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The Real Brokerage Inc. Announces First Quarter 2023 Financial Results

The Real Brokerage Inc. (TSX: REAX) (NASDAQ: REAX), the fastest-growing publicly traded real estate brokerage, announced results for its first quarter ended March 31, 2023.

“Real continues to deliver industry-leading growth in a challenging market with the largest quarterly net agent addition in our company’s history,” said Tamir Poleg, Chairman and Chief Executive Officer. “Our open transaction volume is at an all-time high. And with a number of transformative technology innovations to be released over the next several quarters, including a new GPT-powered AI virtual assistant and the pilot version of our comprehensive consumer experience, we are incredibly excited at the trajectory of the business going forward.”

Q1 2023 Financial Highlights

  • Revenue increased 75% year-over-year to $107.8 million.
  • Gross profit increased 84% year-over-year to $10.8 million.
  • Net loss attributable to owners of the Company of $7.4 million, compared to a $4.3 million loss in Q1 2022.
  • Loss per share of $0.04, compared to a loss per share of $0.03 in Q1 2022.
  • Adjusted EBITDA loss of $792 thousand, compared to a $577 thousand loss in Q1 2022.
  • As of March 31, 2023 the Company held $11.0 million in cash, not including $15.4 million of restricted cash associated with customer deposits, and an additional $8.5 million held in investments in financial assets.
  • The Company repurchased 462 thousand common shares for $601 thousand pursuant to its normal course issuer bid.

Q1 2023 Operational Highlights

  • Surpassed 10,000 agents at the end of the first quarter, a 120% year-over-year increase. During the quarter nearly 1,800 agents joined our platform on a net basis, the largest single-quarter addition in company history.
  • The number of transactions executed in Q1 2023 grew 75% year-over-year to 10,963, and the total value of completed real estate transactions grew 66% year-over-year to $4.0 billion.
  • Commission revenue per productive agent was $26,000, a slight decrease from $29,400 in Q1 2022. These agents on average closed 2.7 transactions during the quarter, compared to 3.0 in Q1 2022.
  • Operating expenses per transaction, excluding revenue share, declined 5% year-over-year to $1,132.
  • As of March 31, 2023, Real’s headcount efficiency ratio, defined as full-time brokerage employees excluding Real Title and LemonBrew Lending employees, divided by the number of agents on our platform, improved 1 to 114 from 1 to 98 as of Q4 2022 and 1 to 55 as of Q1 2022.
  • Implemented the changes to our U.S. fees and additional benefits announced in January, which went into effect for new agents on February 1 and for existing Real agents on April 1. These changes collectively are expected to generate additional net profit of over $5 million in 2023 with an even more significant full-year effect in 2024.

Subsequent to the end of the quarter, on April 4 we announced Sentry Residential merged its military-focused national brokerage into Real, adding to Real’s existing 500-plus military-focused agents. Real plans to leverage our growing presence to launch a Real Military Division, the first of several planned divisions of practice.

On May 3 Real announced it is leveraging GPT to launch Leo, an artificial intelligence-powered assistant that will be integrated with its proprietary transaction management platform to act as a 24/7 concierge to its agents and brokers throughout the U.S. and Canada. A beta version of the technology will be released by the end of Q2 2023.

On May 4 Real announced its expansion into Manitoba, giving the company a presence in four Canadian provinces and 46 states throughout the United States.

Additionally, today we are announcing the launch of Real Signature, a proprietary electronic signature tool built fully inside reZEN that allows agents to create reusable document templates and manage digital signatures throughout the transaction process. This feature will benefit agents by allowing them to save time by templatizing documents for future transactions and save money by avoiding third-party subscription fees. Further, by developing this tool in-house, we will also own all of the data associated with the transaction experience which we can leverage to better automate the transaction process and create better user experiences over the long term.

The Company will discuss the results on a conference call and live webcast today at 11:00 a.m. ET.

Conference Call Details:

Date:

Thursday, May 11, 2023

Time:

11:00 a.m. ET

 

 

Dial-in Number:

North American Toll Free: 877-545-0523

 

International: 973-528-0016

Access Code:

957192

Webcast:

https://www.webcaster4.com/Webcast/Page/2699/48269

 

 

Replay Number:

North American Toll Free: 877-481-4010

 

International: 919-882-2331

Passcode:

48269

Replay Link:

https://www.webcaster4.com/Webcast/Page/2699/48269

Additional information concerning Real’s audited consolidated financial statements and related management’s discussion and analysis for the three months ended March 31, 2023 can be found on the Company’s profile at www.sedar.com.

Non-IFRS Measures

This news release includes reference to “Adjusted EBITDA”, which is 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 EBITDA has 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 March 31, 2023 and 2022 is presented in the table below labeled Reconciliation of Total Comprehensive Loss Attributable to Owners of the Company to Adjusted EBITDA.

 
 
THE REAL BROKERAGE INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in thousands of U.S. dollars)
(unaudited)
 
Unaudited Audited
March 31, 2023 December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents

$

10,975

 

$

10,846

 

Restricted cash

 

15,436

 

 

7,481

 

Investments in financial assets

 

8,491

 

 

7,892

 

Trade receivables

 

1,399

 

 

1,547

 

Other receivables

 

75

 

 

74

 

Prepaid expenses and deposits

 

753

 

 

529

 

TOTAL CURRENT ASSETS

 

37,129

 

 

28,369

 

NON-CURRENT ASSETS
Intangible assets

 

3,511

 

 

3,708

 

Goodwill

 

10,175

 

 

10,262

 

Property and equipment

 

1,419

 

 

1,350

 

Right-of-use assets

 

14

 

 

73

 

TOTAL NON-CURRENT ASSETS

 

15,119

 

 

15,393

 

TOTAL ASSETS

 

52,248

 

 

43,762

 

 
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable

 

370

 

 

474

 

Accrued liabilities

 

14,947

 

 

11,866

 

Customer deposits

 

15,436

 

 

7,481

 

Other payables

 

713

 

 

1,188

 

Lease liabilities

 

16

 

 

96

 

TOTAL CURRENT LIABILITIES

 

31,482

 

 

21,105

 

NON-CURRENT LIABILITIES
Warrants outstanding

 

200

 

 

242

 

TOTAL NON-CURRENT LIABILITIES

 

200

 

 

242

 

TOTAL LIABILITIES

 

31,682

 

 

21,347

 

 
EQUITY
EQUITY ATTRIBUTABLE TO OWNERS
Share premium

 

60,649

 

 

63,204

 

Stock-based compensation reserves

 

29,305

 

 

25,083

 

Deficit

 

(58,099

)

 

(50,704

)

Other reserves

 

(229

)

 

(469

)

Treasury stock, at cost

 

(11,403

)

 

(14,962

)

EQUITY ATTRIBUTABLE TO OWNERS

 

20,223

 

 

22,152

 

Non-controlling interests

 

343

 

 

263

 

TOTAL EQUITY

 

20,566

 

 

22,415

 

TOTAL LIABILITIES AND EQUITY

$

52,248

 

$

43,762

 

 
 
THE REAL BROKERAGE INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND OTHER COMPREHENSIVE LOSS
(Expressed in thousands of U.S. dollars, except for per share amounts)
(unaudited)
 
 
Period Ended March 31,

2023

2022

Revenues

$

107,845

 

$

61,649

 

Commissions and other agent-related costs

 

97,037

 

 

55,787

 

Gross Profit

 

10,808

 

 

5,862

 

 
General & administrative expenses

 

8,638

 

 

5,374

 

Marketing expenses

 

7,684

 

 

3,716

 

Research and development expenses

 

1,524

 

 

1,039

 

Operating Loss

 

(7,038

)

 

(4,267

)

 
Other income

 

28

 

 

179

 

Finance expenses, net

 

(305

)

 

(164

)

Net Loss

 

(7,315

)

 

(4,252

)

Net Income Attributable to Noncontrolling Interests

 

80

 

 

61

 

Net Loss Attributable to Owners of the Company

 

(7,395

)

 

(4,313

)

Other comprehensive income/(loss):
Cumulative (Gain)/Loss on Investments in Debt Instruments Classified as at FVTOCI Reclassified to Profit or Loss

 

93

 

 

(277

)

Foreign currency translation adjustment

 

147

 

 

204

 

Total Comprehensive Loss Attributable to Owners of the Company

 

(7,155

)

 

(4,386

)

Total Comprehensive Income Attributable to NCI

 

80

 

 

61

 

Total Comprehensive Loss

 

(7,075

)

 

(4,325

)

Loss per share
Basic and diluted loss per share

$

(0.04

)

$

(0.03

)

Weighted-average shares, basic and diluted 178,629

174,746

 
 
THE REAL BROKERAGE INC.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in thousands of U.S. dollars)
(unaudited)
 
For Period Ended
March 31, 2023 March 31, 2022
OPERATING ACTIVITIES
Net Loss

$

(7,315

)

$

(4,252

)

Adjustments for:
Depreciation

 

269

 

 

3

 

Equity-settled share-based payments

 

5,761

 

 

937

 

Finance costs

 

183

 

 

109

 

Loss on short term investments

 

-

 

 

205

 

Changes in operating assets and liabilities:
Trade receivables

 

148

 

 

(97

)

Other receivables

 

(1

)

 

(64

)

Prepaid expenses and deposits

 

(224

)

 

(1,000

)

Accounts payable

 

(104

)

 

48

 

Accrued liabilities

 

3,081

 

 

1,401

 

Customer deposits

 

7,955

 

 

12,871

 

Other payables

 

(475

)

 

464

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

9,278

 

 

10,625

 

 
INVESTING ACTIVITIES
Purchase of property and equipment

 

(140

)

 

(376

)

Acquisition of subsidiaries

 

-

 

 

(7,445

)

Investment in Debt Instruments designated at FVTOCI

 

(506

)

 

-

 

NET CASH USED IN INVESTING ACTIVITIES

 

(646

)

 

(7,821

)

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

 

(601

)

 

(4,512

)

Stock Compensation Payable (RSU)

 

-

 

 

1,570

 

Proceeds from exercise of stock options

 

66

 

 

23

 

Payment of lease liabilities

 

(80

)

 

(23

)

NET CASH USED IN FINANCING ACTIVITIES

 

(615

)

 

(2,942

)

 
Net change in cash, cash equivalents and restricted cash

 

8,017

 

 

(138

)

Cash, cash equivalents and restricted cash, beginning of year

 

18,327

 

 

29,129

 

Fluctuations in foreign currency

 

67

 

 

(3

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH BALANCE, ENDING BALANCE

$

26,411

 

$

28,988

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Share-based compensation as part of Expetitle consideration

 

-

 

 

4,325

 

Increase in non-controlling interest

 

80

 

 

-

 

 
 
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, except for per share amounts)
(unaudited)

For Period Ended

March 31, 2023 March 31, 2022
Total Comprehensive Loss Attributable to Owners of the Company

(7,155

)

(4,386

)

Add/(Deduct):
Finance Expenses, net

305

 

502

 

Net Income Attributable to Noncontrolling Interest

80

 

-

 

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

(93

)

-

 

Depreciation

269

 

3

 

Stock Based Compensation

5,761

 

3,178

 

Listing Expenses

-

 

-

 

Restructing Expense

41

 

-

 

Other Professional Expenses

-

 

126

 

Adjusted EBITDA

(792

)

(577

)

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 at 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 its GPT-powered AI virtual assistant and consumer experience platform; the Company’s ability to attract new agents and retain current agents; the Company’s ability to generate anticipated benefits from the changes to its agent fee structure; 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 impact of cybersecurity incidents and the potential loss of critical and confidential information; 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

The Real Brokerage Inc. is revolutionizing the residential real estate industry by pairing best-in-class technology with the trusted guidance of the agent-led experience. Real delivers a cloud-based platform to improve efficiencies and empower agents to provide a seamless end-to-end experience for home buyers and sellers. The company was founded in 2014 and serves 46 states, D.C., and four Canadian provinces with over 10,000 agents. Additional information can be found on its website at www.onereal.com.

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