Schulz, I'll turn the call back over to you.

Thank you, operator, and thanks for everyone for joining the call today. Have a good one.

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