DENVER, May 6, 2020 /PRNewswire/ --
First Quarter 2020 Highlights
(Compared to first
quarter 2019 unless otherwise noted)
- Total agent count increased 5.0% to 131,816 agents (as
previously disclosed)
- U.S. and Canada combined agent
count increased 0.2% to 84,191 agents (as previously
disclosed)
- Total open Motto Mortgage franchises increased 34.1% to 118
offices1 (as previously disclosed)
- Total Revenue of $70.3 million;
Revenue excluding the Marketing Funds increased 0.7% to
$52.8 million
- Net income attributable to RE/MAX Holdings, Inc. of
$2.6 million and earnings per diluted
share (GAAP EPS) of $0.15
- Adjusted EBITDA2 of $19.5
million, Adjusted EBITDA margin2 of 27.8% and
Adjusted earnings per diluted share (Adjusted EPS2) of
$0.39
Operating Statistics as of April 30,
2020
(Compared to April 30,
2019 unless otherwise noted)
- Total agent count increased 4.0% to 131,134 agents
- U.S. and Canada combined agent
count decreased 0.8% to 83,374 agents
- Total open Motto Mortgage franchises increased 35.6% to 122
offices1
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
March 31, 2020.
"The housing market experienced a strong start to 2020, but that
momentum was unfortunately interrupted by the COVID-19 pandemic,"
stated Adam Contos, RE/MAX Holdings
Chief Executive Officer. "In the current environment, the
health and well-being of our employees, affiliates, home buyers and
sellers and the communities in which they live remain our top
priority. Thanks to investments in our business this past year, our
employees are working productively from home, delivering valuable
service and support to our networks. Real estate professionals,
using technology and adhering to social distancing guidelines, are
effectively leading consumers through the buying or selling process
in a safe and largely virtual way. What has become clear is the
expertise of a skilled real estate professional has never been more
important."
Contos continued, "We have ample reason to be confident in our
ability to navigate through this challenging environment. We have
the advantages of strong brands, a resilient business model, a
healthy balance sheet, two highly entrepreneurial networks –
including one that virtually spans the globe – and an
extremely skilled headquarters staff. We've experienced economic
downturns before, and the lessons we've learned will help us
through this one. We continue to invest in the success of our
affiliates – providing financial support, maintaining our brand
presence, and developing relevant new tools, training and
technology. The goal: helping our people emerge from this crisis in
a position of strength."
First Quarter 2020 Operating Results
Agent Count
The following table compares agent count as of March 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March
31,
|
|
Change
|
|
|
|
|
|
2020
|
|
2019
|
|
#
|
|
%
|
U.S.
|
62,668
|
|
62,664
|
|
4
|
|
0.0
|
Canada
|
21,523
|
|
21,367
|
|
156
|
|
0.7
|
Subtotal
|
84,191
|
|
84,031
|
|
160
|
|
0.2
|
Outside the U.S.
& Canada
|
47,625
|
|
41,501
|
|
6,124
|
|
14.8
|
Total
|
131,816
|
|
125,532
|
|
6,284
|
|
5.0
|
Revenue
RE/MAX Holdings generated total revenue of $70.3 million in the first quarter of 2020, a
decrease of $0.9 million or 1.3%
compared to $71.2 million in the
first quarter of 2019. Total revenue decreased primarily due to
agent recruiting initiatives that reduced both continuing franchise
fees and Marketing Funds fees, partially offset by an increase in
broker fees and the growth of Motto. Recurring revenue streams,
which consist of continuing franchise fees and annual dues,
decreased $0.7 million compared to
the first quarter of 2019 and accounted for 62.7% of revenue
(excluding the Marketing Funds) in the first quarter of 2020,
compared to 64.5% in the comparable period in 2019.
Operating Expenses
Total operating expenses were $58.5
million for the first quarter of 2020. First quarter total
operating expenses increased primarily due to higher selling,
operating and administrative expenses and depreciation and
amortization expenses, partially offset by lower Marketing Fund
expenses. Excluding the Marketing Funds from operating expenses,
first quarter 2020 operating expenses totaled $41.0 million, an increase of $1.5 million or 3.9% compared to $39.5 million in the first quarter of 2019.
Selling, operating and administrative expenses were $34.7 million in the first quarter of 2020, an
increase of $0.8 million or 2.3%
compared to the first quarter of 2019 and, excluding the Marketing
Funds, represented 65.7% of revenue, compared to 64.7% in the
prior-year period. Selling, operating and administrative expenses
increased primarily due to higher bad debt expense, incremental
expenses from the First acquisition, technology investments and
increased legal expenses, partially offset by lower equity-based
compensation expense and elimination of the corporate bonus.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $2.6 million for the first quarter of 2020, a
decrease of $1.8 million over the
first quarter of 2019. Reported basic and diluted GAAP EPS were
each $0.15 for the first quarter of
2020 compared to $0.25 in the first
quarter of 2019.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $19.5 million
for the first quarter of 2020, a decrease of $3.5 million or 15.0% from the first quarter of
2019. Adjusted EBITDA decreased primarily due to increased bad debt
expense and incremental net expenses from the First acquisition
partially offset by the elimination of the corporate bonus.
Adjusted EBITDA margin was 27.8% in the first quarter of 2020
compared to 32.3% in the first quarter of 2019.
Adjusted basic and diluted EPS were each $0.39 for the first quarter of 2020, a decrease
of $0.09 per share compared to the
first quarter of 2019. The ownership structure used to calculate
Adjusted basic and diluted EPS for the quarter ended March 31, 2020 assumes RE/MAX Holdings owned 100%
of RMCO, LLC ("RMCO"). The weighted average ownership RE/MAX
Holdings had in RMCO was 58.9% for the quarter ended March 31, 2020.
Balance Sheet
As of March 31, 2020, the Company
had cash and cash equivalents of $80.9
million. The Company's cash and cash equivalents decreased
$2.1 million from December 31, 2019. As of March 31, 2020, the Company had $225.2 million of outstanding debt, net of an
unamortized debt discount and issuance costs, a decrease of
$0.5 million compared to $225.7 million as of December 31, 2019.
Dividend
On May 5, 2020, the Company's
Board of Directors approved a quarterly cash dividend of
$0.22 per share of Class A common
stock. The quarterly dividend is payable on June 2, 2020, to shareholders of record at the
close of business on May 19,
2020.
Webcast and Conference Call
The Company will host a conference call for interested parties
on Thursday, May 7, 2020, 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.
Footnotes:
1 Total open Motto Mortgage franchises includes
only "bricks and mortar" offices with a unique physical address
with rights granted by a full franchise agreement with Motto
Franchising, LLC and excludes any "virtual" offices or
"branchises".
2 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 130,000 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. Motto Mortgage has grown to
over 100 offices across more than 30 states.
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; dividends;
non-GAAP financial measures; housing and mortgage market
conditions; the Company's strategic and operating plans and
business models; the impact of the COVID-19 pandemic and the
ability of the Company and its franchisees to navigate the
challenges presented by the COVID-19 pandemic; investments in
the success of franchisees, including financial support; the
Company's ability to implement its planned expense reductions and
the benefits thereof; the importance of skilled real estate
professionals; the advantages of the Company's strong brands,
resilient business model, healthy balance sheet, two highly
entrepreneurial networks and extremely skilled headquarters staff;
and the Company's continued investment in the success of its
affiliates. 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.
These risks and uncertainties include the global COVID-19 pandemic,
which poses significant and widespread risks to the Company's
business, including the Company's agents, loan originators,
franchisees and employees, as well as home buyers and
sellers. The Company has offered financial support to its
franchisees during this time, but the Company is unable to estimate
the effectiveness of that support or the ultimate effect of such
support on its results of operations and financial condition.
The duration and magnitude of the impact from the COVID-19 pandemic
depends on future developments that cannot be predicted at this
time. The Company has already experienced significant disruption to
its business as a result of the COVID-19 pandemic and such
disruptions may continue, particularly if ongoing mitigation
actions by government authorities remain in place for a significant
amount of time. Notwithstanding any mitigation actions the
Company has initiated and expects to continue as the crisis is
ongoing, sustained material revenue declines relating to this
crisis could impact the Company's financial condition, results of
operations, stock price and ability to access the capital
markets. Other important 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, and
(8) fluctuations in foreign currency exchange rates, 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
March 31,
|
|
|
|
2020
|
|
2019
|
Revenue:
|
|
|
|
|
|
|
|
Continuing franchise
fees
|
|
|
$
|
24,143
|
|
$
|
24,956
|
Annual dues
|
|
|
|
8,921
|
|
|
8,854
|
Broker fees
|
|
|
|
9,444
|
|
|
8,588
|
Marketing Funds
fees
|
|
|
|
17,522
|
|
|
18,772
|
Franchise sales and
other revenue
|
|
|
|
10,242
|
|
|
10,008
|
Total
revenue
|
|
|
|
70,272
|
|
|
71,178
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, operating and
administrative expenses
|
|
|
|
34,677
|
|
|
33,903
|
Marketing Funds
expenses
|
|
|
|
17,522
|
|
|
18,772
|
Depreciation and
amortization
|
|
|
|
6,310
|
|
|
5,558
|
Total operating
expenses
|
|
|
|
58,509
|
|
|
58,233
|
Operating
income
|
|
|
|
11,763
|
|
|
12,945
|
Other expenses,
net:
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
|
(2,682)
|
|
|
(3,155)
|
Interest
income
|
|
|
|
269
|
|
|
320
|
Foreign currency
transaction gains (losses)
|
|
|
|
(270)
|
|
|
55
|
Total other expenses,
net
|
|
|
|
(2,683)
|
|
|
(2,780)
|
Income before
provision for income taxes
|
|
|
|
9,080
|
|
|
10,165
|
Provision for income
taxes
|
|
|
|
(3,790)
|
|
|
(1,908)
|
Net income
|
|
|
|
5,290
|
|
|
8,257
|
Less: net income
attributable to non-controlling interest
|
|
|
|
2,659
|
|
|
3,848
|
Net income
attributable to RE/MAX Holdings, Inc.
|
|
|
$
|
2,631
|
|
$
|
4,409
|
|
|
|
|
|
|
|
|
Net income
attributable to RE/MAX Holdings, Inc. per share of Class A common
stock
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.15
|
|
$
|
0.25
|
Diluted
|
|
|
$
|
0.15
|
|
$
|
0.25
|
Weighted average
shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
Basic
|
|
|
|
17,974,264
|
|
|
17,775,381
|
Diluted
|
|
|
|
18,033,631
|
|
|
17,817,620
|
Cash dividends
declared per share of Class A common stock
|
|
|
$
|
0.22
|
|
$
|
0.21
|
TABLE
2
|
RE/MAX Holdings,
Inc.
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
thousands, except share and per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
80,905
|
|
$
|
83,001
|
Restricted
cash
|
|
|
24,195
|
|
|
20,600
|
Accounts and notes
receivable, current portion, less allowances of $14,879 and
$12,538, respectively
|
|
|
27,289
|
|
|
28,644
|
Income taxes
receivable
|
|
|
1,576
|
|
|
896
|
Other current
assets
|
|
|
10,810
|
|
|
9,638
|
Total current
assets
|
|
|
144,775
|
|
|
142,779
|
Property and
equipment, net of accumulated depreciation of $15,402 and $14,940,
respectively
|
|
|
5,724
|
|
|
5,444
|
Operating lease right
of use assets
|
|
|
49,949
|
|
|
51,129
|
Franchise agreements,
net
|
|
|
83,801
|
|
|
87,670
|
Other intangible
assets, net
|
|
|
29,554
|
|
|
32,315
|
Goodwill
|
|
|
161,698
|
|
|
159,038
|
Deferred tax assets,
net
|
|
|
49,251
|
|
|
52,595
|
Income taxes
receivable, net of current portion
|
|
|
1,690
|
|
|
1,690
|
Other assets, net of
current portion
|
|
|
11,220
|
|
|
9,692
|
Total
assets
|
|
$
|
537,662
|
|
$
|
542,352
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
6,466
|
|
$
|
2,983
|
Accrued
liabilities
|
|
|
52,343
|
|
|
60,163
|
Income taxes
payable
|
|
|
7,918
|
|
|
6,854
|
Deferred
revenue
|
|
|
25,473
|
|
|
25,663
|
Current portion of
debt
|
|
|
2,628
|
|
|
2,648
|
Current portion of
payable pursuant to tax receivable agreements
|
|
|
3,583
|
|
|
3,583
|
Operating lease
liabilities
|
|
|
5,232
|
|
|
5,102
|
Total current
liabilities
|
|
|
103,643
|
|
|
106,996
|
Debt, net of current
portion
|
|
|
222,522
|
|
|
223,033
|
Payable pursuant to
tax receivable agreements, net of current portion
|
|
|
33,140
|
|
|
33,640
|
Deferred tax
liabilities, net
|
|
|
542
|
|
|
293
|
Income taxes payable,
net of current portion
|
|
|
—
|
|
|
—
|
Deferred revenue, net
of current portion
|
|
|
18,495
|
|
|
18,763
|
Operating lease
liabilities, net of current portion
|
|
|
54,598
|
|
|
55,959
|
Other liabilities,
net of current portion
|
|
|
4,644
|
|
|
5,292
|
Total
liabilities
|
|
|
437,584
|
|
|
443,976
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Class A common stock,
par value $.0001 per share, 180,000,000 shares authorized;
18,123,963 and 17,838,233 shares issued and outstanding as of
March 31, 2020 and December 31, 2019,
respectively
|
|
|
2
|
|
|
2
|
Class B common stock,
par value $.0001 per share, 1,000 shares authorized; 1 share issued
and outstanding as of March 31, 2020 and
December 31, 2019
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
470,639
|
|
|
466,945
|
Retained
earnings
|
|
|
28,881
|
|
|
30,525
|
Accumulated other
comprehensive income, net of tax
|
|
|
378
|
|
|
414
|
Total stockholders'
equity attributable to RE/MAX Holdings, Inc.
|
|
|
499,900
|
|
|
497,886
|
Non-controlling
interest
|
|
|
(399,822)
|
|
|
(399,510)
|
Total stockholders'
equity
|
|
|
100,078
|
|
|
98,376
|
Total liabilities
and stockholders' equity
|
|
$
|
537,662
|
|
$
|
542,352
|
TABLE
3
|
RE/MAX Holdings,
Inc.
|
Condensed
Consolidated Statements of Cash Flow
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
5,290
|
|
$
|
8,257
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
6,310
|
|
|
5,558
|
Bad debt
expense
|
|
|
3,435
|
|
|
1,439
|
Equity-based
compensation expense
|
|
|
2,186
|
|
|
4,051
|
Deferred income tax
expense
|
|
|
2,241
|
|
|
1,081
|
Fair value adjustments
to contingent consideration
|
|
|
(505)
|
|
|
(70)
|
Other, net
|
|
|
(504)
|
|
|
651
|
Changes in operating
assets and liabilities
|
|
|
(4,804)
|
|
|
1,474
|
Net cash provided by
operating activities
|
|
|
13,649
|
|
|
22,441
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchases of property,
equipment and capitalization of software
|
|
|
(1,965)
|
|
|
(3,940)
|
Restricted cash
acquired with the Marketing Funds acquisition
|
|
|
—
|
|
|
28,495
|
Other
|
|
|
—
|
|
|
(1,200)
|
Net cash (used in)
provided by investing activities
|
|
|
(1,965)
|
|
|
23,355
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Payments on
debt
|
|
|
(660)
|
|
|
(653)
|
Distributions paid to
non-controlling unitholders
|
|
|
(2,777)
|
|
|
(2,693)
|
Dividends and dividend
equivalents paid to Class A common stockholders
|
|
|
(4,275)
|
|
|
(3,782)
|
Payments related to
tax withholding for share-based compensation
|
|
|
(2,268)
|
|
|
(713)
|
Net cash used in
financing activities
|
|
|
(9,980)
|
|
|
(7,841)
|
Effect of exchange
rate changes on cash
|
|
|
(205)
|
|
|
69
|
Net increase in cash,
cash equivalents and restricted cash
|
|
|
1,499
|
|
|
38,024
|
Cash, cash
equivalents and restricted cash, beginning of year
|
|
|
103,601
|
|
|
59,974
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
105,100
|
|
$
|
97,998
|
TABLE
4
|
RE/MAX Holdings,
Inc.
|
Agent
Count
|
(Unaudited)
|
|
|
|
|
|
As
of
|
|
|
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
|
Agent
Count:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
Regions
|
|
|
48,840
|
|
49,267
|
|
48,576
|
|
48,748
|
|
48,904
|
|
49,318
|
|
50,342
|
|
50,432
|
|
Independent
Regions
|
|
|
13,828
|
|
13,854
|
|
13,972
|
|
13,952
|
|
13,760
|
|
13,804
|
|
13,948
|
|
14,063
|
|
U.S.
Total
|
|
|
62,668
|
|
63,121
|
|
62,548
|
|
62,700
|
|
62,664
|
|
63,122
|
|
64,290
|
|
64,495
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
Regions
|
|
|
6,217
|
|
6,338
|
|
6,402
|
|
6,510
|
|
6,549
|
|
6,702
|
|
6,858
|
|
6,915
|
|
Independent
Regions
|
|
|
15,306
|
|
15,229
|
|
15,117
|
|
14,923
|
|
14,818
|
|
14,625
|
|
14,550
|
|
14,451
|
|
Canada
Total
|
|
|
21,523
|
|
21,567
|
|
21,519
|
|
21,433
|
|
21,367
|
|
21,327
|
|
21,408
|
|
21,366
|
|
U.S. and Canada
Total
|
|
|
84,191
|
|
84,688
|
|
84,067
|
|
84,133
|
|
84,031
|
|
84,449
|
|
85,698
|
|
85,861
|
|
Outside U.S. and
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent
Regions
|
|
|
47,625
|
|
46,201
|
|
44,191
|
|
42,887
|
|
41,501
|
|
39,831
|
|
38,207
|
|
37,221
|
|
Outside U.S. and Canada
Total
|
|
|
47,625
|
|
46,201
|
|
44,191
|
|
42,887
|
|
41,501
|
|
39,831
|
|
38,207
|
|
37,221
|
|
Total
|
|
|
131,816
|
|
130,889
|
|
128,258
|
|
127,020
|
|
125,532
|
|
124,280
|
|
123,905
|
|
123,082
|
|
TABLE
5
|
RE/MAX Holdings,
Inc.
|
Adjusted EBITDA
Reconciliation to Net Income
|
(Amounts in
thousands, except percentages)
|
(Unaudited)
|
|
|
|
|
Three Months
Ended
|
|
|
|
March
31,
|
|
(Amounts in
000s)
|
|
2020
|
|
2019
|
|
Net
income
|
|
$
|
5,290
|
|
$
|
8,257
|
|
Depreciation and
amortization
|
|
|
6,310
|
|
|
5,558
|
|
Interest
expense
|
|
|
2,682
|
|
|
3,155
|
|
Interest
income
|
|
|
(269)
|
|
|
(320)
|
|
Provision for income
taxes
|
|
|
3,790
|
|
|
1,908
|
|
EBITDA
|
|
|
17,803
|
|
|
18,558
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
(11)
|
|
|
379
|
|
Equity-based
compensation expense
|
|
|
2,186
|
|
|
4,051
|
|
Acquisition-related
expense (1)
|
|
|
566
|
|
|
72
|
|
Gain on reduction in
tax receivable agreement liability
|
|
|
(500)
|
|
|
—
|
|
Fair value
adjustments to contingent consideration (2)
|
|
|
(505)
|
|
|
(70)
|
|
Adjusted EBITDA
(3)
|
|
$
|
19,539
|
|
$
|
22,990
|
|
Adjusted EBITDA
Margin (3)
|
|
|
27.8
|
%
|
|
32.3
|
%
|
|
|
|
|
(1)
|
Acquisition-related
expense includes legal, accounting, advisory and consulting fees
incurred in connection with the acquisition and integration of
acquired companies.
|
(2)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability.
|
(3)
|
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
|
|
|
|
March
31,
|
|
(Amounts in
000s)
|
|
2020
|
|
2019
|
|
Net
income
|
|
$
|
5,290
|
|
$
|
8,257
|
|
Amortization of
acquired intangible assets
|
|
|
4,849
|
|
|
4,465
|
|
Provision for income
taxes
|
|
|
3,790
|
|
|
1,908
|
|
Add-backs:
|
|
|
|
|
|
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
(11)
|
|
|
379
|
|
Equity-based
compensation expense
|
|
|
2,186
|
|
|
4,051
|
|
Acquisition-related
expense (1)
|
|
|
566
|
|
|
72
|
|
Gain on reduction in
tax receivable agreement liability
|
|
|
(500)
|
|
|
—
|
|
Fair value
adjustments to contingent consideration (2)
|
|
|
(505)
|
|
|
(70)
|
|
Adjusted pre-tax net
income
|
|
|
15,665
|
|
|
19,062
|
|
Less: Provision for
income taxes at 24% (3)
|
|
|
(3,760)
|
|
|
(4,575)
|
|
Adjusted net
income (4)
|
|
$
|
11,905
|
|
$
|
14,487
|
|
|
|
|
|
|
|
|
|
Total basic pro forma
shares outstanding
|
|
|
30,533,864
|
|
|
30,334,981
|
|
Total diluted pro
forma shares outstanding
|
|
|
30,593,231
|
|
|
30,377,220
|
|
|
|
|
|
|
|
|
|
Adjusted net
income basic earnings per share
(4)
|
|
$
|
0.39
|
|
$
|
0.48
|
|
Adjusted net
income diluted earnings per share
(4)
|
|
$
|
0.39
|
|
$
|
0.48
|
|
|
|
|
|
(1)
|
Acquisition-related
expense includes legal, accounting, advisory and consulting fees
incurred in connection with the acquisition and integration of
acquired companies.
|
(2)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability.
|
(3)
|
24% is the combined
federal and state statutory rate and is an estimate of our
long-term tax rate assuming the full exchange of all outstanding
non-controlling interests for Class A common stock. It excludes the
impacts of (a) our partnership structure, (b) unusual,
non-recurring tax matters, such as the conversion of First to an
LLC, and (c) lower income for 2020 due to the pandemic, which is
causing distorted impacts to differences between tax and GAAP
accounting, and causing certain foreign taxes to be nondeductible
in 2020 when they otherwise have been and we expect will be again
in the future.
|
(4)
|
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
|
|
|
|
March
31,
|
|
|
|
2020
|
|
2019
|
|
Total basic
weighted average shares outstanding:
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
17,974,264
|
|
17,775,381
|
|
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
|
|
Total basic pro forma
weighted average shares outstanding
|
|
30,533,864
|
|
30,334,981
|
|
|
|
|
|
|
|
Total diluted
weighted average shares outstanding:
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
17,974,264
|
|
17,775,381
|
|
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
|
|
Dilutive effect of
unvested restricted stock units (1)
|
|
59,367
|
|
42,239
|
|
Total diluted pro
forma weighted average shares outstanding
|
|
30,593,231
|
|
30,377,220
|
|
|
|
|
(1)
|
In accordance with
the treasury stock method.
|
TABLE
8
|
RE/MAX Holdings,
Inc.
|
Free Cash Flow
& Unencumbered Cash
|
(Unaudited)
|
|
|
|
Three months
ended
|
|
March
31,
|
|
2020
|
|
2019
|
Cash flow from
operations
|
$
|
13,649
|
|
$
|
22,441
|
Less: Purchases of
property, equipment and capitalization of software
|
|
(1,965)
|
|
|
(3,940)
|
Increases in
restricted cash of the Marketing Funds (1)
|
|
(3,595)
|
|
|
(4,732)
|
Free cash flow
(2)
|
|
8,089
|
|
|
13,769
|
|
|
|
|
|
|
Free cash
flow
|
|
8,089
|
|
|
13,769
|
Less: Tax/Other
non-dividend distributions to RIHI
|
|
(14)
|
|
|
(55)
|
Free cash flow
after tax/non-dividend distributions to RIHI
(2)
|
|
8,075
|
|
|
13,714
|
|
|
|
|
|
|
Free cash flow after
tax/non-dividend distributions to RIHI
|
|
8,075
|
|
|
13,714
|
Less: Debt principal
payments
|
|
(660)
|
|
|
(653)
|
Unencumbered cash
generated (2)
|
$
|
7,415
|
|
$
|
13,061
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
Cash flow from
operations
|
$
|
13,649
|
|
$
|
22,441
|
Free cash flow
(2)
|
$
|
8,089
|
|
$
|
13,769
|
Free cash flow after
tax/non-dividend distributions to RIHI (2)
|
$
|
8,075
|
|
$
|
13,714
|
Unencumbered cash
generated (2)
|
$
|
7,415
|
|
$
|
13,061
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
19,539
|
|
$
|
22,990
|
Free cash flow as %
of Adjusted EBITDA (2)
|
|
41.4%
|
|
|
59.9%
|
Free cash flow less
distributions to RIHI as % of Adjusted EBITDA
(2)
|
|
41.3%
|
|
|
59.7%
|
Unencumbered cash
generated as % of Adjusted EBITDA (2)
|
|
37.9%
|
|
|
56.8%
|
|
|
|
|
(1)
|
This line reflects
any subsequent changes in the restricted cash balance (which under
GAAP reflects as either (a) an increase or 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.
|
(2)
|
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, 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.
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, 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.