Philip Soper - President, Residential Franchise and Core Brokerage Services Kevin Cash - Chief Financial Officer

Thank you, Tanya. Good day, everyone.

Thanks for joining us. With me today is our Chief Financial Officer, Kevin Cash.

On today's call, I will begin with a brief look at our financial information, and then Kevin will dive down into our financial results of the quarter in more detail. Finally, I'll conclude by providing some remarks on recent business operation and market developments.

After that, Kevin and I would be happy to answer your questions. As usual, I want to remind you that some remarks expressed during this call may contain forward-looking statements that may differ materially from results published in this morning's press release.

I encourage everyone to review the cautionary language found in our news release and on our Annual Information Form posted on CEDAR. Kevin and I are here after a successful Annual General Meeting, which was held at the Western Prince Hotel this morning in Toronto.

At the meeting, we conducted several matters of business, including the reelection of our Board of Directors led by Chairman, Spencer Enright, and the reappointment of Deloitte as our auditor. Overall, we are pleased with the performance of our business for the three months ended March 31, 2015.

We are proud of our network of REALTORS that for the very first time went over the 16,000 mark. Thanks primarily to acquisitions made in 2014.

We're also pleased to say that with a building pipeline, we've been able to carry the momentum we had on that front into 2015. If you look at the primary measures we use to assess the performance of the company, mainly cash flow from operations and royalties, the first quarter got the year off to a good start.

Our royalties for the first quarter were $8.5 million, up from $8.1 million or an increase of 4% from the same period last year. Our cash flow from operations was $6 million, increasing by $320,000, approximately 6% versus the same period in 2014.

This is driven predominately by an increase in the number of agents in the network, as a result of the acquisition and franchise agreements at the beginning of the quarter. Our cash flow continues to be well in excess of our dividend payments, with a payout ratio of less than 69%.

This puts us in very good financial position to continue making strategic acquisitions and to invest in our business, while continuing to pay our shareholders a stable and growing dividend. Approximately 71% of our revenue is generated from fixed fees, and derived from a network of brokers and REALTORS, which ensures our annual royalties were partially insulated for market fluctuations.

The remaining 29% of our revenue is variable and derived from total transactional dollar volume, which is the sales commissions of our agents and sales representatives. The company had a net increase of 829 agents during the quarter, well up from the net increase of 375 agents in the same period of 2014.

In fact, the addition of more than 800 agents at the beginning of 2015 is the largest addition to our network since the Via Capitale acquisition, back in 2007. For the first quarter of the year, the Canadian housing market closed up 11.8% at $43.2 billion as compared to the same period of 2014, driven by a 7.1% and 4.4% increase in price and units sold, respectively.

The increase in units sold and prices continues to be most spread out in the Toronto and Vancouver markets, and I'll touch on that more, later. The increases in home prices and number of units sold in Canada led to a 2% year-over-year increase in our royalties from variable franchise deals.

We continue to have very strong representation in Central Canada, Atlantic Canada, Manitoba, Saskatchewan, and parts of British Columbia, were under-represented than Alberta. As have been our experience, since our initial public offering in 2003, the company continues to experience a very high level of franchise contract renewals.

Historically, we have successfully renewed over 95% of our franchise agreements as they come due, and we overachieved on that number in 2014. During the first quarter three franchise agreements, representing 158 agents were subject to renewal, and all renewed.

To summarize, we're pleased with company's financial and operational performance for the first quarter and we're excited about the growth ahead. We're off to a good start to 2015 and expect this to be another strong year.

With that, I'll turn things over to Kevin Cash for a closer look at our first quarter financials.

Thank you, Phil, and good afternoon. Now turning to our results, the combination of acquisitions at the beginning of the year and market activity combined to generate a cash flow from operations for the 12 months ended March 31 of $2.4 a share, which was up $300,000 or $0.02 a share from the 12 month ended December 31, 2014.

Royalties for the quarter were up 4% over the first quarter of last year, due primarily to an increase in fixed and other revenue, resulting from the addition of 858 agents on January 1 of this year, which was partially offset by attrition experienced since March 31 of last year. Variable fees were up 2%, as increases in the underlying market was mitigated by agents and teams who have capped out under the fee arrangement.

The BC market, where we are under-represented, which in of itself is overweighed in terms of both selling price of units sold in relation to the agents that service that market. And in light of fact that when a home sale is recorded by the market, and 45 to 60 days later when a home sale closes and related variable fees are recorded.

In other words, there was a spike in activity in March of this year, and we'll expect to see that spike materialize in variable fees in Q2. Training fees were up 5% over the same period of 2014, and these two were mitigated by agents and teams, which are capped in the light of fact previously described.

Operating cost for the quarter was flat as compared to the first quarter of 2014. In reviewing operating cost for the quarter, the company recorded $191,000 in net interest savings, resulting from the refinancing of the company's debt arrangements at the end of last year, less approximately $60,000 interest attributed to the drawdown of $8 million on the company's $10 million acquisition line to fund the acquisition of contracts at the beginning of the year.

These savings were offset by a $79,000 increase in management fees, due to the acquisition of contracts at the beginning of the year and the year-over-year interest cost savings. In addition, the administration costs were up $98,000 due primarily to bad debt provisions contributed to franchisees who are experiencing operating challenges.

For the quarter, the company generated a net and comprehensive loss of $3.5 million or $0.37 per restricted voting share, which was an improvement of $1.3 million from a loss of $0.51 for restricted voting share for the same period of 2014. The primary drivers of this year-over-year change was the $320,000 increase in cash flow from operations as previously described and $1 million of non-cash items.

The primary drivers for the non-cash items were a $965,000 reduction in the year-over-year loss on exchangeable units that is simply attributable to the $1.15 increase in share price for the quarter as compared to $1.44 increase in the quarter last year. An $880,000 reduction in loss was attributable to purchase obligations for franchise agreements recorded in 2014, which did not recur in 2015.

A $477,000 reduction in amortization costs and a $226,000 reduction in income tax expense. These increases in year-over-year results were partially offset by $1.6 million loss, attribute to the valuation of the interest swap on the company's $53 million term facility and as a reminder this is a non-cash item.

We closed out 2014, as Phil spoke about earlier, with approximate 71% fixed and 29% variables to royalty mix, which continues to insulate the company's cash flows from variations in the underlying real estates markets. We are encouraged by the continued productivity of our agent network, which is based on 2014 transactional dollar volume, is approximately 51% more productive than the rest of Canada's REALTORS.

With that, I'd like to turn the call back to Phil.

Thank you, Kevin. I'm going to start with some operational updates.

The strong financial results for our business, it's been able to pretty fly on a first rate operating platform. With this in mind, we've continued to invest in technology, market, and training, and others that help our brokers and agents be so productive.

For instance, in the first quarter of 2015, Royal LePage launched a fully redesigned and reengineered REALTOR internet called the rlpNetwork. For the redesign Royal LePage teamed up with technology giant Google; Affinity Systems, a world class custom software developer; and Akendi Inc., a leader in user experience research and design.

rlpNetwork is the first intranet in Canada to be fully integrated with Google Apps for Work, which connects the company's 16,000 REALTORS enabling real-time collaboration, best practices sharing and cross-Canada referrals. User experience on rlpNetwork is second-to-none.

It was designed with the intuitive navigation, including intelligent menus and a powerful search feature, which leverages Google technologies. We have acquired a huge amount of content over the years and been able to organize it, and more importantly expand it, became a paramount part of the design of rlpNetwork.

Our REALTORS are now able to quickly and easily access sales, lead generation, marketing and training tools they need to do in their day-to-day business. rlpNetwork was also designed in a flexible and responsive fashion, so it can be accessed on any device at any time from anywhere, which has become increasingly a priority for our frontline practitioners given that today's REALTORS are so highly noble.

During the quarter, our Royal LePage brand also started the rollout of its Broker Advisory Services initiative. This initiative is a cross-functional program that contributes to making Royal LePage businesses the most profitable brokerages in the nation.

Broker Advisory Services encompass consulting services for broker owners and national benchmarking initiative, agent-broker satisfaction surveys, and the development of a tool kit for recruitment and retention of real estate team, and advisory services for compliance with the national regulation such as FINTRAC or the recent anti-spam legislation. We're very excited about other achievements on the acquisition front as well.

The company's network, as I mentioned earlier, went over the 16,000 agent mark for the first time. This unprecedented growth carried over nicely into the first quarter of this year.

Just a few weeks ago, I traveled to Saskatoon to celebrate the acquisition of the provinces leading independent brokerage Hallmark Realty. Hallmark was an established and well-respected firm right across the province.

The addition of Hallmark adds another 80 sales professionals to the Royal LePage sales force in Saskatoon, and brings our market share to 22% in the city. In fact, after the announcement, I was talking to the CEO of the Saskatoon Real Estate Association who oversees the industry in the province, and he said it was the most important thing that has happened in Saskatoon in 15 years, and it puts us within a very slim eight realtors of being number one in the province.

And if you recall, if you're regular listeners on the call, we went over that mark and became number one in Manitoba just that about 18 months ago. So our strategy to retain number one position, which we have in Ontario and Atlanta and Canada, is working province by province.

In March, we were happy to have the Peaceland Realty Group of Richmond Hill, Ontario, joined the Royal LePage network. The company was founded in 2011, and has grown to include 73 agents further establish themselves as a leaders within the Mandarin speaking Canadian real estate community.

Peaceland is the latest addition to our company in the area of what we termed ethnic brokerages, which we believe is a portion of the national real estate brokerage industry, where we can experience considerable growth. Previously, we have added brokerages that cater to South Asian, Korean and Chinese communities right across the country, but particularly in British Columbia and Ontario, where the majority of new Canadians make their home.

Our research shows that new Canadian homebuyers and sellers prefer to work with a Canadian firm, but they do like to have a firm that has realtors that live in their communities and who can communicate with them in their native language. So what we have been able to do is marry the tradition and heritage and natural strength of our Canadian brands with the language skilled and home country referral networks of these ethnic brokerages and it's been a win-win situation, and we expect to see continued growth in ethnic communities in the future.

Looking ahead, we have a solid pipeline of the works that will add considerable growth to our company during 2015. Our management team is enthusiastic of about growth opportunities exist in the marketplace.

Real estate is a momentum industry. We cater to sales professionals and they want to work with a winner, and it's clear that our company and our brands have the momentum in the industry right now.

Turning to the market. There were several big macroeconomic events that took place in Q1 that have impacted our business.

A one side of the ledger, the Bank of Canada in reaction to the short drop in energy prices surprised Canadians and the real estate industry by cutting the bank rate or the target rate from 1% where it stood for almost five years to 0.75%. These lower interest rates have been supportive of the housing market, and in particular they were most welcome in the province of Alberta where the damage to consumer confidence of lower oil prices was most acute.

It mitigated the impact of that drop in consumer confidence. And in fact, while we've seen significant declines in the number of transactions create in Alberta home prices that held up fairly well and are essentially flat.

Looking ahead, however, we do believe that we'll see continued softness in home prices in the Alberta market through the middle of the year. We are encouraged that oil has down stack by about 30% of the bottom, a little more even that.

And there is some signs of additional positive consumer confidence returns in the province at this stage. But as I said, we do expect additional softness in prices in the Alberta market through mid-year.

We expect also to see softness in Saskatchewan and Newfoundland and for that to be reflected in home prices albeit to a lesser extent than we expect in Alberta. At the current economic environment across the country points to a soft landing for most housing markets in the country after several years of robust expansion.

What we mean by that is we expect home prices to be flat or increase only slightly giving the economy and family incomes and opportunity to catch up. The exception to this will continue to the in Vancouver and Toronto, our larger city and our most expensive real estate markets.

High demand driven by a response from good demand from the United States and lower Canadian dollar, which have increased our ability to explore profitability as well as restricted supply of single family homes in Toronto and Vancouver should continue to drive single family homes, attached homes in particular to higher levels of performance, price performance, and unit sales than we see in another areas of the country. In sum, we believe as we move into the summer, most housing markets around the country will experience flat house prices and slower market, but are in general a healthy Canadian real estate market.

Finally, before turning things over to the operator and opening the line up for questions, I'd like to note that in April, our Royal LePage brand was named the 2015 Outstanding Corporate Citizen of the Year by the Canadian Franchise Association. Royal LePage received this award through demonstrating sustained support for local Canadian through our network of some 600 offices from coast-to-coast and for the philanthropic innovation on a national scale, raising some $20 million through the Royal LePage Shelter Foundation.

Found in 1998, the Royal LePage Shelter Foundation has helped hundreds of thousand of women and children who have been exposed to the horror of domestic violence. The foundation has also funded major research projects that led to the development of National Education Program aimed at helping you develop healthy relationships.

All administrative cost for the foundation are aboard by the company ensuring 100% money is raised by real tools and consumers go directly to help the cause. The award, the Outstanding Corporate Citizenship award, was much welcomed recognition within the network.

And it was the very first time this award has been given to a real estate company. I would also ask those on the call to keep in eye out in their neighborhood, this upcoming weekend on Saturday is Canada's largest Garage Sale, the Natural Garage Sale for Shelter and the single largest fund raising event for our corporate charity.

In conclusion, Kevin and I are optimistic about the state of our business and the growth opportunities exist for us going forward. Our business performed well in Q1 overall, well-positioned for another strong year.

With that, I'll turn things back over to the operator and open the call to questions.

End of Q&A

I'd like to thank to the continued support, we receive from our investor community and look forward to updating you on future calls and through our news releases. Thank you, operator.