DENVER, Nov. 13, 2013 /PRNewswire/ -- RE/MAX Holdings,
Inc. (the "Company" or "RE/MAX") (NYSE: RMAX), one of the
world's leading franchisors of real estate brokerage services,
today announced strong operating results for the third quarter
ended September 30, 2013.
"We are extremely pleased with the continued positive momentum
in our business during the third quarter," stated Margaret Kelly, Chief Executive Officer of
RE/MAX. "We grew agent count, revenue and our adjusted EBITDA
margin from the prior year quarter. These results highlight our
ability to attract and retain talented agents and generate revenue
growth with consistently high margins through our franchise
model."
Kelly continued, "With the completion of our initial public
offering and the acquisition of two regional franchises in
October 2013, we remain
well-positioned to capitalize on current real estate market
conditions by leveraging our deep industry knowledge and our
premier market presence to grow our agent count and franchise
network in the coming years."
Third Quarter 2013 Highlights
- Increased total agent count to 92,731, up 4% compared to
the prior year quarter
- Grew revenue to $40.3, up
5% million compared to the prior year quarter
- Adjusted EBITDA1 increased to $22.1 million, up 13% compared to the prior
year quarter
- Adjusted EBITDA1 margin was 50% for the nine months
ended September 30, 2013, compared to
45% in the prior year period
- Successful completion of initial public offering ("IPO") and
two acquisitions shortly after the end of the
third quarter
Third Quarter 2013 Operating Results2
RE/MAX generated revenue of $40.3
million during the third quarter of 2013, representing a 5%
increase compared to $38.4 million
for the same period in 2012. Increased revenue was primarily
attributable to growth in agent count, additional fee based revenue
as a result of the acquisition of the RE/MAX of Texas region in December 2012 and higher broker fee revenue due
to a rise in commissions resulting from increased home sale
transactions. Revenue was $118.6
million for the nine months ended September 30, 2013, up 9% from the same period in
2012.
RE/MAX grew total agent count by 3,828 agents or 4% to 92,731
compared to the prior year quarter. Agent count in the United States ("U.S.") and Canada increased by 2,454 agents or 3% to
73,245 compared to the prior year quarter. Agent count outside the
U.S. and Canada saw an increase of
1,374 agents or 8% to 19,486 agents compared to the prior year
quarter.
The Company's fixed recurring revenue streams, annual dues and
continuing franchise fees, accounted for 58% of the Company's
quarterly revenues. Annual dues, fixed fees paid by agents directly
to RE/MAX, rose 3% to $7.5 million
compared to the prior year quarter due to growth in agent count.
Continuing franchise fees, a fixed fee per agent paid by each
regional franchise owner in independent regions or each franchisee
in Company-owned regions, were $16.1
million, up 12% over the prior year quarter. The increase
was primarily driven by the acquisition and subsequent growth of
RE/MAX of Texas, which allowed
RE/MAX to earn additional fixed continuing franchise fees.
RE/MAX also realized incremental growth through additional
broker fee revenue as the housing market continued to recover and
home sale transactions increased. Broker fees, the percentage fee
paid on agent-generated transactions, grew 27% to $7.2 million compared to the prior year quarter
reflecting incremental revenue that RE/MAX realizes as home sale
transactions increase. Franchise sales and other franchise revenue
decreased $1.7 million or 25% from
the prior year quarter primarily due to the sale of master
franchise rights in China for
$2.1 million in the third quarter of
2012.
Brokerage revenue, which principally represents fees assessed by
the Company's owned brokerages for services provided to their
affiliated real estate agents, was $4.5
million, an increase of $0.2
million from the prior year quarter.
Total operating expenses were $25.8
million for the third quarter, $2.4
million higher than the same period in 2012 mainly due to
expenses incurred in association with the IPO and amortization
related to the acquisition of RE/MAX of Texas.
Adjusted EBITDA was $22.1 million
in the third quarter, up 13% from the prior year quarter. The
increase was driven by growth in total revenue of $1.9 million arising from agent growth, higher
broker fee revenue and additional continuing franchise fees from
the acquisition of RE/MAX of Texas, offset by a decrease in franchise sales
and other franchise revenue. Adjusted EBITDA was $58.8 million for the nine months ended
September 30, 2013, up 20% from the
same period last year. The Company's Adjusted EBITDA margin was 50%
for the twelve months ended September 30,
2013. A reconciliation of net income to Adjusted EBITDA is
included in table 5.
Net income was $7.7 million in the
third quarter, $4.7 million less than
the third quarter of 2012 due primarily to increased interest
expense and losses associated with the extinguishment and
refinancing of debt, expenses related to the IPO and increased
amortization associated with the acquisition of RE/MAX of
Texas. RE/MAX reported adjusted
pro forma basic earnings per share ("EPS") of $0.18 and diluted EPS of $0.17 for the three months ended September 30, 2013.
Adjusted net income3 was $9.4
million in the third quarter, in-line with the third quarter
of 2012. RE/MAX reported adjusted net income pro forma basic EPS of
$0.32 and diluted EPS of $0.31 for the three months ended September 30, 2013.
Since RE/MAX did not become a public company until the fourth
quarter of 2013, the ownership structure used to calculate adjusted
pro forma EPS for the three months ended September 30, 2013 reflects RE/MAX owning 100% of
RMCO. Adjusted pro forma basic EPS was based on Class A common
shares outstanding of 29,342,571 and diluted EPS was based on total
weighted average dilutive shares using the treasury stock method of
29,989,723. The actual RE/MAX ownership of RMCO is 39.56%. Refer to
tables 6 through 9 in this release for further detail on adjusted
pro forma basic and diluted EPS.
Balance Sheet
The Company ended the third quarter of 2013 with a cash balance
of $73.5 million, an increase of
$5.0 million from December 31, 2012. In July
2013, RE/MAX borrowed $230.0
million to refinance and repay existing debt. The loss on
early extinguishment of debt was $1.7
million. The costs associated with refinancing the Company's
debt was $3.2 million of which
$1.9 million was expensed. As of
September 30, 2013, the Company had
$229.0 million of term loans
outstanding, net of unamortized discount.
Successful Initial Public Offering
The Company completed its IPO of 11.5 million shares of Class A
common stock on October 7, 2013 at a
price to the public of $22.00 per
share, raising net proceeds of $224.9
million after deducting underwriting commissions and
offering expenses. The net proceeds of the IPO were used to acquire
regional franchise rights in the Southwest and Central Atlantic
regions of the U.S., redeem all the outstanding preferred equity
interests in RMCO held by the private equity firm Weston Presidio
and purchase common interests from Weston Presidio and RE/MAX's
founding shareholders.
This release presents historical results for the periods
presented for RMCO, which in connection with the IPO became
consolidated into RE/MAX subsequent to the end of the Company's
third fiscal quarter. Accordingly, these historical results do not
purport to reflect what the results of operations of RE/MAX would
have been had the IPO and related transactions occurred prior to
such periods. For example, these historical results do not reflect
the attribution of a portion of our income to non-controlling
interest or the provision for corporate income taxes on the income
attributable to RE/MAX that we expect to record in respect of
future periods.
Webcast and Conference Call
The Company will host a webcast and conference call on
November 14, 2013 at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time). The live webcast will
be available at www.remax.com under the Investor Relations section
or directly through the following link:
http://services.choruscall.com/links/rmax131114.html
Listeners should go to the website at least 15 minutes prior to
the start of the webcast to download and install any necessary
audio software.
A replay of the call will be available approximately two hours
after the end of the call on November 14,
2013 through 5:00 p.m. Eastern
Time on December 6, 2013, by
dialing 1-877-344-7529 (U.S.), 1-855-669-9658 (Canada) or 1-412-317-0088 (International) and
entering the pass code 10036134. An archive of the webcast will be
available on the Company's website for a limited time as well.
About the RE/MAX Network
RE/MAX was founded in 1973 by Dave and
Gail Liniger, with an innovative, entrepreneurial culture
affording its agents and franchisees the flexibility to operate
their businesses with great independence. Over 92,000 agents
provide RE/MAX a global reach of more than 90 countries. Nobody
sells more real estate than RE/MAX.
RE/MAX, LLC, one of the world's leading franchisors of real
estate brokerage services, is a subsidiary of RE/MAX Holdings, Inc.
(NYSE: RMAX).
Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of the "safe harbor" provisions of the United States
Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the use of words such as
"anticipate," "believe," "intend," "expect," "estimate," "plan,"
"outlook," "project" and other similar words and expressions that
predict or indicate future events or trends that are not statements
of historical matters. These forward-looking statements include any
statements regarding the Company's strategic and operational plans.
Forward-looking statements should not be read as a guarantee of
future performance or results, and will not necessarily be accurate
indications of the times at, or by, which such performance or
results will be achieved. Forward looking statements are based on
information available at the time those statements are made and/or
management's good faith belief as of that time with respect to
future events, and are subject to risks and uncertainties that
could cause actual performance or results to differ materially from
those expressed in or suggested by the forward looking statements.
Such risks and uncertainties include, without limitation, (1)
changes in business and economic activity in general, (2) changes
in the real estate market, including changes due to interest rates
and availability of financing, (3) our ability to attract and
retain quality franchisees, (4) our franchisees' ability to recruit
and retain agents, (5) changes in laws and regulations that may
affect our business or the real estate market, (6) failure to
maintain, protect and enhance the RE/MAX brand, as well as those
risks and uncertainties described in the sections entitled "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operation" in the final prospectus
relating to the Company's IPO included in the Company's
registration statement on Form S-1 filed with the Securities and
Exchange Commission ("SEC") and similar disclosures in subsequent
reports filed with the SEC, which are available on the investor
relations page of our website at www.remax.com and on the SEC
website at www.sec.gov. Readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as
of the date on which they are made. Except as required by law, the
Company does not intend, and undertakes no duty, to update this
information to reflect future events or
circumstances.
1 Non-GAAP measures. See Table 5 for a
reconciliation of net income to Adjusted EBITDA for the three and
nine months ended September 30, 2013
and 2012 and the end of this release for a definition of Adjusted
EBITDA.
2 For the purposes of this
release, results for RE/MAX and RMCO, LLC ("RMCO") are
interchangeable.
3 Non-GAAP measures. See Table 8 and 9 for a
definition of adjusted net income and adjusted EPS and
reconciliation of these non-GAAP measures to net
income.
|
|
TABLE
1
|
RMCO, LLC
AND
SUBSIDIARIES
|
Condensed
Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss)
|
(Unaudited)
|
(Amounts in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing franchise
fees
|
|
|
|
$16,093
|
|
$14,418
|
|
$ 47,037
|
|
$42,293
|
|
Annual
dues
|
|
|
|
7,455
|
|
7,208
|
|
22,052
|
|
21,376
|
|
Broker
fees
|
|
|
|
7,204
|
|
5,685
|
|
18,704
|
|
14,801
|
|
Franchise sales and
other franchise revenue
|
|
|
5,076
|
|
6,806
|
|
17,823
|
|
17,806
|
|
Brokerage
revenue
|
|
|
|
4,484
|
|
4,312
|
|
13,012
|
|
12,321
|
|
|
|
|
|
Total
revenue
|
|
|
|
40,312
|
|
38,429
|
|
118,628
|
|
108,597
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, operating
and administrative expenses
|
|
|
22,105
|
|
20,614
|
|
70,088
|
|
63,828
|
|
Depreciation and
amortization
|
|
|
|
3,656
|
|
2,788
|
|
11,088
|
|
9,231
|
|
(Gain) loss on sale
of assets
|
|
|
|
(3)
|
|
(2)
|
|
41
|
|
(20)
|
|
|
|
|
|
Total operating
expenses
|
|
|
|
25,758
|
|
23,400
|
|
81,217
|
|
73,039
|
|
|
|
|
|
Operating
income
|
|
|
|
14,554
|
|
15,029
|
|
37,411
|
|
35,558
|
Other expenses,
net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
|
(5,128)
|
|
(2,913)
|
|
(12,053)
|
|
(8,774)
|
|
Interest
income
|
|
|
|
82
|
|
78
|
|
224
|
|
207
|
|
Foreign currency
translation gains (losses), net
|
|
|
281
|
|
394
|
|
(135)
|
|
358
|
|
Loss on early
extinguishment of debt
|
|
|
|
(1,664)
|
|
-
|
|
(1,798)
|
|
(136)
|
|
Equity in earnings of
investees
|
|
|
|
274
|
|
398
|
|
736
|
|
712
|
|
|
|
|
|
Total other expenses,
net
|
|
|
|
(6,155)
|
|
(2,043)
|
|
(13,026)
|
|
(7,633)
|
|
|
|
|
|
Income before
provision for income taxes
|
|
8,399
|
|
12,986
|
|
24,385
|
|
27,925
|
Provision for income
taxes
|
|
|
|
(702)
|
|
(636)
|
|
(1,733)
|
|
(1,740)
|
|
|
|
|
|
Net income
|
|
|
|
7,697
|
|
12,350
|
|
22,652
|
|
26,185
|
Accretion of Class A
Preferred Units to estimated redemption amounts
|
|
(12,050)
|
|
5,734
|
|
67,622
|
|
12,565
|
|
|
|
|
|
Net income (loss)
related to RMCO, LLC Class B Unitholders
|
|
$19,747
|
|
$
6,616
|
|
$(44,970)
|
|
$13,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Change in cumulative
translation adjustment
|
|
|
$
114
|
|
$
15
|
|
$
(184)
|
|
$
98
|
|
|
|
|
|
Other comprehensive
income (loss)
|
|
|
114
|
|
15
|
|
(184)
|
|
98
|
|
|
|
|
|
Total comprehensive
income (loss) related to RMCO, LLC Class B Unitholders
|
$19,861
|
|
$
6,631
|
|
$(45,154)
|
|
$13,718
|
|
|
TABLE
2
|
RMCO, LLC
AND
SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
thousands, except units)
|
|
|
|
|
|
|
|
September 30,
2013
|
|
December 31,
2012
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
73,482
|
|
$
68,501
|
|
Escrow cash -
restricted
|
912
|
|
780
|
|
Accounts and notes
receivable, current portion, less allowances of $4,219 and $3,913,
respectively
|
16,385
|
|
15,034
|
|
Accounts receivable
from affiliates
|
116
|
|
55
|
|
Other current
assets
|
2,733
|
|
2,707
|
|
Total current
assets
|
93,628
|
|
87,077
|
|
|
|
|
|
Property and
equipment, net of accumulated depreciation of $20,996 and $20,426,
respectively
|
2,528
|
|
3,332
|
Franchise agreements,
net of accumulated amortization of $72,395 and $61,489,
respectively
|
69,439
|
|
78,338
|
Other intangible
assets, net of accumulated amortization of $7,586 and $7,053,
respectively
|
2,511
|
|
2,821
|
Goodwill
|
70,902
|
|
71,039
|
Investments in equity
method investees
|
3,710
|
|
3,900
|
Debt issuance costs,
net
|
2,424
|
|
2,930
|
Other
assets
|
6,820
|
|
2,075
|
|
Total
assets
|
$
251,962
|
|
$
251,512
|
|
|
|
|
|
Liabilities,
Redeemable Preferred Units and Members' Deficit
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
840
|
|
$
530
|
|
Accounts payable to
affiliates
|
2,397
|
|
2,385
|
|
Escrow
liabilities
|
912
|
|
780
|
|
Accrued
liabilities
|
10,188
|
|
9,397
|
|
Income taxes
payable
|
7,266
|
|
400
|
|
Deferred revenue and
deposits
|
15,524
|
|
15,996
|
|
Current portion of
debt
|
17,300
|
|
10,600
|
|
Other current
liabilities
|
116
|
|
234
|
|
Total current liabilities
|
54,543
|
|
40,322
|
|
|
|
|
|
Debt, net of current
portion
|
211,657
|
|
221,726
|
Deferred revenue, net
of current portion
|
292
|
|
514
|
Other liabilities,
net of current portion
|
8,004
|
|
7,319
|
|
Total
liabilities
|
274,496
|
|
269,881
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Redeemable preferred
units:
|
|
|
|
|
Class A Preferred
Units, at estimated redemption value (no par value, 150,000 units
authorized, issued and outstanding as of September 30, 2013 and
December 31, 2012; liquidation preference of $49,850 and $49,500 as
of September 30, 2013 and December 31, 2012,
respectively)
|
132,350
|
|
78,400
|
|
|
|
|
|
Members'
deficit:
|
|
|
|
|
Class B Common Units
(no par value,900,000units authorized, 847,500 units issued and
outstanding as of September 30, 2013 and December 31,
2012)
|
(156,447)
|
|
(98,516)
|
|
Accumulated other
comprehensive income
|
1,563
|
|
1,747
|
|
Total members'
deficit
|
(154,884)
|
|
(96,769)
|
|
Total liabilities, redeemable preferred units and members'
deficit
|
$
251,962
|
|
$
251,512
|
|
|
TABLE
3
|
RMCO, LLC
AND
SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
(Amounts in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
ended
September 30,
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
|
|
|
$ 22,652
|
|
$26,185
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
11,088
|
|
9,231
|
|
|
Bad debt
expense
|
|
|
289
|
|
479
|
|
|
Loss on early
extinguishment of debt
|
|
1,798
|
|
136
|
|
|
Equity-based
compensation
|
|
701
|
|
-
|
|
|
Non-cash interest
expense
|
|
723
|
|
700
|
|
|
Other
|
|
|
|
232
|
|
(267)
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts and notes
receivable
|
|
(1,678)
|
|
(737)
|
|
|
|
Advances to
affiliates
|
|
|
(126)
|
|
(86)
|
|
|
|
Other current and
noncurrent assets
|
|
(30)
|
|
(458)
|
|
|
|
Current and
noncurrent liabilities
|
|
1,927
|
|
1,819
|
|
|
|
Deferred
revenue
|
|
|
(686)
|
|
61
|
|
|
|
|
Net cash provided by
operating activities
|
|
36,890
|
|
37,063
|
Cash flows from
investing activities:
|
|
|
|
|
|
Purchases of
property, equipment and software
|
|
(676)
|
|
(1,453)
|
|
Proceeds from sale of
property and equipment
|
|
8
|
|
32
|
|
Capitalization of
trademark costs
|
|
(174)
|
|
(166)
|
|
|
|
|
Net cash used in
investing activities
|
|
(842)
|
|
(1,587)
|
Cash flows from
financing activities:
|
|
|
|
|
|
Proceeds from
issuance of debt
|
|
230,000
|
|
-
|
|
Payments on
debt
|
|
|
(234,083)
|
|
(7,736)
|
|
Debt issuance
costs
|
|
|
(1,301)
|
|
-
|
|
Member
distributions
|
|
|
(20,684)
|
|
(9,530)
|
|
Deferred offering
costs
|
|
|
(4,816)
|
|
-
|
|
Payments on capital
lease obligations
|
|
(211)
|
|
(243)
|
|
|
|
|
Net cash used in
financing activities
|
|
(31,095)
|
|
(17,509)
|
Effect of exchange
rate changes on cash
|
|
28
|
|
85
|
|
|
|
|
Net increase in cash
and cash equivalents
|
|
4,981
|
|
18,052
|
Cash and cash
equivalents, beginning of year
|
|
68,501
|
|
38,611
|
Cash and cash
equivalents, end of year
|
|
$ 73,482
|
|
$56,663
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
|
|
$ 11,443
|
|
$
8,049
|
|
Cash paid for income
taxes
|
|
1,632
|
|
1,579
|
Schedule of noncash
investing and financing activities:
|
|
|
|
|
|
Capital leases for
property and equipment
|
|
$
236
|
|
$
16
|
|
Member distributions
payable
|
|
6,650
|
|
-
|
|
|
TABLE
4
|
RMCO, LLC AND
SUBSIDIARIES
|
Agent
Count
|
(Unaudited)
|
|
|
|
|
|
Agent
Count
|
|
September 30,
2013
|
|
September 30,
2012
|
United
States
|
|
54,222
|
|
51,897
|
Canada
|
|
19,023
|
|
18,894
|
Outside U.S. and
Canada
|
|
19,486
|
|
18,112
|
Total
|
|
92,731
|
|
88,903
|
|
|
TABLE
5
|
RMCO, LLC AND
SUBSIDIARIES
|
Adjusted EBITDA
Reconciliation to Net Income
|
(Unaudited)
|
(Amounts in
thousands)
|
|
|
Three months ended
September 30,
|
|
Nine months
ended September
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Consolidated:
|
|
|
|
|
|
|
|
Net
income
|
$
7,697
|
|
$12,350
|
|
$22,652
|
|
$26,185
|
Depreciation and
amortization
|
3,656
|
|
2,788
|
|
11,088
|
|
9,231
|
Interest
expense
|
5,128
|
|
2,913
|
|
12,053
|
|
8,774
|
Interest
income
|
(82)
|
|
(78)
|
|
(224)
|
|
(207)
|
Provision for income
taxes
|
702
|
|
636
|
|
1,733
|
|
1,740
|
EBITDA
|
17,101
|
|
18,609
|
|
47,302
|
|
45,723
|
Gain on sale of
assets and sublease(1)
|
(164)
|
|
(144)
|
|
(411)
|
|
(442)
|
Loss on early
extinguishment of debt(2)
|
1,664
|
|
-
|
|
1,798
|
|
136
|
Equity-based
compensation(3)
|
-
|
|
-
|
|
701
|
|
-
|
Non-cash
straight-line rent expense(4)
|
261
|
|
270
|
|
970
|
|
1,223
|
Chairman executive
compensation(5)
|
750
|
|
750
|
|
2,250
|
|
2,250
|
Acquisition
integration costs(6)
|
27
|
|
-
|
|
249
|
|
-
|
IPO
expenses(7)
|
2,436
|
|
-
|
|
5,916
|
|
-
|
Adjusted
EBITDA
|
$22,075
|
|
$19,485
|
|
$58,775
|
|
$48,890
|
(1) Represents (gains) and losses on the sale of assets as well
as the loss on the sublease of our corporate headquarters office
building.
(2) Represents losses incurred on early extinguishment of debt
related to the entire repayment of debt of our pre-existing debt
facility during the three months ended September 30, 2013 and losses incurred on the
early extinguishment of debt on our senior secured credit facility
during the nine months ended September 30,
2013 and 2012.
(3) Equity-based compensation includes non-cash compensation
expense recorded related to unit options granted to employees
pursuant to our 2011 Unit Option Plan.
(4) Represents the non-cash charge to appropriately record rent
expense on a straight-line basis over the term of the lease
agreement taking into consideration escalation in monthly cash
payments.
(5) Represents the elimination of annual salaries we paid to
David Liniger, our Chairman and
Co-Founder, and Gail Liniger, our
Vice Chairman and Co-Founder, that we will not continue to pay
following the consummation of our IPO.
(6) Acquisition integration costs include fees incurred in
connection with our acquisition of certain assets of RE/MAX of
Texas in December 2012, and our acquisitions of the
Southwest and Central Atlantic regions in connection
with the IPO including legal, accounting and advisory fees as
well as consulting fees for integration services.
(7) Represents costs incurred in connection with the IPO.
|
|
TABLE
6
|
RE/MAX Holdings,
Inc.
|
Adjusted Pro Forma
Earnings per Share
|
(Reflects
RE/MAX Holdings with 100% ownership of RMCO,
LLC)
|
(Unaudited)
|
|
|
|
Three months
ended
September 30, 2013
|
Adjusted Pro Forma
Basic Earnings per Share:
|
|
|
RMCO pre-tax
income
|
$
8,399,000
|
|
Tax expense at 38% as
if RE/MAX owned 100% of RMCO
|
(3,191,620)
|
|
RMCO adjusted pro
forma net income as if RE/MAX owned 100% of RMCO
|
5,207,380
|
|
|
|
|
Shares of Class A
common stock issued and sold in IPO
|
11,500,000
|
|
Remaining equivalent
shares of stock outstanding on a pro forma basis assuming RE/MAX
ownership in RMCO was 100%
|
17,734,600
|
|
Vested restricted
stock units granted to certain employees in connection with
IPO
|
107,971
|
|
Total basic pro forma
shares outstanding
|
29,342,571
|
|
|
|
Adjusted Pro Forma
Basic Earnings per Share Calculation:
|
$
0.18
|
|
|
|
Adjusted Pro Forma
Diluted Earnings per Share:
|
|
|
RMCO pre-tax
income
|
$
8,399,000
|
|
Tax expense at 38% as
if RE/MAX owned 100% of RMCO
|
(3,191,620)
|
|
RMCO adjusted pro
forma net income as if RE/MAX owned 100% of RMCO
|
5,207,380
|
|
|
|
|
Shares of Class A
common stock issued and sold in IPO
|
11,500,000
|
|
Remaining equivalent
shares of stock outstanding on a pro forma basis assuming RE/MAX
ownership in RMCO was 100%
|
17,734,600
|
|
Vested restricted
stock units granted to certain employees in connection with
IPO
|
107,971
|
|
Weighted average
dilutive shares of common stock equivalents (e.g.
options)(1)
|
647,152
|
|
Total diluted pro
forma shares outstanding
|
29,989,723
|
|
|
|
Adjusted Pro Forma
Diluted Earnings per Share Calculation:
|
$
0.17
|
|
(1) In
accordance with the treasury stock method
|
|
RMCO adjusted pro forma net income as if RE/MAX owned 100% of
RMCO, as defined by RE/MAX, represents net income for RMCO before
non-controlling interest and after pro forma corporate income tax
expense applied at an assumed 38% rate and assumes the full
exchange of Class B shares into Class A Common Stock. Basic and
diluted EPS consists of RMCO adjusted pro forma net income as if
RE/MAX owned 100% of RMCO, divided by the aggregate number of the
Company's Class A Common Stock outstanding, assuming full exchange
of Class B shares into Class A Common Stock of RE/MAX and giving
effect to the dilutive impact, if any, of stock options and
restricted stock awards.
|
|
TABLE
7
|
RE/MAX Holdings,
Inc.
|
Adjusted Pro Forma
Earnings per Share
|
(Reflects
RE/MAX Holdings actual ownership of 39.56% of RMCO,
LLC)
|
|
|
|
Three months
ended
September 30, 2013
|
Adjusted Pro Forma
Basic Earnings per Share:
|
|
|
RMCO pre-tax
income
|
$
8,399,000
|
|
Less: Income
attributable to non-controlling interest (60.44%)
|
$
(5,076,356)
|
|
Pre-tax income
attributable to RE/MAX
|
$
3,322,644
|
|
Tax expense at
38%
|
(1,262,605)
|
|
RMCO adjusted pro
forma net income (RE/MAX actual 39.56% ownership of
RMCO)
|
2,060,039
|
|
|
|
|
Shares of Class A
common stock issued and sold in IPO
|
11,500,000
|
|
Vested restricted
stock units granted to certain employees in connection with
IPO
|
107,971
|
|
Total basic pro forma
shares outstanding
|
11,607,971
|
|
|
|
Adjusted Pro Forma
Basic Earnings per Share Calculation:
|
$
0.18
|
|
|
|
Adjusted Pro Forma
Diluted Earnings per Share:
|
|
|
RMCO pre-tax
income
|
$
8,399,000
|
|
Less: Income
attributable to non-controlling interest (60.44%)
|
$
(5,076,356)
|
|
Pre-tax income
attributable to RE/MAX
|
$
3,322,644
|
|
Tax expense at
38%
|
(1,262,605)
|
|
RMCO adjusted pro
forma net income (RE/MAX actual 39.56% ownership of
RMCO)
|
2,060,039
|
|
|
|
|
Shares of Class A
common stock issued and sold in IPO
|
11,500,000
|
|
Vested restricted
stock units granted to certain employees in connection with
IPO
|
107,971
|
|
Weighted average
dilutive shares of common stock equivalents (e.g.
options)(1)
|
647,152
|
|
Total diluted pro
forma shares outstanding
|
12,255,123
|
|
|
|
Adjusted Pro Forma
Diluted Earnings per Share Calculation:
|
$
0.17
|
|
(1) In
accordance with the treasury stock method
|
|
|
|
TABLE
8
|
RE/MAX Holdings,
Inc.
|
Adjusted Net
Income and Pro Forma Earnings per Share
|
(Reflects
RE/MAX Holdings with 100% ownership of RMCO,
LLC)
|
(Unaudited)
|
(Amounts in thousands except shares
outstanding and EPS)
|
|
|
|
|
|
Three months ended
September 30,
|
|
2013
|
|
2012
|
|
|
|
|
Consolidated:
|
|
|
|
Net
income
|
$
7,697
|
|
$
12,350
|
Amortization
expense
|
3,141
|
|
2,192
|
Canadian tax
expense
|
702
|
|
636
|
One-time
add-backs:
|
|
|
|
Loss on
early extinguishment of debt (1)
|
1,664
|
|
-
|
Interest
charges incurred to refinance debt (2)
|
1,918
|
|
-
|
Adjusted pre-tax net
income
|
15,122
|
|
15,178
|
Less: Provision for
income taxes at 38%
|
(5,746)
|
|
(5,768)
|
Adjusted pro forma
net income
|
$
9,376
|
|
$
9,410
|
|
|
|
|
Total basic pro forma
shares outstanding
|
29,342,571
|
|
29,342,571
|
Total diluted pro
forma shares outstanding
|
29,989,723
|
|
29,989,723
|
|
|
|
|
Adjusted Net
Income Pro Forma Basic Earnings per Share
Calculation:
|
$
0.32
|
|
$
0.32
|
Adjusted Net
Income Pro Forma Diluted Earnings per Share
Calculation:
|
$
0.31
|
|
$
0.31
|
(1) Represents losses incurred on early extinguishment of debt
related to the entire repayment of debt of our pre-existing debt
facility during the three months ended September 30, 2013 and losses incurred on the
early extinguishment of debt on our senior secured credit facility
during the nine months ended September 30,
2013 and 2012.
(2) In connection with the repayment of debt of our pre-existing
debt facility during the three months ended September 30, 2013, $1,918,000 paid to third parties were expensed as
incurred.
Adjusted net income (loss) is defined by the Company as net
income (loss) before amortization and certain one-time expenses
such as loss on early extinguishment of debt and interest charges
related to the refinancing of debt. Income tax expense is adjusted
to reflect 38% of adjusted pre-tax net income. Adjusted net income
pro forma EPS is Adjusted net income (loss) divided by the pro
forma shares outstanding.
RMCO adjusted pro forma net income as if Holdings owned 100% of
RMCO, as defined by RE/MAX, represents net income for RMCO before
non-controlling interest and after pro forma corporate income tax
expense applied at an assumed 38.0% rate and assumes the full
exchange of Class B shares into Class A Common Stock. Basic and
diluted EPS consists of RMCO adjusted pro forma net income as
if Holdings owned 100% of RMCO, divided by the aggregate number of
the Company's Class A Common Stock outstanding, assuming full
exchange of Class B shares into Class A Common Stock of RE/MAX
Holdings, Inc. and giving effect to the dilutive impact, if any, of
stock options and restricted stock awards.
|
|
TABLE
9
|
RE/MAX Holdings,
Inc.
|
Adjusted Net
Income and Pro Forma Earnings per Share
|
(Reflects
RE/MAX Holdings actual ownership of 39.56% of RMCO,
LLC)
|
(Unaudited)
|
(Amounts in
thousands except shares outstanding and EPS)
|
|
|
|
|
|
Three months ended
September 30,
|
|
2013
|
|
2012
|
|
|
|
|
Consolidated:
|
|
|
|
Net
income
|
$
7,697
|
|
$
12,350
|
Amortization
expense
|
3,141
|
|
2,192
|
Canadian tax
expense
|
702
|
|
636
|
One-time
add-backs:
|
|
|
|
Loss on
early extinguishment of debt (1)
|
1,664
|
|
-
|
Interest
charges incurred to refinance debt (2)
|
1,918
|
|
-
|
Adjusted pre-tax net
income
|
15,122
|
|
15,178
|
Less: Income
attributable to non-controlling interest
|
(9,140)
|
|
(9,174)
|
Less: Provision for
income taxes on RE/MAX earnings at 38%
|
(2,273)
|
|
(2,282)
|
Adjusted pro forma
net income
|
$
3,709
|
|
$
3,722
|
|
|
|
|
Total basic pro forma
shares outstanding
|
11,607,971
|
|
11,607,971
|
Total diluted pro
forma shares outstanding
|
12,255,123
|
|
12,255,123
|
|
|
|
|
Adjusted Net
Income Pro Forma Basic Earnings per Share
Calculation:
|
$
0.32
|
|
$
0.32
|
Adjusted Net
Income Pro Forma Diluted Earnings per Share
Calculation:
|
$
0.30
|
|
$
0.30
|
(1) Represents losses incurred on early extinguishment of debt
related to the entire repayment of debt of our pre-existing debt
facility during the three months ended September 30, 2013 and losses incurred on the
early extinguishment of debt on our senior secured credit facility
during the nine months ended September 30,
2013 and 2012.
(2) In connection with the repayment of debt of our pre-existing
debt facility during the three months ended September 30, 2013, $1,918,000 paid to third parties were expensed as
incurred.
Adjusted net income (loss) is defined by the Company as net
income (loss) before amortization and certain one-time expenses
such as loss on early extinguishment of debt and interest
charges related to the refinancing of debt. Income tax expense is
adjusted to reflect 38% of adjusted pre-tax net income. Adjusted
net income pro forma EPS is Adjusted net income (loss) divided
by the weighted average common and common equivalent shares
outstanding.
Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in filings with
the SEC and in public disclosures of non-GAAP financial measures,
such as Adjusted EBITDA and Free Cash Flow and the ratios related
thereto. These measures are derived on the basis of methodologies
other than in accordance with GAAP.
RE/MAX defines Adjusted EBITDA as EBITDA (consolidated net
income (loss) before depreciation and amortization, interest
expense, net and income taxes, each of which is presented in the
Company's unaudited condensed consolidated financial statements
included elsewhere in this release), adjusted for the impact of the
following items that the Company does not consider representative
of the Company's ongoing operating performance: (gain) loss on sale
of assets and sublease, (gain) loss on early extinguishment of
debt, equity based compensation, deferred rent adjustments,
salaries paid to David and Gail
Liniger, the Company's Chairman and Vice Chairman,
respectively, that the Company will not continue to pay subsequent
to the Company's IPO, expenses incurred in connection with the
Company's IPO and acquisition transaction costs. Adjusted EBITDA
margin is defined as Adjusted EBITDA divided by total revenue for
the given period.
Because Adjusted EBITDA omits certain non-cash items and other
infrequent cash charges, the Company believes that it is less
susceptible to variances in actual performance resulting from
depreciation, amortization and other noncash charges and other
infrequent cash charges and is more reflective of other factors
that affect the Company's operating performance. The Company
presents Adjusted EBITDA because it believes it is useful as a
supplemental measure in evaluating the performance of the Company's
operating businesses and provides greater transparency into the
Company's results of operations. The Company's management uses
Adjusted EBITDA as a factor in evaluating the performance of their
business.
Adjusted EBITDA should not be considered in isolation or as a
substitute for net income or other statement of operations data
prepared in accordance with GAAP. Adjusted EBITDA has limitations
as an analytical tool, and you should not consider Adjusted EBITDA
either in isolation or as a substitute for analyzing our results as
reported under GAAP. Some of these limitations are:
- this measure does not reflect changes in, or cash requirements
for, the Company's working capital needs;
- this measure does not reflect the Company's interest expense,
or the cash requirements necessary to service interest or principal
payments on the Company's debt;
- this measure does not reflect the Company's income tax expense
or the cash requirements to pay the Company's taxes;
- this measure does not reflect historical cash expenditures or
future requirements for capital expenditures or contractual
commitments;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often require
replacement in the future, and these measures do not reflect any
cash requirements for such replacements; and
- other companies may calculate this measure differently so they
may not be comparable.
SOURCE RE/MAX Holdings, Inc.