DENVER, Nov. 22, 2021 /PRNewswire/ --
Preliminary Third Quarter 2021 Highlights
(Compared
to third quarter 2020 unless otherwise noted)
- Total Revenue increased 28.0% to $91.0
million
- Revenue excluding the Marketing Funds increased 25.9% to
$67.7 million, and was comprised of
6.9% organic growth1, 18.3% growth from acquisitions and
0.7% growth from foreign currency movements
- Net loss attributable to RE/MAX Holdings, Inc. of $25.1 million and loss per diluted share (GAAP
EPS) of $1.34
- Adjusted EBITDA2 of $35.0
million, Adjusted EBITDA margin2 of 38.4% and
Adjusted earnings per diluted share (Adjusted EPS2) of
$0.71
- Total agent count increased 4.6% to 140,936 agents
- U.S. and Canada combined agent
count increased 2.2% to 85,656 agents
- Total open Motto Mortgage franchises increased 32.3% to 176
offices3
Operating Statistics as of October 31,
2021
(Compared to October
31, 2020 unless otherwise noted)
- Total agent count increased 3.8% to 141,399 agents
- U.S. and Canada combined agent
count increased 1.9% to 85,746 agents
- Total open Motto Mortgage franchises increased 32.8% to 178
offices3
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 preliminary operating
results for the third quarter ended September 30, 2021.
"We achieved record third quarter revenue, Adjusted EBITDA and
Adjusted EPS driven by contributions from the largest Independent
Region acquisition in our history, broad-based performance in our
core operations, and a healthy housing market," said Adam Contos, RE/MAX Holdings Chief Executive
Officer. "Our performance reaffirmed that the investments we've
made in recent years have significantly diversified and expanded
our revenue and growth opportunities. Organic revenue growth
excluding the Marketing Funds also was strong, up nearly 7% in the
third quarter, with much of the incremental revenue translating
into profit.
"Our two primary brands are vibrant and growing. The July
acquisition of RE/MAX INTEGRA's North American operations performed
better than expected during the quarter and brought nearly 20,000
agents into our company-owned regions and overall, the RE/MAX
network has grown by more than 6,000 agents year over year. Our
Motto Mortgage footprint continues to increase as well, with
healthy franchise sales and a year-over-year increase in open
offices of more than 30%.
"Given the strength of the third quarter, we are again
increasing our Adjusted EBITDA guidance for 2021, and we anticipate
finishing the year on a high note. Looking further ahead, we are
excited about our growth prospects in 2022 and beyond."
Preliminary Third Quarter 2021 Operating Results
Agent Count
The following table compares agent count as of September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
September 30,
|
|
Change
|
|
|
|
2021
|
|
2020
|
|
#
|
|
%
|
U.S.
|
|
|
62,007
|
|
62,304
|
|
(297)
|
|
(0.5)
|
Canada
|
|
|
23,649
|
|
21,498
|
|
2,151
|
|
10.0
|
Subtotal
|
|
|
85,656
|
|
83,802
|
|
1,854
|
|
2.2
|
Outside the U.S.
& Canada
|
|
|
55,280
|
|
50,967
|
|
4,313
|
|
8.5
|
Total
|
|
|
140,936
|
|
134,769
|
|
6,167
|
|
4.6
|
Preliminary Revenue
RE/MAX Holdings generated total revenue of $91.0 million in the third quarter of 2021, an
increase of $19.9 million, or 28.0%,
compared to $71.1 million in the
third quarter of 2020. Total revenue grew primarily due to
incremental revenue from the RE/MAX INTEGRA North American regions
acquisition, fewer agent recruiting initiatives versus the prior
year, increased broker fees stemming from rising home prices, price
increases and Motto growth. Recurring revenue streams, which
consist of continuing franchise fees and annual dues, increased
$8.5 million, or 25.6%, compared to
the third quarter of 2020 and accounted for 61.2% of revenue
(excluding the Marketing Funds) in the third quarter of 2021,
almost even with last year's 61.3%.
Preliminary Operating Expenses
Total operating expenses were $128.6
million for the third quarter of 2021, an increase of
$68.4 million, compared to
$60.1 million in the third quarter of
2020. Third quarter total operating expenses increased primarily
due to increased settlement and impairment charges and higher
selling, operating and administrative expenses. Third quarter 2021
settlement and impairment charges were higher primarily due to the
recognition of a $40.5 million loss
on the effective settlement of the pre-existing master franchise
contracts, which had royalty rates below the current market rate,
in conjunction with the acquisition of RE/MAX INTEGRA's North
American regions. The loss represents the difference between
previously contracted royalty rates and the current market rate.
Also, third quarter 2020 selling, operating and administrative
expenses were lower due to temporary COVID-19 costs savings
measures.
Selling, operating and administrative expenses were $51.1 million in the third quarter of 2021, an
increase of $22.9 million, or 81.1%,
compared to the third quarter of 2020 and represented 75.4% of
revenue, excluding the Marketing Funds, compared to 52.5% in the
prior-year period. Selling, operating and administrative expenses
increased primarily due to higher equity-based compensation expense
related to acquisitions and the portion of the corporate bonus paid
in stock; higher personnel costs from headcount increases largely
from acquisitions, and the elimination of the corporate bonus and
suspension of the 401(k) match in the prior year; an increase in
acquisition-related expenses; increased investments in technology;
and higher travel and events expenses compared to the prior year,
partially offset by lower bad debt expense driven by improved
collections.
Depreciation and amortization expenses increased primarily due
to incremental acquisition-related amortization expense and placing
internally developed software into service.
Preliminary Net Income and GAAP EPS
Net loss attributable to RE/MAX Holdings was $25.1 million for the third quarter of 2021
compared to net income of $3.6
million the third quarter of 2020. Reported basic and
diluted GAAP loss per share were each $1.34, respectively, for the third quarter of
2021 compared to basic and diluted GAAP EPS of $0.20 each in the third quarter of 2020.
The effective income tax rate decreased to (1.9)% from 23.1% for
the three months ended September 30, 2021 and 2020,
respectively, primarily driven by the $40.5
million loss on contract settlement that has no tax
provision.
Preliminary Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $35.0 million
for the third quarter of 2021, an increase of $4.6 million or 15.2% from the third quarter of
2020. Adjusted EBITDA in the third quarter of 2021 increased
principally due to contributions from the acquisition of RE/MAX
INTEGRA's North American regions, fewer agent recruiting
initiatives in the current year, and higher broker fees revenue.
Third quarter revenue increases were partially offset by higher
personnel costs from headcount increases and the elimination of the
corporate bonus and suspension of the 401(k) match in the prior
year. Adjusted EBITDA margin was 38.4% in the third quarter of
2021, down compared to 42.7% in the third quarter of 2020.
Adjusted basic and diluted EPS were each $0.71 for the third quarter of 2021 compared to
Adjusted basic and diluted EPS of $0.65 and $0.64,
respectively, for the third quarter of 2020. The ownership
structure used to calculate Adjusted basic and diluted EPS for the
quarter ended September 30, 2021
assumes RE/MAX Holdings owned 100% of RMCO, LLC ("RMCO"). The
weighted average ownership RE/MAX Holdings had in RMCO was 59.8%
for the quarter ended September 30,
2021.
Preliminary Balance Sheet
As of September 30, 2021, the
Company had cash and cash equivalents of $119.4 million, an increase of $18.1 million from December 31, 2020. As of September 30, 2021, the Company had $453.0 million of outstanding debt, net of an
unamortized debt discount and issuance costs, compared to
$223.6 million as of December 31, 2020.
On July 21, 2021, RE/MAX Holdings
announced RE/MAX, LLC amended and restated its Credit Agreement to
raise $460 million in term loans and
increase the capacity of the revolving facility to $50 million. RE/MAX, LLC used the proceeds from
the amended Credit Agreement to repay existing indebtedness of
approximately $224 million and to
fund the $235 million acquisition of
the RE/MAX INTEGRA North American regions.
Immaterial Corrections to Prior Period Financial
Statements
During the third quarter of 2021, in analyzing the purchase
accounting with respect to the RE/MAX INTEGRA North American
regions acquisition, the Company determined that a portion of the
acquisition purchase price was attributable to a loss on the
settlement of the pre-existing master franchise agreements in which
the pre-acquisition royalty rates paid by RE/MAX INTEGRA were below
the current market rate. This is in contrast to prior independent
region acquisitions, where the Company allocated the entire
purchase price to acquired assets, primarily goodwill and other
identifiable intangible assets. The Company has determined this
same conclusion applied to certain of its other independent regions
acquired between 2007 and 2017 where the region paid a royalty rate
below the current market rate prior to the acquisition. In these
circumstances, the Company's goodwill and identifiable intangible
assets balances were overstated, resulting in generally overstated
levels of intangible asset amortization expense subsequent to
acquisition.
Accordingly, the Company corrected the relevant consolidated
financial statements as of December 31,
2020 and for the unaudited three and nine month period ended
September 30, 2020 within these
preliminary consolidated financial statements. Management has
evaluated the materiality of these misstatements based on an
analysis of quantitative and qualitative factors and concluded they
were not material to the prior period financial statements,
individually or in aggregate.
However, in connection with this analysis and correction, the
Company identified a material weakness in its internal control over
financial reporting related to purchase accounting for certain
historical acquisitions (the "Material Weakness"). As a
result of the Material Weakness, the Company plans to amend its
2020 Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report") to
reflect the conclusion by management that there was a Material
Weakness. The Company also expects to receive an amended report on
the Company's internal control over financial reporting from KPMG
LLP for inclusion in the amendment to its 2020 Annual Report.
Once the amended 2020 Annual Report is complete, the Company will
file its Quarterly Report on Form 10-Q for the third quarter of
2021 (the "Form 10-Q"). The Company is working to file its
amended 2020 Annual Report and Form 10-Q as promptly as
possible.
Preliminary Financial Information
The preliminary financial results and other information set
forth in this press release related to the Company's third quarter
of 2021 are unaudited preliminary numbers, which are subject to
change. These results and information have not been reviewed by an
independent registered public accounting firm. As a result of the
preliminary nature of the financial information set forth in this
press release, changes to the financial results may need to be
incorporated into the Company's financial statements in the event
of subsequent information obtained by the Company after the date of
this press release. The Company would be obligated to
continue to adjust its financial results for the third quarter of
2021 to account for subsequent activities (Type 1 subsequent
events) occurring after the issuance of this press release. As a
result, the Company's final results and financial information for
the third quarter to be reported in the Company's delayed Form 10-Q
might vary in material respects from the preliminary financial
information included in this press release.
Dividend
On November 3, 2021, the Company's
Board of Directors approved a quarterly cash dividend of
$0.23 per share of Class A common
stock. The quarterly dividend is payable on December 1, 2021, to shareholders of record at
the close of business on November 17,
2021.
Outlook
The Company's fourth quarter and full-year 2021 Outlook assumes
no further currency movements, acquisitions or divestitures.
For the fourth quarter of 2021, the Company expects:
- Agent count to increase 2.5% to 3.5% over fourth quarter
2020;
- Revenue in a range of $86.0
million to $90.0 million
(including revenue from the Marketing Funds in a range of
$22.0 million to $24.0 million); and
- Adjusted EBITDA in a range of $27.5
million to $30.5 million.
For the full-year 2021, the Company is reducing its agent count
range due to slower-than-expected global growth, changing its
revenue range, and increasing its Adjusted EBITDA range due to
better-than-expected third quarter results. The Company
expects:
- Agent count to increase 2.5% to 3.5% over full-year 2020, down
from 5.0% to 6.0%;
- Revenue in a range of $326.5
million to $330.5 million
(including revenue from the Marketing Funds in a range of
$81.5 million to $83.5 million), changed from $321.0 million to $336.0
million (including revenue from the Marketing Funds in a
range of $80.5 million to
$83.5 million); and
- Adjusted EBITDA in a range of $116.0
million to $119.0 million, up
from $113.0 million to $118.0 million.
Webcast and Conference Call
The Company will host a conference call for interested parties
on Tuesday, November 23, 2021,
beginning at 8:30 a.m. Eastern Time.
Interested parties can access the conference call using the link
below:
https://conferencingportals.com/event/tTSuEepd
Interested parties can access a live webcast through the
Investor Relations section of the Company's website at
http://investors.remaxholdings.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:
1The Company defines organic revenue growth as
revenue growth from continuing operations excluding Marketing
Funds, revenue from acquisitions, and foreign currency movements.
The Company defines revenue from acquisitions as the revenue
generated from the date of an acquisition to its first anniversary
(excluding Marketing Funds revenue related to acquisitions where
applicable).
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.
3Total 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."
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 Dave 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
140,000 agents in over 8,600 offices across more than 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 175
offices across almost 40 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: the
preliminary financial results for the third quarter of 2021;
the timing of the Company's announcement of its third quarter 2021
results and filing of the Form 10-Q; the belief that the
misstatements were not material to the Company's previously issued
financial statements; the expectation of receiving an updated
opinion from KPMG; the expectation and timing of amending the
Company's 2020 Annual Report; agent count; franchise sales;
revenue; operating expenses; the Company's outlook for the fourth
quarter and full year 2021; non-GAAP financial measures; housing
and mortgage market conditions; the benefits of recent acquisitions
including statements about acquisitions diversifying and expanding
revenue and growth opportunities; the Company's growth prospects;
statements regarding the resolution of the previously reported
accounting errors; 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. These
risks and uncertainties include, without limitation, (1) that the
preliminary results for the third quarter of 2021 are
preliminary and subject to change pending the completion of the
Company's quarterly closing process and review, (2) that the
Company's review of the immaterial corrections to prior periods and
the Material Weakness is ongoing, (3) the timing of the Company's
review of the matters described above cannot currently be
predicted, (4) that additional adjustments may be identified, the
impact of which could be material (5) the global COVID-19 pandemic,
which continues to pose 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, (6) changes in the real estate market or interest rates
and availability of financing, (7) changes in business and economic
activity in general, (8) the Company's ability to attract and
retain quality franchisees, (9) the Company's franchisees' ability
to recruit and retain real estate agents and mortgage loan
originators, (10) changes in laws and regulations, (11) the
Company's ability to enhance, market, and protect its brands,
including the RE/MAX and Motto Mortgage brands, (12) the Company's
ability to implement its technology initiatives, and
(13) 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 remaxholdings.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. Preliminary* Consolidated Statements of
Income (In thousands, except share and per share
amounts) (Unaudited)
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing franchise
fees
|
|
$
|
32,464
|
|
$
|
24,339
|
|
$
|
84,793
|
|
$
|
65,220
|
Annual dues
|
|
|
8,967
|
|
|
8,638
|
|
|
26,508
|
|
|
26,304
|
Broker fees
|
|
|
19,245
|
|
|
15,457
|
|
|
48,651
|
|
|
35,327
|
Marketing Funds
fees
|
|
|
23,269
|
|
|
17,290
|
|
|
59,456
|
|
|
46,577
|
Franchise sales and
other revenue
|
|
|
7,052
|
|
|
5,349
|
|
|
21,130
|
|
|
20,124
|
Total
revenue
|
|
|
90,997
|
|
|
71,073
|
|
|
240,538
|
|
|
193,552
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, operating and
administrative expenses
|
|
|
51,099
|
|
|
28,216
|
|
|
133,591
|
|
|
88,241
|
Marketing Funds
expenses
|
|
|
23,269
|
|
|
17,290
|
|
|
59,456
|
|
|
46,577
|
Depreciation and
amortization
|
|
|
8,582
|
|
|
6,730
|
|
|
22,236
|
|
|
19,154
|
Settlement and
impairment charges
|
|
|
45,623
|
|
|
7,902
|
|
|
45,623
|
|
|
7,902
|
Total operating
expenses
|
|
|
128,573
|
|
|
60,138
|
|
|
260,906
|
|
|
161,874
|
Operating income
(loss)
|
|
|
(37,576)
|
|
|
10,935
|
|
|
(20,368)
|
|
|
31,678
|
Other expenses,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(3,315)
|
|
|
(2,159)
|
|
|
(7,537)
|
|
|
(7,028)
|
Interest
income
|
|
|
19
|
|
|
25
|
|
|
201
|
|
|
328
|
Foreign currency
transaction gains (losses)
|
|
|
(435)
|
|
|
94
|
|
|
(818)
|
|
|
(75)
|
Loss on early
extinguishment of debt
|
|
|
(264)
|
|
|
—
|
|
|
(264)
|
|
|
—
|
Total other expenses,
net
|
|
|
(3,995)
|
|
|
(2,040)
|
|
|
(8,418)
|
|
|
(6,775)
|
Income (loss) before
provision for income taxes
|
|
|
(41,571)
|
|
|
8,895
|
|
|
(28,786)
|
|
|
24,903
|
Provision for income
taxes
|
|
|
(792)
|
|
|
(2,057)
|
|
|
(1,454)
|
|
|
(6,584)
|
Net income
(loss)
|
|
$
|
(42,363)
|
|
$
|
6,838
|
|
$
|
(30,240)
|
|
$
|
18,319
|
Less: net income
(loss) attributable to non-controlling interest
|
|
|
(17,214)
|
|
|
3,221
|
|
|
(11,515)
|
|
|
8,436
|
Net income (loss)
attributable to RE/MAX Holdings, Inc.
|
|
$
|
(25,149)
|
|
$
|
3,617
|
|
$
|
(18,725)
|
|
$
|
9,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to RE/MAX Holdings, Inc. per share
of Class A common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.34)
|
|
$
|
0.20
|
|
$
|
(1.00)
|
|
$
|
0.55
|
Diluted
|
|
$
|
(1.34)
|
|
$
|
0.20
|
|
$
|
(1.00)
|
|
$
|
0.54
|
Weighted average
shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
18,739,564
|
|
|
18,196,454
|
|
|
18,651,858
|
|
|
18,098,227
|
Diluted
|
|
|
18,739,564
|
|
|
18,368,051
|
|
|
18,651,858
|
|
|
18,182,856
|
Cash dividends
declared per share of Class A common stock
|
|
$
|
0.23
|
|
$
|
0.22
|
|
$
|
0.69
|
|
$
|
0.66
|
|
*Information for the
three and nine months ended September 30, 2021 is preliminary. See
"Preliminary Financial Information" above.
|
TABLE
2
|
|
RE/MAX Holdings,
Inc. Preliminary* Consolidated Balance
Sheets (In thousands, except share and per share
amounts) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
119,446
|
|
$
|
101,355
|
Restricted
cash
|
|
|
25,150
|
|
|
19,872
|
Accounts and notes
receivable, current portion, less allowances of $10,581 and
$11,724, respectively
|
|
|
35,295
|
|
|
29,985
|
Income taxes
receivable
|
|
|
2,459
|
|
|
1,222
|
Other current
assets
|
|
|
19,248
|
|
|
13,938
|
Total current
assets
|
|
|
201,598
|
|
|
166,372
|
Property and
equipment, net of accumulated depreciation of $16,017 and $14,731,
respectively
|
|
|
12,455
|
|
|
7,872
|
Operating lease right
of use assets
|
|
|
36,555
|
|
|
38,878
|
Franchise agreements,
net
|
|
|
153,666
|
|
|
69,802
|
Other intangible
assets, net
|
|
|
33,719
|
|
|
29,969
|
Goodwill
|
|
|
268,390
|
|
|
165,358
|
Deferred tax assets,
net
|
|
|
52,714
|
|
|
50,702
|
Income taxes
receivable, net of current portion
|
|
|
1,980
|
|
|
1,980
|
Other assets, net of
current portion
|
|
|
18,102
|
|
|
15,435
|
Total
assets
|
|
$
|
779,179
|
|
$
|
546,368
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
4,895
|
|
$
|
2,108
|
Accrued
liabilities
|
|
|
91,193
|
|
|
68,571
|
Income taxes
payable
|
|
|
5,581
|
|
|
9,579
|
Deferred
revenue
|
|
|
25,196
|
|
|
25,282
|
Current portion of
debt
|
|
|
4,600
|
|
|
2,428
|
Current portion of
payable pursuant to tax receivable agreements
|
|
|
3,590
|
|
|
3,590
|
Operating lease
liabilities
|
|
|
6,045
|
|
|
5,687
|
Total current
liabilities
|
|
|
141,100
|
|
|
117,245
|
Debt, net of current
portion
|
|
|
448,390
|
|
|
221,137
|
Payable pursuant to
tax receivable agreements, net of current portion
|
|
|
29,974
|
|
|
29,974
|
Deferred tax
liabilities, net
|
|
|
20,619
|
|
|
490
|
Deferred revenue, net
of current portion
|
|
|
18,356
|
|
|
19,864
|
Operating lease
liabilities, net of current portion
|
|
|
46,614
|
|
|
50,279
|
Other liabilities,
net of current portion
|
|
|
7,945
|
|
|
5,722
|
Total
liabilities
|
|
|
712,998
|
|
|
444,711
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Class A common stock,
par value $.0001 per share, 180,000,000 shares authorized;
18,806,194 and
18,390,691 shares issued and outstanding as of
September 30, 2021 and December 31, 2020,
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, 2021 and
December 31, 2020, respectively
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
510,424
|
|
|
491,422
|
Retained earnings
(accumulated deficit)
|
|
|
(6,585)
|
|
|
25,628
|
Accumulated other
comprehensive income, net of tax
|
|
|
639
|
|
|
612
|
Total stockholders'
equity attributable to RE/MAX Holdings, Inc.
|
|
|
504,480
|
|
|
517,664
|
Non-controlling
interest
|
|
|
(438,299)
|
|
|
(416,007)
|
Total stockholders'
equity
|
|
|
66,181
|
|
|
101,657
|
Total liabilities
and stockholders' equity
|
|
$
|
779,179
|
|
$
|
546,368
|
|
|
|
|
|
|
|
|
*Information for the
three and nine months ended September 30, 2021 is preliminary. See
"Preliminary Financial Information" above.
|
TABLE
3
|
|
RE/MAX Holdings,
Inc. Preliminary* Consolidated Statements of Cash
Flows (In
thousands) (Unaudited)
|
|
|
|
|
Nine Months
Ended
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(30,240)
|
|
$
|
18,319
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
22,236
|
|
|
19,154
|
Impairment charge -
leased assets
|
|
|
—
|
|
|
7,902
|
Impairment charge -
goodwill
|
|
|
5,123
|
|
|
—
|
Bad debt
expense
|
|
|
(208)
|
|
|
4,024
|
Loss on early
extinguishment of debt
|
|
|
264
|
|
|
—
|
Equity-based
compensation expense
|
|
|
27,315
|
|
|
8,347
|
Deferred income tax
expense (benefit)
|
|
|
(1,869)
|
|
|
1,889
|
Fair value adjustments
to contingent consideration
|
|
|
330
|
|
|
(105)
|
Non-cash lease expense
(benefit)
|
|
|
(984)
|
|
|
—
|
Other, net
|
|
|
453
|
|
|
209
|
Changes in operating
assets and liabilities
|
|
|
(5,776)
|
|
|
(16,268)
|
Net cash provided by
operating activities
|
|
|
16,644
|
|
|
43,471
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchases of property,
equipment and capitalization of software
|
|
|
(12,069)
|
|
|
(4,575)
|
Acquisitions, net of
cash, cash equivalents and restricted cash acquired of $14.1
million and
$0.9 million, respectively
|
|
|
(180,402)
|
|
|
(10,627)
|
Net cash used in
investing activities
|
|
|
(192,471)
|
|
|
(15,202)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Proceeds from the
issuance of debt
|
|
|
458,850
|
|
|
—
|
Payments on
debt
|
|
|
(226,240)
|
|
|
(1,986)
|
Capitalized debt
amendment costs
|
|
|
(3,871)
|
|
|
—
|
Distributions paid to
non-controlling unitholders
|
|
|
(10,780)
|
|
|
(10,566)
|
Dividends and dividend
equivalents paid to Class A common stockholders
|
|
|
(13,488)
|
|
|
(12,250)
|
Payments related to
tax withholding for share-based compensation
|
|
|
(5,329)
|
|
|
(2,268)
|
Net cash provided by
(used in) financing activities
|
|
|
199,142
|
|
|
(27,070)
|
Effect of exchange
rate changes on cash
|
|
|
54
|
|
|
(30)
|
Net increase in cash,
cash equivalents and restricted cash
|
|
|
23,369
|
|
|
1,169
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
121,227
|
|
|
103,601
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
144,596
|
|
$
|
104,770
|
|
*Information for the
three and nine months ended September 30, 2021 is preliminary. See
"Preliminary Financial Information" above.
|
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,
|
|
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
Agent
Count:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
Regions
|
|
54,578
|
|
48,025
|
|
48,041
|
|
48,212
|
|
48,263
|
|
47,886
|
|
48,840
|
|
49,267
|
|
Independent
Regions
|
|
7,429
|
|
14,403
|
|
14,220
|
|
14,091
|
|
14,041
|
|
13,791
|
|
13,828
|
|
13,854
|
|
U.S.
Total
|
|
62,007
|
|
62,428
|
|
62,261
|
|
62,303
|
|
62,304
|
|
61,677
|
|
62,668
|
|
63,121
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
Regions
|
|
19,207
|
|
6,387
|
|
6,262
|
|
6,182
|
|
6,135
|
|
6,102
|
|
6,217
|
|
6,338
|
|
Independent
Regions
|
|
4,442
|
|
16,679
|
|
16,248
|
|
15,765
|
|
15,363
|
|
15,193
|
|
15,306
|
|
15,229
|
|
Canada
Total
|
|
23,649
|
|
23,066
|
|
22,510
|
|
21,947
|
|
21,498
|
|
21,295
|
|
21,523
|
|
21,567
|
|
U.S. and Canada
Total
|
|
85,656
|
|
85,494
|
|
84,771
|
|
84,250
|
|
83,802
|
|
82,972
|
|
84,191
|
|
84,688
|
|
Outside U.S. and
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent
Regions
|
|
55,280
|
|
54,707
|
|
55,443
|
|
53,542
|
|
50,967
|
|
48,933
|
|
47,625
|
|
46,201
|
|
Outside U.S. and
Canada Total
|
|
55,280
|
|
54,707
|
|
55,443
|
|
53,542
|
|
50,967
|
|
48,933
|
|
47,625
|
|
46,201
|
|
Total
|
|
140,936
|
|
140,201
|
|
140,214
|
|
137,792
|
|
134,769
|
|
131,905
|
|
131,816
|
|
130,889
|
|
TABLE
5
|
|
RE/MAX Holdings,
Inc. Preliminary* Adjusted EBITDA Reconciliation to Net
Income (In thousands, except
percentages) (Unaudited)
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net income (loss)
(1)
|
|
$
|
(42,363)
|
|
$
|
6,838
|
|
$
|
(30,240)
|
|
$
|
18,319
|
|
Depreciation and
amortization (1)
|
|
|
8,582
|
|
|
6,730
|
|
|
22,236
|
|
|
19,154
|
|
Interest
expense
|
|
|
3,315
|
|
|
2,159
|
|
|
7,537
|
|
|
7,028
|
|
Interest
income
|
|
|
(19)
|
|
|
(25)
|
|
|
(201)
|
|
|
(328)
|
|
Provision for income
taxes (1)
|
|
|
792
|
|
|
2,057
|
|
|
1,454
|
|
|
6,584
|
|
EBITDA
|
|
|
(29,693)
|
|
|
17,759
|
|
|
786
|
|
|
50,757
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
—
|
|
|
(11)
|
|
|
(10)
|
|
|
(33)
|
|
Loss on contract
settlement (2)
|
|
|
40,500
|
|
|
—
|
|
|
40,500
|
|
|
—
|
|
Loss on
extinguishment of debt (3)
|
|
|
264
|
|
|
—
|
|
|
264
|
|
|
—
|
|
Impairment charge -
leased assets (4)
|
|
|
—
|
|
|
7,902
|
|
|
—
|
|
|
7,902
|
|
Impairment charge -
goodwill (5)
|
|
|
5,123
|
|
|
—
|
|
|
5,123
|
|
|
—
|
|
Equity-based
compensation expense
|
|
|
9,008
|
|
|
3,414
|
|
|
27,315
|
|
|
8,347
|
|
Acquisition-related
expense (6)
|
|
|
9,432
|
|
|
1,021
|
|
|
14,303
|
|
|
1,915
|
|
Fair value
adjustments to contingent consideration (7)
|
|
|
320
|
|
|
250
|
|
|
330
|
|
|
(105)
|
|
Adjusted EBITDA
(8)
|
|
$
|
34,954
|
|
$
|
30,335
|
|
$
|
88,611
|
|
$
|
68,783
|
|
Adjusted EBITDA
Margin (8)
|
|
|
38.4
|
%
|
|
42.7
|
%
|
|
36.8
|
%
|
|
35.5
|
%
|
|
*Information for the
three and nine months ended September 30, 2021 is preliminary. See
"Preliminary Financial Information" above.
|
|
|
(1)
|
Prior year amounts
have been restated to reflect the immaterial correction of
amortization for certain acquired Independent Regions.
|
(2)
|
Represents the
effective settlement of the pre-existing master franchise agreement
with RE/MAX INTEGRA that was recognized
with the acquisition.
|
(3)
|
Represents the loss
recognized in connection with the amended and restated Senior
Secured Credit Facility.
|
(4)
|
Represents the
impairment recognized on a portion of the Company's corporate
headquarters office building. Lease costs are lower
by $0.1 million for the quarter and the year-ended December 31,
2020 as a result of the impairment.
|
(5)
|
Lower-than-expected
adoption rates on the First technology, resulted in downward
revision to long-term forecasts, resulting in an
impairment charge to the First reporting unit goodwill.
|
(6)
|
Acquisition-related
expense includes personnel, legal, accounting, advisory and
consulting fees incurred in connection with the
evaluation, due diligence, execution and integration of
acquisitions.
|
(7)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the
contingent consideration liabilities.
|
(8)
|
Non-GAAP measure. See
the end of this press release for definitions of non-GAAP
measures.
|
TABLE
6
|
|
RE/MAX Holdings,
Inc. Preliminary* 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,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
(1)
|
|
$
|
(42,363)
|
|
$
|
6,838
|
|
$
|
(30,240)
|
|
$
|
18,319
|
Amortization of
acquired intangible assets (1)
|
|
|
6,213
|
|
|
4,731
|
|
|
15,578
|
|
|
14,131
|
Provision for income
taxes (1)
|
|
|
792
|
|
|
2,057
|
|
|
1,454
|
|
|
6,584
|
Add-backs:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
—
|
|
|
(11)
|
|
|
(10)
|
|
|
(33)
|
Loss on contract
settlement (2)
|
|
|
40,500
|
|
|
—
|
|
|
40,500
|
|
|
—
|
Loss on
extinguishment of debt (3)
|
|
|
264
|
|
|
—
|
|
|
264
|
|
|
—
|
Impairment charge -
leased assets (4)
|
|
|
—
|
|
|
7,902
|
|
|
—
|
|
|
7,902
|
Impairment charge -
goodwill (5)
|
|
|
5,123
|
|
|
—
|
|
|
5,123
|
|
|
—
|
Equity-based
compensation expense
|
|
|
9,008
|
|
|
3,414
|
|
|
27,315
|
|
|
8,347
|
Acquisition-related
expense (6)
|
|
|
9,432
|
|
|
1,021
|
|
|
14,303
|
|
|
1,915
|
Fair value
adjustments to contingent consideration (7)
|
|
|
320
|
|
|
250
|
|
|
330
|
|
|
(105)
|
Adjusted pre-tax net
income
|
|
|
29,289
|
|
|
26,202
|
|
|
74,617
|
|
|
57,060
|
Less: Provision for
income taxes at 24% (8)
|
|
|
(7,029)
|
|
|
(6,288)
|
|
|
(17,908)
|
|
|
(13,694)
|
Adjusted net
income (9)
|
|
$
|
22,260
|
|
$
|
19,914
|
|
$
|
56,709
|
|
$
|
43,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic pro forma
shares outstanding
|
|
|
31,299,164
|
|
|
30,756,054
|
|
|
31,211,458
|
|
|
30,657,827
|
Total diluted pro
forma shares outstanding
|
|
|
31,299,164
|
|
|
30,927,651
|
|
|
31,211,458
|
|
|
30,742,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income basic earnings per share (9)
|
|
$
|
0.71
|
|
$
|
0.65
|
|
$
|
1.82
|
|
$
|
1.41
|
Adjusted net
income diluted earnings per share (9)
|
|
$
|
0.71
|
|
$
|
0.64
|
|
$
|
1.82
|
|
$
|
1.41
|
|
*Information for the
three and nine months ended September 30, 2021 is preliminary. See
"Preliminary Financial Information" above.
|
|
|
(1)
|
Prior year amounts
have been restated to reflect the immaterial correction of
amortization for certain acquired Independent Regions.
|
(2)
|
Represents the
effective settlement of the pre-existing master franchise agreement
with RE/MAX INTEGRA that was recognized
with the acquisition.
|
(3)
|
Represents the loss
recognized in connection with the amended and restated Senior
Secured Credit Facility.
|
(4)
|
Represents the
impairment recognized on a portion of the Company's corporate
headquarters office building in the prior year.
|
(5)
|
Lower-than-expected
adoption rates of the First technology, resulted in downward
revision to long-term forecasts, resulting in an
impairment charge to the First reporting unit goodwill.
|
(6)
|
Acquisition-related
expense includes personnel, legal, accounting, advisory and
consulting fees incurred in connection with the
evaluation, due diligence, execution, and integration of
acquisitions.
|
(7)
|
Fair value
adjustments to contingent consideration include amounts recognized
for changes in the estimated fair value of the
contingent consideration liabilities.
|
(8)
|
24% is the combined
federal and state statutory rate and is an estimate of the
Company's 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) the Company's
partnership structure, (b) unusual, non-recurring tax matters, such
as the conversion of First and wemlo to LLC's, and (c) lower
income for 2020 due to the pandemic.
|
(9)
|
Non-GAAP measure. See
the end of this press release for definitions of non-GAAP
measures.
|
TABLE
7
|
|
RE/MAX Holdings,
Inc. Preliminary* Pro Forma Shares
Outstanding (Unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Total basic
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
18,739,564
|
|
18,196,454
|
|
18,651,858
|
|
18,098,227
|
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
|
|
31,299,164
|
|
30,756,054
|
|
31,211,458
|
|
30,657,827
|
|
|
|
|
|
|
|
|
|
Total diluted
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
18,739,564
|
|
18,196,454
|
|
18,651,858
|
|
18,098,227
|
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
|
|
—
|
|
84,629
|
Total diluted pro
forma weighted average shares outstanding
|
|
31,299,164
|
|
30,927,651
|
|
31,211,458
|
|
30,742,456
|
|
*Information for the
three and nine months ended September 30, 2021 is preliminary. See
"Preliminary Financial Information" above.
|
|
|
(1)
|
In accordance with
the treasury stock method.
|
TABLE
8
|
|
RE/MAX Holdings,
Inc. Preliminary* Adjusted Free Cash Flow &
Unencumbered Cash (Unaudited)
|
|
|
Nine Months
Ended
|
|
|
September 30,
|
|
|
2021
|
|
2020
|
Cash flow from
operations (1)
|
|
$
|
16,644
|
|
$
|
43,471
|
Less: Purchases of
property, equipment and capitalization of software
|
|
|
(12,069)
|
|
|
(4,575)
|
(Increases) decreases
in restricted cash of the Marketing Funds (2)
|
|
|
(5,278)
|
|
|
4,965
|
Adjusted free cash
flow (3)
|
|
|
(703)
|
|
|
43,861
|
|
|
|
|
|
|
|
Adjusted free cash
flow (3)
|
|
|
(703)
|
|
|
43,861
|
Less: Tax/Other
non-dividend distributions to RIHI
|
|
|
(2,113)
|
|
|
(2,277)
|
Adjusted free cash
flow after tax/non-dividend distributions to RIHI
(3)
|
|
|
(2,816)
|
|
|
41,584
|
|
|
|
|
|
|
|
Adjusted free cash
flow after tax/non-dividend distributions to RIHI
(3)
|
|
|
(2,816)
|
|
|
41,584
|
Less: Debt principal
payments
|
|
|
(2,403)
|
|
|
(1,986)
|
Unencumbered cash
generated (3)
|
|
$
|
(5,219)
|
|
$
|
39,598
|
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
|
Cash flow from
operations
|
|
$
|
16,644
|
|
$
|
43,471
|
Adjusted free cash
flow (3)
|
|
$
|
(703)
|
|
$
|
43,861
|
Adjusted free cash
flow after tax/non-dividend distributions to RIHI
(3)
|
|
$
|
(2,816)
|
|
$
|
41,584
|
Unencumbered cash
generated (2)
|
|
$
|
(5,219)
|
|
$
|
39,598
|
|
|
|
|
|
|
|
Adjusted EBITDA
(3)
|
|
$
|
88,611
|
|
$
|
68,783
|
Adjusted free cash
flow as % of Adjusted EBITDA (3)
|
|
|
(0.8)%
|
|
|
63.8%
|
Adjusted free cash
flow less distributions to RIHI as % of Adjusted EBITDA
(3)
|
|
|
(3.2)%
|
|
|
60.5%
|
Unencumbered cash
generated as % of Adjusted EBITDA (3)
|
|
|
(5.9)%
|
|
|
57.6%
|
|
|
|
*Information for the
three and nine months ended September 30, 2021 is preliminary. See
"Preliminary Financial Information" above.
|
|
|
(1)
|
Cash flow from
operations is significantly lower in 2021 due to the allocation of
$40.5 million of the total consideration paid to
RE/MAX INTEGRA toward a loss on settlement of the pre-existing
franchise contracts, which results in a corresponding reduction
to
cash flow from operations. Such amount is unusual and not
expected to recur in future periods.
|
(2)
|
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 adjusted free cash flow.
|
(3)
|
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 adjusted 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 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, settlement and impairment charges, 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 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, non-cash impairment charges,
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.
Adjusted 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 adjusted free cash flow is removed. The Company believes
adjusted 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.
Adjusted free cash flow after tax and non-dividend distributions
to RIHI is calculated as adjusted 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, adjusted 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 adjusted 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.