Bridgemarq Real Estate Services Q2 2024 Earnings Report

Bridgemarq Real Estate Services EPS Results

• Actual EPS: C$0.17
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Bridgemarq Real Estate Services Revenue Results

• Actual Revenue: $110.09 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Bridgemarq Real Estate Services Announcement Details

• Quarter: Q2 2024
• Date: 8/13/2024
• Time: N/A
• Conference Call Date: Tuesday, August 13, 2024
• Conference Call Time: 10:00AM ET

Bridgemarq Real Estate Services (TSE:BRE) Inc is a Canada-based real estate services company. Its segment includes providing information and services to real estate agents and brokers in Canada through a portfolio of real estate services brands. It supplies realtors with information, tools, and services to assist them in providing and delivery of real estate sales services. The company's brands include Royal LePage and Via Capitale and Johnston and Daniel.

Bridgemarq Real Estate Services Q2 2024 Earnings Call Transcript

Key Takeaways

• Q2 revenue soared to $110.1 million compared to $12.8 million last year, reflecting recent acquisitions and franchise fee increases.
• Net earnings increased to $10.6 million from $1.1 million year-over-year, largely due to a one-time gain on exchangeable unit valuation.
• Operating cash flow rose to $10.5 million versus $3.7 million, driven by higher cash receipts allocated to sales representatives and positive cash generation from acquired businesses.
• The franchise network expanded to 20,570 Realtors, including 2,055 agents from recent Royal LePage and Via Capital acquisitions and 2,751 corporately owned Propio Direct agents.
• Quarterly revaluation of exchangeable units will continue to produce earnings volatility due to required IFRS mark-to-market adjustments.

Presentation

[Operator]

Good morning. My name is Sylvie, and I would like to welcome everyone to the Bridgemarq Real Estate Services Inc. 2024 second quarter results conference call. Note that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. For those of you who dialed in to the conference call, if you would like to ask a question, simply press star, then one on your telephone keypad. And if you would like to withdraw your question, simply press star-star two. And for those of you joining us via webcast, if you would like to ask a question, simply type it in the webcast Q&A box on your screen. We will answer these questions following the dial-in questions after the presentation, time permitting. I would like to introduce Mr.

[Operator]

Spencer Enright, Chief Executive Officer of Bridgemarq Real Estate Services Inc. Please go ahead, sir.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

Well, thank you, operator. Good morning, everyone, and thanks for joining us on the call today. With me today is our Chief Financial Officer, Glen McMillan. I will begin with a brief overview of our company's second quarter results and provide an update on our newly expanded business operations. Glen will then discuss our financial results in more detail, and I'll conclude by providing some remarks on operational highlights, company updates, and market developments. Following our remarks, Glen and I would be happy to take your questions. I want to remind you that some of the remarks expressed during this call may contain forward-looking statements.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

You should not place reliance on these forward-looking statements because they involve known and unknown risks and uncertainties that may cause the actual results and performance of the company to differ materially from the anticipated future results expressed or implied by such forward-looking statements. I encourage everyone to review the cautionary language found in our news release and on all our regulatory filings. These can be found on our website and on SEDAR+. Okay, starting with the market. In the second quarter, Canada's residential resale housing market recorded modest declines compared to the same period last year. On a quarter-over-quarter basis, however, the average selling price rose slightly, and unit sales showed a healthy seasonal increase of approximately 40%. We are very pleased with our performance in the second quarter, the first full quarter since the closing of the transaction.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

Revenue for the second quarter was CAD 110.1 million, compared to CAD 12.8 million last year. Now, this reflects the inclusion of gross commission income and other revenues of the acquired businesses, as well as franchise fee rate increases, which were implemented at the start of 2024. At its meeting yesterday, our board of directors approved a dividend payable on September thirtieth of CAD 0.1125 per share to shareholders of record on August thirtieth. This indicates an annualized dividend of CAD 1.35 per share, which is consistent with 2023. And with that, I'll turn the call over to Glen for a closer look at our second quarter financial performance.

[Glenn McMillan, CFO at Bridgemarq Real Estate Services Inc.]

Thank you, Spencer, and good morning, everyone. Revenue during the first six months of the year was CAD 122 million, a significant increase over the CAD 24.8 million recorded in 2023. The year-over-year improvements in the quarterly and year-to-date numbers include CAD 92 million in gross commission income from the brokerage operations we acquired at the beginning of the quarter. The number of realtors in our franchise network currently sits at 20,570, a net increase of 41 agents since the start of the year. This includes 2,055 agents operating at the Royal LePage and Via Capitale brokerages we recently acquired. Including the Proprio Direct brokerage, which operates throughout Quebec, our corporately owned brokerages are comprised of 2,751 realtors operating in the GTA, the Greater Vancouver Area, and the province of Quebec.

[Glenn McMillan, CFO at Bridgemarq Real Estate Services Inc.]

In the second quarter, the company generated net earnings of CAD 10.6 million, compared to CAD 1.1 million in 2023. The higher earnings are largely driven by a gain of CAD 10.6 million on the valuation of the exchangeable units in the second quarter, compared to a loss of CAD 0.5 million in the same quarter last year. During the quarter, cash provided by operating activities amounted to CAD 10.5 million, compared to CAD 3.7 million in 2023. The increase of CAD 6.8 million is partly due to an increase of approximately CAD 4.8 million in cash receipts that will ultimately be paid to sales representatives.

[Glenn McMillan, CFO at Bridgemarq Real Estate Services Inc.]

The remaining increase in cash flow is due to positive cash flow generated by the acquired businesses, lower overall working capital balances, partly offset by higher interest costs. The Canadian residential real estate market contracted modestly in the second quarter of 2024, closing at CAD 102 billion, a decline of 4% compared to 2023, driven by a 3% decrease in average selling price and a 2% decline in unit sales. Compared to the previous quarter, however, the average selling price posted an increase of 2%, and as Spencer mentioned, total unit sales were up 40%. The Greater Toronto Area real estate market saw a year-over-year increase of 17%....

[Glenn McMillan, CFO at Bridgemarq Real Estate Services Inc.]

closing at CAD 23.5 billion in the second quarter of 2024, driven by a 15% drop in unit sales and a modest 1% decline in average selling prices. However, again, on a quarter-over-quarter basis, total transactional dollar volume was up 32%, driven by a 24% increase in unit sales and a 6% increase in average selling price. The Greater Vancouver real estate market was down 11% year-over-year, closing at CAD 10.6 billion in the second quarter, driven by a 13% decrease in unit sales, partly offset by a 3% increase in average selling price. Again, on a quarter-over-quarter basis, total transactional dollar volume was up by 39%, driven by a 35% increase in unit sales.

[Glenn McMillan, CFO at Bridgemarq Real Estate Services Inc.]

The Greater Montreal Area market recorded an increase of 15% to CAD 7.9 billion in the second quarter compared to the previous year. This reflects a 10% increase in unit sales and a 4% increase in average selling price. Spencer will now provide additional insights into the market and an update on our operations.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

Great. Thanks, Glen. We're not surprised that buyer activity and home prices in Canada's real estate market were modestly below last year's second quarter levels. As you may recall, last year we experienced a very strong spring market rise in resale activity, partially driven by the signals received by the Bank of Canada's pausing of policy rate increases in the early part of 2023. More recently, in June and July of this year, we have seen the policy rate drop by a total of 50 basis points. However, given the timing of the changes, they didn't materially boost market activity in the second quarter.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

Regardless, we're optimistic that these changes have begun to signal to home buyers that conditions will be more attractive for them as we progress through the back half of this year, and which aligns with the Canadian Real Estate Association's latest annual forecast for home sale activity in 2024, which calls for a full year increase of approximately 6% versus the prior year. For us at Bridgemarq, this quarter has been an exciting time. As I've said now on numerous occasions, we recently completed a landmark transaction, which included the acquisition of certain real estate brokerages and the internalization of the management company. Our operations are now quite significantly broader than before, with a more diverse and dynamic revenue base.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

The addition of brokerage operations complements our well-established and successful franchise business and strengthens our ability to capture more growth across a broader spectrum of the real estate industry, both through organic growth and potential acquisition opportunities. This exciting development also provides Bridgemarq with the opportunity to capture a larger percentage of market share of the Canadian real estate market. We now offer several diverse, innovative, and technology-forward solutions for real estate professionals and Canadians, setting ourselves apart as a progressive industry innovator focused on meeting Canadians' home-related needs in this ever-evolving market. We can immediately see the benefit in our quarterly results, with a much larger revenue base and several more operational growth paths through an expanded portfolio of brands and business models.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

Our brand portfolio, led by our 110-year-strong flagship national brand, Royal LePage, continues to attract and retain top real estate agents across the country, and we remain committed to investing in leading tech, industry-leading technology platforms, including lead-generating and nurturing tools and best-in-class training and coaching programs. For example, during the second quarter, we made progress in driving adoption among our Royal LePage network of realtors of our AI-driven digital platform, rlpSPHERE, and offered a comprehensive AI training series, which included advice and best practices on the use of tools such as ChatGPT as well as other AI tools.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

Under our Proprio Direct brand, we continue to drive improved lead-generating traffic to our website, propriodirect.com, and unveiled a new insurance referral partnership, which offers a suite of comprehensive financial protection products, giving our team of real estate professionals within Proprio a competitive edge in offering better value to their clients. These and other exciting developments will allow us to deliver value for shareholders and enable growth opportunities for our industry-leading brands, which ultimately translate into more value for shareholders. This quarter may be the first one in which includes the results of our newly expanded business, but it's only the beginning in our journey to build meaningfully on our past success. Together with Glen and the entire Bridgemarq team, I look forward to continuing to share news of our growth with you moving forward.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

With that, I'll turn the call back to our operator and open the call to questions.

[Operator]

Thank you, sir. As stated, for those who dialed into the conference call, you will need to press star one on your telephone keypad. For those joining via the webcast, please type your question in the Q&A box on your screen. At this time, sir, we have no questions from the phone lines.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

All right. Thanks, operator. I'd like to thank everyone once again for joining us on today's call. Oh, sorry, we did, we did just get a question via the online. Okay. So Glen, do you want to read the question?

[Glenn McMillan, CFO at Bridgemarq Real Estate Services Inc.]

Yeah, I'll read the question out loud. Will this be the last we hear of changes in the value of the exchangeable units affecting earnings? Thank you for your question. The answer to the question is no, this will not be the last time you hear of that. As part of the acquisition, we issued additional exchangeable units as compensation or as proceeds to the company that we bought those businesses from. And so the number of exchangeable units that's outstanding has actually increased. As people may recall, those exchangeable units are exchangeable into restricted voting shares of the company, and they, under IFRS, are required to be revalued on a quarterly basis, and the value will be driven off of the underlying value of the restricted voting shares.

[Glenn McMillan, CFO at Bridgemarq Real Estate Services Inc.]

So there will be gains and losses recorded on those securities going forward.

[Spencer Enright, CEO at Bridgemarq Real Estate Services Inc.]

All right. Thanks, Glen. Yeah, I don't see any other questions through the website. So I'd like to thank everyone again for joining us on today's call. Look forward to speaking with you again after we release our third quarter results in November. Thank you. Thank you, operator.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines.

Participants

Executives

• Glenn McMillan, CFO
• Spencer Enright, CEO