In the latest earnings call, Bridgemarq Real Estate Services Inc. (TSX: BRE) reported a substantial increase in Q3 2024 revenue to $126.8 million, up from $12.8 million in the same quarter the previous year. This growth was primarily driven by acquisitions completed earlier in the year.
Despite the revenue surge, the company experienced a net loss of $10.8 million due to valuation losses on exchangeable units and higher amortization expenses. CEO Spencer Enright and CFO Glen McMillan also announced a consistent dividend of 11.25 cents per share, with an annualized rate of $1.35.
Key Takeaways
- Bridgemarq's Q3 2024 revenue soared to $126.8 million, largely due to strategic acquisitions.
- The company declared a steady dividend of 11.25 cents per share, payable at the end of December.
- A net loss of $10.8 million was reported, contrasting with net earnings of $8.6 million in the previous year's third quarter.
- The number of realtors within Bridgemarq's network slightly decreased.
- Prospects for the Canadian real estate market appear positive with expected increases in transaction activity and average selling prices.
Company Outlook
- Bridgemarq is focused on enhancing operational integration and expanding its franchise base.
- Improved buyer demand and consumer confidence are anticipated due to recent interest rate cuts by the Bank of Canada.
- The Canadian Real Estate Association predicts a 5.2% increase in transaction activity and a 0.9% rise in average selling prices for the next year.
Bearish Highlights
- The company reported a net loss in Q3 2024, citing valuation losses on exchangeable units and higher amortization expenses.
- Adjusted net earnings also saw a decline to $2.7 million from $3.7 million in the prior year.
Bullish Highlights
- Revenue for the first nine months of 2024 reached $249.2 million, a significant increase from the previous year.
- Free cash flow showed an upward trend, with $5.3 million generated in the latest quarter and $15 million year-to-date.
- Upcoming government policy changes are expected to positively impact the real estate market, especially in the Greater Toronto Area and Vancouver.
Misses
- The franchise network experienced a reduction of 99 realtors, despite the addition of 2,010 agents from recent acquisitions.
Q&A Highlights
- Management reiterated their intention to maintain the current dividend per share, though future dividends will be subject to various factors.
- The full-year results are expected to be released in the spring, with management expressing optimism for the future.
In conclusion, Bridgemarq Real Estate Services Inc. experienced a robust increase in revenue this quarter, buoyed by strategic acquisitions. Despite a net loss, the company is poised to capitalize on favorable market conditions and policy changes. With a stable dividend and an optimistic outlook for the Canadian real estate market, Bridgemarq continues to focus on growth and shareholder returns as it navigates through the fluctuating landscape.
InvestingPro Insights
Bridgemarq Real Estate Services Inc.'s recent financial performance and market position are further illuminated by data from InvestingPro. The company's market capitalization stands at $99.36 million USD, reflecting its current market valuation.
One of the most striking InvestingPro Tips is that Bridgemarq "pays a significant dividend to shareholders." This aligns perfectly with the company's announcement of a consistent 11.25 cents per share dividend in the earnings call. The current dividend yield is an impressive 8.97%, which is particularly attractive in the current market environment.
Another relevant InvestingPro Tip indicates that Bridgemarq has "maintained dividend payments for 22 consecutive years." This long-term commitment to shareholder returns underscores the company's financial stability and management's focus on delivering value to investors, even in challenging market conditions.
The company's P/E ratio of 8.69 suggests that it is trading at a relatively low earnings multiple, which could indicate potential undervaluation. This is further supported by the InvestingPro Tip stating that Bridgemarq is "trading at a low EBITDA valuation multiple."
It's worth noting that InvestingPro offers 9 additional tips for Bridgemarq, providing even more comprehensive insights for investors looking to deepen their understanding of the company's financial health and market position.
These InvestingPro insights complement the earnings call information, offering a broader perspective on Bridgemarq's financial standing and market performance. They reinforce the company's commitment to shareholder returns through consistent dividends and highlight potential value opportunities for investors.
Full transcript - Bridgemarq Real Estate Services Inc (BREUF) Q3 2024:
Operator: Good morning. My name is Sylvie and I would like to welcome everyone to Bridgemarq Real Estate Services Inc. 2024 Third Quarter Results Conference Call. This call is being recorded. [Operator Instructions] After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to introduce Mr. Spencer Enright, Chief Executive Officer of Bridgemarq Real Estate Services Inc. Sir, you may begin your conference.
Spencer Enright: Thank you, Sylvie. Good morning, everyone, and thanks for joining us on the call today. With me today is our Chief Financial Officer, Glen McMillan. I will begin with a brief overview of our company's third quarter results. Glen will then discuss our financial results in more detail, and I'll conclude by providing some remarks on operational highlights, company updates, and market development. Following our remarks, Glen and I would be happy to take your questions. I want to remind you that some of the remarks expressed during this call may contain forward-looking statements. You should not place reliance on these forward-looking statements, because they involve known and unknown risks and uncertainties that may cause the actual results and performance of the company to differ materially from the anticipated future results expressed or implied by such forward-looking statements. I encourage everyone to review the cautionary language in our news release and on all our regulatory filings. These can be found on our website and on SEDAR+. We are pleased with our performance in the third quarter. Revenue for Q3 was $126.8 million, compared to $12.8 million last year, which I'll remind you reflects the addition of the businesses that were acquired on March 31. At its meeting yesterday, the Board of Directors approved a dividend payable on December 31 of 11.25 cents per share to shareholders of record on November 29. This indicates an annualized dividend of $1.35 per share, which is consistent with 2023. And with that, I'll turn the call over to Glen for a closer look at our third quarter financial performance.
Glen McMillan: Thank you, Spencer, and Good morning, everyone. Revenue during the first nine months of the year was $249.2 million, a significant increase over the $37.6 million that we recorded in 2023. And as Spencer mentioned during the quarter, revenues were $126 million, up from $12.8 million recorded in the same period last year. The year-over-year improvements are a result of including gross commission income from the brokerage operations we acquired at the beginning of the second quarter. Franchise fees were substantially unchanged from the prior year after adjusting for intercompany eliminations. The number of realtors in our franchise network currently sits at 20,430, a net decline of 99 agents since the start of the year. This includes 2010 agents operating at the Royal LePage and Via Capitale brokerages that we recently acquired. Including the Proprio Direct brokerage, which operates throughout the province of Quebec, our corporately owned brokerages are comprised of 2,724 realtors operating in the GTA, the Greater Vancouver Area, and the province of Quebec. In the third quarter, the company generated a net loss of $10.8 million, compared to net earnings of $8.6 million in 2023. The lower earnings are largely driven by a loss of $10.8 million on the fair valuation of the exchangeable units, compared to a gain last year. Our adjusted net earnings, which considers our operating earnings before certain non-cash, non-operating adjustments and payments to holders of exchangeable units amounted to $2.7 million in the quarter down from $3.7 million in the third quarter of last year. The lower results were as a result of higher amortization expense on the assets that we acquired in March, higher interest rates partly offset by the positive earnings impact of the brokerage operations. During the quarter, cash provided by operating activities amounted to $2.7 million, compared to $4.5 million in 2023. The decrease is driven primarily by increased distributions to holders of exchangeable units, which were issued to complete the acquisition earlier in the year and increased working capital investment. The company generated $5.3 million in free cash flow in the quarter and improvement over the $5.1 million generated in the same quarter of last year. The Canadian residential real estate market grew in the third quarter of 2024, closing at $80 billion, an increase of 5% compared to the same period in 2023, driven by a 1% rise in average selling price and a 4% increase in sales. The Greater Toronto Area real estate market was flat year-over-year, closing at $16.7 billion in the third quarter. The Greater Vancouver real estate market was down 9% year-over-year, driven by an 8% decrease in unit sales and a 2% decline in average selling price. In the province of Quebec, the residential real estate market recorded an increase of 18% closing at $10.3 billion in the third quarter of ‘24, compared to last year. This reflects a 12% increase in unit sales and a 5% increase in average selling prices. Spencer will now provide some additional insights into the market and update on our operations.
Spencer Enright: Thanks, Glen. So in the third quarter, buyer demand remained somewhat sluggish in Canada, largely our most expensive real estate markets. However, early indicators at the start of the fourth quarter point to a boost in buyer activity. October year-over-year sales increased by 30% nationally as was announced by the Canadian Real Estate Association this morning. That also included year-over-year increases of 32% in Greater Vancouver and 44% in the GTA. Much of this can be attributed to increased consumer confidence following multiple rate cuts by the Bank of Canada. Over the last several months, we have seen the policy rate drop 4 times, including by 50 basis points in the most recent announcement in October. Currently, the key lending rate sits at 3.75%. The Central Bank has cited falling inflation as one of the key factors influencing their recent rate decisions. Canada's consumer price index, the broadly used measure of domestic inflation, continues to sit just below the bank's target of 2% to 3%. In September, Canada's inflation rate fell to 1.6%. As consumers benefit from materially lower borrowing costs, the State of the Canadian real estate market is expected to improve, a result that would benefit our shareholders and the 1,000s of real estate professionals in our network. Our brand portfolio, led by our 111-year-strong flagship national brand, Royal LePage, continues to attract and retain top real estate agents across the country. We remain committed to investing in industry-leading technology platforms, including lead generating and nurturing tools, and best-in-class training and coaching programs. For example, during the third quarter, we launched RLP Investor's Edge, a first-in-its-kind investor platform targeted at training and generating leads for our realtors who work with individuals interested in owning real estate for investment purposes. To support agents at our Johnston & Daniel luxury brand with their thought leadership initiatives, we tailored marketing materials created with a focus on economic and industry-related content. In an effort to nurture the next generation of industry professionals Via Capitale, our Quebec-based brand and franchise network, began collaborating with a real estate training academy in Montreal. And as our Quebec-based brand, Proprio Direct, we continued to improve recruiting techniques, attracting a greater number of established professionals to the company. These important developments empower us to drive growth for our industry-leading brands, unlocking new opportunities and delivering greater value for our shareholders. Over the past six months, our operating -- of operating our expanded business, we've produced positive results and are excited about the opportunities for growth that lie ahead. We look forward to continuing to share news of our success with you in the future. With that, I'll turn the call back to our operator and open the call up for questions.
Operator: Thank you, sir. [Operator Instructions] First we will hear from Jeff Fenwick at Cormark Securities. Please go ahead.
Jeff Fenwick: Hi, good morning, everyone. Thanks for taking my question. So I wanted to maybe start off talking about the integration of the own brokerage business into the public company. There was some commentary there about the ongoing integration. You've made some good headway there? What are the things that are left to be done here? Is that integration now largely complete or are there some other areas that you want to enhance or change in some way or additional cost savings that you might be able to find?
Spencer Enright: Yes. Thanks Jeff. Thanks for joining and thanks for the call. Yes, for the most part, we're complete. We restructured the organizational structure, the leadership structure shortly after the transaction was completed. And then we've also just been doing some other, I'd say, organizational structural changes. For example, under Glen, we've consolidated the finance and accounting functions across all the businesses to be a single efficient organization. And my leadership routines now are with, you know, an expanded leadership executives across all of the Bridgemarq businesses. And so that's up and running now. The actual operation of the business, we're looking for opportunities to continue to partner with our other brands. For example, sometimes we have relationships with other suppliers or partners like mortgage referrals and so we're looking at opportunities to do more leverage the bigger scale that we have and look at it more holistically. So for the most part from a reorganization that's all done.
Jeff Fenwick: Okay, that's very helpful. Thank you and maybe just some color would be helpful on the outlook for building the realtor accounts and maybe we'll split it between opportunities to do some reflagging and expand the franchise base versus how you're thinking about opportunities for more of the actual broker ownership?
Spencer Enright: Yes, I can comment on some of that. I think, first of all, just as normal course of business for all of our brands, we have a pipeline of growth activities, whether that's organically recruiting individual agents across the networks or in our brokerages or agent teams, but also franchising. And we've had success here today with some re-flagging of a couple franchises from competitor brands. And those are ongoing. I think those will continue as we would normally do. That, I would say, is probably, you know, the most of what we would see near-term, anything else beyond that is probably more opportunistic and all of it would be, you know, clearly competitively sensitive. So I'm not probably at liberty to share all of that in advance of anything we do.
Jeff Fenwick: Sure, I appreciate that for sure. And maybe any broad commentary just on the competitive environment you are seeing out there? I mean, some of your peers are based out of the U.S. and are active in Canada. There's been a lot of change in the industry I guess over the last couple of years? Any anything material happening there in terms of being more or less aggressive or is this more sort of status quo?
Spencer Enright: Well I think in general, you know, the competitive landscape here is pretty stable versus what we saw, for example, at the beginning of the year or last year. The major players out there are still the same major players with similar structures. You know, and so, you know, we compete, you know, market-by-market, individual community-by-community. And our realtors are competing for listings, competing for clients on a daily basis. None of that's changed. None of the dynamics like that has changed. I think some of the things that we're doing to provide better tools and services, whether it's, you know, leveraging AI, leveraging other tools or properties or lead gen, those things are all ongoing. I wouldn't say that there's a change in the landscape of competitive environment. We haven't really noticed anything different in competitor behavior strategies versus what we've probably observed before.
Jeff Fenwick: Thank you for that, color. And then maybe just one last one, if I may, on the housing market. In general, you did call out some of the data out of [Indiscernible] this morning that looked pretty constructive. How do you think about the opportunity heading into the next year some of the changes put forward by the government around things like insured mortgages and access to longer amortization on some mortgage products look like they could be pretty constructive and will come into play through the end of the year? Are you sort of expecting a nice uptick from changes like that alongside the lower rate environment?
Spencer Enright: Yes, Jeff, well certainly all of those policy changes that we expect to see being beneficial on the insured mortgages, moving the cap up above a million is widely expected by anybody in the industry to benefit the higher income properties, especially in GTA and Vancouver. That $1 million mark is a median pricing on single-family homes in some markets. So this definitely helps us. Looking at Canadian Real Estate Association forecast for next year, they just published the latest -- they do it quarterly. And actually, they're looking at plus 5.2% in transaction activity, average selling price being a little bit higher, plus 0.9%. I wouldn't say that we have any predictions that are materially different than that. But we certainly expect that all of that is driven by better affordability in the market and better policy. I think what we've been encouraged to see and not just in this year, but in recent years, is that all levels of government whether it's municipal, provincial or federal are focused on improving affordability, improving housing supply for all Canadians across the entire country. And it's exciting to see the entire political spectrum working towards a common goal, how they achieve that is very different depending on the roles they play, but this, I think, is the first time in decades that we've had a common purpose across the country and that bodes well. I think that helps us a lot.
Jeff Fenwick: Okay, great. Thanks for that. That's all I had.
Spencer Enright: Great. Thanks. Thanks, Jeff.
Operator: [Operator Instructions]
Spencer Enright: We do have a couple.
Operator: No more on the phone right now.
Glen McMillan: Thanks, Sylvie. We do have a couple of questions that came in through the webcast. First question, looks like free cash flow per share dropped substantially. Could you address this? Thanks. So our free cash flow, which we define as being the cash that we generate that's available for us to distribute to shareholders and to exchangeable unitholders subject to investment opportunities, has actually increased in the quarter and increased on a year-over-year basis. So for the quarter, we generated $5.3 million in free cash flow, compared to $5.1 million for the same quarter last year. And on a year-to-date basis, we generated $15 million in free cash flow compared to $14.5 million last year. I hope that answers that question. And then the second question, management previously stated that it expected the current dividend per share to remain the same. Is this management's belief still today? So the payment of dividend is at the discretion of the Board, and we have continued since the acquisition to pay dividends at the same rate that we paid prior to the acquisition. We can't really speculate as to whether we're going to continue to pay dividends in the future, because it's subject to many, many factors, but we do continue and plan to continue targeting to return a significant amount of the free cash flow that we generate to shareholders in the future. And those are all the questions that we received from the website.
Operator: No further questions on the phone.
Spencer Enright: All right. Well, thanks, everybody, for joining us, and thank you, operator, for helping us on the call. I'd like to thank everyone and look forward to speaking to you again once we release our full-year results in the spring.
Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Have a good weekend.
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