DENVER, Nov. 5, 2020 /PRNewswire/ --
Third Quarter 2020 Highlights
(Compared to third
quarter 2019 unless otherwise noted)
- Total agent count increased 5.1% to 134,769 agents
- U.S. and Canada combined agent
count decreased 0.3% to 83,802 agents
- Total open Motto Mortgage franchises increased 27.9% to 133
offices1
- Total Revenue of $71.1 million;
Revenue excluding the Marketing Funds increased 0.5% to
$53.8 million
- Net income attributable to RE/MAX Holdings, Inc. of
$3.6 million and earnings per diluted
share (GAAP EPS) of $0.19
- Adjusted EBITDA2 of $30.3
million, Adjusted EBITDA margin2 of 42.7% and
Adjusted earnings per diluted share (Adjusted EPS2) of
$0.64
Operating Statistics as of October 31,
2020
(Compared to October
31, 2019 unless otherwise noted)
- Total agent count increased 5.9% to 136,222 agents
- U.S. and Canada combined agent
count decreased 133 agents to 84,113 agents
- Total open Motto Mortgage franchises increased 26.4% to 134
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"), the first national mortgage brokerage
franchise brand in the U.S., today announced operating results for
the quarter ended September 30,
2020.
"The continued execution of our strategy, coupled with the U.S.
housing market's remarkable run, drove our very encouraging results
for the third quarter," stated Adam
Contos, RE/MAX Holdings Chief Executive Officer. "RE/MAX
agent count in both the U.S. and Canada increased sequentially on a
month-to-month basis during the third quarter, particularly in
Company-owned regions, after stabilizing at the end of the second
quarter. Agent count outside the U.S. and Canada surpassed the 50,000 mark during the
quarter, and has now doubled in just five years. Many of our RE/MAX
agents and brokers are reporting their best years ever, and our
Motto Mortgage business also continues to show impressive growth,
as its franchise sales through the first nine months of 2020 nearly
matched the full-year total for 2019."
Contos continued, "The strategic acquisitions of wemlo and
Gadberry Group during the third quarter both tie directly into our
strategy of adding value for the RE/MAX and Motto Mortgage networks
while broadening and diversifying our revenue and growth
opportunities. These acquisitions benefit our memberships,
strengthen our technology and data core, and create promising
commercial possibilities beyond our networks."
Third Quarter 2020 Operating Results
Agent Count
The following table compares agent count as of September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September
30,
|
|
Change
|
|
|
|
|
|
2020
|
|
2019
|
|
#
|
|
%
|
U.S.
|
62,304
|
|
62,548
|
|
(244)
|
|
(0.4)
|
Canada
|
21,498
|
|
21,519
|
|
(21)
|
|
(0.1)
|
Subtotal
|
83,802
|
|
84,067
|
|
(265)
|
|
(0.3)
|
Outside the U.S.
& Canada
|
50,967
|
|
44,191
|
|
6,776
|
|
15.3
|
Total
|
134,769
|
|
128,258
|
|
6,511
|
|
5.1
|
Revenue
RE/MAX Holdings generated total revenue of $71.1 million in the third quarter of 2020, a
decrease of $0.5 million, or 0.7%,
compared to $71.5 million in the
third quarter of 2019. Total revenue decreased primarily due to
previously announced agent recruiting initiatives that reduced both
continuing franchise fees and Marketing Funds fees, largely offset
by increased broker fees stemming from higher existing home sales,
incremental revenue from acquisitions, and Motto growth. Recurring
revenue streams, which consist of continuing franchise fees and
annual dues, decreased $1.0 million
compared to the third quarter of 2019 and accounted for 61.3% of
revenue (excluding the Marketing Funds) in the third quarter of
2020, compared to 63.5% in the comparable period in 2019.
Operating Expenses
Total operating expenses were $60.3
million for the third quarter of 2020, an increase of
$12.2 million, or 25.3%, compared to
$48.1 million in the third quarter of
2019. Third quarter total operating expenses increased primarily
due to higher selling, operating and administrative expenses, a
non-cash impairment charge and increased depreciation and
amortization expenses, partially offset by lower Marketing Fund
expenses. Excluding the Marketing Funds from operating expenses,
third quarter 2020 operating expenses totaled $43.0 million, an increase of $12.9 million or 42.9% compared to $30.1 million in the third quarter of 2019.
Selling, operating and administrative expenses were $28.2 million in the third quarter of 2020, an
increase of $3.7 million, or 15.3%,
compared to the third quarter of 2019 and, excluding the Marketing
Funds, represented 52.5% of revenue, compared to 45.7% in the
prior-year period. Selling, operating and administrative expenses
increased primarily due to higher equity-based compensation
expense, increased personnel costs primarily from acquisitions, and
higher legal fees, partially offset by cost-savings measures
implemented in 2020, including a reduction in travel and events
spend as well as the elimination of the 2020 Company bonus plan and
the temporary suspension of the Company's 401(k) match.
During the third quarter of 2020, the Company recorded a
$7.9 million non-cash impairment
charge related to its plans to sublease certain floors of the
Company's corporate headquarters at market rates below the
Company's current lease rate.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $3.6 million for the third quarter of 2020, a
decrease of $5.6 million compared to
the third quarter of 2019. Reported basic and diluted GAAP EPS were
$0.20 and $0.19, respectively, for the third quarter of
2020 compared to $0.51 each in the
third quarter of 2019.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $30.3 million
for the third quarter of 2020, an increase of $2.2 million or 7.7% from the third quarter of
2019. Adjusted EBITDA increased primarily due to the Company's
cost-savings measures and Motto expansion, partially offset by
increased headcount primarily from the acquisitions of wemlo and
Gadberry Group. Adjusted EBITDA margin was 42.7% in the third
quarter of 2020 compared to 39.4% in the third quarter of 2019.
Adjusted basic and diluted EPS were $0.65 and $0.64,
respectively, for the third quarter of 2020 compared to adjusted
diluted and basic EPS of $0.61 for
the third quarter of 2019. The ownership structure used to
calculate Adjusted basic and diluted EPS for the quarter ended
September 30, 2020 assumes RE/MAX
Holdings owned 100% of RMCO, LLC ("RMCO"). The weighted average
ownership RE/MAX Holdings had in RMCO was 59.2% for the quarter
ended September 30, 2020.
Balance Sheet
As of September 30, 2020, the
Company had cash and cash equivalents of $89.1 million. The Company's cash and cash
equivalents increased $6.1 million
from December 31, 2019. As of
September 30, 2020, the Company had
$224.1 million of outstanding debt,
net of an unamortized debt discount and issuance costs, a decrease
of $1.6 million compared to
$225.7 million as of December 31, 2019.
Dividend
On November 4, 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 December 2, 2020, to shareholders of record at
the close of business on November 18,
2020.
Outlook
The Company's fourth quarter and full-year 2020 Outlook assumes
no further currency movements, acquisitions or divestitures.
For the fourth quarter of 2020, RE/MAX Holdings expects:
- Agent count to increase 4.25% to 5.25% over fourth quarter
2019;
- Revenue in a range of $69.0
million to $72.0 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 $20.0
million to $23.0 million.
For the full-year 2020, RE/MAX Holdings expects:
- Agent count to increase 4.25% to 5.25% over full-year
2019;
- Revenue in a range of $262.5
million to $265.5 million
(including revenue from the Marketing Funds in a range of
$64.0 million to $65.0 million), and
- Adjusted EBITDA in a range of $88.5
million to $91.5 million.
The effective U.S. GAAP tax rate attributable to RE/MAX Holdings
is estimated to be between 27% and 29% in 2020.
Webcast and Conference Call
The Company will host a conference call for interested parties
on Friday, November 6, 2020,
beginning at 8:30 a.m. Eastern Time.
Interested parties can access the conference call using the link
below:
http://www.directeventreg.com/registration/event/5458229
Interested parties can access a live webcast through the
Investor Relations section of the Company's website at
http://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:
1Total 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".
2Adjusted 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 135,000 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 125 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; the Company's
outlook for the fourth quarter and full year 2020; dividends;
non-GAAP financial measures; estimated effective tax rates for
2020; the Company's strategy of adding value for the RE/MAX and
Motto Mortgage networks while broadening and diversifying revenue
and growth opportunities; the wemlo and Gadberry Group acquisitions
benefit to the Company's memberships, technology and data core, and
their creation of promising commercial possibilities beyond the
Company's networks; housing and mortgage market conditions,
including statements about the momentum in the housing market;
recruiting efforts; 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 adapt to the
challenges presented by the COVID-19 pandemic; the Company's
financial and structural strength and ability to expand its value
proposition; the ability of the RE/MAX and Motto networks to find
opportunities to grow and build their businesses in this very
demanding time; and the local leadership demonstrated by
franchisees in both brands by bringing productive agents and loan
originators into the Company's networks and helping those
individuals get even better at what they do. 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 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. 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
|
(In thousands,
except share and per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing franchise
fees
|
|
$
|
24,339
|
|
$
|
25,168
|
|
$
|
65,220
|
|
$
|
75,018
|
Annual dues
|
|
|
8,638
|
|
|
8,835
|
|
|
26,304
|
|
|
26,508
|
Broker fees
|
|
|
15,457
|
|
|
13,292
|
|
|
35,327
|
|
|
35,339
|
Marketing Funds
fees
|
|
|
17,290
|
|
|
18,034
|
|
|
46,577
|
|
|
54,866
|
Franchise sales and
other revenue
|
|
|
5,349
|
|
|
6,212
|
|
|
20,124
|
|
|
22,369
|
Total
revenue
|
|
|
71,073
|
|
|
71,541
|
|
|
193,552
|
|
|
214,100
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, operating and
administrative expenses
|
|
|
28,216
|
|
|
24,468
|
|
|
88,241
|
|
|
84,081
|
Marketing Funds
expenses
|
|
|
17,290
|
|
|
18,034
|
|
|
46,577
|
|
|
54,866
|
Depreciation and
amortization
|
|
|
6,850
|
|
|
5,595
|
|
|
19,572
|
|
|
16,694
|
Impairment charge -
leased assets
|
|
|
7,902
|
|
|
—
|
|
|
7,902
|
|
|
—
|
Total operating
expenses
|
|
|
60,258
|
|
|
48,097
|
|
|
162,292
|
|
|
155,641
|
Operating
income
|
|
|
10,815
|
|
|
23,444
|
|
|
31,260
|
|
|
58,459
|
Other expenses,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(2,159)
|
|
|
(3,089)
|
|
|
(7,028)
|
|
|
(9,398)
|
Interest
income
|
|
|
25
|
|
|
412
|
|
|
328
|
|
|
1,074
|
Foreign currency
transaction gains (losses)
|
|
|
94
|
|
|
(50)
|
|
|
(75)
|
|
|
66
|
Total other expenses,
net
|
|
|
(2,040)
|
|
|
(2,727)
|
|
|
(6,775)
|
|
|
(8,258)
|
Income before
provision for income taxes
|
|
|
8,775
|
|
|
20,717
|
|
|
24,485
|
|
|
50,201
|
Provision for income
taxes
|
|
|
(2,051)
|
|
|
(3,453)
|
|
|
(6,547)
|
|
|
(8,547)
|
Net income
|
|
$
|
6,724
|
|
$
|
17,264
|
|
$
|
17,938
|
|
$
|
41,654
|
Less: net income
attributable to non-controlling interest
|
|
|
3,171
|
|
|
8,091
|
|
|
8,265
|
|
|
19,502
|
Net income
attributable to RE/MAX Holdings, Inc.
|
|
$
|
3,553
|
|
$
|
9,173
|
|
$
|
9,673
|
|
$
|
22,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to RE/MAX Holdings, Inc. per share of Class A common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.20
|
|
$
|
0.51
|
|
$
|
0.53
|
|
$
|
1.24
|
Diluted
|
|
$
|
0.19
|
|
$
|
0.51
|
|
$
|
0.53
|
|
$
|
1.24
|
Weighted average
shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
18,196,454
|
|
|
17,826,332
|
|
|
18,098,227
|
|
|
17,803,708
|
Diluted
|
|
|
18,368,051
|
|
|
17,840,158
|
|
|
18,182,856
|
|
|
17,830,942
|
Cash dividends
declared per share of Class A common stock
|
|
$
|
0.22
|
|
$
|
0.21
|
|
$
|
0.66
|
|
$
|
0.63
|
TABLE 2
RE/MAX Holdings,
Inc.
|
Condensed
Consolidated Balance Sheets
|
(In thousands,
except share and per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
89,135
|
|
$
|
83,001
|
Restricted
cash
|
|
|
15,635
|
|
|
20,600
|
Accounts and notes
receivable, current portion, less allowances of $14,614 and
$12,538, respectively
|
|
|
30,003
|
|
|
28,644
|
Income taxes
receivable
|
|
|
718
|
|
|
896
|
Other current
assets
|
|
|
12,484
|
|
|
9,638
|
Total current
assets
|
|
|
147,975
|
|
|
142,779
|
Property and
equipment, net of accumulated depreciation of $16,408 and $14,940,
respectively
|
|
|
6,016
|
|
|
5,444
|
Operating lease right
of use assets
|
|
|
39,937
|
|
|
51,129
|
Franchise agreements,
net
|
|
|
76,065
|
|
|
87,670
|
Other intangible
assets, net
|
|
|
31,424
|
|
|
32,315
|
Goodwill
|
|
|
176,302
|
|
|
159,038
|
Deferred tax assets,
net
|
|
|
49,377
|
|
|
52,595
|
Income taxes
receivable, net of current portion
|
|
|
1,690
|
|
|
1,690
|
Other assets, net of
current portion
|
|
|
14,535
|
|
|
9,692
|
Total
assets
|
|
$
|
543,321
|
|
$
|
542,352
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
5,727
|
|
$
|
2,983
|
Accrued
liabilities
|
|
|
52,073
|
|
|
60,163
|
Income taxes
payable
|
|
|
7,249
|
|
|
6,854
|
Deferred
revenue
|
|
|
23,147
|
|
|
25,663
|
Current portion of
debt
|
|
|
2,489
|
|
|
2,648
|
Current portion of
payable pursuant to tax receivable agreements
|
|
|
6,478
|
|
|
3,583
|
Operating lease
liabilities
|
|
|
5,553
|
|
|
5,102
|
Total current
liabilities
|
|
|
102,716
|
|
|
106,996
|
Debt, net of current
portion
|
|
|
221,594
|
|
|
223,033
|
Payable pursuant to
tax receivable agreements, net of current portion
|
|
|
30,745
|
|
|
33,640
|
Deferred tax
liabilities, net
|
|
|
1,000
|
|
|
293
|
Deferred revenue, net
of current portion
|
|
|
17,931
|
|
|
18,763
|
Operating lease
liabilities, net of current portion
|
|
|
51,750
|
|
|
55,959
|
Other liabilities,
net of current portion
|
|
|
5,408
|
|
|
5,292
|
Total
liabilities
|
|
|
431,144
|
|
|
443,976
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Class A common stock,
par value $.0001 per share, 180,000,000 shares authorized;
18,372,134 and 17,838,233 shares issued and outstanding as of
September 30, 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 September 30, 2020 and
December 31, 2019
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
485,664
|
|
|
466,945
|
Retained
earnings
|
|
|
27,951
|
|
|
30,525
|
Accumulated other
comprehensive income, net of tax
|
|
|
476
|
|
|
414
|
Total stockholders'
equity attributable to RE/MAX Holdings, Inc.
|
|
|
514,093
|
|
|
497,886
|
Non-controlling
interest
|
|
|
(401,916)
|
|
|
(399,510)
|
Total stockholders'
equity
|
|
|
112,177
|
|
|
98,376
|
Total liabilities
and stockholders' equity
|
|
$
|
543,321
|
|
$
|
542,352
|
TABLE 3
RE/MAX Holdings,
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
17,938
|
|
$
|
41,654
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
19,572
|
|
|
16,694
|
Impairment charge -
leased assets
|
|
|
7,902
|
|
|
—
|
Bad debt
expense
|
|
|
4,024
|
|
|
3,420
|
Equity-based
compensation expense
|
|
|
8,347
|
|
|
4,860
|
Deferred income tax
expense
|
|
|
1,889
|
|
|
3,630
|
Fair value adjustments
to contingent consideration
|
|
|
(105)
|
|
|
330
|
Other, net
|
|
|
209
|
|
|
1,193
|
Changes in operating
assets and liabilities
|
|
|
(16,305)
|
|
|
(16,594)
|
Net cash provided by
operating activities
|
|
|
43,471
|
|
|
55,187
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchases of property,
equipment and capitalization of software
|
|
|
(4,575)
|
|
|
(10,093)
|
Acquisitions, net of
cash acquired
|
|
|
(10,627)
|
|
|
—
|
Restricted cash
acquired with the Marketing Funds acquisition
|
|
|
—
|
|
|
28,495
|
Other
|
|
|
—
|
|
|
(1,200)
|
Net cash (used in)
provided by investing activities
|
|
|
(15,202)
|
|
|
17,202
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Payments on
debt
|
|
|
(1,986)
|
|
|
(1,964)
|
Distributions paid to
non-controlling unitholders
|
|
|
(10,566)
|
|
|
(11,460)
|
Dividends and dividend
equivalents paid to Class A common stockholders
|
|
|
(12,250)
|
|
|
(11,298)
|
Payments related to
tax withholding for share-based compensation
|
|
|
(2,268)
|
|
|
(836)
|
Net cash used in
financing activities
|
|
|
(27,070)
|
|
|
(25,558)
|
Effect of exchange
rate changes on cash
|
|
|
(30)
|
|
|
76
|
Net increase in cash,
cash equivalents and restricted cash
|
|
|
1,169
|
|
|
46,907
|
Cash, cash
equivalents and restricted cash, beginning of year
|
|
|
103,601
|
|
|
59,974
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
104,770
|
|
$
|
106,881
|
TABLE 4
RE/MAX Holdings,
Inc.
|
Agent
Count
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
December 31,
|
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
Agent
Count:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
Regions
|
|
48,263
|
|
47,886
|
|
48,840
|
|
49,267
|
|
48,576
|
|
48,748
|
|
48,904
|
|
49,318
|
Independent
Regions
|
|
14,041
|
|
13,791
|
|
13,828
|
|
13,854
|
|
13,972
|
|
13,952
|
|
13,760
|
|
13,804
|
U.S.
Total
|
|
62,304
|
|
61,677
|
|
62,668
|
|
63,121
|
|
62,548
|
|
62,700
|
|
62,664
|
|
63,122
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
Regions
|
|
6,135
|
|
6,102
|
|
6,217
|
|
6,338
|
|
6,402
|
|
6,510
|
|
6,549
|
|
6,702
|
Independent
Regions
|
|
15,363
|
|
15,193
|
|
15,306
|
|
15,229
|
|
15,117
|
|
14,923
|
|
14,818
|
|
14,625
|
Canada
Total
|
|
21,498
|
|
21,295
|
|
21,523
|
|
21,567
|
|
21,519
|
|
21,433
|
|
21,367
|
|
21,327
|
U.S. and Canada
Total
|
|
83,802
|
|
82,972
|
|
84,191
|
|
84,688
|
|
84,067
|
|
84,133
|
|
84,031
|
|
84,449
|
Outside U.S. and
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent
Regions
|
|
50,967
|
|
48,933
|
|
47,625
|
|
46,201
|
|
44,191
|
|
42,887
|
|
41,501
|
|
39,831
|
Outside U.S. and Canada
Total
|
|
50,967
|
|
48,933
|
|
47,625
|
|
46,201
|
|
44,191
|
|
42,887
|
|
41,501
|
|
39,831
|
Total
|
|
134,769
|
|
131,905
|
|
131,816
|
|
130,889
|
|
128,258
|
|
127,020
|
|
125,532
|
|
124,280
|
TABLE 5
RE/MAX Holdings,
Inc.
|
Adjusted EBITDA
Reconciliation to Net Income
|
(In thousands,
except percentages)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(Amounts in
000s)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net
income
|
|
$
|
6,724
|
|
$
|
17,264
|
|
$
|
17,938
|
|
$
|
41,654
|
|
Depreciation and
amortization
|
|
|
6,850
|
|
|
5,595
|
|
|
19,572
|
|
|
16,694
|
|
Interest
expense
|
|
|
2,159
|
|
|
3,089
|
|
|
7,028
|
|
|
9,398
|
|
Interest
income
|
|
|
(25)
|
|
|
(412)
|
|
|
(328)
|
|
|
(1,074)
|
|
Provision for income
taxes
|
|
|
2,051
|
|
|
3,453
|
|
|
6,547
|
|
|
8,547
|
|
EBITDA
|
|
|
17,759
|
|
|
28,989
|
|
|
50,757
|
|
|
75,219
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
(11)
|
|
|
(10)
|
|
|
(33)
|
|
|
353
|
|
Impairment charge -
leased assets (1)
|
|
|
7,902
|
|
|
—
|
|
|
7,902
|
|
|
—
|
|
Equity-based
compensation expense
|
|
|
3,414
|
|
|
(987)
|
|
|
8,347
|
|
|
4,860
|
|
Acquisition-related
expense (2)
|
|
|
1,021
|
|
|
181
|
|
|
1,915
|
|
|
268
|
|
Fair value
adjustments to contingent consideration (3)
|
|
|
250
|
|
|
(15)
|
|
|
(105)
|
|
|
330
|
|
Adjusted EBITDA
(4)
|
|
$
|
30,335
|
|
$
|
28,158
|
|
$
|
68,783
|
|
$
|
81,030
|
|
Adjusted EBITDA
Margin (4)
|
|
|
42.7
|
%
|
|
39.4
|
%
|
|
35.5
|
%
|
|
37.8
|
%
|
_______________
|
(1)
|
Represents the
impairment recognized on a portion of our 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)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability.
|
(4)
|
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
|
(In thousands,
except share and per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
|
|
September 30,
|
(Amounts in
000s)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net
income
|
|
$
|
6,724
|
|
$
|
17,264
|
|
$
|
17,938
|
|
$
|
41,654
|
Amortization of
acquired intangible assets
|
|
|
4,851
|
|
|
4,459
|
|
|
14,549
|
|
|
13,390
|
Provision for income
taxes
|
|
|
2,051
|
|
|
3,453
|
|
|
6,547
|
|
|
8,547
|
Add-backs:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
(11)
|
|
|
(10)
|
|
|
(33)
|
|
|
353
|
Impairment charge -
leased assets (1)
|
|
|
7,902
|
|
|
—
|
|
|
7,902
|
|
|
—
|
Equity-based
compensation expense
|
|
|
3,414
|
|
|
(987)
|
|
|
8,347
|
|
|
4,860
|
Acquisition-related
expense (2)
|
|
|
1,021
|
|
|
181
|
|
|
1,915
|
|
|
268
|
Fair value
adjustments to contingent consideration (3)
|
|
|
250
|
|
|
(15)
|
|
|
(105)
|
|
|
330
|
Adjusted pre-tax net
income
|
|
|
26,202
|
|
|
24,345
|
|
|
57,060
|
|
|
69,402
|
Less: Provision for
income taxes at 24% (4)
|
|
|
(6,288)
|
|
|
(5,843)
|
|
|
(13,694)
|
|
|
(16,656)
|
Adjusted net
income (4)
|
|
$
|
19,914
|
|
$
|
18,502
|
|
$
|
43,366
|
|
$
|
52,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic pro forma
shares outstanding
|
|
|
30,756,054
|
|
|
30,385,932
|
|
|
30,657,827
|
|
|
30,363,308
|
Total diluted pro
forma shares outstanding
|
|
|
30,927,651
|
|
|
30,399,758
|
|
|
30,742,456
|
|
|
30,390,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income basic earnings per share
(5)
|
|
$
|
0.65
|
|
$
|
0.61
|
|
$
|
1.41
|
|
$
|
1.74
|
Adjusted net
income diluted earnings per share
(5)
|
|
$
|
0.64
|
|
$
|
0.61
|
|
$
|
1.41
|
|
$
|
1.74
|
_______________
|
(1)
|
Represents the
impairment recognized on a portion of our 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)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the contingent
consideration liability.
|
(4)
|
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.
|
(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
|
|
Nine Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Total basic
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
18,196,454
|
|
17,826,332
|
|
18,098,227
|
|
17,803,708
|
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
|
|
30,756,054
|
|
30,385,932
|
|
30,657,827
|
|
30,363,308
|
|
|
|
|
|
|
|
|
|
Total diluted
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
18,196,454
|
|
17,826,332
|
|
18,098,227
|
|
17,803,708
|
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)
|
|
171,597
|
|
13,826
|
|
84,629
|
|
27,234
|
Total diluted pro
forma weighted average shares outstanding
|
|
30,927,651
|
|
30,399,758
|
|
30,742,456
|
|
30,390,542
|
_______________
|
(1)
|
In accordance with
the treasury stock method.
|
TABLE 8
RE/MAX Holdings,
Inc.
|
Free Cash Flow
& Unencumbered Cash
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Nine months
ended
|
|
|
September 30,
|
|
|
2020
|
|
2019
|
Cash flow from
operations
|
|
$
|
43,471
|
|
$
|
55,187
|
Less: Purchases of
property, equipment and capitalization of software
|
|
|
(4,575)
|
|
|
(10,093)
|
Decreases in
restricted cash of the Marketing Funds (1)
|
|
|
4,965
|
|
|
9,377
|
Free cash flow
(2)
|
|
|
43,861
|
|
|
54,471
|
|
|
|
|
|
|
|
Free cash
flow
|
|
|
43,861
|
|
|
54,471
|
Less: Tax/Other
non-dividend distributions to RIHI
|
|
|
(2,277)
|
|
|
(3,547)
|
Free cash flow
after tax/non-dividend distributions to RIHI
(2)
|
|
|
41,584
|
|
|
50,924
|
|
|
|
|
|
|
|
Free cash flow after
tax/non-dividend distributions to RIHI
|
|
|
41,584
|
|
|
50,924
|
Less: Debt principal
payments
|
|
|
(1,986)
|
|
|
(1,964)
|
Unencumbered cash
generated (2)
|
|
$
|
39,598
|
|
$
|
48,960
|
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
|
Cash flow from
operations
|
|
$
|
43,471
|
|
$
|
55,187
|
Free cash flow
(2)
|
|
$
|
43,861
|
|
$
|
54,471
|
Free cash flow after
tax/non-dividend distributions to RIHI (2)
|
|
$
|
41,584
|
|
$
|
50,924
|
Unencumbered cash
generated (2)
|
|
$
|
39,598
|
|
$
|
48,960
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
|
68,783
|
|
$
|
81,030
|
Free cash flow as %
of Adjusted EBITDA (2)
|
|
|
63.8%
|
|
|
67.2%
|
Free cash flow less
distributions to RIHI as % of Adjusted EBITDA
(2)
|
|
|
60.5%
|
|
|
62.8%
|
Unencumbered cash
generated as % of Adjusted EBITDA (2)
|
|
|
57.6%
|
|
|
60.4%
|
_______________
|
(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, impairment charge on leased assets,
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.
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, impairment charge on leased
assets, 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.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/remax-holdings-inc-reports-third-quarter-2020-results-301167284.html
SOURCE RE/MAX Holdings, Inc.