Bridgemarq Real Estate Services Inc. ($BRE)

Good afternoon. My name is Sylvie, and I would like to welcome everyone to the Bridgemarq Real Estate Services Inc. 2026 First Quarter Results Conference Call. Note that this call is being recorded. [Operator Instructions]. I now would like to introduce Ms. Anne-Elise Allegritti, Director of Investor Relations at Bridgemarq Real Estate Services Inc. Ms. Allegritti, you may begin the conference.

Thank you, Sylvie. Good afternoon, everyone, and thank you for being with us today on the call. I am joined in the room by our Chief Executive Officer, Spencer Enright, and our Chief Financial Officer, Wallace Wang. They will begin with a brief overview of our company's first quarter results. Wallace will then discuss our financial results in more detail, and Spencer will conclude by providing some remarks on the operational highlights, company updates and market developments. Following their remarks, Spencer and Wallace will be happy to take your questions. Please note, all the analyst questions will be permitted on the dial-in line. All others who wish to submit a question are welcome to do so via the Q&A feature on the webcast. You can find the link to the webcast on the Events page of our website. I want to remind everyone 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 statements. I encourage everyone to review the cautionary language found in our news release and on all of our regulatory filings. These can be found on our website at bridgemarq.ca and on SEDAR+. I will now pass the call over to Spencer Enright to give a brief overview of our first quarter results.

Thanks very much, Elise, and good afternoon, everyone. In the first quarter, Bridgemarq continued to advance its leadership position in the Canadian real estate industry supported by a strategic investment in AI, a strong and differentiated brand presence and an ongoing commitment to empowering professionals across our network. The strength of our diverse business model paired with a clear focus on innovation and adaptability positions us to capitalize on new opportunities and drive continued growth in the months ahead, even as we navigate a dynamic and evolving macroeconomic landscape. Revenue for Q1 amounts to $69.9 million compared to $78 million generated in the first quarter of 2025, which is reflective of weakness in the Canadian real estate market and a decrease in the number of realtors driven by the nonrenewal of one of our large franchises within Royal LePage network. At its meeting yesterday, our Board of Directors approved a dividend of $0.11 to $0.25 per share, payable on June 30 to shareholders of record on May 29. This indicates an annualized dividend of $1.35 per share, which is consistent with 2025. And with that, I'll turn the call over to Wallace for a closer look at our first quarter financial performance.

Thank you, Spencer. And good afternoon, everyone. As Spencer mentioned, revenue during the first 3 months of the year amounted to $69.9 million, a decrease over the $78 million generated in the first quarter of 2025. This was primarily due to a lower agent count and softer real estate market conditions. The number of realtors in our network currently sits at 20, 136. This includes more than 2,300 agents operating within the company's corporately owned real estate brokerages in the Greater Toronto area, the Greater Vancouver area and within the province of Quebec. In the first quarter, the company generated a net loss of $3.2 million compared to net earnings of $6.0 million in 2025. The lower earnings are largely driven by a loss of $2.6 million of the valuation of the exchangeable units in Q1 compared to a gain of $5.7 million during the same quarter in 2025. In the first quarter, adjusted net earnings, which considers our operating earnings before certain noncash nonoperating adjustments and payments to holders of exchangeable units amounted to $1.8 million down from $3.1 million in the prior year. The reduction in adjusted net earnings is primarily due to the lower revenue, partly offset by lower commission expenses. Cash provided by operating activities amounted to $0.3 million in the first quarter of 2026 compared to cash used in the operating activities of $1.6 million in the same quarter last year. This improvement was primarily due to the deferral of interest payments related to distributions on the exchangeable units and lower income taxes paid, partly offset by lower revenues. Finally, the company generated $1.9 million in free cash flow during the quarter, down from $4.1 million during the same quarter last year. This is primarily due to lower operating income and higher capital expenditures during the quarter, some of which were onetime in nature. In terms of market data, the Canadian residential real estate market closed the first quarter of 2026 at $50 billion, an 8% decline from 2025 driven by a 1% decline in the average selling price and a 7% decline in unit sales. In the first quarter, the Greater Toronto area contracted by 13% year-over-year compared to the same period last year, driven by a 7% decline in both the average home prices and unit sales. The Greater Vancouver area also contracted during the first quarter, with total transaction dollar volume decreasing 14% year-over-year as selling prices and unit sales declined by 2% and 13%, respectively. By contrast, in the province of Quebec, the residential real estate market recorded a modest 3% gain in Q1 compared to the previous year. This reflects a 6% increase in the average selling price offset by a 3% decline in unit sales. Spencer will now provide additional insights into the market and an update on our operations.

Thanks, Wallace. As well as stated, market activity was mixed across the country last quarter with Toronto and Vancouver showing continued softness. However, we did see some notable highlights in other regions such as Quebec, persisting consumer hesitancy, driven in part by housing affordability hurdles in large urban markets, combined with uncertainty in key economic factors such as interest rates and the economy in general, contributed to a subdued start in the 2026 spring housing market. In March, Canada's consumer price index increased 2.4% year-over-year, up from the 1.8% recorded in February. This increase was driven largely by higher gasoline prices. The Bank of Canada's next rate decision is scheduled for June. However, it is uncertain what rate changes will take place, if any, given competing influences by the inflation impact, including energy price impact and the result of upcoming trade agreement negotiations. Now I'd like to give you a few updates on the company's operations. First quarter marks significant progress across several strategic initiatives for us with continued momentum across our core growth and innovation priorities. We saw meaningful progress in the adoption of AI across our network with more than a dozen virtual training sessions delivering to approximately 1,500 professionals. This high level of engagement reflects our ongoing commitment to equipping agents with productivity-enhancing tools that drive efficiency, scalability and improved client outcomes. We also established our inaugural National Commercial Advisory Council, a strategic leadership group designed to generate new business opportunities within our Royal LePage commercial real estate network of professionals. This initiative enhances our ability to respond to evolving market dynamics and support growth in the Commercial segment. In the Proprio Direct Network, we continue to advance our digital strategy with the rollout of a cloud-based consumer -- or sorry, customer experience platform, integrating marketing tools, lead management and CRM capabilities. In parallel, the completion of a new learning management system has established a more structured and scalable training environment, supporting consistent professional development and long-term network performance. Our Via Capitale brand strengthens its market presence through a comprehensive digital advertising campaign, driving significant online engagement and expanding its reach across key social media platforms. These efforts are enhancing brand visibility, supporting agent recruitment and reinforcing our competitive positioning in the products. Collectively, these initiatives are strengthening the foundation of our industry-leading brands, enhancing operational efficiency and positioning the company to continue to capture new opportunities for growth while continuing to deliver long-term value for our shareholders. As we look ahead through the rest of the year, I am optimistic we will realize meaningful revenue growth across our total business, first, through the conversion of a number of exciting franchising prospects in our sales funnel. Additionally, we continue to focus on revenue growth through agent recruiting, while optimizing our brokerage operations to improve EBITDA margins. With that, I'll turn the call back to our operator and open up the call to questions.

[Operator Instructions]. Your first phone question will be from Jeff Fenwick at ATB Cormark.

I wanted to start my questioning on the tech product that you've been rolling out to the brokers there. I'm just hoping to get a little more color on that. You mentioned AI. And are these solutions that you've been developing in-house and are rolling out. And then maybe related to that, you mentioned Proprio had some things specific to it as well. I'm wondering if that's something that ends up getting shared across the rest of the banners within Bridgemarq.

Yes, there's a couple of dimensions to that, Jeff. Thanks for the call and question. First of all, with the rlpSPHERE product that we offer, which is a comprehensive CRM-based solution to our network of Royal LePage, we've embedded in that some intelligence that helps them be more productive with their marketing and as well as their customer management and get more insights on the behavior of the clients that they're servicing. In addition to that, across all of our banners, we're doing similar things where we're empowering the agents to be more productive with the workflow that they have and more -- in a more intelligent fashion. With the direct-to-consumer interactions we have with -- on our multiple websites, we're also engaging with Canadians in more intelligent ways with kind of more behind-the-scenes AI intelligent software powering our website and also looking at lead generation, not just through traditional SEO/SEM type of mechanisms, but also through the vehicles like ChatGPT, where actually we're getting more and more leads from consumers as opposed to traditional website-based search engines. So there's a whole lot of things. A lot of it is driven by productivity, but also revenue monetization with lead management.

Okay. That's very helpful. And then you made some remarks there at the end of your comments with respect to, I guess, a full recruiting funnel. I know you had the one large group that didn't renew and that created a step down. So how should we think about the prospects over the year of kind of rebuilding that base of realtors and continuing to push forward here? What's the recruiting environment look like?

Yes. I think when we look at any individual years or quarter-by-quarter, a lot of that has variability to it in terms of the number of agents we might bring into the network through new franchising. And we talked about this in the past, Jeff, I think as you model it, you might want to base it on historical norms of what we have through franchising. But I'm optimistic with what we've got in terms of ongoing conversations with prospects all across the country. There's quite a few franchises from competing brands that are up for renewal, respectively, within their framework that are engaging with us and have reached out to us. And so that happens every year. But 1 year after another, depending on the cycles of their renewal of existing contracts, we might see more, we might see less. This year could be one of those years where we see a bit more. Again, each one is a personal decision, and there's probability against each one. So they're not all guaranteed. But this year could shape up to be a pretty robust one. Again, within kind of what you would have seen historically in the kind of variability year-by-year that we would have seen before.

Okay. That's helpful. And then maybe you could put it in the context of the larger competitive market out there. It looks like industry consolidation is continuing. We saw real brokerage announcing the acquisition of RE/MAX. I think in Canada, you had My Abode invest into Sutton as a fintech sort of partnership there. What's your read on what's happening in the industry here and how Bridgemarq is positioned within that today?

Well, I think we're positioned pretty well for a couple of reasons. One, competitors that are gone -- undergoing significant transformational change has uncertainty attached to it. And actually, since some of those announcements, we've seen an uptick in the number of inbound unsolicited calls to us from those competitive franchises, asking for a conversation. So that uncertainty creates a lot of disturbance with the group. On our end, we're as stable as we have been for over 110 years. We've been in the franchising model since the early 1990s and we represent a stable home for all of our proprietary operators that are part of our network. So on that end, it's created an opportunity for us to have new conversations that maybe we would have been trying in the past without a lot of success. And we're not sure where that will go in terms of short-term movement. But certainly, over the next balance of this year, in the next year, as people contracts come up for renewal on their end, they're reaching and to us now wanting to understand more about what we offer. So that's exciting, and I think that, that creates opportunity for us.

Okay. And then maybe one on just the financial dynamics in the context of a market where activity has been depressed, still deferring dividends with your largest shareholder for now. So when I look at leverage levels in the business, they are kind of steadily climbing higher here and not clear to me that at the end of that deferral period, which I believe was 1 year that you might not need to extend it. But then we start to get in a situation where leverage is maybe getting a little uncomfortable for you. So how do you characterize how you want to navigate the business here over the next kind of 6 to 12 months in that perspective?

Yes. So Jeff, maybe I'll answer it in 2 parts. One is with respect to dividends and the other one is with respect to the leverage. So I would say, on the dividend front, we are obviously, again, monitoring the situation very closely. We're working with the Board, and these decisions are made on a monthly basis by the Board. So we're not able to provide any forward guidance on that, but we are watching this situation very closely. From a leverage standpoint, there are also 2 things. One is, I'm sure as you follow our financials, Q1 is typically a quarter with a lot of working capital outflows, so namely, the annual employee bonus. So generally speaking, we do expect to draw on our operating line to fund those working capital as the season starts, the spring market starts, we're expecting to see more cash inflows than we're expecting to pay down some of that debt. But obviously, having said that, this leverage debt reduction would be one of our capital allocation priorities that we're going to be looking at in conjunction with everything else that's going out within the business, including dividend including all of these additional accretive CapEx opportunities that we're looking at. So we'll manage it that way.

Okay, great. Thanks for those answers. That's all I had.

And at this time, we have no other phone questions registered.

There are currently also no questions on the webcast.

All right. Thanks, Wallace. I'd like to thank everyone once again for joining us on today's call. We look forward to speaking with you again after we release our second quarter results in August.

Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.