Earnings call transcript: Bridgemark Real Estate Q4 2024 sees strong revenue growth

Bridgemark Real Estate Services Inc. (BMARK) reported a significant increase in revenue for Q4 2024, reaching $101.5 million compared to $10.8 million in Q4 2023. Despite this growth, the company faced a net loss of $10.3 million for the full year, contrasting with net earnings of $4 million in 2023. The company anticipates improved free cash flow in 2025, with a continued focus on technological innovation and market expansion. According to InvestingPro analysis, BMARK currently trades at $1.91 with a P/E ratio of 7.5, suggesting the stock may be undervalued compared to its Fair Value estimate.

Key Takeaways

• Q4 2024 revenue surged to $101.5 million, a substantial increase from the previous year.
• Full-year 2024 net loss stood at $10.3 million, compared to $4 million net earnings in 2023.
• The company integrated AI tools and launched new data-driven products.
• Bridgemark’s realtor network expanded to over 20,000 professionals.
• The Canadian real estate market saw a 12% increase, with Quebec showing the highest growth.

Company Performance

Bridgemark Real Estate Services Inc. demonstrated robust revenue growth in 2024, driven by strategic acquisitions and technological advancements. The company acquired several brokerages, including Royal LePage, Via Capitale, and Propio Direct, which contributed to its expanded realtor network. The Canadian real estate market’s growth, particularly in Quebec, also supported Bridgemark’s performance.

Financial Highlights

• Full Year 2024 Revenue: $350.7 million, up from $48.5 million in 2023.
• Q4 2024 Revenue: $101.5 million, compared to $10.8 million in Q4 2023.
• Net Loss in 2024: $10.3 million, compared to net earnings of $4 million in 2023.
• Adjusted Net Earnings: $7.3 million, down from $12.4 million in the previous year.
• Free Cash Flow: $16.8 million, down from $18.1 million in 2023.
• Dividend: $0.1125 per share, annualized at $1.35 per share.

Outlook & Guidance

Looking ahead, Bridgemark anticipates improved free cash flow in 2025, with InvestingPro forecasting EPS of $0.36 for FY2025. The company remains vigilant about potential tariff impacts on the real estate market and is committed to leveraging technology to enhance its services. Bridgemark plans to support its realtor network through market fluctuations and continue its expansion efforts. The company maintains a FAIR Financial Health score of 2.03, according to InvestingPro’s comprehensive analysis. For detailed insights and additional metrics, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Spencer Enright emphasized the company’s resilience and strategic positioning, stating, "2024 was a year of positive growth," and "Our business is well set up to succeed through any [market] changes." Enright also highlighted the stability and productivity of Bridgemark’s realtor network, which remains a key asset for the company.

Risks and Challenges

• Potential tariff impacts on real estate transactions could affect market dynamics.
• The company’s net loss in 2024 highlights the need for continued financial management.
• Market saturation and competition from other real estate firms pose ongoing challenges.
• Economic fluctuations and interest rate changes could impact property sales and prices.

Q&A

During the earnings call, analysts inquired about commission rate seasonality and the company’s strategies for realtor network growth. Bridgemark addressed concerns regarding corporate cost allocations and reassured stakeholders about dividend sustainability.

Full transcript - BRE Properties Inc (BRE) Q4 2024:

Sully, Conference Operator: Good morning. My name is Sully, and I will be your conference operator. I would like to welcome everyone to Bridgemark Real Estate Services Inc. Twenty twenty four Fourth Quarter Results Conference Call. Note that this call is being recorded.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. And I would like to introduce Mr. Spencer Enright, Chief Executive Officer of Bridgemark Real Estate Services Inc. Mr.

Enright, you may begin.

Spencer Enright, Chief Executive Officer, Bridgemark Real Estate Services Inc.: Thank you, operator. Good morning, everyone, and thanks for joining us on the call today. With me today is our Chief Financial Officer, Glenn McMillan. I’ll turn it over to Glenn in a moment to talk about our financial results and summarize what the real estate markets did in 2024. I will then provide some remarks on operational highlights, company updates and broader market developments.

Following our remarks, Glenn 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 found in our news release and on our regulatory filings. These can be found on our website and on SEDAR Plus.

Twenty twenty four was an exciting year for Bridgemark. The expansion of our business into real estate brokerage operations and the internalization of management of our franchise business opens the door to future growth for the company. Revenue for 2024 amounted to $350,700,000 compared to $48,500,000 in 2023, which is reflective of the addition of the brokerage operations we acquired on March 31. At its meeting yesterday, our Board of Directors approved a dividend payable on April thirty of zero point one one two five dollars per share to shareholders of record on March 31. This indicates an annualized dividend of $1.35 per share.

And with that, I’ll turn the call over to Glenn for a closer look at our full year financial performance.

Glenn McMillan, Chief Financial Officer, Bridgemark Real Estate Services Inc.: Thank you, Spencer, and good morning, everyone. As Spencer mentioned, revenue for 2024 was up significantly year over year due to the inclusion of the operating results of our brokerage business. In the fourth quarter, revenues amounted to $101,500,000 compared to $10,800,000 in the fourth quarter of last year. The number of realtors in our franchise network currently sits at 20,283. This includes approximately 2,000 agents operating at the Royal LePage and Via Capitell brokerages, which we acquired as part of the transaction.

Including the Quebec based Propio Direct brokerage, our corporately owned brokerages are comprised of approximately 2,700 realtors operating in the Greater Toronto and Vancouver areas and in the province of Quebec. In 2024, the company generated a net loss of $10,300,000 compared to net earnings of $4,000,000 last year. The lower net earnings are largely driven by a non cash accounting loss on the fair valuation of the exchangeable units, higher interest expense on our debt and increased depreciation and amortization expenses associated with the acquired brokerage business. Starting last quarter, we introduced the concept of adjusted net earnings in an effort to remove some of the accounting noise and provide users with a measure that better reflects the operating results of the company. Adjusted net earnings represents our after tax operating income before giving effect to certain non cash and non operating adjustments, including the loss on the fair value of exchangeable units, which I spoke about a moment ago, and also excluding payments to exchangeable unitholders.

In 2024, adjusted net earnings amounted to $7,300,000 down from $12,400,000 in the prior year. The reduction is largely due to higher interest expense on third party debt, an increase in non cash amortization of intangible assets acquired as part of the acquisition and other non cash impairment charges, partly offset by the positive impact of the acquired brokerage businesses. Cash provided by operating activities increased by $3,400,000 in the year compared to last year, Due primarily to the inclusion of the results of the brokerage operations, a reduction in working capital, partly offset by higher interest costs. The company generated $16,800,000 in free cash flow in 2024, down from the $18,100,000 generated in 2023 with the driver due to increased interest expenses. Up until the end of 2023, we had a favorable fixed rate interest rate swap, which matured at the end of that year.

And as a result, interest expense on our debt increased by $1,700,000 in 2024. Despite periods of weak activity in certain markets last year, the overall Canadian market showed positive growth closing at $338,000,000,000 an increase of 12% compared to 2023. This was driven by an 11% increase in unit sales and a 2% rise in average selling price. The Greater Toronto real estate market expanded by a modest 2% year over year compared to 2023 as prices remain flat and unit sales increased by 2%. The Greater Vancouver real estate market also recorded modest gains of 2% driven by a 1% increase in both unit sales and average price.

And meanwhile in the province of Quebec, the residential real estate market recorded a healthy 28% increase compared to the previous year, reflecting a 19% increase in unit sales and an 8% increase in average selling prices. Now, I’ll turn it over to Spencer to provide additional insights into the market and an update on our operations.

Spencer Enright, Chief Executive Officer, Bridgemark Real Estate Services Inc.: Thanks, Glenn. In the final quarter of twenty twenty four, we saw an increase in sales activity in major markets across the country compared to the end of twenty twenty three when interest rates were significantly higher. In Toronto and Vancouver, the country’s most expensive real estate markets, we’ve seen inventory continue to build while prices have remained stable. Although buyer confidence remains tentative, these improved conditions combined with declining interest rates will prove favorable for buyers. More choice and greater affordability will offer first time buyers an entryway into the market.

On Wednesday this week, the Bank of Canada cut its key lending rate by another 25 basis points to land at 2.75%. This marks the seventh consecutive cut and a total of two twenty five points since last June. The Central Bank’s governing council has noted that it will proceed carefully with any further changes to interest rates as it assesses both the upward pressures of inflation from higher costs and the downward pressures from weaker demand. Notwithstanding the hesitation due to economic uncertainty, declining borrowing rates should encourage more buyers off the sidelines as their borrowing power continues to improve. Now I’d like to give you a few updates on the company’s operation.

2024 was a year of positive growth with the acquisition of several brokerages including Via Capitale and Propio de Fect as well as the corporately owned Royal LePage branches. Bridgemark is proud to be an all Canadian company whose success is rooted firmly in the domestic brands that make up our dynamic portfolio. This is led of course by our one hundred and twelve year strong flagship national brand Royal LePage, which continues to attract and retain top real estate professionals from across the country. We also added close to 700 agents in the province of Quebec last year operating under the Propion Direct banner. In 2024, we continue to demonstrate our commitment to innovation and technological advancement focused on leveraging such things as artificial intelligence tools to support our networks of real estate professionals.

All of our brands have incorporated various tailored AI tools into their respective service offerings. For example, Propio Direct launched a series of tools that provide data driven insights to agents and enhance the virtual staging of homes to better serve their clients. We continue to interact with Canadians every day through our industry leading websites and social media profiles. RoyalLePage.ca remains the most visited real estate company website in Canada. Our commitment to innovation and continuous improvement in our service offerings enable us to continue to attract and support top talented realtors and in turn deliver greater value to our shareholders.

As I’ve mentioned, 2024 marked a historic year for the company and we are very excited to explore the growth opportunities that lie ahead both in 2025 and beyond. With our stable cash flows and multiple pathways to expansion, BridgeMark’s unique operating model is well positioned for continued success. With that, I will turn the call back to our operator and open the call to questions.

Sully, Conference Operator: Thank you, sir. You. Your first question will be from Fernando Terelba at Cormark Securities. Please go ahead.

Fernando Terelba, Analyst, Cormark Securities: Thank you and good morning everyone. This is Fernando on for Jeff Fenwick. I was hoping that maybe we could get a bit more commentary on the commission rate for the quarter. It looks like it’s been on a bit of an uptrend for the past couple of months. And just wondering what moves that around and whether we should think of the current commission rate as a run rate moving forward or if maybe there’s seasonality in that?

Glenn McMillan, Chief Financial Officer, Bridgemark Real Estate Services Inc.: Yes. Sorry. Is this Fernando or Jeff?

Fernando Terelba, Analyst, Cormark Securities: Fernando. On for Jeff. But it’s Fernando, yes.

Glenn McMillan, Chief Financial Officer, Bridgemark Real Estate Services Inc.: Yes. Okay, great. So, Fernando, I think it’s probably better for you to look at the full year numbers. There is some seasonality that’s built into those commission rates and it’s really a function of a number of things. Market is one thing, but also there’s the seasonality over the course of the year.

So I think you really need to look at the full year numbers to get a better sense.

Fernando Terelba, Analyst, Cormark Securities: Got you. Excellent. And then maybe just one follow-up there on OpEx. I think there looks like there was maybe a little bit of a pickup on operating expenses for the quarter. Basically the same question, what’s driving that?

And I’m guessing as well maybe a bit of seasonality there?

Glenn McMillan, Chief Financial Officer, Bridgemark Real Estate Services Inc.: Yes, there’s really nothing significant there. I think when you’re looking at comparing seasonality, there are some challenges with the addition of the brokerage businesses that it does make it certainly difficult to compare year over year basis. But there’s other than maybe some year end catch up adjustments, there’s really nothing from an operating perspective that would drive that.

Fernando Terelba, Analyst, Cormark Securities: Got you. Okay. Thank you. I’ll requeue for now.

Sully, Conference Operator: Thank you. Follow-up from Fernando.

Fernando Terelba, Analyst, Cormark Securities: Perfect. So maybe just turning to $20.25, I have to ask the tariff question. Just wondering if you have any insights as to whether in your experience tariffs are keeping people on the side lines for transacting so far in 2025? Or if it’s maybe keeping people on the side lines for joining the industry as brokers? Any thoughts there on the macro level and potential derivative impacts there from tariffs?

Spencer Enright, Chief Executive Officer, Bridgemark Real Estate Services Inc.: Yes, sure. Thanks. It’s Spencer. I’ll take that. Happy thanks for the question.

Look, first of all, what actually happens with actual tariffs is completely uncertain at this point. There’s a threat of tariffs. I know that this week some tariff decisions were actually made and put in place. But as we’re all in the same boat, it’s very difficult to predict what we’ll expect to actually see in tariffs, not just from our country’s government, but from others around the world. And it’s very unprecedented.

We’ve never really seen this experience here in Canada in recent memory certainly. So it’s very difficult to understand how everyday Canadians are reacting to that. And we don’t really have a pulse on how the population as a whole is doing. We can only really look at what is happening with actual activity in the market. It’s reasonable to suspect that when people’s confidence is lower that they’ll be a little bit more reluctant to make new commitments in terms of purchases.

And certainly, home purchase is a significant one. So we’re monitoring it very closely. But if there is a change in buyer behavior, then our business is well set up to succeed through any of those changes. And as we’ve seen in the past, our market is cyclical to begin with and there are peaks and troughs even over multi years. And we’ve seen other external shocks to the market as well.

The business, the way we set it up is set up to do very well from a cash flow standpoint even in periods where we’re at a bottom from a volume activity. In terms of Realtors, we actually really see not a lot of change in number of Realtors in the industry that are registered. And certainly in our networks, the over 20,000 Realtors we have are very productive people. And even in down cycles, they’re still very successful and can be very successful with the number of transactions they do, the commissions they generate. And so short term issues rarely influence their career decisions when they’re this is a career decision for them.

But we’re monitoring that very closely. And I think that as we look forward to the balance of the year, again, we don’t really know what will actually transpire with tariffs. But there could be challenges in local communities where there’s more of a vulnerability to export industries than others. But overall, nationally, we’re not seeing anything at this point.

Fernando Terelba, Analyst, Cormark Securities: Okay. Thank you. That’s wonderful color. And then maybe I’ll just finish off with the tail end of that about the realtor count. On the franchise network, is there anything that maybe you would highlight as to what moves that counter on?

I mean, I know in the past couple of quarters, it has moved around a little bit, not by a lot. So I don’t really expect much other than maybe attrition, but just wanted to get your thoughts as to whether there’s anything that you want to highlight as to the move in the realtor account.

Spencer Enright, Chief Executive Officer, Bridgemark Real Estate Services Inc.: Sure. Well, first of all, just in terms of our realtor count and population, we grow the number of realtors in our network of various different ways. We have a very large franchise network and the franchisees, those brokerages, those broker owner operators recruit on a daily basis and look to bring in new talent everywhere across the country. And so that organic growth is happening all the time. In addition to that, we signed new franchise agreements with companies, individuals from time to time where it makes sense.

And so we can grow the realtor count by what we call re flagging and creating new franchisee contracts. So there’s different ways of growing. There’s always turnover within the industry itself, but we also have a very stable realtor population because they are productive and they’ve proven to be very loyal to our brands. On the whole, in the quarter, you may see some fluctuations at different times quarter by quarter in terms of realtor count. When we sign new franchisees, we typically highlight when we do that when we do larger ones.

And so, you can definitely look to those as a significant step function increases in our account. But other than that, it’s really just normal course, the daily recruiting and typical turnover that we might have seen in past years with our franchise networks.

Fernando Terelba, Analyst, Cormark Securities: Okay, perfect. That’s it for me. Thank you.

Sully, Conference Operator: Thank you. And at this time, Mr. Enright, we have no other questions on the phone.

Spencer Enright, Chief Executive Officer, Bridgemark Real Estate Services Inc.: Thank you. We do have one, I believe, via webcast. Glenn, do you want to read it out?

Glenn McMillan, Chief Financial Officer, Bridgemark Real Estate Services Inc.: Yes. There’s actually two there. The first one is in the previous twenty twenty five presentations, the combined franchise operations and brokerage operations EBITDA is more than the total year to date EBITDA, does that mean that Propio loses money negative EBITDA? That’s not what it means. Propio’s EBITDA is included as part of the brokerage operations.

The difference between the sum of the franchise operations EBITDA and the brokerage operations EBITDA is there are costs that we do not allocate to those segments. And it’s a corporate cost segment and those costs are comprised mainly of senior management expenses that are not allocable to one segment or the other. Public company related costs, as you know, we are a public company and there are costs associated with that. We don’t burden the segments with those costs. And there’s also director’s fees and audit related costs that are not allocated back to those segments.

The second question is that the dividend payments appear to exceed free cash flow. Will there be a need to reduce the dividend payments? So the company has a history of repaying or paying a significant amount of its free cash flow out to its shareholders and is committed to doing that. The dividends themselves are actually determined on a monthly basis and are determined by the Board of Directors and approved, as I say, on a monthly basis. And so, the company at this point does have significant amount of resources in order to support those dividends in the short term.

And we also do believe that the current year, we are expecting free cash flow to improve as markets start to improve over the next little while. And those are all the questions.

Spencer Enright, Chief Executive Officer, Bridgemark Real Estate Services Inc.: All right. Thanks, Glenn, and thank you, operator. I’d like to thank everyone once again for joining us on today’s call and look forward to speaking to you again after we release our first quarter results in May. Thank you very much, everyone.

Sully, Conference 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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