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RMA Global (ASX:RMY): Interview with Chairman David Williams

December 16, 2021

RMA Global, RMY, video

RMA Global (ASX:RMY): We spoke with David Williams, Chairman about the fast growth RateMyAgent is experiencing in Australia and the US. We also discussed how the company is conquering the US market and when RMY is expected to be cashflow positive.

See the full transcription below.

Disclosure: Directors of Pitt Street Research/Stocks Down Under own shares in RMY.



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Stuart: Hello, and welcome to Stocks Down Under. My name is Stuart Roberts, and I’m one of the founders of our firm. And it’s Wednesday 15th December 2021. Joining me from Melbourne is the legendary Mr. David Williams, chairman of various successful companies including the one we’re going to talk about today, RMA Global. David, good morning.

David: Good morning to you, Stuart.

Stuart: So David, it’s fair to say that RMA Global share price wise has not had a good 2020-2021. When we wrote about it in Stocks Down Under, it was 64 cents. At the moment, it’s about 20. But there’s one influential shareholder who’s been buying heavily, and I’m talking to him right now. What’s exciting you about RMA Global as we speak?

David: Look, this is really disrupting the world, and we’ve disrupted Australia, and if we turned off, you know, our global expansion, we would be profitable now in Australia and continue to be profitable and growing in profits. But this is a product that’s going to be driven by the U.S. market first and foremost, and once we’ve got that really, we’ve broken the back on that, we’ll tackle the rest of the world. But we’re getting enormous traction in the U.S. and I agree, the market isn’t looking, nobody seems to be looking. And I thought, well, I’m going to buy more because I believe in the company and we’re seeing enormous success in terms of agent acquisition in the U.S.

Stuart: Right. Now, for those investors who don’t know RMA Global overall, let’s just summarize the business. It’s RateMyAgent. So, if I want to find out whether the agent who is selling my house or apartment is any good, I can go to RateMyAgent and look at a whole lot of independent reviews of how good he or she was, right?

David: Correct. That’s exactly what it is. It’s disrupting the real estate market in the sense that we support agents by allowing them to market themselves online. First of all, by reviews, but then using those reviews to see how to push your marketing and push your profile and push your reviews and push your talents around the internet and around social media.

And it’s not just reviews by the way, Stuart, it’s how much did I get the house for, how many sales do I do a year, what’s my average price, what do my reviews look like? There’s something for everybody in it, and that’s really what we’re, we’re trying to disrupt how agents market themselves. And if you look at our site in Australia, I don’t exactly know what the exact number is, but we would have 85% of all real estate agents on that site.

Stuart: Well, that’s right. I checked with the agent who handled the apartment I’m sitting in right now talking to you, and he gets a lot of good reviews on the site. Marc Kennis who’s the other half of Stocks Down Under, we checked with his agent yesterday, and he gets good reviews, and we talked to him, and he spends a heck of a lot of money on the platform because it works so well for him. It’s fair to say RateMyAgent has been the biggest marketing tool for real estate professionals in a generation.

David: Yeah. Once you get to know the product range, it’s one thing to just be on the site. Okay, I’m there, there’s my profile, there’s my picture, there’s a picture of every house I’ve sold, there’s my reviews, and allow people to come to the site looking for the best agent in wherever you are, Brown, let’s say, you know.

But the people who are getting the most, or the agents are getting the most out of it are using that database in sales to proactively push that message around the market. So, if you’re an agent and you’ve got a good review today for a house you sold, fine. Just leave it on the program, leave it on the site, it’ll do its own work. But we give you the option saying, how would you like to push that around social media? To put it on Facebook, to put it on Google, to put it on LinkedIn, you know, for 100 bucks? Three clicks, yes, yes, yes, bang, and it’s out.

And so, anybody who’s then looking at real estate in those suburbs, if it’s on our site, it will pop up as a pop up on their screen. So, really enhancing, you know, the product range we’ve got is enormous. Ditto on the listing side. So, you can be on, you can be on the main, but for 100 bucks or 200 bucks, you can also put that listing through RateMyAgent. So, we’ve got a sort of a, you know, a cut down version. When you think about it, we’ve got everything that’s got and more.

Stuart: Well, I was just going to say, this could be a little bit brave of me, but are we potentially disruptive not just to the market generally, but to the established leaders in the form of those two companies you just mentioned?

David: Potentially, potentially. And, you know, there’s no love loss between a lot of agents and some of the market leaders, ditto in the U.S. But our first and foremost, firstly, we’re not trying to clip the agent’s ticket, right? We’re not trying to take away your comm like some of the other sites are doing, we’re just reporting the agents. Primarily, we’re there to support real estate agents and to help them better market themselves, and that’s where we’re heading to.

Stuart: Now, to that end, we mentioned the U.S. several times. This platform obviously has established itself in Australia. America’s ten times bigger, and they’ve got a lot of realtors who want to market their services. Are there any challenges you’re facing in terms of adapting the market to U.S. conditions, or does it adapt of its own accord?

David: Look, it adapts pretty much of its own accord, but as people are prone to say about every industry, the U.S. is not just one country, it’s 52 countries. So, there’s variations between the way in which agents interact in the market, how they collect their data, how they set out their data and so forth. And so, even if we were successful let’s say in Texas, putting that data into the same format that we use, you know, sometimes needs a bit of work.

But we’re enormously successful in it. You say it’s 10 times bigger, of course, it is on a population basis, but on an agency basis, it’s significantly bigger than 10 times. And so, in Australia for example, we’ve got about 35,000 active agents on our site, that’s people who have sold a property in the last year defined as active. And there’s probably, nobody knows exactly, but there’s probably about 50,000 – 55,000 agents in this country.

A lot of them don’t work of course because people come in and go out of the industry and they still might have their registration and so forth. In the US, that’s more like 1.3 to 1.4 million. So, it’s a multiple of the population if you like. There’s a whole lot of reasons for that. One of the reasons is because in the U.S., there’s a buyer and a seller’s agent. So, when you go to sell a property, you might say, I’m selling that flat you’re sitting in there, and you’ve got your own agent working for you, and there’s buyer’s agents who come in and then say, oh, I’ve got somebody who might be interested, that comm is split.

So, in Australia, you want to sell that apartment, somebody’s going to come along and say, okay, I’ll sell it for you, but I want to charge you 2%. You’ll negotiate and you might end up at 1 1/2%. In the U.S., it’ll start at 6%, but 3% goes to the buyer’s agent, 3% goes to the seller’s agent. So, that construction of how much money gets lost in transaction cost, it drives a much bigger market in the U.S.

The second thing that drives it is that there’s so many small cities. I mean, we’re concentrated down the East Coast. But in the U.S., there’s sorts of small cities where you’ll have, say for example, a lady who runs a PTA and runs a basketball team and she’s also an agent, but she might sell one house in every two years. So, there’s a long tail in the U.S.

What we’re interested in, we’re interested in the old 80/20 world. In the U.S., there’s 300,000 agents out of that total 1.3, 1.4, 300,000 agents that do 80% of the transactions in that country. And it’s the same thing here. We’re interested only in the 80/20. Of course, if other agents want to come along and they’re just starting out and they really want to promote himself, we want you on the platform, and we’ll have you on the platform anyway. But the people we really want to market to are those 80/20 people, the 20% of agents who are selling 80% of the properties.

Stuart: And throw in the fact that America is such a restless country, people are moving from one part of the country to another all the time. So, the level of transactions in the market is probably higher than here I suspect.

David: Correct. And it’s also a much bigger marketing challenge. So, I was talking to an agent the other day in Florida who I know, and she says, look, I’m looking agent promoter, our agent promoter product, but I I don’t want it to be in Florida. I want it to be in New York because all of the houses I’ve sold in this last year have been New York people coming to live in Florida.

Stuart: Of course. That’s right. You’ve seen this big immigration out of the cities as a result of, you know, disorders in American cities last year for example.

David: Correct. But it’s always happening. It’s happening in the U.S. anyway much more than it has. We’ve seen it here, people are leaving Melbourne, [inaudible 00:08:25] and up on the Northern beaches, and all that sort of stuff. But it’s always been a function of the U.S., you know, economy. You go to school in a different place that you went to University at, you work in a different place to where you went to University. So, there’s a lot of, you know, there’s a lot of fluidity in where the people live.

And so, the marketing challenge for promoting yourself as an agent. If you’re an agent in Florida and 80% of your buyers are from out of state, well, okay, how do I actually get to those people, how do I get noticed, you know.

Stuart: Right. Now, and you pointed out earlier, RMA Global’s not profitable yet. But if we were not expanding globally, it’s a fair bet that you’d be profitable just from the Australian and New Zealand business. You’re active in New Zealand, right?

David: Correct. Very active, and New Zealand is really going well.

Stuart: Right. So, and obviously, the U.S. expansion is cash-consumptive, but in a minor way. You flagged that before the end of FY22, potentially, you’ll reach cash-positive territory.

David: Correct, even in the U.S.

Stuart: Right. So, then, obviously, onwards and upwards. What markets do we want to conquer after America?

David: Well, I think we’re going to get, whether we want to or not, we’re going to get dragged into Canada because one of the things that’s happening in, what happened in Australia is we went to some of the big agencies, you know. So, we go to Ray White for example, and they go, no, we, that’s our data, they’re our agents.

So, we went to the agents. And so, what happened is the agents come on and they get on and they get bigger and they get bigger, and you’re sitting in your lunch room and, you know, one of the guys is sitting next to you guys, “Shit, where’d you get that listing from?” “Oh, I got it off RateMyAgent.” So, the agents come on.

Now, what we’ve got in Australia is we’ve got the agencies now coming on saying, listen, let’s do a whole of agency deal. So, you said we just announced one last week with Harcourts, and Harcourts, we’ve got a huge percentage of the Harcourts agents on anyway in their own right. But Harcourts wants a review for every single transaction that happens, and they want us to help them promote Harcourts as a brand, as well as the agents promoting themselves. What’s happening in the U.S. strangely is that we’ve now got agencies like the equivalent of Harcourts coming to us saying, let’s do an agency deal, long before we’ve got more than 10% or 20% of the agents in the agencies…

Stuart: And obviously, Canada, you can start from scratch there, basically, yeah, going to the agencies before the agents, right?

David: Well, what I was just going to say was, you know, where will we go next? We’ll be dragged into Canada because a couple of the agencies that we’re talking to have got big presence in Canada. That deal we just announced last week with Harcourts, if you look at it closely, Harcourts are already huge in the West Coast of the U.S., they’re already huge in New Zealand, and they’re already huge in South Africa.

So, we’ve done a worldwide deal with them, but yeah, we’re really trialing it hard now in Aussie. Once that’s fine, bang, we’ll be after those other markets as well. So, the main will happen, where will we go after the U.S.? We will be in Canada before we finish with the U.S., you know.

Stuart: Okay. So, today, we know duly, you’ve been a heavy buyer of the stock just lately. You’re getting about a third of what it was trading at 18 months ago. Markets tend to turn away from companies that are cash-consumptive, but your board’s very strong message is that the cash consumption is beginning to come to an end very shortly for this company.

David: Exactly. But, you know, it’s not just cash. I mean, you know, we’ve said that by the end of this FY, we’ll be cashflow positive, and the U.S. is growing very quickly. The market’s seen it. We’re now, I haven’t looked in the last [inaudible 00:11:45] because the number of agents on our site, let’s say in the U.S., is going up every day. But I’m guessing it will be 175,000 agents. Three hundred thousand is what we want, the 300,000 best-selling agents is what we want. And by the time we get there, we’ll be significantly cashflow positive. But I’m not really worried about the cash, because I know in stocks like this that when you show that growth, when the market’s got enough information so that they can draw their own dotted lines, it takes off.

I mean, you only need to look at Afterpays and everybody else in the world that are not yet cashflow positive, but it’s the growth, it’s where people can see the, you know, draw their own dotted line and see the growth. And on that dotted line, they can see that you’re quickly turning to cash, and then, it goes away with itself, you know. So, it’s not cash that’s driving me, it’s more the growth that we’re seeing in the U.S., the number of new agents on, the number of new reviews, and that’s, you know, when I say people are starting to take the drug as I refer to it, i.e. get the reviews, then you know you’re on fire, you know, because that’s just showing you as an agent, I’m engaged with the platform, you know.

Stuart: All right. So, let me ask one last question before we wind it up. As a board, what would be concerning you in terms of the growth of this business right now? Like are you growing too quickly for example, and that could potentially lead to its own problems?

David: No. I’m not concerned about that whatsoever. I’m more concerned about how at what point do we put more effort into turning the drug users into paying drug users, you know what I mean? Because the model is it costs me nothing to get on as an agent, it costs me nothing to get a review, right. Now, how do I now convince you, you’re obviously engaged, probably, you’ve started getting your reviews. You’re engaged with the profit, you love it, and you think you’re getting something out of it, how do I engage you to use the products that we’ve got more widely and to pay for them? It’s not a worry for me, that’s the fundamental focus that we’ve got to have as a business.

Stuart: Right. And David, you and I have known each other, I’ve known your name now for the best part of 20 years, and the rule I have is if David Williams is buying, you don’t sell. Share with us a bit of your career. We first met in the context of Medical Developments International where you and your colleagues took the green whistle to the globe. Polynovo has been a recent success story of yours where potentially the stock could get back above $4. But going way back in time, what turned you into such a great investor?

David: It was an accident of history. You know me, I’ve been an investment banker for 35 years, so I’m doing M&A. And as an M&A guy, every week, you see one new transaction, at least one. And in each of those transactions, they’re good for somebody. They’re not necessarily good for me, but occasionally, you see things where none of your clients want the thing, and you go, you know what? I’m smarter than them. If they don’t see it, I’ll do it. I’ll just prove that it can be done. And I’ll give you an example, you know. You can’t do this in a big bank. When I was running Societe Generale or ANZ or Arthur Andersen, you can’t get through compliance on that system. So, really started say 13, 14 years ago when I went out of my own and I set up, what is now Kidder Williams. So, the first thing that comes along is Tassal. Tassal went broke. This is the largest salmon producer in this country.

Stuart: And now ready to supply us with all the prawns we need for Christmas, right?

David: Correct, they brought in the prawns in North Queensland. But at that stage, I bought it for 42…Webster by the way had the next biggest, and they looked at it, and they asked me to advise them. And I told them what my fee was, it was like half a million dollars, he says it’s too much, we’re not going to employ you. So, then Simplot came to me and they said, well, you know, we’re thinking about it as well, what about it? And we started doing a bit of work, and then, Terry O’Brien who’s running Simplot, he said, oh, you know what? I can’t get my head around the farms. I don’t want the brand, I don’t want the price, we’re not going to do it. And I had been advising Tassal by the way for 10 years anyway. So, I thought, you know, nobody wants it, bugger it. I’ll buy it.

So, I bought it for 42, and this is why I bought it. Forty two million down, subject to DD and subject to the funding. In other words, we got a free option. So I go to the [inaudible 00:15:51], all of the old friends, Wam and Thorney, and they all go, yeah, yeah, we’d be in. But I had sold it to them at 60. So, I got the 60 million, applied the 42, but I got 20% for free, for free, I didn’t have to put in a cent. And [inaudible 00:16:06] paid for it. It then went to 800 million which is where it is today, 800, 850 million or something, but I got 20% for free. So, you know, my definition of a good deal is if you can get a free carry out of it, that’s a good deal.

Stuart: Yeah. I’m looking for as many of those as I get my hands on.

David: Well, the same thing happened at Medical Developments. I bought it for 10 1/2, I floated it for 16, I got 38% for free, got the DRP to take me to 52%, next thing, it’s $800 million. I had 50% of the company. So, I took 100 off the table, I’m still the biggest shareholder with about 15%. So, it’s, I’m still running, you know, a very successfulish, you know, M&A practice focused on pharmaceuticals and food and Ag, but, you know, there’s a lot of deals in the market, not a lot, you know, there’s a lot of gold nuggets on the street. But there’s various examples, I’ve just given you two, but we know there’s another one, where they just need a different mindset in order to turn them into great companies.

There’s a lot of great companies, especially in the pharma space where you’re very strong. There’s a lot of great technology, but people die by 1,000 cuts because they hang onto it too long and they don’t raise enough money. You’ve got to [inaudible 00:17:17] on some of these things. If you’re going to be serious about it, look at Polynovo. I went in there, there was six people. I sacked two, I had four. I didn’t have anything. But I raised the money, I put on 20 more people, I put on a manufacturing guy before we even had a product to manufacture, because you need to sort of catch up and be ready.

Stuart: Absolutely. That’s right, yeah.

David: And every time I raised money, the market cap went up. And now, you know, as you quite rightly said earlier this year was $2 billion, you know.

Stuart: Right, right. David Williams, thanks for sharing some of your insights here, and we look forward to tracking you on the success of RateMyAgent for the next doublings and triplings of this stock.

David: Stuart, it’s very good to talk to you again.

Stuart: All right. Stay well.

David: See you soon.