Good morning, and welcome to the RE/MAX Holdings Fourth Quarter 2025 Earnings Conference Call and Webcast. My name is Tracy, and I will be facilitating the audio portion of today's call. At this time, I would like to turn the call over to Joe Schwartz, Senior Vice President of Finance and Investor Relations. Mr. Schwartz, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to RE/MAX Holdings Fourth Quarter 2025 Earnings Conference Call. Please visit the Investor Relations section of www.remaxholdings.com for all earnings-related materials, including our standard earnings presentation and to access the live webcast and replay of the call today. Our prepared remarks and answers to your questions in today's call may contain forward-looking statements. Forward-looking statements include those related to agent count, franchise sales and open offices, financial measures and outlook, brand expansion, competition, technology, housing and mortgage market conditions, capital allocation, credit facility, dividends, share repurchases, litigation settlements, strategic and operational plans and business models. Forward-looking statements represent management's current estimates. RE/MAX Holdings assumes no obligation to update any forward-looking statements in the future. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those projected in forward-looking statements. These are discussed in our fourth quarter 2025 financial results press release and other SEC filings. Also, we will refer to certain non-GAAP measures in today's call. Please see the definitions and reconciliations of non-GAAP measures contained in our most recent quarterly financial results press release, which is available on our website. Joining me on our call today are Erik Carlson, our Chief Executive Officer; and Karri Callahan, our Chief Financial Officer. With that, I'd like to turn the call over to them. Erik?

Thank you, Joe, and thanks to all of you who have joined us today. In 2025, we built a strong strategic foundation, and we're beginning to see the payoff. We've made great progress in enhancing our brand and our overall value proposition, and we view 2026 as a year of tremendous opportunity for our company, our franchisees, our agents, and our loan originators. We accomplished all of this despite 2025 being the third consecutive year of a historically slow housing market, which began with a major win. In January, we had the largest brokerage conversion in RE/MAX history, as an Ontario family of visionary entrepreneurs and their nearly 1,200 agents joined RE/MAX Canada, adding to the market-leading presence we enjoy from coast to coast. Engagement throughout the RE/MAX network reflects growing enthusiasm for our strategic investments in the brand, reaffirming the strength of our overall direction. At the same time, we continue to operate the business with discipline, as evidenced by our fourth quarter profit and margin performance, which came in at the high end of our expectations. Given the productivity and professionalism of our network and the resilience of our model, we believe we're well positioned to capitalize on a recovering market. We're continuing to support our affiliates in growing their business and increasing their profitability. In terms of housing data and consumer insights, despite a typically slow start of the year in January, we continue to see the housing market normalizing in various ways, and that is a healthy development. According to our latest RE/MAX National Housing Report, inventory and new listings remain higher than a year ago, and the overall fundamentals suggest we'll have a more balanced market this year. Across many markets, we're seeing early signs of a more even playing field. Seller concessions are becoming more common; the negotiations are more thoughtful; and interest rates are trending downward, which helps support buyer activity. We also believe some recent policy proposals could prove to be constructive to housing if effectively implemented, including those aimed at increasing the inventory of single-family homes available to individual homebuyers, as well as those that aim to lower the 30-year mortgage rate. Over time, we should also see the lock-in effect of low mortgage rates continue to ease. The results of our recently published consumer survey show that despite delays caused by affordability and broader economic uncertainty, 88% of prospective buyers still say they're likely to purchase a home in 2026. Market conditions have slowed timelines, but not the underlying demand. Also, buyers said they're looking for more than a house; they want a sense of community, too. That plays directly to our strengths as the most trusted real estate brand in the United States and Canada. RE/MAX agents are local experts who skillfully help consumers navigate complexity, evaluate trade-offs, and make confident long-term decisions. Turning to our operational performance, as of December 31, our overall worldwide agent count hit another all-time high at over 148,500 agents. The growth of the RE/MAX agent base outside the U.S. and Canada continues to fuel new records, and we continue to make progress in stabilizing agent count, as evidenced by our best fourth quarter performance since 2021. In a difficult market, Canadian agent count finished the year relatively flat to 2024, but we started the year with tremendous momentum. It's also worth noting that the reach of our global network enables us to serve an unparalleled number of consumers. In this decade alone, since January 1, 2020, RE/MAX agents have closed over 10 million transaction sides worldwide. It's an incredible achievement, and as we continue to evolve our strategies, we're exploring new ways to lean into the tremendous opportunity this global sales power presents. As I mentioned earlier, in mid-January, we announced the largest conversion in the history of our company. A family of visionary entrepreneurial real estate leaders, Vivian Risi and her children, Michelle and Justin, chose RE/MAX for their 17 office Toronto-based operation, largely to deliver a wider range of tools and opportunities to their nearly 1,200 agents, both for now and into the future. We're thrilled to welcome the Risi family and their talented agents to our network. The Risi family also chose RE/MAX for our global footprint, robust referral network, and powerful marketing and technology platforms. These advantages should reinforce their agents' productivity and growth potential in a dynamic real estate landscape. This conversion demonstrates that the enhancements to our overall value proposition are working, as brokers both in and beyond our network recognize the power of our current competitive advantages and the momentum that we're building. This landmark conversion is just the beginning. We're increasingly encouraged by our pipeline of conversion, merger, and acquisition candidates across the U.S. and Canada. We have a strong slate of sizable opportunities we plan to close and announce in the months ahead. We believe much of the excitement surrounding the RE/MAX brand is driven by the tremendous team effort that has reinvigorated our value proposition. Our innovations are centered on enhancing our competitive advantages and helping agents win more business, save time, and make more money, which in turn helps increase broker profitability. The new economic models we launched last year, Aspire, Ascend, and Appreciate, continue to provide brokers with greater flexibility and a wider framework for recruiting and retention. While Q4 is always seasonally challenging, our Q4 recruitment rate outpaced last year's, building on the positive trends from late Q2 and Q3. The benefits of developing and launching these new options last year should continue to emerge over time. Notably, adoption of Aspire is already over 2,000 agents, and the program's educational and technology elements position these newly recruited agents for sustained careers with the network. Announced several months later, Ascend and Appreciate continue to see increasing adoption as word grows about the value they offer. Less than a year after launch, both are still trending upward. We also continue to invest in our digital marketing assets. Our six-month Marketing as a Service platform continues to gain traction, and the results are very encouraging. For example, listings that are promoted through our platform are delivering three times more views, six times more active users, and five times more actions compared to similar listings that have not been promoted on remax.com. These are just some of the initial findings, but they underscore the product's ROI and value to RE/MAX agents. Overall, the platform is scaling in line with expectations, showing resilient demand, rising paid adoption, and strong effectiveness, all of which positions us for continued growth throughout the year ahead. We launched a newly designed remax.com and are launching a redesigned remax.ca in Canada. They both incorporate personalized content and AI capabilities that deliver better consumer engagement, making stronger connections to agents while also furthering our monetization strategies. For instance, agents can now turn listings into AI-generated videos with the click of a button. Additionally, consumers can leverage AI to redesign home exteriors and interiors of property photos on our websites, improving engagement and extending the amount of time they spend on-site. Our RE/MAX Media Network continues to build meaningful momentum with a healthy mix of programmatic and direct sourcing. Revenue this year is pacing ahead of forecast, which is an encouraging sign. Brands are clearly interested in taking part, so there's ample reason to expect advertising revenue from the RE/MAX Media Network to increase significantly this year. Additionally, our lead top-tier curation program continues to deliver a better agent and consumer experience, as conversion rates and corresponding revenue contributions are exceeding our initial expectations. Also from a lead source perspective, we're introducing a golf lifestyle designation. This program will enable RE/MAX agents to be certified as real estate professionals who understand club, course, and real estate dynamics unique to golf properties. Our new program will include training, certification, and real estate leads that position participating RE/MAX agents as trusted advisers for golfers looking to find new homes and new communities. Let me now spend a moment on important developments within our mortgage business. As we look across the broader housing and mortgage landscape, one of the consistent themes we see is the need for flexibility, particularly in how independent operators structure their business in these changing market conditions. With that in mind, we rolled out a new franchise royalty fee model earlier this year across the Motto network. The goal here is simple: to better align our economic structure with the realities of today's market while supporting long-term growth with our franchisees and the brand. This new model reduces fixed costs through a lower flat fee and introduces a transaction-based component that scales with performance. It's designed to provide more flexibility, encourage operational excellence, and support sustainable growth over time. This is not a forced transition; existing offices can opt into the new model if they believe it benefits their business, while new franchisees will follow the updated structure moving forward. That optionality is intentional; different stages, and we want to meet them where they are. From a strategic standpoint, this approach mirrors the thinking behind our RE/MAX fee model options, Aspire, Ascend, and Appreciate, which were designed to give RE/MAX affiliates more choice, more control, and better alignment with how they choose to grow their business. As part of our continued focus on strengthening the long-term health and competitiveness of the Motto brand, we deliberately chose to terminate a number of franchisees during the fourth quarter. These decisions were rooted in our responsibility to maintain a high-quality system that reflects the standards and expectations required to deliver a consistent borrower experience. We continue to see significant opportunities within our mortgage business. These include leveraging the new fee model to grow the Motto base, drive greater adoption of wemlo processing, both from inside and beyond our Motto network, as well as exploring additional ways to capitalize on the hundreds of thousands of transactions RE/MAX agents close annually in the United States and Canada. We're also exploring possibilities around the thousands of leads that flow through our digital platforms. Applying both the real estate and mortgage, our fourth quarter achievements and enhancements reflect a concerted focus on strategic growth network strength and a differentiated value for franchisees, agents, and loan originators alike. As we look across both industries, the pace of change requires brands to offer scale without sacrificing local expertise. We're providing constant support and value to our customers, and we continue to lean into our RE/MAX and Motto networks, and the enthusiasm we see is very real. That enthusiasm has been fueled by the energy of new leaders who have recently joined the team. One of those inspirational leaders is Chris Lim, who we just promoted to President and Chief Growth Officer of RE/MAX. Over the past 13 months, Chris has helped to modernize operations, increase support services, expand our value proposition, and elevate the way consumers perceive this global brand, especially on our digital platforms. He brings a creative upscale mindset to every project and played a direct role in several major brokerage conversions, most notably in Hawaii and Ontario. Chris, congratulations. As we look toward the rest of 2026, we remain focused on executing our comprehensive growth and revenue strategy. Last year, we brought in new leadership, launched new products and services, developed new economic models, and strengthened the foundation for our future. This year, we're focused on driving adoption, managing outcomes, and ensuring that our company and networks continue to win.

Thank you, Erik. Good morning, everyone. As Erik said, we are encouraged by our fourth quarter operating results and overall financial performance. Profits for the quarter landed at the high end of our expectations, and our revenue performance was solid despite a challenging housing market. Some of our notable quarterly financial highlights included total revenue of $71.1 million, adjusted EBITDA of $22.4 million, adjusted EBITDA margin of 31.5%, and adjusted diluted EPS of $0.30. Looking closer at revenue, excluding the marketing funds, revenue was $53.6 million, a decrease of 0.4% compared to the same period last year, driven by a decline in organic revenue of 0.4% and flat foreign currency movements. The decline in organic revenue was driven mainly by a reduction in U.S. agent count and the impact of recently introduced incentives, including the Aspire program, partially offset by an increase in broker fees and revenue contributions from our new initiatives, which include marketing as a service and the monetization strategies from our flagship website. Fourth quarter selling, operating, and administrative expenses increased $1.6 million or 4.4% to $37.3 million. This increase was primarily due to losses on the sale and disposal of assets and an increase in expenses from the timing of other events, partially offset by a reduction in certain personnel-related expenses. The resilience of our franchise economic model and our ongoing evaluation of every aspect of our business has resulted in our ability to continue to delever despite a challenging macro and housing environment. Our total leverage ratio decreased to 3.12 times as of December 31. A continuation from last quarter, our total leverage ratio remains below the 3.5 times level, affording us greater flexibility from a capital allocation perspective. Importantly, we currently expect to remain below that 3.5 times level throughout the year. From a capital allocation perspective, our priorities remain unchanged. We're strategically reinvesting in the business, and we'll continue to build our cash reserves. Now on to our guidance. Our first quarter and full year 2026 outlook assumes no further currency movements, acquisitions, or divestitures. For the first quarter of 2026, we expect agent count to increase 1.5% to 2.5% over the first quarter of 2025, revenue in a range of $69 million to $74 million, including revenue from the marketing funds in a range of $16 million to $18 million, and adjusted EBITDA in a range of $14 million to $17 million. For the full year 2026, we expect agent count to increase 1.5% to 3.5% over the full year 2025, revenue in a range of $285 million to $305 million, including revenue from the marketing funds in a range of $66 million to $70 million, and adjusted EBITDA in a range of $90 million to $100 million. With that, operator, let's open it up for questions.

Your first question comes from Nick McAndrew with Zelman & Associates. Your line is open. Please go ahead.

Questions. Maybe just to start, I think as the earlier Aspire cohorts moved beyond the onboarding phase, can you just talk about what you're seeing with those earlier cohorts in terms of agent developments or productivity as some of those agents move through the program?

Sure. Nick, we continue to be really excited about the Aspire program. We know that we see significant reduction in the churn of our agents as we move them up the productivity cohort. And as we've seen, it's really early that cohort is very small, but as those agents have gone through, we are seeing some upticks in productivity as they go through the training and they get engaged with our tools. We are seeing some improvement in productivity, and we're also seeing improvement in retention within that cohort. Importantly, as Erik said in the scripted remarks, the ASPIRE program in and of itself is really spurring recruiting activity for our brokerages. The optionality that the program offers is another beneficial aspect, as we've seen the continued stabilization from a U.S. agent count perspective here in the fourth quarter, our best fourth quarter since 2021 and a continued trend from Q2 and Q3.

Got it. And I guess, second, just a follow-up. Congrats on the 1,200 agent Canadian addition. I'm just curious whether it's the new comp structures, brand positioning, or tech offerings; are there any factors that stood out in what's resonating with that agent base that's coming through RE/MAX?

Yes, Nick, this is Erik. I appreciate you saying 'choosing RE/MAX' because that's actually the way we look at it. I think it's a combination of all of the above, to be quite frank. About a year ago, we launched the brand modernization. We've done a lot of really hard work on our value proposition. We've shown up with different people from a leadership perspective. We're really leaning into the network. As we're talking to prospective clients about the RE/MAX opportunity, it's not only just about tech and our education and the community; it's our global footprint. More than 148,000 agents in 120 countries mean that although real estate today is still very local, it is worldwide. We're proud of our footprint, but also the tools and processes we are putting in place to help agents and consumers find great agents around the world. Our MAX referral program continues to see improvements and additional transactions, which is very healthy. I believe the Risi family is just such a tremendous group and well respected in real estate. We're super excited that they chose RE/MAX as their next partner. It speaks volumes of the agency's value in our brand and what it represents today and in the future.

Your next question comes from the line of Dae Lee with JPMorgan. Please go ahead.

Great. I guess my first one is on the discussions around AI-driven automation to change the industry. How are franchises responding to the automation drive, and what are they optimistic about?

Yes. Dae, it's Erik. I'll provide a little context on how we think about it and some of the feedback that we're getting from our network. I think using AI for the sake of it is a mistake. We're trying to be very purposeful in how we deploy automation technology. Our network and real estate agents and/or brokerages are very curious about it; there's a sense of 'Hey, I need to lean in,' paired with a sense of 'I'm scared of it.' What we try to do here at RE/MAX is be purposeful in our approach. We're deploying tools and services like MAX AI, which helps nurture leads and helps consumers find the right real estate agent within the RE/MAX network. You'd be surprised how many agents still use email as a primary method to correspond with consumers. We aim to automate some of that workflow. Our purpose here is to help agents win listings, win more business, do it in less time, and make more money. When we think about AI, we think about how we can deploy it to help achieve those three goals. We're taking a very purposeful approach while leaning into our North Star to help agents be more successful in the market.

Got it. Helpful. As a follow-up, I'm encouraged to see momentum into 2026. What are the key swing factors in your revenue guidance, and which KPIs should we be tracking to see revenue tilt to the higher end of your guidance?

Yes, great question, Dae. We try to take a purposeful approach to everything. There's definitely some opportunity to push to the higher end. We just finished the third straight year of a pretty depressed housing cycle, so anything from a macro perspective would definitely be a tailwind pushing us toward the higher end of that guidance. We obviously can't control the macro environment, but we've done a great job reinforcing our value proposition and focusing on what we can control. Further stabilization and growth from a U.S. agent count perspective, as Erik mentioned in the scripted remarks, will also be positive. Our pipeline for additional conversions, mergers, and acquisition activity looks good, which could impact our bottom line positively. Lastly, our new monetization initiatives, including marketing as a service as well as our digital channels, are seeing significant year-over-year growth, which could also help push us to the high end of the range.

Your next question comes from the line of Tommy McJoynt with KBW. Please go ahead.

I have a question on the Aspire program and the impact on the broker fee revenue line. Can you quantify how much it impacted this quarter? Will it be recognized evenly over the year, and could there be a major true-up at year-end if volumes differ from your expectations?

Yes, Tommy, great question. As Erik mentioned in the scripted remarks, we have about 2,000 agents now involved, and we're seeing good adoption. The impact on broker fees was not very significant—around a couple of hundred thousand dollars, maybe $0.5 million. Regarding how the activity will be recognized, it will smooth out over time. We expect to see less seasonality in the broker fee line as participation in the program grows. There was a little impact in Q4, but it wasn't pronounced.

Your next question comes from the line of Valentin Alvar with Jones Trading.

Regarding your disclosure on the earnings release relating to selling, operating, and administrative expenses, can you give us some idea of ongoing versus one-time cost pressures to gauge the run rate?

Sure, it's Karri. Regarding that information, a couple of unusual and one-time costs impacted our recent expenses. We had about a $1 million charge related to some sales and disposals of assets, which won't continue. When considering what that looks like moving forward, the Q4 run rate for selling, operating, and administrative expenses seems consistent into Q2, Q3, and Q4 of this year once normalized. Keep in mind that Q1 is typically a bit higher for us due to our annual agent convention in Las Vegas. We have over 60 countries represented and many agents attending, leading to increased investment in Q1, which should look pretty consistent compared to Q1 of '24 and '25.

With where the stock is today and mortgage rates near the 6% mark, are you more likely to engage in additional share repurchases versus Q4?

Yes, it's an excellent question. From a recurring fee perspective as well as significant earnings to free cash flow generation, we're pleased to have been below that 3.5 times leverage level for several quarters now. This provides us with increased flexibility regarding returns. We're taking a prudent approach to capital allocation, but given our current leverage position, returning capital is definitely on the table again. We're looking to balance it with reinvesting in the business while ensuring that capital goes to opportunities that generate the highest returns.

Operator, if I may, this is Erik. I know Tommy, you got cut off on your question regarding private listings. Our position has not changed; we feel that transparency and broad distribution of listings provide the best outcomes for buyers and sellers. With our vast network around the world, we're prepared to participate in a broader private listing-type network if needed, but philosophically, we prioritize consumer interests. Transparency and the broadest distribution of listings are our guiding principles.

There are no further questions at this time. I will now hand the call back to Joe Schwartz, Senior Vice President of Finance and Investor Relations. Mr. Schwartz, please go ahead.

Thank you, operator, and thank you, everyone, for joining the call today. We hope everyone has a great weekend.

This concludes today's call. Thank you for attending. You may now disconnect.