DENVER, Feb. 23, 2022 /PRNewswire/ --
Full-Year 2021 Highlights
(Compared to full-year
2020 unless otherwise noted)
- Total Revenue increased 23.9% to $329.7
million
- Revenue excluding the Marketing Funds1 increased
22.7% to $247.3 million, and was
comprised of 11.8% organic growth2, 9.8% growth from
acquisitions and 1.1% growth from foreign currency movements
- Net loss attributable to RE/MAX Holdings, Inc. of $15.6 million and loss per diluted share (GAAP
EPS) of $0.84
- Adjusted EBITDA3 increased 29.3% to $119.7 million, Adjusted EBITDA
margin3 of 36.3% and Adjusted earnings per diluted share
(Adjusted EPS3) of $2.43
- Total agent count increased 3.1% to 141,998 agents
- U.S. and Canada combined agent
count increased 1.4% to 85,471 agents
- Total open Motto Mortgage franchises increased 32.6% to 187
offices4
Fourth Quarter 2021 Highlights
(Compared to fourth
quarter 2020 unless otherwise noted)
- Total Revenue increased 23.1% to $89.2
million
- Revenue excluding the Marketing Funds increased 21.2% to
$66.2 million, and was comprised of
5.0% organic growth, 15.3% growth from acquisitions and 0.9% growth
from foreign currency movements
- Net income attributable to RE/MAX Holdings, Inc. of
$3.1 million and earnings per diluted
share (GAAP EPS) of $0.16
- Adjusted EBITDA increased 30.7% to $31.1
million, Adjusted EBITDA margin of 34.8% and Adjusted
earnings per diluted share (Adjusted EPS) of $0.60
Operating Statistics as of January 31,
2022
(Compared to January
31, 2021 unless otherwise noted)
- Total agent count increased 2.9% to 141,716 agents
- U.S. and Canada combined agent
count increased 1.1% to 84,911 agents
- Total open Motto Mortgage franchises increased 35.2% to 192
offices
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 fourth quarter and full year ended December 31, 2021.
"Continued solid organic growth from our core operations and
strong contributions from our acquisition of the RE/MAX INTEGRA
North American regions drove our fourth quarter outperformance,"
said Adam Contos, RE/MAX Holdings
Chief Executive Officer. "The INTEGRA acquisition has been more
impactful than we anticipated, generating higher-than-expected
agent count, revenue and Adjusted EBITDA.
"We added more than 2,000 RE/MAX agents in Canada year over year, which more than offset
softer results in the U.S. On the mortgage side, Motto Mortgage
opened nearly 60 offices in 2021 – a record – and we continue to
sell franchises at a healthy pace. We believe both brands are well
positioned to grow meaningfully in 2022."
Steve Joyce, RE/MAX Holdings
Director and incoming Chief Executive Officer, echoed that outlook:
"Over the past few years, Adam and the leadership team have done an
outstanding job investing for growth, expanding our services and
positioning RE/MAX Holdings for continued future success. The
strategic investments we've made have significantly diversified our
revenue and broadened our growth opportunities. Those investments
started to pay off in 2021, and, as evidenced by our 2022 financial
guidance, we expect that to continue in the year ahead."
Joyce continued, "I look forward to working with our talented
team to further strengthen RE/MAX Holdings. My goals as CEO are
straightforward. First, amplify our growth – and revitalize our
U.S. agent count growth, in particular – by focusing on a few core
strategic initiatives. And, second, work with our Board of
Directors to identify our next company leader. I am excited about
both opportunities and look forward to sharing more good news in
the coming weeks and months."
Fourth Quarter 2021 Operating Results
Agent Count
The following table compares agent count as of December 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31,
|
|
Change
|
|
|
|
2021
|
|
2020
|
|
#
|
|
%
|
U.S.
|
|
|
61,327
|
|
62,303
|
|
(976)
|
|
(1.6)
|
Canada
|
|
|
24,144
|
|
21,947
|
|
2,197
|
|
10.0
|
Subtotal
|
|
|
85,471
|
|
84,250
|
|
1,221
|
|
1.4
|
Outside the U.S.
& Canada
|
|
|
56,527
|
|
53,542
|
|
2,985
|
|
5.6
|
Total
|
|
|
141,998
|
|
137,792
|
|
4,206
|
|
3.1
|
Revenue
RE/MAX Holdings generated $89.2
million in the fourth quarter of 2021, an increase of
$16.7 million, or 23.1%, compared to
$72.4 million in the fourth quarter
of 2020. Revenue excluding the Marketing Funds was $66.2 million in the fourth quarter of 2021, an
increase of 21.2% versus the same period in 2020. This increase was
comprised of 5.0% organic growth, 15.3% acquisitive growth and 0.9%
growth from foreign-currency movements. Organic growth increased
primarily due to fewer agent recruiting initiatives versus the
prior year, a price increase in RE/MAX continuing franchise fees,
increased events-related revenue, and Motto growth. Growth
attributable to acquisitions was due to revenue from the RE/MAX
INTEGRA North American regions acquisition.
Recurring revenue streams, which consist of continuing franchise
fees and annual dues, increased $9.0
million, or 26.6%, compared to the fourth quarter of 2020
and accounted for 64.6% of revenue (excluding the Marketing Funds)
in the fourth quarter of 2021 compared to 61.8% of revenue in the
prior-year period.
Operating Expenses
Total operating expenses were $78.7
million for the fourth quarter of 2021, an increase of
$13.2 million, or 20.1%, compared to
$65.5 million in the fourth quarter
of 2020. Fourth quarter 2021 total operating expenses increased
primarily due to higher selling, operating and administrative
expenses; increased Marketing Funds expenses; and higher
depreciation and amortization expenses.
Selling, operating and administrative expenses were $46.3 million in the fourth quarter of 2021, an
increase of $5.5 million, or 13.6%,
compared to the fourth quarter of 2020 and represented 69.9% of
revenue, excluding the Marketing Funds, compared to 74.6% in the
prior-year period. Fourth quarter 2021 selling, operating and
administrative expenses increased primarily due to an increase in
acquisition-related expenses, higher travel and events expenses,
and higher personnel costs from headcount increases.
Fourth quarter 2021 depreciation and amortization expenses
increased primarily due to incremental acquisition-related
amortization expense and placing internally developed software into
service.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $3.1 million for the fourth quarter of 2021
compared to $1.4 million the fourth
quarter of 2020. Reported basic and diluted GAAP income per share
were $0.17 and $0.16, respectively, for the fourth quarter
of 2021 compared to basic and diluted GAAP EPS of $0.07 each in the fourth quarter of 2020.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $31.1 million
for the fourth quarter of 2021, an increase of $7.3 million, or 30.7%, compared to the fourth
quarter of 2020. Fourth quarter 2021 Adjusted EBITDA increased
primarily due to contributions from the acquisition of RE/MAX
INTEGRA's North American regions. Adjusted EBITDA also increased
due to incremental revenue from fewer agent recruiting initiatives
in the current year and increased revenue from a price increase in
RE/MAX continuing franchise fees partially offset by increased
travel costs and continued investment in our mortgage business.
Adjusted EBITDA margin was 34.8% in the fourth quarter of 2021, up
compared to 32.8% in the fourth quarter of 2020.
Adjusted basic and diluted EPS were $0.61 and $0.60,
respectively, for the fourth quarter of 2021 compared to Adjusted
basic and diluted EPS of $0.48 and
$0.47, respectively, for the fourth
quarter of 2020. The ownership structure used to calculate Adjusted
basic and diluted EPS for the quarter ended December 31, 2021 assumes RE/MAX Holdings owned
100% of RMCO, LLC ("RMCO"). The weighted average ownership RE/MAX
Holdings had in RMCO was 60.0% for the quarter ended December 31, 2021.
Balance Sheet
As of December 31, 2021, the
Company had cash and cash equivalents of $126.3 million, an increase of $24.9 million from December 31, 2020. As of December 31, 2021, the Company had $452.1 million of outstanding debt, net of an
unamortized debt discount and issuance costs, compared to
$223.6 million as of December 31, 2020.
Share Repurchase Program
RE/MAX Holdings previously announced on January 11, 2022, that its Board of Directors
authorized a common stock repurchase program of up to $100 million, reflecting confidence in the
Company's performance and the strength of its balance
sheet.
Dividend
On February 22, 2022, the Company
announced that its Board of Directors approved a quarterly cash
dividend of $0.23 per share of Class
A common stock. The quarterly dividend is payable on
March 16, 2022, to shareholders of
record at the close of business on March 4,
2022.
Outlook
The Company's first quarter and full-year 2022 Outlook assumes
no further currency movements, acquisitions or divestitures.
For the first quarter of 2022, RE/MAX Holdings expects:
- Agent count to increase 1.5% to 2.5% over first quarter
2021;
- Revenue in a range of $88.0
million to $92.0 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 $25.0
million to $28.0 million.
For the full-year 2022, the Company expects:
- Agent count to increase 2.0% to 4.0% over full-year 2021;
- Revenue in a range of $366.0
million to $376.0 million
(including revenue from the Marketing Funds in a range of
$91.5 million to $95.5 million); and
- Adjusted EBITDA in a range of $130.0
million to $135.0
million.
Webcast and Conference Call
The Company will host a conference call for interested parties
on Thursday, February 24, 2022,
beginning at 8:30 a.m. Eastern Time.
Interested parties can register in advance for the conference call
using the link below:
https://conferencingportals.com/event/tTSuEepd
Interested parties also 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:
1Revenue excluding the Marketing Funds is a non-GAAP
measure of financial performance that differs from the U.S.
Generally Accepted Accounting Principles and a reconciliation to
the most directly comparable U.S. GAAP measure is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue excluding
the Marketing Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
89,163
|
|
$
|
72,449
|
|
$
|
329,701
|
|
$
|
266,001
|
Less: Marketing Funds
fees
|
|
|
22,935
|
|
|
17,825
|
|
|
82,391
|
|
|
64,402
|
Revenue excluding the
Marketing Funds
|
|
$
|
66,228
|
|
$
|
54,624
|
|
$
|
247,310
|
|
$
|
201,599
|
2The Company defines organic revenue growth as
revenue growth from continuing operations excluding (i) revenue
from Marketing Funds, (ii) revenue from acquisitions, and (iii) the
impact of 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).
3Adjusted 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.
4Total 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 almost 9,000
offices and a presence in 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 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: agent
count; franchise sales; revenue; operating expenses; the Company's
outlook for the first quarter and full year 2022; non-GAAP
financial measures; housing and mortgage market conditions; the
benefits of strategic investment including statements about
investments diversifying and broadening revenue and growth
opportunities; our current goals and strategic priorities including
the identification of the next leader for the Company; the
Company's share repurchase program; 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) the global COVID-19 pandemic, which
continues to pose significant and widespread risks and ongoing
uncertainty for the Company's business, including the Company's
agents, loan originators, franchisees and employees, as well as
home buyers and sellers, (2) changes in the real estate market or
interest rates and availability of financing, (3) changes in
business and economic activity in general, (4) the Company's
ability to attract and retain quality franchisees, (5) the
Company's franchisees' ability to recruit and retain real estate
agents and mortgage loan originators, (6) changes in laws and
regulations, (7) the Company's ability to enhance, market, and
protect its brands, including the RE/MAX and Motto Mortgage brands,
(8) the Company's ability to implement its technology initiatives,
(9) risks and uncertainties related to the share repurchase program
including the timing, amount and the price at which any share
repurchases might be made in connection with the program, (10)
risks related to the Company's CEO transition,
(11) fluctuations in foreign currency exchange rates, and (12)
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.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. Consolidated Statements of Income
(Loss) (In thousands, except share and per share
amounts) (Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing franchise
fees
|
|
$
|
33,711
|
|
$
|
24,997
|
|
$
|
118,504
|
|
$
|
90,217
|
Annual dues
|
|
|
9,041
|
|
|
8,771
|
|
|
35,549
|
|
|
35,075
|
Broker fees
|
|
|
16,805
|
|
|
14,701
|
|
|
65,456
|
|
|
50,028
|
Marketing Funds
fees
|
|
|
22,935
|
|
|
17,825
|
|
|
82,391
|
|
|
64,402
|
Franchise sales and
other revenue
|
|
|
6,671
|
|
|
6,155
|
|
|
27,801
|
|
|
26,279
|
Total
revenue
|
|
|
89,163
|
|
|
72,449
|
|
|
329,701
|
|
|
266,001
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, operating and
administrative expenses
|
|
|
46,282
|
|
|
40,757
|
|
|
179,873
|
|
|
128,998
|
Marketing Funds
expenses
|
|
|
22,935
|
|
|
17,825
|
|
|
82,391
|
|
|
64,402
|
Depreciation and
amortization
|
|
|
9,097
|
|
|
6,952
|
|
|
31,333
|
|
|
26,106
|
Settlement and
impairment charges
|
|
|
412
|
|
|
—
|
|
|
46,035
|
|
|
7,902
|
Total operating
expenses
|
|
|
78,726
|
|
|
65,534
|
|
|
339,632
|
|
|
227,408
|
Operating income
(loss)
|
|
|
10,437
|
|
|
6,915
|
|
|
(9,931)
|
|
|
38,593
|
Other expenses,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(3,807)
|
|
|
(2,195)
|
|
|
(11,344)
|
|
|
(9,223)
|
Interest
income
|
|
|
16
|
|
|
12
|
|
|
217
|
|
|
340
|
Foreign currency
transaction gains (losses)
|
|
|
(21)
|
|
|
73
|
|
|
(839)
|
|
|
(2)
|
Loss on early
extinguishment of debt
|
|
|
—
|
|
|
—
|
|
|
(264)
|
|
|
—
|
Total other expenses,
net
|
|
|
(3,812)
|
|
|
(2,110)
|
|
|
(12,230)
|
|
|
(8,885)
|
Income (loss) before
provision for income taxes
|
|
|
6,625
|
|
|
4,805
|
|
|
(22,161)
|
|
|
29,708
|
Provision for income
taxes
|
|
|
(1,005)
|
|
|
(2,578)
|
|
|
(2,459)
|
|
|
(9,162)
|
Net income
(loss)
|
|
$
|
5,620
|
|
$
|
2,227
|
|
$
|
(24,620)
|
|
$
|
20,546
|
Less: net income
(loss) attributable to non-controlling interest
|
|
|
2,511
|
|
|
860
|
|
|
(9,004)
|
|
|
9,296
|
Net income (loss)
attributable to RE/MAX Holdings, Inc.
|
|
$
|
3,109
|
|
$
|
1,367
|
|
$
|
(15,616)
|
|
$
|
11,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to RE/MAX Holdings, Inc. per share
of Class A common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.17
|
|
$
|
0.07
|
|
$
|
(0.84)
|
|
$
|
0.62
|
Diluted
|
|
$
|
0.16
|
|
$
|
0.07
|
|
$
|
(0.84)
|
|
$
|
0.61
|
Weighted average
shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
18,806,194
|
|
|
18,386,709
|
|
|
18,690,442
|
|
|
18,170,348
|
Diluted
|
|
|
19,112,039
|
|
|
18,748,412
|
|
|
18,690,442
|
|
|
18,324,246
|
Cash dividends
declared per share of Class A common stock
|
|
$
|
0.23
|
|
$
|
0.22
|
|
$
|
0.92
|
|
$
|
0.88
|
TABLE
2
|
RE/MAX Holdings,
Inc.
Consolidated Balance Sheets
(In thousands, except share and per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
As of December
31,
|
|
|
2021
|
|
2020
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
126,270
|
|
$
|
101,355
|
Restricted
cash
|
|
|
32,129
|
|
|
19,872
|
Accounts and notes
receivable, current portion, net of allowances
|
|
|
34,611
|
|
|
29,985
|
Income taxes
receivable
|
|
|
1,754
|
|
|
1,222
|
Other current
assets
|
|
|
16,010
|
|
|
13,938
|
Total current
assets
|
|
|
210,774
|
|
|
166,372
|
Property and
equipment, net of accumulated depreciation
|
|
|
12,686
|
|
|
7,872
|
Operating lease right
of use assets
|
|
|
36,523
|
|
|
38,878
|
Franchise agreements,
net
|
|
|
143,832
|
|
|
69,802
|
Other intangible
assets, net
|
|
|
32,530
|
|
|
29,969
|
Goodwill
|
|
|
269,115
|
|
|
165,358
|
Deferred tax assets,
net
|
|
|
51,314
|
|
|
50,702
|
Income taxes
receivable, net of current portion
|
|
|
1,803
|
|
|
1,980
|
Other assets, net of
current portion
|
|
|
17,556
|
|
|
15,435
|
Total
assets
|
|
$
|
776,133
|
|
$
|
546,368
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
5,189
|
|
$
|
2,108
|
Accrued
liabilities
|
|
|
96,768
|
|
|
68,571
|
Income taxes
payable
|
|
|
2,546
|
|
|
9,579
|
Deferred
revenue
|
|
|
27,178
|
|
|
25,282
|
Current portion of
debt
|
|
|
4,600
|
|
|
2,428
|
Current portion of
payable pursuant to tax receivable agreements
|
|
|
3,610
|
|
|
3,590
|
Operating lease
liabilities
|
|
|
6,328
|
|
|
5,687
|
Total current
liabilities
|
|
|
146,219
|
|
|
117,245
|
Debt, net of current
portion
|
|
|
447,459
|
|
|
221,137
|
Payable pursuant to
tax receivable agreements, net of current portion
|
|
|
26,893
|
|
|
29,974
|
Deferred tax
liabilities, net
|
|
|
14,699
|
|
|
490
|
Deferred revenue, net
of current portion
|
|
|
18,929
|
|
|
19,864
|
Operating lease
liabilities, net of current portion
|
|
|
45,948
|
|
|
50,279
|
Other liabilities,
net of current portion
|
|
|
6,919
|
|
|
5,722
|
Total
liabilities
|
|
|
707,066
|
|
|
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
December 31, 2021 and 2020,
respectively
|
|
|
2
|
|
|
2
|
Class B common stock,
par value $.0001 per share, 1,000 shares authorized; 1 share
issued
and outstanding as of December 31, 2021 and 2020,
respectively
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
515,443
|
|
|
491,422
|
Retained earnings
(accumulated deficit)
|
|
|
(7,821)
|
|
|
25,628
|
Accumulated other
comprehensive income, net of tax
|
|
|
650
|
|
|
612
|
Total stockholders'
equity attributable to RE/MAX Holdings, Inc.
|
|
|
508,274
|
|
|
517,664
|
Non-controlling
interest
|
|
|
(439,207)
|
|
|
(416,007)
|
Total stockholders'
equity
|
|
|
69,067
|
|
|
101,657
|
Total liabilities
and stockholders' equity
|
|
$
|
776,133
|
|
$
|
546,368
|
|
|
|
|
|
|
|
TABLE
3
|
RE/MAX Holdings,
Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
|
Year Ended
December 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(24,620)
|
|
$
|
20,546
|
|
$
|
47,314
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
31,333
|
|
|
26,106
|
|
|
21,792
|
Impairment charge -
leased assets
|
|
|
—
|
|
|
7,902
|
|
|
—
|
Impairment charge -
goodwill
|
|
|
5,123
|
|
|
—
|
|
|
—
|
Bad debt
expense
|
|
|
(1,345)
|
|
|
2,903
|
|
|
4,964
|
Loss on early
extinguishment of debt
|
|
|
264
|
|
|
—
|
|
|
—
|
Equity-based
compensation expense
|
|
|
34,298
|
|
|
16,267
|
|
|
10,934
|
Deferred income tax
expense (benefit)
|
|
|
(2,528)
|
|
|
1,899
|
|
|
2,383
|
Fair value adjustments
to contingent consideration
|
|
|
309
|
|
|
814
|
|
|
241
|
Non-cash change in tax
receivable agreements liability
|
|
|
382
|
|
|
—
|
|
|
—
|
Non-cash lease expense
(benefit)
|
|
|
(1,335)
|
|
|
(508)
|
|
|
—
|
Other, net
|
|
|
522
|
|
|
1,051
|
|
|
1,252
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts and notes
receivable, current portion
|
|
|
3,329
|
|
|
(3,460)
|
|
|
(5,614)
|
Other current and
noncurrent assets
|
|
|
(2,090)
|
|
|
(10,665)
|
|
|
(6,084)
|
Other current and
noncurrent liabilities
|
|
|
11,882
|
|
|
9,035
|
|
|
6,737
|
Payments pursuant to
tax receivable agreements
|
|
|
(3,444)
|
|
|
(3,562)
|
|
|
(3,556)
|
Income taxes
receivable/payable
|
|
|
(9,775)
|
|
|
2,109
|
|
|
178
|
Deferred revenue,
current and noncurrent
|
|
|
137
|
|
|
410
|
|
|
(1,566)
|
Net cash provided by
operating activities
|
|
|
42,442
|
|
|
70,847
|
|
|
78,975
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property,
equipment and capitalization of software
|
|
|
(15,239)
|
|
|
(6,903)
|
|
|
(13,226)
|
Acquisitions, net of
cash acquired of $14.1 million, $0.9 million and $0.1 million,
respectively
|
|
|
(180,002)
|
|
|
(10,627)
|
|
|
(14,945)
|
Restricted cash
acquired
|
|
|
—
|
|
|
—
|
|
|
28,495
|
Other
|
|
|
319
|
|
|
—
|
|
|
(1,200)
|
Net cash used in
investing activities
|
|
|
(194,922)
|
|
|
(17,530)
|
|
|
(876)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from the
issuance of debt
|
|
|
458,850
|
|
|
—
|
|
|
—
|
Payments on
debt
|
|
|
(227,390)
|
|
|
(2,634)
|
|
|
(2,622)
|
Capitalized debt
amendment costs
|
|
|
(3,871)
|
|
|
—
|
|
|
—
|
Distributions paid to
non-controlling unitholders
|
|
|
(14,206)
|
|
|
(14,058)
|
|
|
(15,430)
|
Dividends and dividend
equivalents paid to Class A common stockholders
|
|
|
(17,833)
|
|
|
(16,354)
|
|
|
(15,074)
|
Payments related to
tax withholding for share-based compensation
|
|
|
(5,329)
|
|
|
(2,544)
|
|
|
(1,110)
|
Payment of contingent
consideration
|
|
|
(869)
|
|
|
(409)
|
|
|
(306)
|
Net cash provided by
(used in) financing activities
|
|
|
189,352
|
|
|
(35,999)
|
|
|
(34,542)
|
Effect of exchange
rate changes on cash
|
|
|
300
|
|
|
308
|
|
|
70
|
Net increase in cash,
cash equivalents and restricted cash
|
|
|
37,172
|
|
|
17,626
|
|
|
43,627
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
121,227
|
|
|
103,601
|
|
|
59,974
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
158,399
|
|
$
|
121,227
|
|
$
|
103,601
|
TABLE
4
|
RE/MAX Holdings,
Inc.
Agent Count
(Unaudited)
|
|
|
|
As
of
|
|
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March 31,
|
|
December 31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
|
|
2021
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
Agent
Count:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
Regions
|
|
53,946
|
|
54,578
|
|
48,025
|
|
48,041
|
|
48,212
|
|
48,263
|
|
47,886
|
|
48,840
|
|
49,267
|
|
Independent
Regions
|
|
7,381
|
|
7,429
|
|
14,403
|
|
14,220
|
|
14,091
|
|
14,041
|
|
13,791
|
|
13,828
|
|
13,854
|
|
U.S.
Total
|
|
61,327
|
|
62,007
|
|
62,428
|
|
62,261
|
|
62,303
|
|
62,304
|
|
61,677
|
|
62,668
|
|
63,121
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
Regions
|
|
19,596
|
|
19,207
|
|
6,387
|
|
6,262
|
|
6,182
|
|
6,135
|
|
6,102
|
|
6,217
|
|
6,338
|
|
Independent
Regions
|
|
4,548
|
|
4,442
|
|
16,679
|
|
16,248
|
|
15,765
|
|
15,363
|
|
15,193
|
|
15,306
|
|
15,229
|
|
Canada
Total
|
|
24,144
|
|
23,649
|
|
23,066
|
|
22,510
|
|
21,947
|
|
21,498
|
|
21,295
|
|
21,523
|
|
21,567
|
|
U.S. and Canada
Total
|
|
85,471
|
|
85,656
|
|
85,494
|
|
84,771
|
|
84,250
|
|
83,802
|
|
82,972
|
|
84,191
|
|
84,688
|
|
Outside U.S. and
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent
Regions
|
|
56,527
|
|
55,280
|
|
54,707
|
|
55,443
|
|
53,542
|
|
50,967
|
|
48,933
|
|
47,625
|
|
46,201
|
|
Outside U.S. and
Canada Total
|
|
56,527
|
|
55,280
|
|
54,707
|
|
55,443
|
|
53,542
|
|
50,967
|
|
48,933
|
|
47,625
|
|
46,201
|
|
Total
|
|
141,998
|
|
140,936
|
|
140,201
|
|
140,214
|
|
137,792
|
|
134,769
|
|
131,905
|
|
131,816
|
|
130,889
|
|
TABLE
5
|
RE/MAX Holdings,
Inc.
Adjusted EBITDA Reconciliation to Net Income (Loss)
(In thousands, except percentages)
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net income (loss)
(1)
|
|
$
|
5,620
|
|
$
|
2,227
|
|
$
|
(24,620)
|
|
$
|
20,546
|
|
Depreciation and
amortization (1)
|
|
|
9,097
|
|
|
6,952
|
|
|
31,333
|
|
|
26,106
|
|
Interest
expense
|
|
|
3,807
|
|
|
2,195
|
|
|
11,344
|
|
|
9,223
|
|
Interest
income
|
|
|
(16)
|
|
|
(12)
|
|
|
(217)
|
|
|
(340)
|
|
Provision for income
taxes (1)
|
|
|
1,005
|
|
|
2,578
|
|
|
2,459
|
|
|
9,162
|
|
EBITDA
|
|
|
19,513
|
|
|
13,940
|
|
|
20,299
|
|
|
64,697
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
15
|
|
|
633
|
|
|
5
|
|
|
600
|
|
Loss on contract
settlement (2)
|
|
|
400
|
|
|
—
|
|
|
40,900
|
|
|
—
|
|
Loss on
extinguishment of debt (3)
|
|
|
—
|
|
|
—
|
|
|
264
|
|
|
—
|
|
Impairment charge -
leased assets (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,902
|
|
Impairment charge -
goodwill (5)
|
|
|
—
|
|
|
—
|
|
|
5,123
|
|
|
—
|
|
Equity-based
compensation expense
|
|
|
6,983
|
|
|
7,920
|
|
|
34,298
|
|
|
16,267
|
|
Acquisition-related
expense (6)
|
|
|
3,119
|
|
|
460
|
|
|
17,422
|
|
|
2,375
|
|
Fair value
adjustments to contingent consideration (7)
|
|
|
(21)
|
|
|
919
|
|
|
309
|
|
|
814
|
|
Other
|
|
|
1,057
|
|
|
(97)
|
|
|
1,057
|
|
|
(97)
|
|
Adjusted EBITDA
(8)
|
|
$
|
31,066
|
|
$
|
23,775
|
|
$
|
119,677
|
|
$
|
92,558
|
|
Adjusted EBITDA
Margin (8)
|
|
|
34.8
|
%
|
|
32.8
|
%
|
|
36.3
|
%
|
|
34.8
|
%
|
(1)
|
Amounts for the three
months ended December 31, 2020 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 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.
Adjusted Net Income (Loss) and Adjusted Earnings per
Share
(In thousands, except share and per share
amounts)
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
(1)
|
|
$
|
5,620
|
|
$
|
2,227
|
|
$
|
(24,620)
|
|
$
|
20,546
|
Amortization of
acquired intangible assets (1)
|
|
|
6,979
|
|
|
4,748
|
|
|
22,557
|
|
|
18,879
|
Provision for income
taxes (1)
|
|
|
1,005
|
|
—
|
2,578
|
|
|
2,459
|
|
|
9,162
|
Add-backs:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sale
or disposition of assets
|
|
|
15
|
|
|
633
|
|
|
5
|
|
|
600
|
Loss on contract
settlement (2)
|
|
|
400
|
|
|
—
|
|
|
40,900
|
|
|
—
|
Loss on
extinguishment of debt (3)
|
|
|
—
|
|
|
—
|
|
|
264
|
|
|
—
|
Impairment charge -
leased assets (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,902
|
Impairment charge -
goodwill (5)
|
|
|
—
|
|
|
—
|
|
|
5,123
|
|
|
—
|
Equity-based
compensation expense
|
|
|
6,983
|
|
|
7,920
|
|
|
34,298
|
|
|
16,267
|
Acquisition-related
expense (6)
|
|
|
3,119
|
|
|
460
|
|
|
17,422
|
|
|
2,375
|
Fair value
adjustments to contingent consideration (7)
|
|
|
(21)
|
|
|
919
|
|
|
309
|
|
|
814
|
Other
|
|
|
1,057
|
|
|
(97)
|
|
|
1,057
|
|
|
(97)
|
Adjusted pre-tax net
income
|
|
|
25,157
|
|
|
19,388
|
|
|
99,774
|
|
|
76,448
|
Less: Provision for
income taxes at 24% (8)
|
|
|
(6,038)
|
|
|
(4,653)
|
|
|
(23,946)
|
|
|
(18,348)
|
Adjusted net
income (9)
|
|
$
|
19,119
|
|
$
|
14,735
|
|
$
|
75,828
|
|
$
|
58,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic pro forma
shares outstanding
|
|
|
31,365,794
|
|
|
30,946,309
|
|
|
31,250,042
|
|
|
30,729,948
|
Total diluted pro
forma shares outstanding
|
|
|
31,671,639
|
|
|
31,308,012
|
|
|
31,250,042
|
|
|
30,883,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income basic earnings per share (9)
|
|
$
|
0.61
|
|
$
|
0.48
|
|
$
|
2.43
|
|
$
|
1.89
|
Adjusted net
income diluted earnings per share (9)
|
|
$
|
0.60
|
|
$
|
0.47
|
|
$
|
2.43
|
|
$
|
1.88
|
(1)
|
Amounts for the three
months ended December 31, 2020 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 an estimate of
the long-term tax rate assuming the exchange of all outstanding
non-controlling interest partnership units for Class A Common Stock
that (a) removes the impact of unusual, non-recurring tax matters,
and (b) does not estimate the residual impacts to foreign taxes of
additional step-ups in tax basis from an exchange because that is
dependent on stock prices at the time of such exchange and the
calculation is impracticable.
|
(9)
|
Non-GAAP measure. See
the end of this press release for definitions of non-GAAP
measures.
|
TABLE
7
|
RE/MAX Holdings,
Inc.
Pro Forma Shares Outstanding
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Total basic
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
18,806,194
|
|
18,386,709
|
|
18,690,442
|
|
18,170,348
|
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
|
|
31,365,794
|
|
30,946,309
|
|
31,250,042
|
|
30,729,948
|
|
|
|
|
|
|
|
|
|
Total diluted
weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average
shares of Class A common stock outstanding
|
|
18,806,194
|
|
18,386,709
|
|
18,690,442
|
|
18,170,348
|
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)
|
|
305,845
|
|
361,703
|
|
—
|
|
153,898
|
Total diluted pro
forma weighted average shares outstanding
|
|
31,671,639
|
|
31,308,012
|
|
31,250,042
|
|
30,883,846
|
|
(1)
In accordance with the treasury stock method.
|
TABLE
8
|
RE/MAX Holdings,
Inc.
Adjusted Free Cash Flow & Unencumbered Cash
(Unaudited)
|
|
|
|
Year
Ended
|
|
|
December 31,
|
|
|
2021
|
|
2020
|
Cash flow from
operations (1)
|
|
$
|
42,442
|
|
$
|
70,847
|
Less: Purchases of
property, equipment and capitalization of software
|
|
|
(15,239)
|
|
|
(6,903)
|
(Increases) decreases
in restricted cash of the Marketing Funds (2)
|
|
|
(12,257)
|
|
|
728
|
Adjusted free cash
flow (3)
|
|
|
14,946
|
|
|
64,672
|
|
|
|
|
|
|
|
Adjusted free cash
flow (3)
|
|
|
14,946
|
|
|
64,672
|
Less: Tax/Other
non-dividend distributions to RIHI
|
|
|
(2,650)
|
|
|
(3,006)
|
Adjusted free cash
flow after tax/non-dividend distributions to RIHI
(3)
|
|
|
12,296
|
|
|
61,666
|
|
|
|
|
|
|
|
Adjusted free cash
flow after tax/non-dividend distributions to RIHI
(3)
|
|
|
12,296
|
|
|
61,666
|
Less: Debt principal
payments
|
|
|
(3,553)
|
|
|
(2,634)
|
Unencumbered cash
generated (3)
|
|
$
|
8,743
|
|
$
|
59,032
|
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
|
Cash flow from
operations
|
|
$
|
42,442
|
|
$
|
70,847
|
Adjusted free cash
flow (3)
|
|
$
|
14,946
|
|
$
|
64,672
|
Adjusted free cash
flow after tax/non-dividend distributions to RIHI
(3)
|
|
$
|
12,296
|
|
$
|
61,666
|
Unencumbered cash
generated (2)
|
|
$
|
8,743
|
|
$
|
59,032
|
|
|
|
|
|
|
|
Adjusted EBITDA
(3)
|
|
$
|
119,677
|
|
$
|
92,558
|
Adjusted free cash
flow as % of Adjusted EBITDA (3)
|
|
|
12.5%
|
|
|
69.9%
|
Adjusted free cash
flow less distributions to RIHI as % of Adjusted EBITDA
(3)
|
|
|
10.3%
|
|
|
66.6%
|
Unencumbered cash
generated as % of Adjusted EBITDA (3)
|
|
|
7.3%
|
|
|
63.8%
|
(1)
|
Cash flow from
operations was significantly lower in 2021 due to the allocation of
$40.9 million of the total consideration paid to RE/MAX INTEGRA
toward a loss on settlement of the pre-existing franchise
contracts, which resulted 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.
Revenue excluding the Marketing Funds is calculated directly
from our consolidated financial statements as Total revenue less
Marketing Funds fees. See Footnotes for a reconciliation to the
most directly comparable U.S. GAAP measure.
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.