RE/MAX HOLDINGS, INC. REPORTS FOURTH QUARTER AND FULL-YEAR 2021 RESULTS
RE/MAX Holdings reported a robust full-year 2021 with total revenue rising 23.9% to $329.7 million, driven by 11.8% organic growth, 9.8% acquisitions, and 1.1% from currency movements. Despite a net loss of $15.6 million, Adjusted EBITDA grew 29.3% to $119.7 million. The agent count increased 3.1% to 141,998. Looking ahead, RE/MAX anticipates revenue between $366.0 million and $376.0 million for 2022. The company also authorized a $100 million stock repurchase program, reflecting confidence in financial stability.
- Total revenue increased 23.9% to $329.7 million for the full year.
- Adjusted EBITDA rose 29.3% to $119.7 million.
- Agent count increased 3.1% to 141,998 agents.
- Quarterly cash dividend approved at $0.23 per share.
- Authorized a $100 million stock repurchase program.
- Net loss attributable to RE/MAX Holdings was $15.6 million.
- U.S. agent count declined by 1.6%, offset by growth in Canada.
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 of11.8% organic growth2,9.8% growth from acquisitions and1.1% 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 of36.3% 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 of5.0% organic growth,15.3% growth from acquisitions and0.9% 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 of34.8% 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
Recurring revenue streams, which consist of continuing franchise fees and annual dues, increased
Operating Expenses
Total operating expenses were
Selling, operating and administrative expenses were
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
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was
Adjusted basic and diluted EPS were
Balance Sheet
As of December 31, 2021, the Company had cash and cash equivalents of
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
Dividend
On February 22, 2022, the Company announced that its Board of Directors approved a quarterly cash dividend of
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% to2.5% 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% to4.0% 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. | ||||||||||||
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. | ||||||
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; | 2 | 2 | ||||
Class B common stock, par value $.0001 per share, 1,000 shares authorized; 1 share issued | — | — | ||||
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. | |||||||||
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 | (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. | |||||||||||||||||||
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. | |||||||||||||
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. | ||||||||||||
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 | (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) | |
(9) | 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 | 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 | 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 | 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. | ||||||
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) | ||||||
Adjusted free cash flow less distributions to RIHI as % of Adjusted EBITDA (3) | ||||||
Unencumbered cash generated as % of Adjusted EBITDA (3) | ||||||
(1) | Cash flow from operations was significantly lower in 2021 due to the allocation of |
(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.
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