ZoomInfo Technologies Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 21, 2025

There are 9 speakers on the call.

Operator

Good morning, and welcome to the REMAX Holdings Fourth Quarter twenty twenty four 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 Schultz, Senior Vice President of Investor Relations. Mr. Schultz?

Speaker 1

Thank you, operator. Good morning, everyone, and welcome to REMAX Holdings' fourth quarter twenty twenty four earnings conference call. Please visit the Investor Relations section of www.remaxholdings.com for all earnings related materials, including our standard earnings presentation and to access the live webcast and the replay of the call today. Our 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 facilities, dividends, share repurchases, litigation settlement, strategic and operational plans and business models.

Speaker 1

Forward looking statements represent management's current estimates. REMAX 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 fourth quarter twenty twenty four financial results press release and other SEC filings. Also, we will refer to certain non GAAP measures on today's call.

Speaker 1

Please see the definitions and reconciliations of our 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 Eric Carlson, our Chief Executive Officer and Kerry Callahan, our Chief Financial Officer. Ward Morrison will join us for Q and A. With that, I'd like to turn the call over to REMAX Holdings' CEO, Eric Carlson. Eric?

Speaker 2

Thank you, Andy, and thanks to everyone for joining us this morning. There were many positives in our fourth quarter results, which were headlined by better than anticipated profit performance for the third consecutive quarter. Operational efficiency remains a focal point for our team and that effort continues to contribute to our strong margin and bottom line results. The housing macro environment remains in a state of transition. There are a lot of variables, inventory, interest rates and moves by the current administration to name a few.

Speaker 2

However, change and uncertainty bring opportunity and our networks are built for times like these. They have proven they can succeed in almost any market. The resilience of our company coupled with the confidence we have in our growth strategy alongside our proven ability to execute on operational efficiency sets us up for future success. Although we still have more work to do, it's encouraging to see our efforts reflected in our financial performance. Regarding agent count, our international agent count accelerated during the fourth quarter increasing almost 9% over last year's Q4.

Speaker 2

In fact, we've more than doubled our international agent count since 2017, ending 2024 with over 70,000 agents outside The U. S. And Canada for the first time. In Canada, where the REMAX brand and network is the industry leader, we had over 25,000 agents as of year end. One important side note, in order to protect the company and REMAX network in Canada, we have substantially agreed on monetary terms and to make certain business practice changes to settle two industry class action lawsuits, including one on a nationwide basis.

Speaker 2

We still have some work to do on the final settlement agreement and we believe this is absolutely the best decision for all of our stakeholders, affiliates, employees, shareholders and debt holders alike. We very much appreciate our Canadian network and believe this is in the best interest and shows strong support for what they do on a day in day out basis. Terry will provide some additional details in just a bit. Here in The U. S, we experienced some agent decline, which is typical at year end.

Speaker 2

We remain laser focused on enhancing our overall value proposition and delivering innovative new products and services designed to bend the trend and stabilize and grow agent count. Now when we look back at this past quarter and 2024 overall, in addition to operational efficiency, we directed much of our effort on building or improving upon foundational elements universal to every successful business, culture, leadership and systems. These critical areas will continue to be points of emphasis throughout 2025 and over the long term. Embedded in our culture is the focus on improving the customer experience at every opportunity. One key to that objective is our Voice of the Customer program through which we solicit, measure, manage and respond to customer feedback.

Speaker 2

We're leaning into the power of our networks for insights and using that important information to shape our strategy and our operational plans. This methodology will aid our ongoing efforts to increase agent count. Our quest to improve the customer experience has also yield incremental revenue opportunities. For example, our Maxtec Lead Concierge and REMAX Media Network initiatives came as a direct result of building out capabilities designed to enhance the customer experience. Last fall, we launched Lead Concierge in The U.

Speaker 2

S. And we're expecting to begin testing it in Canada very soon. The idea is to nurture high intent leads from remax.com and remax.ca and transform them into action ready buyers. It saves agent time, alleviates frustration of chasing down leads that eventually hit a dead end and look, it materially improves the customer experience. Our REMAX media network program essentially providing high quality advertisements on our heavily trafficked websites has compelling upside.

Speaker 2

We believe it could eventually generate a 7 digit revenue figure annually. Both our lead concierge and REMAX Media network efforts are just starting to contribute to our top line and should ramp up throughout this year and well beyond. As we move into 2025, we're starting from a position of strength. We have the most enviable set of competitive advantages in the business. The leading brand in real estate, an unmatched global footprint, a scaled business with attractive financial characteristics and the most trusted professional and productive agents.

Speaker 2

REMAX agents are simply the best. Our strategy is straightforward, continue to strengthen and enhance our existing business, develop new products and services to help our networks and evaluate other growth opportunities. These are exciting times at REMAX and we're open for business. From a leadership perspective, we started the year off strong with two impactful additions to our team. Chris Lim joined REMAX earlier this month as Executive Vice President and Chief Growth Officer.

Speaker 2

With over twenty two years of experience in real estate, franchise development, brokerage operations and strategic growth, Chris brings a wealth of expertise to the role. As a seasoned real estate executive, his proven track record of leadership and innovation will help REMAX attract the industry's best talent while elevating the affiliate experience and in turn, the home buyer and seller experience. Chris oversees the teams dedicated to supporting franchise growth and strength in The U. S. Company owned regions.

Speaker 2

Certain franchises receive customized support that aligns with their needs and driving the company's objectives of increasing agent count and expanding market presence. Travis Saxton also recently joined the company as Executive Vice President of Strategy. Travis brings over two decades of expertise in residential real estate technology, digital marketing and management consulting. Throughout his career, Travis has held executive positions where he's helped elevate technology solutions and content strategies to improve business outcomes. Travis has worked closely with leading real estate brokerages across The U.

Speaker 2

S. And Canada, including many of the REMAX network's largest and most successful affiliates, helping them refine, innovate and leverage business systems for growth and efficiency. In his new role, Travis guides real estate strategy and innovation with a focus on integrating solutions to optimize operations and support affiliate growth. Chris, Travis and the rest of our outstanding team will continue to work toward improving our value proposition, so our network can win more listings, make more money and save time while doing so, all while helping brokerages improve their profitability. Regarding our mortgage segment, we see positive developments amid the current industry conditions, which are impacting our overall performance.

Speaker 2

Motto continues to sell franchises consistently adding capable entrepreneurs to our network. There is a steady interest in the opportunity and that is reflected in the fact that despite the sluggish macro environment, model sales last year were roughly on par with 2023. Regarding Limo, other industry players are taking notice of our growing market presence and we're fielding more inquiries from third parties looking to explore partnership opportunities. For example, last month, a leader in the wholesale mortgage lending space announced Wing Lo as a process partner, an exclusive concierge service designed to enhance the loan processing support for its customers. We continue to lean in, be curious and to challenge everything.

Speaker 2

We're striving to improve on the best we currently have to offer, while simultaneously innovating and improving our value proposition and advancing our position as a leader in the industry. Beginning with R4, our annual agent convention next week, you should expect to see a steady stream of compelling announcements and initiatives to come out this year. We've got exciting opportunities involving referrals, artificial intelligence, marketing, branding, social networks and more. 2025 is shaping up to be an important year for REMAX Holdings and its brands, a year of transition, continued building, innovation and evolution. We look forward to sharing our progress with you.

Speaker 2

With that, I'll turn it over to Carrie.

Speaker 3

Thank you, Eric. Good morning, everyone. We finished the year positively and delivered strong margin and profit performance, continuing a trend we started in the second quarter. Diligent expense management and strong collections were the primary drivers for the better than expected results across these metrics. Some of our notable quarterly financial highlights included total revenue of $72,500,000 adjusted EBITDA of $23,300,000 up almost 2% over Q4 of last year adjusted EBITDA margin of 32.2%, an increase of two twenty basis points over the fourth quarter of twenty twenty three and adjusted diluted EPS of $0.3 Looking closer at revenue, excluding the marketing funds, revenue was $53,800,000 a decrease of 3.9% compared to the same period last year, driven by negative organic growth of 3.5% and adverse foreign currency movements of 0.4%.

Speaker 3

Negative organic growth was principally driven due to U. S. Agent count and reduced revenue from previous acquisition. Once again, margin performance improved, thanks to strong cost management and encouraging collections. Throughout the year, we implemented process improvements and added additional resources, which contributed to improved collections activity.

Speaker 3

Fourth quarter selling, operating and administrative expenses decreased $3,400,000 or 8.6% to $35,800,000 The cost reductions were primarily driven by a decrease in bad debt and investments in events, partially offset by certain higher personnel costs. Improved collections and enhanced operational efficiency drove strong cash flow generation in the quarter as two thirds of our adjusted EBITDA and nearly one third of our revenue converted to adjusted free cash flow. As Eric mentioned, we have reached agreement on monetary terms to settle two industry class action lawsuits in Canada for approximately $5,500,000 Execution of the final settlement agreement is subject to the parties reaching an agreement on all terms. These cases are comparable to the ones that we have settled here in The U. S.

Speaker 3

Upon finalizing the formal settlement agreement, the company, its subsidiaries and affiliates and REMAX subfranchisors, franchisees and their sales associates in Canada would be released from all claims on a nationwide basis. Similar to The U. S, the final settlement agreement will require court approval. We continue to deny the allegations made in the complaint and in no way acknowledge any wrongdoing. We believe that protecting our Canadian network from the risk of potential damages and the uncertainty of litigation makes this decision the right course of action.

Speaker 3

As industry leaders, REMAX affiliates understand the value of transparency, clarity and fully informed buyers and sellers. These are key elements to the foundation of repeat and referral business, the basis of top producing agents. As a result of the strategic decision to settle the Canadian litigation, our total leverage ratio ticked up slightly to 3.57:one as of the end of the year. Given the cash generative nature of our business, we believe our cash reserves will continue to grow and enable us to delever as we move throughout 2025. We are prioritizing strategically reinvesting in the business and believe resuming a modest level of stock repurchases given the current price is attractive.

Speaker 3

However, as always, we remain judicious regarding capital allocation decisions. Our first quarter and full year 2025 outlook assumes no further currency movements, acquisitions or divestitures. For the first quarter of twenty twenty five, we expect agent count to increase 1% to 2% over first quarter twenty twenty four revenue in a range of $71,000,000 to $76,000,000 including revenue from the marketing funds in a range of $18,000,000 to $20,000,000 dollars and adjusted EBITDA in a range of $16,000,000 to $18,500,000 And for the full year 2025, we expect agent count to change negative 1% to positive 1% over full year 2024, revenue in a range of $290,000,000 to $310,000,000 including revenue from the marketing fund in a range of $71,000,000 to $75,000,000 and adjusted EBITDA in a range of $90,000,000 to $100,000,000 With that operator, let's open it up for questions.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Anthony Paolone with JPMorgan. Please go ahead.

Speaker 4

Thanks and good morning. First question is with regards to some of the personnel changes you've made and some of the initiatives you've talked about like lead concierge and the media efforts, like what are the sort of additional revenue opportunities that you see? Do any of them rise to, say, the size of AMATA? Just trying to understand how much of the effort here is around new revenue streams versus just the overall customer experience around what you have currently?

Speaker 2

Yes, Tony, this is Eric. Thanks for the question. If you look at I've been here almost, I guess, fifteen months now and really working on kind of turning over every stone and looking for not only opportunities to kind of improve the stabilize and improve the current business, but also increase additional revenue streams for the existing business. So like we are optimistic. And I know that it's not totally reflected to the outside, but in the inside, we're quite excited.

Speaker 2

And unfortunately, this call is just two days before our large agent event R4, which starts Sunday night, where we've got a number of initiatives that we'll be talking about with the network in order to help kind of improve the overall value proposition that we bring to agents and brokerages that are in the worldwide REMAX community. And so, you're going to have to kind of wait to see there. I made a promise to the network that I talk to the network first. So you'll have to look at the press releases there. But on a bit more serious note, I mean, like Lead Concierge is not only good for consumers and agents, but it will drive the bottom line.

Speaker 2

Now, as we are also optimistic about model growth, I don't think that Lead Concierge itself would ever kind of catch that from a top line revenue perspective if Ward is doing his job. And you can ask Ward about that in a minute. But I think that we're already seeing thousands of agents opted into that program. We are moving through hundreds of leads. Customers are agents are closing conversions.

Speaker 2

And like it's not really about what's happening right now. Other than that, we have the plumbing in place. And so, now that we have the plumbing in place and we're contacting customers within a few minutes and we're cycling those leads to opted in agents who are responding quickly, we can start to analyze whether or not we want to continue to generate additional sources, spend additional dollars, etcetera, because we closed the loop on the marketing, right? And so, that's kind of an important factor. I want to be clear, like, our website definitely generates high intent traffic, fifty years in the business, good traffic that's really not paid for.

Speaker 2

We are not in the portal business. We're not going to spend like the portals, but because of the brand and the high intensity of customers looking for the REMAX name, we see traffic. So we're just trying to optimize that asset. So that's positive. In addition, we've talked about the REMAX Media Network.

Speaker 2

We launched that in Q4. That is ramping nicely. I think that we're seeing good quality advertisements that can not only improve the consumer experience and make the site more energetic, attractive and spend a bit more time there, but also it is generating some top line revenue. We'll have more on that probably in Q2. I would say that we're still kind of in the early phases.

Speaker 2

We're talking to a lot of advertisers and agencies. We've built good inventory positions. We need to build out more, but we've got the plumbing in place and it's working. So, we're kind of stepping on the gas a bit to sell now. So, we're like I said in my opening comments, I mean, we're optimistic that that's going to create a seven digit revenue opportunity for us.

Speaker 2

Most of that, you'll start to see ramp in the back half of the year. And then, our biggest opportunity is still with how we're going to stabilize U. S. Agent count and continue to generate revenue from those fees. And it really comes down to improving our value proposition.

Speaker 2

And so I'm excited about the handful of things that we'll talk about next week in order to kind of reintroduce our brand to the network and improve that value proposition. We've been leaning in and really providing more support to the network. We're excited to strengthen our swagger next week. And by the way, like we're in the business of helping agents and brokers win listings, make more money, do it in less time and get brokers back to some level of profitability. So that's what we'll be talking about at a high level next week and we're excited about it.

Speaker 2

So hopefully that helped, Tony.

Speaker 4

Yes, that's great. And we'll work out for the headlines, I guess. And then just my follow-up is really on broker commissions. Can you give us just your thoughts on what you're seeing in the system right now in terms of how buyers are approaching the new rules and any change in rates you're seeing?

Speaker 2

I'm going to let Carrie take that one, Toni.

Speaker 3

Hey, good morning, Toni. So from a rate perspective, it's actually been remarkably consistent throughout 2024, especially kind of as the activity happens post NAR settlement. What we've seen internally, is a very consistent trend from a rate perspective. I think when you think about just the REMAX network and the hallmarks of the our competitive advantages around trust, professionalism and productivity, our network has adapted very well. Obviously continue to represent buyers and sellers in the highest quality manner just given the competitive advantages and what it stands to work for with a REMAX agent.

Speaker 3

And we haven't really seen much impact in terms of the overall economics. I think if anything, it has put us in a stronger position, just given the two to one productivity and what the brand stands for from a trust perspective with consumers.

Speaker 5

Okay. Thank you.

Operator

Your next question comes from the line of Nick McAndrew with Zelman. Please go ahead.

Speaker 6

Hey, guys. This is Nick on for Ryan. Thanks for taking my questions. Carrie, maybe one for you just to start, obviously being very diligent on the cost side of things. Wondering if you can just touch on some of the major buckets that you've been able to strip out costs from over the last year, but also how you're thinking about any incremental opportunity into 2025 for further savings?

Speaker 3

Yes, that's a great question, Nick. I think obviously the entire team really pulled together as we went through 2024. Large focus area was just around our operational efficiency. So not taking anything for granted, not leaving any stone unturned and making sure that we were very purposeful and thoughtful in terms of every dollar that was spent and making sure that we could maximize the returns on those investments. Obviously, if you just look at the overall cost structure, personnel continues to be a large piece of the picture.

Speaker 3

But if you look at kind of our Q4 twenty twenty four run rate, you're looking at total SO and A kind of around $36,000,000 Obviously, we always have a bump in Q1. Eric mentioned earlier our R4 annual agent conference, so our SO and A always ticks up a little bit. Q1 of twenty twenty five is looking kind of comparable to 2024. And then as we get into Q2, Q3, Q4 of this year, looking at trying to maintain that SO and A run rate. So I think we've done a really nice job looking across the cost structure to really optimize where we can, to be able to just offset any other inflationary pressures that might be happening.

Speaker 3

And so as we get into Q2, Q3 and Q4, kind of looking at a reasonable kind of Q4 twenty twenty four run rate in that kind of $36,000,000 to $37,000,000 range as the run rate in the back half of the year.

Speaker 6

And then maybe switching gears for a follow-up. On The U. S. Agent side of things, are there any trends to call out kind of beneath the headline numbers, whether that's by geography or agent segments of at least kind of are you seeing any shift in the demographic of patients joining the network? Are they newer agents?

Speaker 6

Do they come over from teams or independent brokerages? Just any color to add there? Thanks.

Speaker 2

Yes. Thanks, Nick. We got to ask, did Ryan take the day off?

Speaker 6

He's around here somewhere.

Speaker 2

All right. All right. I get where we stand now with you guys. All right. So it's a joy to have you Nick, don't get me wrong.

Speaker 2

But from an agent perspective, it's a bit more of the same. Like I mean, I think that there is there are new agents and I'll talk just a little bit broadly. There are new agents coming into the business that are still struggling to find their way. We're not seeing kind of our highly tenured professional agents leave us at a high churn cliff. That's been fairly stable.

Speaker 2

And I think that one of our ideas and goals is to actually be able to attract more of those. So when I talked earlier about improving our value proposition, part of that is to be able to bring all sorts of agents into the network and get them to that professional productive trusted level regardless of whether they come in that manner or not. So, I think that we have a little bit more work still to do on helping brokers onboard agents and make them productive. And so, generally, that's where you're seeing most of the churn, lower tenure, lower productivity.

Speaker 6

Great. Thanks, Eric.

Operator

Your next question comes from the line of Ronald Kamden with Morgan Stanley. Please go ahead.

Speaker 7

Hey, just two quick ones. One is just on the both on The U. S. Asian count and the outside of The U. S.

Speaker 7

Asian count. Just curious if you could provide just a little bit more color on sort of what's driving the attrition? Is there anything new versus the past twelve months that's driving some of the downside on The U. S. And actually the upside on the international?

Speaker 7

And is there sort of a different tact or strategy that you guys have taken or plan to take to continue the trends outside of The U. S. And sort of improve the trends in The U. S, if that makes sense?

Speaker 2

I think so, Ron. I mean, I'll talk in general about U. S. Agent count through the different kind of geographies. I mean, Canada is still strong over 25,000 agents.

Speaker 2

We put down just a couple 100 or so off of Q4, which is an all time high for us. I do think that there is in Canada, obviously, we've got premier market presence, right? I mean, we've got 30%, like 28% market share. The market leader, great brand, different market up there. As we noted in our remarks on the front of the call, I mean, obviously, we felt it was important strategically to settle the Canadian law case lawsuits in order to provide some additional air cover and remove some variables from Canada.

Speaker 2

So I think it's a little bit more maybe top of the funnel there. On the international side, look, I mean 70,000 is an all time high for us. So up just under 10% year over year, seeing good, but the brand is strong internationally, right? Over 110 countries, we've got just awesome entrepreneurs that are running regions and brokerages that are hungry. There's just huge opportunity internationally, not only to grow our agent base, but to monetize that.

Speaker 2

And so we've got strategies against that, although I'll come back to U. S. Agent count, that's probably that's the primary focus for us today. And I do think I talked a little bit about churn with Nick. I think that it's a top of the funnel issue and I think it's a top of the funnel issue for not only the industry, but also for us.

Speaker 2

And I believe in some of the items that we're going to roll out next week and improving the value proposition, building a good foundation, focusing on the customer experience, the agent experience and the broker experience. And if we do those things and stay true to who we have been and who we want to be, we'll be in a good position. And I'm very optimistic about our ability to lean in, support the network and return us to U. S. Agent stability growth and we'll have monetization opportunities along the way.

Speaker 7

Great. And then just another quick update on I think there was a Canadian substantial agreement in Canada. I think the company is still waiting on the appeals process of the $55,000,000 settlement. Just curious is after sort of those two, does that address sort of all the litigation that's sort of mentioned in the 10 K? Or are there other sort of stuff that we're waiting on?

Speaker 7

Thanks.

Speaker 3

Yes. Good morning, Ron. I think as you noted, we're really happy with where we are, just with respect to the work that's been done from both a U. S. Perspective as well as a Canadian perspective.

Speaker 3

It removes a lot of uncertainty and we absolutely think that it's in the best interest, of all of our stakeholders. And with respect to any of the other litigation, we did file the 10 K last night and everything else is outlined in those disclosures.

Speaker 7

Great. That's it for me. Thanks so much.

Operator

Your next question comes from the line of John Campbell with Stephens. Please go ahead.

Speaker 5

Hey, guys. Good morning. Good morning, John. Good morning. So maybe let's start with R4.

Speaker 5

I know you've got that around the corner. I appreciate you got to hold the line a little bit on the commentary around some upcoming changes. Sounds like you guys have some stuff up the sleeve there. But it sounds like you kind of hinted at remax.com and maybe envisioning a different way to maybe present that to consumers. But just kind of tying this back to CCP, that's obviously the big battleground topic these days.

Speaker 5

One of your public competitors is kind of the leading public figure on the anti CCP side of things. They've gotten obviously investors on board with their strategy. They're kind of getting people on board with the view that they can compete with Zillow and Realtor.com and whatnot and kind of be a portal. Stock looks like it's doubled over the last month. I'm hoping you can maybe refresh us on REMAX's latest stance on CCP and then what extent you can maybe talk about how you're envisioning that kind of direct consumer access over time?

Speaker 2

Well, John, thanks for the question. I was waiting for it from you. I appreciate you being patient about our four network announcements because I know that you sell also. So, you know what it means to tell our dear customers what's on the table for them first. So we're excited about next week and it's just not great timing for you guys today.

Speaker 2

But look, I don't think our position on CCP has changed necessarily since last quarter. I do think that there is kind of like an anti and pro fight happening. And I think that there is a lot of middle ground there to explore. Look, we are in a great position with our brand, with our market share, with our global presence and agent count. I mean, like nobody in the world sells more real estate than REMAX.

Speaker 2

And so, I think that we're prepared either way. So let me talk about that first. So like if that other public competitor got their wishes, I mean, we would be ready to compete, meaning that we thought about our business practices and our technology and how we would go to market potentially in a different way. Now would it exactly be what that anti approach is? Probably not.

Speaker 2

I mean, generally, we believe in like transparency and what's in the best interest of the customer. So as you know, there are obviously pockets of customers that feel that they get a better price from being kind of off a listing and doing things in a private way. And in some cases that may work for certain unique individuals. I think overall though, what the data shows is that when you have transparency and you get more people to see your property, whether that's within your community, within your state, within your country or worldwide, you're going to see potentially the price be better than what you could have gotten otherwise. But I think what's most important is what we're going to try to do and what we're going to try to focus on is what is best for buyers and sellers and really take that customer experience to heart because I think if you really think about that customer experience and their wants and needs, that will win out in the long term.

Speaker 2

And that doesn't mean that you can't do certain things and make a better profit in the short term, but we're not short term players. We've been in business fifty two years. We expect to be in business another fifty two. And so we're going to focus really on that buyer and seller experience followed very closely by the agent experience. And we've got 140,000 agents that are doing unbelievable work every day to bring the experience of buying or selling a home and that emotional and financial decision to life.

Speaker 2

And so we're going to lean in and support our great network with a better value proposition and tools so they can win more listings and make more money and save some time doing it and provide a great customer experience because we have like this unbelievable trusted professional and productive group. So do I think that is there another public company out there that would be more in the pro CCB camp with some flexibility? That's probably a little bit more where we end up than in the anti camp today, John.

Speaker 5

Okay. That's a great response. And sorry to position that with R4 around the corner. I know it's kind of difficult to answer. But, okay.

Speaker 5

So, Kerry, let's talk about the appetite for buybacks. You mentioned the stock dislocation. Hoping we can revisit that commentary. I guess just first, what are your limitations from covenant standpoint? And then how much capacity do you have?

Speaker 5

Like how impact we think a buyback can be for you guys?

Speaker 3

Yes. So I think, John, as we said in the scripted remarks, the franchise nature of our business is fantastic. And obviously, we had strong free cash flow generation this year. The quarter about two thirds of our earnings generated turned into a free cash flow and on the year a little more than a half. So as we move into 2025, the first priority right now is just maintaining, getting our leverage down a little bit.

Speaker 3

It did tick up a little bit, with the settlement of the Canadian lawsuits, which as I said earlier was absolutely, we think the right thing to do and to remove some uncertainty and put it behind us. But with the dislocation in the stock, if we can get that under the 3.5 times, which we're close right now, we're looking at about 3.57 as of the end of the year. Looking at things from a buyback perspective, we would remove all restrictions from a credit agreement perspective. So really focus on, as Eric said, the value proposition, reinvesting back into the business, allocating capital to drive the top line. And then with the dislocation from a stock price perspective, think that buying back the shares is a very good we get a very good return on that, and look to do that here in 2025 as we continue to delever.

Speaker 5

Okay. That's helpful. And then maybe just to, tack this on. So, priorities right now, reinvestments in the business, buybacks and then eventually potentially the dividend?

Speaker 3

So I think, John, with everything, we're always looking and having conversations from that perspective as it relates to return of capital. Looking at from a strategic perspective and as Eric said in his scripted remarks, looking at our strategy is pretty simple right now in terms of enhancing what we have from a current perspective, developing new products and then looking at other opportunities. And then those other opportunities could relate to return of capital as well.

Speaker 5

Okay. Thanks, Kiera.

Operator

Your next question comes from the line of Tommy McJoynt with KBW. Please go ahead.

Speaker 8

Good morning, guys. Thanks for taking my questions. Just a couple of questions around the guidance. So first off, looking at the revenue, excluding the marketing funds, it looks like the guidance points to anywhere from down 4% to up 3%. Could you help us maybe think about what's contemplated in there for the more volume sensitive brokerage fees versus the recurring revenues in that guidance number?

Speaker 3

Sure. Good morning, Tommy. So as we think about, as we think about just kind of agent counts and what's kind of implied from an agent count perspective that would be more driven, which would be more impactful as it relates, to kind of the more recurring fees and like breaking that out by geography. From a global perspective, obviously in 2024, we had outsized performance and we were up about 9%. That we're looking at that to be a little bit more muted for next year kind of mid single digit growth.

Speaker 3

From a Canadian perspective, we were flat in 24%, just given some of the uncertainty from a housing perspective up there, looking for kind of similar trends just given the overall strength of the network and the brand and the market share that we have up in Canada. And then from a U. S. Perspective, we're really excited, about the path and the trajectory that we're on right now. You know, still seeing some pressure, and a little bit of a decline, but do expect to see some improvement.

Speaker 3

So some improvement from a U. S. Agent account perspective next year, but still a little bit negative. And then from a broker fee perspective, obviously, it's early in the year, a lot of golf left to be played across all geographies. But looking at broker fees, up kind of low single digits on a percentage basis year over year right now.

Speaker 8

Great. Appreciate that. And then separately, are there any one off costs or margin headwinds that are associated with some of these new product and program build out that we should keep in mind that are contemplated in the 2025 EBITDA number?

Speaker 3

So, Tommy, it's a great question. And I think one of the things that we're focused on from a revenue diversification perspective is really looking at those opportunities where we think we can really move the needle in terms of creating value for our network, but not taking a lot of risk from a financial perspective. So not significant kind of one time items that we haven't been able to otherwise cover because as we said, we've really tried to lay the foundation. And I think the fourth quarter is a testament to that because it is the third quarter in a row where we've seen some over performance from a profit perspective just given the focus and how judiciously we've been on the cost structure side. And so I think that that's something of consequence.

Speaker 3

The other thing I think that we just think about from an industry trends perspective is just around consolidation. One of the initiatives that we've talked about over the course of the last couple of years is our conversions, mergers and acquisitions initiative. And so that's another area just as we think about, it's not necessarily a one time cost, but as we think about just allocating capital to growth initiatives in the future, That's something else that we're focused on, just given that overall industry trends.

Speaker 8

Makes sense. Thanks.

Operator

Ladies and gentlemen, that does conclude our question and answer session. And I will now turn the conference back over to Andy Schultz for closing comments.

Speaker 1

Thank you, operator, and thanks to everyone for joining our call today. This concludes the event. Have a great weekend.

Operator

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.

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Earnings Conference Call
ZoomInfo Technologies Q4 2024
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