RE/MAX Holdings, Inc. Reports First Quarter 2021 Results
RE/MAX Holdings (RMAX) reported strong first quarter results for 2021, with a 6.4% increase in agent count to 140,214 and total revenue of $72.3 million, representing a 2.9% year-over-year growth. Net income fell to $1.1 million and GAAP EPS decreased to $0.06. Adjusted EBITDA rose 18.5% to $23.2 million, with an adjusted EPS of $0.46. The company anticipates an agent count increase of 7.0% to 8.0% and revenue of $74.0 million to $78.0 million for Q2 2021. A quarterly dividend of $0.23 per share was also approved.
- Agent count increased 6.4% to 140,214 agents.
- Total revenue rose 2.9% to $72.3 million.
- Adjusted EBITDA increased 18.5% to $23.2 million.
- Quarterly dividend of $0.23 per share approved.
- Net income decreased to $1.1 million from $2.6 million.
- GAAP EPS declined to $0.06 from $0.15.
- Total operating expenses increased 17.5% to $68.8 million.
DENVER, May 6, 2021 /PRNewswire/ --
First Quarter 2021 Highlights
(Compared to first quarter 2020 unless otherwise noted)
- Total agent count increased
6.4% to 140,214 agents - U.S. and Canada combined agent count increased
0.7% to 84,771 agents - Total open Motto Mortgage franchises increased
27.1% to 150 offices1 - Total Revenue of
$72.3 million ; Revenue excluding the Marketing Funds increased2.7% to$54.2 million - Net income attributable to RE/MAX Holdings, Inc. of
$1.1 million and earnings per diluted share (GAAP EPS) of$0.06 - Adjusted EBITDA2 of
$23.2 million , Adjusted EBITDA margin2 of32.0% and Adjusted earnings per diluted share (Adjusted EPS2) of$0.46
Operating Statistics as of April 30, 2021
(Compared to April 30, 2020 unless otherwise noted)
- Total agent count increased
6.7% to 139,862 agents - U.S. and Canada combined agent count increased
2.0% to 85,076 agents - Total open Motto Mortgage franchises increased
27.9% to 156 offices1
RE/MAX Holdings, Inc. (the "Company" or "RE/MAX Holdings") (NYSE: RMAX), parent company of RE/MAX, one of the world's leading franchisors of real estate brokerage services, and Motto Mortgage ("Motto"), the first national mortgage brokerage franchise brand in the U.S., today announced operating results for the first quarter ended March 31, 2021.
"A robust housing market and record Motto growth helped drive strong financial results for the first quarter," stated Adam Contos, RE/MAX Holdings Chief Executive Officer. "During this period, we also saw our largest year-over-year increase in agent count in over a decade, adding more than 8,000 new agents, led by healthy agent growth in Canada and double-digit agent growth globally. Motto continued its record pace of franchise sales, selling the most franchises in its history for the trailing twelve month period ended March 31, 2021. We now have over 150 open Motto offices in almost 40 states. We are encouraged that many of the strong tailwinds we saw in the first quarter continued in April."
Contos continued, "We continue to increase and enhance our value proposition for both of our franchise networks. At our recent RE/MAX agent conference, we introduced an opportunity for virtually all U.S. RE/MAX affiliates to access health benefits as well as new tools, technology, and educational resources for the exclusive benefit of our agents, teams and brokers. Within our mortgage business we continue to ramp up our wemlo acquisition, offering affordable, dependable loan processing services to more of our Motto franchises each week."
First Quarter 2021 Operating Results
Agent Count
The following table compares agent count as of March 31, 2021 and 2020:
As of March 31, | Change | ||||||||
2021 | 2020 | # | % | ||||||
U.S. | 62,261 | 62,668 | (407) | (0.6) | |||||
Canada | 22,510 | 21,523 | 987 | 4.6 | |||||
Subtotal | 84,771 | 84,191 | 580 | 0.7 | |||||
Outside the U.S. & Canada | 55,443 | 47,625 | 7,818 | 16.4 | |||||
Total | 140,214 | 131,816 | 8,398 | 6.4 | |||||
Revenue
RE/MAX Holdings generated total revenue of
Operating Expenses
Total operating expenses were
Selling, operating and administrative expenses were
Depreciation and amortization expenses increased primarily due to placing internally developed software into service and incremental acquisition-related amortization expense.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was
Adjusted basic and diluted EPS were
Balance Sheet
As of March 31, 2021, the Company had cash and cash equivalents of
Dividend
On May 5, 2021, the Company's Board of Directors approved a quarterly cash dividend of
Outlook
The Company's second quarter and full-year 2021 Outlook assumes no further currency movements, acquisitions or divestitures.
For the second quarter of 2021, RE/MAX Holdings expects:
- Agent count to increase
7.0% to8.0% over second quarter 2020; - Revenue in a range of
$74.0 million to$78.0 million (including revenue from the Marketing Funds in a range of$17.5 million to$18.5 million ); and - Adjusted EBITDA in a range of
$25.5 million to$28.5 million .
For the full-year 2021, RE/MAX Holdings is increasing its agent count guidance and expects:
- Agent count to increase
5.0% to6.0% over full-year 2020, up from4.0% to5.0% ; - Revenue in a range of
$300.0 million to$310.0 million (including revenue from the Marketing Funds in a range of$71.0 million to$74.0 million ), and - Adjusted EBITDA in a range of
$103.0 million to$107.0 million .
The effective U.S. GAAP tax rate attributable to RE/MAX Holdings is estimated to be between
Webcast and Conference Call
The Company will host a conference call for interested parties on Friday, May 7, 2021, beginning at 8:30 a.m. Eastern Time. Interested parties can access the conference call using the link below:
http://www.directeventreg.com/registration/event/8293584
Interested parties can access a live webcast through the Investor Relations section of the Company's website at http://investors.remax.com. Please dial-in or join the webcast 10 minutes before the start of the conference call. An archive of the webcast will be available on the Company's website for a limited time as well.
Basis of Presentation
Unless otherwise noted, the results presented in this press release are consolidated and exclude adjustments attributable to the non-controlling interest.
Footnotes:
1Total open Motto Mortgage franchises includes only "bricks and mortar" offices with a unique physical address with rights granted by a full franchise agreement with Motto Franchising, LLC and excludes any "virtual" offices or "Branchises".
2Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS are non-GAAP measures. These terms are defined at the end of this release. Please see Tables 5 and 6 appearing later in this release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.
About RE/MAX Holdings, Inc.
RE/MAX Holdings, Inc. (NYSE: RMAX) is one of the world's leading franchisors in the real estate industry, franchising real estate brokerages globally under the RE/MAX® brand, and mortgage brokerages within the U.S. under the Motto® Mortgage brand. RE/MAX was founded in 1973 by David and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. Now with nearly 140,000 agents across over 110 countries and territories, nobody in the world sells more real estate than RE/MAX, as measured by total residential transaction sides. Dedicated to innovation and change in the real estate industry, RE/MAX launched Motto Franchising, LLC, a ground-breaking mortgage brokerage franchisor, in 2016. Motto Mortgage has grown to over 150 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 second quarter and full year 2021; dividends; non-GAAP financial measures; estimated effective tax rates for 2021; housing and mortgage market conditions; the rollout of booj in Canada; the enhancement of the Company's value proposition; the continued ramp up of the Company's wemlo acquisition; 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 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. Other important risks and uncertainties include, without limitation, (1) changes in the real estate market or interest rates and availability of financing, (2) changes in business and economic activity in general, (3) the Company's ability to attract and retain quality franchisees, (4) the Company's franchisees' ability to recruit and retain real estate agents and mortgage loan originators, (5) changes in laws and regulations, (6) the Company's ability to enhance, market, and protect its brands, including the RE/MAX and Motto Mortgage brands, (7) the Company's ability to implement its technology initiatives, and (8) fluctuations in foreign currency exchange rates, and those risks and uncertainties described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent periodic and current reports filed with the SEC, which are available on the investor relations page of the Company's website at www.remax.com and on the SEC website at www.sec.gov. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no obligation, to update this information to reflect future events or circumstances.
TABLE 1 | ||||||
RE/MAX Holdings, Inc. | ||||||
Three Months Ended March 31, | ||||||
2021 | 2020 | |||||
Revenue: | ||||||
Continuing franchise fees | $ | 25,374 | $ | 24,143 | ||
Annual dues | 8,672 | 8,921 | ||||
Broker fees | 11,953 | 9,444 | ||||
Marketing Funds fees | 18,145 | 17,522 | ||||
Franchise sales and other revenue | 8,151 | 10,242 | ||||
Total revenue | 72,295 | 70,272 | ||||
Operating expenses: | ||||||
Selling, operating and administrative expenses | 43,676 | 34,677 | ||||
Marketing Funds expenses | 18,145 | 17,522 | ||||
Depreciation and amortization | 6,937 | 6,310 | ||||
Total operating expenses | 68,758 | 58,509 | ||||
Operating income | 3,537 | 11,763 | ||||
Other expenses, net: | ||||||
Interest expense | (2,098) | (2,682) | ||||
Interest income | 163 | 269 | ||||
Foreign currency transaction gains (losses) | (20) | (270) | ||||
Total other expenses, net | (1,955) | (2,683) | ||||
Income before provision for income taxes | 1,582 | 9,080 | ||||
Provision for income taxes | 58 | (3,790) | ||||
Net income | $ | 1,640 | $ | 5,290 | ||
Less: net income attributable to non-controlling interest | 548 | 2,659 | ||||
Net income attributable to RE/MAX Holdings, Inc. | $ | 1,092 | $ | 2,631 | ||
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock | ||||||
Basic | $ | 0.06 | $ | 0.15 | ||
Diluted | $ | 0.06 | $ | 0.15 | ||
Weighted average shares of Class A common stock outstanding | ||||||
Basic | 18,496,532 | 17,974,264 | ||||
Diluted | 18,866,727 | 18,033,631 | ||||
Cash dividends declared per share of Class A common stock | $ | 0.23 | $ | 0.22 | ||
TABLE 2 | ||||||
RE/MAX Holdings, Inc. | ||||||
March 31, | December 31, | |||||
2021 | 2020 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 102,632 | $ | 101,355 | ||
Restricted cash | 21,500 | 19,872 | ||||
Accounts and notes receivable, current portion, less allowances of | 29,544 | 29,985 | ||||
Income taxes receivable | 2,158 | 1,222 | ||||
Other current assets | 14,715 | 13,938 | ||||
Total current assets | 170,549 | 166,372 | ||||
Property and equipment, net of accumulated depreciation of | 9,184 | 7,872 | ||||
Operating lease right of use assets | 37,816 | 38,878 | ||||
Franchise agreements, net | 68,337 | 72,196 | ||||
Other intangible assets, net | 28,284 | 29,969 | ||||
Goodwill | 176,008 | 175,835 | ||||
Deferred tax assets, net | 49,162 | 48,855 | ||||
Income taxes receivable, net of current portion | 1,980 | 1,980 | ||||
Other assets, net of current portion | 17,068 | 15,435 | ||||
Total assets | $ | 558,388 | $ | 557,392 | ||
Liabilities and stockholders' equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 5,782 | $ | 2,108 | ||
Accrued liabilities | 67,208 | 68,571 | ||||
Income taxes payable | 9,884 | 9,579 | ||||
Deferred revenue | 24,689 | 25,282 | ||||
Current portion of debt | 2,356 | 2,428 | ||||
Current portion of payable pursuant to tax receivable agreements | 3,590 | 3,590 | ||||
Operating lease liabilities | 5,826 | 5,687 | ||||
Total current liabilities | 119,335 | 117,245 | ||||
Debt, net of current portion | 220,676 | 221,137 | ||||
Payable pursuant to tax receivable agreements, net of current portion | 29,974 | 29,974 | ||||
Deferred tax liabilities, net | 496 | 490 | ||||
Deferred revenue, net of current portion | 19,601 | 19,864 | ||||
Operating lease liabilities, net of current portion | 48,794 | 50,279 | ||||
Other liabilities, net of current portion | 5,411 | 5,722 | ||||
Total liabilities | 444,287 | 444,711 | ||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Class A common stock, par value $.0001 per share, 180,000,000 shares authorized; 18,719,248 and 18,390,691 shares issued and outstanding as of March 31, 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 March 31, 2021 and December 31, 2020, respectively | — | — | ||||
Additional paid-in capital | 498,810 | 491,422 | ||||
Retained earnings | 21,433 | 25,139 | ||||
Accumulated other comprehensive income, net of tax | 653 | 612 | ||||
Total stockholders' equity attributable to RE/MAX Holdings, Inc. | 520,898 | 517,175 | ||||
Non-controlling interest | (406,797) | (404,494) | ||||
Total stockholders' equity | 114,101 | 112,681 | ||||
Total liabilities and stockholders' equity | $ | 558,388 | $ | 557,392 | ||
TABLE 3 | ||||||
RE/MAX Holdings, Inc. | ||||||
Three Months Ended March 31, | ||||||
2021 | 2020 | |||||
Cash flows from operating activities: | ||||||
Net income | $ | 1,640 | $ | 5,290 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 6,937 | 6,310 | ||||
Bad debt expense | 287 | 3,435 | ||||
Equity-based compensation expense | 12,054 | 2,186 | ||||
Deferred income tax expense | (320) | 2,241 | ||||
Fair value adjustments to contingent consideration | (280) | (505) | ||||
Non-cash lease expense (benefit) | (284) | — | ||||
Other, net | 87 | (504) | ||||
Changes in operating assets and liabilities | 711 | (4,804) | ||||
Net cash provided by operating activities | 20,832 | 13,649 | ||||
Cash flows from investing activities: | ||||||
Purchases of property, equipment and capitalization of software | (4,381) | (1,965) | ||||
Net cash used in investing activities | (4,381) | (1,965) | ||||
Cash flows from financing activities: | ||||||
Payments on debt | (660) | (660) | ||||
Distributions paid to non-controlling unitholders | (2,889) | (2,777) | ||||
Dividends and dividend equivalents paid to Class A common stockholders | (4,798) | (4,275) | ||||
Payments related to tax withholding for share-based compensation | (5,291) | (2,268) | ||||
Net cash used in financing activities | (13,638) | (9,980) | ||||
Effect of exchange rate changes on cash | 92 | (205) | ||||
Net increase in cash, cash equivalents and restricted cash | 2,905 | 1,499 | ||||
Cash, cash equivalents and restricted cash, beginning of period | 121,227 | 103,601 | ||||
Cash, cash equivalents and restricted cash, end of period | $ | 124,132 | $ | 105,100 | ||
TABLE 4 | |||||||||||||||||
RE/MAX Holdings, Inc. | |||||||||||||||||
As of | |||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||
2021 | 2020 | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||
Agent Count: | |||||||||||||||||
U.S. | |||||||||||||||||
Company-Owned Regions | 48,041 | 48,212 | 48,263 | 47,886 | 48,840 | 49,267 | 48,576 | 48,748 | |||||||||
Independent Regions | 14,220 | 14,091 | 14,041 | 13,791 | 13,828 | 13,854 | 13,972 | 13,952 | |||||||||
U.S. Total | 62,261 | 62,303 | 62,304 | 61,677 | 62,668 | 63,121 | 62,548 | 62,700 | |||||||||
Canada | |||||||||||||||||
Company-Owned Regions | 6,262 | 6,182 | 6,135 | 6,102 | 6,217 | 6,338 | 6,402 | 6,510 | |||||||||
Independent Regions | 16,248 | 15,765 | 15,363 | 15,193 | 15,306 | 15,229 | 15,117 | 14,923 | |||||||||
Canada Total | 22,510 | 21,947 | 21,498 | 21,295 | 21,523 | 21,567 | 21,519 | 21,433 | |||||||||
U.S. and Canada Total | 84,771 | 84,250 | 83,802 | 82,972 | 84,191 | 84,688 | 84,067 | 84,133 | |||||||||
Outside U.S. and Canada | |||||||||||||||||
Independent Regions | 55,443 | 53,542 | 50,967 | 48,933 | 47,625 | 46,201 | 44,191 | 42,887 | |||||||||
Outside U.S. and Canada Total | 55,443 | 53,542 | 50,967 | 48,933 | 47,625 | 46,201 | 44,191 | 42,887 | |||||||||
Total | 140,214 | 137,792 | 134,769 | 131,905 | 131,816 | 130,889 | 128,258 | 127,020 | |||||||||
TABLE 5 | |||||||
RE/MAX Holdings, Inc. | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2021 | 2020 | ||||||
Net income | $ | 1,640 | $ | 5,290 | |||
Depreciation and amortization | 6,937 | 6,310 | |||||
Interest expense | 2,098 | 2,682 | |||||
Interest income | (163) | (269) | |||||
Provision for income taxes | (58) | 3,790 | |||||
EBITDA | 10,454 | 17,803 | |||||
(Gain) loss on sale or disposition of assets | (11) | (11) | |||||
Equity-based compensation expense | 12,054 | 2,186 | |||||
Acquisition-related expense (1) | 943 | 566 | |||||
Gain on reduction in tax receivable agreement liability | — | (500) | |||||
Fair value adjustments to contingent consideration (2) | (280) | (505) | |||||
Adjusted EBITDA (3) | $ | 23,160 | $ | 19,539 | |||
Adjusted EBITDA Margin (3) | 32.0 | % | 27.8 | % | |||
(1) | Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with acquisition activities and integration of acquired companies. |
(2) | Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. |
(3) | Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures. |
TABLE 6 | ||||||
RE/MAX Holdings, Inc. | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2021 | 2020 | |||||
Net income | $ | 1,640 | $ | 5,290 | ||
Amortization of acquired intangible assets | 4,855 | 4,849 | ||||
Provision for income taxes | (58) | 3,790 | ||||
Add-backs: | ||||||
(Gain) loss on sale or disposition of assets | (11) | (11) | ||||
Equity-based compensation expense | 12,054 | 2,186 | ||||
Acquisition-related expense (1) | 943 | 566 | ||||
Gain on reduction in tax receivable agreement liability | — | (500) | ||||
Fair value adjustments to contingent consideration (2) | (280) | (505) | ||||
Adjusted pre-tax net income | 19,143 | 15,665 | ||||
Less: Provision for income taxes at | (4,594) | (3,760) | ||||
Adjusted net income (5) | $ | 14,549 | $ | 11,905 | ||
Total basic pro forma shares outstanding | 31,056,132 | 30,533,864 | ||||
Total diluted pro forma shares outstanding | 31,426,327 | 30,593,231 | ||||
Adjusted net income basic earnings per share (4) | $ | 0.47 | $ | 0.39 | ||
Adjusted net income diluted earnings per share (4) | $ | 0.46 | $ | 0.39 | ||
(1) | Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with acquisition activities and integration of acquired companies. |
(2) | Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. |
(3) | |
(4) | Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures. |
TABLE 7 | ||||
RE/MAX Holdings, Inc. | ||||
Three Months Ended | ||||
March 31, | ||||
2021 | 2020 | |||
Total basic weighted average shares outstanding: | ||||
Weighted average shares of Class A common stock outstanding | 18,496,532 | 17,974,264 | ||
Remaining equivalent weighted average shares of stock outstanding on a pro forma basis assuming RE/MAX Holdings owned | 12,559,600 | 12,559,600 | ||
Total basic pro forma weighted average shares outstanding | 31,056,132 | 30,533,864 | ||
Total diluted weighted average shares outstanding: | ||||
Weighted average shares of Class A common stock outstanding | 18,496,532 | 17,974,264 | ||
Remaining equivalent weighted average shares of stock outstanding on a pro forma basis assuming RE/MAX Holdings owned | 12,559,600 | 12,559,600 | ||
Dilutive effect of unvested restricted stock units (1) | 370,195 | 59,367 | ||
Total diluted pro forma weighted average shares outstanding | 31,426,327 | 30,593,231 | ||
(1) In accordance with the treasury stock method. | |
TABLE 8 | ||||||
RE/MAX Holdings, Inc. | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2021 | 2020 | |||||
Cash flow from operations | $ | 20,832 | $ | 13,649 | ||
Less: Purchases of property, equipment and capitalization of software | (4,381) | (1,965) | ||||
(Increases) decreases in restricted cash of the Marketing Funds (1) | (1,628) | (3,595) | ||||
Free cash flow (2) | 14,823 | 8,089 | ||||
Free cash flow | 14,823 | 8,089 | ||||
Less: Tax/Other non-dividend distributions to RIHI | — | (14) | ||||
Free cash flow after tax/non-dividend distributions to RIHI (2) | 14,823 | 8,075 | ||||
Free cash flow after tax/non-dividend distributions to RIHI | 14,823 | 8,075 | ||||
Less: Debt principal payments | (660) | (660) | ||||
Unencumbered cash generated (2) | $ | 14,163 | $ | 7,415 | ||
Summary | ||||||
Cash flow from operations | $ | 20,832 | $ | 13,649 | ||
Free cash flow (2) | $ | 14,823 | $ | 8,089 | ||
Free cash flow after tax/non-dividend distributions to RIHI (2) | $ | 14,823 | $ | 8,075 | ||
Unencumbered cash generated (2) | $ | 14,163 | $ | 7,415 | ||
Adjusted EBITDA | $ | 23,160 | $ | 19,539 | ||
Free cash flow as % of Adjusted EBITDA (2) | ||||||
Free cash flow less distributions to RIHI as % of Adjusted EBITDA (2) | ||||||
Unencumbered cash generated as % of Adjusted EBITDA (2) | ||||||
(1) | This line reflects any subsequent changes in the restricted cash balance (which under GAAP reflects as either (a) an increase or decrease in cash flow from operations or (b) an incremental amount of purchases of property and equipment and capitalization of developed software) so as to remove the impact of changes in restricted cash in determining free cash flow. |
(2) | Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures. |
Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in filings with the SEC and in public disclosures of financial measures that are not in accordance with U.S. GAAP, such as Adjusted EBITDA and the ratios related thereto, Adjusted net income, Adjusted basic and diluted earnings per share (Adjusted EPS) and free cash flow. These measures are derived on the basis of methodologies other than in accordance with U.S. GAAP.
The Company defines Adjusted EBITDA as EBITDA (consolidated net income before depreciation and amortization, interest expense, interest income and the provision for income taxes, each of which is presented in the unaudited 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, non-cash 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 and Adjusted EBITDA margin omit certain non-cash items and other non-recurring cash charges or other items, the Company believes that each measure is less susceptible to variances that affect its operating performance resulting from depreciation, amortization and other non-cash and non-recurring cash charges or other items. The Company presents Adjusted EBITDA and the related Adjusted EBITDA margin because the Company believes they are useful as supplemental measures in evaluating the performance of its operating businesses and provides greater transparency into the Company's results of operations. The Company's management uses Adjusted EBITDA and Adjusted EBITDA margin as factors in evaluating the performance of the business.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analyzing the Company's results as reported under U.S. GAAP. Some of these limitations are:
- these measures do not reflect changes in, or cash requirements for, the Company's working capital needs;
- these measures do not reflect the Company's interest expense, or the cash requirements necessary to service interest or principal payments on its debt;
- these measures do not reflect the Company's income tax expense or the cash requirements to pay its taxes;
- these measures do not reflect the cash requirements to pay dividends to stockholders of the Company's Class A common stock and tax and other cash distributions to its non-controlling unitholders;
- these measures do not reflect the cash requirements pursuant to the tax receivable agreements;
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements;
- although equity-based compensation is a non-cash charge, the issuance of equity-based awards may have a dilutive impact on earnings per share; and
- other companies may calculate these measures differently so similarly named measures may not be comparable.
The Company's Adjusted EBITDA guidance does not include certain charges and costs. The adjustments to EBITDA in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior quarters, such as gain on sale or disposition of assets and sublease and acquisition-related expense, among others. The exclusion of these charges and costs in future periods will have a significant impact on the Company's Adjusted EBITDA. The Company is not able to provide a reconciliation of the Company's non-GAAP financial guidance to the corresponding U.S. GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.
Adjusted net income is calculated as Net income attributable to RE/MAX Holdings, assuming the full exchange of all outstanding non-controlling interests for shares of Class A common stock as of the beginning of the period (and the related increase to the provision for income taxes after such exchange), plus primarily non-cash items and other items that management does not consider to be useful in assessing the Company's operating performance (e.g., amortization of acquired intangible assets, gain on sale or disposition of assets and sub-lease, 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.
Free cash flow is calculated as cash flows from operations less capital expenditures and any changes in restricted cash of the Marketing Funds, all as reported under GAAP, and quantifies how much cash a company has to pursue opportunities that enhance shareholder value. The restricted cash of the Marketing Funds is limited in use for the benefit of franchisees and any impact to free cash flow is removed. The Company believes free cash flow is useful to investors as a supplemental measure as it calculates the cash flow available for working capital needs, re-investment opportunities, potential independent region and strategic acquisitions, dividend payments or other strategic uses of cash.
Free cash flow after tax and non-dividend distributions to RIHI is calculated as free cash flow less tax and other non-dividend distributions paid to RIHI (the non-controlling interest holder) to enable RIHI to satisfy its income tax obligations. Similar payments would be made by the Company directly to federal and state taxing authorities as a component of the Company's consolidated provision for income taxes if a full exchange of non-controlling interests occurred in the future. As a result and given the significance of the Company's ongoing tax and non-dividend distribution obligations to its non-controlling interest, free cash flow after tax and non-dividend distributions, when used in conjunction with GAAP financial measures, provides a meaningful view of cash flow available to the Company to pursue opportunities that enhance shareholder value.
Unencumbered cash generated is calculated as free cash flow after tax and non-dividend distributions to RIHI less quarterly debt principal payments less annual excess cash flow payment on debt, as applicable. Given the significance of the Company's excess cash flow payment on debt, when applicable, unencumbered cash generated, when used in conjunction with GAAP financial measures, provides a meaningful view of the cash flow available to the Company to pursue opportunities that enhance shareholder value after considering its debt service obligations.
View original content to download multimedia:http://www.prnewswire.com/news-releases/remax-holdings-inc-reports-first-quarter-2021-results-301285935.html
SOURCE RE/MAX Holdings, Inc.
FAQ
What are the Q1 2021 highlights for RE/MAX Holdings (RMAX)?
What was the net income for RE/MAX Holdings (RMAX) in Q1 2021?
What is the expected revenue range for RE/MAX in Q2 2021?
When will the quarterly dividend for RE/MAX Holdings (RMAX) be paid?
What is RE/MAX Holdings' (RMAX) outlook for the full year 2021?
