reAlpha Tech Corp. (AIRE) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us. My name is Paul Cecil. I'm the Vice President of Strategy here at reAlpha, and I will be your moderator for today's live video call on X Spaces. And I've got Mike here with me right now. So today is a big moment. We're here to discuss our third quarter results and do it in a way that reflects who we are: open, transparent and connected directly with our community. Instead of a closed door analyst call, we're hosting this conversation live on X Spaces with all of you here with us, and that's something we're very proud of. Joining us today is our Chief Executive Officer, Mike Logozzo. Many of you know Mike, but for anyone who's newer to the reAlpha community, Mike has been with this company since day 1. He served as CFO, COO, President, and now CEO. And throughout that journey, he's been instrumental in shaping the company's strategy, operations and culture. Before reAlpha, he spent nearly 2 decades at BMW Financial Services, ultimately overseeing a $32 billion portfolio across the Americas, and later led innovation programs at L Marks. His background in scaling complex operations and driving innovation has played a major role in getting reAlpha to where it is today and where we're headed next. Mike is going to walk through the quarter, talk about some key business highlights, and then we'll jump straight into questions from all of you. Please free to submit your questions at any time below the -- in the comments sections. And we'll pin relevant items in the Nest, which is on the top of our page right now, including our quarterly filing, press release, latest corporate presentation and shareholder letter. So before we begin, a couple of small housekeeping items. We want to get through as many investor questions as possible. So we've already had a lot of engagement. And if you do have multiple questions, we'll take 2 to 3 per person so others can have the chance to participate as well. We love the engagement. We just want to make sure we can hear from as many voices and investors as possible. And one last thing is I need to remind everyone that certain statements made today may contain forward-looking information as defined under applicable securities laws. These may include expectations, forecasts, goals, patterns, plans, projections or assumptions that are based on our current views and are not historical facts. These statements are inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially. For complete information, please refer to our filings with the SEC, including our most recent Form 10-Q. We will also not be commenting or answering questions on stock price or stock predictions, valuation targets, nonpublic or unannounced financial activity, anything restricted under SEC and Reg FD guidelines. So if any question touches on these areas, we'll move past it. With that, thank you again very much for joining us, and I will turn it over to our CEO, Mike Logozzo, to kick things off.

Hi, everybody. I'm really looking forward to today. This is something that's been a long time in the making and really looking forward again to spending the time with you sharing our vision, our mission, our results and then getting an opportunity to answer your questions as well. So I'll turn it over to Paul. Let's get started.

Awesome. Thanks, Mike. Can you tell us why you joined reAlpha?

Absolutely. So as Paul mentioned, I joined reAlpha back in early 2021. I was employee #1. And I would say the reason why I joined, it was twofold. First and foremost was I believed in the vision of Gary Devanur. And Gary, if you're online, we miss you buddy. But what I wanted to let you know is that Gary is a true visionary. He is somebody who had this great vision to bring the real estate into the digital era. And what I mean by that is real estate historically has been behind the times when it comes to technology. The reason for that is because it's very complex. There's a lot of fees. There's a lot of different players involved. And this just worked over time and people dealt with it. And it is really ripe for disruption. The second thing is that the TAM or the total addressable market for real estate is huge. It's the largest asset class in the world. So combining those 2 things together, along with Gary's track record of being a successful serial entrepreneur who's taken a previous company on NASDAQ, it was a great opportunity to come in and try to build another company that we could also bring public and serve a purpose and a mission to try to get homeowners or people to become homebuyers again.

Awesome. Thanks, Mike. Can you tell us about -- a little bit more about your approach to leadership and communication?

Yes. I would say that I'm a guy who doesn't do a lot of hype. I try to come in, I set a strategy, I build a good team around me to execute that strategy. I don't micromanage them, but I hold them accountable. And ultimately, at the end of the day, if we all work together towards a common goal, a common strategy, giving them the flexibility to even adapt, right? As long as we have a common North Star that we're all aiming towards and you have faith in the leaders who are strong in their particular areas and you all work together and align, you're going to hit it. Ultimately, I believe we will.

So what's your vision? And why are you excited about what we're doing here at reAlpha?

Well, what we want to do is we want people to obviously become homeowners. And what I mean by that is that there's -- we all know the home prices are as high as they've ever been. We know interest rates are sky high as well, and it's very difficult for people to become homebuyers. I just saw that I think the median age of a first-time homebuyer now is 40 years old. When I was younger and I bought a house, it was 28. So it's really, really tough for people nowadays, given the cost of homes and the current interest rates to be one. And we wanted to build a platform that really enabled homebuyers through technology to live the American dream, and that excites me.

Awesome. And now moving on to kind of the Q3 earnings highlights. Could you give us some highlights about Q3?

Sure. So in our Q3, I'll kind of stick to obviously what we disclosed, but we've had 3 consecutive quarters of revenue growth. And our Q1 of this year was more of all of last year combined. Our Q2 surpassed that and our Q3 surpassed that. So if you're into patterns or trends, I would say that it's heading in the right direction. We improved our balance sheet. What I mean by that is we've raised $7.5 million in equity offerings. We had 8.3 million warrants exercised as of October 20, and we used a lot of that to repay our debt in full. So we are now a debt-free company. We regained compliance with NASDAQ with our $35 million minimum market value. And many of you have probably saw that we obtained a 6-month extension to meet the $1. I feel very confident about that. Again, we have 6 months to do it, but things, as I mentioned, are heading in the right direction there. We've expanded our service availability. So in this past quarter, Realty, we expanded into Georgia, Mortgage into Utah and Nevada. Our technologies feel really proud about what we've done there. We took Claire, and we've turned Claire, who is our AI agent into a true concierge that will take a homebuyer prospect through the process. So answering the questions that they have and trying to guide them all the way through to preapproval. We launched our AI Loan Officer Assistant. And what this does is this is really more for internal facing, but it ultimately, I would say, will benefit the customer just due to the less friction and faster turnaround times by helping our loan officers do their work more efficiently. And then we also did an AI-powered engagement agent. And what that does is that actually helps create leads into our platform and allows for the humans to focus on the ones that are, I guess, the highest probability leads. And what we've seen is a 90% increase in lead engagement, a 200% increase in the appointments for people to view a home and a 140% increase in the loan applications. So I believe what we're doing is really making sense. These are statistically significant numbers that we are sharing with you. And as we go on and scale with these types of improvements, we feel really good about where we're headed, and the types of things that we could do with the staff that we currently have. We've also done a lot of, I would say, integrations internally. So one of our first acquisitions was an AI company in Nepal called Naamche. And we've fully integrated them into reAlpha. They are a true tech team now. We have basically a One reAlpha mindset that I'll talk a little bit about as we go through today. But Naamche is fully integrated. They are all reAlpha. Everything that they have is all on the same platform as ours. And we're starting to do that now with our unified messaging with our other acquisitions, so whether it be Realty, Mortgage, Title to have, again, a unified experience for the customer.

Awesome. Thanks, Mike. And with that, we'll start to move on to questions. I'm going to take the ones first that we've kind of received ahead of time. And then if there are any additional questions that we have not answered, I will ask Mike those questions as well. So first, Mike, we have a question from the OG stocks, ticker. Can you tell us more about the overall plan of expansions of reAlpha to other states? It would be nice to have an overview of which services will be rolled out to which states in the next months.

Sure. Those of you who have seen our latest investor deck, there's a map on there, which shows all of the states in which we're operating. We have 3 different dots on there. One represents Realty, one Mortgage and one Title. And you'll very quickly realize that the dots are not in sync. They're out of whack. They're heavily weighted towards Mortgage. In Mortgage, we're in 32 states, for example, in Title, we're in 3. So what we're trying to do is to sync those up and focusing -- I would say we're focusing primarily on the top 10 states when it comes to residential real estate volume or transactions. Just to put that in perspective, the top 10 states represent over 60% of the real estate transactions. So if you're a company that's trying to scale, instead of trying to be everywhere, why not try to be in the areas that have the largest transaction volume? So what I mean by that would be, if you think about it, it's obviously Florida, Texas, California, North Carolina. I think Ohio is in there, is #9. But if -- we can't explicitly say where we're going, but like I said, top 10 states is kind of where I believe we need to be. And it's about really syncing up the Realty, Mortgage and Title because that ultimately benefits the customer. That's our true service offering to the customer, truly where the value proposition lies is utilizing all 3 of those services, giving them an opportunity to get a rebate back and then also giving them the flexibility as to where they want to use that rebate. They could use it as cash at closing, they could use it as a portion of their down payment to get into their home, or they could use it to buy down their interest rate. And we all know, in today's environment, that's a really important thing, too. So -- but that only happens when we have all 3 lined up, and that's our goal right now is to try to -- at a minimum, try to get in the top 10 states where we could do that.

So we also have -- we have several questions from [ That Man Billy ]. First of all, the Q3 results mentioned several strategic developments. Which of those does management believe has the greatest strategic importance right now?

I would say the capital that we've raised had the most strategic importance. And what I mean by that is that we are a company now that has runway. And now that we have runway, we're focused on growth. And so I would say that, that was the most important. I think that they all were important in their own way. But having capital solves a lot of problems, and it allows us, again, to focus on growth, which is what you guys want to hear.

Absolutely. And additionally, are there areas of the business where you believe that additional automation, partnerships or technology investment could accelerate scaling?

I do. And it's multifold here. So we'll continue to look at acquisitions, accretive acquisitions that align with our core product and allow us to scale faster. We're also looking at kind of adding on to our core as well. So our core product right now, it's a home buying product, right? It has a Realty component, a Mortgage component and a Title component. But if you think beyond that, beyond the closing of the transaction, there's other things as well that we could be one-stop shopping for. Think about moving services, think about utility setup services. Why not be the one-stop shopping for all of that? And I would say for some of those types of things, we may not want to acquire, but maybe that there's an opportunity for partnerships with a moving company or maybe an insurance company. There's plenty of opportunities out there. But right now, we're focusing on the core because we think that, that is where our focus needs to be, right? And we have a lot of growing to do and a lot to prove to you.

Absolutely. And as a reminder to everyone, if you do have additional questions, please put them in the comments down below. I will not be adding additional speakers on to here, but I can take the comments from below. Okay, so next question from [ That Man Billy ], how is customer feedback shaping your product road map or service improvements? And are there themes emerging from those insights?

I would say that -- well, the number one customer feedback is the fact that we're not synced up in all of the states. Customers want to be able to get that rebate and benefit from using all 3 services. We're not there, and we need to be there. So that's number one, customer feedback. Number two, I think, is really more about this One reAlpha theme that I mentioned earlier about what we don't want to do is have Realty, Mortgage and Title operating in different verticals or vacuums, right? It needs to be a cohesive process. We don't want to just replicate how things are being done today. Like today, what happens is the customer has to navigate the Realty process, the realtor set up for them. Then they have to navigate the process that Mortgage sets up for them, and then they have to navigate the process that Title sets up for them. They're all typically usually different companies. There's handoffs. And it's just -- it's a gauntlet if you think about it from that perspective. What we've done is we're putting the customer in the center of the process, and we're building the process around the customer. So not having to enter in information more than one time, trying to remove the friction and make it seamless. So yes, I mean, we're still kind of building that out because we've grown through some acquisitions. These are companies that have been stand-alone, and now they're becoming part of a greater product. So we're trying to reduce the amount of friction and all of the handoffs that go on to make this as seamless and frictionless as possible.

Okay. We have a question from [ Sakibsabi85909. ] Why are investors now interested in investing in reAlpha stock? Why will you guys -- what will you guys do next for the company and investors?

I would say this is a pretty important point for me. I want to make sure I drive this home. reAlpha historically has attracted what I'll refer to as traders. And what I mean by that is because of our volatility in our stock and because of the size of the transactions, which are really big for a company of our size, it attracts a lot of day traders or people who are coming in to get in and get out. What we're starting to find now, and I think this is due to the quarter-on-quarter growth that we're seeing is people who are interested in more fundamentals and more of a longer game, who are willing to come in with bigger check sizes and kind of -- they believe in the vision, they believe in the mission, they're starting to see the fundamentals come into place, that's when this company starts to attract what I refer to as investors. So kind of transitioning from attracting traders to investors is really what we're trying to get to as a company because that brings a little bit more stability and that ultimately will help us continue to grow on that path.