DENVER, Oct. 31, 2019 /PRNewswire/ --
Third Quarter 2019 Highlights
(Compared to third quarter 2018 unless otherwise
noted)
- Total agent count increased 3.5% to 128,258 agents
- U.S. and Canada combined agent
count decreased 1.9% to 84,067 agents
- Total open Motto Mortgage franchises increased to 104
offices
- Revenue of $71.5 million;
excluding Marketing Funds revenue, decreased 2.5% to $53.5 million
- Net income attributable to RE/MAX Holdings, Inc. of
$9.2 million and earnings per diluted
share (GAAP EPS) of $0.51
- Adjusted EBITDA1 of $28.2
million, Adjusted EBITDA margin1 of 39.4% and
Adjusted earnings per diluted share (Adjusted EPS1) of
$0.61
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 ended
September 30, 2019.
"The successful launch of our booj technology platform, greater
stability in U.S. agent count, continued double-digit growth in
international agent count, and ongoing Motto Mortgage expansion
were third-quarter highlights," stated Adam
Contos, RE/MAX Holdings Chief Executive Officer. "We're
starting to see positive traction from the multiple strategic moves
we've made the past two years. And although it's still early, our
recent performance coupled with the improving housing markets in
both the U.S. and Canada gives us
added confidence that we'll end 2019 with momentum."
Contos continued, "The release of the booj platform was a
milestone event for RE/MAX. After months of anticipation, our
brokers and agents are extremely pleased with the new technology,
which will help them better connect with clients and establish a
far more effective digital presence. The advantages they've been
hearing about are now becoming real, and they will continue to see
further evidence of this with agent, team and office websites, a
modern new consumer app, and the refresh of remax.com. The booj
launch has helped energize our brokers with a renewed focus on
growing their businesses, which should prove impactful as we head
toward 2020. On the Motto side, we see continued demand across
multiple customer types along with an acceleration in open rates of
recent franchisees. Many of our current franchisees are also
enjoying the recent re-financing boom on top of steady purchase
origination volume. We are pleased with how well Motto has grown
through its first three years, and we continue to invest in its
future growth and success."
Third Quarter 2019 Operating Results
Agent Count
The following table compares agent count as of September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September
30,
|
|
Change
|
|
|
|
|
|
2019
|
|
2018
|
|
#
|
|
%
|
U.S.
|
62,548
|
|
64,290
|
|
(1,742)
|
|
(2.7)
|
Canada
|
21,519
|
|
21,408
|
|
111
|
|
0.5
|
Subtotal
|
84,067
|
|
85,698
|
|
(1,631)
|
|
(1.9)
|
Outside the U.S.
& Canada
|
44,191
|
|
38,207
|
|
5,984
|
|
15.7
|
Total
|
128,258
|
|
123,905
|
|
4,353
|
|
3.5
|
Revenue
RE/MAX Holdings generated total revenue of $71.5 million in the third quarter of 2019, an
increase of $16.7 million or 30.4%
compared to $54.9 million in the
third quarter of 2018. Revenue increased primarily due to the
January 1, 2019 acquisition of the
Marketing Funds. Recurring revenue streams, which consist of
continuing franchise fees and annual dues, decreased $0.6 million compared to the third quarter of
2018 and accounted for 63.5% of revenue in the third quarter of
2019, excluding the Marketing Funds, compared to 63.1% in the
comparable period in 2018.
Operating Expenses
Total operating expenses were $48.1
million for the third quarter of 2019. Excluding operating
expenses from the Marketing Funds, third quarter 2019 operating
expenses totaled $30.1 million, a
decrease of $3.0 million or 9.0%
compared to $33.1 million in the
third quarter of 2018. Expenses decreased primarily due to lower
selling, operating and administrative expenses.
Selling, operating and administrative expenses were $24.5 million in the third quarter of 2019, a
decrease of $3.0 million or 10.9%
compared to the third quarter of 2018 and represented 45.7% of
revenue, excluding the Marketing Funds, compared to 50.1% in the
prior-year period. Selling, operating and administrative expenses
decreased primarily due to lower equity-based compensation and
other personnel expenses and professional fees, partially offset by
increases in training expenses for the booj technology platform and
property tax expense as well as a less favorable fair value
adjustment of our Motto contingent consideration
liability.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $9.2 million for the third quarter of 2019, an
increase of $1.0 million over the
third quarter of 2018. Reported basic and diluted GAAP EPS were
$0.51 for the third quarter of 2019
compared to $0.46 in the third
quarter of 2018.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $28.2 million
for the third quarter of 2019, a decrease of $1.3 million or 4.4% from the third quarter of
2018. Adjusted EBITDA decreased primarily due to lower organic
revenue growth and additional training expenses related to the booj
technology rollout, partially offset by lower costs for
professional fees. Adjusted EBITDA margin was 39.4% in the third
quarter of 2019 compared to 53.7% in the third quarter of 2018 and
decreased primarily due to the acquisition of the Marketing
Funds.
Adjusted basic and diluted EPS were each $0.61 for the third quarter of 2019, a decrease
of $0.02 per share compared to the
third quarter of 2018. The ownership structure used to calculate
Adjusted basic and diluted EPS for the quarter ended September 30, 2019 assumes RE/MAX Holdings owned
100% of RMCO, LLC ("RMCO"). The weighted average ownership RE/MAX
Holdings had in RMCO was 58.7% for the quarter ended September 30, 2019.
Balance Sheet
As of September 30, 2019, the
Company had cash and cash equivalents of $87.8 million. The Company's cash and cash
equivalents increased $27.8 million
from December 31, 2018. As of
September 30, 2019, the Company had
$226.2 million of outstanding debt,
net of an unamortized debt discount and issuance costs, a decrease
of $1.6 million compared to
$227.8 million as of December 31, 2018.
Dividend
On October 30, 2019, the Company's
Board of Directors approved a quarterly cash dividend of
$0.21 per share. The quarterly
dividend is payable on November 27,
2019, to shareholders of record at the close of business on
November 13, 2019.
Outlook
The Company's fourth quarter and full-year 2019 Outlook assumes
no further currency movements, acquisitions or divestitures.
For the fourth quarter of 2019, RE/MAX Holdings expects:
- Agent count to increase 3.0% to 4.0% over fourth quarter
2018;
- Revenue in a range of $66.5
million to $69.5 million
(including revenue from the Marketing Funds in a range of
$17.5 million to $18.5 million); and
- Adjusted EBITDA in a range of $21.0
million to $23.0 million.
For the full-year 2019, RE/MAX Holdings is adjusting its
guidance and now expects:
- Agent count to increase 3.0% to 4.0% over full-year 2018,
changed from 2.0% to 4.0%;
- Revenue in a range of $280.5
million to $283.5 million
(including revenue from the Marketing Funds in a range of
$72.0 million to $74.0 million), changed from $279.5 million to $283.5
million (including revenue from the Marketing Funds in a
range of $71.5 million to
$73.5 million); and
- Adjusted EBITDA in a range of $102.0
million to $104.0 million,
changed from $101.0 million to
$104.0 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, November 1, 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 fourth 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; expansion of Motto Mortgage; the booj
technology platform, including agent, team and office websites,
consumer app and refresh of remax.com; and the Company's strategic
and operating plans and business models. 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 impact of recent
changes to our senior management team, (10) the impact of the
findings and recommendations of the previously disclosed Special
Committee investigation on the Company and its management and
operations, 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 and Quarterly Reports on
Form 10-Q 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.
Condensed Consolidated Statements of Income
(Amounts in thousands, except share and per share
amounts) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing franchise
fees
|
|
$
|
25,168
|
|
$
|
25,495
|
|
$
|
75,018
|
|
$
|
75,946
|
Annual dues
|
|
|
8,835
|
|
|
9,106
|
|
|
26,508
|
|
|
26,775
|
Broker fees
|
|
|
13,292
|
|
|
13,488
|
|
|
35,339
|
|
|
36,669
|
Marketing Funds
fees
|
|
|
18,034
|
|
|
—
|
|
|
54,866
|
|
|
—
|
Franchise sales and
other revenue
|
|
|
6,212
|
|
|
6,777
|
|
|
22,369
|
|
|
22,395
|
Total
revenue
|
|
|
71,541
|
|
|
54,866
|
|
|
214,100
|
|
|
161,785
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, operating and
administrative expenses
|
|
|
24,478
|
|
|
27,461
|
|
|
83,728
|
|
|
90,136
|
Marketing Funds
expenses
|
|
|
18,034
|
|
|
—
|
|
|
54,866
|
|
|
—
|
Depreciation and
amortization
|
|
|
5,595
|
|
|
5,608
|
|
|
16,694
|
|
|
15,252
|
(Gain) loss on sale or
disposition of assets, net
|
|
|
(10)
|
|
|
(10)
|
|
|
353
|
|
|
(41)
|
Total operating
expenses
|
|
|
48,097
|
|
|
33,059
|
|
|
155,641
|
|
|
105,347
|
Operating
income
|
|
|
23,444
|
|
|
21,807
|
|
|
58,459
|
|
|
56,438
|
Other expenses,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(3,089)
|
|
|
(3,050)
|
|
|
(9,398)
|
|
|
(8,945)
|
Interest
income
|
|
|
412
|
|
|
180
|
|
|
1,074
|
|
|
397
|
Foreign currency
transaction gains (losses)
|
|
|
(50)
|
|
|
24
|
|
|
66
|
|
|
(162)
|
Total other expenses,
net
|
|
|
(2,727)
|
|
|
(2,846)
|
|
|
(8,258)
|
|
|
(8,710)
|
Income before
provision for income taxes
|
|
|
20,717
|
|
|
18,961
|
|
|
50,201
|
|
|
47,728
|
Provision for income
taxes
|
|
|
(3,453)
|
|
|
(3,420)
|
|
|
(8,547)
|
|
|
(8,429)
|
Net income
|
|
$
|
17,264
|
|
$
|
15,541
|
|
$
|
41,654
|
|
$
|
39,299
|
Less: net income
attributable to non-controlling interest
|
|
|
8,091
|
|
|
7,402
|
|
|
19,502
|
|
|
18,529
|
Net income
attributable to RE/MAX Holdings, Inc.
|
|
$
|
9,173
|
|
$
|
8,139
|
|
$
|
22,152
|
|
$
|
20,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to RE/MAX Holdings, Inc. per share of Class A common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.51
|
|
$
|
0.46
|
|
$
|
1.24
|
|
$
|
1.17
|
Diluted
|
|
$
|
0.51
|
|
$
|
0.46
|
|
$
|
1.24
|
|
$
|
1.17
|
Weighted average
shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,826,332
|
|
|
17,746,184
|
|
|
17,803,708
|
|
|
17,733,910
|
Diluted
|
|
|
17,840,158
|
|
|
17,771,212
|
|
|
17,830,942
|
|
|
17,767,638
|
Cash dividends
declared per share of Class A common stock
|
|
$
|
0.21
|
|
$
|
0.20
|
|
$
|
0.63
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE
2
|
RE/MAX Holdings,
Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share
amounts) (Unaudited)
|
|
|
|
|
|
|
|
|
|
September
30,
2019
|
|
December
31,
2018
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
87,763
|
|
$
|
59,974
|
Restricted
cash
|
|
|
19,118
|
|
|
—
|
Accounts and notes
receivable, current portion, less allowances of $11,273 and $7,980,
respectively
|
|
|
30,722
|
|
|
21,185
|
Income taxes
receivable
|
|
|
1,508
|
|
|
533
|
Other current
assets
|
|
|
12,165
|
|
|
5,855
|
Total current
assets
|
|
|
151,276
|
|
|
87,547
|
Property and
equipment, net of accumulated depreciation of $14,572 and $13,280,
respectively
|
|
|
5,462
|
|
|
4,390
|
Operating lease right
of use assets
|
|
|
52,258
|
|
|
—
|
Franchise agreements,
net
|
|
|
91,538
|
|
|
103,157
|
Other intangible
assets, net
|
|
|
24,946
|
|
|
22,965
|
Goodwill
|
|
|
150,776
|
|
|
150,684
|
Deferred tax assets,
net
|
|
|
49,971
|
|
|
53,698
|
Other assets, net of
current portion
|
|
|
5,506
|
|
|
4,399
|
Total
assets
|
|
$
|
531,733
|
|
$
|
426,840
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,428
|
|
$
|
1,890
|
Accrued
liabilities
|
|
|
51,129
|
|
|
13,143
|
Income taxes
payable
|
|
|
143
|
|
|
208
|
Deferred
revenue
|
|
|
24,996
|
|
|
25,489
|
Current portion of
debt
|
|
|
2,645
|
|
|
2,622
|
Current portion of
payable pursuant to tax receivable agreements
|
|
|
3,578
|
|
|
3,567
|
Operating lease
liabilities
|
|
|
4,957
|
|
|
—
|
Total current
liabilities
|
|
|
90,876
|
|
|
46,919
|
Debt, net of current
portion
|
|
|
223,556
|
|
|
225,165
|
Payable pursuant to
tax receivable agreements, net of current portion
|
|
|
34,355
|
|
|
37,220
|
Deferred tax
liabilities, net
|
|
|
328
|
|
|
400
|
Deferred revenue, net
of current portion
|
|
|
18,851
|
|
|
20,224
|
Operating lease
liabilities, net of current portion
|
|
|
57,280
|
|
|
—
|
Other liabilities,
net of current portion
|
|
|
6,077
|
|
|
17,637
|
Total
liabilities
|
|
|
431,323
|
|
|
347,565
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Class A common stock,
par value $0.0001 per share, 180,000,000 shares authorized;
17,835,719
shares issued and outstanding as of September 30, 2019;
17,754,416 shares issued and outstanding as
of December 31, 2018
|
|
|
2
|
|
|
2
|
Class B common stock,
par value $0.0001 per share, 1,000 shares authorized; 1 share
issued and
outstanding as of September 30, 2019 and
December 31, 2018
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
462,245
|
|
|
460,101
|
Retained
earnings
|
|
|
31,992
|
|
|
21,138
|
Accumulated other
comprehensive income, net of tax
|
|
|
379
|
|
|
328
|
Total stockholders'
equity attributable to RE/MAX Holdings, Inc.
|
|
|
494,618
|
|
|
481,569
|
Non-controlling
interest
|
|
|
(394,208)
|
|
|
(402,294)
|
Total stockholders'
equity
|
|
|
100,410
|
|
|
79,275
|
Total liabilities
and stockholders' equity
|
|
$
|
531,733
|
|
$
|
426,840
|
TABLE
3
|
RE/MAX Holdings,
Inc.
Condensed Consolidated Statements of Cash Flow
(Amounts in
thousands) (Unaudited)
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
41,654
|
|
$
|
39,299
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
16,694
|
|
|
15,252
|
Bad debt
expense
|
|
|
3,420
|
|
|
1,257
|
Loss (gain) on sale or
disposition of assets and sublease, net
|
|
|
353
|
|
|
(146)
|
Equity-based
compensation expense
|
|
|
4,860
|
|
|
6,141
|
Deferred income tax
expense
|
|
|
3,630
|
|
|
3,503
|
Fair value adjustments
to contingent consideration
|
|
|
330
|
|
|
(860)
|
Payments pursuant to
tax receivable agreements
|
|
|
(2,854)
|
|
|
(5,047)
|
Other, net
|
|
|
840
|
|
|
902
|
Changes in operating
assets and liabilities
|
|
|
(13,740)
|
|
|
(3,279)
|
Net cash provided by
operating activities
|
|
|
55,187
|
|
|
57,022
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchases of property,
equipment and software and capitalization of trademark
costs
|
|
|
(10,093)
|
|
|
(5,316)
|
Acquisitions, net of
cash acquired of $0 and $362, respectively
|
|
|
—
|
|
|
(25,888)
|
Restricted cash
acquired with the Marketing Funds acquisition
|
|
|
28,495
|
|
|
—
|
Other
|
|
|
(1,200)
|
|
|
—
|
Net cash provided by
(used in) investing activities
|
|
|
17,202
|
|
|
(31,204)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Payments on
debt
|
|
|
(1,964)
|
|
|
(2,382)
|
Distributions paid to
non-controlling unitholders
|
|
|
(11,460)
|
|
|
(11,259)
|
Dividends and dividend
equivalents paid to Class A common stockholders
|
|
|
(11,298)
|
|
|
(10,758)
|
Payment of payroll
taxes related to net settled restricted stock units
|
|
|
(836)
|
|
|
(895)
|
Payment of contingent
consideration
|
|
|
—
|
|
|
(50)
|
Net cash used in
financing activities
|
|
|
(25,558)
|
|
|
(25,344)
|
Effect of exchange
rate changes on cash
|
|
|
76
|
|
|
(18)
|
Net increase
(decrease) in cash, cash equivalents and restricted
cash
|
|
|
46,907
|
|
|
456
|
Cash, cash
equivalents and restricted cash, beginning of year
|
|
|
59,974
|
|
|
50,807
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
106,881
|
|
$
|
51,263
|
TABLE
4
|
RE/MAX Holdings,
Inc.
Agent Count (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
|
|
September
30,
2019
|
|
June
30,
2019
|
|
March
31,
2019
|
|
December
31,
2018
|
|
September
30,
2018
|
|
June
30,
2018
|
|
March
31,
2018
|
|
December
31,
2017
|
|
Agent
Count:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned Regions
(1)
|
|
|
48,576
|
|
48,748
|
|
48,904
|
|
49,318
|
|
50,342
|
|
50,432
|
|
49,760
|
|
49,411
|
|
Independent Regions
(1)
|
|
|
13,972
|
|
13,952
|
|
13,760
|
|
13,804
|
|
13,948
|
|
14,063
|
|
13,852
|
|
13,751
|
|
U.S.
Total
|
|
|
62,548
|
|
62,700
|
|
62,664
|
|
63,122
|
|
64,290
|
|
64,495
|
|
63,612
|
|
63,162
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
Regions
|
|
|
6,402
|
|
6,510
|
|
6,549
|
|
6,702
|
|
6,858
|
|
6,915
|
|
6,920
|
|
6,882
|
|
Independent
Regions
|
|
|
15,117
|
|
14,923
|
|
14,818
|
|
14,625
|
|
14,550
|
|
14,451
|
|
14,297
|
|
14,230
|
|
Canada
Total
|
|
|
21,519
|
|
21,433
|
|
21,367
|
|
21,327
|
|
21,408
|
|
21,366
|
|
21,217
|
|
21,112
|
|
U.S. and Canada
Total
|
|
|
84,067
|
|
84,133
|
|
84,031
|
|
84,449
|
|
85,698
|
|
85,861
|
|
84,829
|
|
84,274
|
|
Outside U.S. and
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent
Regions
|
|
|
44,191
|
|
42,887
|
|
41,501
|
|
39,831
|
|
38,207
|
|
37,221
|
|
35,992
|
|
34,767
|
|
Outside U.S. and Canada
Total
|
|
|
44,191
|
|
42,887
|
|
41,501
|
|
39,831
|
|
38,207
|
|
37,221
|
|
35,992
|
|
34,767
|
|
Total
|
|
|
128,258
|
|
127,020
|
|
125,532
|
|
124,280
|
|
123,905
|
|
123,082
|
|
120,821
|
|
119,041
|
|
____________________
|
(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
September
30,
|
|
Nine Months
Ended September 30,
|
|
(Amounts in
000s)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Net
income
|
$
|
17,264
|
|
$
|
15,541
|
|
$
|
41,654
|
|
$
|
39,299
|
|
Depreciation and
amortization
|
|
5,595
|
|
|
5,608
|
|
|
16,694
|
|
|
15,252
|
|
Interest
expense
|
|
3,089
|
|
|
3,050
|
|
|
9,398
|
|
|
8,945
|
|
Interest
income
|
|
(412)
|
|
|
(180)
|
|
|
(1,074)
|
|
|
(397)
|
|
Provision for income
taxes
|
|
3,453
|
|
|
3,420
|
|
|
8,547
|
|
|
8,429
|
|
EBITDA
|
|
28,989
|
|
|
27,439
|
|
|
75,219
|
|
|
71,528
|
|
(Gain) loss on sale
or disposition of assets and sublease, net
|
|
(10)
|
|
|
(5)
|
|
|
353
|
|
|
(146)
|
|
Equity-based
compensation expense (1)
|
|
(987)
|
|
|
2,717
|
|
|
4,860
|
|
|
6,141
|
|
Acquisition-related
expense (2)
|
|
181
|
|
|
141
|
|
|
268
|
|
|
1,628
|
|
Special Committee
investigation and remediation expense (3)
|
|
—
|
|
|
111
|
|
|
—
|
|
|
2,761
|
|
Fair value
adjustments to contingent consideration (4)
|
|
(15)
|
|
|
(940)
|
|
|
330
|
|
|
(860)
|
|
Adjusted EBITDA
(5)
|
$
|
28,158
|
|
$
|
29,463
|
|
$
|
81,030
|
|
$
|
81,052
|
|
Adjusted EBITDA
Margin (5)
|
|
39.4
|
%
|
|
53.7
|
%
|
|
37.8
|
%
|
|
50.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
|
(1)
|
For the three and
nine months ended September 30, 2019, the Company reversed expense
for performance awards for certain booj work deliverables as well
as for certain revenue performance awards. The booj delivery date
was extended to December 31, 2019.
|
(2)
|
Acquisition-related
expense includes legal, accounting, advisory and consulting fees
incurred in connection with the acquisition and integration of
acquired companies.
|
(3)
|
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.
|
(4)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability.
|
(5)
|
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
September
30,
|
|
Nine Months
Ended
September
30,
|
(Amounts in
000s)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net
income
|
|
$
|
17,264
|
|
$
|
15,541
|
|
$
|
41,654
|
|
$
|
39,299
|
Amortization of
acquired intangible assets
|
|
|
4,459
|
|
|
4,841
|
|
|
13,390
|
|
|
13,036
|
Provision for income
taxes
|
|
|
3,453
|
|
|
3,420
|
|
|
8,547
|
|
|
8,429
|
Add-backs:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sale
or disposition of assets and sublease, net
|
|
|
(10)
|
|
|
(5)
|
|
|
353
|
|
|
(146)
|
Equity-based
compensation expense (1)
|
|
|
(987)
|
|
|
2,717
|
|
|
4,860
|
|
|
6,141
|
Acquisition-related
expense (2)
|
|
|
181
|
|
|
141
|
|
|
268
|
|
|
1,628
|
Special Committee
investigation and remediation expense (3)
|
|
|
—
|
|
|
111
|
|
|
—
|
|
|
2,761
|
Fair value
adjustments to contingent consideration (4)
|
|
|
(15)
|
|
|
(940)
|
|
|
330
|
|
|
(860)
|
Adjusted pre-tax net
income
|
|
|
24,345
|
|
|
25,826
|
|
|
69,402
|
|
|
70,288
|
Less: Provision for
income taxes at 24%
|
|
|
(5,843)
|
|
|
(6,198)
|
|
|
(16,656)
|
|
|
(16,869)
|
Adjusted net
income (5)
|
|
$
|
18,502
|
|
$
|
19,628
|
|
$
|
52,746
|
|
$
|
53,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic pro forma
shares outstanding
|
|
|
30,385,932
|
|
|
30,305,784
|
|
|
30,363,308
|
|
|
30,293,510
|
Total diluted pro
forma shares outstanding
|
|
|
30,399,758
|
|
|
30,330,812
|
|
|
30,390,542
|
|
|
30,327,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income basic earnings per share (5)
|
|
$
|
0.61
|
|
$
|
0.65
|
|
$
|
1.74
|
|
$
|
1.76
|
Adjusted net
income diluted earnings per share (5)
|
|
$
|
0.61
|
|
$
|
0.65
|
|
$
|
1.74
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
|
(1)
|
For the three and
nine months ended September 30, 2019, the Company reversed expense
for performance awards for certain booj work deliverables as well
as for certain revenue performance awards. The booj delivery date
was extended to December 31, 2019.
|
(2)
|
Acquisition-related
expense includes legal, accounting, advisory and consulting fees
incurred in connection with the acquisition and integration of
acquired companies.
|
(3)
|
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.
|
(4)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability.
|
(5)
|
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
September
30,
|
|
Nine Months
Ended
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Total basic
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
17,826,332
|
|
17,746,184
|
|
17,803,708
|
|
17,733,910
|
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
|
|
30,385,932
|
|
30,305,784
|
|
30,363,308
|
|
30,293,510
|
|
|
|
|
|
|
|
|
|
Total diluted
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
17,826,332
|
|
17,746,184
|
|
17,803,708
|
|
17,733,910
|
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)
|
|
13,826
|
|
25,028
|
|
27,234
|
|
33,728
|
Total diluted pro
forma weighted average shares outstanding
|
|
30,399,758
|
|
30,330,812
|
|
30,390,542
|
|
30,327,238
|
____________________
|
(1)
|
In accordance with
the treasury stock method.
|
TABLE
8
|
RE/MAX Holdings,
Inc. Free Cash Flow & Unencumbered
Cash (Unaudited)
|
|
|
|
|
|
|
|
September
30,
|
|
2019
|
|
2018
|
Cash flow from
operations
|
$
|
55,187
|
|
$
|
57,022
|
Less: Purchases of
property and equipment and capitalization of developed software and
trademark costs
|
|
(10,093)
|
|
|
(5,316)
|
Decreases in
restricted cash of the Marketing Funds (1)
|
|
9,377
|
|
|
-
|
Free cash flow
(2)
|
|
54,471
|
|
|
51,706
|
|
|
|
|
|
|
Free cash
flow
|
|
54,471
|
|
|
51,706
|
Less: Tax/Other
non-dividend distributions to RIHI
|
|
(3,547)
|
|
|
(3,723)
|
Free cash flow
after tax/non-dividend distributions to RIHI
(2)
|
|
50,924
|
|
|
47,983
|
|
|
|
|
|
|
Free cash flow after
tax/non-dividend distributions to RIHI
|
|
50,924
|
|
|
47,983
|
Less: Debt principal
payments
|
|
(1,964)
|
|
|
(2,348)
|
Unencumbered cash
generated (2)
|
$
|
48,960
|
|
$
|
45,635
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
Cash flow from
operations
|
$
|
55,187
|
|
$
|
57,022
|
Free cash
flow
|
$
|
54,471
|
|
$
|
51,706
|
Free cash flow after
tax/non-dividend distributions to RIHI
|
$
|
50,924
|
|
$
|
47,983
|
Unencumbered cash
generated
|
$
|
48,960
|
|
$
|
45,635
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
81,030
|
|
$
|
81,052
|
Free cash flow as %
of Adjusted EBITDA
|
|
67.2%
|
|
|
63.8%
|
Free cash flow less
distributions to RIHI as % of Adjusted EBITDA
|
|
62.8%
|
|
|
59.2%
|
Unencumbered cash
generated as % of Adjusted EBITDA
|
|
60.4%
|
|
|
56.3%
|
____________________
|
(1)
|
In January 2019, the
Company acquired all of the regional and pan-regional advertising
fund entities previously owned by its founder and Chairman of the
Board of Directors, David Liniger, collectively, the "Marketing
Funds". Beginning January 1, 2019, all assets and liabilities of
the Marketing Funds are reflected in the condensed consolidated
financial statements of the Company, including approximately $28.5
million of restricted cash. This line reflects any subsequent
changes in the restricted cash balance since the initial
acquisition date (which under GAAP reflects as either (a) a
decrease in cash flow from operations or (b) an incremental amount
of purchases of property and equipment and capitalization of
developed software) so as to remove the impact of changes in
restricted cash in determining free cash flow.
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(2)
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Non-GAAP measure. See
the end of this press release for definitions of non-GAAP
measures.
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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.
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 and any changes in restricted cash of the
Marketing Funds, all as reported under GAAP, and quantifies how
much cash a company has to pursue opportunities that enhance
shareholder value. The restricted cash of the Marketing Funds is
limited in use for the benefit of franchisees and any impact to
free cash flow is removed. 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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SOURCE RE/MAX Holdings, Inc.