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The Real Brokerage Inc. Announces Third Quarter 2023 Financial Results

The Real Brokerage Inc. (NASDAQ: REAX), the fastest-growing publicly traded real estate brokerage, this morning announced results for its third quarter ended September 30, 2023.

“The third quarter marks another significant achievement for Real. We generated record revenue, a second consecutive quarter of positive adjusted EBITDA, and expanded our agent base to 12,175. We remain an outlier in our industry, continuing our track record of significant growth despite challenging end market conditions,” said Tamir Poleg, Chairman and Chief Executive Officer. “The investments we are making into our business will continue to distinguish our platform from peers, and we remain laser focused on building solutions that we believe will fundamentally transform the real estate buying and selling experience. I was thrilled to bring this vision into sharper focus at our annual RISE agent conference in October, where we unveiled our One Real consumer app, introduced a groundbreaking agent-focused financial suite called Real Wallet, and showcased a range of innovative products and services designed to further support our agents and their clients.”

Q3 2023 Financial Highlights

  • Revenue increased 92% year-over-year to $214.6 million.
  • Gross profit increased 119% year-over-year to $18.8 million.
  • Adjusted EBITDA profit of $3.5 million, a $3.0 million improvement from the third quarter of 2022, and our second consecutive quarter of positive adjusted EBITDA.
  • Operating expenses, including Revenue Share, increased 77% year-over-year to $22.7 million.
  • Revenue share expense increased 105% year-over-year to $7.9 million.
  • Adjusted operating expense, which reflects operating expenses less revenue share, stock-based compensation, depreciation and other unique or non-cash expenses, increased 67% year-over-year to $11.4 million.
  • Net loss attributable to owners of the Company was $4.0 million, compared to a $5.2 million loss in the third quarter of 2022.
  • Loss per share of $0.02, compared to a loss per share of $0.03 in the third quarter of 2022.
  • Unrestricted cash and investments increased by $5.0 million during the quarter to $33.0 million. As of September 30, 2023 the Company held $19.0 million in cash and an additional $14.0 million held in investments in financial assets. The $33.0 million does not include $16.3 million of restricted cash associated with customer deposits.
  • The Company repurchased 159,000 common shares for $306,000 pursuant to its normal course issuer bid.

Q3 2023 Operational Highlights

  • Total agents on the platform increased to 12,175 at the end of the third quarter, an 81% year-over-year increase.
  • The number of transactions closed in the third quarter of 2023 grew 82% year-over-year to 20,397.
  • The total value of completed real estate transactions grew 91% year-over-year to $8.1 billion.
  • Operating expense per transaction, excluding revenue share, declined 10% year-over-year to $725.
  • As of September 30, 2023, Real’s headcount efficiency ratio, defined as full-time brokerage employees excluding One Real Title and One Real Mortgage employees, divided by the number of agents on our platform, was 1 to 101. This compares to 1 to 77 employees as of September 30, 2022.

Business Highlights and Recent Updates

Subsequent to the end of the quarter, in October, Real unveiled an array of innovative products and features at its annual RISE agent conference in San Diego. These introductions represent a leap forward toward our goal of redefining the real estate experience and simplifying the entire homebuying process for consumers, while equipping agents with the tools, technology, and resources to effectively manage and expand their businesses. Highlights included:

  • The “One Real” consumer-facing mobile app — the first step towards realizing our vision of creating a simple solution that combines every touchpoint in the home buying and selling process into a single, seamless consumer experience. The initial version gives agents the ability to invite clients to be pre-approved and cleared to close on a home mortgage from the palm of their hand in as little as 14 days.
  • The Real Wallet — a first-of-its-kind fintech product designed specifically for Real agents that centralizes the functionality of a debit card, credit card, reward points and an array of perks. This new suite of products will open new monetization opportunities within the vast amount of commission dollars already transacted on our reZEN transaction platform. Initial testing for the Real Wallet is scheduled for the first half of 2024.
  • Leo 2.0 — a major update to our AI-powered virtual concierge, Leo 2.0 introduces powerful predictive capabilities. It enables Leo to anticipate agents' questions based on analyzing historical interactions and patterns across our entire agent network. In essence, Leo has evolved into a proactive assistant, adept at anticipating questions and addressing issues before agents even think to ask them.

For more details on all the conference announcements, please refer to the following news releases:

Conference Call

The Company will discuss the results on a conference call and live webcast today at 11:00 a.m. ET. An audio-only webcast of the call may be accessed from the Investor Relations section of the company’s website at https://investors.onereal.com/ or by registering at the link here. A replay of the webcast will be available for one year.

Conference Call Details:

Date:

Thursday, November 9, 2023

Time:

11:00 a.m. ET

 

Dial-in Number:

North American Toll Free: 888-506-0062

International: 973-528-0011

Access Code:

482869

Webcast:

https://www.webcaster4.com/Webcast/Page/2699/49221

 

Replay Information:

Replay Number:

North American Toll Free: 877-481-4010

International: 919-882-2331

Access Code:

49221

Replay Link:

https://www.webcaster4.com/Webcast/Page/2699/49221

Additional information concerning Real’s audited consolidated financial statements and related management’s discussion and analysis for the three months ended September 30, 2023 can be found on the Company’s profile at www.sedarplus.ca.

Non-IFRS Measures

This news release includes reference to “Adjusted EBITDA” and “Adjusted Operating Expense”, are a non-International Financial Reporting Standards (“IFRS”) financial measure. Non-IFRS measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies.

Adjusted EBITDA is used as an alternative to net income by removing major non-cash items such as amortization, interest, stock-based compensation, current and deferred income tax expenses and other items management considers non-operating in nature. Adjusted Operating Expense is used as an alternative to operating expenses by removing major non-cash items such as Stock-Based Compensation, Depreciation, and other unique or non-cash expenses, while retaining ongoing fixed operating expenses and excluding variable cash expenses associated with Revenue Share. Adjusted EBITDA and Adjusted Operating Expense have no direct comparable IFRS financial measures. The Company has used or included these non-IFRS measures solely to provide investors with added insight into Real’s financial performance. Readers are cautioned that such non-IFRS measures may not be appropriate for any other purpose. Non-IFRS measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Our Adjusted EBITDA for the three months ended September 30, 2023 and 2022 is presented in the table below labeled Reconciliation of Total Comprehensive Loss Attributable to Owners of the Company to Adjusted EBITDA. Our Adjusted Operating Expense for the three months ended September 30, 2023 and 2022 is presented in the table below labeled Reconciliation of Operating Expense to Adjusted Operating Expense.

 

THE REAL BROKERAGE INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONS

(Expressed in thousands of U.S. dollars)

UNAUDITED

 

Unaudited

Audited

 

September 30, 2023

December 31, 2022

ASSETS

 

CURRENT ASSETS

 

Cash and cash equivalents

$

19,006

 

$

10,846

 

Restricted cash

 

16,333

 

 

7,481

 

Investments in financial assets

 

14,028

 

 

7,892

 

Trade receivables

 

2,539

 

 

1,547

 

Other receivables

 

75

 

 

74

 

Prepaid expenses and deposits

 

1,325

 

 

529

 

TOTAL CURRENT ASSETS

 

53,306

 

 

28,369

 

NON-CURRENT ASSETS

 

 

 

 

 

 

Intangible assets

 

3,118

 

 

3,708

 

Goodwill

 

10,174

 

 

10,262

 

Property and equipment

 

1,561

 

 

1,350

 

Right-of-use assets

 

-

 

 

73

 

TOTAL NON-CURRENT ASSETS

 

14,853

 

 

15,393

 

TOTAL ASSETS

 

68,159

 

 

43,762

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

653

 

 

474

 

Accrued liabilities

 

23,934

 

 

11,866

 

Customer deposits

 

16,333

 

 

7,481

 

Other payables

 

2,072

 

 

1,188

 

Lease liabilities

 

-

 

 

96

 

TOTAL CURRENT LIABILITIES

 

42,992

 

 

21,105

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

Warrants outstanding

 

246

 

 

242

 

TOTAL NON-CURRENT LIABILITIES

 

246

 

 

242

 

TOTAL LIABILITIES

 

43,238

 

 

21,347

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

EQUITY ATTRIBUTABLE TO OWNERS

 

 

 

 

 

 

Share premium

 

59,400

 

 

63,204

 

Stock-based compensation reserves

 

32,661

 

 

25,083

 

Deficit

 

(66,241)

 

 

(50,704)

 

Other reserves

 

(245)

 

 

(469)

 

Treasury stock, at cost

 

(925)

 

 

(14,962)

 

EQUITY ATTRIBUTABLE TO OWNERS

 

24,650

 

 

22,152

 

Non-controlling interests

 

271

 

 

263

 

TOTAL EQUITY

 

24,921

 

 

22,415

 

TOTAL LIABILITIES AND EQUITY

 

68,159

 

 

43,762

 

THE REAL BROKERAGE INC.

INTERIM CONDENSED STATEMENT OF LOSS AND COMPREHENSIVE LOSS

(Expressed in thousands of U.S. dollars, except for per share amounts)

UNAUDITED

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

2022

 

 

2023

2022

Revenues

$

214,640

 

$

111,633

 

$

507,817

 

$

285,638

 

Commissions and other agent-related costs

 

195,865

 

 

103,057

 

 

460,475

 

 

261,908

 

Gross Profit

 

18,775

 

 

8,576

 

 

47,342

 

 

23,730

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

9,234

 

 

5,544

 

 

27,526

 

 

17,034

 

Marketing expenses

 

11,577

 

 

6,197

 

 

29,527

 

 

15,613

 

Research and development expenses

 

1,931

 

 

1,146

 

 

5,034

 

 

3,865

 

Operating Loss

 

(3,967)

 

 

(4,311)

 

 

(14,745)

 

 

(12,782)

 

 

 

 

 

 

 

 

 

 

 

Other income

 

38

 

 

231

 

 

106

 

 

667

 

Listing expenses

 

-

 

 

(135)

 

 

-

 

 

(135)

 

Finance expenses, net

 

(10)

 

 

(954)

 

 

(587)

 

 

(1,326)

 

Net Loss

 

(3,939)

 

 

(5,169)

 

 

(15,226)

 

 

(13,576)

 

Net income attributable to noncontrolling interests

 

85

 

 

78

 

 

311

 

 

192

 

Net Loss Attributable to the Owners of the Company

 

(4,024)

 

 

(5,247)

 

 

(15,537)

 

 

(13,768)

 

Other comprehensive income/(loss):

 

 

 

 

 

 

 

 

 

Cumulative (gain)/loss on investments in debt instruments classified as FVTOCI reclassified to profit or loss

 

79

 

 

(142)

 

 

214

 

 

(535)

 

Foreign currency translation adjustment

 

(52)

 

 

(51)

 

 

10

 

 

343

 

Total Comprehensive Loss Attributable to Owners of the Company

 

(3,997)

 

 

(5,440)

 

 

(15,313)

 

 

(13,960)

 

Total Comprehensive Income Attributable to NCI

 

85

 

 

78

 

 

311

 

 

192

 

Total Comprehensive Loss

 

(3,912)

 

 

(5,362)

 

 

(15,002)

 

 

(13,768)

 

Loss per share

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

(0.02)

 

 

(0.03)

 

 

(0.09)

 

 

(0.08)

 

Weighted-average shares, basic and diluted

 

180,611

 

 

179,466

 

 

180,158

 

 

179,320

 

     

THE REAL BROKERAGE INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Expressed in thousands of U.S. dollars)

UNAUDITED

     

Three Months Ended September 30,

Nine Months Ended September 30,

 

2023

 

2022

2023

2022

OPERATING ACTIVITIES

 

 

 

 

Net loss

$

(3,939)

 

$

(5,169)

$

(15,226)

$

(13,576)

 

Adjustments for:

 

 

 

 

 

 

 

Depreciation

 

277

 

 

87

 

830

 

225

 

Equity-settled share-based payment

 

7,144

 

 

1,113

 

18,980

 

2,324

 

Finance costs

 

(143)

 

 

28

 

156

 

237

 

Loss/(gain) on short term investments

 

-

 

 

11

 

-

 

(125)

 

Stock compensation payable (RSU)

 

-

 

 

1,603

 

-

 

5,645

 

Changes in operating asset and liabilities:

 

 

 

 

 

 

 

Trade receivables

 

(614)

 

 

(543)

 

(992)

 

(529)

 

Other receivables

 

(23)

 

 

(8)

 

(1)

 

(51)

 

Prepaid expenses and deposits

 

(266)

 

 

517

 

(796)

 

(334)

 

Accounts payable

 

(493)

 

 

690

 

179

 

1,255

 

Accrued liabilities

 

2,654

 

 

1,278

 

12,068

 

6,233

 

Customer deposits

 

(13,247)

 

 

(4,512)

 

8,852

 

6,769

 

Other payables

 

718

 

 

1,017

 

1,684

 

1,488

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

(7,932)

 

 

(3,888)

 

25,734

 

9,570

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

Purchase of property and equipment

 

(197)

 

 

(302)

 

(448)

 

(927)

 

Acquisition of subsidiaries

 

-

 

 

-

 

-

 

(7,445)

 

Investment deposits in debt instruments held at FVTOCI

 

(3,037)

 

 

(5,420)

 

(6,766)

 

(1,431)

 

Investment withdrawals in debt instruments held at FVTOCI

 

-

 

 

-

 

845

 

-

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

(3,234)

 

 

(5,722)

 

(6,369)

 

(9,803)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

Purchase of common shares for Restricted Share Unit (RSU) Plan

 

(350)

 

 

(1,219)

 

(1,761)

 

(6,911)

 

Proceeds from exercise of stock options

 

380

 

 

26

 

592

 

73

 

Payment of lease liabilities

 

-

 

 

(23)

 

(96)

 

(68)

 

Payment of contingent consideration

 

-

 

 

-

 

(800)

 

-

 

Cash disbursements for non-controlling interest

 

(303)

 

 

(24)

 

(303)

 

(67)

 

NET CASH USED IN FINANCING ACTIVITIES

 

(273)

 

 

(1,240)

 

(2,368)

 

(6,973)

 

 

 

 

 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

 

(11,439)

 

 

(10,850)

 

16,997

 

(7,206)

 

Cash, cash equivalents and restricted cash, beginning of period

 

46,745

 

 

32,771

 

18,327

 

29,129

 

Fluctuations in foreign currency

 

33

 

 

22

 

15

 

20

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE

$

35,339

 

$

21,943

$

35,339

$

21,943

 

THE REAL BROKERAGE INC.

RECONCILIATION OF TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO OWNERS OF THE COMPANY TO ADJUSTED EBITDA

(Expressed in thousands of U.S. dollars)

UNAUDITED

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30, 2023

 

September 30, 2022

 

September 30, 2023

 

September 30, 2022

Total Comprehensive Loss Attributable to Owners of the Company

 

(3,997)

 

(5,440)

 

(15,313)

 

(13,960)

Add/(Deduct):

 

 

 

 

 

 

 

 

Finance Expenses, net

 

10

 

954

 

587

 

1,326

Net Income Attributable to Noncontrolling Interest

 

85

 

78

 

311

 

192

Cumulative (Gain)/Loss on Investments in Debt Instruments Classified as at FVTOCI Reclassified to Profit or Loss

 

(79)

 

142

 

(214)

 

535

Depreciation

 

277

 

87

 

830

 

225

Stock-Based Compensation

 

7,144

 

4,506

 

18,980

 

10,568

Listing Expenses

 

-

 

135

 

-

 

135

Restructuring Expenses

 

80

 

62

 

165

 

62

Other Professional Expenses

 

-

 

25

 

-

 

306

Adjusted EBITDA1

 

3,520

 

549

 

5,346

 

(611)

 

1Adjusted EBITDA for September 30, 2022 has been restated to account for Stock-Based Compensation recognized in Cost of Goods Sold.

THE REAL BROKERAGE INC.

RECONCILIATION OF OPERATING EXPENSE TO ADJUSTED OPERATING EXPENSE BY QUARTER

(Expressed in thousands of U.S. dollars)

UNAUDITED

 

2022

 

2023

 

Q1

Q2

Q3

Q4

 

Q1

Q2

Q3

Operating Expense

10,129

13,496

12,886

15,184

17,846

21,499

22,742

Less: Revenue Share Expense

$2,703

$4,376

$3,876

$4,020

$5,434

$7,684

$7,946

Revenue Share Expense (% of revenue)

4.4%

3.9%

3.5%

4.2%

5.0%

4.1%

3.7%

Less: Non-Cash Operating Expenses

Stock-Based Compensations - Employees

1,205

897

281

608

1,019

1,214

285

Stock-Based Compensations - Agents

582

547

1,776

2,614

1,541

1,640

2,769

Depreciation Expense

3

135

87

108

269

284

277

Restructuring Expense

-

-

62

160

41

44

80

Total Non-Cash Operating Expenses

1,790

1,579

2,206

3,490

2,870

3,182

3,411

Adjusted Operating Expense1

5,636

7,541

6,804

7,674

9,542

10,633

11,385

Adjusted Operating Expense (% of revenue)

9.1%

6.7%

6.1%

8.0%

8.8%

5.7%

5.3%

 

 

 

 

 

 

 

 

 

1Adjusted operating expense excludes revenue share, stock-based compensation, depreciation and other non-recurring or non-cash expenses.

 

THE REAL BROKERAGE INC.

KEY PERFORMANCE METRICS BY QUARTER

 

 

2022

 

2023

Q1

Q2

Q3

Q4

 

Q1

Q2

Q3

Closed Transaction Sides

6,248

10,224

11,233

9,745

10,963

17,537

20,397

Total Value of Home Side Transactions ($, billions)

2.4

4.2

4.2

3.5

4.0

7.0

8.1

Median Home Sale Price ($, thousands)

345

375

360

348

350

369

370

 

Total Agents

4,500

5,600

6,700

8,200

10,000

11,500

12,175

Agent Churn Rate (%)

7.9

7.2

7.3

4.4

8.3

6.5

10.8

Revenue Churn Rate (%)

1.6

2.1

2.5

2.4

4.3

3.8

4.5

 

Full-Time Employees

112

121

122

118

127

145

162

Full-Time Employees, Excluding One Real Title and One Real Mortgage

82

91

87

84

88

102

120

Headcount Efficiency Ratio1

1: 55

1: 62

1: 77

1: 98

1: 114

1: 113

1: 101

Revenue Per Full Time Employee ($, thousands)1

752

1,235

1,283

1,144

1,226

1,817

1,789

Operating Expense Excluding Revenue Share

($, thousands)

7,426

9,120

9,010

11,164

12,412

13,815

14,796

Operating Expense Per Transaction Excluding Revenue Share

1,189

892

802

1,146

1,132

788

725

 

1Excluding One Real Title and One Real Mortgage.

Forward-Looking Information

This press release contains forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as “seek”, “anticipate”, “believe”, “plan”, “estimate”, “expect”, “likely” and “intend” and statements that an event or result “may”, “will”, “should”, “could” or “might” occur or be achieved and other similar expressions. These statements reflect management’s current beliefs and are based on information currently available to management as of the date hereof. Forward-looking information in this press release includes, without limiting the foregoing, expectations regarding Real’s growth and the business and strategic plans of the Company.

Forward-looking information is based on assumptions that may prove to be incorrect, including but not limited to assumptions regarding Real’s business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. Real considers these assumptions to be reasonable in the circumstances. However, forward-looking information is subject to known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking information. Important factors that could cause such differences include, but are not limited to, slowdowns in real estate markets; the impact of increased interest rates; economic and industry downturns; the Company’s ability to continuously innovate, and the dependability of the Company’s platform; the Company’s ability to successfully launch new technologies, including the Real Wallet; the Company’s ability to attract new agents and retain current agents; the loss of key personnel; the Company’s ability to expand its brokerage and adjacent services businesses; the Company’s ability to carefully manage its expense structure and continue to grow; the Company’s ability to compete successfully in the markets in which it operates; the Company’s ability to sustain adjusted EBITDA profitability; the impact of cybersecurity incidents and the potential loss of critical and confidential information; the effect of claims, lawsuits and other proceedings that the Company is subject to from time to time; the impact of natural disasters and catastrophic events; compliance with the laws to which the Company is subject and the Company’s ability to protect its intellectual property rights. These factors should be carefully considered and readers should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this press release are based upon what management believes to be reasonable assumptions, Real cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this press release, and Real assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law.

About Real

Real (NASDAQ: REAX) is a real estate experience company working to make life’s most complex transaction simple. The fast-growing company combines essential real estate, mortgage and closing services with powerful technology to deliver a single seamless end-to-end consumer experience, guided by trusted agents. With a presence throughout the U.S. and Canada, Real supports more than 12,000 agents who use its digital brokerage platform and tight-knit professional community to power their own forward-thinking businesses. Additional information can be found on its website at www.onereal.com.

Contacts

For additional information, please contact:

Ravi Jani

Vice President, Investor Relations and Financial Planning & Analysis

investors@therealbrokerage.com

908.280.2515



For media inquiries, please contact:

Elisabeth Warrick

Senior Director, Marketing, Communications & Brand

elisabeth@therealbrokerage.com

201.564.4221

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