DENVER, Aug. 3, 2017 /PRNewswire/ --
Second Quarter 2017 Highlights
(Compared to second quarter 2016 unless otherwise noted)
- Total agent count grew by 5.7% to 116,270 agents
- U.S. and Canada combined agent count increased 2.8% to 84,302 agents
- Revenue increased 12.5% to $48.8 million
- Net income attributable to RE/MAX Holdings, Inc. of $7.5 million and earnings per diluted
share (GAAP EPS) of $0.42
- Adjusted EBITDA1 of $29.2 million, Adjusted EBITDA margin1 of 59.7% and
Adjusted earnings per diluted share (Adjusted EPS1) of $0.54
- Announced $0.18 quarterly dividend on August 2, 2017
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"), an innovative mortgage brokerage franchise,
today announced operating results for the quarter ended June 30, 2017.
"Execution on our core business drivers and a robust housing market drove increased agent count and double-digit revenue
growth year-over-year," stated Adam Contos, Co-Chief Executive Officer. "Our ability to expand our
network, reacquire independent regions, and grow Motto Mortgage provides us with multiple levers of growth."
Contos continued, "For the third year in a row, RE/MAX agents and teams named 'America's Best Real Estate Agents' outnumbered
every other brand according to REAL Trends' rankings. One out of every five agents included in this year's survey is a member of
our network. Our agents are incredibly dedicated to their clients and this ranking confirms that many of the industry's
best are affiliated with RE/MAX."
Second Quarter 2017 Operating Results
Agent Count
The following table compares agent count as of June 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
Change
|
|
|
2017
|
|
2016
|
|
#
|
|
%
|
|
U.S.
|
63,249
|
|
61,635
|
|
1,614
|
|
2.6%
|
|
Canada
|
21,053
|
|
20,336
|
|
717
|
|
3.5%
|
|
Subtotal
|
84,302
|
|
81,971
|
|
2,331
|
|
2.8%
|
|
Outside the U.S. & Canada
|
31,968
|
|
27,989
|
|
3,979
|
|
14.2%
|
|
Total
|
116,270
|
|
109,960
|
|
6,310
|
|
5.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
RE/MAX Holdings generated total revenue of $48.8 million for the second quarter of 2017, an
increase of $5.4 million or 12.5% compared to $43.4 million in the
second quarter of 2016, primarily due to contributions from the acquired independent regions, agent count growth and fee
increases in the Company-owned regions.
Recurring revenue streams, which consist of continuing franchise fees and annual dues, increased $3.7
million or 13.3% over the second quarter of 2016 and accounted for 64.7% of revenue in the second quarter of 2017 compared
to 64.3% in the prior-year period.
Operating Expenses
Total operating expenses were $26.0 million for the second quarter of 2017, an increase of
$3.3 million or 14.6% compared to the second quarter of 2016. This increase was due to additional
amortization expense from the acquired independent regions as well as increased selling, operating and administrative expenses,
many of which related to the acquired independent regions and the initial investment in Motto.
Selling, operating and administrative expenses were $20.6 million in the second quarter of 2017,
an increase of $1.8 million or 9.5% from the second quarter of 2016 and represented 42.3% of
revenue compared to 43.4% in the prior-year period. Expenses increased primarily due to continued investments in Motto and higher
professional fees and other expenses, including costs related to the acquired independent regions and investments to support the
Company's technology infrastructure.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $7.5 million for the second quarter of 2017, an
increase of $0.6 million or 8.2% from the second quarter of 2016. Net income grew primarily due to
the contribution from acquired independent regions, agent count growth and fee increases in the Company-owned regions. The
increase was partially offset by higher amortization expense and operating expenses, as well as a decrease in revenue from
preferred marketing arrangements. Reported basic and diluted EPS attributable to RE/MAX Holdings were $0.43 and $0.42 per share, respectively, for the second quarter of 2017.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $29.2 million for the second quarter of 2017, an increase of $3.9 million or 15.3% from the second quarter of 2016. Adjusted EBITDA grew primarily due to contributions from
the acquired independent regions, agent count growth and fee increases in the Company-owned regions, partially offset by
investments in Motto and a decrease in revenue from preferred marketing arrangements. Adjusted EBITDA margin was 59.7% in
the second quarter of 2017 compared to 58.3% in the second quarter of 2016.
Adjusted basic and diluted EPS were both $0.54 for the second quarter of 2017. The ownership
structure used to calculate Adjusted basic and diluted EPS for the quarter ended June 30, 2017
assumes RE/MAX Holdings owned 100% of RMCO, LLC ("RMCO"). The weighted average ownership RE/MAX Holdings had in RMCO was 58.5%
for the three months ended June 30, 2017.
Balance Sheet
As of June 30, 2017, the Company had a cash balance of $70.3
million, an increase of $12.7 million from December 31, 2016.
As of June 30, 2017, RE/MAX had $229.9 million of term loans
outstanding, net of unamortized debt discount and issuance costs, essentially flat compared with $230.8
million as of December 31, 2016.
"We generated nearly $32 million in free cash flow during the first half of 2017, highlighting
the growth and positive cash flow characteristics of our business model," said Karri Callahan,
Chief Financial Officer. "Second quarter margins, while benefiting from the favorable timing of expenses, also showcased the
inherent leverage in our 100%-franchised business. Certain investments initially planned for the second quarter are now
anticipated to occur in the second half of the year and are reflected in our third-quarter and full-year 2017 Outlook."
Dividend
On August 2, 2017, the Company's Board of Directors approved a quarterly cash dividend of
$0.18 per share. The quarterly dividend is payable on August 30,
2017, to shareholders of record at the close of business on August 16, 2017.
Outlook
The Company's third-quarter and full-year 2017 Outlook assumes no further currency movements, acquisitions or
divestitures.
For the third quarter of 2017, RE/MAX Holdings expects:
- Agent count to increase 4.5% to 5.5% over third quarter 2016;
- Revenue in a range of $49.0 million to $50.5 million;
- Selling, operating and administrative expenses in a range of 46.0% to 47.5% of third quarter 2017 revenue; and
- Adjusted EBITDA margin in a range of 54.0% to 55.5% of third quarter 2017 revenue.
For the full-year 2017, RE/MAX Holdings is increasing its agent count guidance, reiterating its full-year 2017 financial
guidance and expects:
- Agent count to increase 4.5% to 5.5% over 2016, up from 4.0% to 5.0%, driven by agent count growth outside the U.S. and
Canada;
- Revenue in a range of $194.0 million to $197.0 million;
- Selling, operating and administrative expenses in a range of 48.0% to 49.5% of 2017 revenue; and
- Adjusted EBITDA margin in a range of 52.5% to 54.0% of 2017 revenue.
The effective U.S. GAAP tax rate attributable to RE/MAX Holdings is estimated to be between 23% and 25% in
2017.
Webcast and Conference Call
The Company will host a conference call for interested parties on Friday, August 4, 2017,
beginning at 8:30 a.m. Eastern Time. Interested parties are able to access the conference call
using the following dial-in numbers:
U.S.
|
1-877-201-0168
|
Canada &
International
|
1-647-788-4901
|
Interested parties are also able to access a live webcast through the Investor Relations section of the Company's website at
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. For the RE/MAX Quarterly Update Q2 2017 infographic, visit http://rem.ax/2cYFT50.
Basis of Presentation
Unless otherwise noted, the results presented in this press release are consolidated and exclude adjustments attributable to
the non-controlling interest.
About the RE/MAX Network
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. Over 115,000
agents provide RE/MAX a global reach of over 100 countries and territories. Nobody sells more real estate than RE/MAX as measured
by total residential transaction sides.
RE/MAX, one of the world's leading franchisors of real estate brokerage services, and Motto Mortgage, an innovative mortgage
brokerage franchise, are subsidiaries of RMCO, LLC, which is controlled and managed by RE/MAX Holdings, Inc. (NYSE: RMAX).
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 may be identified by the use of words such as
"believe," "intend," "expect," "estimate," "plan," "outlook," "project" and other similar words and expressions that predict or
indicate future events or trends that are not statements of historical matters. These forward-looking statements include
statements regarding the Company's outlook for the third quarter and full fiscal year, including expectations regarding agent
count, revenue, SO&A (Selling, operating and administrative) expenses, and Adjusted EBITDA margins for its third quarter of
2017 and full fiscal year; the Company's focus in 2017 and over the long term on successfully growing its strategic initiatives
related to its acquisition of six independent regions and the launch of Motto Mortgage; as well as other statements regarding the
Company's strategic and operational plans and business models. Forward-looking statements should not be read as a guarantee of
future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or
results will 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. Such risks and uncertainties include, without limitation, (1) changes in business and economic activity in general,
(2) changes in the real estate market, including changes due to interest rates and availability of financing, (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 that may affect the business or the real estate market,
(6) failure to maintain, protect and enhance the RE/MAX and Motto Mortgage brands, (7) fluctuations in foreign currency exchange
rates, as well as 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 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 duty, to
update this information to reflect future events or circumstances.
1
|
Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS are non-GAAP
measures. These terms are defined elsewhere in this release. Please see the schedules appearing later in this
release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.
|
TABLE 1
|
|
RE/MAX Holdings, Inc.
|
Condensed Consolidated Statements of Income
|
(Amounts in thousands, except share and per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing franchise fees
|
|
$
|
23,284
|
|
$
|
19,846
|
|
$
|
46,249
|
|
$
|
38,753
|
Annual dues
|
|
|
8,320
|
|
|
8,046
|
|
|
16,556
|
|
|
15,950
|
Broker fees
|
|
|
12,555
|
|
|
10,384
|
|
|
20,789
|
|
|
17,585
|
Franchise sales and other franchise revenue
|
|
|
4,660
|
|
|
5,128
|
|
|
13,454
|
|
|
13,921
|
Brokerage revenue
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
112
|
Total revenue
|
|
|
48,819
|
|
|
43,404
|
|
|
97,048
|
|
|
86,321
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, operating and administrative expenses
|
|
|
20,637
|
|
|
18,842
|
|
|
47,431
|
|
|
42,074
|
Depreciation and amortization
|
|
|
5,397
|
|
|
3,872
|
|
|
11,392
|
|
|
7,593
|
(Gain) loss on sale or disposition of assets, net
|
|
|
(12)
|
|
|
(11)
|
|
|
(25)
|
|
|
96
|
Total operating expenses
|
|
|
26,022
|
|
|
22,703
|
|
|
58,798
|
|
|
49,763
|
Operating income
|
|
|
22,797
|
|
|
20,701
|
|
|
38,250
|
|
|
36,558
|
Other expenses, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(2,462)
|
|
|
(2,091)
|
|
|
(4,816)
|
|
|
(4,372)
|
Interest income
|
|
|
25
|
|
|
35
|
|
|
50
|
|
|
86
|
Foreign currency transaction gains
|
|
|
39
|
|
|
20
|
|
|
16
|
|
|
184
|
Loss on early extinguishment of debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(136)
|
Total other expenses, net
|
|
|
(2,398)
|
|
|
(2,036)
|
|
|
(4,750)
|
|
|
(4,238)
|
Income before provision for income taxes
|
|
|
20,399
|
|
|
18,665
|
|
|
33,500
|
|
|
32,320
|
Provision for income taxes
|
|
|
(4,762)
|
|
|
(4,285)
|
|
|
(7,792)
|
|
|
(7,544)
|
Net income
|
|
$
|
15,637
|
|
$
|
14,380
|
|
$
|
25,708
|
|
$
|
24,776
|
Less: net income attributable to non-controlling interest
|
|
|
8,108
|
|
|
7,419
|
|
|
13,266
|
|
|
12,875
|
Net income attributable to RE/MAX Holdings, Inc.
|
|
$
|
7,529
|
|
$
|
6,961
|
|
$
|
12,442
|
|
$
|
11,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to RE/MAX Holdings, Inc. per share of Class A
common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.43
|
|
$
|
0.39
|
|
$
|
0.70
|
|
$
|
0.68
|
Diluted
|
|
$
|
0.42
|
|
$
|
0.39
|
|
$
|
0.70
|
|
$
|
0.67
|
Weighted average shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,696,842
|
|
|
17,636,590
|
|
|
17,679,936
|
|
|
17,610,470
|
Diluted
|
|
|
17,723,802
|
|
|
17,668,995
|
|
|
17,720,564
|
|
|
17,653,433
|
Cash dividends declared per share of Class A common stock
|
|
$
|
0.18
|
|
$
|
0.15
|
|
$
|
0.36
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 2
|
|
RE/MAX Holdings, Inc.
|
Condensed Consolidated Balance Sheets
|
(Amounts in thousands, except share and per share
amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2017
|
|
2016
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
70,317
|
|
$
|
57,609
|
Accounts and notes receivable, current portion, less allowances of $6,141
and $5,535, respectively
|
|
|
20,580
|
|
|
19,419
|
Income taxes receivable
|
|
|
2,193
|
|
|
—
|
Other current assets
|
|
|
2,972
|
|
|
4,186
|
Total current assets
|
|
|
96,062
|
|
|
81,214
|
Property and equipment, net of accumulated depreciation of $12,623 and
$12,196, respectively
|
|
|
2,987
|
|
|
2,691
|
Franchise agreements, net
|
|
|
99,036
|
|
|
109,140
|
Other intangible assets, net
|
|
|
9,332
|
|
|
9,811
|
Goodwill
|
|
|
127,081
|
|
|
126,633
|
Deferred tax assets, net
|
|
|
102,933
|
|
|
105,770
|
Other assets, net of current portion
|
|
|
1,729
|
|
|
1,894
|
Total assets
|
|
$
|
439,160
|
|
$
|
437,153
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
344
|
|
$
|
855
|
Accounts payable to affiliates
|
|
|
14
|
|
|
145
|
Accrued liabilities
|
|
|
8,034
|
|
|
13,268
|
Income taxes payable
|
|
|
52
|
|
|
379
|
Deferred revenue and deposits
|
|
|
18,003
|
|
|
16,306
|
Current portion of debt
|
|
|
2,350
|
|
|
2,350
|
Current portion of payable pursuant to tax receivable agreements
|
|
|
11,390
|
|
|
13,235
|
Total current liabilities
|
|
|
40,187
|
|
|
46,538
|
Debt, net of current portion
|
|
|
227,551
|
|
|
228,470
|
Payable pursuant to tax receivable agreements, net of current
portion
|
|
|
85,574
|
|
|
85,574
|
Deferred tax liabilities, net
|
|
|
143
|
|
|
133
|
Other liabilities, net of current portion
|
|
|
15,741
|
|
|
15,729
|
Total liabilities
|
|
|
369,196
|
|
|
376,444
|
Commitments and contingencies
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
Class A common stock, par value $0.0001 per share, 180,000,000 shares
authorized; 17,696,991 shares issued and outstanding as of June 30, 2017; 17,652,548 shares issued and
outstanding as of December 31, 2016
|
|
|
2
|
|
|
2
|
Class B common stock, par value $0.0001 per share, 1,000 shares authorized;
1 share issued and outstanding as of June 30, 2017 and December 31, 2016
|
|
|
—
|
|
|
—
|
Additional paid-in capital
|
|
|
447,478
|
|
|
447,001
|
Retained earnings
|
|
|
22,828
|
|
|
16,808
|
Accumulated other comprehensive income (loss), net of tax
|
|
|
188
|
|
|
(28)
|
Total stockholders' equity attributable to RE/MAX Holdings, Inc.
|
|
|
470,496
|
|
|
463,783
|
Non-controlling interest
|
|
|
(400,532)
|
|
|
(403,074)
|
Total stockholders' equity
|
|
|
69,964
|
|
|
60,709
|
Total liabilities and stockholders' equity
|
|
$
|
439,160
|
|
$
|
437,153
|
TABLE 3
|
|
RE/MAX Holdings, Inc.
|
Condensed Consolidated Statements of Cash Flow
|
(Amounts in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
25,708
|
|
$
|
24,776
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
11,392
|
|
|
7,593
|
Bad debt expense
|
|
|
587
|
|
|
109
|
Loss on early extinguishment of debt
|
|
|
—
|
|
|
136
|
Equity-based compensation expense
|
|
|
1,293
|
|
|
1,311
|
Deferred income tax expense
|
|
|
2,701
|
|
|
2,529
|
Fair value adjustments to contingent consideration
|
|
|
(170)
|
|
|
—
|
Other, net
|
|
|
231
|
|
|
319
|
Changes in operating assets and liabilities
|
|
|
(8,801)
|
|
|
(9,741)
|
Net cash provided by operating activities
|
|
|
32,941
|
|
|
27,032
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of property, equipment and software
|
|
|
(1,290)
|
|
|
(2,106)
|
Capitalization of trademark costs
|
|
|
(33)
|
|
|
(16)
|
Acquisitions, net of cash acquired of $0 and $131, respectively
|
|
|
—
|
|
|
(9,869)
|
Other investing activity, net
|
|
|
—
|
|
|
54
|
Net cash used in investing activities
|
|
|
(1,323)
|
|
|
(11,937)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Payments on debt
|
|
|
(1,175)
|
|
|
(13,734)
|
Distributions paid to non-controlling unitholders
|
|
|
(10,971)
|
|
|
(8,912)
|
Dividends and dividend equivalents paid to Class A common
stockholders
|
|
|
(6,422)
|
|
|
(5,285)
|
Payments on capital lease obligations
|
|
|
(5)
|
|
|
(51)
|
Proceeds from exercise of stock options
|
|
|
—
|
|
|
101
|
Payment of payroll taxes related to net settled restricted stock
units
|
|
|
(816)
|
|
|
(360)
|
Net cash used in financing activities
|
|
|
(19,389)
|
|
|
(28,241)
|
Effect of exchange rate changes on cash
|
|
|
479
|
|
|
508
|
Net increase (decrease) in cash and cash equivalents
|
|
|
12,708
|
|
|
(12,638)
|
Cash and cash equivalents, beginning of year
|
|
|
57,609
|
|
|
110,212
|
Cash and cash equivalents, end of period
|
|
$
|
70,317
|
|
$
|
97,574
|
|
|
|
|
|
|
|
TABLE 4
|
|
RE/MAX Holdings, Inc.
|
Agent Count
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
Agent Count:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned Regions (1)
|
|
47,252
|
|
46,708
|
|
46,240
|
|
39,790
|
|
39,493
|
|
38,469
|
|
37,250
|
Independent Regions (1)
|
|
15,997
|
|
15,733
|
|
15,490
|
|
22,451
|
|
22,142
|
|
21,848
|
|
22,668
|
U.S. Total
|
|
63,249
|
|
62,441
|
|
61,730
|
|
62,241
|
|
61,635
|
|
60,317
|
|
59,918
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned Regions
|
|
6,893
|
|
6,786
|
|
6,713
|
|
6,728
|
|
6,701
|
|
6,580
|
|
6,553
|
Independent Regions
|
|
14,160
|
|
14,050
|
|
13,959
|
|
13,828
|
|
13,635
|
|
13,239
|
|
13,115
|
Canada Total
|
|
21,053
|
|
20,836
|
|
20,672
|
|
20,556
|
|
20,336
|
|
19,819
|
|
19,668
|
U.S. and Canada Total
|
|
84,302
|
|
83,277
|
|
82,402
|
|
82,797
|
|
81,971
|
|
80,136
|
|
79,586
|
Outside U.S. and Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Regions
|
|
31,968
|
|
30,527
|
|
29,513
|
|
28,391
|
|
27,989
|
|
26,572
|
|
25,240
|
Outside U.S. and Canada Total
|
|
31,968
|
|
30,527
|
|
29,513
|
|
28,391
|
|
27,989
|
|
26,572
|
|
25,240
|
Total
|
|
116,270
|
|
113,804
|
|
111,915
|
|
111,188
|
|
109,960
|
|
106,708
|
|
104,826
|
|
|
(1)
|
As of each quarter end since December 31, 2016, U.S. Company-owned Regions
include agents in the Georgia, Kentucky/Tennessee and Southern Ohio regions, which converted from Independent Regions to
Company-owned Regions in connection with the acquisition of certain assets of RE/MAX of Georgia, Inc., RE/MAX of
Kentucky/Tennessee, Inc. and RE/MAX of Southern Ohio, Inc., collectively ("RE/MAX Regional Services"), including the
regional franchise agreements issued by us permitting the sale of RE/MAX franchises in the states of Georgia, Kentucky
and Tennessee and Southern Ohio, on December 15, 2016. As of the acquisition date, the Georgia, Kentucky/Tennessee
and Southern Ohio regions had 3,963 agents. As of each quarter end since December 31, 2016, U.S. Company-owned
Regions include agents in the New Jersey region, which converted from an Independent Region to a Company-owned Region in
connection with the acquisition of certain assets of RE/MAX of New Jersey, Inc. ("RE/MAX of New Jersey"), including the
regional franchise agreements issued by us permitting the sale of RE/MAX franchises in the state of New Jersey, on
December 1, 2016. As of the acquisition date, the New Jersey region had 3,008 agents. As of each quarter end
since June 30, 2016, U.S. Company-owned Regions include agents in the Alaska region, which converted from an Independent
Region to a Company-owned Region in connection with the acquisition of certain assets of RE/MAX of Alaska, Inc. ("RE/MAX
of Alaska"), including the regional franchise agreements issued by us permitting the sale of RE/MAX franchises in the
state of Alaska, on April 1, 2016. As of the acquisition date, the Alaska region had 245 agents. In addition,
as of each quarter end since March 31, 2016, U.S. Company-owned Regions include agents in the New York region, which
converted from an Independent Region to a Company-owned Region in connection with the acquisition of certain assets of
RE/MAX of New York, Inc. ("RE/MAX of New York"), including the regional franchise agreements issued by us permitting the
sale of RE/MAX franchises in the state of New York, on February 22, 2016. As of the acquisition date, the New York
region had 869 agents.
|
TABLE 5
|
|
RE/MAX Holdings, Inc.
|
Adjusted EBITDA Reconciliation to Net Income
|
(Amounts in thousands, except percentages)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
Net income
|
$
|
15,637
|
|
$
|
14,380
|
|
|
$
|
25,708
|
|
$
|
24,776
|
|
Depreciation and amortization
|
|
5,397
|
|
|
3,872
|
|
|
|
11,392
|
|
|
7,593
|
|
Interest expense
|
|
2,462
|
|
|
2,091
|
|
|
|
4,816
|
|
|
4,372
|
|
Interest income
|
|
(25)
|
|
|
(35)
|
|
|
|
(50)
|
|
|
(86)
|
|
Provision for income taxes
|
|
4,762
|
|
|
4,285
|
|
|
|
7,792
|
|
|
7,544
|
|
EBITDA
|
|
28,233
|
|
|
24,593
|
|
|
|
49,658
|
|
|
44,199
|
|
Gain on sale or disposition of assets and sublease (1)
|
|
(74)
|
|
|
(99)
|
|
|
|
(121)
|
|
|
(76)
|
|
Loss on early extinguishment of debt
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
136
|
|
Equity-based compensation expense
|
|
732
|
|
|
545
|
|
|
|
1,293
|
|
|
1,311
|
|
Public offering related expenses (2)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
193
|
|
Acquisition related expenses (3)
|
|
274
|
|
|
246
|
|
|
|
832
|
|
|
530
|
|
Adjusted EBITDA (4)
|
$
|
29,165
|
|
$
|
25,285
|
|
|
$
|
51,662
|
|
$
|
46,293
|
|
Adjusted EBITDA Margin (4)
|
|
59.7
|
%
|
|
58.3
|
%
|
|
|
53.2
|
%
|
|
53.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents gain on the sale or disposition of assets as well as the (gains)
losses on the sublease of a portion of the Company's corporate headquarters office building.
|
(2)
|
Represents costs incurred for compliance services performed during the six
months ended June 30, 2016 in connection with RIHI's redemption of 5,175,000 common units in RMCO during the fourth
quarter of 2015 (the "Secondary Offering").
|
(3)
|
Acquisition-related expenses include fees incurred in connection with the
Company's acquisition and integration of certain assets of Tails, Inc. ("Tails") in October 2013, the six independent
regions that were acquired during 2016 (New York, Alaska, New Jersey, Georgia, Kentucky/Tennessee and Southern Ohio,
collectively, the "2016 Acquired Regions") and Motto. Costs include legal, accounting and advisory fees as well as
consulting fees for integration services.
|
(4)
|
Non-GAAP measure. See the end of this press release for definitions of
Non-GAAP measures.
|
TABLE 6
|
|
RE/MAX Holdings, Inc.
|
Adjusted Net Income and Adjusted Earnings per Share
|
(Amounts in thousands, except share and per share
amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
|
|
$
|
15,637
|
|
$
|
14,380
|
|
$
|
25,708
|
|
$
|
24,776
|
Amortization of acquired intangible assets
|
|
|
4,806
|
|
|
3,534
|
|
|
10,229
|
|
|
6,975
|
Provision for income taxes
|
|
|
4,762
|
|
|
4,285
|
|
|
7,792
|
|
|
7,544
|
Add-backs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale or disposition of assets and sublease (1)
|
|
|
(74)
|
|
|
(99)
|
|
|
(121)
|
|
|
(76)
|
Loss on early extinguishment of debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
136
|
Equity-based compensation expense
|
|
|
732
|
|
|
545
|
|
|
1,293
|
|
|
1,311
|
Public offering related expenses (2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193
|
Acquisition related expenses (3)
|
|
|
274
|
|
|
246
|
|
|
832
|
|
|
530
|
Adjusted pre-tax net income
|
|
|
26,137
|
|
|
22,891
|
|
|
45,733
|
|
|
41,389
|
Less: Provision for income taxes at 38%
|
|
|
(9,932)
|
|
|
(8,699)
|
|
|
(17,379)
|
|
|
(15,728)
|
Adjusted net income (4)
|
|
$
|
16,205
|
|
$
|
14,192
|
|
$
|
28,354
|
|
$
|
25,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic pro forma shares outstanding
|
|
|
30,256,442
|
|
|
30,196,190
|
|
|
30,239,536
|
|
|
30,170,070
|
Total diluted pro forma shares outstanding
|
|
|
30,283,402
|
|
|
30,228,595
|
|
|
30,280,164
|
|
|
30,213,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income basic earnings per share (4)
|
|
$
|
0.54
|
|
$
|
0.47
|
|
$
|
0.94
|
|
$
|
0.85
|
Adjusted net income diluted earnings per share (4)
|
|
$
|
0.54
|
|
$
|
0.47
|
|
$
|
0.94
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents gain on the sale or disposition of assets as well as the (gains)
losses on the sublease of a portion of the Company's corporate headquarters office building.
|
(2)
|
Represents costs incurred for compliance services performed during the six
months ended June 30, 2016 in connection with the Secondary Offering.
|
(3)
|
Acquisition-related expenses include fees incurred in connection with the
Company's acquisition and integration of certain assets of Tails, the 2016 Acquired Regions and Motto. Costs include
legal, accounting and advisory fees as well as consulting fees for integration services.
|
(4)
|
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
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Total basic weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average shares of Class A common stock outstanding
|
|
17,696,842
|
|
17,636,590
|
|
17,679,936
|
|
17,610,470
|
Remaining equivalent weighted average shares of stock outstanding on a pro
forma basis assuming RE/MAX Holdings owned 100% of RMCO
|
|
12,559,600
|
|
12,559,600
|
|
12,559,600
|
|
12,559,600
|
Total basic pro forma weighted average shares outstanding
|
|
30,256,442
|
|
30,196,190
|
|
30,239,536
|
|
30,170,070
|
|
|
|
|
|
|
|
|
|
Total diluted weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Weighted average shares of Class A common stock outstanding
|
|
17,696,842
|
|
17,636,590
|
|
17,679,936
|
|
17,610,470
|
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 stock options (1)
|
|
—
|
|
4,360
|
|
—
|
|
10,047
|
Dilutive effect of unvested restricted stock units (1)
|
|
26,960
|
|
28,045
|
|
40,628
|
|
32,916
|
Total diluted pro forma weighted average shares outstanding
|
|
30,283,402
|
|
30,228,595
|
|
30,280,164
|
|
30,213,033
|
|
|
(1)
|
In accordance with the treasury stock method.
|
TABLE 8
|
|
RE/MAX Holdings, Inc.
|
Free Cash Flow & Unencumbered Cash
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
Cash flow from operations
|
$
|
32,941
|
|
$
|
27,032
|
Less: Purchases of property, equipment and software
|
|
(1,290)
|
|
|
(2,106)
|
Free cash flow (1)
|
|
31,651
|
|
|
24,926
|
|
|
|
|
|
|
Free cash flow
|
|
31,651
|
|
|
24,926
|
Less: Tax/Other non-dividend distributions to RIHI
|
|
(6,450)
|
|
|
(5,144)
|
Free cash flow after tax/non-dividend distributions to RIHI
(1)
|
|
25,201
|
|
|
19,782
|
|
|
|
|
|
|
Free cash flow after tax/non-dividend distributions to RIHI
|
|
25,201
|
|
|
19,782
|
Less: Quarterly debt principal payments
|
|
(1,175)
|
|
|
(1,007)
|
Less: Annual excess cash flow (ECF) payment
|
|
—
|
|
|
(12,727)
|
Unencumbered cash generated (1)
|
$
|
24,026
|
|
$
|
6,048
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
Cash flow from operations
|
$
|
32,941
|
|
$
|
27,032
|
Free cash flow
|
$
|
31,651
|
|
$
|
24,926
|
Free cash flow after tax/non-dividend distributions to RIHI
|
$
|
25,201
|
|
$
|
19,782
|
Unencumbered cash generated
|
$
|
24,026
|
|
$
|
6,048
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
|
51,662
|
|
$
|
46,293
|
Free cash flow as % of Adjusted EBITDA
|
|
61.3%
|
|
|
53.8%
|
Free cash flow less distributions to RIHI as % of Adjusted
EBITDA
|
|
48.8%
|
|
|
42.7%
|
Unencumbered cash generated as % of Adjusted EBITDA
|
|
46.5%
|
|
|
13.1%
|
|
|
(1)
|
Non-GAAP measure. See the end of this press release for definitions of
Non-GAAP measures.
|
Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in filings with the SEC and in public disclosures of financial measures that are
not in accordance with U.S. GAAP, such as Adjusted EBITDA and the ratios related thereto, Adjusted net income, Adjusted basic and
diluted earnings per share (Adjusted EPS) and Free cash flow. These measures are derived on the basis of methodologies other than
in accordance with U.S. GAAP.
The Company defines Adjusted EBITDA as EBITDA (consolidated net income before depreciation and amortization, interest expense,
interest income and the provision for income taxes, each of which is presented in the unaudited condensed consolidated financial
statements included in the Quarterly Report on Form 10-Q), adjusted for the impact of the following items that are either
non-cash or the Company does not consider representative of its ongoing operating performance: loss or gain on sale or
disposition of assets and sublease, loss on early extinguishment of debt, professional fees and certain expenses incurred in
connection with the Secondary Offering, acquisition-related expenses and equity-based compensation expense. Adjusted EBITDA
margin represents Adjusted EBITDA as a percentage of revenue. During the first quarter of 2017, the Company revised its
definition of Adjusted EBITDA to better reflect the performance of the business and comply with SEC guidance. The Company now
adjusts for equity-based compensation expense and no longer adjusts for straight-line rent expense and severance-related
expenses. Adjusted EBITDA was revised in prior periods to reflect this change for consistency in presentation.
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 to pay RIHI Inc. and Oberndorf 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 margin guidance does not include certain charges and costs. The adjustments to EBITDA margin in
future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA margin in
prior quarters, such as gain on sale or disposition of assets and sublease and acquisition related expenses, among others.
The exclusion of these charges and costs in future periods will have a significant impact on the Company's Adjusted EBITDA
margin. 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, loss on early debt extinguishment, public-offering related expenses, acquisition-related
expenses 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, both as reported under GAAP, and
quantifies how much cash a company has to pursue opportunities that enhance shareholder value. 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.
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SOURCE RE/MAX Holdings, Inc.