Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Jul. 31, 2019 | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2019 | |
Entity File Number | 001-36101 | |
Entity Registrant Name | RE/MAX Holdings, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 80-0937145 | |
Entity Address Line One | 5075 South Syracuse Street | |
Entity Address City or Town | Denver | |
Entity Address State or Province | CO | |
Entity Address Postal Zip Code | 80237 | |
City Area Code | 303 | |
Local Phone Number | 770-5531 | |
Title of 12(b) Security | Class A Common Stock, $0.0001 par value per share | |
Trading Symbol | RMAX | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001581091 | |
Amendment Flag | false | |
Common Class A | ||
Entity Common Stock, Shares Outstanding | 17,833,158 | |
Common Class B | ||
Entity Common Stock, Shares Outstanding | 1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 72,486 | $ 59,974 |
Restricted cash | 23,627 | 0 |
Accounts and notes receivable, current portion, less allowances of $9,774 and $7,980, respectively | 32,206 | 21,185 |
Income taxes receivable | 1,669 | 533 |
Other current assets | 8,474 | 5,855 |
Total current assets | 138,462 | 87,547 |
Property and equipment, net of accumulated depreciation of $14,117 and $13,280 respectively | 5,643 | 4,390 |
Operating lease right of use assets | 53,363 | 0 |
Franchise agreements, net | 95,407 | 103,157 |
Other intangible assets, net | 23,478 | 22,965 |
Goodwill | 150,812 | 150,684 |
Deferred tax assets, net | 50,997 | 53,698 |
Other assets, net of current portion | 5,687 | 4,399 |
Total assets | 523,849 | 426,840 |
Current liabilities: | ||
Accounts payable | 3,673 | 1,890 |
Accrued liabilities | 48,937 | 13,143 |
Income taxes payable | 11 | 208 |
Deferred revenue | 25,571 | 25,489 |
Current portion of debt | 2,637 | 2,622 |
Current portion of payable pursuant to tax receivable agreements | 3,578 | 3,567 |
Operating lease liabilities | 4,829 | 0 |
Total current liabilities | 89,236 | 46,919 |
Debt, net of current portion | 224,090 | 225,165 |
Payable pursuant to tax receivable agreements, net of current portion | 34,355 | 37,220 |
Deferred tax liabilities, net | 313 | 400 |
Deferred revenue, net of current portion | 19,121 | 20,224 |
Operating lease liabilities, net of current portion | 58,578 | 0 |
Other liabilities, net of current portion | 6,231 | 17,637 |
Total liabilities | 431,924 | 347,565 |
Commitments and contingencies (note 14) | ||
Stockholders' equity: | ||
Additional paid-in capital | 463,055 | 460,101 |
Retained earnings | 26,595 | 21,138 |
Accumulated other comprehensive income, net of tax | 397 | 328 |
Total stockholders' equity attributable to RE/MAX Holdings, Inc. | 490,049 | 481,569 |
Non-controlling interest | (398,124) | (402,294) |
Total stockholders' equity | 91,925 | 79,275 |
Total liabilities and stockholders' equity | 523,849 | 426,840 |
Common Class A | ||
Stockholders' equity: | ||
Common stock | 2 | 2 |
Total stockholders' equity | 2 | 2 |
Common Class B | ||
Stockholders' equity: | ||
Common stock | 0 | 0 |
Total stockholders' equity | $ 0 | $ 0 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Accounts and notes receivable, allowance | $ 9,774 | $ 7,980 |
Property and equipment, accumulated depreciation | $ 14,117 | $ 13,280 |
Common Class A | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 180,000,000 | 180,000,000 |
Common stock, shares issued | 17,809,119 | 17,754,416 |
Common stock, shares outstanding | 17,809,119 | 17,754,416 |
Common Class B | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 1,000 | 1,000 |
Common stock, shares issued | 1 | 1 |
Common stock, shares outstanding | 1 | 1 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenue: | ||||
Total revenue | $ 71,381,000 | $ 54,277,000 | $ 142,559,000 | $ 106,919,000 |
Operating expenses: | ||||
Selling, operating and administrative expenses | 25,726,000 | 28,307,000 | 59,250,000 | 62,675,000 |
Marketing Funds expenses | 18,060,000 | 0 | 36,832,000 | 0 |
Depreciation and amortization | 5,541,000 | 5,069,000 | 11,099,000 | 9,644,000 |
(Gain) loss on sale or disposition of assets, net | (16,000) | (13,000) | 363,000 | (31,000) |
Total operating expenses | 49,311,000 | 33,363,000 | 107,544,000 | 72,288,000 |
Operating income | 22,070,000 | 20,914,000 | 35,015,000 | 34,631,000 |
Other expenses, net: | ||||
Interest expense | (3,154,000) | (3,171,000) | (6,309,000) | (5,895,000) |
Interest income | 342,000 | 98,000 | 662,000 | 217,000 |
Foreign currency transaction gains (losses) | 61,000 | (103,000) | 116,000 | (186,000) |
Total other expenses, net | (2,751,000) | (3,176,000) | (5,531,000) | (5,864,000) |
Income before provision for income taxes | 19,319,000 | 17,738,000 | 29,484,000 | 28,767,000 |
Provision for income taxes | (3,186,000) | (3,147,000) | (5,094,000) | (5,009,000) |
Net income | 16,133,000 | 14,591,000 | 24,390,000 | 23,758,000 |
Less: net income attributable to non-controlling interest (note 4) | 7,563,000 | 6,943,000 | 11,411,000 | 11,127,000 |
Net income attributable to RE/MAX Holdings, Inc. | 8,570,000 | 7,648,000 | $ 12,979,000 | $ 12,631,000 |
Weighted average shares of Class A common stock outstanding | ||||
Cash dividends declared per share of Class A common stock | $ 0.42 | $ 0.40 | ||
Common Class A | ||||
Other expenses, net: | ||||
Net income | $ 0 | $ 0 | ||
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock | ||||
Basic | $ 0.48 | $ 0.43 | 0.73 | 0.71 |
Diluted | $ 0.48 | $ 0.43 | $ 0.73 | $ 0.71 |
Weighted average shares of Class A common stock outstanding | ||||
Basic | 17,808,321 | 17,746,042 | 17,791,942 | 17,727,671 |
Diluted | 17,833,958 | 17,769,641 | 17,825,880 | 17,763,592 |
Cash dividends declared per share of Class A common stock | $ 0.21 | $ 0.20 | $ 0.42 | $ 0.40 |
Continuing franchise fees | ||||
Revenue: | ||||
Total revenue | $ 24,894,000 | $ 25,211,000 | $ 49,850,000 | $ 50,451,000 |
Annual dues | ||||
Revenue: | ||||
Total revenue | 8,819,000 | 8,973,000 | 17,673,000 | 17,669,000 |
Broker fees | ||||
Revenue: | ||||
Total revenue | 13,459,000 | 13,993,000 | 22,047,000 | 23,181,000 |
Marketing Funds fees | ||||
Revenue: | ||||
Total revenue | 18,060,000 | 0 | 36,832,000 | 0 |
Franchise sales and other revenue | ||||
Revenue: | ||||
Total revenue | $ 6,149,000 | $ 6,100,000 | $ 16,157,000 | $ 15,618,000 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 16,133 | $ 14,591 | $ 24,390 | $ 23,758 |
Change in cumulative translation adjustment | 65 | (85) | 134 | (167) |
Other comprehensive income (loss), net of tax | 65 | (85) | 134 | (167) |
Comprehensive income | 16,198 | 14,506 | 24,524 | 23,591 |
Less: comprehensive income attributable to non-controlling interest | 7,595 | 6,912 | 11,476 | 11,057 |
Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax | $ 8,603 | $ 7,594 | $ 13,048 | $ 12,534 |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Stockholders' Equity - USD ($) | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss), net of tax | Non-controlling interest | Common Class A | Common Class B | Total |
Beginning balance, Value at Dec. 31, 2017 | $ 451,199,000 | $ 8,400,000 | $ 459,000 | $ (410,934,000) | $ 2,000 | $ 0 | $ 49,126,000 |
Beginning balance, Shares at Dec. 31, 2017 | 17,696,991 | 1 | |||||
Net income | 0 | 4,983,000 | 0 | 4,184,000 | $ 0 | $ 0 | 9,167,000 |
Distributions to non-controlling unitholders | 0 | 0 | 0 | (4,212,000) | 0 | 0 | (4,212,000) |
Equity-based compensation expense and related dividend equivalents, value | 1,268,000 | (48,000) | 0 | 0 | $ 0 | $ 0 | 1,220,000 |
Equity-based compensation expense and related dividend equivalents, shares | 46,520 | 0 | |||||
Dividends to Class A common stockholders | 0 | (3,547,000) | 0 | 0 | $ 0 | $ 0 | (3,547,000) |
Change in accumulated other comprehensive income | 0 | 0 | (43,000) | (39,000) | 0 | 0 | (82,000) |
Payroll taxes related to net settled restricted stock units (value) | (564,000) | 0 | 0 | 0 | $ 0 | $ 0 | (564,000) |
Payroll taxes related to net settled restricted stock units (in shares) | (10,209) | 0 | |||||
Ending balance, Value at Mar. 31, 2018 | 451,903,000 | 9,788,000 | 416,000 | (411,001,000) | $ 2,000 | $ 0 | 51,108,000 |
Ending balance, Shares at Mar. 31, 2018 | 17,733,302 | 1 | |||||
Beginning balance, Value at Dec. 31, 2017 | 451,199,000 | 8,400,000 | 459,000 | (410,934,000) | $ 2,000 | $ 0 | 49,126,000 |
Beginning balance, Shares at Dec. 31, 2017 | 17,696,991 | 1 | |||||
Net income | 23,758,000 | ||||||
Dividends to Class A common stockholders | (7,096,000) | ||||||
Change in accumulated other comprehensive income | (167,000) | ||||||
Ending balance, Value at Jun. 30, 2018 | 454,045,000 | 13,822,000 | 362,000 | (407,695,000) | $ 2,000 | $ 0 | 60,536,000 |
Ending balance, Shares at Jun. 30, 2018 | 17,746,184 | 1 | |||||
Beginning balance, Value at Mar. 31, 2018 | 451,903,000 | 9,788,000 | 416,000 | (411,001,000) | $ 2,000 | $ 0 | 51,108,000 |
Beginning balance, Shares at Mar. 31, 2018 | 17,733,302 | 1 | |||||
Net income | 0 | 7,648,000 | 0 | 6,943,000 | $ 0 | $ 0 | 14,591,000 |
Distributions to non-controlling unitholders | 0 | 0 | 0 | (3,606,000) | 0 | 0 | (3,606,000) |
Equity-based compensation expense and related dividend equivalents, value | 2,162,000 | (65,000) | 0 | 0 | $ 0 | $ 0 | 2,097,000 |
Equity-based compensation expense and related dividend equivalents, shares | 18,358 | 0 | |||||
Dividends to Class A common stockholders | 0 | (3,549,000) | 0 | 0 | $ 0 | $ 0 | (3,549,000) |
Change in accumulated other comprehensive income | 0 | 0 | (54,000) | (31,000) | 0 | 0 | (85,000) |
Payroll taxes related to net settled restricted stock units (value) | (331,000) | 0 | 0 | 0 | $ 0 | $ 0 | (331,000) |
Payroll taxes related to net settled restricted stock units (in shares) | (5,476) | 0 | |||||
Other | 311,000 | 0 | 0 | 0 | $ 0 | $ 0 | 311,000 |
Ending balance, Value at Jun. 30, 2018 | 454,045,000 | 13,822,000 | 362,000 | (407,695,000) | $ 2,000 | $ 0 | 60,536,000 |
Ending balance, Shares at Jun. 30, 2018 | 17,746,184 | 1 | |||||
Beginning balance, Value at Dec. 31, 2018 | 460,101,000 | 21,138,000 | 328,000 | (402,294,000) | $ 2,000 | $ 0 | 79,275,000 |
Beginning balance, Shares at Dec. 31, 2018 | 17,754,416 | 1 | |||||
Net income | 0 | 4,409,000 | 0 | 3,848,000 | $ 0 | $ 0 | 8,257,000 |
Distributions to non-controlling unitholders | 0 | 0 | 0 | (2,693,000) | 0 | 0 | (2,693,000) |
Equity-based compensation expense and related dividend equivalents, value | 3,213,000 | (42,000) | 0 | 0 | $ 0 | $ 0 | 3,171,000 |
Equity-based compensation expense and related dividend equivalents, shares | 70,797 | 0 | |||||
Dividends to Class A common stockholders | 0 | (3,740,000) | 0 | 0 | $ 0 | $ 0 | (3,740,000) |
Change in accumulated other comprehensive income | 0 | 0 | 36,000 | 33,000 | 0 | 0 | 69,000 |
Payroll taxes related to net settled restricted stock units (value) | (713,000) | 0 | 0 | 0 | $ 0 | $ 0 | (713,000) |
Payroll taxes related to net settled restricted stock units (in shares) | (17,265) | 0 | |||||
Ending balance, Value at Mar. 31, 2019 | 462,601,000 | 21,765,000 | 364,000 | (401,106,000) | $ 2,000 | $ 0 | 83,626,000 |
Ending balance, Shares at Mar. 31, 2019 | 17,807,948 | 1 | |||||
Beginning balance, Value at Dec. 31, 2018 | 460,101,000 | 21,138,000 | 328,000 | (402,294,000) | $ 2,000 | $ 0 | 79,275,000 |
Beginning balance, Shares at Dec. 31, 2018 | 17,754,416 | 1 | |||||
Net income | 24,390,000 | ||||||
Dividends to Class A common stockholders | (7,479,000) | ||||||
Change in accumulated other comprehensive income | 134,000 | ||||||
Ending balance, Value at Jun. 30, 2019 | 463,055,000 | 26,595,000 | 397,000 | (398,124,000) | $ 2,000 | $ 0 | 91,925,000 |
Ending balance, Shares at Jun. 30, 2019 | 17,809,119 | 1 | |||||
Beginning balance, Value at Mar. 31, 2019 | 462,601,000 | 21,765,000 | 364,000 | (401,106,000) | $ 2,000 | $ 0 | 83,626,000 |
Beginning balance, Shares at Mar. 31, 2019 | 17,807,948 | 1 | |||||
Net income | 0 | 8,570,000 | 0 | 7,563,000 | $ 0 | $ 0 | 16,133,000 |
Distributions to non-controlling unitholders | 0 | 0 | 0 | (4,613,000) | 0 | 0 | (4,613,000) |
Equity-based compensation expense and related dividend equivalents, value | 182,000 | (1,000) | 0 | 0 | $ 0 | $ 0 | 181,000 |
Equity-based compensation expense and related dividend equivalents, shares | 1,740 | 0 | |||||
Dividends to Class A common stockholders | 0 | (3,739,000) | 0 | 0 | $ 0 | $ 0 | (3,739,000) |
Change in accumulated other comprehensive income | 0 | 0 | 33,000 | 32,000 | 0 | 0 | 65,000 |
Payroll taxes related to net settled restricted stock units (value) | (18,000) | 0 | 0 | 0 | $ 0 | $ 0 | (18,000) |
Payroll taxes related to net settled restricted stock units (in shares) | (569) | 0 | |||||
Other | 290,000 | 0 | 0 | 0 | $ 0 | $ 0 | 290,000 |
Ending balance, Value at Jun. 30, 2019 | $ 463,055,000 | $ 26,595,000 | $ 397,000 | $ (398,124,000) | $ 2,000 | $ 0 | $ 91,925,000 |
Ending balance, Shares at Jun. 30, 2019 | 17,809,119 | 1 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 24,390 | $ 23,758 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 11,099 | 9,644 |
Bad debt expense | 2,560 | 823 |
Loss (gain) on sale or disposition of assets and sublease, net | 363 | (141) |
Equity-based compensation expense | 5,847 | 3,424 |
Deferred income tax expense | 2,521 | 2,060 |
Fair value adjustments to contingent consideration | 345 | 80 |
Payments pursuant to tax receivable agreements | (2,854) | 0 |
Other, net | 685 | 567 |
Changes in operating assets and liabilities | (11,973) | (6,285) |
Net cash provided by operating activities | 32,983 | 33,930 |
Cash flows from investing activities: | ||
Purchases of property, equipment and software and capitalization of trademark costs | (7,378) | (1,441) |
Acquisitions, net of cash acquired of $0 and $362, respectively | 0 | (25,888) |
Restricted cash acquired with the Marketing Funds acquisition | 28,495 | 0 |
Other | (1,200) | 0 |
Net cash provided by (used in) investing activities | 19,917 | (27,329) |
Cash flows from financing activities: | ||
Payments on debt | (1,311) | (1,554) |
Distributions paid to non-controlling unitholders | (7,306) | (7,818) |
Dividends and dividend equivalents paid to Class A common stockholders | (7,522) | (7,209) |
Payment of payroll taxes related to net settled restricted stock units | (731) | (895) |
Payment of contingent consideration | 0 | (50) |
Net cash used in financing activities | (16,870) | (17,526) |
Effect of exchange rate changes on cash | 109 | (43) |
Net increase (decrease) in cash, cash equivalents and restricted cash | 36,139 | (10,968) |
Cash, cash equivalents and restricted cash, beginning of year | 59,974 | 50,807 |
Cash, cash equivalents and restricted cash, end of period | 96,113 | 39,839 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 5,948 | 5,616 |
Net cash paid for income taxes | 3,885 | 3,741 |
Schedule of non cash investing activities: | ||
Property, equipment, software and trademarks included in accounts payable and accrued liabilities | $ 547 | $ 259 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Consolidated Statements of Cash Flows | ||
Cash acquired | $ 0 | $ 362 |
Business and Organization
Business and Organization | 6 Months Ended |
Jun. 30, 2019 | |
Business and Organization | |
Business and Organization | 1. Business and Organization RE/MAX Holdings, Inc. (“RE/MAX Holdings”) and its consolidated subsidiaries, including RMCO, LLC (“RMCO”), are referred to hereinafter as the “Company.” The Company is a franchisor in the real estate industry, franchising real estate brokerages globally under the RE/MAX brand (“RE/MAX”) and mortgage brokerages within the United States (“U.S.”) under the Motto Mortgage brand. RE/MAX, founded in 1973, has over 125,000 agents operating in over 8,000 offices and a presence in more than 110 countries and territories. Motto Mortgage (“Motto”), founded in 2016, is the first nationally franchised mortgage brokerage in the U.S. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying Condensed Consolidated Balance Sheet at December 31, 2018, which was derived from the audited consolidated financial statements at that date, and the unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements are presented on a consolidated basis and include the accounts of RE/MAX Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of June 30, 2019 and the results of its operations and comprehensive income, cash flows and changes in its stockholder’s equity for the three and six months ended June 30, 2019 and 2018. Interim results may not be indicative of full-year performance. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Annual Report on Form 10-K”). Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Segment Reporting In January 2019, the Company acquired all of the regional and pan-regional advertising fund entities previously owned by its founder and Chairman of the Board of Directors, David Liniger. All of these entities, except for the Western Canada region, were then merged into a new entity called RE/MAX Marketing Fund (with the Western Canada fund, collectively, the “Marketing Funds”). See Note 6, Acquisitions The Company operates under the following reportable segments: ● RE/MAX Franchising – comprises the operations of the Company’s owned and independent global franchising operations under the RE/MAX brand name and corporate-wide shared services expenses. ● Marketing Funds – comprises the operations of the Company’s marketing campaigns designed to build and maintain brand awareness and support certain agent marketing technology. ● Other – comprises the operations of Motto Franchising and booj, which, due to quantitative insignificance, do not meet the criteria of a reportable segment. Principles of Consolidation RE/MAX Holdings consolidates RMCO and records a non-controlling interest in the accompanying Condensed Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income, respectively. Revenue Recognition The Company generates most of its revenue from contracts with customers. The Company’s franchise agreements offer the following benefits to the franchisee: common use and promotion of RE/MAX and Motto trademarks; distinctive sales and promotional materials; access to technology; standardized supplies and other materials used in RE/MAX and Motto offices; and recommended procedures for operation of RE/MAX or Motto offices. The Company concluded that these benefits are highly related and all a part of one performance obligation, a license of symbolic intellectual property that is billed through a variety of fees including franchise sales, continuing franchise fees, marketing funds fees, broker fees, and annual dues, described below. The Company has other performance obligations associated with contracts with customers in other revenue for training, marketing and events, and legacy booj customers. The method used to measure progress is over the passage of time for most streams of revenue. The following is a description of principal activities from which the Company generates its revenue. Continuing Franchise Fees Revenue from continuing franchise fees consists of fixed contractual fees paid monthly by franchisees based on the number of RE/MAX agents in the respective franchised region or office and the number of Motto offices open, reaching the full monthly billing once the Motto office has been open and operating for a year. This revenue is recognized in the month for which the fee is billed. This revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents and number of Motto offices. Marketing Funds Fees Revenue from Marketing Funds fees consists of fixed contractual fees paid monthly by franchise owners and franchisees based on the number of RE/MAX agents in the respective franchised region or office or the number of Motto offices. These revenues are obligated to be used for marketing campaigns to build brand awareness and to support agent marketing technology. Amounts received into the Marketing Funds are recognized as revenue in the month for which the fee is billed. This revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents or number of Motto offices. All assets of the Marketing Funds are contractually restricted for the benefit of franchisees, and the Company recognizes an equal and offsetting liability on the Company’s balance sheet. Additionally, this results in recording an equal and offsetting amount of expenses against all revenues such that there is no impact to overall profitability of the Company from these revenues. Annual Dues Annual dues revenue consists of fixed contractual fees paid annually based on the number of RE/MAX agents. The Company defers the annual dues revenue when billed and recognizes the revenue ratably over the 12-month period to which it relates. Annual dues revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents. The activity in the Company’s deferred revenue for annual dues is included in “Deferred revenue” and “Deferred revenue, net of current portion” on the Condensed Consolidated Balance Sheets, and consists of the following in aggregate (in thousands): Balance at New billings Revenue recognized (a) Balance at end Six months ended June 30, 2019 $ 15,877 $ 18,828 $ (17,673) $ 17,032 (a) Revenue recognized related to the beginning balance was $4.5 million and $11.4 million for the three and six months ended June 30, 2019, respectively. Broker Fees Revenue from broker fees represents fees received from the Company’s RE/MAX franchised regions or franchise offices that are based on a percentage of RE/MAX agents’ gross commission income on home sale transactions. Revenue from broker fees is recognized as a sales-based royalty and recognized in the month when a home sale transaction occurs. Motto franchisees do not pay any fees based on the number or dollar value of loans brokered. Franchise Sales Franchise sales comprises revenue from the sale or renewal of franchises. A fee is charged upon a franchise sale or renewal. Those fees are deemed to be a part of the license of symbolic intellectual property and are recognized as revenue over the contractual term of the franchise agreement, which is typically five years for RE/MAX and seven years for Motto. The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands): Balance at New billings Revenue recognized (a) Balance at end Six months ended June 30, 2019 $ 27,560 $ 3,283 $ (4,697) $ 26,146 (a) Revenue recognized related to the beginning balance was $2.1 million and $4.4 million for the three and six months ended June 30, 2019, respectively. Commissions Related to Franchise Sales Commissions paid on franchise sales are recognized as an asset and amortized over the contract life of the franchise agreement. The activity in the Company’s capitalized contract costs for commissions (which are included in “other current assets” and “other assets, net of current portion” on the Condensed Consolidated Balance Sheets) consist of the following (in thousands): Balance at Additions to contract Balance at end beginning of period Expense recognized cost for new activity of period Six months ended June 30, 2019 $ 3,748 $ (704) $ 525 $ 3,569 Other Revenue Other revenue is primarily revenue from preferred marketing arrangements and event-based revenue from training and other programs. Revenue from preferred marketing arrangements involves both flat fees paid in advance as well as revenue sharing, both of which are generally recognized over the period of the arrangement and are recorded net as the Company does not control the good or service provided. Event-based revenue is recognized when the event occurs and until then is included in “Deferred revenue”. Other revenue also includes revenue from booj’s legacy operations for its external customers as booj continues to provide technology products and services, such as websites, mobile apps, reporting and site tools, to its legacy customers. Disaggregated Revenue In the following table, segment revenue is disaggregated by geographical area for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 U.S. $ 41,689 $ 43,343 $ 83,424 $ 86,695 Canada 5,893 6,213 11,242 11,976 Global 2,803 2,554 5,543 5,033 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 U.S. 16,381 — 33,053 — Canada 1,500 — 3,385 — Global 179 — 394 — Total Marketing Funds 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total $ 71,381 $ 54,277 $ 142,559 $ 106,919 In the following table, segment revenue is disaggregated by owned or independent regions in the U.S. and Canada for the RE/MAX Franchising segment for the three and six months ended June 30, 2019 and 2018 (in thousands). The split between owned or independent regions is not material to the Marketing Funds or Other segments: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Company-owned Regions $ 34,019 $ 35,692 $ 64,037 $ 67,055 Independent Regions 11,394 11,694 22,317 22,843 Global and Other 4,972 4,724 13,855 13,806 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 Marketing Funds 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total $ 71,381 $ 54,277 $ 142,559 $ 106,919 Transaction Price Allocated to the Remaining Performance Obligations The following table includes estimated revenue by year expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in thousands): Remaining 6 2020 2021 2022 2023 2024 Thereafter Total Annual dues $ 12,615 $ 4,417 $ — $ — $ — $ — $ — $ 17,032 Franchise sales 3,737 6,512 5,162 3,693 2,193 1,108 3,741 26,146 Total $ 16,352 $ 10,929 $ 5,162 $ 3,693 $ 2,193 $ 1,108 $ 3,741 $ 43,178 Cash, Cash Equivalents and Restricted Cash All cash held by the Marketing Funds is contractually restricted. The following table reconciles the amounts presented for cash, both unrestricted and restricted, in the Condensed Consolidated Balance Sheets to the amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands): June 30, December 31, 2019 2018 Cash and cash equivalents $ 72,486 $ 59,974 Restricted cash 23,627 — Total cash, cash equivalents and restricted cash $ 96,113 $ 59,974 Services Provided to the Marketing Funds by RE/MAX Franchising RE/MAX Franchising charges the Marketing Funds for various services it performs. These services are primarily comprised of (a) providing agent marketing technology, including customer relationship management tools, the www.remax.com website, agent and office websites, and mobile apps, (b) dedicated employees focused on marketing campaigns, and (c) various administrative services including accounting, tax and legal. Because these costs are ultimately paid by the Marketing Funds, they do not impact the net income of RE/MAX Holdings as the Marketing Funds have no reported net income. Costs charged from RE/MAX Franchising to the Marketing Funds for the three and six months ended June 30, 2019 are as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, Technology development - operating $ 1,199 $ 2,164 Technology development - capital 1,529 2,464 Marketing staff and administrative services 1,024 2,049 Total $ 3,752 $ 6,677 Costs charged to the Marketing Funds for the three and six months ended June 30, 2018 are disclosed in Note 15, Related-Party Transactions Recently Adopted Accounting Pronouncements In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220), In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) with a lease are initial direct costs. The practical expedient was applied consistently to all the Company’s leases, including those for which the Company acts as the lessor. In addition, the Company elected the practical expedient relating to the combination of lease and non-lease components as a single lease component. The Company chose not to apply the hindsight practical expedient. The new lease guidance has been applied to all the Company’s leases as of January 1, 2019, which impacted how operating lease assets and liabilities were recorded within the Condensed Consolidated Balance Sheet, resulting in the recording of approximately $65.8 million of lease liabilities and approximately $55.6 million of right-of-use (“ROU”) assets on the Condensed Consolidated Balance Sheet. Deferred rent and sublease loss balances as of January 1, 2019 of approximately $9.3 million and approximately $2.4 million, respectively, and intangible assets of approximately $1.5 million were subsumed into the ROU asset at transition. Adoption of the new standard did not materially affect the Company’s consolidated net earnings and had no impact on cash flows. See Note 3, Leases, New Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) |
Leases
Leases | 6 Months Ended |
Jun. 30, 2019 | |
Leases | |
Leases | 3. Leases The Company leases corporate offices, a distribution center, billboards and certain equipment. As all franchisees are independently owned and operated, there are no leases recognized for any offices used by the Company’s franchisees. The leases have remaining lease terms ranging from less than a year up to 15 years, some of which include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years depending on the lease. Of these renewal options, the Company determined that none are reasonably certain to be exercised. All the Company’s material leases are classified as operating leases. The Company has a lease for its corporate headquarters office building (the “Master Lease”) that expires in 2028. The Company may, at its option, extend the Master Lease for two renewal periods of 10 years. Under the terms of the Master Lease, the Company pays an annual base rent, which escalates 3% each year, including the first optional renewal period. The second optional renewal period resets to fair market rental value, and the rent escalates 3% each year until expiration. The Company pays for operating expenses in connection with the ownership, maintenance, operation, upkeep and repair of the leased space. The Master Lease is the Company’s only significant lease as of June 30, 2019. The Company acts as the lessor for four sublease agreements on its corporate headquarters, consisting solely of operating leases, each of which include a renewal option for the lessee to extend the length of the lease. Renewal options for two of the sublease agreements are contingent upon renewal of the corporate headquarters lease, which is not reasonably certain to be exercised in 2028. As such, the Company determined these sublease renewal options are not reasonably certain to be exercised. Renewal options for the remaining two sublease agreements have already been exercised and will expire before the end of the corporate headquarters lease in 2028. The Company has made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from any of its short-term leases. All leases with a term of 12 months or less at commencement, for which the Company is not reasonably certain to exercise available renewal options that would extend the lease term past 12 months, will be recognized on a straight-line basis over the lease term. The Company used its Senior Secured Credit Facility interest rate to extrapolate a rate for each of its leases to calculate the present value of the lease liability and right-of-use asset. A summary of the Company’s lease cost is as follows (in thousands, except for weighted-averages): Six Months Ended June 30, 2019 Lease Cost Operating lease cost (a) $ 6,112 Sublease income (724) Short-term lease cost (b) 5,300 Total lease cost $ 10,688 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 4,211 Weighted-average remaining lease term in years - operating leases 8.9 Weighted-average discount rate - operating leases 6.32 % (a) Includes approximately $1.8 million of variable lease cost. (b) Includes expenses associated with short-term leases of billboard advertisements and is included in “Marketing Funds expenses” on the Condensed Consolidated Statements of Income. Maturities under non-cancellable leases as of June 30, 2019 were as follows (in thousands): Rent Payments Sublease Receipts Total Cash Outflows Year ending December 31: Remainder of 2019 $ 4,290 $ (559) $ 3,731 2020 8,750 (888) 7,862 2021 9,004 (775) 8,229 2022 9,000 (804) 8,196 2023 9,173 (822) 8,351 Thereafter 43,711 (1,382) 42,329 Total lease payments $ 83,928 $ (5,230) $ 78,698 Less: imputed interest 20,521 Present value of lease liabilities $ 63,407 As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, maturities under non-cancellable leases as of December 31, 2018 were as follows (in thousands): Rent Payments Sublease Receipts Total Cash Outflows Year ending December 31: 2019 $ 9,402 $ (1,087) $ 8,315 2020 9,601 (873) 8,728 2021 9,341 (775) 8,566 2022 9,011 (804) 8,207 2023 9,169 (827) 8,342 Thereafter 43,556 (1,382) 42,174 Total lease payments $ 90,080 $ (5,748) $ 84,332 |
Non-controlling Interest
Non-controlling Interest | 6 Months Ended |
Jun. 30, 2019 | |
Noncontrolling Interest | |
Non-controlling Interest | 4. Non-controlling Interest RE/MAX Holdings is the sole managing member of RMCO and operates and controls all of the business affairs of RMCO. The ownership of the common units in RMCO is summarized as follows: June 30, 2019 December 31, 2018 Shares Ownership % Shares Ownership % Non-controlling interest ownership of common units in RMCO 12,559,600 41.36 % 12,559,600 41.43 % RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO) 17,809,119 58.64 % 17,754,416 58.57 % Total common units in RMCO 30,368,719 100.00 % 30,314,016 100.00 % The weighted average ownership percentages for the applicable reporting periods are used to calculate the net income attributable to RE/MAX Holdings. A reconciliation of “Income before provision for income taxes” to “Net Income attributable to RE/MAX Holdings, Inc.” and “Net Income attributable to non-controlling interest” in the accompanying Condensed Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except for percentages): Three Months Ended June 30, 2019 2018 RE/MAX Non-controlling Total RE/MAX Non-controlling Total Weighted average ownership percentage of RMCO (a) 58.64 % 41.36 % 100.00 % 58.56 % 41.44 % 100.00 % Income before provision for income taxes (a) $ 11,328 $ 7,991 $ 19,319 $ 10,367 $ 7,371 $ 17,738 Provision for income taxes (b)(c) (2,758) (428) (3,186) (2,719) (428) (3,147) Net income $ 8,570 $ 7,563 $ 16,133 $ 7,648 $ 6,943 $ 14,591 Six Months Ended June 30, 2019 2018 RE/MAX Non-controlling Total RE/MAX Non-controlling Total Weighted average ownership percentage of RMCO (a) 58.62 % 41.38 % 100.00 % 58.53 % 41.47 % 100.00 % Income before provision for income taxes (a) $ 17,286 $ 12,198 $ 29,484 $ 16,820 $ 11,947 $ 28,767 Provision for income taxes (b)(c) (4,307) (787) (5,094) (4,189) (820) (5,009) Net income $ 12,979 $ 11,411 $ 24,390 $ 12,631 $ 11,127 $ 23,758 (a) The weighted average ownership percentage of RMCO differs from the allocation of income before provision for income taxes between RE/MAX Holdings and the non-controlling interest due to certain relatively insignificant expenses recorded at RE/MAX Holdings. (b) The provision for income taxes attributable to RE/MAX Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the pass-through income from RMCO. It also includes RE/MAX Holdings’ share of taxes directly incurred by RMCO and its subsidiaries, related primarily to tax liabilities in certain foreign jurisdictions. (c) The provision for income taxes attributable to the non-controlling interest represents its share of taxes related primarily to tax liabilities in certain foreign jurisdictions directly incurred by RMCO or its subsidiaries. Because RMCO is a pass-through entity, there is no U.S. federal and state income tax provision recorded on the non-controlling interest. Distributions and Other Payments to Non-controlling Unitholders Under the terms of RMCO’s fourth amended and restated limited liability company operating agreement (the “RMCO, LLC Agreement”), RMCO makes cash distributions to non-controlling unitholders on a pro-rata basis. The distributions paid or payable to non-controlling unitholders are summarized as follows (in thousands): Six Months Ended June 30, 2019 2018 Tax and other distributions $ 2,031 $ 2,794 Dividend distributions 5,275 5,024 Total distributions to non-controlling unitholders $ 7,306 $ 7,818 |
Earnings Per Share and Dividend
Earnings Per Share and Dividends | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share and Dividends | |
Earnings Per Share and Dividends | 5. Earnings Per Share and Dividends Earnings Per Share Basic earnings per share (“EPS”) measures the performance of an entity over the reporting period. Diluted EPS measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The treasury stock method is used to determine the dilutive potential of stock options and restricted stock units. The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except share and per share information): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Numerator Net income attributable to RE/MAX Holdings, Inc. $ 8,570 $ 7,648 $ 12,979 $ 12,631 Denominator for basic net income per share of Class A common stock Weighted average shares of Class A common stock outstanding 17,808,321 17,746,042 17,791,942 17,727,671 Denominator for diluted net income per share of Class A common stock Weighted average shares of Class A common stock outstanding 17,808,321 17,746,042 17,791,942 17,727,671 Add dilutive effect of the following: Restricted stock units 25,637 23,599 33,938 35,921 Weighted average shares of Class A common stock outstanding, diluted 17,833,958 17,769,641 17,825,880 17,763,592 Earnings per share of Class A common stock Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic $ 0.48 $ 0.43 $ 0.73 $ 0.71 Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted $ 0.48 $ 0.43 $ 0.73 $ 0.71 Outstanding Class B common stock does not share in the earnings of RE/MAX Holdings and is therefore not a participating security. Accordingly, basic and diluted net income per share of Class B common stock has not been presented. Dividends Dividends declared and paid quarterly per share on all outstanding shares of Class A common stock were as follows (in thousands, except share and per share information): Six Months Ended June 30, 2019 2018 Date paid Per share Amount paid Amount paid Date paid Per share Amount paid Amount paid Dividend declared during quarter ended: March 31 March 20, 2019 $ 0.21 $ 3,740 $ 2,638 March 21, 2018 $ 0.20 $ 3,547 $ 2,512 June 30 May 29, 2019 0.21 3,739 2,638 May 30, 2018 0.20 3,549 2,512 $ 0.42 $ 7,479 $ 5,276 $ 0.40 $ 7,096 $ 5,024 On July 31, 2019, the Company’s Board of Directors declared a quarterly dividend of $0.21 per share on all outstanding shares of Class A common stock, which is payable on August 28, 2019 to stockholders of record at the close of business on August 14, 2019. |
Acquisitions
Acquisitions | 6 Months Ended |
Jun. 30, 2019 | |
Acquisitions | |
Acquisitions | 6. Acquisitions Marketing Funds On January 1, 2019, the Company acquired all of the regional and pan-regional advertising fund entities previously owned by its founder and Chairman of the Board of Directors, David Liniger, for a nominal amount. As in the past, the Marketing Funds are contractually obligated to use the funds collected to support both regional and pan-regional marketing campaigns designed to build and maintain brand awareness and to support the Company’s agent marketing technology. The Company does not plan for the use of the funds to change because of this acquisition and consolidation. The acquisitions of the Marketing Funds are part of the Company’s succession plan, and ownership of the Marketing Funds by the franchisor is a common structure. Fees incurred with the acquisition of the Marketing Funds were not material for the three and six months ended June 30, 2019 and the year ended December 31, 2018. The total assets equal the total liabilities of the Marketing Funds and beginning January 1, 2019, are reflected in the condensed consolidated financial statements of the Company. The Company also began recognizing revenue from the amounts collected, which substantially increased its revenues and expenses. The following table summarizes the Company’s allocation of the purchase price to the fair value of assets acquired and liabilities assumed (in thousands): Restricted cash $ 28,495 Other current assets 8,472 Property and equipment 788 Other assets, net of current portion 126 Total assets acquired 37,881 Other current liabilities 37,881 Total liabilities assumed 37,881 Total acquisition price $ - The Company finalized its accounting for the acquisition of the Marketing Funds during the three months ended June 30, 2019. The Marketing Funds constitutes a business and was accounted for using the fair value acquisition method. The total purchase price was allocated to the assets acquired based on their estimated fair values. Booj, LLC On February 26, 2018, RE/MAX, LLC acquired all membership interests in booj using $26.3 million in cash generated from operations, plus up to approximately $10.0 million in equity-based compensation to be earned over time, which will be accounted for as compensation expense in the future (see Note 12, Equity-Based Compensation for additional information). RE/MAX, LLC acquired booj in order to deliver core technology solutions designed for and with RE/MAX affiliates. The following table summarizes the Company’s allocation of the purchase price to the fair value of assets acquired and liabilities assumed (in thousands): booj Cash $ 362 Other current assets 367 Property and equipment 625 Software 7,400 Trademarks 500 Non-compete agreement 1,200 Customer relationships 800 Other intangible assets 1,589 Other assets, net of current portion 336 Total assets acquired, excluding goodwill 13,179 Current portion of debt (606) Other current liabilities (557) Debt, net of current portion (805) Total liabilities assumed (1,968) Goodwill 15,039 Total purchase price $ 26,250 The Company finalized its accounting for the acquisition of booj during the year ended December 31, 2018. Booj constitutes a business and was accounted for using the fair value acquisition method. The total purchase price was allocated to the assets acquired based on their estimated fair values. The largest intangible assets acquired were valued using an income approach which utilizes Level 3 inputs and are being amortized over a weighted-average useful life using the straight-line method. The excess of the total purchase price over the fair value of the identifiable assets acquired was recorded as goodwill. The goodwill is attributable to expected synergies and projected long-term revenue growth for the RE/MAX network. All of the goodwill recognized is tax deductible. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the acquisition of booj had occurred on January 1, 2017 and the acquisition of the Marketing Funds had occurred January 1, 2018. The historical financial information has been adjusted to give effect to events that are (1) directly attributed to the acquisitions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. This unaudited pro forma information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the acquisitions had actually occurred on such dates, nor of the results that may be obtained in the future. Three Months Ended Six Months Ended June 30, 2018 June 30, 2018 (in thousands, except per share amounts) Total revenue $ 73,055 $ 145,432 Net income attributable to RE/MAX Holdings, Inc. $ 7,648 $ 11,640 Basic earnings per common share $ 0.43 $ 0.66 Diluted earnings per common share $ 0.43 $ 0.66 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 6 Months Ended |
Jun. 30, 2019 | |
Intangible Assets and Goodwill | |
Intangible Assets and Goodwill | 7. Intangible Assets and Goodwill The following table provides the components of the Company’s intangible assets (in thousands, except weighted average amortization period in years): Weighted Average As of June 30, 2019 As of December 31, 2018 Amortization Initial Accumulated Net Initial Accumulated Net Period Cost Amortization Balance Cost Amortization Balance Franchise agreements 12.5 $ 180,867 $ (85,460) $ 95,407 $ 180,867 $ (77,710) $ 103,157 Other intangible assets: Software (a) 4.3 $ 25,111 $ (7,605) $ 17,506 $ 20,579 $ (5,802) $ 14,777 Trademarks 9.3 1,886 (938) 948 1,857 (839) 1,018 Non-compete agreements 7.7 3,700 (1,221) 2,479 3,700 (896) 2,804 Training materials 3.0 2,350 (392) 1,958 2,350 (157) 2,193 Other (b) 5.0 800 (213) 587 2,389 (216) 2,173 Total other intangible assets 4.9 $ 33,847 $ (10,369) $ 23,478 $ 30,875 $ (7,910) $ 22,965 (a) As of June 30, 2019, and December 31, 2018, capitalized software development costs of $7.4 million and $ 4.5 million, respectively, were related to technology projects not yet complete and ready for their intended use and thus were not subject to amortization. (b) Other consists of customer relationships and a favorable market lease, both obtained in connection with the acquisition of booj. The favorable market lease was subsumed into “Operating lease right of use assets” on the accompanying Condensed Consolidated Balance Sheet upon adopting the new lease standard on January 1, 2019. See Note 2, Summary of Significant Accounting Policies for additional information. Amortization expense for the three months ended June 30, 2019 and 2018 was $5.1 million and $4.7 million, respectively. Amortization expense for the six months ended June 30, 2019 and 2018 was $10.3 million and $9.1 million, respectively. As of June 30, 2019, the estimated future amortization expense for the next five years related to intangible assets is as follows (in thousands): As of June 30, 2019: Remainder of 2019 $ 18,969 2020 $ 22,271 2021 $ 21,462 2022 $ 18,312 2023 $ 14,157 The following table presents changes to goodwill for the period from January 1, 2019 to June 30, 2019 (in thousands), by segment: RE/MAX Other Total Balance, January 1, 2019 $ 138,884 $ 11,800 $ 150,684 Effect of changes in foreign currency exchange rates 128 — 128 Balance, June 30, 2019 $ 139,012 $ 11,800 $ 150,812 |
Accrued Liabilities
Accrued Liabilities | 6 Months Ended |
Jun. 30, 2019 | |
Accrued Liabilities. | |
Accrued Liabilities | 8. Accrued Liabilities Accrued liabilities consist of the following (in thousands): June 30, December 31, 2019 2018 Marketing Funds (a) $ 35,288 $ — Accrued payroll and related employee costs 8,171 6,517 Accrued taxes 1,181 1,480 Accrued professional fees 868 2,010 Other 3,429 3,136 $ 48,937 $ 13,143 (a) Consists primarily of liabilities recognized to reflect the contractual restriction that all funds collected in the Marketing Funds must be spent for designated purposes. See Note 2, Summary of Significant Accounting Policies for additional information. As previously noted, the Marketing Funds were acquired on January 1, 2019. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt | |
Debt | 9. Debt Debt, net of current portion, consists of the following (in thousands): June 30, December 31, 2019 2018 Senior Secured Credit Facility $ 228,538 $ 229,713 Other long-term financing (a) 494 635 Less unamortized debt issuance costs (1,332) (1,481) Less unamortized debt discount costs (973) (1,080) Less current portion (a) (2,637) (2,622) $ 224,090 $ 225,165 (a) Includes financing assumed with the acquisition of booj. As of June 30, 2019, the carrying value of this financing approximates the fair value. Maturities of debt are as follows (in thousands): As of June 30, 2019: Remainder of 2019 $ 1,315 2020 2,704 2021 2,350 2022 2,350 2023 220,313 $ 229,032 Senior Secured Credit Facility On December 15, 2016, RMCO and RE/MAX, LLC, a wholly owned subsidiary of RMCO, entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and various lenders party thereto (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility consists of a $235.0 million term loan facility which matures on December 15, 2023 and a $10.0 million revolving loan facility which must be repaid on December 15, 2021. As of June 30, 2019, the Company had no revolving loans outstanding under its Senior Secured Credit Facility. As of June 30, 2019, the interest rate on the term loan facility was 5.15%. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Measurements | |
Fair Value Measurements | 10. Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, the Company follows a three-tier fair value hierarchy, which is described in detail in the 2018 Annual Report on Form 10-K. A summary of the Company’s liabilities measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 is as follows (in thousands): As of June 30, 2019 As of December 31, 2018 Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 Liabilities Contingent consideration $ 5,415 $ — $ — $ 5,415 $ 5,070 $ — $ — $ 5,070 The Company is required to pay additional purchase consideration totaling eight percent of gross receipts collected by Motto each year (the “Revenue Share Year”) through September 30, 2026, with no limitation as to the maximum payout. The fair value of the contingent purchase consideration represents the forecasted discounted cash payments that the Company expects to pay. Increases or decreases in the fair value of the contingent purchase consideration can result from changes in discount rates as well as the timing and amount of forecasted revenues. The forecasted revenue growth assumption that is most sensitive is the assumed franchise sales count for which the forecast assumes between 50 and 80 franchises sold annually. This assumption is based on historical sales and an assumption of growth over time. A 10% reduction in the number of franchise sales would decrease the liability by $0.3 million. A 1% change to the discount rate applied to the forecast would change the liability by approximately $0.3 million. The Company measures this liability each reporting period and recognizes changes in fair value, if any, in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income. The table below presents a reconciliation of this liability for the period from January 1, 2019 to June 30, 2019 (in thousands): Balance at January 1, 2019 $ 5,070 Fair value adjustments 345 Balance at June 30, 2019 $ 5,415 The following table summarizes the carrying value and fair value of the Senior Secured Credit Facility as of June 30, 2019 and December 31, 2018 (in thousands): June 30, December 31, 2019 2018 Carrying Fair Value Carrying Fair Value Senior Secured Credit Facility $ 226,233 $ 227,395 $ 227,152 $ 221,673 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Income Taxes | 11. Income Taxes The “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income for the three and six months ended June 30, 2019 and 2018 is based on an estimate of the Company’s annualized effective income tax rate. On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted which includes significant changes to the U.S. Corporate tax system. The Company will continue to evaluate tax planning opportunities as well as monitor any changes that might be contained in the final regulations related to TCJA. Such final regulations are expected in 2019. |
Equity-Based Compensation
Equity-Based Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Equity-Based Compensation | |
Equity-Based Compensation | 12. Equity-Based Compensation Employee stock-based compensation expense, net of the amount capitalized in internally developed software, is as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Expense from Time-based awards (a) $ 1,872 $ 1,061 $ 3,963 $ 1,861 Expense from Performance-based awards (a)(b) (872) 1,101 250 1,569 Expense from bonus to be settled in shares (c) 920 — 1,818 — Equity-based compensation capitalized (a) (124) (6) (184) (6) Equity-based compensation expense 1,796 2,156 5,847 3,424 Tax benefit from equity-based compensation (254) (305) (827) (484) Excess tax benefit from equity-based compensation 57 (73) 113 (145) Net compensation cost $ 1,599 $ 1,778 $ 5,133 $ 2,795 (a) Includes expense recognized and costs capitalized in connection with the awards granted to booj employees and former owners at the time of acquisition. (b) Expense recognized for performance-based awards is re-assessed each quarter based on expectations of achievement against the performance conditions. As of June 30, 2019, certain conditions were no longer deemed probable of being met, primarily for awards that must achieve a certain amount of revenue over a three-year performance period, and the cumulative expense previously recognized was reversed in the current period. (c) In 2019, the Company revised its annual bonus plan so that a portion of the bonus for most employees will be settled in shares if the Company meets certain performance metrics. The share amounts to be issued will be determined based on the stock price at the time of vesting in early 2020. These amounts are recognized as “Accrued liabilities” in the accompanying Condensed Consolidated Balance Sheet and are not included in “Additional paid-in capital” until shares are issued. Time-based Restricted Stock Units The following table summarizes equity-based compensation activity related to time-based RSUs as of and for the six months ended June 30, 2019: Time-based Weighted average Balance, January 1, 2019 298,610 $ 51.97 Granted 158,342 $ 38.61 Shares vested (including tax withholding) (a) (66,918) $ 46.66 Forfeited (5,844) $ 46.41 Balance, June 30, 2019 384,190 $ 47.48 (a) Pursuant to the terms of the 2013 Incentive Plan, RSUs withheld by the Company for the payment of the employee's tax withholding related to an RSU vesting are added back to the pool of shares available for future awards. At June 30, 2019, there was $13.2 million of total unrecognized time-based RSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 2.15 years for time-based restricted stock units. Performance-based Restricted Stock Units The following table summarizes equity-based compensation activity related to performance-based RSUs as of and for the six months ended June 30, 2019: Performance-based Weighted average Balance, January 1, 2019 179,615 $ 55.75 Granted (a) 93,028 $ 41.37 Shares vested (5,620) $ 56.59 Forfeited (30,716) $ 52.97 Balance, June 30, 2019 236,307 $ 39.24 (a) Represents the total participant target award. At June 30, 2019, there was $4.3 million of total unrecognized performance-based RSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 2.06 years for performance-based RSUs. After giving effect to all outstanding awards (assuming maximum achievement of performance goals for performance-based awards), there were 2,187,446 additional shares available for the Company to grant as of June 30, 2019. |
Leadership Changes and the New
Leadership Changes and the New Service Model | 6 Months Ended |
Jun. 30, 2019 | |
Leadership Changes and the New Service Model | |
Leadership Changes and the New Service Model | 13. Leadership Changes and the New Service Model On February 9, 2018, the Company announced the retirement of the Company’s President. The Company entered into a Separation Agreement with the President, and pursuant to the terms of this agreement, the Company incurred a total cost of $1.8 million which was recorded to “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income during the quarter ended March 31, 2018, which is being paid over a 39-month period. In addition, the Company announced a new service model in early 2019 designed to deliver more value to franchisees, as well as support franchisee growth and professional development (the “New Service Model”). In connection with the New Service Model, the Company incurred approximately $2.1 million in total expenses related to severance and outplacement services provided to certain former employees of the Company, of which $0.7 million in expense was recognized for the three months ended March 31, 2019 and the remainder was recognized in 2018. These expenses are included in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income. All of the above costs were attributable to the RE/MAX Franchising reportable segment. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 14. Commitments and Contingencies There have been no material changes to the Company’s commitments and contingencies as of the date of this report, outside of the ordinary course of business, since reporting in the Company’s 2018 Form 10-K. The Company has a contingent consideration arrangement to pay additional purchase consideration based on Motto’s future gross receipts, through September 30, 2026. See Note 10, Fair Value Measurements The Company is subject to litigation claims arising in the ordinary course of business. The Company believes that it has adequately accrued for legal matters in accordance with the requirements of GAAP. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries. Management of the Company believes that no such litigation matters involving a reasonably possible chance of loss will, individually or in the aggregate, result in a material adverse effect on the Company's financial condition, results of operations and cash flows. |
Related-Party Transactions
Related-Party Transactions | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions | |
Related-Party Transactions | 15. Related-Party Transactions The majority stockholders of RIHI, specifically the Company’s current Chairman and Co-Founder and the Company’s Vice Chair and Co-Founder have made and continue to make a golf course they own available to the Company for business purposes. The Company used the golf course and related facilities for business purposes at minimal charge during the six months ended June 30, 2019 and 2018. Additionally, the Company recorded expense of $0.3 million for the value of the benefits provided to Company personnel and others for the complimentary use of the golf course during each of the six months ended June 30, 2019 and 2018, with an offsetting increase in additional paid in capital. The Company provides services, such as accounting, legal, marketing, technology, human resources and public relations services, to certain affiliated entities (primarily the Company’s affiliated marketing funds prior to the acquisition of the Marketing Funds on January 1, 2019), and it allows these companies to share its leased office space. During the three and six months ended June 30, 2018, the total amount allocated for services rendered and rent for office space provided on behalf of affiliated entities was $0.9 million and $1.9 million, respectively. As of January 1, 2019, the affiliated marketing funds are included in the consolidated financial statements (see Note 6, Acquisitions |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2019 | |
Segment Information | |
Segment Information | 16. Segment Information The Company has two reportable segments: RE/MAX Franchising and the Marketing Funds. The category Other consists of the Motto Franchising and booj operating segments. Management evaluates the operating results of its segments based upon revenue and adjusted earnings before interest, the provision for income taxes, depreciation and amortization and other non-cash and non-recurring cash charges or other items (“Adjusted EBITDA”). The Company’s presentation of Adjusted EBITDA may not be comparable to similar measures used by other companies. The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies The following table presents revenue from external customers by segment for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Continuing franchise fees $ 23,978 $ 24,761 $ 48,095 $ 49,562 Annual dues 8,819 8,973 17,673 17,669 Broker fees 13,459 13,994 22,047 23,181 Franchise sales and other revenue 4,129 4,382 12,394 13,292 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 Marketing Funds fees 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total revenue $ 71,381 $ 54,277 $ 142,559 $ 106,919 The following table presents a reconciliation of Adjusted EBITDA by segment to income before provision for income taxes for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Adjusted EBITDA: RE/MAX Franchising $ 30,020 $ 29,990 $ 54,165 $ 53,797 Adjusted EBITDA: Other (138) (1,245) (1,293) (2,208) Adjusted EBITDA: Consolidated (a) 29,882 28,745 52,872 51,589 Gain (loss) on sale or disposition of assets and sublease, net 16 113 (363) 141 Equity-based compensation expense (1,796) (2,156) (5,847) (3,424) Acquisition-related expense (b) (15) (313) (87) (1,487) Special Committee investigation and remediation expense (c) — (564) — (2,650) Fair value adjustments to contingent consideration (d) (415) 55 (345) (80) Interest income 342 98 662 217 Interest expense (3,154) (3,171) (6,309) (5,895) Depreciation and amortization (5,541) (5,069) (11,099) (9,644) Income before provision for income taxes $ 19,319 $ 17,738 $ 29,484 $ 28,767 (a) As the revenue for the Marketing Funds are contractually restricted for the benefit of franchisees and the Company has an equal and offsetting amount of expenses such that there is no impact to overall profitability of the Company, there is no Adjusted EBITDA for the Marketing Funds. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for more information on the Company’s presentation of Adjusted EBITDA and a reconciliation of the differences between the Company’s Adjusted EBITDA and net income, which is the most comparable GAAP measure for operating performance. (b) Acquisition-related expense includes legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies. (c) Special Committee investigation and remediation expense relates to costs incurred in relation to the previously disclosed investigation by the special committee of independent directors of actions of certain members of our senior management and the implementation of the remediation plan. (d) Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability. See Note 10, Fair Value Measurements for additional information. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying Condensed Consolidated Balance Sheet at December 31, 2018, which was derived from the audited consolidated financial statements at that date, and the unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements are presented on a consolidated basis and include the accounts of RE/MAX Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of June 30, 2019 and the results of its operations and comprehensive income, cash flows and changes in its stockholder’s equity for the three and six months ended June 30, 2019 and 2018. Interim results may not be indicative of full-year performance. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Annual Report on Form 10-K”). |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Segment Reporting | Segment Reporting In January 2019, the Company acquired all of the regional and pan-regional advertising fund entities previously owned by its founder and Chairman of the Board of Directors, David Liniger. All of these entities, except for the Western Canada region, were then merged into a new entity called RE/MAX Marketing Fund (with the Western Canada fund, collectively, the “Marketing Funds”). See Note 6, Acquisitions The Company operates under the following reportable segments: ● RE/MAX Franchising – comprises the operations of the Company’s owned and independent global franchising operations under the RE/MAX brand name and corporate-wide shared services expenses. ● Marketing Funds – comprises the operations of the Company’s marketing campaigns designed to build and maintain brand awareness and support certain agent marketing technology. ● Other – comprises the operations of Motto Franchising and booj, which, due to quantitative insignificance, do not meet the criteria of a reportable segment. |
Principles of Consolidation | Principles of Consolidation RE/MAX Holdings consolidates RMCO and records a non-controlling interest in the accompanying Condensed Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income, respectively. |
Revenue Recognition | Revenue Recognition The Company generates most of its revenue from contracts with customers. The Company’s franchise agreements offer the following benefits to the franchisee: common use and promotion of RE/MAX and Motto trademarks; distinctive sales and promotional materials; access to technology; standardized supplies and other materials used in RE/MAX and Motto offices; and recommended procedures for operation of RE/MAX or Motto offices. The Company concluded that these benefits are highly related and all a part of one performance obligation, a license of symbolic intellectual property that is billed through a variety of fees including franchise sales, continuing franchise fees, marketing funds fees, broker fees, and annual dues, described below. The Company has other performance obligations associated with contracts with customers in other revenue for training, marketing and events, and legacy booj customers. The method used to measure progress is over the passage of time for most streams of revenue. The following is a description of principal activities from which the Company generates its revenue. Continuing Franchise Fees Revenue from continuing franchise fees consists of fixed contractual fees paid monthly by franchisees based on the number of RE/MAX agents in the respective franchised region or office and the number of Motto offices open, reaching the full monthly billing once the Motto office has been open and operating for a year. This revenue is recognized in the month for which the fee is billed. This revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents and number of Motto offices. Marketing Funds Fees Revenue from Marketing Funds fees consists of fixed contractual fees paid monthly by franchise owners and franchisees based on the number of RE/MAX agents in the respective franchised region or office or the number of Motto offices. These revenues are obligated to be used for marketing campaigns to build brand awareness and to support agent marketing technology. Amounts received into the Marketing Funds are recognized as revenue in the month for which the fee is billed. This revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents or number of Motto offices. All assets of the Marketing Funds are contractually restricted for the benefit of franchisees, and the Company recognizes an equal and offsetting liability on the Company’s balance sheet. Additionally, this results in recording an equal and offsetting amount of expenses against all revenues such that there is no impact to overall profitability of the Company from these revenues. Annual Dues Annual dues revenue consists of fixed contractual fees paid annually based on the number of RE/MAX agents. The Company defers the annual dues revenue when billed and recognizes the revenue ratably over the 12-month period to which it relates. Annual dues revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents. The activity in the Company’s deferred revenue for annual dues is included in “Deferred revenue” and “Deferred revenue, net of current portion” on the Condensed Consolidated Balance Sheets, and consists of the following in aggregate (in thousands): Balance at New billings Revenue recognized (a) Balance at end Six months ended June 30, 2019 $ 15,877 $ 18,828 $ (17,673) $ 17,032 (a) Revenue recognized related to the beginning balance was $4.5 million and $11.4 million for the three and six months ended June 30, 2019, respectively. Broker Fees Revenue from broker fees represents fees received from the Company’s RE/MAX franchised regions or franchise offices that are based on a percentage of RE/MAX agents’ gross commission income on home sale transactions. Revenue from broker fees is recognized as a sales-based royalty and recognized in the month when a home sale transaction occurs. Motto franchisees do not pay any fees based on the number or dollar value of loans brokered. Franchise Sales Franchise sales comprises revenue from the sale or renewal of franchises. A fee is charged upon a franchise sale or renewal. Those fees are deemed to be a part of the license of symbolic intellectual property and are recognized as revenue over the contractual term of the franchise agreement, which is typically five years for RE/MAX and seven years for Motto. The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands): Balance at New billings Revenue recognized (a) Balance at end Six months ended June 30, 2019 $ 27,560 $ 3,283 $ (4,697) $ 26,146 (a) Revenue recognized related to the beginning balance was $2.1 million and $4.4 million for the three and six months ended June 30, 2019, respectively. Commissions Related to Franchise Sales Commissions paid on franchise sales are recognized as an asset and amortized over the contract life of the franchise agreement. The activity in the Company’s capitalized contract costs for commissions (which are included in “other current assets” and “other assets, net of current portion” on the Condensed Consolidated Balance Sheets) consist of the following (in thousands): Balance at Additions to contract Balance at end beginning of period Expense recognized cost for new activity of period Six months ended June 30, 2019 $ 3,748 $ (704) $ 525 $ 3,569 Other Revenue Other revenue is primarily revenue from preferred marketing arrangements and event-based revenue from training and other programs. Revenue from preferred marketing arrangements involves both flat fees paid in advance as well as revenue sharing, both of which are generally recognized over the period of the arrangement and are recorded net as the Company does not control the good or service provided. Event-based revenue is recognized when the event occurs and until then is included in “Deferred revenue”. Other revenue also includes revenue from booj’s legacy operations for its external customers as booj continues to provide technology products and services, such as websites, mobile apps, reporting and site tools, to its legacy customers. Disaggregated Revenue In the following table, segment revenue is disaggregated by geographical area for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 U.S. $ 41,689 $ 43,343 $ 83,424 $ 86,695 Canada 5,893 6,213 11,242 11,976 Global 2,803 2,554 5,543 5,033 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 U.S. 16,381 — 33,053 — Canada 1,500 — 3,385 — Global 179 — 394 — Total Marketing Funds 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total $ 71,381 $ 54,277 $ 142,559 $ 106,919 In the following table, segment revenue is disaggregated by owned or independent regions in the U.S. and Canada for the RE/MAX Franchising segment for the three and six months ended June 30, 2019 and 2018 (in thousands). The split between owned or independent regions is not material to the Marketing Funds or Other segments: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Company-owned Regions $ 34,019 $ 35,692 $ 64,037 $ 67,055 Independent Regions 11,394 11,694 22,317 22,843 Global and Other 4,972 4,724 13,855 13,806 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 Marketing Funds 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total $ 71,381 $ 54,277 $ 142,559 $ 106,919 Transaction Price Allocated to the Remaining Performance Obligations The following table includes estimated revenue by year expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in thousands): Remaining 6 2020 2021 2022 2023 2024 Thereafter Total Annual dues $ 12,615 $ 4,417 $ — $ — $ — $ — $ — $ 17,032 Franchise sales 3,737 6,512 5,162 3,693 2,193 1,108 3,741 26,146 Total $ 16,352 $ 10,929 $ 5,162 $ 3,693 $ 2,193 $ 1,108 $ 3,741 $ 43,178 |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash All cash held by the Marketing Funds is contractually restricted. The following table reconciles the amounts presented for cash, both unrestricted and restricted, in the Condensed Consolidated Balance Sheets to the amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands): June 30, December 31, 2019 2018 Cash and cash equivalents $ 72,486 $ 59,974 Restricted cash 23,627 — Total cash, cash equivalents and restricted cash $ 96,113 $ 59,974 |
Services Provided to the Marketing Funds by RE/MAX Franchising | Services Provided to the Marketing Funds by RE/MAX Franchising RE/MAX Franchising charges the Marketing Funds for various services it performs. These services are primarily comprised of (a) providing agent marketing technology, including customer relationship management tools, the www.remax.com website, agent and office websites, and mobile apps, (b) dedicated employees focused on marketing campaigns, and (c) various administrative services including accounting, tax and legal. Because these costs are ultimately paid by the Marketing Funds, they do not impact the net income of RE/MAX Holdings as the Marketing Funds have no reported net income. Costs charged from RE/MAX Franchising to the Marketing Funds for the three and six months ended June 30, 2019 are as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, Technology development - operating $ 1,199 $ 2,164 Technology development - capital 1,529 2,464 Marketing staff and administrative services 1,024 2,049 Total $ 3,752 $ 6,677 Costs charged to the Marketing Funds for the three and six months ended June 30, 2018 are disclosed in Note 15, Related-Party Transactions |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220), In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) with a lease are initial direct costs. The practical expedient was applied consistently to all the Company’s leases, including those for which the Company acts as the lessor. In addition, the Company elected the practical expedient relating to the combination of lease and non-lease components as a single lease component. The Company chose not to apply the hindsight practical expedient. The new lease guidance has been applied to all the Company’s leases as of January 1, 2019, which impacted how operating lease assets and liabilities were recorded within the Condensed Consolidated Balance Sheet, resulting in the recording of approximately $65.8 million of lease liabilities and approximately $55.6 million of right-of-use (“ROU”) assets on the Condensed Consolidated Balance Sheet. Deferred rent and sublease loss balances as of January 1, 2019 of approximately $9.3 million and approximately $2.4 million, respectively, and intangible assets of approximately $1.5 million were subsumed into the ROU asset at transition. Adoption of the new standard did not materially affect the Company’s consolidated net earnings and had no impact on cash flows. See Note 3, Leases, |
New Accounting Pronouncements Not Yet Adopted | New Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Commissions related to franchise sales | The activity in the Company’s capitalized contract costs for commissions (which are included in “other current assets” and “other assets, net of current portion” on the Condensed Consolidated Balance Sheets) consist of the following (in thousands): Balance at Additions to contract Balance at end beginning of period Expense recognized cost for new activity of period Six months ended June 30, 2019 $ 3,748 $ (704) $ 525 $ 3,569 |
Schedule of disaggregated revenue | In the following table, segment revenue is disaggregated by geographical area for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 U.S. $ 41,689 $ 43,343 $ 83,424 $ 86,695 Canada 5,893 6,213 11,242 11,976 Global 2,803 2,554 5,543 5,033 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 U.S. 16,381 — 33,053 — Canada 1,500 — 3,385 — Global 179 — 394 — Total Marketing Funds 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total $ 71,381 $ 54,277 $ 142,559 $ 106,919 In the following table, segment revenue is disaggregated by owned or independent regions in the U.S. and Canada for the RE/MAX Franchising segment for the three and six months ended June 30, 2019 and 2018 (in thousands). The split between owned or independent regions is not material to the Marketing Funds or Other segments: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Company-owned Regions $ 34,019 $ 35,692 $ 64,037 $ 67,055 Independent Regions 11,394 11,694 22,317 22,843 Global and Other 4,972 4,724 13,855 13,806 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 Marketing Funds 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total $ 71,381 $ 54,277 $ 142,559 $ 106,919 |
Schedule of transaction price allocated to the remaining performance obligations | The following table includes estimated revenue by year expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in thousands): Remaining 6 2020 2021 2022 2023 2024 Thereafter Total Annual dues $ 12,615 $ 4,417 $ — $ — $ — $ — $ — $ 17,032 Franchise sales 3,737 6,512 5,162 3,693 2,193 1,108 3,741 26,146 Total $ 16,352 $ 10,929 $ 5,162 $ 3,693 $ 2,193 $ 1,108 $ 3,741 $ 43,178 |
Schedule of reconciliation of cash, both unrestricted and restricted | The following table reconciles the amounts presented for cash, both unrestricted and restricted, in the Condensed Consolidated Balance Sheets to the amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands): June 30, December 31, 2019 2018 Cash and cash equivalents $ 72,486 $ 59,974 Restricted cash 23,627 — Total cash, cash equivalents and restricted cash $ 96,113 $ 59,974 |
Schedule of cost charges to intersegment | Costs charged from RE/MAX Franchising to the Marketing Funds for the three and six months ended June 30, 2019 are as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, Technology development - operating $ 1,199 $ 2,164 Technology development - capital 1,529 2,464 Marketing staff and administrative services 1,024 2,049 Total $ 3,752 $ 6,677 |
Annual dues | |
Schedule of contract liability | The activity in the Company’s deferred revenue for annual dues is included in “Deferred revenue” and “Deferred revenue, net of current portion” on the Condensed Consolidated Balance Sheets, and consists of the following in aggregate (in thousands): Balance at New billings Revenue recognized (a) Balance at end Six months ended June 30, 2019 $ 15,877 $ 18,828 $ (17,673) $ 17,032 (a) Revenue recognized related to the beginning balance was $4.5 million and $11.4 million for the three and six months ended June 30, 2019, respectively. |
Franchise sales revenue | |
Schedule of contract liability | The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands): Balance at New billings Revenue recognized (a) Balance at end Six months ended June 30, 2019 $ 27,560 $ 3,283 $ (4,697) $ 26,146 (a) Revenue recognized related to the beginning balance was $2.1 million and $4.4 million for the three and six months ended June 30, 2019, respectively. |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases | |
Schedule of lease cost and other information | Six Months Ended June 30, 2019 Lease Cost Operating lease cost (a) $ 6,112 Sublease income (724) Short-term lease cost (b) 5,300 Total lease cost $ 10,688 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 4,211 Weighted-average remaining lease term in years - operating leases 8.9 Weighted-average discount rate - operating leases 6.32 % (a) Includes approximately $1.8 million of variable lease cost. (b) Includes expenses associated with short-term leases of billboard advertisements and is included in “Marketing Funds expenses” on the Condensed Consolidated Statements of Income. |
Schedule of maturities of lease liabilities under non-cancellable leases | Rent Payments Sublease Receipts Total Cash Outflows Year ending December 31: Remainder of 2019 $ 4,290 $ (559) $ 3,731 2020 8,750 (888) 7,862 2021 9,004 (775) 8,229 2022 9,000 (804) 8,196 2023 9,173 (822) 8,351 Thereafter 43,711 (1,382) 42,329 Total lease payments $ 83,928 $ (5,230) $ 78,698 Less: imputed interest 20,521 Present value of lease liabilities $ 63,407 |
Schedule of previous lease accounting, maturities of lease liabilities | Rent Payments Sublease Receipts Total Cash Outflows Year ending December 31: 2019 $ 9,402 $ (1,087) $ 8,315 2020 9,601 (873) 8,728 2021 9,341 (775) 8,566 2022 9,011 (804) 8,207 2023 9,169 (827) 8,342 Thereafter 43,556 (1,382) 42,174 Total lease payments $ 90,080 $ (5,748) $ 84,332 |
Non-controlling Interest (Table
Non-controlling Interest (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Noncontrolling Interest | |
Summary of Ownership of the Common Units | June 30, 2019 December 31, 2018 Shares Ownership % Shares Ownership % Non-controlling interest ownership of common units in RMCO 12,559,600 41.36 % 12,559,600 41.43 % RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO) 17,809,119 58.64 % 17,754,416 58.57 % Total common units in RMCO 30,368,719 100.00 % 30,314,016 100.00 % |
Reconciliation from Income Before Provision for Income Taxes to Net Income | The weighted average ownership percentages for the applicable reporting periods are used to calculate the net income attributable to RE/MAX Holdings. A reconciliation of “Income before provision for income taxes” to “Net Income attributable to RE/MAX Holdings, Inc.” and “Net Income attributable to non-controlling interest” in the accompanying Condensed Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except for percentages): Three Months Ended June 30, 2019 2018 RE/MAX Non-controlling Total RE/MAX Non-controlling Total Weighted average ownership percentage of RMCO (a) 58.64 % 41.36 % 100.00 % 58.56 % 41.44 % 100.00 % Income before provision for income taxes (a) $ 11,328 $ 7,991 $ 19,319 $ 10,367 $ 7,371 $ 17,738 Provision for income taxes (b)(c) (2,758) (428) (3,186) (2,719) (428) (3,147) Net income $ 8,570 $ 7,563 $ 16,133 $ 7,648 $ 6,943 $ 14,591 Six Months Ended June 30, 2019 2018 RE/MAX Non-controlling Total RE/MAX Non-controlling Total Weighted average ownership percentage of RMCO (a) 58.62 % 41.38 % 100.00 % 58.53 % 41.47 % 100.00 % Income before provision for income taxes (a) $ 17,286 $ 12,198 $ 29,484 $ 16,820 $ 11,947 $ 28,767 Provision for income taxes (b)(c) (4,307) (787) (5,094) (4,189) (820) (5,009) Net income $ 12,979 $ 11,411 $ 24,390 $ 12,631 $ 11,127 $ 23,758 (a) The weighted average ownership percentage of RMCO differs from the allocation of income before provision for income taxes between RE/MAX Holdings and the non-controlling interest due to certain relatively insignificant expenses recorded at RE/MAX Holdings. (b) The provision for income taxes attributable to RE/MAX Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the pass-through income from RMCO. It also includes RE/MAX Holdings’ share of taxes directly incurred by RMCO and its subsidiaries, related primarily to tax liabilities in certain foreign jurisdictions. (c) The provision for income taxes attributable to the non-controlling interest represents its share of taxes related primarily to tax liabilities in certain foreign jurisdictions directly incurred by RMCO or its subsidiaries. Because RMCO is a pass-through entity, there is no U.S. federal and state income tax provision recorded on the non-controlling interest. |
Distributions Paid or Payable | The distributions paid or payable to non-controlling unitholders are summarized as follows (in thousands): Six Months Ended June 30, 2019 2018 Tax and other distributions $ 2,031 $ 2,794 Dividend distributions 5,275 5,024 Total distributions to non-controlling unitholders $ 7,306 $ 7,818 |
Earnings Per Share and Divide_2
Earnings Per Share and Dividends (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share and Dividends | |
Reconciliation of Numerator and Denominator used in Basic and Diluted EPS Calculations | The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except share and per share information): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Numerator Net income attributable to RE/MAX Holdings, Inc. $ 8,570 $ 7,648 $ 12,979 $ 12,631 Denominator for basic net income per share of Class A common stock Weighted average shares of Class A common stock outstanding 17,808,321 17,746,042 17,791,942 17,727,671 Denominator for diluted net income per share of Class A common stock Weighted average shares of Class A common stock outstanding 17,808,321 17,746,042 17,791,942 17,727,671 Add dilutive effect of the following: Restricted stock units 25,637 23,599 33,938 35,921 Weighted average shares of Class A common stock outstanding, diluted 17,833,958 17,769,641 17,825,880 17,763,592 Earnings per share of Class A common stock Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic $ 0.48 $ 0.43 $ 0.73 $ 0.71 Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted $ 0.48 $ 0.43 $ 0.73 $ 0.71 |
Schedule of Dividends Declared and Paid Quarterly per Share | Dividends declared and paid quarterly per share on all outstanding shares of Class A common stock were as follows (in thousands, except share and per share information): Six Months Ended June 30, 2019 2018 Date paid Per share Amount paid Amount paid Date paid Per share Amount paid Amount paid Dividend declared during quarter ended: March 31 March 20, 2019 $ 0.21 $ 3,740 $ 2,638 March 21, 2018 $ 0.20 $ 3,547 $ 2,512 June 30 May 29, 2019 0.21 3,739 2,638 May 30, 2018 0.20 3,549 2,512 $ 0.42 $ 7,479 $ 5,276 $ 0.40 $ 7,096 $ 5,024 |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Acquisitions | |
Summary of Unaudited Pro Forma Information | Three Months Ended Six Months Ended June 30, 2018 June 30, 2018 (in thousands, except per share amounts) Total revenue $ 73,055 $ 145,432 Net income attributable to RE/MAX Holdings, Inc. $ 7,648 $ 11,640 Basic earnings per common share $ 0.43 $ 0.66 Diluted earnings per common share $ 0.43 $ 0.66 |
Booj Llc | |
Acquisitions | |
Schedule of Fair Value Of Assets at Acquisition Date | The following table summarizes the Company’s allocation of the purchase price to the fair value of assets acquired and liabilities assumed (in thousands): booj Cash $ 362 Other current assets 367 Property and equipment 625 Software 7,400 Trademarks 500 Non-compete agreement 1,200 Customer relationships 800 Other intangible assets 1,589 Other assets, net of current portion 336 Total assets acquired, excluding goodwill 13,179 Current portion of debt (606) Other current liabilities (557) Debt, net of current portion (805) Total liabilities assumed (1,968) Goodwill 15,039 Total purchase price $ 26,250 |
Marketing funds | |
Acquisitions | |
Schedule of Fair Value Of Assets at Acquisition Date | The following table summarizes the Company’s allocation of the purchase price to the fair value of assets acquired and liabilities assumed (in thousands): Restricted cash $ 28,495 Other current assets 8,472 Property and equipment 788 Other assets, net of current portion 126 Total assets acquired 37,881 Other current liabilities 37,881 Total liabilities assumed 37,881 Total acquisition price $ - |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Intangible Assets and Goodwill | |
Schedule of components of intangible assets | The following table provides the components of the Company’s intangible assets (in thousands, except weighted average amortization period in years): Weighted Average As of June 30, 2019 As of December 31, 2018 Amortization Initial Accumulated Net Initial Accumulated Net Period Cost Amortization Balance Cost Amortization Balance Franchise agreements 12.5 $ 180,867 $ (85,460) $ 95,407 $ 180,867 $ (77,710) $ 103,157 Other intangible assets: Software (a) 4.3 $ 25,111 $ (7,605) $ 17,506 $ 20,579 $ (5,802) $ 14,777 Trademarks 9.3 1,886 (938) 948 1,857 (839) 1,018 Non-compete agreements 7.7 3,700 (1,221) 2,479 3,700 (896) 2,804 Training materials 3.0 2,350 (392) 1,958 2,350 (157) 2,193 Other (b) 5.0 800 (213) 587 2,389 (216) 2,173 Total other intangible assets 4.9 $ 33,847 $ (10,369) $ 23,478 $ 30,875 $ (7,910) $ 22,965 (a) As of June 30, 2019, and December 31, 2018, capitalized software development costs of $7.4 million and $ 4.5 million, respectively, were related to technology projects not yet complete and ready for their intended use and thus were not subject to amortization. (b) Other consists of customer relationships and a favorable market lease, both obtained in connection with the acquisition of booj. The favorable market lease was subsumed into “Operating lease right of use assets” on the accompanying Condensed Consolidated Balance Sheet upon adopting the new lease standard on January 1, 2019. See Note 2, Summary of Significant Accounting Policies for additional information. |
Schedule of estimated future amortization of intangible assets, other than goodwill | As of June 30, 2019, the estimated future amortization expense for the next five years related to intangible assets is as follows (in thousands): As of June 30, 2019: Remainder of 2019 $ 18,969 2020 $ 22,271 2021 $ 21,462 2022 $ 18,312 2023 $ 14,157 |
Schedule of changes to goodwill | The following table presents changes to goodwill for the period from January 1, 2019 to June 30, 2019 (in thousands), by segment: RE/MAX Other Total Balance, January 1, 2019 $ 138,884 $ 11,800 $ 150,684 Effect of changes in foreign currency exchange rates 128 — 128 Balance, June 30, 2019 $ 139,012 $ 11,800 $ 150,812 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accrued Liabilities. | |
Schedule of Accrued Liabilities | June 30, December 31, 2019 2018 Marketing Funds (a) $ 35,288 $ — Accrued payroll and related employee costs 8,171 6,517 Accrued taxes 1,181 1,480 Accrued professional fees 868 2,010 Other 3,429 3,136 $ 48,937 $ 13,143 (a) Consists primarily of liabilities recognized to reflect the contractual restriction that all funds collected in the Marketing Funds must be spent for designated purposes. See Note 2, Summary of Significant Accounting Policies for additional information. As previously noted, the Marketing Funds were acquired on January 1, 2019. |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt | |
Schedule of debt | Debt, net of current portion, consists of the following (in thousands): June 30, December 31, 2019 2018 Senior Secured Credit Facility $ 228,538 $ 229,713 Other long-term financing (a) 494 635 Less unamortized debt issuance costs (1,332) (1,481) Less unamortized debt discount costs (973) (1,080) Less current portion (a) (2,637) (2,622) $ 224,090 $ 225,165 (a) Includes financing assumed with the acquisition of booj. As of June 30, 2019, the carrying value of this financing approximates the fair value. |
Schedule of Maturities of Debt | Maturities of debt are as follows (in thousands): As of June 30, 2019: Remainder of 2019 $ 1,315 2020 2,704 2021 2,350 2022 2,350 2023 220,313 $ 229,032 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Measurements | |
Liabilities measured at fair value on a recurring basis | A summary of the Company’s liabilities measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 is as follows (in thousands): As of June 30, 2019 As of December 31, 2018 Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 Liabilities Contingent consideration $ 5,415 $ — $ — $ 5,415 $ 5,070 $ — $ — $ 5,070 |
Reconciliation of all liabilities of Company measured at fair value on a recurring basis using significant unobservable inputs | The table below presents a reconciliation of this liability for the period from January 1, 2019 to June 30, 2019 (in thousands): Balance at January 1, 2019 $ 5,070 Fair value adjustments 345 Balance at June 30, 2019 $ 5,415 |
Summary of carrying value and fair value of senior secured credit facility | The following table summarizes the carrying value and fair value of the Senior Secured Credit Facility as of June 30, 2019 and December 31, 2018 (in thousands): June 30, December 31, 2019 2018 Carrying Fair Value Carrying Fair Value Senior Secured Credit Facility $ 226,233 $ 227,395 $ 227,152 $ 221,673 |
Equity-Based Compensation (Tabl
Equity-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Employee Stock-Based Compensation Expense | Employee stock-based compensation expense, net of the amount capitalized in internally developed software, is as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Expense from Time-based awards (a) $ 1,872 $ 1,061 $ 3,963 $ 1,861 Expense from Performance-based awards (a)(b) (872) 1,101 250 1,569 Expense from bonus to be settled in shares (c) 920 — 1,818 — Equity-based compensation capitalized (a) (124) (6) (184) (6) Equity-based compensation expense 1,796 2,156 5,847 3,424 Tax benefit from equity-based compensation (254) (305) (827) (484) Excess tax benefit from equity-based compensation 57 (73) 113 (145) Net compensation cost $ 1,599 $ 1,778 $ 5,133 $ 2,795 (a) Includes expense recognized and costs capitalized in connection with the awards granted to booj employees and former owners at the time of acquisition. (b) Expense recognized for performance-based awards is re-assessed each quarter based on expectations of achievement against the performance conditions. As of June 30, 2019, certain conditions were no longer deemed probable of being met, primarily for awards that must achieve a certain amount of revenue over a three-year performance period, and the cumulative expense previously recognized was reversed in the current period. (c) In 2019, the Company revised its annual bonus plan so that a portion of the bonus for most employees will be settled in shares if the Company meets certain performance metrics. The share amounts to be issued will be determined based on the stock price at the time of vesting in early 2020. These amounts are recognized as “Accrued liabilities” in the accompanying Condensed Consolidated Balance Sheet and are not included in “Additional paid-in capital” until shares are issued. |
Time-based Restricted Stock Units | |
Restricted Stock Units | Time-based Weighted average Balance, January 1, 2019 298,610 $ 51.97 Granted 158,342 $ 38.61 Shares vested (including tax withholding) (a) (66,918) $ 46.66 Forfeited (5,844) $ 46.41 Balance, June 30, 2019 384,190 $ 47.48 (a) Pursuant to the terms of the 2013 Incentive Plan, RSUs withheld by the Company for the payment of the employee's tax withholding related to an RSU vesting are added back to the pool of shares available for future awards. |
Performance-based Restricted Stock Units | |
Restricted Stock Units | Performance-based Weighted average Balance, January 1, 2019 179,615 $ 55.75 Granted (a) 93,028 $ 41.37 Shares vested (5,620) $ 56.59 Forfeited (30,716) $ 52.97 Balance, June 30, 2019 236,307 $ 39.24 (a) Represents the total participant target award. |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Information | |
Schedule of Revenue from External Customers By Segment | The following table presents revenue from external customers by segment for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Continuing franchise fees $ 23,978 $ 24,761 $ 48,095 $ 49,562 Annual dues 8,819 8,973 17,673 17,669 Broker fees 13,459 13,994 22,047 23,181 Franchise sales and other revenue 4,129 4,382 12,394 13,292 Total RE/MAX Franchising 50,385 52,110 100,209 103,704 Marketing Funds fees 18,060 — 36,832 — Other 2,936 2,167 5,518 3,215 Total revenue $ 71,381 $ 54,277 $ 142,559 $ 106,919 |
Reconciliation of Adjusted EBITDA for its Reportable Segment to Consolidated Balances | The following table presents a reconciliation of Adjusted EBITDA by segment to income before provision for income taxes for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Adjusted EBITDA: RE/MAX Franchising $ 30,020 $ 29,990 $ 54,165 $ 53,797 Adjusted EBITDA: Other (138) (1,245) (1,293) (2,208) Adjusted EBITDA: Consolidated (a) 29,882 28,745 52,872 51,589 Gain (loss) on sale or disposition of assets and sublease, net 16 113 (363) 141 Equity-based compensation expense (1,796) (2,156) (5,847) (3,424) Acquisition-related expense (b) (15) (313) (87) (1,487) Special Committee investigation and remediation expense (c) — (564) — (2,650) Fair value adjustments to contingent consideration (d) (415) 55 (345) (80) Interest income 342 98 662 217 Interest expense (3,154) (3,171) (6,309) (5,895) Depreciation and amortization (5,541) (5,069) (11,099) (9,644) Income before provision for income taxes $ 19,319 $ 17,738 $ 29,484 $ 28,767 (a) As the revenue for the Marketing Funds are contractually restricted for the benefit of franchisees and the Company has an equal and offsetting amount of expenses such that there is no impact to overall profitability of the Company, there is no Adjusted EBITDA for the Marketing Funds. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for more information on the Company’s presentation of Adjusted EBITDA and a reconciliation of the differences between the Company’s Adjusted EBITDA and net income, which is the most comparable GAAP measure for operating performance. (b) Acquisition-related expense includes legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies. (c) Special Committee investigation and remediation expense relates to costs incurred in relation to the previously disclosed investigation by the special committee of independent directors of actions of certain members of our senior management and the implementation of the remediation plan. (d) Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability. See Note 10, Fair Value Measurements for additional information. |
Business and Organization (Deta
Business and Organization (Details) - Minimum | Jun. 30, 2019countryitemOffice |
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |
Number of agents | item | 125,000 |
Number of offices | Office | 8,000 |
Number of countries in which entity operates | country | 110 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Schedule of Deferred Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Annual dues | ||
Disaggregation of Revenue [Line Items] | ||
Deferred revenue recognition period | 12 months | |
Balance at beginning of period | $ 15,877 | |
New billings | 18,828 | |
Revenue recognized | (17,673) | |
Balance at the end of period | $ 17,032 | 17,032 |
Revenue recognized | 4,500 | 11,400 |
Franchise sales revenue | ||
Disaggregation of Revenue [Line Items] | ||
Balance at beginning of period | 27,560 | |
New billings | 3,283 | |
Revenue recognized | 4,697 | |
Balance at the end of period | 26,146 | 26,146 |
Revenue recognized | $ 2,100 | $ 4,400 |
Franchise sales revenue | RE/MAX franchise agreements | ||
Disaggregation of Revenue [Line Items] | ||
Period of franchise agreement | 5 years | |
Franchise sales revenue | Motto franchise agreements | ||
Disaggregation of Revenue [Line Items] | ||
Period of franchise agreement | 7 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Commissions Related to Franchise Sales (Details) - Commissions Related to Franchise Sales $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Capitalized Contract Cost [Line Items] | |
Balance at beginning of period | $ 3,748 |
Expense recognized | (704) |
Additions to contract cost for new activity | 525 |
Balance at end of period | $ 3,569 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Disaggregated revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 71,381 | $ 54,277 | $ 142,559 | $ 106,919 |
Owned Regions | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 34,019 | 35,692 | 64,037 | 67,055 |
Independent Regions | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 11,394 | 11,694 | 22,317 | 22,843 |
Global and Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 4,972 | 4,724 | 13,855 | 13,806 |
RE/MAX Franchising | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 50,385 | 52,110 | 100,209 | 103,704 |
Total Marketing Funds | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 18,060 | 0 | 36,832 | 0 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 2,936 | 2,167 | 5,518 | 3,215 |
U.S. | RE/MAX Franchising | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 41,689 | 43,343 | 83,424 | 86,695 |
U.S. | Total Marketing Funds | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 16,381 | 0 | 33,053 | 0 |
Canada | RE/MAX Franchising | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 5,893 | 6,213 | 11,242 | 11,976 |
Canada | Total Marketing Funds | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 1,500 | 0 | 3,385 | 0 |
Global | RE/MAX Franchising | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 2,803 | 2,554 | 5,543 | 5,033 |
Global | Total Marketing Funds | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 179 | $ 0 | $ 394 | $ 0 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Transaction Price (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 43,178 |
Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | 17,032 |
Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | 26,146 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01 | Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 16,352 |
Performance period | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01 | Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 12,615 |
Performance period | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01 | Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 3,737 |
Performance period | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 10,929 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 4,417 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 6,512 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 5,162 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 0 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 5,162 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 3,693 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 0 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 3,693 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 2,193 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 0 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 2,193 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 1,108 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 0 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 1,108 |
Performance period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | Annual Dues And Franchise Sales | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 3,741 |
Performance period | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | Annual dues | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 0 |
Performance period | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | Franchise sales revenue | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation revenue | $ 3,741 |
Performance period |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | Dec. 31, 2017 |
Cash, Cash Equivalents and Restricted Cash | ||||
Cash and cash equivalents | $ 72,486 | $ 59,974 | ||
Restricted Cash | 23,627 | 0 | ||
Total cash, cash equivalents and restricted cash | $ 96,113 | $ 59,974 | $ 39,839 | $ 50,807 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Services Provided to Marketing Funds by RE/MAX Franchising (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Cost charges | $ 3,752 | $ 6,677 |
Marketing funds | Technology development - operating | ||
Cost charges | 1,199 | 2,164 |
Marketing funds | Technology development - capital | ||
Cost charges | 1,529 | 2,464 |
Marketing funds | Marketing staff and administrative services | ||
Cost charges | $ 1,024 | $ 2,049 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Change in Accounting Principle, Accounting Standards Update, Transition Option Elected [Fixed List] | Prospective | ||
Lease, Practical Expedient, Use of Hindsight [true false] | false | ||
Operating Lease, Right-of-Use Asset | $ 55,600 | $ 53,363 | $ 0 |
Operating Lease, Liability | 65,800 | $ 63,407 | |
Deferred rent | 9,300 | ||
Sublease loss | 2,400 | ||
Intangible assets | $ 1,500 | ||
ASU 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Lease, Practical Expedients, Package [true false] | true | ||
New Accounting Pronouncement or Change in Accounting Principle, Prior Period Not Restated [true false] | true |
Leases (Details)
Leases (Details) | 1 Months Ended | 6 Months Ended |
Apr. 30, 2010item | Jun. 30, 2019agreementitem | |
Lessee, Lease, Description [Line Items] | ||
Remaining lease term | 15 years | |
Option to renew - lessee | true | |
Number of sublease agreements | 4 | |
Number of renewal options reasonably certain to be exercised | item | 0 | |
Number of sublease agreements - contingent upon renewal | 2 | |
Number of sublease agreements - exercised | 2 | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Renewal of lease period | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Renewal of lease period | 20 years | |
Master Lease | ||
Lessee, Lease, Description [Line Items] | ||
Number Of Renewal Terms | item | 2 | |
Percentage Of Increase In Operating Lease Rent | 3.00% | |
Renewal of lease period | 10 years |
Leases - Lease Cost (Details)
Leases - Lease Cost (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Lease Cost | |
Operating lease cost | $ 6,112 |
Sublease income | (724) |
Short-term lease cost | 5,300 |
Total lease cost | 10,688 |
Operating cash flows from operating leases | $ 4,211 |
Weighted-average remaining lease term in years - operating leases | 8 years 10 months 24 days |
Weighted-average discount rate - operating leases | 6.32% |
Variable lease cost | $ 1,800 |
Leases - Maturities of lease li
Leases - Maturities of lease liabilities under non-cancellable leases (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jan. 01, 2019 |
Rent Payments | ||
Remainder of 2019 | $ 4,290 | |
2020 | 8,750 | |
2021 | 9,004 | |
2022 | 9,000 | |
2023 | 9,173 | |
Thereafter | 43,711 | |
Total lease payments | 83,928 | |
Less: imputed interest | 20,521 | |
Present value of lease liabilities | 63,407 | $ 65,800 |
Sublease Receipts | ||
2019 | 559 | |
2020 | 888 | |
2021 | 775 | |
2022 | 804 | |
2023 | 822 | |
Thereafter | 1,382 | |
Sublease Receipts | 5,230 | |
Total Cash Outflows | ||
2019 | 3,731 | |
2020 | 7,862 | |
2021 | 8,229 | |
2022 | 8,196 | |
2023 | 8,351 | |
Thereafter | 42,329 | |
Total Cash Outflows | $ 78,698 |
Leases - Previous lease account
Leases - Previous lease accounting, maturities of lease liabilities (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Rent Payments | |
2019 | $ 9,402 |
2020 | 9,601 |
2021 | 9,341 |
2022 | 9,011 |
2023 | 9,169 |
Thereafter | 43,556 |
Total lease payments | 90,080 |
Sublease Receipts | |
2019 | (1,087) |
2020 | (873) |
2021 | (775) |
2022 | (804) |
2023 | (827) |
Thereafter | (1,382) |
Total Sublease receipts | (5,748) |
Total Cash Outflows | |
2019 | 8,315 |
2020 | 8,728 |
2021 | 8,566 |
2022 | 8,207 |
2023 | 8,342 |
Thereafter | 42,174 |
Total Cash Outflows | $ 84,332 |
Non-controlling Interest - Owne
Non-controlling Interest - Ownership of common units in RMCO (Details) - RMCO, LLC - shares | Jun. 30, 2019 | Dec. 31, 2018 |
Shares [Abstract] | ||
Non-controlling interest ownership of common units in RMCO | 12,559,600 | 12,559,600 |
RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO) | 17,809,119 | 17,754,416 |
Total number of common stock units in RMCO | 30,368,719 | 30,314,016 |
Ownership Percentage [Abstract] | ||
Non-controlling interest ownership of common units in RMCO as a percentage | 41.36% | 41.43% |
RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO) | 58.64% | 58.57% |
Total percentage of common stock units | 100.00% | 100.00% |
Non-controlling Interest - Net
Non-controlling Interest - Net income reconciliation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Noncontrolling Interest | ||||||
Weighted average ownership percentage of controlling interest | 58.64% | 58.56% | 58.62% | 58.53% | ||
Weighted average ownership percentage of noncontrolling interest | 41.36% | 41.44% | 41.38% | 41.47% | ||
Total (as a percentage) | 100.00% | 100.00% | 100.00% | 100.00% | ||
Income before provision for income taxes attributable to RE/MAX Holdings, Inc. | $ 11,328 | $ 10,367 | $ 17,286 | $ 16,820 | ||
Provision for income taxes attributable to RE/MAX Holdings, Inc. | (2,758) | (2,719) | (4,307) | (4,189) | ||
Net income attributable to RE/MAX Holdings, Inc. | 8,570 | 7,648 | 12,979 | 12,631 | ||
Income before provision for income taxes: Non-controlling interest | 7,991 | 7,371 | 12,198 | 11,947 | ||
Provision for income taxes: Non-controlling interest | (428) | (428) | (787) | (820) | ||
Net income: Non-controlling interest | 7,563 | 6,943 | 11,411 | 11,127 | ||
Income before provision for income taxes | 19,319 | 17,738 | 29,484 | 28,767 | ||
Provision for income taxes | (3,186) | (3,147) | (5,094) | (5,009) | ||
Net income | $ 16,133 | $ 8,257 | $ 14,591 | $ 9,167 | $ 24,390 | $ 23,758 |
Non-controlling Interest - Dist
Non-controlling Interest - Distributions Paid or Payable (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Dividends Payable [Line Items] | ||
Distributions paid or payable to or on behalf of non-controlling unitholders | $ 7,306 | $ 7,818 |
Tax and other distributions | ||
Dividends Payable [Line Items] | ||
Distributions paid or payable to or on behalf of non-controlling unitholders | 2,031 | 2,794 |
Dividend distributions | ||
Dividends Payable [Line Items] | ||
Distributions paid or payable to or on behalf of non-controlling unitholders | $ 5,275 | $ 5,024 |
Earnings Per Share and Divide_3
Earnings Per Share and Dividends - Reconciliation of the numerator and denominator used in basic and diluted EPS calculations (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Numerator | ||||
Net income attributable to RE/MAX Holdings, Inc. | $ 8,570 | $ 7,648 | $ 12,979 | $ 12,631 |
Common Class A | ||||
Denominator for basic net income per share of Class A common stock | ||||
Weighted average shares of Class A common stock outstanding | 17,808,321 | 17,746,042 | 17,791,942 | 17,727,671 |
Denominator for diluted net income per share of Class A common stock | ||||
Weighted average shares of Class A common stock outstanding | 17,808,321 | 17,746,042 | 17,791,942 | 17,727,671 |
Add dilutive effect of the following: | ||||
Weighted average shares of Class A common stock outstanding, diluted | 17,833,958 | 17,769,641 | 17,825,880 | 17,763,592 |
Earnings per share of Class A common stock | ||||
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic | $ 0.48 | $ 0.43 | $ 0.73 | $ 0.71 |
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted | $ 0.48 | $ 0.43 | $ 0.73 | $ 0.71 |
Restricted Stock Units (RSUs) | Common Class A | ||||
Add dilutive effect of the following: | ||||
Restricted stock units | 25,637 | 23,599 | 33,938 | 35,921 |
Earnings Per Share and Divide_4
Earnings Per Share and Dividends - Additional Information (Details) - USD ($) | Jul. 31, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 |
Dividends Payable [Line Items] | |||||||
Cash dividends declared per share of Class A common stock | $ 0.42 | $ 0.40 | |||||
Dividends declared and paid | $ 3,739,000 | $ 3,740,000 | $ 3,549,000 | $ 3,547,000 | $ 7,479,000 | $ 7,096,000 | |
Common Class A | |||||||
Dividends Payable [Line Items] | |||||||
Cash dividends declared per share of Class A common stock | $ 0.21 | $ 0.21 | $ 0.20 | $ 0.20 | $ 0.42 | $ 0.40 | |
Dividends declared and paid | $ 0 | $ 0 | $ 0 | $ 0 | |||
Quarterly dividend | Common Class A | |||||||
Dividends Payable [Line Items] | |||||||
Cash dividends declared per share of Class A common stock | $ 0.21 | ||||||
Non-controlling interest | |||||||
Dividends Payable [Line Items] | |||||||
Dividends declared and paid | 0 | 0 | 0 | 0 | |||
Distributions declared to non-controlling unitholders | $ 2,638,000 | $ 2,638,000 | $ 2,512,000 | $ 2,512,000 | $ 5,276,000 | $ 5,024,000 |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ / shares in Units, $ in Thousands | Feb. 26, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Purchase Price Allocation | ||||||
Goodwill | $ 150,812 | $ 150,684 | ||||
Pro Forma Information | ||||||
Total revenue | $ 73,055 | $ 145,432 | ||||
Net income attributable to RE/MAX Holdings, Inc. | $ 7,648 | $ 11,640 | ||||
Basic earnings per common share | $ 0.43 | $ 0.66 | ||||
Diluted earnings per common share | $ 0.43 | $ 0.66 | ||||
Booj Llc | ||||||
Business Acquisition [Line Items] | ||||||
Cash consideration | $ 26,300 | |||||
Issuance of Class A common stock, equity-based compensation plans, value | 10,000 | |||||
Purchase Price Allocation | ||||||
Cash | 362 | |||||
Other current assets | 367 | |||||
Property and equipment | 625 | |||||
Software | 7,400 | |||||
Trademarks | 500 | |||||
Non-compete agreement | 1,200 | |||||
Customer relationships | 800 | |||||
Other intangible assets | 1,589 | |||||
Other assets, net of current portion | 336 | |||||
Total assets acquired, excluding goodwill | 13,179 | |||||
Current portion of debt | (606) | |||||
Other current liabilities | 557 | |||||
Debt, net of current portion | (805) | |||||
Total liabilities assumed | 1,968 | |||||
Goodwill | 15,039 | |||||
Total purchase price | $ 26,250 | |||||
Marketing funds | ||||||
Purchase Price Allocation | ||||||
Restricted cash | $ 28,495 | |||||
Other current assets | 8,472 | |||||
Property and equipment | 788 | |||||
Other assets, net of current portion | 126 | |||||
Total assets acquired | 37,881 | |||||
Other current liabilities | 37,881 | |||||
Total liabilities assumed | $ 37,881 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill - Components of Company's Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Finite Lived Intangible Assets [Line Items] | |||||
Net Balance | $ 95,407 | $ 95,407 | $ 103,157 | ||
Amortization expense | 5,100 | $ 4,700 | 10,300 | $ 9,100 | |
Franchise agreements | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Initial Cost | 180,867 | 180,867 | 180,867 | ||
Accumulated Amortization | (85,460) | (85,460) | (77,710) | ||
Net Balance | 95,407 | $ 95,407 | 103,157 | ||
Franchise agreements | Weighted Average | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Useful life of intangible assets | 12 years 6 months | ||||
Other intangible assets | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Initial Cost | 33,847 | $ 33,847 | 30,875 | ||
Accumulated Amortization | (10,369) | (10,369) | (7,910) | ||
Net Balance | 23,478 | $ 23,478 | 22,965 | ||
Other intangible assets | Weighted Average | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Useful life of intangible assets | 4 years 10 months 24 days | ||||
Software | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Initial Cost | 25,111 | $ 25,111 | 20,579 | ||
Accumulated Amortization | (7,605) | (7,605) | (5,802) | ||
Net Balance | 17,506 | $ 17,506 | 14,777 | ||
Software | Weighted Average | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Useful life of intangible assets | 4 years 3 months 18 days | ||||
Trademarks | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Initial Cost | 1,886 | $ 1,886 | 1,857 | ||
Accumulated Amortization | (938) | (938) | (839) | ||
Net Balance | 948 | $ 948 | 1,018 | ||
Trademarks | Weighted Average | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Useful life of intangible assets | 9 years 3 months 18 days | ||||
Software Development | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Capitalized software development costs | 7,400 | $ 7,400 | 4,500 | ||
Non-compete agreements | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Initial Cost | 3,700 | 3,700 | 3,700 | ||
Accumulated Amortization | (1,221) | (1,221) | (896) | ||
Net Balance | 2,479 | $ 2,479 | 2,804 | ||
Non-compete agreements | Weighted Average | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Useful life of intangible assets | 7 years 8 months 12 days | ||||
Training materials | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Initial Cost | 2,350 | $ 2,350 | 2,350 | ||
Accumulated Amortization | (392) | (392) | (157) | ||
Net Balance | 1,958 | $ 1,958 | 2,193 | ||
Training materials | Weighted Average | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Useful life of intangible assets | 3 years | ||||
Other | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Initial Cost | 800 | $ 800 | 2,389 | ||
Accumulated Amortization | (213) | (213) | (216) | ||
Net Balance | $ 587 | $ 587 | $ 2,173 | ||
Other | Weighted Average | |||||
Finite Lived Intangible Assets [Line Items] | |||||
Useful life of intangible assets | 5 years |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill - Estimated Future Amortization of Intangible Assets, Other Than Goodwill (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract] | |
Remainder of 2019 | $ 18,969 |
2020 | 22,271 |
2021 | 21,462 |
2022 | 18,312 |
2023 | $ 14,157 |
Intangible Assets and Goodwil_4
Intangible Assets and Goodwill - Schedule of Changes in Goodwill (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Changes to goodwill | |
Beginning Balance | $ 150,684 |
Effect of changes in foreign currency exchange rates | 128 |
Ending Balance | 150,812 |
RE/MAX Franchising | |
Changes to goodwill | |
Beginning Balance | 138,884 |
Effect of changes in foreign currency exchange rates | 128 |
Ending Balance | 139,012 |
Other | |
Changes to goodwill | |
Beginning Balance | 11,800 |
Effect of changes in foreign currency exchange rates | 0 |
Ending Balance | $ 11,800 |
Accrued Liabilities - Schedule
Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Accrued Liabilities. | ||
Marketing Funds | $ 35,288 | $ 0 |
Accrued payroll and related employee costs | 8,171 | 6,517 |
Accrued taxes | 1,181 | 1,480 |
Accrued professional fees | 868 | 2,010 |
Other | 3,429 | 3,136 |
Accrued liabilities | $ 48,937 | $ 13,143 |
Debt - Schedule of Debt (Detail
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||
Long term debt | $ 229,032 | |
Less unamortized debt issuance costs | (1,332) | $ (1,481) |
Less unamortized debt discount costs | (973) | (1,080) |
Less current portion | (2,637) | (2,622) |
Debt, net of current portion | 224,090 | 225,165 |
Senior Secured Credit Facility | ||
Debt Instrument [Line Items] | ||
Long term debt | 228,538 | 229,713 |
Other long-term financing | ||
Debt Instrument [Line Items] | ||
Long term debt | $ 494 | $ 635 |
Debt - Schedule of Maturities o
Debt - Schedule of Maturities of Debt (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Debt | |
Remainder of 2019 | $ 1,315 |
2020 | 2,704 |
2021 | 2,350 |
2022 | 2,350 |
2023 | 220,313 |
Long term debt | $ 229,032 |
Debt - Additional Information (
Debt - Additional Information (Details) - USD ($) | Jun. 30, 2019 | Dec. 15, 2016 |
Debt Instrument [Line Items] | ||
Debt instrument, interest rate | 5.15% | |
Term loan | Senior Secured Credit Facility | ||
Debt Instrument [Line Items] | ||
Notes Payable to Bank | $ 235,000,000 | |
Revolving loan facility | ||
Debt Instrument [Line Items] | ||
Amounts drawn on line of credit | $ 0 | |
Revolving loan facility | Senior Secured Credit Facility | ||
Debt Instrument [Line Items] | ||
Credit facility, borrowing capacity | $ 10,000,000 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019USD ($)item | Dec. 31, 2018USD ($) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Percentage of gross revenues to be paid yearly | 8.00% | |
Measured on a recurring basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration liability | $ 5,415 | $ 5,070 |
Level 1 | Measured on a recurring basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration liability | 0 | 0 |
Level 2 | Measured on a recurring basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration liability | 0 | 0 |
Level 3 | Measured on a recurring basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration liability | 5,415 | $ 5,070 |
Ten Percent Reduction In Franchise Sales [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred revenue and deposits, current portion | 300 | |
One Percent Change To Discount Rate [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred revenue and deposits, current portion | $ 300 | |
Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assumed number of franchises sold annually | item | 50 | |
Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assumed number of franchises sold annually | item | 80 |
Fair Value Measurements - Recon
Fair Value Measurements - Reconciliation of Assets and Liabilities Measured Using Significant Unobservable Inputs (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Fair value adjustment | $ 415 | $ (55) | $ 345 | $ 80 |
Measured on a recurring basis | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Balance at Beginning | 5,070 | |||
Balance at Ending | 5,415 | 5,415 | ||
Level 3 | Measured on a recurring basis | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Balance at Beginning | 5,070 | |||
Fair value adjustment | 345 | |||
Balance at Ending | $ 5,415 | $ 5,415 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Senior Secured Credit Facility (Details) - Senior Secured Credit Facility - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Carrying amounts | ||
Debt Instrument [Line Items] | ||
Long term debt, carrying amount | $ 226,233 | $ 227,152 |
Level 2 | Estimated fair value | ||
Debt Instrument [Line Items] | ||
Long term debt, fair value | $ 227,395 | $ 221,673 |
Equity-Based Compensation (Deta
Equity-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Employee stock-based compensation expense | ||||
Equity-based compensation capitalized (a) | $ (124) | $ (6) | $ (184) | $ (6) |
Equity-based compensation expense | 1,796 | 2,156 | 5,847 | 3,424 |
Tax benefit from equity-based compensation | (254) | (305) | (827) | (484) |
Excess tax benefit from equity-based compensation | 57 | (73) | 113 | (145) |
Net compensation cost | $ 1,599 | 1,778 | $ 5,133 | 2,795 |
Restricted Stock Units | ||||
Additional shares available to grant under plan (in shares) | 2,187,446 | 2,187,446 | ||
Time-based Restricted Stock Units | ||||
Employee stock-based compensation expense | ||||
Equity-based compensation expense | $ 1,872 | 1,061 | $ 3,963 | 1,861 |
Restricted Stock Units | ||||
Nonvested at beginning of period | 298,610 | |||
Granted | 158,342 | |||
Shares vested | (66,918) | |||
Forfeited | (5,844) | |||
Nonvested at end of period | 384,190 | 384,190 | ||
Nonvested at beginning of period, Weighted average grant date fair value per share | $ 51.97 | |||
Granted, Weighted average grant date fair value per share | 38.61 | |||
Shares vested, Weighted average grant date fair value per share | 46.66 | |||
Forfeited, Weighted average grant date fair value per share | 46.41 | |||
Nonvested at end of period, Weighted average grant date fair value per share | $ 47.48 | $ 47.48 | ||
Unrecognized compensation cost | $ 13,200 | $ 13,200 | ||
Period for recognition of RSU compensation expense | 2 years 1 month 24 days | |||
Performance-based Restricted Stock Units | ||||
Employee stock-based compensation expense | ||||
Equity-based compensation expense | $ (872) | 1,101 | $ 250 | 1,569 |
Restricted Stock Units | ||||
Nonvested at beginning of period | 179,615 | |||
Granted | 93,028 | |||
Shares vested | (5,620) | |||
Forfeited | (30,716) | |||
Nonvested at end of period | 236,307 | 236,307 | ||
Nonvested at beginning of period, Weighted average grant date fair value per share | $ 55.75 | |||
Granted, Weighted average grant date fair value per share | 41.37 | |||
Shares vested, Weighted average grant date fair value per share | 56.59 | |||
Forfeited, Weighted average grant date fair value per share | 52.97 | |||
Nonvested at end of period, Weighted average grant date fair value per share | $ 39.24 | $ 39.24 | ||
Unrecognized compensation cost | $ 4,300 | $ 4,300 | ||
Period for recognition of RSU compensation expense | 2 years 21 days | |||
Bonus settled in shares | ||||
Employee stock-based compensation expense | ||||
Equity-based compensation expense | $ 920 | $ 0 | $ 1,818 | $ 0 |
Leadership Changes and the Ne_2
Leadership Changes and the New Service Model (Details) - USD ($) $ in Millions | Feb. 09, 2018 | Mar. 31, 2019 | Mar. 31, 2019 |
Former President | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
The period for payment of restructuring costs. | 39 months | ||
RE/MAX Franchising | President | Separation And Transition Agreement | Selling, General and Administrative Expenses | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Incurred cost under Separation Agreement | $ 1.8 | ||
RE/MAX Franchising | Restructuring Plan | Selling, General and Administrative Expenses | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Severance and other related expenses | $ 2.1 | ||
RE/MAX Franchising | Restructuring Plan | Former Employees | Selling, General and Administrative Expenses | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Severance and other related expenses | $ 0.7 |
Related-Party Transactions (Det
Related-Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Related party balances and activity | |||
Expenses recorded for benefits provided by related party | $ 0.3 | $ 0.3 | |
Services rendered and rent for office space provided | |||
Related party balances and activity | |||
Amounts allocated for services rendered and rent for office space | $ 0.9 | $ 1.9 |
Segment Information (Details)
Segment Information (Details) | 6 Months Ended |
Jun. 30, 2019segment | |
Segment Information | |
Number of reportable segments | 2 |
Segment Information - Revenue (
Segment Information - Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Reporting Information | ||||
Total revenue | $ 71,381 | $ 54,277 | $ 142,559 | $ 106,919 |
RE/MAX Franchising | ||||
Segment Reporting Information | ||||
Total revenue | 50,385 | 52,110 | 100,209 | 103,704 |
Marketing Funds fees | ||||
Segment Reporting Information | ||||
Total revenue | 18,060 | 0 | 36,832 | 0 |
Other | ||||
Segment Reporting Information | ||||
Total revenue | 2,936 | 2,167 | 5,518 | 3,215 |
Continuing franchise fees | ||||
Segment Reporting Information | ||||
Total revenue | 24,894 | 25,211 | 49,850 | 50,451 |
Continuing franchise fees | RE/MAX Franchising | ||||
Segment Reporting Information | ||||
Total revenue | 23,978 | 24,761 | 48,095 | 49,562 |
Annual dues | ||||
Segment Reporting Information | ||||
Total revenue | 8,819 | 8,973 | 17,673 | 17,669 |
Annual dues | RE/MAX Franchising | ||||
Segment Reporting Information | ||||
Total revenue | 8,819 | 8,973 | 17,673 | 17,669 |
Broker fees | ||||
Segment Reporting Information | ||||
Total revenue | 13,459 | 13,993 | 22,047 | 23,181 |
Broker fees | RE/MAX Franchising | ||||
Segment Reporting Information | ||||
Total revenue | 13,459 | 13,994 | 22,047 | 23,181 |
Franchise sales and other revenue | ||||
Segment Reporting Information | ||||
Total revenue | 6,149 | 6,100 | 16,157 | 15,618 |
Franchise sales and other revenue | RE/MAX Franchising | ||||
Segment Reporting Information | ||||
Total revenue | $ 4,129 | $ 4,382 | $ 12,394 | $ 13,292 |
Segment Information - Reconcili
Segment Information - Reconciliation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated | ||||
Adjusted EBITDA | $ 29,882 | $ 28,745 | $ 52,872 | $ 51,589 |
(Gain) loss on sale or disposition of assets and sublease, net | 16 | 113 | (363) | 141 |
Equity-based compensation expense | (1,796) | (2,156) | (5,847) | (3,424) |
Acquisition-related expense | (15) | (313) | (87) | (1,487) |
Special Committee investigation and remediation expense | 0 | (564) | 0 | (2,650) |
Fair value adjustments to contingent consideration | (415) | 55 | (345) | (80) |
Interest income | 342 | 98 | 662 | 217 |
Interest expense | (3,154) | (3,171) | (6,309) | (5,895) |
Depreciation and amortization | (5,541) | (5,069) | (11,099) | (9,644) |
Income before provision for income taxes | 19,319 | 17,738 | 29,484 | 28,767 |
RE/MAX Franchising | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated | ||||
Adjusted EBITDA | 30,020 | 29,990 | 54,165 | 53,797 |
Other | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated | ||||
Adjusted EBITDA | $ (138) | $ (1,245) | $ (1,293) | $ (2,208) |