Welcome to the final session of day one. Sorry, I think I have my papers. I'm Brad Erickson. I cover internet at RBC. Very pleased today to have the Founder and CEO of The Real Brokerage, Tamir Poleg.
Yeah, thanks for having me.
How'd I do?
Yeah, yeah.
Hanging in?
That's right.
All right, good. Welcome. Thanks for being here.
Yeah.
Nice to see you in person.
Thank you very much.
So I have my usual laundry list of questions. Obviously, if there's audience questions, feel free to raise your hand, but maybe as we start, newer story to the public markets, new stories to a lot of the investors, I think, here at this conference. Maybe just start off with a couple minutes around just little background on the company and sort of what bring us up to date.
Yeah.
And then we'll go from there.
Sure, well, having founded the company in 2014, it doesn't feel new to me, but yeah, so we are a real estate technology company. Our main business is real estate brokerage, but we also operate a mortgage company and a title company. Started back in 2014, took it public in 2020, did a direct listing on Nasdaq in 2021, and pretty much since the summer of 2020, we started growing like crazy, and the reason behind it is because that we're able to attract a lot of agents to our platform. There's 1.5 million agents in the U.S. and another 150,000 agents in Canada, and we've built a platform that serves them in a really good way, so we offer them all the technology that they need in order to power their businesses.
We offer them very compelling economics, a lot of opportunities to make money outside of just closing real estate deals. And that seems to resonate with a lot of agents. So we've, we're a very kind of a compelling growth story right now in the industry. Housing has been suffering in the past two and a half years, and we've been growing revenue pretty steadily between 80%-100% year- over- year since 2020, so very unusual. We're taking market share at the moment, but it all starts with our ability to attract and retain high producing agents. And we do that again by just offering everything that they need in order to be successful, so that's us in a nutshell.
Got it. And where are these agents coming from? Are they, are they new to the industry, coming from other brokerages, or what would you say? What's the mix look like?
Yeah, I mean, if you analyze our financials, you can see that our per agent productivity is higher than the average in the industry. So we are attracting the more productive agents. And typically we're not accepting newly licensed agents, and they're coming from all over. They're coming from traditional brokerages, local brokerages, large names that some of you are familiar with, Century 21, Coldwell Banker, RE/MAX of the world, so we're taking market share from everybody. We have to remember that 90% of agents in the U.S. are still affiliated with traditional brokerages, some of the names that I just mentioned, but we are seeing a shift from that traditional model to newer models like ourselves. And we are one of very few players that are representing an alternative right now, and we are taking market share from those incumbents.
Got it. And given what's going on with the market right now, how does that contribute to being able to coach new agents?
It's a good question. We're, we're not coaching, we're attracting, but.
Sorry. That's a fair point.
Yeah.
That's an end-of-the-day comment. That shows myself in the penalty box on that one.
But I mean, you would think that agents will be attracted to our model because we save them a lot of money, and especially at times like these when they're closing fewer deals, that maybe they're more inclined to switching brokerages and looking for a more cost-effective alternative for them, which is what we represent, but at the same time, we've been growing like crazy in 2020 and 2021, so I'm not sure that the market conditions really matter to us.
Yeah, that's helpful. And what, let's get into the specifics of the pitch, right? What are the three or four or five things. And I know the software side, I wanna get into that in a little bit, but just start with the straight economics, right? Like what are you offering them that they're not getting or that they're missing?
Maybe I'll start one step before that.
Sure.
Agents are independent contractors, but by law, they have to be affiliated with a brokerage. So they can choose to be affiliated with a RE/MAX or Joe Realty or Real. Now, if they choose to be affiliated with a traditional brokerage, typically there's a manager in the office. The manager tells them when they need to show up, how their marketing materials should look like, how to talk to their clients. So at the end of the day, they feel as if they're independent contractors, but they really work for somebody.
Yeah.
Whereas when they join Real, they feel as if they join a platform that they can grow their business on in the way they see fit. So that's powerful. When it comes to economics, the average agent will end up paying half at Real compared to a traditional brokerage. We have a model that does not have monthly fees. Typically, they would pay $100 or $200 in monthly fees. And then every commission check at a traditional brokerage will be split, let's say, on a 70%, 30% basis. At Real, no monthly fees, 85, 15 split. And we have a $12,000 annual cap. So once they pay us $12,000 a year in splits, they get to keep 100% of their commissions, and they only pay a transaction fee of $315.
If you're a successful agent and you're making, let's say, $500,000 a year and you're on a 20, 80, 20 split with whatever brokerage, you will be paying them $100,000.
Yeah.
Whereas at Real, you will be paying us $10,000.
Yeah.
So that's significant.
Is that, I think some do have desk fees though, but I wanna say they're a lot higher than $12,000. How does that compare with the rest of the industry?
Again, there are all sorts of fees. There are desk fees, monthly fees, transaction fees, you know, fees, you name it. Brokerages are trying to milk agents in every possible way. We think that what we offer is fair.
Yeah.
It's very attractive.
Yeah.
They end up saving a lot of money.
Yeah. What portion of your agents do hit that cap, would you say?
We know exactly the number. It's about.
That's good.
We have over 22,000 agents affiliated with us, and about 12% of them actually hit the cap.
Got it. Okay. And then just talking about agent retention, I guess you guys have been growing fast. I imagine how, how do you hang on to these folks?
It's a funny industry. It's a high churn industry.
Yeah.
Agents like to switch brokerages every couple of years.
Yeah.
And we like to look at revenue churn because what you truly, truly care about is the agents that are contributing to revenue. You don't care about, there are a lot of agents that just have licenses and they're not doing anything with the licenses. So you want to keep, you want to, to attract and keep the high producing agents or the agents that are actually generating revenue. So our revenue churn has been kind of steady around below 2% per quarter.
Okay.
Which is very low, I can tell you, by industry standards. I think that the industry standards are more around 10% per quarter.
No, that's impressive. Okay. Let's see here. I think when you think about like productivity, we're doing a little math. I wanna say it's each agent in your business doing about 1.6 transactions a quarter, I wanna say. Keep me honest if that number's wrong.
Yeah. It's, it's around that, but.
Yeah. I guess my question is, is that a good number? Is that a healthy number? And where do you want that number to be over time? What do you think?
We want it to be as high as possible, but we have to keep in mind that because we're growing so rapidly.
Yeah.
The agents that joined us a month ago, two months ago, or even three months ago didn't have a chance to close a transaction on the platform.
Yeah.
So when you're trying to analyze at the end of the quarter, number of transactions divided by number of agents, this is a little bit misleading because you really have to divide it by the number of agents we had a quarter or two ago.
Sure. That makes sense. Yeah.
So I think that the true numbers are more than, more like two transactions per quarter or something like that.
Yeah. Yeah. Well, yeah, and I saw you guys had added what, like 700 agents just since the end of last quarter.
Yeah. We added about 8,000 agents this year.
Yeah.
A little bit more.
Yeah. What's the recruiting mechanism that you guys are using to do all this?
Yeah. You didn't use poaching. That's good.
I learned.
So.
It's a long day.
Prior to 2020, we were actually spending a lot of money on Google and Facebook serving ads to agents who might be interested in joining us.
Yeah.
And then when somebody would fill out the form, we would reach out to them. I was actually doing all of the attraction calls at the beginning. And then in 2020, back then we had about 800 agents. Again, 2020, 800 agents. We have close to 23,000 right now. We realized that we can leverage the sales capabilities and the networking capabilities of our agents and try to turn them into not only salespeople who sell real estate, but also pitch Real to their friends. And we created a revenue share program that incentivizes agents to go and attract friends to Real. And if they're successful, they earn a portion of that revenue that's generated by those agents.
Yeah.
And that kind of caught fire. So we rely on our agents for growing the company. We don't spend any money on upfront marketing, which is kind of awesome.
Yeah.
At the same time, what we're seeing is that only 10% or 11% of the agents are actually engaged in agent attraction. So there's a lot, there's much more growth to actually unlock there by just educating the remaining 90% on how to have those attraction conversations and how to actually do it.
Yeah. What, and I don't know if you can give us a little flavor. What do the economics look like for those 10% or 11% of agents? Like how much is, how much are they augmenting their income or any way to think about that?
We have agents making a significant amount of money.
Yeah.
So if.
Are there agents making more money from recruiting other agents into these deals?
Oh, 100%. 100%. Even though you have to be a productive agent in order to participate in revenue share. So you have to continue and sell real estate.
Yeah.
But our revenue share program has five tiers. So if I attracted you to the company and you're, a capper, you're a good agent, I make up to $4,000 a year from your transactions.
Okay.
And if you attracted Joe to the company and Joe closes the deal, you make some of it, I make some of it. So at the end of the day, there's like a kind of a mechanism that makes sure that there's incentive for everybody to go and attract. But it's not only that. When I bring you into the company, I feel responsible for you to be successful because if you're successful, I'm making money. It means that I'm supporting you.
Yeah.
If you have a problem, I'm there to support you. I'm there to answer. I'm there to push you. I'm there to educate you.
Yeah.
I would say that that mechanism also allows us to be very lean on support and some other services because our agents are doing it instead of us.
Yeah. Got it. And how do you, how did you build that culturally? 'Cause you were just mentioning to me like the company's virtual, right? You're all, you're running this from different places, technically headquartered in Miami. Not sure anybody actually is in Miami, but that's all good. How did you build that culture to be able to have sort of, it sounds like mentorship essentially going on or?
So as you mentioned, we're a non-brick-and-mortar company both on the agent side. Agents don't have offices to go to. Agents can choose to rent their own offices and some of them do, but we do not provide that. That's a huge cost saving for us. But also on the corporate side, we're a fully remote company. It starts with technology. If you can build technology that can not only improve their businesses and make them more efficient, the agents, but also connect them and enable them to have those conversations and interactions, you're probably winning. Our technology is focused on different things. And one of those things is community.
Yeah.
How can we foster collaboration? How can we make sure that agents can find each other? How can we make sure that they can exchange leads and celebrate success?
Yeah.
And we have a community feature on the app, and it's very vibrant. So it starts with just having technology as an enabler. And it continues with finding individuals who can create local excitement.
Yeah.
Who can be like pillars in a specific market, and then they start building around them, and then it creates like a flywheel effect. We, as a matter of fact, in San Diego, for example, have close to 30% market share right now because we attracted a few individuals that had a lot of connections, and they started the flywheel effect.
Wow.
In Calgary, Alberta, we have about 15% market share because of that.
Wow.
So what I'm trying to say is that even though technology plays a big role.
Yeah.
At the end of the day, it's about people.
Yeah. Yeah. That's interesting. I wouldn't have thought Calgary and San Diego would sound.
Yeah.
Alike in any way, but, teams, right? Teams are obviously big, the bigger teams of agents are, I think generally gaining share these days just broadly in the industry. Do you guys often attract bigger teams or are you attracting more sort of individuals because you have some of these services? How do you think about mix on that?
It's a mix. It's a mix. It's probably, I would say 50/50.
Really?
We were not focused on building things for teams or attracting teams, but at some point we realized that many of them are coming our way. And we started asking ourselves, why is that?
Yeah.
So just for everybody to understand, teams are kind of a structure of a group of agents working together within a brokerage as a team. Typically, there's a high producing agent that knows how to generate a lot of leads. They don't have the capacity to cater to all the leads. So they bring in another person and then another one and another one, and they operate as a brokerage within a brokerage. I think that our platform is very suitable for teams because teams are focused on sales. This is what they do best. They don't wanna deal with all of the overhead, the paperwork, all of the things that they don't enjoy. They enjoy selling. And we take away all of those things from them.
So, I think that the combination of our economics with the fact that we have the revenue share program, with the fact that agents are shareholders in the company and we have an equity incentive program for them, and our ability to actually save them time in closing transactions make it very attractive for teams.
Got it. I was gonna touch on that later, but maybe let's go there now. What, what is the equity incentive program? How does that work relative to kind of total comp?
Agents can earn equity in a couple of ways. One is every time they cap, they get a small RSU grant from the company. Every time they attract an agent to the company and that agent closes their first deal, they earn a small RSU grant. But the majority of the equity buildup is done through allocating a percentage of their commission revenue to actually purchase company shares, and if they're with us 12 months after that closing.
Yeah.
They receive a bonus. So we have a constant demand for the stock by the agents.
Yeah.
We facilitate that through a buyback in the open market.
Yeah. How big is this? Like, how big has this been over the last year, for example?
Last quarter, I think it was around $16 million.
Okay.
In stock that agents purchased.
Got it.
It's significant.
Yeah. Yeah. And then let's talk about, you know, it's interesting, like there's a few big software players and there's lots of software players in the real estate space, but somehow there's been a few in the different areas, whether it's, you know, ERP or CRM, that kind of stuff that have done really well. What are you guys bringing to the table software services wise that you think is differentiated for your agents?
I'll explain how we look at technology because we are a pure tech player, even though we operate a brokerage.
Yeah.
For us, technology has four main pillars. One is productivity, everything that we can help agents save time and make more money. And by the way, we are a mobile-first company. We believe that agents should be out there in the field talking to clients and they need to have their businesses in the palm of their hands. So everything they need from a powerful dashboard, a 24/7 support, a transaction management system that allows them to draft contracts and send them for review and e-signature and education or an academy. That's on the productivity side.
Mm-hmm.
CRM, we decided that we're not gonna develop by ourselves because agents are a little bit protective of their clients' data, and they wanna have the flexibility of switching to a different brokerage without.
Yeah.
The CRM staying at.
Makes sense. Yeah.
The brokerage level.
Yeah.
Second segment of technology is marketing. People don't choose agents based on their brand affiliation. And.
Based on what?
On their brand affiliation. People, you wouldn't care who your agent is affiliated with. You don't care if they're with Real, RE/MAX, or Coldwell Banker.
Yeah.
So we decided that we're not gonna spend any marketing dollars on creating a consumer-facing brand. We are gonna help our agents brand themselves within their communities, both offline and online. So everything they need from business cards, yard signs, brochures, car magnets, you name it, available on our marketing platform.
Yep.
They can customize it. It gets shipped directly to them. And we also help them with the online presence. They receive a personal branded website, a personal branded app. They can invite their clients to download the app, look at the website, look at their bios, look at the listings, communicate directly from there.
Yep.
And everything, by the way, is included as a part of the Real package. They don't have to pay extra. Third segment of technology is community. As I mentioned, agents need to have the ability to interact. And we have a community feature. I'm not gonna spend time on that. And then the fourth segment, which is probably the most powerful one, is brokerage operations. Think about a brokerage office, people in the back processing transactions, reviewing documents, processing payments, all of those things. We've automated all of that to the full extent possible. Typically, at a brokerage, you would have one employee for every 20 agents. Our ratio is one to 140. So we are by far the most efficient player in the industry. And that's due to a lot of software that replaced humans. I'll give you a couple of examples.
We just now started rolling out a new system. When you're closing a real estate transaction, typically there's a hundred pages or 200 pages that the brokerage has to review, contracts, addendums, all of those things.
Yeah.
Humans are doing it. So somebody's sitting in an office looking at all of those documents. If you're an agent and you wanna submit a transaction, you typically have to wait for that human to review it.
Yeah.
Maybe that human is busy now. Maybe they'll do it tomorrow. It creates a little bit of frustration because you want a fast turnaround. The system that we built is based on AI and it knows how to look at documents as soon as agents upload them to our system and within three seconds detect all of the errors. So within three seconds, the system tells you you have 12 corrections to make.
Yeah.
You're missing a signature here. You're missing this addendum. And then that saves us a lot of manpower.
Yeah.
It just provides a much better service.
Yeah.
To the agent. So that's just a testament of the efficiency that we bring. But maybe we should touch. Am I talking too much?
No, you're good.
Okay. Maybe we should touch on that.
I wanna listen to you, not me.
So a couple of exciting things on the technology front. A couple of years ago, we realized that while we were building an amazing platform for agents, the home buying journey is really broken and flawed. It lacks transparency. It takes a lot of time. It's just not fun for buyers. So think about the fact that you're spending all of your life savings and you're borrowing a lot of money, and then it ends up in a transaction that.
Yeah.
That you're not really enjoying. And then we ask ourselves, how can we improve that? We realized that we wanna integrate the three main building blocks of a real estate transaction: brokerage services, everything that you're doing with an agent, with mortgage services.
Mm-hmm.
And title.
Yeah.
So we made two acquisitions. We acquired a title company and a mortgage company, and we started building a consumer-facing app with the aim of providing an end-to-end journey for home buyers. Then a couple of months ago, we realized that you probably have, I don't know, 50 apps on your phone, but you're using seven of them.
Yeah.
And like, how can we become one of those seven? And it's tough. It's difficult. And then we realized that about 80%-90% of the interactions that agents are having with their clients are done via text.
Mm-hmm.
So what if we could, instead of having an app interface, could bolt onto the textual interface and by that, provide all of the kind of different tasks and services that you go through when you're buying a home? So a couple of weeks ago, we announced that in the second quarter of 2025, we're going to offer all of our agents a phone number dedicated to them. That phone number will be powered by Leo. Leo is our AI assistant.
Mm-hmm.
Leo will know exactly how you speak, what kind of words you're using, what does the process look like, what kind of tasks you're doing, what kind of questions you're asking your clients. Once you meet a client, you tell the client, "Hey, just text this number," and Leo will start collecting all of the information: what kind of property you're interested in, what's your financial situation, what's important to you, let's get you pre-qualified for a mortgage.
Yeah.
Leo will be able to actually replace probably 90% of the tasks that agents perform without the client actually feeling that it's a bot.
Yeah.
Because it will be communicating like you.
Yeah.
So this is something that we're working on, and we think that this will become a huge competitive advantage for agents and will allow us to bolt on our ancillary services that are, which are really high margin services.
Yeah.
We have 80% gross margin on title, 50% gross margin on mortgage. But in addition to that, we just launched the Real Wallet, which is a digital wallet. It's a product that has never been launched in our industry. When agents close a transaction, typically, the brokerage cuts them a check. They have to go and deposit the check into their own bank accounts. With the Real Wallet, agents now have a wallet, an account on our platform. They close a transaction, the money gets deposited directly into the wallet. They have a debit card that we provide them with. They can spend the money through the debit card or they can transfer the money into their own bank accounts. If they swipe the debit card, we earn the interchange fee. If they leave money in the wallet, we earn interest on that money.
Because we have so much data on our agents' businesses, productivity, past performance.
Yeah.
We can underwrite them for credit lines. So we have a lot of agents with substantial credit lines.
Yep.
Every time they use the credit line, we earn an APR.
Wow.
We have seen encouraging adoption of.
Yeah.
Of the wallet so far.
Yeah. That's great. On mortgage and title, that's always been a challenge for the digital platforms to sort of bolt on, right? Like it's just a difficult user experience, a lot of execution risk, that sort of thing. How have you guys found that as you've added that product? And then just what, where are you in terms of like attach rate and all that stuff?
So both mortgage and title are still nascent businesses for us, very low single-digit attach rates. The challenge with mortgage and title is that every agent has their lender, their title connection. It's a relationship that's really difficult to break.
Yeah.
So in the short term, for example, on the title side, we decided to go and offer our most successful teams joint ventures so they can become partners in the title company.
Mm-hmm.
They can enjoy profit distribution. The challenge with mortgage and title is that as a title company or a mortgage company, you cannot incentivize agents.
Yeah.
To send their deals over, so JVs is a way to actually have a monetary incentive for agents. But we think that longer term, the key would be through technology. If we could create an experience for the agents that results in a better transaction, faster transaction, more transparency, and more assurance.
Mm-hmm.
That the transaction will close.
Yeah.
They're more likely to send their clients, and I'll give you an example. If I'm an agent at Real, I refer a client to my lender.
Mm-hmm.
I trust this lender to close it. It'll probably take 60 days, but I've worked with the lender before. That's how they operate right now.
Yeah.
In the future, if they refer a client to us and based on our history with that agent, we will be able to tell the agent, "Hey, not only are we offering a $2,500 rebate to your client, but we also, we will deposit the money into your wallet well ahead of closing. So here you go. You have confidence that you will get paid.
Yeah.
There's a benefit for your client. We will send constant updates and we will be able to guarantee closing as well." So it's just a very different experience with a lot of incentive.
Yeah.
For the agent. But again, this is kind of based on technology.
Yeah. No, very, very compelling. One area we haven't really talked on is demand generation. And you kind of said, like, it sounds like you leave that largely to your agents, but just curious, what, what are your agents doing digital channel-wise, digital marketing? And do you, do you play a role in any of that?
just.
Like, as an example, I know sometimes at your level and certainly your size of brokerage, right, you can establish deals with a Zillow, for example, to sort of grease the skids for spending for your agents. But how do you guys approach that?
So one of the first things we built back in 2014 was a system that knows how to buy leads from Zillow.
Mm-hmm.
Send it to the most suitable agent to serve that lead.
Yep.
ROI was negative. So we decided this, this is not a game we wanna play. If I look at our agent population, some of them are acquiring leads online from Zillow and others.
Yep.
But I think that we're, and we decided not to be a part of that.
Yeah.
Strategically, we're not gonna be involved in lead gen.
Mm-hmm.
Maybe we will be involved in lead nurturing.
Mm-hmm.
Via Leo. So, if you have a database of 20,000 potential clients, Leo can have conversations with them all the time and just nurture them.
Sure.
up to a point where they're ready to transact.
Yeah.
But what's interesting is that our industry has shifted more, is shifting more and more towards content creation.
Mm-hmm.
The most successful agents are the ones that are actually doing interesting things on YouTube and social media, using video. I would say that within 30% of the most successful agents on social media.
Mm-hmm.
We're right now with Real. We created a community of those high-profile agents that just generate a lot of content.
Yeah.
And,
Got it. What about some of the newer models, like a more, and I should have asked this earlier, but buy side, sell side, what's your mix of transactions?
Probably 55% sell side, buy side, 45%.
Buy side. Okay.
So.
Just, you know, some of these newer models, popping up on these digital channels of, you know, being able to promote your listing, right? And then being able to go out and sell yourself as like, "Hey, I'm a preferred customer on XYZ marketing channel and I can market your home and all that stuff." Have you guys seen any? I'm just curious to get your take on that.
Yeah.
I know it's not like part and parcel of your business, but what's your take on that model?
So we haven't seen any demand for that.
Yeah.
We did establish a luxury division. So typically a home sold by our agent is a $400,000 home.
Mm-hmm.
But we have been receiving more and more demand from luxury-focused agents. So we established a luxury division. And on the luxury division, a part of the offering for clients is, "We'll get your home on Barron's and Financial Times and, you know.
Mm-hmm.
Kind of high-end publications. But at the end of the day, it's the agent's ability to market the property.
Yeah.
I'm a much bigger believer in content and social media.
Yeah.
And being creative.
Yeah.
Than any of those traditional ways.
Yeah. That makes sense. Classic. I left one to two minutes for the financials, but just talk about the model real fast, and kind of the cost structure.
Yeah. So when agents join, they pay a $249 joining fee. There's an annual brokerage fee of $750. And then the majority of their revenue comes from splitting commissions on an 85/15 basis with a $12,000 cap.
Yeah.
So once they pay us $12,000 a year in commission splits, they get to keep 100% of their commissions and they only pay a transaction fee of $350.
Yeah.
Got it.
Then gross margins, where does all, I know it, it depends on sort of conversion rates.
Yes.
That kind of thing, but like where does it net out?
on the brokerage side?
Yeah. 'Cause like it was, what, it was like 6.5%, something like that.
No, it's around 9%-10%.
9% to, like I said, 9%- 10%.
Yeah. Exactly.
See how I did that.
Yeah.
Yeah. Yeah.
Yeah. But yeah, again, on title, we have 80% gross margins.
Yeah.
Mortgage 50%.
Got it and then.
And then Wallet will be.
Yeah.
Very high double digits.
And then fixed cost basis today versus like target model that you guys see in the future?
I think we're doing a good job at growing our gross profit much faster than we grow our operating expenses.
Yeah.
That will probably continue. There's a lot of leverage of software in operations.
Got it.
So you can expect that to continue.
Yeah.
Obviously, profitability grows as well.
Yeah. And then lastly, just capital structure, balance sheet, where are you guys at today?
Yeah. We're cash flow positive. We have $32 $33 million on in the bank.
Yeah.
No debt. And we just increased the cash position all the time.
Got it. Sounds great. All right. We're out of time. Thanks for being here.
Thank you very much.
Appreciate it.
Appreciate it.