The Real Brokerage's (NASDAQ:REAX) Q4 Sales Top Estimates
Real estate technology company The Real Brokerage (NASDAQ:REAX) announced better-than-expected results in Q4 FY2023, with revenue up 88.7% year on year to $181.3 million. It made a GAAP loss of $0.07 per share, down from its loss of $0.04 per share in the same quarter last year.
Is now the time to buy The Real Brokerage? Find out by accessing our full research report, it's free.
The Real Brokerage (REAX) Q4 FY2023 Highlights:
Revenue: $181.3 million vs analyst estimates of $161.4 million (12.4% beat)
Adj EBITDA: $8.5 million vs analyst estimates of $0.3 million (big beat)
EPS: -$0.07 vs analyst estimates of -$0.04 (-$0.04 miss)
Free Cash Flow was -$6.77 million compared to -$8.13 million in the previous quarter
Gross Margin (GAAP): 8.6%, in line with the same quarter last year
Market Capitalization: $512.2 million
"Real delivered another record year in 2023, despite a challenging industry backdrop. Our performance both in the quarter and for the full year is a testament to our unique agent value proposition, our scalable technology platform, and our efficient operating model," said Tamir Poleg, Real’s Chairman and Chief Executive Officer.
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ:REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
Real Estate Services
Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. The Real Brokerage's annualized revenue growth rate of 157% over the last four years was incredible for a consumer discretionary business.
Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. The Real Brokerage's recent history shows its momentum has slowed as its annualized revenue growth of 138% over the last two years is below its four-year trend.
This quarter, The Real Brokerage reported magnificent year-on-year revenue growth of 88.7%, and its $181.3 million of revenue beat Wall Street's estimates by 12.4%. Looking ahead, Wall Street expects sales to grow 24% over the next 12 months, a deceleration from this quarter.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, The Real Brokerage has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 1.9%, subpar for a consumer discretionary business.
The Real Brokerage burned through $6.77 million of cash in Q4, equivalent to a negative 3.7% margin, reducing its cash burn by 64.9% year on year.
Key Takeaways from The Real Brokerage's Q4 Results
We were impressed by how significantly The Real Brokerage blew past analysts' revenue and adjusted EBITDA expectations this quarter. No guidance was given. Overall, this was a solid quarter for The Real Brokerage. The stock is up 4.9% after reporting and currently trades at $3 per share.
So should you invest in The Real Brokerage right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
