DENVER, Feb. 21, 2019 /PRNewswire/ --
Full-Year 2018 Highlights
(Compared to full-year 2017 unless otherwise noted)
- Total agent count increased 4.4% to 124,280 agents
- U.S. and Canada combined agent
count increased 0.2% to 84,449 agents
- Total open Motto Mortgage franchises more than doubled to 78
offices
- Revenue increased 9.8% to $212.6
million
- Net income attributable to RE/MAX Holdings, Inc. of
$27.0 million and earnings per
diluted share (GAAP EPS) of $1.52
- Adjusted EBITDA1 of $104.3
million, Adjusted EBITDA margin1 of 49.1% and
Adjusted earnings per diluted share (Adjusted EPS1) of
$2.25
Fourth Quarter 2018 Highlights
(Compared to fourth quarter 2017 unless otherwise noted)
- Revenue increased 4.8% to $50.8
million
- Net income attributable to RE/MAX Holdings, Inc. of
$6.3 million and earnings per diluted
share (GAAP EPS) of $0.35
- Adjusted EBITDA1 of $23.3
million, Adjusted EBITDA margin1 of 45.8% and
Adjusted earnings per diluted share (Adjusted EPS1) of
$0.49
- Announced a 5% increase to the quarterly dividend on
February 20, 2019
RE/MAX Holdings, Inc. (the "Company" or "RE/MAX
Holdings") (NYSE: RMAX), parent company of RE/MAX, one of the
world's leading franchisors of real estate brokerage services, and
Motto Mortgage ("Motto"), an innovative mortgage brokerage
franchise, today announced operating results for the quarter and
full year ended December 31,
2018.
"We are pleased with our fourth quarter performance as our
differentiated business model continued to demonstrate its strength
in a correcting market," stated Adam
Contos, RE/MAX Holdings Chief Executive Officer. "For
the full-year 2018, we increased RE/MAX agent count, the number of
open Motto franchises, revenue, Adjusted EBITDA and free cash flow
while continuing to invest meaningfully in future organic growth
opportunities despite a double-digit reduction in U.S. existing
home sales to end the year. We believe the agent-centric RE/MAX
model is more insulated and resilient than many others in our
industry and our expanding Motto business provides another organic
growth channel during times like these."
Contos continued, "We have great momentum as we enter into the
new year. Our position of strength enables us to consider smart
organizational changes that evolve and improve the business. For
instance, we recently reinvented our RE/MAX brokerage support
structure to make it more focused and impactful. Our new service
model, which emphasizes business systems, accountability and
technology engagement, is designed to accelerate brokerage growth
regardless of market conditions. Looking ahead, we are optimistic,
knowing RE/MAX agents perform well in any market. The first
booj-developed RE/MAX tech products will roll out this year, and
interest in owning a Motto franchise remains high and we continue
to feel good about our pipeline."
Fourth Quarter 2018 Operating Results
Agent Count
The following table compares agent count as of December 31, 2018 and 2017:
|
As of December
31
|
|
Change
|
|
2018
|
|
2017
|
|
#
|
|
%
|
U.S.
|
63,122
|
|
63,162
|
|
(40)
|
|
(0.1)
|
Canada
|
21,327
|
|
21,112
|
|
215
|
|
1.0
|
Subtotal
|
84,449
|
|
84,274
|
|
175
|
|
0.2
|
Outside the U.S.
& Canada
|
39,831
|
|
34,767
|
|
5,064
|
|
14.6
|
Total
|
124,280
|
|
119,041
|
|
5,239
|
|
4.4
|
Revenue
RE/MAX Holdings generated total revenue of $50.8 million in the fourth quarter of 2018, an
increase of $2.3 million or 4.8%
compared to $48.5 million in the
fourth quarter of 2017. Revenue increased primarily due to
acquisitions. Recurring revenue streams, which consist of
continuing franchise fees and annual dues, increased $1.3 million or 3.8% over the fourth quarter of
2017 and accounted for 67.4% of revenue in the fourth quarter of
2018 compared to 68.1% in the comparable period in 2017.
Operating Expenses
Total operating expenses were $29.4
million for the fourth quarter of 2018 and included a
$6.1 million gain on reduction in tax
receivable agreement liability, an outcome of the Company
finalizing its implementation of the Tax Cuts and Jobs Act. Total
operating expenses were negligible in the fourth quarter of 2017
due to a $32.7 million gain on
reduction in tax receivable agreement liability. Excluding this
line item, operating expenses increased due to higher selling,
operating and administrative expenses and depreciation and
amortization expenses.
Selling, operating and administrative expenses were $30.0 million in the fourth quarter of 2018, an
increase of $2.3 million or 8.2%
compared to the fourth quarter of 2017 and represented 59.1% of
revenue compared to 57.3% in the prior-year period. Selling,
operating and administrative expenses increased primarily due to
investments in technology and the costs to support booj's legacy
operations, as well as increased severance and equity compensation
expenses. These increases were partially offset by decreased
acquisition expenses and professional fees.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $6.3 million for the fourth quarter of 2018, an
increase of $11.8 million over the
fourth quarter of 2017. The increase was primarily due to the
impacts from the enactment of the Tax Cuts and Jobs Act. Reported
basic and diluted GAAP EPS were each $0.35 for the fourth quarter of 2018.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $23.3 million
for the fourth quarter of 2018, a decrease of $2.3 million or 9.0% from the fourth quarter of
2017. Adjusted EBITDA decreased primarily due to investments in
technology and increased severance expenses partially offset by
contributions from the acquisition of the Northern Illinois region. Adjusted EBITDA
margin was 45.8% in the fourth quarter of 2018 compared to 52.7% in
the fourth quarter of 2017.
Adjusted basic and diluted EPS were each $0.49 for the fourth quarter of 2018 and
primarily benefited from the enactment of the Tax Cuts and Jobs Act
compared to the prior-year period. The ownership structure used to
calculate Adjusted basic and diluted EPS for the quarter ended
December 31, 2018 assumes RE/MAX
Holdings owned 100% of RMCO, LLC ("RMCO"). The weighted average
ownership RE/MAX Holdings had in RMCO was 58.6% for the quarter
ended December 31, 2018.
Balance Sheet
As of December 31, 2018, the
Company had a cash balance of $60.0
million, an increase of $9.2
million from December 31,
2017. As of December 31, 2018,
RE/MAX had $227.8 million of
outstanding debt, net of an unamortized debt discount and issuance
costs, a decrease of $1.2 million
compared to $229.0 million as of
December 31, 2017.
Dividend
On February 20, 2019, the
Company's Board of Directors approved a quarterly cash dividend of
$0.21 per share. The quarterly
dividend is payable on March 20,
2019, to shareholders of record at the close of business on
March 6, 2019.
Outlook
As previously disclosed, on January 1,
2019, the Company acquired the RE/MAX advertising funds in
Company-owned Regions and the Motto advertising fund (collectively,
the "Marketing Funds"). Revenue from the Marketing Funds will
increase the Company's revenue; however, since all of the revenue
from the Marketing Funds is contractually encumbered, the Company
does not expect a material impact, if any, to its overall
profitability as a result of this acquisition.
The Company's first quarter and full-year 2019 Outlook includes
the acquisitions of the Marketing Funds and assumes no further
currency movements, acquisitions or divestitures.
For the first quarter of 2019, RE/MAX Holdings expects:
- Agent count to increase 3.5% to 4.5% over first quarter
2018;
- Revenue in a range of $70.0
million to $73.0 million
(including revenue from the Marketing Funds in a range of
$18.0 million to $19.0 million); and
- Adjusted EBITDA in a range of $22.0
million to $24.0 million.
For the full-year 2019, RE/MAX Holdings expects:
- Agent count to increase 2.0% to 4.0% over full-year 2018;
- Revenue in a range of $287.0
million to $291.0 million
(including revenue from the Marketing Funds in a range of
$72.5 million to $74.5 million); and
- Adjusted EBITDA in a range of $104.5
million to $107.5
million.
The effective U.S. GAAP tax rate attributable to RE/MAX Holdings
is estimated to be between 17% and 19% in 2019.
Webcast and Conference Call
The Company will host a conference call for interested parties
on Friday, February 22, 2019,
beginning at 8:30 a.m. Eastern Time.
Interested parties can access the conference call using the
following dial-in numbers:
U.S.
|
1-833-287-0798
|
Canada &
International
|
1-647-689-4457
|
Interested parties can access a live webcast through the
Investor Relations section of the Company's website at
investors.remax.com. Please dial-in or join the webcast 10 minutes
before the start of the conference call. An archive of the webcast
will be available on the Company's website for a limited time as
well.
Basis of Presentation
Unless otherwise noted, the results presented in this press
release are consolidated and exclude adjustments attributable to
the non-controlling interest.
Footnote:
1 Adjusted EBITDA, Adjusted EBITDA margin and
Adjusted EPS are non-GAAP measures. These terms are defined at the
end of this release. Please see Tables 5 and 6 appearing
later in this release for reconciliations of these non-GAAP
measures to the most directly comparable GAAP measures.
About RE/MAX Holdings, Inc.
RE/MAX Holdings, Inc. (NYSE: RMAX) is one of the world's leading
franchisors in the real estate industry, franchising real estate
brokerages globally under the RE/MAX® brand, and
mortgage brokerages within the U.S. under the
Motto® Mortgage brand. RE/MAX was founded in 1973
by David and Gail Liniger, with an
innovative, entrepreneurial culture affording its agents and
franchisees the flexibility to operate their businesses with great
independence. Now with more than 125,000 agents across over 110
countries and territories, nobody in the world sells more real
estate than RE/MAX, as measured by total residential transaction
sides. Dedicated to innovation and change in the real estate
industry, RE/MAX launched Motto Franchising, LLC, a ground-breaking
mortgage brokerage franchisor, in 2016.
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 are often identified by the use of words such as
"believe," "intend," "expect," "estimate," "plan," "outlook,"
"project," "anticipate," "may," "will," "would" and other similar
words and expressions that predict or indicate future events or
trends that are not statements of historical matters.
Forward-looking statements include statements related to: agent
count; franchise sales; revenue; operating expenses; the Company's
outlook for the first quarter and full year 2019; dividends;
non-GAAP financial measures; estimated effective tax rates for
2019; housing and mortgage market conditions; economic and
demographic trends; competition; technology initiatives; potential
transactions; future expansion of Motto Mortgage and such
expansion's impact on revenue; the Company's belief that expanding
the Motto Mortgage business provides another organic growth
channel; statements regarding the Company's agents performing well
in any market; the statement that the first booj-developed RE/MAX
tech products will be introduced in 2019; the Company's belief that
the acquisition of certain marketing funds will not have a material
impact to the Company's profitability; and the Company's
strategic and operating plans and business models, including
the ability of the Company's agents to adapt to slower market
conditions and our belief that our agent-centric model is resilient
and more insulated to a slowdown in real estate transactions
compared to more traditional broker-centric businesses.
Forward-looking statements should not be read as a guarantee of
future performance or results and will not necessarily accurately
indicate the times at which such performance or results may 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 the real
estate market or interest rates and availability of financing, (2)
changes in business and economic activity in general, (3) the
Company's ability to attract and retain quality franchisees, (4)
the Company's franchisees' ability to recruit and retain real
estate agents and mortgage loan originators, (5) changes in laws
and regulations, (6) the Company's ability to enhance, market, and
protect the RE/MAX and Motto Mortgage brands, (7) the Company's
ability to implement its technology initiatives, (8) fluctuations
in foreign currency exchange rates, (9) the existence and
identification of control deficiencies, including the material
weakness in our internal control over financial reporting, and any
impact of such control deficiencies as well as costs in remediating
those control deficiencies, (10) the impact of recent changes to
our senior management team, (11) the impact of the findings and
recommendations of the previously disclosed Special Committee
investigation on the Company and its management and operations,
including the effect of measures taken in response to the
investigation, reputational damage to the Company relating to the
investigation, time and expenses incurred in implementing the
recommendations of the Special Committee, any legal proceedings or
governmental or regulatory investigations or actions related to the
underlying matters of the Special Committee's internal
investigation or other matters, and the diversion of management's
time and resources to address such matters, and those risks and
uncertainties described in the sections entitled "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the most recent Annual Report on Form
10-K filed with the Securities and Exchange Commission ("SEC") and
similar disclosures in subsequent periodic and current reports
filed with the SEC, which are available on the investor relations
page of the Company's 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 obligation, to update
this information to reflect future events or circumstances.
TABLE
1
|
RE/MAX Holdings,
Inc.
|
Consolidated
Statements of Income
|
(Amounts in
thousands, except share and per share amounts)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
|
|
2017
|
|
|
|
2017
|
|
2018
|
|
As
adjusted*
|
|
2018
|
|
As
adjusted*
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Continuing franchise
fees
|
$
|
25,158
|
|
$
|
24,396
|
|
$
|
101,104
|
|
$
|
93,694
|
Annual dues
|
|
9,119
|
|
|
8,620
|
|
|
35,894
|
|
|
33,767
|
Broker fees
|
|
10,202
|
|
|
10,886
|
|
|
46,871
|
|
|
43,801
|
Franchise sales and
other revenue
|
|
6,362
|
|
|
4,608
|
|
|
28,757
|
|
|
22,452
|
Total
revenue
|
|
50,841
|
|
|
48,510
|
|
|
212,626
|
|
|
193,714
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, operating and
administrative expenses
|
|
30,043
|
|
|
27,779
|
|
|
120,179
|
|
|
106,946
|
Depreciation and
amortization
|
|
5,426
|
|
|
4,834
|
|
|
20,678
|
|
|
20,512
|
Loss on sale or
disposition of assets, net
|
|
104
|
|
|
233
|
|
|
63
|
|
|
660
|
Gain on reduction in
tax receivable agreement liability
|
|
(6,145)
|
|
|
(32,736)
|
|
|
(6,145)
|
|
|
(32,736)
|
Total operating
expenses
|
|
29,428
|
|
|
110
|
|
|
134,775
|
|
|
95,382
|
Operating
income
|
|
21,413
|
|
|
48,400
|
|
|
77,851
|
|
|
98,332
|
Other expenses,
net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(3,106)
|
|
|
(2,582)
|
|
|
(12,051)
|
|
|
(9,996)
|
Interest
income
|
|
279
|
|
|
156
|
|
|
676
|
|
|
352
|
Foreign currency
transaction (losses) gains
|
|
(150)
|
|
|
(115)
|
|
|
(312)
|
|
|
174
|
Total other expenses,
net
|
|
(2,977)
|
|
|
(2,541)
|
|
|
(11,687)
|
|
|
(9,470)
|
Income before
provision for income taxes
|
|
18,436
|
|
|
45,859
|
|
|
66,164
|
|
|
88,862
|
Provision for income
taxes
|
|
(7,370)
|
|
|
(46,261)
|
|
|
(15,799)
|
|
|
(57,047)
|
Net income
(loss)
|
$
|
11,066
|
|
$
|
(402)
|
|
$
|
50,365
|
|
$
|
31,815
|
Less: net income
attributable to non-controlling interest
|
|
4,792
|
|
|
5,075
|
|
|
23,321
|
|
|
21,577
|
Net income (loss)
attributable to RE/MAX Holdings, Inc.
|
$
|
6,274
|
|
$
|
(5,477)
|
|
$
|
27,044
|
|
$
|
10,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to RE/MAX Holdings, Inc. per share of Class A common
stock
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.35
|
|
$
|
(0.31)
|
|
$
|
1.52
|
|
$
|
0.58
|
Diluted
|
$
|
0.35
|
|
$
|
(0.31)
|
|
$
|
1.52
|
|
$
|
0.58
|
Weighted average
shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
17,748,745
|
|
|
17,696,991
|
|
|
17,737,649
|
|
|
17,688,533
|
Diluted
|
|
17,771,180
|
|
|
17,747,744
|
|
|
17,767,499
|
|
|
17,731,800
|
Cash dividends
declared per share of Class A common stock
|
$
|
0.20
|
|
$
|
0.18
|
|
$
|
0.80
|
|
$
|
0.72
|
____________________________
|
*Effective January 1,
2018, the Company adopted ASU 2014-09, Revenue from Contracts
with Customers (Topic 606), the new revenue recognition
standard, retrospectively. All 2017 financial results have been
recast to reflect this change.
|
TABLE
2
|
RE/MAX Holdings,
Inc.
|
Consolidated
Balance Sheets
|
(Amounts in
thousands, except share and per share amounts)
|
(Unaudited)
|
|
|
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2018
|
|
As
adjusted*
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
59,974
|
|
$
|
50,807
|
Accounts and notes
receivable, current portion, less allowances of $7,980 and $7,223,
respectively
|
|
21,185
|
|
|
20,284
|
Income taxes
receivable
|
|
533
|
|
|
963
|
Other current
assets
|
|
5,855
|
|
|
7,974
|
Total current
assets
|
|
87,547
|
|
|
80,028
|
Property and
equipment, net of accumulated depreciation of $13,280 and $12,326,
respectively
|
|
4,390
|
|
|
2,905
|
Franchise agreements,
net
|
|
103,157
|
|
|
119,349
|
Other intangible
assets, net
|
|
22,965
|
|
|
8,476
|
Goodwill
|
|
150,684
|
|
|
135,213
|
Deferred tax assets,
net
|
|
53,698
|
|
|
62,841
|
Other assets, net of
current portion
|
|
4,399
|
|
|
4,023
|
Total
assets
|
$
|
426,840
|
|
$
|
412,835
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
1,890
|
|
$
|
517
|
Accrued
liabilities
|
|
13,143
|
|
|
15,390
|
Income taxes
payable
|
|
208
|
|
|
97
|
Deferred
revenue
|
|
25,489
|
|
|
25,268
|
Current portion of
debt
|
|
2,622
|
|
|
2,350
|
Current portion of
payable pursuant to tax receivable agreements
|
|
3,567
|
|
|
6,252
|
Total current
liabilities
|
|
46,919
|
|
|
49,874
|
Debt, net of current
portion
|
|
225,165
|
|
|
226,636
|
Payable pursuant to
tax receivable agreements, net of current portion
|
|
37,220
|
|
|
46,923
|
Deferred tax
liabilities, net
|
|
400
|
|
|
151
|
Deferred revenue, net
of current portion
|
|
20,224
|
|
|
20,228
|
Other liabilities,
net of current portion
|
|
17,637
|
|
|
19,897
|
Total
liabilities
|
|
347,565
|
|
|
363,709
|
Commitments and
contingencies
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Class A common stock,
par value $0.0001 per share, 180,000,000 shares authorized;
17,754,416 shares issued and outstanding as of
December 31, 2018; 17,696,991 shares issued and
outstanding as of December 31, 2017
|
|
2
|
|
|
2
|
Class B common stock,
par value $0.0001 per share, 1,000 shares authorized; 1 share
issued and outstanding as of December 31, 2018 and
December 31, 2017
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
460,101
|
|
|
451,199
|
Retained
earnings
|
|
21,138
|
|
|
8,400
|
Accumulated other
comprehensive income, net of tax
|
|
328
|
|
|
459
|
Total stockholders'
equity attributable to RE/MAX Holdings, Inc.
|
|
481,569
|
|
|
460,060
|
Non-controlling
interest
|
|
(402,294)
|
|
|
(410,934)
|
Total stockholders'
equity
|
|
79,275
|
|
|
49,126
|
Total liabilities
and stockholders' equity
|
$
|
426,840
|
|
$
|
412,835
|
____________________________
|
*Effective January 1,
2018, the Company adopted ASU 2014-09, Revenue from Contracts
with Customers (Topic 606), the new revenue recognition
standard, retrospectively. All 2017 financial results have been
recast to reflect this change.
|
TABLE
3
|
RE/MAX Holdings,
Inc.
|
Consolidated
Statements of Cash Flow
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
Year Ended
December 31,
|
|
|
|
2017
|
|
2018
|
|
As
adjusted*
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
$
|
50,365
|
|
$
|
31,815
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
20,678
|
|
|
20,512
|
Bad debt
expense
|
|
2,257
|
|
|
1,109
|
(Gain) loss on sale or
disposition of assets and sublease, net
|
|
(139)
|
|
|
4,260
|
Equity-based
compensation expense
|
|
9,176
|
|
|
2,900
|
Deferred income tax
expense
|
|
9,552
|
|
|
47,966
|
Fair value adjustments
to contingent consideration
|
|
(1,289)
|
|
|
180
|
Payments pursuant to
tax receivable agreements
|
|
(6,305)
|
|
|
(13,371)
|
Non-cash change in tax
receivable agreement liability
|
|
(6,145)
|
|
|
(32,736)
|
Other
|
|
1,082
|
|
|
1,145
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
Accounts and notes
receivable, current portion
|
|
(3,241)
|
|
|
(2,826)
|
Advances from/to
affiliates
|
|
581
|
|
|
(106)
|
Other current and
noncurrent assets
|
|
2,170
|
|
|
(2,724)
|
Other current and
noncurrent liabilities
|
|
(3,497)
|
|
|
2,815
|
Income taxes
receivable/payable
|
|
560
|
|
|
(1,133)
|
Deferred revenue and
deposits, current portion
|
|
259
|
|
|
3,482
|
Net cash provided by
operating activities
|
|
76,064
|
|
|
63,288
|
Cash flows from
investing activities:
|
|
|
|
|
|
Purchases of property
and equipment and capitalization of developed software and
trademark costs
|
|
(7,787)
|
|
|
(2,198)
|
Acquisitions, net of
cash acquired of $362 and $0, respectively
|
|
(25,888)
|
|
|
(35,720)
|
Net cash used in
investing activities
|
|
(33,675)
|
|
|
(37,918)
|
Cash flows from
financing activities:
|
|
|
|
|
|
Payments on
debt
|
|
(3,171)
|
|
|
(2,366)
|
Distributions paid to
non-controlling unitholders
|
|
(14,559)
|
|
|
(17,260)
|
Dividends and dividend
equivalents paid to Class A common stockholders
|
|
(14,306)
|
|
|
(12,793)
|
Payment of payroll
taxes related to net settled restricted stock units
|
|
(895)
|
|
|
(816)
|
Payment of contingent
consideration
|
|
(221)
|
|
|
—
|
Net cash used in
financing activities
|
|
(33,152)
|
|
|
(33,235)
|
Effect of exchange
rate changes on cash
|
|
(70)
|
|
|
1,063
|
Net increase
(decrease) in cash and cash equivalents
|
|
9,167
|
|
|
(6,802)
|
Cash and cash
equivalents, beginning of year
|
|
50,807
|
|
|
57,609
|
Cash and cash
equivalents, end of period
|
$
|
59,974
|
|
$
|
50,807
|
____________________________
|
*Effective January 1,
2018, the Company adopted ASU 2014-09, Revenue from Contracts
with Customers (Topic 606), the new revenue recognition
standard, retrospectively. All 2017 financial results have been
recast to reflect this change.
|
TABLE
4
|
RE/MAX Holdings,
Inc.
|
Agent
Count
|
(Unaudited)
|
|
|
As
of
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
Agent
Count:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned Regions
(1)
|
49,318
|
|
50,342
|
|
50,432
|
|
49,760
|
|
49,411
|
|
47,397
|
|
47,252
|
|
46,708
|
Independent Regions
(1)
|
13,804
|
|
13,948
|
|
14,063
|
|
13,852
|
|
13,751
|
|
16,152
|
|
15,997
|
|
15,733
|
U.S.
Total
|
63,122
|
|
64,290
|
|
64,495
|
|
63,612
|
|
63,162
|
|
63,549
|
|
63,249
|
|
62,441
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
Regions
|
6,702
|
|
6,858
|
|
6,915
|
|
6,920
|
|
6,882
|
|
6,924
|
|
6,893
|
|
6,786
|
Independent
Regions
|
14,625
|
|
14,550
|
|
14,451
|
|
14,297
|
|
14,230
|
|
14,236
|
|
14,160
|
|
14,050
|
Canada
Total
|
21,327
|
|
21,408
|
|
21,366
|
|
21,217
|
|
21,112
|
|
21,160
|
|
21,053
|
|
20,836
|
U.S. and Canada
Total
|
84,449
|
|
85,698
|
|
85,861
|
|
84,829
|
|
84,274
|
|
84,709
|
|
84,302
|
|
83,277
|
Outside U.S. and
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent
Regions
|
39,831
|
|
38,207
|
|
37,221
|
|
35,992
|
|
34,767
|
|
32,859
|
|
31,968
|
|
30,527
|
Outside U.S. and
Canada Total
|
39,831
|
|
38,207
|
|
37,221
|
|
35,992
|
|
34,767
|
|
32,859
|
|
31,968
|
|
30,527
|
Total
|
124,280
|
|
123,905
|
|
123,082
|
|
120,821
|
|
119,041
|
|
117,568
|
|
116,270
|
|
113,804
|
________________________________________
|
(1)
|
As of each quarter
end since December 31, 2017, U.S. Company-owned Regions include
agents in the Northern Illinois region, which converted from an
Independent Region to a Company-owned Region in connection with the
acquisition of certain assets of RE/MAX of Northern Illinois, Inc.,
including the regional franchise agreements issued by us permitting
the sale of RE/MAX franchises in the northern region of the state
of Illinois, on November 15, 2017. As of the acquisition date, the
Northern Illinois region had 2,266 agents.
|
TABLE
5
|
RE/MAX Holdings,
Inc.
|
Adjusted EBITDA
Reconciliation to Net Income
|
(Amounts in
thousands, except percentages)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
|
Year
Ended
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
|
|
2017
|
|
|
|
|
2017
|
|
|
2018
|
|
As
adjusted*
|
|
|
2018
|
|
As
adjusted*
|
|
Net income
(loss)
|
$
|
11,066
|
|
$
|
(402)
|
|
|
$
|
50,365
|
|
$
|
31,815
|
|
Depreciation and
amortization
|
|
5,426
|
|
|
4,834
|
|
|
|
20,678
|
|
|
20,512
|
|
Interest
expense
|
|
3,106
|
|
|
2,582
|
|
|
|
12,051
|
|
|
9,996
|
|
Interest
income
|
|
(279)
|
|
|
(156)
|
|
|
|
(676)
|
|
|
(352)
|
|
Provision for income
taxes
|
|
7,370
|
|
|
46,261
|
|
|
|
15,799
|
|
|
57,047
|
|
EBITDA
|
|
26,689
|
|
|
53,119
|
|
|
|
98,217
|
|
|
119,018
|
|
Loss (gain) on sale
or disposition of assets and sublease, net
(1)
|
|
7
|
|
|
401
|
|
|
|
(139)
|
|
|
4,260
|
|
Equity-based
compensation expense
|
|
3,035
|
|
|
739
|
|
|
|
9,176
|
|
|
2,900
|
|
Acquisition-related
expense (2)
|
|
6
|
|
|
1,491
|
|
|
|
1,634
|
|
|
5,889
|
|
Gain on reduction in
tax receivable agreement liability (3)
|
|
(6,145)
|
|
|
(32,736)
|
|
|
|
(6,145)
|
|
|
(32,736)
|
|
Special Committee
investigation and remediation expense (4)
|
|
101
|
|
|
2,634
|
|
|
|
2,862
|
|
|
2,634
|
|
Fair value
adjustments to contingent consideration (5)
|
|
(429)
|
|
|
(70)
|
|
|
|
(1,289)
|
|
|
180
|
|
Adjusted EBITDA
(6)
|
$
|
23,264
|
|
$
|
25,578
|
|
|
$
|
104,316
|
|
$
|
102,145
|
|
Adjusted EBITDA
Margin (6)
|
|
45.8
|
%
|
|
52.7
|
%
|
|
|
49.1
|
%
|
|
52.7
|
%
|
_____________________________
|
*Effective January 1,
2018, the Company adopted ASU 2014-09, Revenue from Contracts
with Customers (Topic 606), the new revenue recognition
standard, retrospectively. All 2017 financial results have been
recast to reflect this change.
|
|
(1)
|
Represents loss
(gain) on the sale or disposition of assets as well as the losses
(gains) on the sublease of a portion of the Company's corporate
headquarters office building.
|
(2)
|
Acquisition-related
expense includes legal, accounting, advisory and consulting fees
incurred in connection with the acquisition and integration of
acquired companies.
|
(3)
|
Gain on reduction in
tax receivable agreement liability is a result of the Tax Cuts and
Jobs Act enacted in December 2017 and further clarified in
2018.
|
(4)
|
Special Committee
investigation and remediation expense relates to costs incurred in
relation to the previously disclosed investigation by the special
committee of independent directors of actions of certain members of
our senior management and the implementation of the remediation
plan.
|
(5)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability related to the acquisition of Full House
Mortgage Connection, Inc. ("Full House"), a franchisor of mortgage
brokers that created concepts used to develop Motto.
|
(6)
|
Non-GAAP measure. See
the end of this press release for definitions of non-GAAP
measures.
|
TABLE
6
|
RE/MAX Holdings,
Inc.
|
Adjusted Net
Income and Adjusted Earnings per Share
|
(Amounts in
thousands, except share and per share amounts)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
|
|
2017
|
|
|
|
2017
|
|
2018
|
|
As
adjusted*
|
|
2018
|
|
As
adjusted*
|
Net income
(loss)
|
$
|
11,066
|
|
$
|
(402)
|
|
$
|
50,365
|
|
$
|
31,815
|
Amortization of
acquired intangible assets
|
|
4,466
|
|
|
3,847
|
|
|
17,502
|
|
|
17,741
|
Provision for income
taxes
|
|
7,370
|
|
|
46,261
|
|
|
15,799
|
|
|
57,047
|
Add-backs:
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on sale or
disposition of assets and sublease, net (1)
|
|
7
|
|
|
401
|
|
|
(139)
|
|
|
4,260
|
Equity-based
compensation expense
|
|
3,035
|
|
|
739
|
|
|
9,176
|
|
|
2,900
|
Acquisition-related
expense (2)
|
|
6
|
|
|
1,491
|
|
|
1,634
|
|
|
5,889
|
Gain on reduction in
tax receivable agreement liability (3)
|
|
(6,145)
|
|
|
(32,736)
|
|
|
(6,145)
|
|
|
(32,736)
|
Special Committee
investigation and remediation expense (4)
|
|
101
|
|
|
2,634
|
|
|
2,862
|
|
|
2,634
|
Fair value adjustments
to contingent consideration (5)
|
|
(429)
|
|
|
(70)
|
|
|
(1,289)
|
|
|
180
|
Adjusted pre-tax net
income
|
|
19,477
|
|
|
22,165
|
|
|
89,765
|
|
|
89,730
|
Provision for income
taxes at 24% for 2018 and 38% for 2017, respectively
|
|
(4,675)
|
|
|
(8,423)
|
|
|
(21,544)
|
|
|
(34,097)
|
Adjusted net
income (6)
|
$
|
14,802
|
|
$
|
13,742
|
|
$
|
68,221
|
|
$
|
55,633
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic pro forma
shares outstanding
|
|
30,308,345
|
|
|
30,256,591
|
|
|
30,297,249
|
|
|
30,248,133
|
Total diluted pro
forma shares outstanding
|
|
30,330,780
|
|
|
30,307,344
|
|
|
30,327,099
|
|
|
30,291,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income basic earnings per share (6)
|
$
|
0.49
|
|
$
|
0.45
|
|
$
|
2.25
|
|
$
|
1.84
|
Adjusted net
income diluted earnings per share (6)
|
$
|
0.49
|
|
$
|
0.45
|
|
$
|
2.25
|
|
$
|
1.84
|
____________________________
|
*Effective January 1,
2018, the Company adopted ASU 2014-09, Revenue from Contracts
with Customers (Topic 606), the new revenue recognition
standard, retrospectively. All 2017 financial results have been
recast to reflect this change.
|
|
(1)
|
Represents loss
(gain) on the sale or disposition of assets as well as the losses
(gains) on the sublease of a portion of the Company's corporate
headquarters office building.
|
(2)
|
Acquisition-related
expense includes legal, accounting, advisory and consulting fees
incurred in connection with the acquisition and integration of
acquired companies.
|
(3)
|
Gain on reduction in
tax receivable agreement liability is a result of the Tax Cuts and
Jobs Act enacted in December 2017 and further clarified in
2018.
|
(4)
|
Special Committee
investigation and remediation expense relates to costs incurred in
relation to the previously disclosed investigation by the special
committee of independent directors of actions of certain members of
our senior management and the implementation of the remediation
plan.
|
(5)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability related to the acquisition of Full
House.
|
(6)
|
Non-GAAP measure. See
the end of this press release for definitions of non-GAAP
measures.
|
TABLE
7
|
RE/MAX Holdings,
Inc.
|
Pro Forma Shares
Outstanding
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Total basic
weighted average shares outstanding:
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
17,748,745
|
|
17,696,991
|
|
17,737,649
|
|
17,688,533
|
Remaining equivalent
weighted average shares of stock outstanding on a pro forma basis
assuming RE/MAX Holdings owned 100% of RMCO
|
12,559,600
|
|
12,559,600
|
|
12,559,600
|
|
12,559,600
|
Total basic pro forma
weighted average shares outstanding
|
30,308,345
|
|
30,256,591
|
|
30,297,249
|
|
30,248,133
|
|
|
|
|
|
|
|
|
Total diluted
weighted average shares outstanding:
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
17,748,745
|
|
17,696,991
|
|
17,737,649
|
|
17,688,533
|
Remaining equivalent
weighted average shares of stock outstanding on a pro forma basis
assuming RE/MAX Holdings owned 100% of RMCO
|
12,559,600
|
|
12,559,600
|
|
12,559,600
|
|
12,559,600
|
Dilutive effect of
unvested restricted stock units (1)
|
22,435
|
|
50,753
|
|
29,850
|
|
43,267
|
Total diluted pro
forma weighted average shares outstanding
|
30,330,780
|
|
30,307,344
|
|
30,327,099
|
|
30,291,400
|
____________________________
|
(1)
|
In accordance with
the treasury stock method.
|
TABLE
8
|
RE/MAX Holdings,
Inc.
|
Free Cash Flow
& Unencumbered Cash
|
(Unaudited)
|
|
|
Year Ended
December 31,
|
|
|
|
2017
|
|
2018
|
|
As
adjusted*
|
Cash flow from
operations
|
$
|
76,064
|
|
$
|
63,288
|
Less: Purchases of
property and equipment and capitalization of developed software and
trademark costs
|
|
(7,787)
|
|
|
(2,126)
|
Free cash flow
(1)
|
|
68,277
|
|
|
61,162
|
|
|
|
|
|
|
Free cash
flow
|
|
68,277
|
|
|
61,162
|
Less: Tax/Other
non-dividend distributions to RIHI
|
|
(4,511)
|
|
|
(8,217)
|
Free cash flow
after tax/non-dividend distributions to
RIHI (1)
|
|
63,766
|
|
|
52,945
|
|
|
|
|
|
|
Free cash flow after
tax/non-dividend distributions to RIHI
|
|
63,766
|
|
|
52,945
|
Less: Debt principal
payments
|
|
(3,126)
|
|
|
(2,350)
|
Unencumbered cash
generated (1)
|
$
|
60,640
|
|
$
|
50,595
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
Cash flow from
operations
|
$
|
76,064
|
|
$
|
63,288
|
Free cash
flow
|
$
|
68,277
|
|
$
|
61,162
|
Free cash flow after
tax/non-dividend distributions to RIHI
|
$
|
63,766
|
|
$
|
52,945
|
Unencumbered cash
generated
|
$
|
60,640
|
|
$
|
50,595
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
104,316
|
|
$
|
102,145
|
Free cash flow as %
of Adjusted EBITDA
|
|
65.5%
|
|
|
59.9%
|
Free cash flow less
distributions to RIHI as % of Adjusted EBITDA
|
|
61.1%
|
|
|
51.8%
|
Unencumbered cash
generated as % of Adjusted EBITDA
|
|
58.1%
|
|
|
49.5%
|
____________________________
|
*Effective January 1,
2018, the Company adopted ASU 2014-09, Revenue from Contracts
with Customers (Topic 606), the new revenue recognition
standard, retrospectively. All 2017 financial results have been
recast to reflect this change.
|
|
(1)
|
Non-GAAP measure. See
the end of this press release for definitions of non-GAAP
measures.
|
Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in filings with
the SEC and in public disclosures of financial measures that are
not in accordance with U.S. GAAP, such as Adjusted EBITDA and the
ratios related thereto, Adjusted net income, Adjusted basic and
diluted earnings per share (Adjusted EPS) and Free cash flow. These
measures are derived on the basis of methodologies other than in
accordance with U.S. GAAP.
The Company defines Adjusted EBITDA as EBITDA (consolidated net
income before depreciation and amortization, interest expense,
interest income and the provision for income taxes, each of which
is presented in the unaudited condensed consolidated financial
statements included earlier in this press release), adjusted for
the impact of the following items that are either non-cash or that
the Company does not consider representative of its ongoing
operating performance: loss or gain on sale or disposition of
assets and sublease, equity-based compensation expense,
acquisition-related expense, Special Committee investigation and
remediation expense, gain on reduction in tax receivable agreement
liability, expense or income related to changes in the estimated
fair value measurement of contingent consideration, and other
non-recurring items. The Company now adjusts for expense or income
related to changes in the estimated fair value measurement of
contingent consideration as it is a noncash item that the Company
believes is not reflective of operating performance. Adjusted
EBITDA was revised in prior periods to reflect this change for
consistency in presentation.
Because Adjusted EBITDA and Adjusted EBITDA margin omit certain
non-cash items and other non-recurring cash charges or other items,
the Company believes that each measure is less susceptible to
variances that affect its operating performance resulting from
depreciation, amortization and other non-cash and non-recurring
cash charges or other items. The Company presents Adjusted EBITDA
and the related Adjusted EBITDA margin because the Company believes
they are useful as supplemental measures in evaluating the
performance of its operating businesses and provides greater
transparency into the Company's results of operations. The
Company's management uses Adjusted EBITDA and Adjusted EBITDA
margin as factors in evaluating the performance of the
business.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as
analytical tools, and you should not consider these measures in
isolation or as a substitute for analyzing the Company's results as
reported under U.S. GAAP. Some of these limitations are:
- these measures do not reflect changes in, or cash requirements
for, the Company's working capital needs;
- these measures do not reflect the Company's interest expense,
or the cash requirements necessary to service interest or principal
payments on its debt;
- these measures do not reflect the Company's income tax expense
or the cash requirements to pay its taxes;
- these measures do not reflect the cash requirements to pay
dividends to stockholders of the Company's Class A common stock and
tax and other cash distributions to its non-controlling
unitholders;
- these measures do not reflect the cash requirements pursuant to
the tax receivable agreements;
- 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;
- although equity-based compensation is a non-cash charge, the
issuance of equity-based awards may have a dilutive impact on
earnings per share; and
- other companies may calculate these measures differently so
similarly named measures may not be comparable.
The Company's Adjusted EBITDA guidance does not include certain
charges and costs. The adjustments to EBITDA in future periods are
generally expected to be similar to the kinds of charges and costs
excluded from Adjusted EBITDA in prior quarters, such as gain on
sale or disposition of assets and sublease and acquisition-related
expense, among others. The exclusion of these charges and
costs in future periods will have a significant impact on the
Company's Adjusted EBITDA. The Company is not able to provide a
reconciliation of the Company's non-GAAP financial guidance to the
corresponding U.S. GAAP measures without unreasonable effort
because of the uncertainty and variability of the nature and amount
of these future charges and costs.
Adjusted net income is calculated as Net income attributable to
RE/MAX Holdings, assuming the full exchange of all outstanding
non-controlling interests for shares of Class A common stock as of
the beginning of the period (and the related increase to the
provision for income taxes after such exchange), plus primarily
non-cash items and other items that management does not consider to
be useful in assessing the Company's operating performance (e.g.,
amortization of acquired intangible assets, gain on sale or
disposition of assets and sub-lease, Special Committee
investigation and remediation expense, acquisition-related expense
and equity-based compensation expense).
Adjusted basic and diluted earnings per share (Adjusted EPS) are
calculated as Adjusted net income (as defined above) divided by pro
forma (assuming the full exchange of all outstanding
non-controlling interests) basic and diluted weighted average
shares, as applicable.
When used in conjunction with GAAP financial measures, Adjusted
net income and Adjusted EPS are supplemental measures of operating
performance that management believes are useful measures to
evaluate the Company's performance relative to the performance of
its competitors as well as performance period over period. By
assuming the full exchange of all outstanding non-controlling
interests, management believes these measures:
- facilitate comparisons with other companies that do not have a
low effective tax rate driven by a non-controlling interest on a
pass-through entity;
- facilitate period over period comparisons because they
eliminate the effect of changes in Net income attributable to
RE/MAX Holdings, Inc. driven by increases in its ownership of RMCO,
LLC, which are unrelated to the Company's operating performance;
and
- eliminate primarily non-cash and other items that management
does not consider to be useful in assessing the Company's operating
performance.
Free cash flow is calculated as cash flows from operations less
capital expenditures, both as reported under GAAP, and quantifies
how much cash a company has to pursue opportunities that enhance
shareholder value. The Company believes free cash flow is
useful to investors as a supplemental measure as it calculates the
cash flow available for working capital needs, re-investment
opportunities, potential independent region and strategic
acquisitions, dividend payments or other strategic uses of
cash.
Free cash flow after tax and non-dividend distributions to RIHI
is calculated as free cash flow less tax and other non-dividend
distributions paid to RIHI (the non-controlling interest holder) to
enable RIHI to satisfy its income tax obligations. Similar payments
would be made by the Company directly to federal and state taxing
authorities as a component of the Company's consolidated provision
for income taxes if a full exchange of non-controlling interests
occurred in the future. As a result and given the
significance of the Company's ongoing tax and non-dividend
distribution obligations to its non-controlling interest, free cash
flow after tax and non-dividend distributions, when used in
conjunction with GAAP financial measures, provides a meaningful
view of cash flow available to the Company to pursue opportunities
that enhance shareholder value.
Unencumbered cash generated is calculated as free cash flow
after tax and non-dividend distributions to RIHI less quarterly
debt principal payments less annual excess cash flow payment on
debt, as applicable. Given the significance of the Company's excess
cash flow payment on debt, when applicable, unencumbered cash
generated, when used in conjunction with GAAP financial measures,
provides a meaningful view of the cash flow available to the
Company to pursue opportunities that enhance shareholder value
after considering its debt service obligations.
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content:http://www.prnewswire.com/news-releases/remax-holdings-reports-fourth-quarter-and-full-year-2018-results-300800052.html
SOURCE RE/MAX Holdings, Inc.