Q4 2023 Re/Max Holdings Inc Earnings Call

Participants

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

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

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

Amy Lessinger; SVP, Region Development; RE/MAX Holdings, Inc.

Ward Morrison; President, CEO, Motto Mortgage and wemlo; RE/MAX Holdings, Inc.

Soham Bhonsle; Analyst; BTIG Ltd

Anthony Paolone; Analyst; JPMorgan Chase & Co.

Tommy McJoynt; Analyst; KBW

Ryan McKeveny; Analyst; Zelman & Associates

Ronald Camden; Analyst; Morgan Stanley

John Campbell; Analyst; Stephens Inc.

Presentation

Operator

Good morning and welcome to the RE/MAX Holdings fourth quarter and full year 2023 earnings conference call and webcast. My name is Krista 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, you may begin.

Andy Schulz

Thank you, operator. Good morning, everyone, and welcome to RE/MAX Holdings fourth quarter and full year 2023 earnings conference call, please visit the Investor Relations section of www.re/max Holdings.com for all earnings related materials, including our standard earnings presentation and to access the live webcast and the replay of the call today are 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 Q4 2023 financial results press release and other SEC filings. 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 and Amy Lessinger are 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.

Erik Carlson

Thank you, Andy, and thanks to everyone for joining our call today. I'm very excited to be with you on my first earnings call and to be leading the company during this pivotal time for our team and the broader housing market our industry-leading brands, attractive financial model and unique competitive advantage creates substantial opportunities in today's real estate landscape. As many of you know, I'm relatively new to this position. Having joined the Company in mid-November, and I continue to be bullish about our future.
Today, I'm going to share some initial observations from my first 100 days, and Karri is going to discuss our fourth quarter performance in more detail and give you our Q1 and full year 2024 outlook. And as Andy mentioned, Ward and Amy are also here for what we think will be an informative QA session since my arrival, among my highest priorities is focusing on our people and our leadership team, having the right people in the right positions is absolutely vital to our future success.
And that's why I'm delighted to announce the promotions of three of our senior leaders and the lessons you're adding Lee and Susie winters, Amy's a passionate member of the RE/MAX organization for over 25 years as an agent, a team leader, a franchise owner and now a member of our executive leadership team.
She's been promoted to President of RE/MAX LLP, where he will lead the RE/MAX brand and network you succeed with Vale who is leaving the Company. Adi Lee has been promoted to Executive Vice President of Marketing Communications into that, she will continue to lead advertising, marketing, communications and public relations.
In addition to now managing the Company's events team and Suzy Winters is being promoted to Executive Vice President, General Counsel, Chief Compliance Officer and Secretary. Amy, at the end to the will all report directly to me, but these are well deserved and positive changes that I believe will help us navigate the road ahead and realize our full potential.
During my first 100 days, I spent a considerable amount of time listening, learning and leading meeting with hundreds of stakeholders. I mean, a lot of great people and had a lot of innovative ideas, which I know we can leverage. It's been a bit of a drinking from a fire hose sort of experience immersing myself into our business, covering everything from high-level strategy to the detail of the various processes, systems and structures. During these conversations, I'm often asked her what attracted you to the Company? Why did you take this job?
Well, initially, I was drawn by the company's purpose, helping people realize their dream of home ownership for many of us buying or selling a home is almost one of the most important decisions that we make and one of the most joyful days that we'll experience in our lifetime.
Also, I was equally energized about joining the company because of what I knew about RE/MAX, an iconic brand, the number one worldwide in residential real estate side, RE/MAX has a brand people know an unmatched global presence, a unique value proposition of services and competitive advantages, and most importantly, the most dynamic, most productive and most trusted agents and brokers in the business known for being skilled experienced and very good at what they do.
Re/max agents have made remap the world's most productive real estate network. And in the U.S. and Canada, consumers have voted them the most trusted agent for several years straight look, RE/MAX agents are simply the gold standard. The original RE/MAX business model, which gives entrepreneurs a way to maximize their career, is still thriving around the globe.
Over 140,000 RE/MAX agents in more than 110 countries and territories deliver positive outcomes of buyers and sellers every single day and we believe Remec still has a lot of room to grow. I'm also enthusiastic about the mortgage side of our business model, and we will have unique product offerings that have shown great promise in the marketplace with better end market conditions and a continued focus and efforts.
We are confident that with time our mortgage segment can grow into a meaningful revenue business. The bottom line I'm here because I believe I can make a difference what we're motivated by and confident in our competitive advantages and other than pricing potential growth opportunity. We are acutely aware of what we need to do to improve our performance.
Two of our priorities and the playbook are clear, we need to stabilize and grow U.S. agent count and expand the mortgage business, posting gains in those two areas with build market share, increase revenue and earnings, each will create momentum for additional growth won't be easy, but we know how important, those two objectives are in both the short and long term.
The better news from what we saw in 2023 is encouraging interest rate trends, improving customer sentiment and ongoing pent-up demand bode well for progressively better housing market performance moving forward, one that should get incrementally better as the year goes on.
As it relates to our business, our team continues to see plenty of opportunities from my career. I've been focused on continually improving the customer experience, delivering distinctive products and services that meet customers’ needs diversified financial performance and leveraging best-in-class capability that enable teams to win.
Utilizing my sales, marketing operations and leadership background, our playbook will concentrate and operating our business as effectively and efficiently as possible, having a growth mindset and focusing on delivering the absolute best customer service. We've got a great foundation to build our team, our affiliates. They're passionate about our brand about each other and about innovating growing and simply getting better each and every day since mid-November, we've spent time assessing what programs to accelerate what programs to expand in which to discontinue.
This allows us to be more effective and will enhance our ability to fast track program that make a difference. And that's why we believe our current strategic growth initiatives provide us with the best opportunity for improved performance this year and build on the foundation for the long term. We continue to see measurable progress and positive results from our programs.
Current market conditions have certainly overshadowed the desired results, however, were eager to see how our initiatives perform in an improving market, and we are optimistic that we can deliver better outcomes for our growth programs were announced in mid-2022. The team knew the conversions and mergers and acquisitions or see M&A. And the team's efforts in particular would require some time to communicate to gain traction and build momentum, and that's proven to be the case.
Now when we look back at the original cohort of brokerages that joined us in 2022 via the CM. and A. program, our one year returns were in line with expectation and the number of completed transactions more than doubled year over year in 2023 on a team from the original pilot program launched in 2022. It was expanded last summer in a modified version and has continued to help broker owners bring more agents and team into the network while incentivizing smaller teams to grow.
As a result of the program's impact and our lessons learned, we're expanding the modified version of the program to encourage team recruitment and growth across much of the U.S. From our perspective, this is prudent, prudent investment that will help franchises grow their offices, help team leaders, build larger teams and simultaneously it sends a message across the industry that teams have yet another reason to affiliate with RE/MAX.
Our full value proposition for Teams is compelling, and we have third party validation that RE/MAX teams are more productive than the norm. In many respects. The investment illustrates our commitment, our commitment to growing U.S. agent count, and we believe growth initiatives like this over time will help us regain crucial upward momentum in that regard.
Now on the mortgage side, we remain confident in our mortgage and a box product offerings, growth prospects of our two brands and the investments we've made in the respective sales organizations over the past year in 2023, during one of the most challenging end market condition the mortgage industry has faced in recent history. We nonetheless grew our mortgage business, which when you think about it, that's a remarkable achievement. And one that not too many other companies can claim that.
Having said that, our growth was muted and our motto churn rate did tick up even in a rebounding market like the one we expect to see in 2024, our overall open Motto office count will continue to face macro headwinds and still likely going to be flat to slightly up for the year. So we expect to steadily improve our franchise sales as the market stabilizes and we rebuild our pipeline.
Lastly, in September, Remec, Delphi entered into a nationwide settlement associated with costly industry litigation. We did go to protect our U.S. agent franchisees and the company for multiple class action lawsuits. The proposed settlement subject to final court approval slated for early May.
And while the settlement came at a significant financial cost, we believe was the right decision for all of our stakeholders, affiliate employees, shareholders and debtholders alike. We view it as an investment in the brand, the network, the franchisees, and most importantly, the agents. Many people have suggested the proposed settlement, the differentiator could actually create a new competitive advantage. We certainly hope so and think it can be.
With that, I'll turn it over to Karri here.

Karri Callahan

Good morning, everyone better than expected. Margins from expected expense management highlighted our fourth quarter performance, driven by a deliberate move we made last summer to rightsize our cost structure amid a very challenging housing market. Some of the notable quarterly financial highlights included total revenue of $76.6 million, adjusted EBITDA of $23 million with an adjusted EBITDA margin of 30% and adjusted diluted EPS of $0.3.
Looking closer at revenue, excluding marketing fund revenue was $56 million, a decrease of 5.8% compared to the same period last year. This decrease was driven by negative 5.6% organic growth and adverse foreign currency movements of 0.2%. Organic growth decreased principally due to a reduction in U.S. agent count and lower broker fees, partially offset by higher mortgage segment revenue. Notably, while our organic growth rate remained negative, the pace of the decline did slow in Q3 as we started to lap the tougher comparable quarters.
Q4 selling, operating and administrative expenses increased 9.6% to $39.1 million, primarily due to changes in the fair value of contingent consideration liabilities during the fourth quarter. Given the continued macro-economic pressures which cause mortgage rates to reach multi-decade highs, we revised the mortgage segment near term franchise sales forecast for the next three years.
This, along with fewer than expected franchise sales in 2023 caused a decline in our mortgage segment, projected future cash flows. The reduction in our near term franchise sales outlook was the principal driver of the non-cash goodwill impairment charge of $18.6 million. Despite the current headwinds, we remain bullish on our market opportunity and believe we can meaningfully accelerate our fan. Thank they'll pay us over the medium and long term, given the compelling value proposition offered by both motto and the loan.
From a capital allocation perspective, our priorities are unchanged since last quarter. While we are pleased to have been granted preliminary approval of our settlement and are seeing the reason for optimism from a macro perspective, uncertainty with respect to 2024 remain as a result, we continue to be responsible stewards of capital and think it's best to focus on replenishing our cash in the near term. That said, we believe we still have the financial flexibility to pursue those growth opportunities where we see the greatest potential.
Before I get to our outlook, I wanted to mention a few items impacting year-over-year comparisons. Bert, last year with the Remec 50th anniversary celebration and our annual agent convention had the highest attendance in more than 15 years. We do expect a smaller crowd this year, resulting in a reduction to other revenue in Q1 of between three and $3.5 million.
In addition, given the wind-down of our book first and January operation. We expect a year-over-year decline of approximately $3 million in revenue and $1 million in adjusted EBITDA in FY24. Of this amount, we expect the Q1 impact to be a year-over-year reduction of approximately $1 million in revenue and $0.5 million in earnings.
Last as a follow-up to what Eric mentioned related to team modified and expanded student program offers an alternative fee structure that is designed to support and encourage the growth of medium to large size team to activate the program's financial incentive, which include reduced recurring fees and a broker fee.
Our brokerage and an eligible state must first, add any combination of six new team leaders and members from outside of the network. As a result of this growth requirements, we expect to incur less familiar foregone revenue in 2024 related to the expansion of this program. We included additional details about the initiative in our Form 10-K and are happy to answer any questions you might have regarding the program.
Our fourth quarter and full year 2024 outlook assumes no further currency movements, acquisitions or divestitures. For the first quarter of 2024, we expect agent count to change from a negative 0.5% to a positive 0.5% over first 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 $16.5 million to $19.5 million.
For the full year 2024, we expect agent count to change from a negative 0.5% to a 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, operator, let's open it up for questions.

Question and Answer Session

Operator

(Operator Instructions) Soham Bhonsle, BTIG.

Soham Bhonsle

Hey, everyone. Good morning, corporate and well, I'm bringing America welcome to the fold down. I guess you've had some time to sit back and assess the whole situation. And sounds like, you know, what you're saying is the current programs that you have in place are sort of where you want to go going forward.
So just want to hone in that hone into that for a little bit and maybe just provide us some quantification around what benefits you're seeing from these programs versus, you know, and folks that are not in this program just to give us confidence around, you know, agent count growth and things, things of that sort.

Erik Carlson

Yes, sure. I mean, I think I'll let maybe Amy talk a little bit about some of the benefits that she's hearing specifically from the network from. Look, I mean, I'm just over three months now. I appreciate the welcome. I am, as I stated earlier, drinking a little bit from a fire hose, and I've been on a bit of a tour of duty.
And I think, you know, from a from a high-level perspective, there's definitely opportunities. I mean that they are not I'm not trying to hide the fact that 2023 was definitely a rough year for the industry and for the team. But I think what the team has done a good job of and we'll continue to build on this because the foundation is there is to continue to focus on some things that are working and get out discontinued some things that may not be as effective. And so as we have pointed out, not only in the 10-K
, but in the opening remarks, there are opportunities still with franchise sales, G&A as a good program for us and the team's initiative, although, you know my personal feeling as it was in pilot wage laws, we have we have to get that out and we have to get that out in a prudent investment type matter, right? So but we are hearing good feedback from the channel. I'll let Amy maybe dip into that a little bit more to provide you some color and then I'm happy to take a follow up on that.

Amy Lessinger

Sure. Good morning, Rick. It's important. Our initiatives are really driving the desired behaviors and outcome that's evident from the M&A result, given that they doubled. So we intend to put our foot on the gas there and continue forward on examples. We added hundreds of agents in Q4 as a result of that. In addition, with Teams expanding, we've seen great results and we've now launched it add to our additional US core state. And so we anticipate good results from that.

Karri Callahan

You don't want to carry just a couple things that I would know more from a financial perspective. And we agree with what Eric and Amy have commented on one. As it relates to M&A, we have done some look-back analyses and the returns on those are really consistent with what our expectations are still really doing everything we can to meet our customers in the marketplace with different innovative solutions and bringing those on to RE/MAX, given the strength of the brand.
And then from a team perspective, also just wanted to highlight some of the differences there in terms of the rollout, when we announced the modification, a there's a different component there, and it's really some lessons learned that we've iterated and gone through this program where we have today for requiring our franchisees to actually bring on new agents to be eligible for the fee concessions.
So they have to bring in six additional agents and into their brokerage on before they're eligible to participate in the program. And so as I mentioned in the scripted remarks, it's about a $1 million investment that we expect on currently this year, which is a lot less than the investment was when we launched on an initial five states in the summer of 2022.

Soham Bhonsle

Okay, great. Thanks for the color. And in carry on the revenue guide, it's come in a little lighter than we were expecting. But then if I sort of marry that with just where you are sort of forecasting agent count to be looks like you're expecting some sort of lift in the back half. And so should we take that to mean that the lower revenue. Really the biggest piece here is the model piece and then everything else is sort of smaller.
Just any Yes. Any sort of level of impact would be helpful.

Karri Callahan

Sure. Yes. I guess I would highlight three things on there. One Keep in mind, and I mentioned this on the scripted remarks that in Q1 we are expecting headwinds of $3 million to 3.5 million because of our annual agent conference last year, the 50th anniversary and just had the highest attendance we've seen in about 15 years. And we do expect lower attendance this year, we will also have some year-over-year headwinds just with the wind down of our legacy tech business.
So on a full year basis, that's another, you know, call it roughly $3 million and then $1 million that I mentioned on the team's initiatives. And then we've got some puts and takes throughout the course of the rest of the business on the on the mortgage side, we were pleased to see and obviously in a very, very difficult end market and we did it and eke out a little bit of organic growth in 2023. And as we look ahead to 2024, I still think that there's a lot of optimism and around that business. But the growth rate looks probably are comparable, if not just a little stronger.

Soham Bhonsle

Okay, great. And then just very quickly on the TLR business, there's an update there that would be helpful, too.

Karri Callahan

I'm sure that we disclose a lot of information with respect to that in our in our 10-K and based on how we look at the PLR calculation in accordance with the credit agreement as of the end of the year, we're looking at a ratio of 7.8. One of the things that's really important there, though, that I wanted to stress is that we do anticipate being below that 4.5 times by the end of the third quarter.
And I think the thing that we always just have to keep in mind is the overall strength of the model, right? The 100% franchised business, the asset-light model, as Eric mentioned in his prepared remarks, we think the settlement is an investment that is having an adverse. It obviously impacts on the TLR right now, but we'll get past that here in 2024 and move forward with the operational and financial strengths and characteristics of the business.

Soham Bhonsle

Great bench well protocols.

Operator

Anthony Paolone, JPMorgan.

Anthony Paolone

Thanks. I'll welcome, Eric and congratulations Amy, on my first question is maybe can you maybe step back, it sounds like maybe learn some lessons with the teams roll out the broker rollout and just refresh us on just what exactly the value proposition of what RE/MAX is offering for teams to come over? And just what I'm trying to bridge sort of that financial impact and kind of what that what exactly the incentives are.

Karri Callahan

Good morning, Tony and Karri. I'll go ahead and start and then if there's anything that I've missed, the team can jump in. So I think when we look at the overall team's offering, we're looking at it kind of across three different verticals. One is from kind of an education perspective. We've got a lot of initiatives with various partners in terms of how do we help our brokerages and our team leaders not only build and scale their businesses at a broker's level or at a team level The second piece is around technology.
So the launch of the KB core platform was instrumental in terms of providing a team specific instance, to help teams more effectively and efficiently manage their business because at RE/MAX, whether you're an individual or a team, productivity is key to us and everything we do and to enable our network and from a technology perspective is important.
And then lastly, looking at how can we really be competitive in the marketplace from an economics perspective? And so I think those first two pillars are things over the course of the last 18 months as the pilot has been in place that we really focused on from an economics perspective on the changes that we've made in the initial five state rollout we had and there was not a growth component until it was basically entirely foregone revenue when we announced that program back in 2022.
And we said it was going to be an annualized impact of kind of $3 million to $4 million just for those five states. And now what we have learned is we really want to partner with the network. And that's important from a growth perspective and make sure that they've got some skin in the game.
And so now there is the growth requirement where on offices, our franchisees have to recruit six new team members or team leaders into their office. And at that point, they'll be eligible on for the competitive CC. program. And that's why the financial impact is a little bit less for the rest of the rollout.

Anthony Paolone

Okay. So then just to understand, I know there's some financial impact with this, but if you deem it successful and it's working and it gets fully rolled out, like should we expect just continued? Is there a financial headwind until the whole thing is, I guess, kind of dialed into the system like is that a couple of years processor just trying to play that out?

Karri Callahan

No. I mean, in my own because we're rolling it out effective on for one, there could be a little bit of a trickle into Q1 of 2025. But yes, it probably is a 12 month investment and then you should have a tailwind after that Okay.

Anthony Paolone

And then just my follow-up is just a bit more bigger picture on just U.S. agent count. Do you think there's a lot more to go in terms of agents leaving the industry given just the muted level activity of activity now for a decent amount of time? Like is there a lag there?
And I understand the RE/MAX agents are more productive and likely to push through all this, but just trying to get your view on kind of where we are in terms of just the overall industry and how much more there might need to be in front of shrinking agents?

Amy Lessinger

I think a couple of thoughts there. First of all, you know, this time of year, we always see a purging of nonproductive agents just across the industry as a whole. But given our agents are more professional and more productive, we tend to be a little bit more insulated from that. So and in addition, I think we anticipate more transactions this year than last year. So actually, that should be, you know, from our favor, given our model and our structure.
Okay.

Anthony Paolone

Thank you.

Operator

Tommy McJoynt, KBW.

Tommy McJoynt

Hey, good morning, guys. Thanks for taking my questions and welcome to everyone new on the call here. And I wanted to see if we could dig into a little bit on the agent count guidance that you guys did provide just for the total agent count, if we were able to kind of break it down by geography, maybe at least directionally, there would be helpful.
So relative to last year, we saw US down 6% and Canada flat and international up 7% on just directionally relative to those figures, do you envision an acceleration or deceleration of those last year's trends in each of those regions?

Karri Callahan

Morning, Tommy, I'm curious. So I think the trends are going to be, I think, similar, but hopefully some improvement. So still expecting kind of relatively flat performance in Canada, obviously been a tough end market there, but I think it really does highlight the strength of the brand up in Canada still expecting to see growth in international. And again, hallmark of the RE/MAX brand is just the global footprint. And then in the US still expecting to see some pressure, but hopefully a little bit less of a decline than what we saw in 2023.

Tommy McJoynt

Okay, got it. Thank you. And then on the next question, you mentioned the revenue headwinds related to the convention and then the legacy tech revenue headwinds. Are there what's the impact on earnings or EBITDA from those two items?

Karri Callahan

So yes, on the impact, that convention has kind of passed $1 million in Q1. And then on the others, it's about [$1 million] bucks for the full year.

Tommy McJoynt

Perfect. Got it. Okay. And then just my last question on with RE/MAX agents, obviously representing sort of a broad base of the market naturally, you kind of see lots of data on how your agents are transacting and with all the headlines around the settlement and the class action litigation and the industry have you noticed any increase in the use of buyer agent agreements or are more buyers paid paying their buyer agents directly or any new commission model that have gained traction like a flat fee models or just kind of what are you seeing in the past few months now that some of these headlines have become more pronounced?

Erik Carlson

Hey, Tom, it's Eric. I'm not going to comment on that or any kind of dig into some of the details, I mean, but I think, you know, one of the things from the investment there and a differentiated basis is we're getting a lot of positive feedback from the network, right? Can feedback about that for 50 years? Really, we've cared about agents and agents feel like with us leading with anywhere on the settlement.
They appreciate that leadership position and then appreciate us making investments and helping them through a very tough time on the agri and title that any comment on a few more details that you hearing specifically from the network.

Amy Lessinger

Yes, I think come first of all, you know, I think that this shows that we care about our agents. And without a doubt, the sentiment is terrific. One of our big things is education. And for example, we in RE/MAX University, we offer something called the accredited buyer representative designation which give our agent education on exactly how to articulate their value proposition, et cetera. So we anticipate that there will be more demand for that as we move through. But as far, as you know, varied models, et cetera that are out there. I think it's too soon to really highlight those.

Andy Schulz

And Jaime, I would add in there on the mortgage side, of the house, they're continuing to be ahead of the curve as well. They're talking to different groups talking to the Fannie, Freddie, FHA, VA to understand, can we potentially put the buyer's agency commission into the transaction in some form or fashion. So even the mortgage side of the house is trying to figure out if changes happen in the industry, how can we support those changes?

Tommy McJoynt

Yes, Jerry, I think it will be interesting to watch how that develops and Thanks. Thanks for the responses.

Operator

Ryan McKeveny, Zelman.

Ryan McKeveny

Hey, good morning, welcome, Eric and Amy. A bit of a high-level question for AMI. So I think pretty ingrained and visible and respected obviously, Agrusti network for a long time. So I guess anything you can share on maybe what your strategic approach will be, what your franchise owners and agents think about maybe going to be the same or different than and then Nick, in that seat and then just kind of big picture opportunities you see and to kind of move the needle going forward, would be great. Thank you very much.

Erik Carlson

Hey, Ryan, it's Eric. I mean, it's just that day one right off the bat. What is the overall strategy? So I appreciate the pressure and Amy as it has got a good response for that.

Amy Lessinger

Yes, yes. And having been in the business for a very long time as an agent, a team leader of bookrunner, I do see things on from an entrepreneurial standpoint from their standpoint. And I've used that experience in the last almost the last four years that I've been on this side to help drive the initiatives forward to provide our network with what they need to excel. And so of course, I echo Eric's sentiments with respect to we've got to stabilize agent count and grow agent count in the US. That will be the first and foremost priority that I have.

Erik Carlson

But look, Brian, I think we do that a bit by obviously leaning in others. It's been a it's been a tough year, like I had like I stated, but the great thing and one of the reasons that I stated, I why I love this network is just the passion, not only the passion from the people here at HQ or the folks in the field that are supporting RE/MAX brokers and agents.
But the network itself has an unbelievable passion for the brand for what they do on a daily basis for being curious about how they can get better about innovating. And so, you know, from a from a corporate perspective, our franchise or perspective, there's opportunities for us to lean in and to educate in a different way to use technology to help enable some of effectiveness and efficiency don't be confused.
I mean, we are people focused technology-enabled and will that we'll lean into that. But there's others areas of opportunity for us. And what you'll see us do here over the course of 2024 is to continue to lean into the details and start to bend the trend.
So some of our efforts, whether it be M&A or teams are showing positive results. But we also have a few agents that are leaving the network that might want to say. And you can understand this. I mean, people don't necessarily leave a brand or a company, they leave a manager.
And so the same, the same holds true and for agents, and you'll see us continue with that differentiated programs over the course of 2024 to help agents find a home where they can be productive and feel welcomed and continued due to the great work that they do with consumers every single day and thanks so much.

Ryan McKeveny

That's really helpful commentary from both of you, Karri. Just one final one on the international agent count. Obviously, it's been a big growth component of things. If we just look at the January 2024 operating stats against four Q, it looks like it looks like at least through January, there's a bit of a step lower internationally.
I guess I'm curious if there's anything to call out call out there. I know you already made the comment that big picture you think that will remain a growth driver, but anything going on near term to call out there?

Karri Callahan

Yes. I mean, you're right. We did see a little bit of pressure in January, a lot of time on global regions on kind of evaluate quota nonperforming on agents and offices throughout the year. And we have some volatility just in terms of how that activity has reported and that just happened to be reported in January.
The thing I would note is what we're seeing in February so far is that the international agent count is off to a solid start. And as I mentioned earlier, we expect to kind of see that healthy growth rate continue on as we progress through 2024.

Ryan McKeveny

Okay, perfect. Thank you so much.

Operator

Ronald Camden, Morgan Stanley.

Ronald Camden

Great. Welcome, Eric and congrats, everyone. Just a couple of quick ones. Just looking at the 10-K regarding sort of the settlement agreement, I think you mentioned that sort of May 9 is the final approval hearing, but I guess I was surprised to see that, you know, there was some additional disclosures on February 15.
Looks like the DOJ file the statement here denying approval of another settlement. Looks like there were some additional litigation and litigation claims that were also disclosed this quarter versus last. So I guess the question is, are those additional disclosures?
Are we supposed to are we supposed to think about those? Are they completely irrelevant? Not related to the May 9 situation, but do they have an impact and sort of bigger picture as you sort of take a step back, how does that impact just how long this litigation passed settlement could be an overhang for the Company.

Karri Callahan

Hey, good morning, Ron and Kerry. So I think a couple of the things that I want to stress on about the settlement. First and foremost, we, as Eric mentioned, are extremely happy with the decisions that we made to settle the cases on behalf of our network, our franchisees, our agents and really all of our stakeholders as it relates to a lot of the additional disclosures and those relate to some copycat cases and that have subsequently been filed after October 31 verdict.
Importantly, to note, our settlement does cover us on all claims for home sellers on a nationwide basis. So once May ninth and yet here, we are cautiously optimistic about final approval and we expect and the general copycat cases would go away. And these have been We've obviously just had to disclose the fact that they that they did exist as it relates to back to the Company.

Ronald Camden

Got it.

Operator

John Campbell, Stephens.

John Campbell

Good morning, this morning are Joe. I wanted to I guess I wanted to zoom out and maybe talk about the overall strategy. It sounds like you guys are remaining laser focused on the better domestic growth, the road out a ton of new initiatives that some of those appear pretty promising on are and you've pivoted away the past, you had a philosophy around kind of owning the technology, obviously you've outsourced that and kind of partnered. So that was a pretty big pivot.
But I'm curious about whether you're considering if all things are on the table, like I'm thinking more about like the legacy items, maybe the foundation of the business. So think of things like the continuing franchise fees and annual dues and then also the minimum age agent count. I know that's here and there's call it a little bit of strife with some owners. So I'm wondering if you're considering pertaining some of those items and maybe if you could talk to us.

Erik Carlson

Hey, John, it's Eric carried on. Good, good. Look, I think, yes, I think that we've got a great foundation in place. And so a few things here. One is you know, in my opening remarks, I hinted towards it, but you know, just from a baseline perspective, we're not through necessarily the baby out with the bathwater, right? So you've got a good foundation in place. We're going to operate as effectively and as efficiently as we can.
So that may be a bit more sales rigor that maybe discipline around a few other items. But you know, I come from obviously an operations background and I'll bring a little bit of that, obviously to RE/MAX and to help also of franchisees in their local communities, run better businesses and be more effective and efficient your technology front there.
And I said it earlier, but I'll reinforce it. I mean, we are a people-focused business right so I still I feel like the transaction is about the agents and they can provide more success. Consumers love that. And so that doesn't mean we ignore technology. We enable effectiveness and customer experience with technology. So people focused technology-enabled, definitely there's no doubt here.
There's a curiosity, especially in the channel and with them, you know, with our network and our agents or brokers and folks here. So we will explore a growth mindset. That's about curiosity, that's about innovation that's out leaning in right through the model and discovering new things where we can help and we will be laser focused on improving the customer experience and being the absolute best there.
I'm very passionate about that. But at the same time, you know, it is a clean sheet of paper. I'm coming in brand-new I'm here just over three months. So I like to wake up every day and think about, you know, whether the sees us. Examples of these are day one, you know, you can think of a clean sheet or a blank whiteboard and so we will be open-minded.
Walt, I will also be opportunistic I know you'd love to hear exactly what our strategy is going to be. We're not going to lay that out quite yet, but we are we are working on it and so more and more to come there. But there's nothing really closed off, I guess I'd say, John.
And so if it's a different way to think about helping brokers and owners be successful in the market or helping agents that could be feels that there's TRPs that would be tools that could be programs like teams and all those things are on the table. So a long answer with no answer for you.

John Campbell

No, that's helpful, Adolfo. I think you said enough there, Gary. I was a little surprised to hear about the model impairment charge, it seems like you guys have obviously performed well there. I mean, obviously, the mortgage market is very difficult, housing difficult, but then you've got the refi impact on mortgage that it added another layer of complexity.
But I'm just curious if that impairment, if that's more of a markdown from a maybe like an ultra-bullish outlook and just kind of taking that down a bit? Or is there something structural where the maybe the current business base is at risk? I know you guys mentioned the word churn, which you haven't really mentioned much about Motto in the past. And I'm curious about whether that's again taking that down from a very bullish long-term forecast versus nothing systemic.

Karri Callahan

Yes, hey, it's great. And it's a valid question, John. I think you know, as I said in the scripted remarks, we continue to be very, very bullish on the opportunity for the mortgage segment on both the motto business from a franchise sales perspective, obviously sales are down, but there were still selling franchises in the mortgage space in a historically difficult mortgage environment.
And then on the remodel side, continue to see strong growth there and given how the service areas included and mandated in the franchise agreement, you still continue to be very bullish on the opportunity there. You unfortunately really tied up kind of in the accounting rules.
And we really had to just really put our best foot forward in terms of what the projected near term cash flows were related to our business. And it's really because of the macro environment and that reduction in near-term cash flow that caused the impairment, but nothing structural or how we see the long-term opportunity associated with that business.

Erik Carlson

And John, maybe we can comment on churn that also might be a legacy term that I use for my at my own pay TV days. So but a lot more comments on that.

Ward Morrison

Yes. I mean, obviously, '23 was it was a tough year in the mortgage industry. So we did have some terminations on that stepped up a little bit. So we feel like with any kind of change in interest rates and we can improve that.
Additionally, we started to really focus on recruiting LOs, trying to benefit our owners more LOs into the office or loan originators so that they can do more business and make sure that they can weather the storm because all that matters in mortgage mortgages volume. And so really just trying to drive that volume in those locations so that those offices remain strong and sound in the near future.

John Campbell

Okay. That's helpful. And then maybe I'll squeeze in one more here and this related to the model. But I mean, it's clear to see the decline in the franchise, the sign franchises over the last couple of years, I think you're doing maybe a little bit less than half of what you did probably two or three years ago as you took this impairment charge and you're having to forecast out what you're assuming for franchise sales here.
I don't know if you can provide a little bit of color there. Any kind of indication of what that might look like this year, do you expect that to bounce back as much as the overall mortgage market bounces back? Just kind of any kind of direction on that?

Karri Callahan

Sure. So I think as we looked at that forecast, that's embedded kind of in that cash flow analysis, we're kind of ramping from tens of sales up to hundreds in the outer in the outer years near term, as we look at 2024 for communal, looking to have some growth.
Last year, we did 27 and looking maybe in that 40- to 50-ish range. And this year, that's obviously dependent on what happens from a from a macro perspective and what happens with rates. But as I said, Ward and the team have really done a great job still even selling more mortgage products. I'm in a really difficult end market.

John Campbell

Okay. That's part of that I was looking for. Thank you, guys.

Operator

And that does conclude our question and answer session. I will now turn the conference over to Andy Schulz for closing remarks.

Andy Schulz

Thank you, operator, and thanks to everyone for joining our call today. If you have any additional questions, please reach out to Investor Relations. Otherwise, have a terrific weekend.

Operator

And this concludes today's conference call. Thank you for your participation, and you may now disconnect.