Q1 2024 Re/Max Holdings Inc Earnings Call

Participants

Andy Schulz; IR; RE/MAX Holdings, Inc.

Erik Carlson; Director, CEO; RE/MAX Holdings, Inc.

Karri Callahan; CFO; RE/MAX Holdings, Inc.

Amy Lessinger; President; RE/MAX Holdings, Inc.

Soham Bhonsle; Analyst; BTIG

Ryan McKeveny; Analyst; Zelman & Associates

Ronald Kamdem; Analyst; Morgan Stanley

Tommy McJoynt; Analyst; Keefe, Bruyette, & Woods

John Campbell; Analyst; Stephens Inc.

Presentation

Operator

Good morning, and welcome to the RE/MAX Holdings first quarter 2024 earnings conference call and Webcast. My name is Brianna, 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, Senior Vice President of Investor Relations. Mr. Schulz?

Andy Schulz

Thank you, operator. Good morning, everyone, and welcome to RE/MAX Holdings first quarter 2024 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 the replay of the call today. Our prepared remarks and answers to your questions on 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 settlement, 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 first quarter 2024 financial results press release and other SEC filings, and also, we will refer to certain non-GAAP measures on 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; our brand leaders, Ward Morrison, Amy Lessinger any lessons your are also here and will join us for Q&A.
With that, I'd like to turn the call over to RE/MAX Holdings CEO. Erik Carlson. Eric?

Erik Carlson

Thank you, Andy, and thanks to everyone for joining us today. In the short time has passed since our last call. Several events of note have taken place on the housing front, the industry appears to be in the early stages of recovery. Industry reports and feedback from our network helps. Demand remains robust, and the supply of for-sale homes continues to rise, providing some relief to frustrated buyers in this most unusual housing market. However, interest rates have moved up using the number of transactions and adding uncertainty to the Fed will cut interest rates later in the year as some had expected and hoped would be the case.
While there are a lot of factors currently affecting the real estate market, one thing remains constant RE/MAX agents, leverage their skills, experience and competitive advantages to serve as many customers as they can. Key difference between our business model and that of many of our peers, our model incentivizes agents to help buyers and sellers reach their housing goals while some other models and center agents to recruit other agents, many of whom are productive.
In contrast, our agents' commitment and drive sustain the RE/MAX culture of productivity. And this was recently confirmed by a widely respected industry survey, 2024 real trends verified best brokerages rankings revealed that RE/MAX agents at large U.S. brokerages on average outsold the competition 2-to-1 in residential transaction sides last year.
In a survey of more than 1,300 participating large brokerages, RE/MAX agents averaged 11.8 transaction sites more than double the average of other agents plus when the brokerages are ranked by transaction sides for agents, 88 of the top 100 are RE/MAX firms. This marks the 16th straight year in which the real trend data confirms that Remec leads in average per agent productivity known for being skilled experienced and very good at what they do.
Our agents have made RE/MAX the world's most productive real estate network as measured by our residential transaction sites. In addition, RE/MAX agents in the US and Canada have been voted as the most trusted for several years straight and trust as a top consideration among consumers when they're selecting their real estate agents.
Our industry-leading trust and productivity are key competitive advantages. Our iconic brand is the number one name in real estate. We have an unequaled global presence, a distinct value proposition of services, and most importantly, the best agents and brokers in the business. As I said previously, RE/MAX agents are simply the gold standard. Our competitive advantages should serve us well considering recent industry developments taking place amid a lot of noise and misinformation.
To recap, on March 15, the National Association of Realtors announced a proposed nationwide settlement agreement that would release our association owned MLSs and most of its membership from liability and multiple seller initiated commission losses. The proposed settlement includes a payment by our as well as several changes in business practices in our industry.
You propose business changes that are most relevant to RE/MAX affiliates are expected to go into effect mid July 2024. First, while offers of compensation, the buyers' agents are still permitted by the agreement, they cannot take place in the MLS and second written agreements will be required for MLS participants. Notably about 20 states already require written by our agency agreements.
Let me stress. We continue to remain steadfast in our support of buyer agency and buyer broker compensation, emphasizing the significant advantages of having buyers and sellers represented by trustworthy seasoned real estate professionals. These skilled agents ensure that consumers receive guidance and advocacy while navigating the complexities of the home buying and selling process.
This representation generally drives better outcomes and experiences for the consumers involved from an artist growth we quickly moved to communicate with RE/MAX affiliates and help them understand the changes of RE/MAX brand president, any lessons or immediately held informational sessions for our brokers and our agents with 51 years of history.
We've had a front row seat, many sudden changes in our industry and the wisdom that comes with experience continues to serve us well, education and outreach to other core strengths of RE/MAX were our top priorities. Following our announcements, our preparation, we have developed and have now deployed materials and resources to help our affiliates navigate the post settlement landscape from education and consultation, marketing and consumer messaging. Re/max will continue to support affiliates in every possible way.
We advised our network that there were four primary things that they should be focused on. First, RE/MAX affiliates should continue to conduct their business as the security of being released and protected from liability related to these industry lawsuits pending final court approval of the Remec settlement slated for hearing next week on May ninth. Second, they should start preparing for the two proposed new rule changes expected to take effect in July.
This includes updating their marketing materials by our presentation and buyer representation agreements. Third, they should continue to speak to their clients in a clear, transparent way about the value they provide and how they're compensated for. They should stay updated on ongoing industry developments. The terms of the proposed settlement would change some aspects of the business by RE/MAX agents are well positioned to navigate these changes, and we will help guide them as they evolve.
Given the extensive experience within our network, our affiliates are able to lean on and learn from the RE/MAX community. That's the power of a network filled with full-time productive professionals in our settlement announcement, many have asked us how the proposed changes might impact the industry. Only time will really tell all commissions are negotiable as they always have been ultimately the responsibility to set fees to clearly communicate value lies within the individual brokerages teams and agents.
That has always been the case within our network. We're moving intentionally and methodically. Given these unusual times, we're in a period of transition and some uncertainty. I will have a better read on how these developments will impact the industry and RE/MAX as the year unfolds. In the meantime, we'll continue to operate our business as efficiently and effectively as possible, maintaining a growth mindset and stay laser focused on delivering the absolute best customer experience.
We're leaving no stone unturned, and we're challenging each process and function to improve not only the velocity but our outcomes. These efforts should yield measurable results in the aggregate, and we believe we have additional revenue opportunities and the potential for margin improvement driven by control over operating costs fell.
As we said last quarter, this will take time, but we are moving with the requisite sense of urgency. We've got a great foundation to build upon our team, our affiliates. They're passionate, passionate about our brands about each other and about innovating growing and simply getting better each and every day. We recently held our annual agent convention called R4 in Las Vegas.
With thousands of attendees from 60 countries. The event was both inspiring and reassuring personally, my first, our core I spend most of my time listening trying to learn as much as possible from our network and other industry leaders who has a fantastic experience, our agents and brokers. We're not only confident and enthusiastic, but excited about the opportunities ahead and can't wait until next year's events.
Regarding our growth initiatives. We continue to iterate digging into details getting insight and uncovering additional opportunities. To date, we've seen positive results, so not large enough yet to overcome the overall contraction currently being experienced throughout the real estate industry. We launched our expanded teams initiative April 1, and we're seeing the first brokerages unlock the benefits by adding the required six new team members.
Notwithstanding the macro pressure, our conversions, mergers and acquisitions or C. M&A program continues to add brokerages and agents to the network. It also continues to evolve as we work through our pipeline of compelling prospects, identify new targets and developing new approaches. We are laying the groundwork, which should serve us well when the market resumes its growth cycle.
Now on the mortgage side, despite one of the most challenging end market conditions the mortgage industry has faced in recent history. We continue to grow Tier 2 for focused on what we can control our recent franchise and loan originator convention, a good participation despite the market condition attendees. We're excited excited about the future prospects of the mortgage industry. Motto is going through its first renewal process as the original cohort of franchises are completing their seven year franchise terms, and we're off to an encouraging start with that.
Thank you, and I'll turn it over to Karri.

Karri Callahan

Thank you, Eric. Good morning, everyone. Effective cost management amidst a challenging housing market summed up our financial performance for the first quarter. Some of the notable quarterly financial highlights included total revenue of $78.3 million, adjusted EBITDA of $19 million with an adjusted EBITDA margin of 24.3% in adjusted diluted EPS of $0.2.
Looking closer at revenue. Excluding the Marketing Funds, revenue was $58.1 million, a decrease of 9.3% compared to the same period last year, driven by negative organic growth. Organic growth decreased principally due to a reduction in events related revenue and lower U.S. agent count, partially offset by higher mortgage segment revenue.
With respect to events, recall that last year, we celebrated our 50th anniversary at our annual agent convention, which led to exceptional attendance and revenue. This year's conference was smaller. In comparison, Q4 selling, operating and administrative expenses decreased 6.9% to $45.7 million, primarily due to lower expenses from our annual convention and reduced legal expenses, partially offset by higher equity-based compensation from a capital allocation perspective, we continue to be disciplined and patient, particularly in light of the fact that rate cuts appear less likely to occur in the second half of this year.
And our pending settlement that is not yet finalized. So housing appears to be rebounding. It is a slow process for all these reasons. We continue to be responsible stewards of capital and think it's best to focus on replenishing our cash in the near term. Simultaneously, we believe we still have the financial flexibility to pursue those growth opportunities where we see the greatest potential our second quarter and full year 2024 outlook assumes no further currency movements, acquisitions or divestitures.
For the second quarter of 2024, we expect agent count to change negative 1.5% to 0% over second quarter 2023 revenue in a range of $75 million to $80 million, including revenue from the marketing funds in a range of $19 million to $21 million and adjusted EBITDA in a range of $24 million to $27 million. And for the full year 2024, we continue to expect agent count to change negative 0.5% to positive 1.5% over full year 2023 revenue in a range of $300 million to $320 million, including revenue from the marketing funds in a range of $78 million to $82 million and adjusted EBITDA in a range of $90 million to $100 million.
With that, Al, let's open it up for questions.

Question and Answer Session

Operator

(Operator Instructions) Soham Bhonsle, BTIG.

Soham Bhonsle

Good morning, Harald and Well, Tom, maybe first one for Eric. Doesn't matter on, do you feel like the VMDR settlements are enough to sort of satisfy the DOJ's concerns as you speak to folks around the industry? Or do you think they may look to include some other additional stipulations before we get final approval.
Yes.

Erik Carlson

So on this is this is Eric, and then I'll pass it over to Amy for some additional color. I think it's a you know, we don't know necessarily what the DOJ is making and so it would be tough for us to speculate. I think that the settlement, although there's changes that supports what we've been developed, promoters of this, which is transparency around the transaction and representation on both the buy and the sell side. And, you know, coming back from our four recently and over the past month and maybe might have some more color here.
You know, definitely agents and brokers are there chatting about obviously the changes, the potential impact what RE/MAX and the industry is doing to help support them and they're hearing from customers. There are more questions about what does this mean from a compensation perspective? What does it mean from the values you offer. And, you know, from the RE/MAX perspective, we're comfortable with that because obviously we've got full-time agents and they're highly productive.
They're in the business they're good at negotiating. They provide great value. And so although we have to make changes our system business practices, the good thing, as you know, it's already happening in about 20 states. So we'll learn from that. Not to say that those are perfect representations, but they're helpful to know to to guide kind of what the future path looks like. So as it relates to the DOJ hard to tell. We'll leave that to them. I'm sure they'll make great decisions. But from us for us, we're trying to right now control what we can control.
So Amy, maybe you have a bit more color.

Amy Lessinger

Obviously, you've been in the field to make sure in talking to our brokers out there, they are highly focused on ensuring they're educating their agents. And we've provided a lot of support there. And I'll echo Eric's sentiments and the fact that your agents are already experienced, but they're probably getting a few more questions from buyers and sellers than they have in the past.
And I think that we welcome the conversation and our agents welcome the conversation that we've always believed in transparency in the transaction. And I think that it is absolutely right and perfect that we're already prepared. We had already prepared education leading up to this. And and so our brokers in the field. I think that's the point of differentiation as well.
They are at the local level supporting their agents on a day-to-day basis, and we have provided them with education through our RE/MAX university platform where they can hold classes and bring everyone up to speed on what they need to do to facilitate a conversation about what it means to be represented in a transaction and how competition works?

Soham Bhonsle

And then I guess just curious, are you seeing any pushback from buyers on the commission rate early on? Or are we still sort of status quo?

Amy Lessinger

It's interesting so far, we are not widely hearing that the reported 90% of buyers last year engaged in being represented. And so, you know, in the U.S. in particular buyers are used to being represented and they understand the value of being represented. Their interests are protected. They value local market market expertise, the ability for the agent to negotiate on their behalf, really streamlines the process.
And so really it questions that we're getting is what does it mean to be represented? And so, you know, we've always been able to negotiate on their behalf. And commissions have always been negotiable, but I think it's really diving a little deeper into what does true rep buyer representation mean.

Soham Bhonsle

Okay. And then maybe one long-term one as we sort of think about the next three to five years. I think the consensus seems to be that there's going to be fewer agents in the industry but those that maybe remain are going to be more professional in nature, which is, I guess, positive for the RE/MAX model.
But it also means that your competition for some of those best agents is going to probably intensify as well. So can you maybe just talk about what changes or potential refreshes you may have to do for the RE/MAX model as you're trying to adapt to and there's enhanced competition for the best agents in the industry?

Erik Carlson

Well, look, as you know, so I appreciate the question. I think that we compete for the best agents in the industry today. So I think it's something that it has been in our 51 year history, and we're good at it, not to say that we're not going to have to evolve, which is what I talked about in my opening comments. I do think it's a little bit early to understand some of the changes that will occur over the over the summer and the impact.
However, obviously, we focused on what we think we can control, and that is look at the power of our network with 140,000 agents worldwide means something the number of brokers that we have in local communities means something they have their finger on the pulse. They're able to. It does serve the needs. The wants help with questions. Communication education, not only the materials that we provide in our U. RE/MAX, University
But at that local level, and that's, you know, the importance of broker, the relationship living and working in the community with agents and helping them understand the value that not only that brokerage provides, but obviously the RE/MAX brands, tools and community provide. And so I think we're well positioned to compete. But I do agree that we will have to continue to compete and competition will get more fierce and will part-time agents leave?
I think that is I think I agree. I totally agree with that consensus to what level I don't know. But I do think that we're well positioned because we are full-time and productive, and we've got the support of a great community. We're in a better position than that, not to say that we don't have work to do and that we're going to have to keep our eye on the competition and work hard every day to help brokers and agents be successful in their market.

Amy Lessinger

Well, I think I'd add to that too. And so on that everything we do here for decades has truly been designed to help an agent be more professional, more productive and ultimately lead them to a path and an opportunity to sell more houses. And so we're not playing catch-up there. But I also echo Eric's sentiments about the fact that we can continue to evolve and make sure that we stay in the most competitive position possible.

Soham Bhonsle

Thanks for that.

Operator

Ryan McKeveny, Zelman & Associates

Ryan McKeveny

Oh, I'm sorry, hopefully you can hear me now. I was on mute. Sorry about that. Thank you, guys, for taking the question on the capital allocation side of things longer term, obviously near term, kind of a rebuild of cash mentality on maybe for carry.
Is there a level at which you want to see the cash balance get to before thinking rethinking about things like like share repurchases or dividends. Just any framework on if there's if there's any certain level you're targeting getting back to before reintroducing that or and just general thoughts on that.

Amy Lessinger

Thank you, Sherri. Good morning, Ryan. Great question. As you said, you know right now there is just a fair amount of uncertainty from a macro perspective and we're obviously laser-focused on on getting the settlement settlement be behind us in terms of the things that we're focused on, we're really focused on leveraging over the long term, the strong economic and cash flow characteristics of the business.
And we've got our eyes focused on a couple of different leverage levels that are stipulated in our in our credit agreement. The good news is the franchise model, the strong economics, the earnings to free cash flow characteristics are ex the settlement. We're still looking it 45% to 50% conversion of our cash earnings to free cash flow for 2024. And so really focused on on and getting the leverage level lower on and, you know, back in accordance with the levels that are stipulated in our credit facility.
And then we'll be I'm definitely focused on those initiatives to help drive the Company's growth in the future because we do continue to believe that there are a lot of opportunities for us across the network fixed carry And one more for you on kind of a modeling one on the broker fee revenue and I think year over year down down just slightly and kind of best on year over year performance in quite a bit. It was ahead of our estimate.

Ryan McKeveny

I guess I'm just curious is that just macro kind of EHS related trends during the quarter, especially in February, but the pickup we all saw or have there been any kind of structural adjustments at all within the way broker fee revenues are being structured? Thank you.

Amy Lessinger

Yes, I think it's a great question, Ryan. I think it really is macro related. But I do think some of that comes back to just the overall strength of the network, right, with the most productive agents, even in a challenging macro environment, we stand to see and to perform their well and I think from both the top line perspective as well as from a margin perspective this quarter, we're just really happy with the results. And I think it really highlights some of the differentiation in the financial model.

Ryan McKeveny

That's great. Thank you very much.

Operator

Ronald Kamdem, Morgan Stanley.

Ronald Kamdem

Great. Hey, just a couple of quick ones from me. So on the U.S. agent count, VNOC continue to decline. I was just curious if you guys when you guys sort of slice and dice the data if there is any sort of, you know, high-level semantics of the agents that are leaving. So is it all part-time or is it just the most unprofitable? And the reason I ask is because is there a sense of how much more of that is there to go before you could start seeing about high rental and new foundation lead?

Karri Callahan

The industry has contracted, which we've seen that historically in the past. And so we are not immune to that. But I think that, you know what we expect moving forward is that professionalism and the ability to navigate, given the industry changes is going to become even more important.
And so we feel like we're sitting in a great position to capture agents who truly need support during this time and who truly need to elevate their skill set because we're ready with everything that they need to succeed. So so we would expect things at our ability to compete to be very, very high here and the promises go ahead of your carriage.

Amy Lessinger

Yes, not only do you have the math just a little bit from a numbers perspective, and especially especially as we look at kind of experience and tenure from a ten-year perspective, the cohort of agents that we're seeing across our network continues to be pretty consistent with what we've seen historically. And from an experience perspective, I think the latest statistics I saw from an IRR perspective, you know.
Close to 20% of agents across the industry have zero to two years of experience, whereas on the RE/MAX side, you know, it's closer to 10%. And so I think we continue to differentiate ourselves there both from an experience perspective and then our agents being more tenured than the industry on. And that trend has has has continued and at least and even strengthened a little bit over recent quarters and Ron, this is Eric.

Erik Carlson

I mean, you know your question's a good one and obviously, there is insight and there's actions that we can take. So I mean, we're not necessarily satisfied with the agent decline either from a net or disconnect perspective and so on. I think that I wouldn't be it would be obvious if you think about it kind of what some of the reasons our employees leave managers versus companies usually and agents duly brokerages versus kind of the brand. And so that's one of the items there.
And I do think that the industry based on the on the volume last year on home sales and unit volume this year is it's harder to be an agent. And so we are probably a little bit better protected. And we feel mitigated because of the full-time nature of our agents. But that's not to say that we don't have work to increase agent satisfaction, broker satisfaction and provide additional tools, support resources.
We'll tell agents be more successful in a market, whether it's a tough market or easy market. So and I think carrier's perspective is a good one, but just know that we continue to turn over every rock here to understand what we can do to better support agents and brokers. And I certainly hope and I think that we'll be able to bend the trend.

Ronald Kamdem

Great. And then just my second one is just on the sort of the implication of the NAR ruling. It sounds like you guys have been sort of front-footed on education and, you know, I'm staying in front of sort of agents and brokers and so forth. I guess my question is when you think about sort of the 20 states that have already sort and you don't have those those policies in place versus the ones that have. Is there anything sort of structurally are processes wise that that needs to change on the broker and agent level as you sort of move forward?

Erik Carlson

So real quick, Ron. I mean, I'll pass it over to Amy for some commentary to she's obviously, yes, she's closer to being an agent, a team leader, and they have run into brokerage than than I am as you've probably forgotten more than Oliver. No, but I think that obviously we need to still see some of the rules, right? So some of the specifics aren't necessarily outlined to the extent where you can make some changes and you're starting to see some folks come out with whether it's different buyer agreements, et cetera, and so on.
First and foremost, what we wanted to do is obviously let our community know that we're there to support them like we always have been throughout our history to help them through a tough times or with updates that happen quickly. And so education is kind of first and foremost and kind of getting back to the basics of the value, provide you negotiation skills, how you talk about compensation for that value. And then we'll be we'll be in a good situation in order to make changes to agreements, processes, things of that type of nature.

Amy Lessinger

And I'll turn it over to Amy because she's obviously had her feet on the street here more recently is here and kind of what's happening at the brokerage level so far and just a little bit of history, fire agency came into play in the mid-1990s, there was a big shift because buyers historically they were not represented and they did have a big study leading up to it where over almost -- three quarters of buyers out there thought that when an agent showed them a home, they were being represented.
So and so they made a big shift and a big change so even though these other states have not had mandatory buyer agency agreements, those agreements exist and have existed for a very long time and have been definitely widely used. It's just that they weren't mandatory. So this change, it's not so colossal among agents out there, they are familiar with what it means to be represented or to be a buyer's agent.
And so now though it becomes mandatory age and some of the fields, of course, are going to change that elaborate regarding compensation and specifying and amounts, et cetera. So we will anticipate that those changes in the forms will come at the local level and they will be disseminated. And that's one of our strengths again, is that our brokers boots on the ground they will be able to navigate that speed and efficiency.

Ronald Kamdem

Thanks, Tom.

Operator

Tommy McJoynt, KBW.

Tommy McJoynt

Hey, guys, good morning. Thanks for taking our questions come along a similar line of questioning, Tom, with all the data that you see on your agents and perhaps even anecdotally based your face time with your agent at our annual convention. Is there any evidence of RE/MAX agents or frankly their local competitors experimenting with compensation arrangements that are different than the typical call it two point percent rate? I understand it dependent on local market, perhaps something like $6 compensation amounts are slimmed down offerings. Anything of that sort that you're hearing or seeing in about it?

Amy Lessinger

Well, first of all and you. Hi, Tommy. First of all, I think you know, it's important to say that unit rates have never been set. They've always been negotiable and varying models have existed for a very long time, whether it be flat, fee-based percentage based, et cetera. So I'm so no, at this moment, we're not seeing a large, you know, an uptick and insurgents of variation there. I just haven't I haven't really heard the network talking too much about that yet.

Erik Carlson

I mean, I guess what I'd say is like from our four there isn't like a a an old model that's now a new model that has all of a sudden kind of a quick fix. I think you know, from our perspective and our brokers and agents, especially at our fault for were just talking about the idea that they've always spoken about the value that they provide either on the seller or the buyer side and this is going to be different, obviously, with maybe agreement before they go to showing, et cetera, et cetera.
However, the idea that their full-time professionals helps them because they've got tenure and they've got productivity. So like they have more swings at the bat. So they're actually probably a little bit more prepared than others from that perspective. And that's not I mean, we're obviously proud of the community at RE/MAX, but I do think full-time professionals and folks that are more productive, you know, in turbulent times, it helps them to get through it the peaks and valleys.

Tommy McJoynt

Thanks. And I can't I'm switching gears over to the international agent side that this may get asked every every couple of quarters. I just wanted to have the latest update. If I look at the sort of just take Planet, the global fee revenues and kind of divide it by the number of non-US.
And Canada agents, it looks like that number has been running around kind of $200. And then largely, I think sort of I think about the monetization opportunity. Would you see kind of the prospects for that to be increasing decreasing? And kind of what initiatives do you have to add to potentially move that number?

Erik Carlson

I mean, I'll start there. It's a it's definitely something that's on the roadmap. I mean, you're right, the fees have been running around 200. We have a great network. And, you know, just about I think I heard 10 countries a lot of agents out there. There are definitely monetization opportunities. We're not going to talk about that strategy here on the call. I know you'd like to, however, I don't I don't see downside there always be nothing but upside.

Tommy McJoynt

Got it. Thank you.

Operator

John Campbell, Stephens.

John Campbell

Hey, guys, good morning on that on the on the exiting April agent count you guys provided in the press release if you were just keep that static or just kind of hold the line for rest of the year it looks like I'm just getting down, I think totally just down maybe 120 bps year over year exiting this year at the low end of the total agent guidance you guys provided was down 50 bps.
So obviously you're going to need some sequential growth from here. I want to check on your level of confidence with the guidance and then maybe secondly, just how impactful seasonality typically is do you feel like the past cadence of kind of seasonal growth that will hold this year?

Amy Lessinger

Yes, good morning, John. I think it's a great question. I think a couple of things to note with respect to kind of the first quarter and then even through April from that, from that guide perspective on international agent count has has been a little a little lumpy on. We've had the puts and takes obviously, Eric just mentioned the 110 countries and territories and but we still on a year-over-year basis have grown international agent count by 3,500 agents and have had some pockets of strength, especially in on in Central and South America.
And so some of the some of the reductions that we've seen there, we expect to more than on kind of rebuild ourselves and get back to kind of that. And I'm close to mid-single-digit organic year-over-year growth on the international basis. And that's the biggest I kind of see the deviation as we look at the US and Canada on, you know, hoping to get some some trends, but obviously the macro conditions are a little bit tougher.

John Campbell

Okay. So it sounds like you're expecting continuation of U.S. Canadian headcount reduction and then a little bit better international? That's fair.

Amy Lessinger

No. So I just want to clarify there from an international perspective, kind of getting back on a year-over-year basis to that, to that kind of mid-single-digit level of growth. And then when we look at the US and Canada, obviously, what we've seen right now in terms of kind of the year over year performance, I'm kind of more in Canada kind of on a sequential basis.
Obviously, we've got tremendous market share in Canada on until kind of looking at looking at that from a from a Canadian perspective. And then in terms of in terms of the year over year perspective in the U.S. and obviously the macro conditions are a little bit tighter on, but I'm expecting a little bit of sequential improvement in terms of what we've seen in the first quarter.

John Campbell

Okay. That's good color. I appreciate that. And then on motto, I mean, if I go back and just kind of tally the franchise signings over the last couple of years, I'm showing you guys maybe have I don't know what two thirds or so that that are live now I know there's probably an element of attrition in play there. So maybe if you could talk to how many how many franchises you have going through implementation or are getting set up now? And then relative to that pipeline, once you get them live and paying full fees, what that level of revenue might represent?

Erik Carlson

Yes. I mean, I'm in the IIb open status right now, we have close to 20 that are to be opened right now. We've already opened up eight this year. So we're on a great roll when it comes to opening offices, we obviously need to sell a few more. So that continues to be a spot that we are working on there, definitely some green shoots when it comes to sales and it's been a tough market to sell into, but we are still growing last year. We still have sold close to 30 last year.
We believe we can go higher than that this year. That's still the plan. So we still think there's opportunity. Obviously, it does take anywhere from 60 to 180 days to get somebody open and then after open, they start paying us at the month seven. So it does take a little bit of time, but after that equates to approximately $5,000 a month between the ad fund and the royalty fee.
And so the opportunity for moderate is still be or an organic growth engine is there. And we continue to sell really high-quality sales there fewer. But like yesterday, just talking independent, that has 80 agents and they're ready and willing and excited to get into mortgage. And they actually were already sort of working with the company, but they wanted to own their own. So we're still seeing people in the real estate sector who are looking for opportunities to get into ancillary and Mortgage continues to be the best one forward.

John Campbell

Okay. That makes sense. And more maybe a quick follow-up there. So about [$60,000] a year per franchise when they're live and paying full fees, that's the right number to go with that growth.

Erik Carlson

Yes.

John Campbell

Okay, thank you.

Operator

Seeing no further questions at this time, this will conclude our question and answer session. I will now turn the call back to Andy Schulz for any closing remarks.

Andy Schulz

But thank you, operator, and thanks to everyone for joining our call today. Have a great weekend.

Operator

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