Good day, ladies and gentlemen, and welcome to the Real Brokerage fourth quarter earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James Carbonara. Sir, the floor is yours.
Thank you. Once again, welcome to Real's fourth quarter 2021 earnings call. With me on the call are Tamir Poleg, Chief Executive Officer, and Michelle Ressler, Chief Financial Officer. This morning, Real filed its financial results and management discussion and analysis for its fourth quarter ended December 31, 2021 on SEDAR. These documents, along with the accompanying news release, can be found on SEDAR. I'd now like to read you the company's abbreviated safe harbor statement.
I'd like to remind you that statements made in this conference call concerning future revenues, results from operations, financial positions, markets, economic conditions, product releases, partnerships, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements which may involve known risks, known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied by such statements. Non-GAAP and non-IFRS results will also be discussed on the call. The company believes the presentation of non-GAAP and non-IFRS information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. Additionally, all references in this call reflect currency in U.S. dollars. Now I'd like to turn the call over to Tamir Poleg, Chief Executive Officer of Real. Tamir, please proceed.
Thanks, James, and thanks everyone for joining today. I would like to start by thanking the hundreds of agents and large teams who joined Real in the past few months and to our community of agents who have contributed to the growth we are experiencing. I will now continue by highlighting some top-level financial results. Then I will provide some operational updates before turning it over to our Chief Financial Officer, Michelle Ressler, to dive deeper into our financials. Let's start with the fourth quarter financial results. Q4 revenue was $60.5 million, an increase of 612% year-over-year. Driving that growth was a 161% increase in real estate agents joining Real, as well as a 173% increase in the revenue per agent to $13.11 thousand. Now, turning to operating highlights.
In terms of geographic expansion, during the fourth quarter, we announced Real's expansion into Iowa, Michigan, Idaho, Kentucky, and Wyoming. Sorry. In Canada, we launched in Ontario. After the quarter ended, we announced expansion into New Mexico and Arkansas, bringing our tally of states to 42 states, the District of Columbia and Canada. We look forward to growing our business in Canada and in each of the operating states. Our focus in 2022 will remain on North America, and we'll grow deeper and wider in the states we're currently serving. Moving to agent referrals, this continues to be an important part of our growth. We believe we attract agents by providing the best tools, incentives, culture, and working environment.
Just as an example, this is what attracted Red Rock Real Estate Group and 275+ agents into Real in October. They saw an opportunity unavailable at any of the brokerages they had searched. Red Rock was attracted to our tech platform and a model that enables agents to earn stock in Real. We are proud to say that Red Rock is now a part of the Real team and look forward to having them play an important role in our operations. Moving to retention. Equity incentives not only attract groups like Red Rock, but also helps us retain agents. The majority of agents continue to opt into our equity incentive plan. It has allowed us to attract top-tier talent into our management team.
As many recall, during the quarter, we announced that Katharine Mobley will be joining our management team as the Chief Marketing Officer. Kath led global marketing at First Advantage. Prior to her role at First Advantage, she served as the Chief Marketing Officer at several technology firms and managed a range of global brands with accounts at several Fortune 500 companies. Also in Q4, we announced Rajnish Naik joined our management team as Chief Operating Officer. Rajnish joins Real from Workrise, previously known as RigUp. Rajnish also held senior leadership positions at Uber. He brings an entrepreneurial spirit, having founded his first company with his friend while he was studying at the University of North Carolina at Chapel Hill, later sold to Oracle. Now, turning to product focus. I'll start with Instant Payments, which we launched last October.
You may remember our intention with Instant Payments is to change the way agents are paid in the real estate industry. With the first of its kind model, agents will have the option to be paid at the time a transaction is executed rather than at closing. This new program is disrupting the industry by assisting agents, new and experienced, to build and grow their business by getting paid faster. We are constantly expanding the offering of Instant Payments to more and more agents and more scenarios. We invest an increasing amount of resources in the build-out of our consumer-facing experience based on a combination of software solutions for providing convenience, transparency, control, and speed on one hand, and a human agent who would be able to assist to guide the client and understand their needs and emotional journey.
I want to reinforce our belief that by creating a digital experience that keeps agents in the middle of a transaction, we can considerably enhance the way people buy and sell homes. In this way, we are evolving beyond a traditional brokerage, but rather into a large online real estate company that aims to change the way people buy and sell homes and fix the broken home buying process. Shifting gears to M&A. After the quarter ended, we announced the acquisition of Expetitle Inc. The result is creating an enhanced technology-driven experience from search to close for realtors and their customers. Expetitle, has developed technology that simplifies the paper-intensive and time-intensive title and escrow process, reducing errors and saving time. Agents can navigate the entire closing experience in a few clicks using Expetitle's mobile app.
I am excited to welcome Sean and the Expetitle team to the Real family. Expetitle is now called the Real Title, and its innovative approach to title and closing is synergetic with Real's mission to improve both the agent and consumer experience in the real estate industry. Joining forces will allow us to expedite our efforts towards creating a more convenient, transparent, and faster home buying experience for our agents' clients. Finally, moving on to the efficiency of our team. We continue to grow headcounts and real estate transactions efficiently. In fact, as of December 31, 2021, our efficiency ratio, which is full-time employees divided by the number of agents that are currently on our team, remains high, right around 1 to 62. We believe that this is a big competitive advantage.
To conclude, we are committed to growth through geographical expansion, agent referral, retention, product development, and the efficiency of our team. We are unwavering in our mission of having a positive impact on as many real estate agents and home buyers as possible. I'd like to reiterate as well that moving ahead, we're focused on adding ancillary services and building consumer-facing technology that further improves the home buying experience. Doing so will also add additional streams of revenue and grow our total available addressable market as we expand into the online real estate industry. We also intend to grow sustainably, boasting a solid balance sheet, and we are operating as cash flow positive. At this point, I will now turn it to Michelle for a more in-depth view of our financials. Michelle?
Thank you, Tamir, and thank you everyone for joining us. I'll start by assessing some of our key financial results for the fourth quarter and full year 2021. We experienced another quarter and full year of phenomenal growth. Our Q4 revenues grew 612% year-over-year to $50.5 million and 635% for the full year 2021 to $122 million compared to the same period last year. This increase was mostly driven by agent growth, which was up 161%, and revenue per agent, which grew as well. This growth is further supported by proprietary technology platforms, which allow us to continue expanding our agent count and geographic footprint at an accelerated pace.
If we look at gross profit, our gross profit grew 449% to $4.1 million in Q4 2021 and 415% to $11.1 million for the full year 2021 in comparison to last year. Our margins are affected by the increase of number of agents who cap and the increase in volume and rising unit prices, resulting in downward pressure as we continue to attract high-producing agents. We expect to offset this pressure and increase margins through the introduction of financial services, such as our newly launched Instant Payments program that Tamir touched on previously, and by adding ancillary services.
We have now added our first ancillary service with the acquisition of Expetitle , now called Real Title, and can expect to see the early contributions to our top-line revenue and margins take effect towards the second half of this year. Our net operating loss for the quarter was $3.8 million in Q4, compared to $1.3 million in Q4 of 2020. Net operating loss was $11.7 million in 2021, compared to $3.6 million in 2020. This change was primarily the result of investments in building our team of agents, team management, employee personnel, as well as our technology infrastructure. As a percentage of revenue, total losses were 10% in 2021, and this is versus 22% in 2020, demonstrating our efforts to monitor spend and cautious approach to managing resources.
We place great importance on our management team and on hiring top talent all across the board and look forward to the enormous value Kat, Raj, and the rest of those who have joined us this quarter will add. We view each and every one of these hires, along with investments in our technology infrastructure, as key contributors to our growth and necessary to support this accelerated pace. Adjusted EBITDA loss for the quarter was recorded at $2.9 million, in comparison to $400,000 for the prior year.
Adjusted EBITDA loss for the year was $5.1 million in 2021, compared to $1.8 million in 2020. Management believes that adjusted EBITDA provides useful information about our financial performance and also helps identify underlying trends in our business that otherwise could be masked by the effects of expenses that we exclude in adjusted EBITDA. In particular, we believe the exclusion of stock-based compensation expenses provides a useful supplemental measure in evaluating the performance of our operations and also provides better transparency into our results of operations. Overall, our operating expenses were $7.9 million in Q4, and this is in comparison to $2.1 million in Q4 of last year. On an annual basis, operating expenses were $22.3 million in 2021 compared to $5 million in 2020.
On an adjusted EBITDA basis, operating expenses were approximately $15.5 million, and that's compared to $3 million last year. The change is primarily due to increases in headcount, improvements in technology infrastructure, stock-based compensation expenses, and other one-time expenses, such as those related to our listing on Nasdaq Capital Market. The growth in our number of full-time employees is attributable to Real's commitment to better service agents and to further expansion of the company. These investments in key management and employee personnel allow us to offer best-in-class service to our agents and our agents' customers. With year-over-year revenue growth at 635%, we believe we have proven our ability to do so in a highly efficient manner and with minimal impact on operational costs.
As Tamir mentioned, Real's full-time employee-to-agent ratio as of December 31st, 2021 is 1: 62, compared to 1:59 in December 2020, thus demonstrating increased efficiency even as we begin to ramp. General and administrative costs were $3.4 million in Q4 in comparison to $1.7 million in Q4 of last year. On an annual basis, general and administrative costs were $10.6 million in 2021 compared to $3.7 million in 2020. That increase is mostly driven by the costs related to being a public company and increases in headcount that further support our growth. G&A expenses are expected to increase going forward as we continue to scale rapidly. However, as mentioned, we actively monitor spending and the impact on our bottom line.
Marketing costs grew from $3.8 million in Q4 to $300,000 in Q4 of last year. That change is primarily due to revenue share paid to agents as well as stock-based compensation related to the agent equity program. Agents earn revenue share for new agents that they personally refer to Real and are eligible for the equity incentive program based on certain attraction and performance criteria. We expect to see the costs associated with our agent incentive programs to translate into significant year-over-year growth and also believe it to be very fruitful contributors to long-term goals and success of the company. Research and development costs were $700,000 in Q4 in comparison to $76,000 in Q4 of last year.
On an annual basis, research and development costs grew to $4 million in 2021 in comparison to $400,000 in 2020. The increase is primarily due to the increase in full-time employees and the addition of an additional development team, all supporting our focus on building a robust and consumer-facing agent product. We have developed the technology for full automation of the real estate transaction through the agent mobile app and are now beginning to build the consumer journey. As a percentage of revenue, sales, general and administrative costs were 15% this year, and last year they were 28%. This is highly representative of our level of efficiency and ability to scale. As mentioned, we have a technology infrastructure that's able to support us on the path forward to 100,000 agents with minimal impact on our operational costs.
We ended Q4 with our balance sheet strong, holding $38 million in cash and investments, a significant increase from the total cash balance of $21 million in the prior year. Cash flows from operations increased by 311% in comparison to Q4 last year, and the company holds no debt. During the year, the company repurchased 4.9 million of common shares for a total of $12.644 million pursuant to the terms of its normal course issuer bid. The company continues to strengthen its balance sheet and industry footprint, as well as demonstrate significant year-over-year growth. This acceleration as we continue to ramp and expand our focus from not only our agents but the consumer journey as well. This concludes my financial remarks. I will now ask the operator to open up lines for Q&A.
Operator, can you please poll for questions?
Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from Darren Aftahi. Please announce your affiliation, then pose your question.
Hey, guys. I'm with Roth Capital Partners. Nice work on the quarter. A couple if I may. Could you give the transactions in the fourth quarter and then what transactions per agent were for Q4 too? Then I've got two follow-ups.
Michelle, do you have that number?
I'm sorry. My connection got disconnected. Can you please repeat the question?
Yes. Hi, Michelle. I'm looking for the 42 transactions and then what the implied transactions per agent were in the fourth quarter.
Sure. Transactions per agent were 13,000 for the year, and the implied transactions per agent
I'm sorry?
The number of total transactions in Q3 was around 6,400. We ended the quarter with 3,850 agents, so that's roughly 1.5 transactions per agent for the quarter.
Sorry, Tamir, you said three Q. Did you mean 4 Q, 5,400?
4Q.
Yes. Got it. Okay, perfect. For the year, I think you were at a little over six transactions per agent. I'm just curious with the rapid expansion of your agent base as you go into 2022, like, what are your general thoughts about that 6.1 number on an annualized basis? Is that a number we could see sort of being neutral in 2022, get better, perhaps get worse? Just any color around that.
Sure. What we've seen is that we have a constant improvement in the transactions per agent throughout 2021. We continue to see that trend continuing. I do not think that we will experience the same increase in per agent transactions. I believe that in 2022, the number will be 7-8 transactions per agent for the entire year.
Great. If I could squeeze one last one in. I know Michelle talked about, I guess it's now called Real Title, will be contributory in the second half of the year. Can you just kinda walk through just the integration efforts? Are those done? When are those going to be done? Just general thoughts around what initial attach rates could look like early on and then maybe as we get through 2022. Thanks.
Sure. Thanks, Darren. We look at the integration of Expetitle as a two-step process. There's the immediate process, where we welcome their employees. We integrate the technology. We make sure that we understand fully how the business works. Then we go the traditional way of pitching it to our agents and asking them to actually funnel their transactions through the Real Title company, which is now operating in three states, in Texas, Georgia, and Florida. We think that this will be somewhat of a slow ramp up as you can experience in other brokerages. At the same time, we are building some solutions, both on the tech side and on the business offerings, that will drive our agents to drive more and more transactions into the Real Title.
I will just mention two things. One, creating JVs with agents, where high-performing teams can actually become partners in LLCs that operate title operations. That's one thing. On the technology side, as we are building the consumer experience, part of the experience itself would be to automatically attach transactions into our own title company. We think that in 2022, for the first half of the year, we will see kind of a slow ramp up. The Real Title is currently contributing around $120,000 on a monthly basis to the revenue. As we start the second half, we will probably see an acceleration of the attach rates.
Great. Maybe I could. I lied, I'll squeeze one more in. When you talk about, like, having a verticalization and consumer experience, when you talk about JV-ing title versus actually having that in what seems like a revamped consumer app, if you will, is this gonna be more like a DoorDash or an Uber Eats where you actually, let's say, you know, order some food and then you have the ability to add on services like, "Hey, I need to get some Gatorade from the local convenience store or, you know, aspirin," what have you. Is that kind of the UI kind of plan of Real going forward?
Well, obviously, buying a home is a little bit more complicated than ordering food, but at the same time, we would want to simplify as much of it as possible. We think that the vast majority of home buyers and sellers do not really have any preference when it comes to a title company. The intention is to integrate our title company into each and every transaction in a way that will be more favorable to the consumer at the end of the day, as long as they either pay the same or less. The experience itself is much smoother. I think that benefits the consumer. Yes, I think you can try and imagine the experience you're going through when you're ordering from DoorDash or Uber Eats.
At the same time, again, buying a home is a little bit more complicated. We will be trying to provide simply more convenience, speed, and transparency to home buyers through a digital experience. When it comes to title, we believe that title is somewhat of a commodity and consumers do not really care which title company is being used.
As soon as I mean, if you can attach it to the digital experience when a consumer is actually downloading the app and providing us their personal information, financial information, so we can underwrite them for a mortgage, part of it will be checking a box saying, "I would like to use the Real Title company." That's all they will need to do, and in exchange, they will be getting more transparency and understanding of what the next steps are and where they are in process. It will enable them to close faster and just with less friction.
Great. Thank you.
Thanks, Darren.
Your next question for today is coming from Tom White. Please announce your affiliation, then pose your question.
Great. Thanks, D.A. Davidson. Hey, guys. Thanks for taking the questions. A couple, if I might, maybe just to follow up on the last one about kind of the consumer-facing technology tools that, you know, you guys are talking about working on. You know, how do you think about, like, incentivizing home buyers and home sellers to, you know, actually download them or use them? Or I don't know if there's a way to make it sort of a requirement for working with a real agent.
You know, are you thinking about, like, sort of incentivizing them via, you know, maybe discounts on things like, kind of like core brokerage commissions and as a way to kinda try and encourage higher attach for some of the kinda higher revenue per transactions or higher kinda margin per transaction offerings? I had a follow-up.
Thanks, Tom. I think first we have to acknowledge that the existing home buying process is just broken. It's not friendly, it's not convenient to buyers, it creates a lot of anxiety. There's no transparency. They have to deal with different stakeholders. They talk to a lender, they talk to a title company, they have an agent, there's an appraiser, there's an inspector. At the end of the day, as a buyer, when you're actually starting the journey, you have no certainty that you will end up actually owning the home that you would like to purchase.
If you actually do, then you're in the hands of somebody else, typically the lender, who dictates when you're gonna close and how much equity or money you will need to bring to the closing table, and that might change last minute. When we look at this, we understand that there's an opportunity to create something very different. Again, giving the control back to the buyers and providing them more convenience and control and transparency and speed, that eventually will just create a much better experience. If we are able to drive value through an experience and service and not necessarily through economics, I think that is more than sufficient. The process itself is that we have thousands of agents.
Those agents interact with tens of thousands and, I mean, in the future, hundreds of thousands of home buyers. There's an inherent relationship and confidence that's being built there. As soon as a consumer is starting to work with one of our agents, they will be asked to download the app, and the app will guide them through a few steps which will help us understand what it is exactly that they're looking for in their future home, understand their financial situation, and then we will kind of guide them from there. The initial interaction with our technology, with our app, will be coming through our agents that will be asking them to download the app.
Okay. That's helpful. On agent attraction, you know, obviously you guys are attracting a ton of agents. Curious whether, you know, in your view, there's like a you know, one part of the overall value prop that you guys provide that is, you know, maybe like a disproportionate driver of what's attracting agents to the platform. You know, is it the splits? Is it the revenue share program? Is it the tools?
I'm curious also like now that models like yours are more understood, you know, by the market, you know, by agents out there, curious whether like there's a dynamic where people wanna kinda like get in early on, you know, what is clearly a growing platform and a model that, you know, isn't maybe viewed as risky as it maybe once was, you know, five years ago or whatever by agents broadly.
Yes. Thank you. First I have to refer to your comment about us bringing a ton of agents. Yes, we are experiencing a lot of growth and a lot of attention from agents, but every agent is a whole world. Just grouping them as a ton is a little bit. I think we need to change the narrative a little bit. I would like to answer the question of why agents are actually joining us by somewhat of a surprising answer because we are talking to agents, a lot of agents on a daily basis, and I'm engaged in many conversations with high producing teams and high producing agents.
What we're seeing more and more is that I mean, beyond the technology, beyond the financial opportunities, what comes up a lot is culture. Agents are highly social individuals, and they're attracted to like-minded people and they're attracted to our culture, and we manage to build a culture of working hard and being kind and collaborating. I think that this is attracting a lot of agents who not only see the opportunity, they also see the opportunity of belonging to something that resonates with their values. Culture is becoming increasingly important.
As to the second question of this alternative model becoming better and better known, yes, I think that people understand that this is the future and they would like to join early and they would like to have an impact on the company. They understand that coming in at this point will enable them not only benefit from it financially, but also be a part of really making an impact on how this company grows, making an impact on decisions, making an impact on others that will be joining. Definitely there's an early stage opportunity component when it comes to agents thinking about whether to do that move or not.
Great. Thanks. I guess maybe I also lied because I'll try and slip in one last one if I could. Curious if you'd be willing to weigh in on maybe where you think agent count maybe could be by the end of this year. And also, you know, if the market kind of cools off a bit relative to kind of the last 12-18 months, you know, how do you think that impacts kind of agent attraction? Thanks.
Yeah, good question. We are not really providing any estimates or guidance, but we started the year at a certain number. We're right now at 4,500 agents. Just measuring our agent count growth in the past, you know, year or so, we're seeing that it's steadily around 150%, 160%, 165% year-over-year. You can do the math and, you know, and estimate where we will be towards the end of the year, if we started at around 4,000. Now, as far as the real estate market goes, we're seeing a very tight inventory right now, and that I think, I believe, has an impact on everyone.
Just this morning, the February home sales numbers came out. I believe that, first of all, the market needs to cool down a little bit. There's a lot of pain on the buyer side, but I believe that as the market cools off, we will be in a great position to capture more and more agents. At the end of the day, let's assume a scenario of transactions hypothetically decreasing by 20% in a certain period of time, then agents still need to sustain their families, so they need to make the same amount of money out of fewer transactions. I think that at this point, they will just be looking for alternatives. When they look at Real, the cost to value ratio is just outstanding.
I think that, at that point, when there will be some sort of a shift downwards in the market, we are very well positioned to welcome those agents that will be looking for an alternative to where they are today.
Got it. Makes sense. Thanks, Tamir. Thanks, Michelle.
Thanks, Tom.
I see no further questions at this time. Thank you, everyone, for joining. This concludes today's call. You may now disconnect your lines.