The Real Brokerage Inc. Announces Third Quarter 2023 Financial Results

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

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

Q3 2023 Financial Highlights

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

Q3 2023 Operational Highlights

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

Business Highlights and Recent Updates

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

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

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

• Giving Agents Financial Freedom Takes Center Stage at the Real RISE 2023 Conference
• The Real Brokerage Announces New Brand Positioning; Game-Changing Marketing Tools For Its Agents
• The Real Brokerage Annual Conference to Focus on Innovation, Delivering an End-to-End Consumer Solution

Conference Call

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

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

Non-IFRS Measures

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

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

Forward-Looking Information

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

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

About Real

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

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