Executive Summary / Key Takeaways

• Disruptive Model Driving Market Share: The Real Brokerage (REAX) is fundamentally reshaping the real estate industry with an agent-centric, technology-driven model that offers compelling financial incentives, a proprietary AI-powered platform, and a collaborative culture. This approach is enabling significant market share gains and agent growth, even as the broader housing market faces headwinds.
• First Quarter of Profitability Highlights Operational Leverage: REAX achieved its first-ever quarter of positive operating income ($1.7 million) and net income ($1.6 million) in Q2 2025, alongside a 59% year-over-year revenue increase to $541 million. This milestone underscores the scalability and efficiency of its model, with gross profit growth outpacing operating expense growth.
• Technological Leadership with AI and Fintech: The company's core technology, including Leo CoPilot and the Reason platform, is driving operational efficiency and agent productivity, as evidenced by a 28% reduction in agent support calls handled by AI. Strategic investments in Leo for Clients and the rapidly growing Real Wallet fintech platform (annualized run rate exceeding $1 million) are poised to unlock new high-margin revenue streams and enhance agent wealth-building.
• Strong Liquidity and Capital Allocation: REAX maintains a robust balance sheet with $55 million in unrestricted cash and no debt, generating substantial operating cash flow of $41 million in Q2 2025. A $150 million share repurchase authorization signals management's confidence in long-term value creation.
• Outlook Focused on Sustained Growth and Margin Expansion: While anticipating typical seasonal revenue declines and gross margin fluctuations in Q3 2025, REAX expects significant year-over-year improvements in revenue, gross profit, and Adjusted EBITDA for the full year. Continued investment in AI, the consumer roadmap, and ancillary services is central to its strategy for long-term profitability and market leadership.

The Real Estate Revolution: An Agent-Centric, Tech-Powered Ascent

The Real Brokerage Inc. (REAX) was founded in 2014 with a clear mandate: to reinvent the traditional real estate brokerage model. The company recognized that real estate agents historically bore excessive costs for insufficient value, and it set out to simplify the complex home transaction by empowering agents with superior financial incentives, a proprietary software-based technology platform, and a collaborative culture. This foundational strategy has propelled REAX from its inception to a dominant position in the North American real estate landscape, now operating across all 50 U.S. states and four Canadian provinces.

The broader real estate industry currently faces significant challenges, including volatile interest rates, ongoing affordability pressures, and a decline in existing home sales, which were on pace to finish 2024 near a 30-year trough. Industry transactions declined by 1% in Q2 2025, and the National Association of Realtors anticipates approximately 200,000 agents will leave the industry in the coming year. In this environment, traditional brokerages, burdened by high costs and outdated practices, are struggling for relevance. REAX, however, views these headwinds as an opportunity, leveraging its agile, technology-driven model to gain substantial market share from competitors. The company's agent count surged by 43% year-over-year to 28,000 by the end of Q2 2025, exceeding 29,200 as of August 7, 2025, demonstrating its compelling value proposition in a contracting market.

Technological Edge: AI and Fintech as the Core Moat

At the heart of Real's disruptive model lies its commitment to technological differentiation, particularly through artificial intelligence and financial technology. The company's proprietary "Reason" software platform is continuously enhanced by AI-powered tools designed to boost agent productivity and streamline operations.

Leo CoPilot, Real's AI assistant, serves as the primary point of contact for agent support, handling thousands of daily interactions across mobile and voice. This integration has tangibly reduced the number of calls received by human support teams by 28% in Q2 2025, freeing up expert staff for more complex issues and providing agents with immediate, accurate assistance. Beyond support, REAX has achieved significant operational efficiency by automating the closing and payment processing for almost 50% of its transactions with the oversight of only a handful of remote employees. This stands in stark contrast to traditional brokerages, which would likely require hundreds of U.S.-based employees and physical office space to manage the same transaction volume, highlighting REAX's superior cost structure and scalability.

Real's technological roadmap extends to the consumer experience with Leo for Clients, an upcoming AI-driven, text-based platform expected to launch in 2025. This product aims to deliver an end-to-end AI-driven home buying experience, offering tools for personalized home searches, showing bookings, mortgage applications, and real-time closing progress, all while maintaining seamless connectivity with the agent. The strategic acquisition of Flyhomes' AI-powered consumer home search portal and related technology assets on July 1, 2025, further accelerates this consumer roadmap, integrating deep MLS integrations and market insights into Leo for Clients and bolstering Real's in-house R&D capabilities with experienced engineers. This acquisition is expected to have an ongoing operating expense impact of approximately $2 million to $3 million annually.

Complementing its AI initiatives is Real Wallet, a rapidly expanding fintech platform purpose-built for agents. Real Wallet offers business checking accounts (including specialized tax-focused accounts), debit cards, and production-based lending programs. In Q2 2025, Real Wallet generated $250,000 in revenue, with an annualized run rate now exceeding $1 million. Total deposits in U.S. business checking accounts surpassed $14 million, a nearly 70% increase since May, with approximately 3,600 U.S. agents utilizing these accounts. In Canada, $4 million in lines of credit have been extended to over 250 agents. With gross margins around 90%, Real Wallet is a powerful future profit driver. The company plans to pilot its U.S. lending product and formally launch Real Wallet rewards points in Q3 2025, anticipating a significant increase in the portfolio's size and impact, especially given the larger U.S. agent base. This platform not only provides agents with enhanced financial flexibility and wealth-building avenues but also acts as a strong retention lever for high-producing agents.

Financial Performance: From Growth to Profitability

Real's technology-driven model has translated into impressive financial performance, culminating in a significant milestone in Q2 2025: the company's first-ever quarter of positive operating income and net income. Revenue in Q2 2025 surged by 59% year-over-year to $541 million, driven by a 62% increase in transactions closed, which exceeded 49,000. This growth significantly outpaced the 1% decline in the overall existing home sales market. Gross profit also saw a substantial increase of 50% to $47.9 million.

The company reported positive operating income of $1.7 million and positive net income of $1.6 million in Q2 2025, a testament to its operational leverage.

Adjusted EBITDA improved by 43% year-over-year to $20 million, up from $14 million in Q2 2024. This strong performance contributed to robust cash flow from operating activities, which reached $41 million in the quarter. For the full year 2024, REAX achieved its first-ever $1 billion revenue year, reaching $1.3 billion, an 84% increase from 2023. Full-year gross profit grew 82% to $114.7 million, and Adjusted EBITDA hit a record $40 million, up 188% from the prior year.

While the gross margin in Q2 2025 slightly decreased to 8.9% from 9.4% in Q2 2024, this is largely a "high-class problem." It reflects the growing share of revenue generated by highly productive agents who have reached their annual commission caps. Approximately 14% of the agent base was capped in Q2 2025, up from 11% a year ago, contributing roughly 60% of total commission revenue. These capped agents pay a flat per-transaction fee rather than a commission split, leading to a lower gross margin percentage on those transactions. However, this trend underscores the company's success in attracting and retaining top-producing agents. Operating expenses as a percentage of revenue improved by 100 basis points to 8.5% in Q2 2025, and adjusted operating expense per transaction declined by 5% year-over-year to $459, further demonstrating efficient scaling. The core brokerage segment generated $3 million in operating income in Q2 2025, partially offset by strategic investments in ancillary business lines.

REAX maintains a strong balance sheet with no debt and unrestricted cash and investments at an all-time high of $55 million at the end of Q2 2025. The company allocated $2.7 million to share repurchases in Q2 2025 and plans to increase the pace of buybacks in the second half of the year under a recently authorized $150 million share repurchase program, reflecting strong confidence in its long-term strategy and commitment to shareholder value.

Strategic Initiatives and Agent Empowerment

Real's growth is not solely driven by technology but also by a suite of strategic initiatives designed to empower its agent community. The company actively manages its agent base, offboarding over 1,500 non-productive agents in Q2 2025. This strategic move, while impacting net agent count, resulted in a 7% year-over-year increase in transactions per average agent, significantly outpacing industry averages, and maintaining a best-in-class revenue churn rate of 2%.

Ancillary business lines, including One Real Mortgage, One Real Title, and Real Wallet, are central to Real's long-term strategy. These segments typically generate gross margins 5 to 8 times higher than the core brokerage. In Q2 2025, these businesses grew by a combined 50%, contributing approximately 1% of total revenue and nearly 5% of gross profit. One Real Mortgage saw exceptional revenue growth of 80% in the quarter, driven by an expanding loan officer network and promotional offers. One Real Title's revenue growth decelerated to 7% due to a strategic shift from less scalable team-based joint ventures to more robust state-based JVs. The company launched its first three new state JVs in Q2 2025, with plans for approximately 12 in the near term, anticipating reaccelerated growth and improved attach rates (currently around 4% for title and 1% for mortgage).

Agent development and community building are also key. Real is launching "Agent Breakthrough," a free 60-day virtual program in the fall, offering high-impact marketing strategies and AI training to all real estate agents. The "Further Together Event Series," agent-led in-person coaching events, will commence in Q3 2025, fostering collaboration and skill development. Furthermore, recent changes to the revenue share model, effective August 2025, will allow productive agents to unlock more revenue share tiers faster, reinforcing Real's commitment to rewarding its top performers without impacting the company's overall financial statements. The private label program, launched in January 2024, has also been a significant success, attracting approximately 40 independent brokerages and nearly 1,200 agents by allowing them to maintain their brand identity while leveraging Real's platform.

Competitive Positioning: Outmaneuvering the Old Guard

Real operates in a highly competitive real estate brokerage industry, but its unique, technology-first model provides distinct advantages over both traditional firms and other tech-focused rivals. Unlike traditional brokerages, Real's proprietary software eliminates the need for physical office space, drastically reducing overhead and enabling a lean, efficient operation. This efficiency is reflected in its headcount efficiency ratio of 1:87 (employees to agents) at the end of Q2 2025, a significant improvement from previous periods.

Real is actively gaining market share, asserting its position as one of the few companies growing significantly in the current challenging environment. Its average productivity per agent has outpaced the industry for over two years, a testament to the effectiveness of its tools and incentives. Against competitors like Redfin (RDFN), eXp World Holdings (EXPI), Zillow Group (ZG), and Compass (COMP), Real differentiates itself through its mobile-first technology, wealth-building opportunities for agents (revenue share, equity, Real Wallet), and a strong collaborative culture. While larger rivals may have broader market reach or established brand recognition, Real's agent-centric approach fosters higher agent loyalty and retention, positioning it as a more adaptable and resilient platform. The company's focus on empowering agents with AI tools and next-generation technology ensures they are "outskilled and outmaneuvered" compared to those operating outside of Real.

Outlook and Risks: Building for the Long Term

Looking ahead, Real anticipates continued growth and improved profitability, even as it acknowledges ongoing market challenges. Consistent with typical industry seasonality, the company expects revenue in Q3 2025 to decline modestly from Q2 levels, with a sequentially lower gross margin percentage due to a higher mix of capped agents. Operating expenses are projected to increase in Q3 2025, reflecting strategic investments in headcount, the Flyhomes acquisition, AI automation efforts, and professional fees.

Despite these near-term fluctuations, Real's management expects significant year-over-year improvement in revenue, gross profit, and Adjusted EBITDA for the full year. The R&D prioritization strategy focuses on strengthening its core technology, leveraging AI for greater efficiency, making significant investments in the consumer roadmap (Leo for Clients), and heavily evolving Real Wallet. The company's international expansion strategy remains focused on maximizing market share in the U.S. and Canada before considering new regions, with plans to open in Saskatchewan, Canada, in 2025.

Key risks include the persistent headwinds in the housing market, volatile interest rates, and the potential for industry-wide agent attrition. However, Real's model is designed to thrive in such environments by attracting productive agents seeking better financial terms and advanced tools. The company's resilience to potential commission rate changes, particularly in light of the NAR settlement, is bolstered by the fact that over 50% of its transactions are handled by capped agents who pay a flat fee, not a commission split. This structure, combined with the potential for accelerated agent growth if commissions decline industry-wide, positions Real favorably to withstand market shifts.

Conclusion

The Real Brokerage Inc. stands as a compelling investment thesis, demonstrating robust growth and a clear path to sustained profitability by fundamentally reimagining the real estate brokerage model. Its unwavering commitment to agent empowerment, driven by cutting-edge AI and fintech innovations, creates a powerful competitive moat that allows it to capture market share and enhance agent productivity in a challenging industry. The achievement of its first profitable quarter in Q2 2025, coupled with strong cash flow generation and a disciplined capital allocation strategy, underscores the operational leverage inherent in its platform. As Real continues to invest in its technological roadmap, expand its high-margin ancillary services, and cultivate a thriving agent community, it is well-positioned to redefine industry standards and deliver enduring value for its stakeholders.