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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020.

OR

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                 to                 .

Commission file number: 001-36101

RE/MAX Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

80-0937145

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

5075 South Syracuse Street
Denver, Colorado

80237

(Address of principal executive offices)

(Zip Code)

(303) 770-5531

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value per share

RMAX

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No     

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Emerging growth company

Non-accelerated filer

Smaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

On October 31, 2020, there were 18,557,201 outstanding shares of the registrant’s Class A common stock (including unvested restricted stock), $0.0001 par value per share, and 1 outstanding share of Class B common stock, $0.0001 par value per share.

Table of Contents

TABLE OF CONTENTS

 

 

 

Page No.

 

 

PART I. – FINANCIAL INFORMATION

Item 1.

 

Financial Statements

3

 

 

Condensed Consolidated Balance Sheets

3

 

 

Condensed Consolidated Statements of Income

4

Condensed Consolidated Statements of Comprehensive Income

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity

6

 

 

Condensed Consolidated Statements of Cash Flows

8

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risks

37

Item 4.

 

Controls and Procedures

38

 

 

PART II. – OTHER INFORMATION

Item 1.

 

Legal Proceedings

38

Item 1A.

 

Risk Factors

38

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

 

Defaults Upon Senior Securities

40

Item 4.

 

Mine Safety Disclosures

40

Item 5.

 

Other Information

40

Item 6.

 

Exhibits

41

SIGNATURES

42

2

Table of Contents

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

RE/MAX HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

September 30, 

December 31, 

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

89,135

$

83,001

Restricted cash

15,635

20,600

Accounts and notes receivable, current portion, less allowances of $14,614 and $12,538, respectively

30,003

28,644

Income taxes receivable

718

896

Other current assets

12,484

9,638

Total current assets

147,975

142,779

Property and equipment, net of accumulated depreciation of $16,408 and $14,940, respectively

6,016

5,444

Operating lease right of use assets

39,937

51,129

Franchise agreements, net

76,065

87,670

Other intangible assets, net

31,424

32,315

Goodwill

176,302

159,038

Deferred tax assets, net

49,377

52,595

Income taxes receivable, net of current portion

1,690

1,690

Other assets, net of current portion

14,535

9,692

Total assets

$

543,321

$

542,352

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

5,727

$

2,983

Accrued liabilities

52,073

60,163

Income taxes payable

7,249

6,854

Deferred revenue

23,147

25,663

Current portion of debt

2,489

2,648

Current portion of payable pursuant to tax receivable agreements

6,478

3,583

Operating lease liabilities

5,553

5,102

Total current liabilities

102,716

106,996

Debt, net of current portion

221,594

223,033

Payable pursuant to tax receivable agreements, net of current portion

30,745

33,640

Deferred tax liabilities, net

1,000

293

Deferred revenue, net of current portion

17,931

18,763

Operating lease liabilities, net of current portion

51,750

55,959

Other liabilities, net of current portion

5,408

5,292

Total liabilities

431,144

443,976

Commitments and contingencies (note 12)

Stockholders' equity:

Class A common stock, par value $.0001 per share, 180,000,000 shares authorized; 18,372,134 and 17,838,233 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

2

2

Class B common stock, par value $.0001 per share, 1,000 shares authorized; 1 share issued and outstanding as of September 30, 2020 and December 31, 2019

Additional paid-in capital

485,664

466,945

Retained earnings

27,951

30,525

Accumulated other comprehensive income, net of tax

476

414

Total stockholders' equity attributable to RE/MAX Holdings, Inc.

514,093

497,886

Non-controlling interest

(401,916)

(399,510)

Total stockholders' equity

112,177

98,376

Total liabilities and stockholders' equity

$

543,321

$

542,352

See accompanying notes to unaudited condensed consolidated financial statements.

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Table of Contents

RE/MAX HOLDINGS, INC.

Condensed Consolidated Statements of Income

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

 

2019

 

2020

 

2019

Revenue:

Continuing franchise fees

$

24,339

$

25,168

$

65,220

$

75,018

Annual dues

8,638

8,835

26,304

26,508

Broker fees

15,457

13,292

35,327

35,339

Marketing Funds fees

17,290

18,034

46,577

54,866

Franchise sales and other revenue

5,349

6,212

20,124

22,369

Total revenue

71,073

71,541

193,552

214,100

Operating expenses:

Selling, operating and administrative expenses

28,216

24,468

88,241

84,081

Marketing Funds expenses

17,290

18,034

46,577

54,866

Depreciation and amortization

6,850

5,595

19,572

16,694

Impairment charge - leased assets

7,902

7,902

Total operating expenses

60,258

48,097

162,292

155,641

Operating income

10,815

23,444

31,260

58,459

Other expenses, net:

Interest expense

(2,159)

(3,089)

(7,028)

(9,398)

Interest income

25

412

328

1,074

Foreign currency transaction gains (losses)

94

(50)

(75)

66

Total other expenses, net

(2,040)

(2,727)

(6,775)

(8,258)

Income before provision for income taxes

8,775

20,717

24,485

50,201

Provision for income taxes

(2,051)

(3,453)

(6,547)

(8,547)

Net income

$

6,724

$

17,264

$

17,938

$

41,654

Less: net income attributable to non-controlling interest (note 3)

3,171

8,091

8,265

19,502

Net income attributable to RE/MAX Holdings, Inc.

$

3,553

$

9,173

$

9,673

$

22,152

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock

Basic

$

0.20

$

0.51

$

0.53

$

1.24

Diluted

$

0.19

$

0.51

$

0.53

$

1.24

Weighted average shares of Class A common stock outstanding

Basic

18,196,454

17,826,332

18,098,227

17,803,708

Diluted

18,368,051

17,840,158

18,182,856

17,830,942

Cash dividends declared per share of Class A common stock

$

0.22

$

0.21

$

0.66

$

0.63

See accompanying notes to unaudited condensed consolidated financial statements.

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RE/MAX HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Net income

$

6,724

$

17,264

$

17,938

$

41,654

Change in cumulative translation adjustment

70

(39)

(43)

95

Other comprehensive income (loss), net of tax

70

(39)

(43)

95

Comprehensive income

6,794

17,225

17,895

41,749

Less: comprehensive income attributable to non-controlling interest

3,205

8,070

8,160

19,546

Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax

$

3,589

$

9,155

$

9,735

$

22,203

See accompanying notes to unaudited condensed consolidated financial statements.

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RE/MAX HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

Accumulated other

Class A

Class B

Additional

comprehensive

Non-

Total

common stock

common stock

paid-in

Retained

income (loss),

controlling

stockholders'

    

Shares

    

Amount

    

Shares

    

Amount

    

capital

    

earnings

    

net of tax

    

interest

    

equity

Balances, January 1, 2020

17,838,233

$

2

1

$

$

466,945

$

30,525

$

414

$

(399,510)

$

98,376

Net income

2,631

2,659

5,290

Distributions to non-controlling unitholders

(2,777)

(2,777)

Equity-based compensation expense and related dividend equivalents

368,375

5,962

(289)

5,673

Dividends to Class A common stockholders

(3,986)

(3,986)

Change in accumulated other comprehensive income

(36)

(194)

(230)

Payroll taxes related to net settled restricted stock units

(82,645)

(2,268)

(2,268)

Balances, March 31, 2020

18,123,963

2

1

470,639

28,881

378

(399,822)

100,078

Net income

3,489

2,435

5,924

Distributions to non-controlling unitholders

(2,789)

(2,789)

Equity-based compensation expense and related dividend equivalents

2,812

2,812

Dividends to Class A common stockholders

(3,987)

(3,987)

Change in accumulated other comprehensive income

62

55

117

Other

2

2

Balances, June 30, 2020

18,123,963

2

1

473,451

28,385

440

(400,121)

102,157

Net income

3,553

3,171

6,724

Distributions to non-controlling unitholders

(5,000)

(5,000)

Equity-based compensation expense and related dividend equivalents

3,413

3,413

Dividends to Class A common stockholders

(3,988)

(3,988)

Change in accumulated other comprehensive income

36

34

70

Acquisitions

248,171

8,800

8,800

Other

1

1

Balances, September 30, 2020

18,372,134

$

2

1

$

$

485,664

$

27,951

$

476

$

(401,916)

$

112,177

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Accumulated other

Class A

Class B

Additional

comprehensive

Non-

Total

common stock

common stock

paid-in

Retained

income (loss),

controlling

stockholders'

    

Shares

    

Amount

    

Shares

    

Amount

    

capital

    

earnings

    

net of tax

    

interest

    

equity

Balances, January 1, 2019

17,754,416

$

2

1

$

$

460,101

$

21,138

$

328

$

(402,294)

$

79,275

Net income

4,409

3,848

8,257

Distributions to non-controlling unitholders

(2,693)

(2,693)

Equity-based compensation expense and related dividend equivalents

70,797

3,213

(42)

3,171

Dividends to Class A common stockholders

(3,740)

(3,740)

Change in accumulated other comprehensive income

36

33

69

Payroll taxes related to net settled restricted stock units

(17,265)

(713)

(713)

Balances, March 31, 2019

17,807,948

2

1

462,601

21,765

364

(401,106)

83,626

Net income

8,570

7,563

16,133

Distributions to non-controlling unitholders

(4,613)

(4,613)

Equity-based compensation expense and related dividend equivalents

1,740

182

(1)

181

Dividends to Class A common stockholders

(3,739)

(3,739)

Change in accumulated other comprehensive income

33

32

65

Payroll taxes related to net settled restricted stock units

(569)

(18)

(18)

Other

290

290

Balances, June 30, 2019

17,809,119

2

1

463,055

26,595

397

(398,124)

91,925

Net income

9,173

8,091

17,264

Distributions to non-controlling unitholders

(4,154)

(4,154)

Equity-based compensation expense and related dividend equivalents

30,278

(888)

(31)

(919)

Dividends to Class A common stockholders

(3,745)

(3,745)

Change in accumulated other comprehensive income

(18)

(21)

(39)

Payroll taxes related to net settled restricted stock units

(3,678)

(105)

(105)

Other

183

183

Balances, September 30, 2019

17,835,719

$

2

1

$

$

462,245

$

31,992

$

379

$

(394,208)

$

100,410

See accompanying notes to unaudited condensed consolidated financial statements.

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RE/MAX HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine Months Ended

September 30, 

2020

2019

Cash flows from operating activities:

Net income

$

17,938

$

41,654

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

19,572

16,694

Impairment charge - leased assets

7,902

Bad debt expense

4,024

3,420

Equity-based compensation expense

8,347

4,860

Deferred income tax expense

1,889

3,630

Fair value adjustments to contingent consideration

(105)

330

Other, net

209

1,193

Changes in operating assets and liabilities

(16,305)

(16,594)

Net cash provided by operating activities

43,471

55,187

Cash flows from investing activities:

Purchases of property, equipment and capitalization of software

(4,575)

(10,093)

Acquisitions, net of cash acquired of $867k and $−, respectively

(10,627)

Restricted cash acquired with the Marketing Funds acquisition

28,495

Other

(1,200)

Net cash (used in) provided by investing activities

(15,202)

17,202

Cash flows from financing activities:

Payments on debt

(1,986)

(1,964)

Distributions paid to non-controlling unitholders

(10,566)

(11,460)

Dividends and dividend equivalents paid to Class A common stockholders

(12,250)

(11,298)

Payments related to tax withholding for share-based compensation

(2,268)

(836)

Net cash used in financing activities

(27,070)

(25,558)

Effect of exchange rate changes on cash

(30)

76

Net increase in cash, cash equivalents and restricted cash

1,169

46,907

Cash, cash equivalents and restricted cash, beginning of year

103,601

59,974

Cash, cash equivalents and restricted cash, end of period

$

104,770

$

106,881

Supplemental disclosures of cash flow information:

Cash paid for interest

$

6,638

$

9,004

Net cash paid for income taxes

$

3,963

$

6,032

Payments pursuant to tax receivable agreements

$

$

2,854

Schedule of non-cash investing activities:

Class A shares issued as consideration for acquisitions

$

8,800

$

See accompanying notes to unaudited condensed consolidated financial statements.

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1. Business and Organization

RE/MAX Holdings, Inc. (“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 (“Motto”). RE/MAX, founded in 1973, has over 130,000 agents operating in over 8,000 offices and a presence in more than 110 countries and territories. Motto, founded in 2016, is the first nationally franchised mortgage brokerage in the U.S. RE/MAX and Motto are 100% franchised and do not operate any real estate or mortgage brokerage offices.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Balance Sheet at December 31, 2019, 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 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 September 30, 2020 and the results of its operations and comprehensive income, cash flows and changes in its stockholders’ equity for the three and nine months ended September 30, 2020 and 2019. 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, 2019 (“2019 Annual Report on Form 10-K”). Please refer to that document for a fuller discussion of all significant accounting policies.

Use of Estimates

The preparation of the accompanying 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.

Revenue Recognition

The Company generates the substantial majority of its revenue from contracts with customers. The Company’s major streams of revenue are:

Continuing franchise fees, which are fixed contractual fees paid monthly by regional franchise owners and franchisees based on the number of RE/MAX agents in the respective franchised region or office and the number of Motto offices.
Annual dues, which are fees charged directly to RE/MAX agents.
Broker fees, which are fees paid on real estate commissions when a RE/MAX agent assists a consumer to buy or sell a home.
Marketing Funds fees, which are fixed contractual fees paid monthly by franchisees based on the number of RE/MAX agents in the respective franchised region or office or the number of Motto offices.

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Table of Contents

Franchise sales and other franchise revenue, which consist of fees from initial sales of RE/MAX and Motto franchises, renewals of RE/MAX franchises, master franchise fees, preferred marketing arrangements, approved supplier programs and event-based revenue from training and other programs.

Annual Dues

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
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

15,982

$

24,840

$

(26,304)

$

14,518

(a)

Revenue recognized related to the beginning balance was $2.4 million and $13.7 million for the three and nine months ended September 30, 2020, respectively.

Franchise Sales

The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands):

    

Balance at
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

25,884

$

6,029

$

(7,130)

$

24,783

(a)

Revenue recognized related to the beginning balance was $2.0 million and $6.6 million for the three and nine months ended September 30, 2020, 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

Expense

Additions to contract

Balance at end

    

beginning of period

    

recognized

    

cost for new activity

    

of period

Nine Months Ended September 30, 2020

$

3,578

$

(1,076)

$

1,142

$

3,644

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Disaggregated Revenue

In the following table, segment revenue is disaggregated by geographical area (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

U.S.

$

42,257

$

42,013

$

114,786

$

125,437

Canada

5,898

5,886

15,833

17,128

Global

2,797

3,182

8,609

8,725

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

U.S.

15,701

16,163

41,948

49,216

Canada

1,405

1,644

4,075

5,029

Global

184

227

554

621

Total Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising (a)

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

(a)Revenue from the Motto Franchising segment is derived exclusively within the U.S.

In the following table, segment revenue is disaggregated by Company-Owned or Independent Regions in the U.S., Canada and Global (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Company-Owned Regions

$

40,226

$

39,693

$

104,632

$

115,423

Independent Regions

8,792

8,954

25,357

25,726

Global and Other

1,934

2,434

9,239

10,141

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

Certain items in the table above have been reclassified in the three and nine months ended September 30, 2019 to conform with the current year presentation.

Transaction Price Allocated to the Remaining Performance Obligations

The following table includes estimated revenue by year, excluding certain other immaterial items, 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):

    

Remainder of 2020

    

2021

    

2022

    

2023

    

2024

    

2025

    

Thereafter

    

Total

Annual dues

$

6,500

$

8,018

$

$

$

$

$

$

14,518

Franchise sales

1,846

6,572

5,230

3,831

2,555

1,350

3,399

24,783

Total

$

8,346

$

14,590

$

5,230

$

3,831

$

2,555

$

1,350

$

3,399

$

39,301

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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):

September 30, 

December 31,

    

2020

2019

Cash and cash equivalents

$

89,135

$

83,001

Restricted cash

15,635

20,600

Total cash, cash equivalents and restricted cash

$

104,770

$

103,601

Services Provided to the Marketing Funds by RE/MAX Franchising

RE/MAX Franchising charges the Marketing Funds for various services it performs. These services primarily comprise (a) building and maintaining agent marketing technology, including customer relationship management tools, the remax.com website, agent, office and team websites, and mobile apps, (b) dedicated employees focused on marketing campaigns, and (c) various administrative services including customer support of technology, accounting and legal. Because these costs are ultimately paid by the Marketing Funds, they do not impact the net income of Holdings as the Marketing Funds have no reported net income.

Costs charged from RE/MAX Franchising to the Marketing Funds are as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Technology development - operating

$

2,721

$

1,523

$

9,414

$

3,687

Technology development - capital

104

1,420

864

3,884

Marketing staff and administrative services

988

589

3,199

2,638

Total

$

3,813

$

3,532

$

13,477

$

10,209

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. All of the Company’s material leases are classified as operating leases.

The Company acts as the lessor for four sublease agreements on its corporate headquarters, consisting solely of operating leases.

The Company has made an accounting policy election not to recognize right-of-use (“ROU”) 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.

During the third quarter of 2020, the Company began executing on a plan to both refresh its corporate headquarters and sublease space made available through the refresh. As a result, the Company changed its asset grouping for its headquarters ROU asset to separate the portion that it intends to sublease from the portion it will continue to occupy and performed an impairment test on the portion it intends to sublease. Based on a comparison of undiscounted cash flows to the ROU asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease rate on the Company’s corporate headquarters and expected sublease rates available in the market. This resulted in an impairment charge of $7.9 million, which reflects the excess of the ROU asset over its fair value.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU“) 2018-15, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for

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Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in the software licensing arrangements under the internal-use software guidance. ASU 2018-15 also clarifies that any capitalized costs should not be recorded to “Depreciation and amortization” in the Consolidated Statements of Income. The Company adopted this standard effective January 1, 2020 prospectively to all new implementation costs incurred after adoption. The amendments of ASU 2018-15 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which eliminates certain disclosure requirements for fair value measurements and requires new or modified disclosures. ASU 2018-13 became effective for the Company on January 1, 2020. This new guidance was applied on a prospective basis. The amendments of ASU 2018-13 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires earlier recognition of credit losses on loans, held-to-maturity securities, and certain other financial assets. ASU 2016-13 replaces the current incurred loss model with a model requiring entities to estimate expected credit losses over the life of the financial instrument based on both historical information as well as reasonable and supportable forecasts. The FASB requires entities to use a modified retrospective transition approach, in which an adjustment is made to beginning retained earnings for the cumulative effect of adopting the standard. ASU 2016-13 became effective for the Company on January 1, 2020. The standard had an immaterial effect on the Company’s credit losses at transition and no adjustment to retained earnings was required. All periods presented for comparative purposes prior to the adoption date of this standard were not adjusted.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which contains temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The new guidance is effective upon issuance and may be adopted on any date on or after March 12, 2020. The relief is temporary and only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company believes the amendments of ASU 2020-04 will not have a significant impact on the Company’s consolidated financial statements and related disclosures as the Company does not currently engage in interest rate hedging of its LIBOR based debt, nor does it believe it has any material contracts tied to LIBOR other than its Senior Secured Credit Agreement, as defined in Note 8, Debt.

3. Non-controlling Interest

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:

September 30, 2020

December 31, 2019

    

Shares

    

Ownership %

    

Shares

    

Ownership %

 

Non-controlling interest ownership of common units in RMCO

12,559,600

40.6

%  

12,559,600

41.3

%

Holdings outstanding Class A common stock (equal to Holdings common units in RMCO)

18,372,134

59.4

%  

17,838,233

58.7

%

Total common units in RMCO

30,931,734

100.0

%  

30,397,833

100.0

%

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The weighted average ownership percentages for the applicable reporting periods are used to calculate the “Net income attributable to RE/MAX Holdings, Inc.” 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 percentages):

Three Months Ended September 30, 

2020

2019

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

Weighted average ownership percentage of RMCO(a)

59.2

%  

40.8

%  

100.0

%  

58.7

%  

41.3

%  

100.0

%

Income before provision for income taxes(a)

$

5,142

$

3,633

$

8,775

$

12,152

$

8,565

$

20,717

Provision for income taxes(b)(c)

(1,589)

(462)

(2,051)

(2,979)

(474)

(3,453)

Net income

$

3,553

$

3,171

$

6,724

$

9,173

$

8,091

$

17,264

Nine Months Ended September 30, 

2020

2019

RE/MAX
Holdings,
Inc.

Non-controlling
interest

Total

RE/MAX
Holdings,
Inc.

Non-controlling
interest

Total

Weighted average ownership percentage of RMCO(a)

59.0

%

41.0

%

100.0

%

58.6

%

41.4

%

100.0

%

Income before provision for income taxes(a)

$

14,589

$

9,896

$

24,485

$

29,438

$

20,763

$

50,201

Provision for income taxes(b)(c)

(4,916)

(1,631)

(6,547)

(7,286)

(1,261)

(8,547)

Net income

$

9,673

$

8,265

$

17,938

$

22,152

$

19,502

$

41,654

(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 items recorded at RE/MAX Holdings.
(b)The provision for income taxes attributable to Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the flow-through income from RMCO. It also includes 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. Otherwise, because RMCO is a flow-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 limited liability company operating 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):

Nine Months Ended

September 30, 

2020

2019

Tax and other distributions

$

2,277

$

3,547

Dividend distributions

8,289

7,913

Total distributions to non-controlling unitholders

$

10,566

$

11,460

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4. Earnings Per Share and Dividends

Earnings Per Share

The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except shares and per share information):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Numerator

Net income attributable to RE/MAX Holdings, Inc.

$

3,553

$

9,173

$

9,673

$

22,152

Denominator for basic net income per share of Class A common stock

Weighted average shares of Class A common stock outstanding

18,196,454

17,826,332

18,098,227

17,803,708

Denominator for diluted net income per share of Class A common stock

Weighted average shares of Class A common stock outstanding

18,196,454

17,826,332

18,098,227

17,803,708

Add dilutive effect of the following:

Restricted stock

171,597

13,826

84,629

27,234

Weighted average shares of Class A common stock outstanding, diluted

18,368,051

17,840,158

18,182,856

17,830,942

Earnings per share of Class A common stock

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic

$

0.20

$

0.51

$

0.53

$

1.24

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted

$

0.19

$

0.51

$

0.53

$

1.24

Outstanding Class B common stock does not share in the earnings of 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 during each quarter ended per share on all outstanding shares of Class A common stock were as follows (in thousands, except per share information):

Nine Months Ended September 30, 

2020

2019

Quarter end declared

    

Date paid

    

Per share

    

Amount paid
to Class A
stockholders

    

Amount paid
to non-controlling
unitholders

    

Date paid

    

Per share

    

Amount paid
to Class A
stockholders

    

Amount paid
to non-controlling
unitholders

March 31

March 18, 2020

$

0.22

$

3,986

$

2,763

March 20, 2019

$

0.21

$

3,740

$

2,638

June 30

June 2, 2020

0.22

3,987

2,763

May 29, 2019

0.21

3,739

2,637

September 30

September 2, 2020

0.22

3,988

2,763

August 28, 2019

0.21

3,745

2,638

$

0.66

$

11,961

$

8,289

$

0.63

$

11,224

$

7,913

On November 4, 2020, the Company’s Board of Directors declared a quarterly dividend of $0.22 per share on all outstanding shares of Class A common stock, which is payable on December 2, 2020 to stockholders of record at the close of business on November 18, 2020.

5. Acquisitions

Technology Acquisitions

On September 10, 2020, the Company acquired The Gadberry Group, LLC (“Gadberry”) for $4.6 million in cash, net of cash acquired, and $5.5 million in Class A common stock, plus approximately $9.9 million of equity-based compensation, which will be accounted for as compensation expense in the future over two to three years (see Note 11, Equity-Based Compensation for additional information). In addition, the Company recorded a contingent consideration liability in connection with the purchase of Gadberry, which had an acquisition date fair value of $0.9 million, measured at the present value of the probability weighted consideration expected to be transferred. Gadberry is a location intelligence data company whose products have been instrumental in the success of the Company’s consumer website, www.remax.com. Founded in 2000, Gadberry specializes in building products that help clients solve geospatial

15

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challenges through location data. Gadberry plans to expand its non-RE/MAX clients while maintaining their contributions to the RE/MAX technology offering.

On August 25, 2020, the Company acquired Wemlo, Inc. (“wemlo”) for $6.1 million in cash, net of cash acquired, and $3.3 million in Class A in common stock, plus approximately $6.7 million of equity-based compensation, which will be accounted for as compensation expense in the future over three years (see Note 11, Equity-Based Compensation for additional information). Wemlo is a fintech company that has developed its cloud service for mortgage brokers, combining third-party loan processing services with an all-in-one digital platform.

The total purchase price was allocated to the assets and liabilities acquired based on their preliminary estimated fair values. The Company recorded $14.4 million in goodwill, of which approximately 50% is deductible for tax purposes, and $6.3 million in other intangibles as a result of these 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 acquisitions of the Marketing Funds were part of the Company’s succession plan, and ownership of the Marketing Funds by the franchisor is a common structure. Expenses incurred with the acquisition of the Marketing Funds were not material.

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 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.

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6. 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 September 30, 2020

As of December 31, 2019

Amortization

Initial

Accumulated

Net

Initial

Accumulated

Net

Period

Cost

Amortization

Balance

Cost

Amortization

Balance

Franchise agreements

12.5

$

180,867

$

(104,802)

$

76,065

$

180,867

$

(93,197)

$

87,670

Other intangible assets:

Software (a)

4.4

$

42,251

$

(15,952)

$

26,299

$

36,680

$

(9,653)

$

27,027

Trademarks

8.3

2,311

(1,204)

1,107

1,904

(1,037)

867

Non-compete agreements

4.4

3,920

(2,479)

1,441

3,700

(1,546)

2,154

Training materials

5.0

2,400

(1,000)

1,400

2,400

(640)

1,760

Other

3.8

1,670

(493)

1,177

800

(293)

507

Total other intangible assets

4.6

$

52,552

$

(21,128)

$

31,424

$

45,484

$

(13,169)

$

32,315

(a)As of September 30, 2020 and December 31, 2019, capitalized software development costs of $0.8 million and $10.5 million, respectively, were related to technology projects not yet complete and ready for their intended use and thus were not subject to amortization.

Amortization expense was $6.4 million and $5.2 million for the three months ended September 30, 2020 and 2019, respectively, and $18.3 million and $15.5 million for the nine months ended September 30, 2020 and 2019, respectively.

The estimated future amortization expense for the next five years related to intangible assets is as follows (in thousands):

As of September 30, 2020:

Remainder of 2020

$

7,271

2021

27,622

2022

21,004

2023

16,817

2024

14,150

Thereafter

20,625

$

107,489

The following table presents changes to goodwill (in thousands), by segment:

RE/MAX
Franchising

Motto Franchising

    

Other

    

Total

Balance, January 1, 2020

$

147,238

$

11,800

$

$

159,038

Goodwill recognized from acquisitions

2,926

6,837

7,586

17,349

Effect of changes in foreign currency exchange rates

(85)

(85)

Balance, September 30, 2020

$

150,079

$

18,637

$

7,586

$

176,302

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7. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

September 30, 

December 31, 

2020

2019

Marketing Funds (a)

$

41,709

$

39,672

Accrued payroll and related employee costs

3,443

11,900

Accrued taxes

1,833

2,451

Accrued professional fees

1,895

2,047

Other

3,193

4,093

$

52,073

$

60,163

(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.

8. Debt

Debt, net of current portion, consists of the following (in thousands):

September 30, 

    

December 31, 

2020

2019

Senior Secured Credit Facility

$

225,600

$

227,363

Other long-term financing(a)

139

362

Less unamortized debt issuance costs

(957)

(1,182)

Less unamortized debt discount costs

(699)

(862)

Less current portion(a)

(2,489)

(2,648)

$

221,594

$

223,033

(a)Includes financing assumed with the acquisition of booj. As of September 30, 2020, the carrying value of this financing approximates the fair value.

Maturities of debt are as follows (in thousands):

As of September 30, 2020

    

Remainder of 2020

$

663

2021

2,414

2022

2,350

2023

220,312

$

225,739

Senior Secured Credit Facility

In July 2013, the Company entered into a credit agreement with several lenders and administered by a bank, referred to herein as the “2013 Senior Secured Credit Facility.” In December 2016, the 2013 Senior Secured Credit Facility was amended and restated, referred to herein as 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 for which any loans outstanding must be repaid on December 15, 2021. As of September 30, 2020, the Company had no revolving loans outstanding under its Senior Secured Credit Facility. As of September 30, 2020, the interest rate on the term loan facility was 3.50%.

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9. Fair Value Measurements

Fair value is a market-based measurement that is 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 2019 Annual Report on Form 10-K.

A summary of the Company’s liabilities measured at fair value on a recurring basis is as follows (in thousands):

September 30, 2020

December 31, 2019

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Fair Value

    

Level 1

    

Level 2

    

Level 3

Liabilities

Contingent consideration

$

5,830

$

$

$

5,830

$

5,005

$

$

$

5,005

The Company is required to pay additional purchase consideration totaling 8% 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 60-80 franchises sold annually, with a weighted average of approximately 75. The model also assumes a discount rate of approximately 15%. A 10% reduction in the number of franchise sales would decrease the liability by $0.2 million. A 1% change to the discount rate applied to the forecast would change the liability by approximately $0.1 million. As of September 30, 2020, contingent consideration also includes an amount recognized in connection with the acquisition of Gadberry (see Note 5, Acquisitions for more information on this acquisition).

The Company measures these contingent consideration liabilities 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 and recorded as a component of “Accrued liabilities” and “Other liabilities, net of current portion” in the accompanying Condensed Consolidated Balance Sheets.

The table below presents a reconciliation of this liability (in thousands):

Total

Balance at January 1, 2020

$

5,005

Fair value adjustments

(105)

Acquisitions - Gadberry

930

Balance at September 30, 2020

$

5,830

The following table summarizes the carrying value and fair value of the Senior Secured Credit Facility (in thousands):

    

September 30, 2020

December 31, 2019

Carrying
Amount

    

Fair Value
Level 2

    

Carrying
Amount

    

Fair Value
Level 2

Senior Secured Credit Facility

$

223,944

$

222,216

$

225,319

$

227,363

10. Income Taxes

The “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income is based on an estimate of the Company’s annualized effective income tax rate.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted which includes several significant business tax provisions. The Company recognized the effect of this change in tax law during the first quarter, which was not significant. The CARES Act provides a five-year carryback of net operating losses generated in tax years beginning after December 31, 2017 and before January 1, 2020. Based upon this change in law, any 2020 tax loss, if realized, will be able to be carried back five years.

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11. Equity-Based Compensation

Employee equity-based compensation expense, net of the amount capitalized in internally developed software, is as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Expense from time-based awards (a)

$

3,040

$

1,883

$

7,535

$

5,846

Expense from performance-based awards (a)(b)

374

(3,582)

844

(3,332)

Expense from bonus to be settled in shares (c)

687

2,505

Equity-based compensation capitalized

25

(32)

(159)

Equity-based compensation expense

$

3,414

$

(987)

$

8,347

$

4,860

(a)Includes awards granted to booj, First, wemlo and Gadberry 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. The Company granted certain performance awards to booj employees that were modified in September 2019 to extend the due date resulting in a significant reversal of expense in the third quarter of 2019. These awards substantially vested on December 31, 2019 and have no comparable amounts in 2020.
(c)In 2019, the Company revised its annual bonus plan so that a portion of the bonus for most employees would be settled in shares if the Company met certain performance metrics. The Company eliminated the 2020 corporate bonus plan as part of cost savings measures in connection with the COVID-19 pandemic.

Time-based Restricted Stock

The following table summarizes equity-based compensation activity related to time-based restricted stock units and restricted stock awards:

    

Shares

    

Weighted average
grant date fair
value per share

Balance, January 1, 2020

455,452

$

46.15

Granted

769,750

$

33.05

Shares vested (including tax withholding) (a)

(163,028)

$

45.58

Forfeited

(14,778)

$

37.20

Balance, September 30, 2020

1,047,396

$

36.73

(a)Pursuant to the terms of the RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan, shares withheld by the Company for the payment of the employee's tax withholding related to shares vesting are added back to the pool of shares available for future awards.

As of September 30, 2020, there was $30.0 million of total unrecognized expense, all of which is related to unvested awards, which is expected to be recognized over the weighted-average remaining vesting period of 2.2 years.

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Table of Contents

Performance-based Restricted Stock

The following table summarizes equity-based compensation activity related to performance-based restricted stock units:

    

Shares

    

Weighted average
grant date fair
value per share

Balance, January 1, 2020

139,964

$

45.31

Granted

205,188

$

28.34

Shares vested (including tax withholding) (a)

(6,331)

$

38.49

Forfeited

(8,629)

$

39.77

Balance, September 30, 2020

330,192

$

35.04

(a)Represents the total participant target award.

As of September 30, 2020, there was $2.9 million of total unrecognized expense, all of which is related to unvested awards, which is expected to be recognized over the weighted-average remaining vesting period of 2.0 years.

12. Commitments and Contingencies

In March 2019, a putative class action complaint was filed that, as amended, brings claims against National Association of Realtors (“NAR”), Realogy Holdings Corp., HomeServices of America, Inc, RE/MAX, LLC, and Keller Williams Realty, Inc by plaintiff Christopher Moehrl in the Northern District of Illinois. The Company has since been named as a defendant in other cases that make similar allegations and seek similar relief. For convenience all of these lawsuits are collectively referred to as the “Moehrl-related suits.” The plaintiffs in the Moehrl-related suits allege that a NAR rule requires brokers to make a blanket, non-negotiable offer of buyer broker compensation when listing a property, and that this results in inflated costs to buyers and/or sellers in violation of antitrust and other federal and state laws. Some actions allege that buyer brokers steered their clients toward listings offering those brokers higher compensation. The Moehrl-related suits further allege that the Company and other franchisor defendants use their agreements with franchisees to require them to follow the NAR rule. Plaintiffs seek damages from the defendants and an injunction against defendants requiring sellers to pay the buyer broker. The Company intends to vigorously defend against all of these claims. The Company may become involved in additional litigation or other legal proceedings concerning the same or similar allegations.

13. Segment Information

The Company operates under the following four operating segments: RE/MAX Franchising, Motto Franchising, Marketing Funds and booj. Due to quantitative insignificance, the booj operating segment does not meet the criteria of a reportable segment and is included in “Other”. Motto Franchising does not meet the quantitative significance test; however, management has chosen to report results for the segment as it believes it will be a key driver of future success for Holdings. 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. Except for the adjustments identified below in arriving at Adjusted EBITDA, the accounting policies of the reportable segments are the same as those described in the Company’s 2019 Annual Report on Form 10-K.

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The following table presents revenue from external customers by segment (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Continuing franchise fees (a)

$

22,799

$

24,096

$

61,471

$

72,191

Annual dues

8,638

8,835

26,304

26,508

Broker fees

15,457

13,292

35,327

35,339

Franchise sales and other revenue

4,058

4,858

16,126

17,252

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

Continuing franchise fees

1,540

1,072

3,749

2,827

Franchise sales and other revenue

366

106

685

340

Total Motto Franchising

1,906

1,178

4,434

3,167

Marketing Funds fees (a)

17,290

18,034

46,577

54,866

Other

925

1,248

3,313

4,777

Total revenue

$

71,073

$

71,541

$

193,552

$

214,100

(a)For the Nine Months ended September 30, 2020, Continuing franchise fees and Marketing Funds fees declined primarily due to the temporary COVID-19 related financial support programs offered to franchisees.

The following table presents a reconciliation of Adjusted EBITDA by segment to income before provision for income taxes (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Adjusted EBITDA: RE/MAX Franchising

$

30,959

$

29,134

$

71,008

$

83,299

Adjusted EBITDA: Motto Franchising

(176)

(652)

(1,495)

(2,112)

Adjusted EBITDA: Other

(448)

(324)

(730)

(157)

Adjusted EBITDA: Consolidated

30,335

28,158

68,783

81,030

Gain (loss) on sale or disposition of assets

11

10

33

(353)

Impairment charge - leased assets (a)

(7,902)

(7,902)

Equity-based compensation expense

(3,414)

987

(8,347)

(4,860)

Acquisition-related expense (b)

(1,021)

(181)

(1,915)

(268)

Fair value adjustments to contingent consideration (c)

(250)

15

105

(330)

Interest income

25

412

328

1,074

Interest expense

(2,159)

(3,089)

(7,028)

(9,398)

Depreciation and amortization

(6,850)

(5,595)

(19,572)

(16,694)

Income before provision for income taxes

$

8,775

$

20,717

$

24,485

$

50,201

(a)Represents the impairment recognized on a portion of the Company’s corporate headquarters office building. See Note 2, Summary of Significant Accounting Policies for additional information.
(b)Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.
(c)Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 9, Fair Value Measurements for additional information.

(a)

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements (“financial statements”) and accompanying notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and accompanying notes included in our most recent Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Annual Report on Form 10-K”).

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are often identified by the use of words such as “believe,” “intend,” “expect,” “estimate,” “plan,” “outlook,” “project,” “anticipate,” “may,” “will,” “would” and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. Forward-looking statements include statements related to: agent count; franchise sales; the impact of the global coronavirus (“COVID-19”) pandemic on our results of operations, financial condition, liquidity and business, including agent count, revenues, expenses, operations, goodwill, income taxes and allowance for doubtful accounts; support that we offered to our franchisees, its effectiveness, and the implication of this support (or future support) to our revenue; our business model, revenue streams, cost structure, balance sheet, and financial flexibility; management of expenses and capital expenditures in response to the impacts of the COVID-19 pandemic, including the amounts and timing of anticipated reductions; revenue; operating expenses; financial outlook; our plans regarding dividends; non-GAAP financial measures; housing and mortgage market condition and trends; economic and demographic trends; competition; the anticipated benefits our technology initiatives; our anticipated sources and uses of liquidity including for potential acquisitions; and our strategic and operating plans and business models including our plans to re-invest in our business.

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily accurately indicate the times at which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materiality from those expressed in or suggested by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our 2019 Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not intend, and we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

The results of operations discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are those of RE/MAX Holdings, Inc. (“Holdings”) and its consolidated subsidiaries, including RMCO, LLC and its consolidated subsidiaries (“RMCO”), collectively, the “Company,” “we,” “our” or “us.”

Business Overview

We are one of the world’s leading franchisors in the real estate industry, franchising real estate brokerages globally under the RE/MAX brand (“RE/MAX”) and mortgage brokerages within the U.S. under the Motto Mortgage brand (“Motto”). RE/MAX and Motto are 100% franchised – we do not own any of the brokerages that operate under these brands. Although we partner with our franchisees to assist them in growing their brokerages, they fund the cost of developing their businesses. As a result, we maintain a low fixed-cost structure, which combined with our recurring, fee-based models, enables us to capitalize on the economic benefits of the franchising model, yielding high margins and significant cash flow.

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Impacts of COVID-19

The global economy and our business have been dramatically affected by the COVID-19 pandemic. We continue to monitor its impact on all aspects of our business. Our priority, with regard to COVID-19, continues to be the safety, health and well-being of our employees, networks, consumers and others with whom we partner in our business activities to continue our operations in this unprecedented environment.

Revenue impacts

The COVID-19 pandemic significantly slowed the amount of homebuying, selling and borrowing activity in the second quarter. After year-over-year transaction declines in April and May that averaged nearly 30% in Company-Owned Regions, the market improved significantly during the third quarter, with an average year-over-year transaction growth of approximately 10%.

In response to the COVID-19 pandemic, during the second quarter we offered our RE/MAX franchisees in Company-Owned Regions in the U.S. and Canada and our Motto Mortgage franchisees temporary financial relief options to support their businesses, which resulted in reductions of Continuing franchise fees and Marketing Funds fees of $7.0 million and $4.9 million in the second quarter, respectively. All North American relief programs ended in the second quarter, although small amounts continued into the third quarter for our global regions. At this time, we do not plan to offer further financial relief programs.

Expense and cash flow impacts

We also implemented a cost mitigation plan that included the elimination of the 2020 corporate bonus plan, the temporary suspension of the 401(k) match, travel and events, and the implementation of a hiring freeze. We deferred $3.3 million of capital expenditures originally expected to be incurred during the year and chose to defer payments pursuant to our Tax Receivable Agreements (“TRAs”) to later in the year upon final completion of our federal income tax returns.

Financial and Operational Highlights – Three Months Ended September 30, 2020

(Compared to the three months ended September 30, 2019, unless otherwise noted)

Acquired The Gadberry Group, LLC (“Gadberry”), a location intelligence data company and Wemlo, Inc. (“wemlo”), a fintech company that provides third-party mortgage loan processing services through its “Service Cloud” for mortgage brokers, combining third-party loan processing with an all-in-one digital platform.
Total agent count grew by 5.1% to 134,769 agents.
U.S. and Canada combined agent count decreased 0.3% to 83,802 agents.
Total open Motto Mortgage franchises increased 27.9% to 133 offices.
Revenue of $71.1 million, down 0.7% from the prior year.
Net income attributable to RE/MAX Holdings, Inc. of $3.6 million.
Adjusted EBITDA of $30.3 million and Adjusted EBITDA margin of 42.7% compared to Adjusted EBITDA of $28.2 million and Adjusted EBITDA margin of 39.4% from the prior year.

Execution of our strategy, and continued investment in our business alongside rebounding U.S. housing and mortgage markets helped our business recover quickly from coronavirus-related declines experienced in the second quarter of 2020. We were encouraged by the sequential increases in our key metrics of agent count, particularly in Company-owned regions, and Motto Mortgage franchise sales.

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We continued to invest for long-term growth and completed the acquisitions of wemlo and Gadberry during the third quarter of 2020. The strategic acquisitions of wemlo and Gadberry tie directly into our strategy of adding value for the RE/MAX and Motto Mortgage networks while broadening and diversifying our revenue and growth opportunities. These acquisitions benefit our networks, strengthen our technology and data core, and create additional commercial possibilities. We are already investing in wemlo and Gadberry and currently expect these two acquisitions to adversely impact Adjusted EBITDA in a range of $1.0 million to $1.5 million in the fourth quarter of 2020 and become accretive in 2022.

Selected Operating and Financial Highlights

For comparability purposes, the following tables set forth our agent count, Motto open offices, franchise sales and results of operations for the periods presented in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, as well as our agent count for the periods ended October 31, 2020 and October 31, 2019. The period-to-period comparison of agent count, Motto open offices, franchise sales and financial results is not necessarily indicative of future performance.

As of October 31,

Change

As of September 30, 

Change

2020

2019

%

2020

2019

%

Total agent count growth

5.9

%  

3.5

%  

5.1

%  

3.5

%  

Agent Count:

U.S.

62,403

62,675

(0.4)

%

62,304

62,548

(0.4)

%

Canada

21,710

21,571

0.6

%

21,498

21,519

(0.1)

%

U.S. and Canada Total

84,113

84,246

(0.2)

%

83,802

84,067

(0.3)

%

Outside U.S. and Canada

52,109

44,426

17.3

%

50,967

44,191

15.3

%

Network-wide agent count

136,222

128,672

5.9

%

134,769

128,258

5.1

%

Motto open offices (2)

134

106

26.4

%

133

104

27.9

%

Nine Months Ended

September 30, 

2020

2019

RE/MAX franchise sales (1)

633

651

(2.8)

%

Motto franchise sales (2)

47

29

62.1

%

(1)Includes franchise sales in the U.S., Canada and global regions.
(2)Excludes virtual offices and branchises.

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

    

2019

2020

2019

Total revenue

$

71,073

$

71,541

$

193,552

$

214,100

Total selling, operating and administrative expenses

$

28,216

$

24,468

$

88,241

$

84,081

Operating income

$

10,815

$

23,444

$

31,260

$

58,459

Net income attributable to RE/MAX Holdings, Inc.

$

3,553

$

9,173

$

9,673

$

22,152

Adjusted EBITDA (1)

$

30,335

$

28,158

$

68,783

$

81,030

Adjusted EBITDA margin (1)

42.7

%  

39.4

%  

35.5

%  

37.8

%  

(1)See “—Non-GAAP Financial Measures” for further discussion of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of the differences between Adjusted EBITDA and net income, which is the most comparable U.S. generally accepted accounting principles (“U.S. GAAP”) measure for operating performance. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue.

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Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019

Revenue

A summary of the components of our revenue is as follows (in thousands except percentages):

Three Months Ended

Change

September 30, 

Favorable/(Unfavorable)

2020

2019

$

%

Revenue:

Continuing franchise fees

$

24,339

$

25,168

$

(829)

(3.3)

%

Annual dues

8,638

8,835

(197)

(2.2)

%

Broker fees

15,457

13,292

2,165

16.3

%

Marketing Funds fees

17,290

18,034

(744)

(4.1)

%

Franchise sales and other revenue

5,349

6,212

(863)

(13.9)

%

Total revenue

$

71,073

$

71,541

$

(468)

(0.7)

%

Consolidated revenue decreased primarily due to previously announced agent recruiting initiatives that reduced both Continuing franchise fees and Marketing Funds fees for a limited period of time, partially offset by an increase in Broker fees, incremental revenue from acquisitions and growth of Motto.

Continuing Franchise Fees

Revenue from Continuing franchise fees decreased primarily due to previously announced agent recruiting initiatives which waived Continuing franchise fees for a limited period of time partially offset by Motto expansion.

Broker Fees

Revenue from Broker fees increased primarily due to higher total transactions per agent and rising home prices, partially offset by declines in agent count in Company-Owned Regions.

Marketing Funds fees

Revenue from the Marketing Funds fees decreased primarily due to previously announced agent recruiting initiatives which waived Marketing Funds fees for a limited period of time.

Franchise Sales and Other Revenue

Franchise sales and other revenue decreased primarily due to continued attrition of booj’s legacy customer base, lower approved supplier revenue and lower events revenue due to COVID-19, partially offset by incremental revenue from acquisitions. We expect the attrition of the booj legacy customer base to negatively impact the fourth quarter and full year 2020 by approximately $0.5 million and $2.0 million, respectively, as compared to the same period in the prior year.

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Operating Expenses

A summary of the components of our operating expenses is as follows (in thousands, except percentages):

Three Months Ended

Change

September 30, 

Favorable/(Unfavorable)

2020

2019

$

%

Operating expenses:

Selling, operating and administrative expenses

$

28,216

$

24,468

$

(3,748)

(15.3)

%

Marketing Funds expenses

17,290

18,034

744

4.1

%

Depreciation and amortization

6,850

5,595

(1,255)

(22.4)

%

Impairment charge - leased assets

7,902

(7,902)

n/m

%

Total operating expenses

$

60,258

$

48,097

$

(12,161)

(25.3)

%

Percent of revenue

84.8

%  

67.2

%  


Selling, operating and administrative expenses consists of personnel costs, professional fee expenses, lease costs and other expenses. Other expenses within Selling, operating and administrative expenses include certain marketing and production costs that are not paid by the Marketing Funds, including travel and entertainment costs, and costs associated with our annual conventions in the U.S. and other events and technology services.

Three Months Ended

Change

September 30, 

Favorable/(Unfavorable)

2020

2019

$

%

Selling, operating and administrative expenses:

Personnel

$

16,613

$

11,403

$

(5,210)

(45.7)

%

Professional fees

3,530

3,000

(530)

(17.7)

%

Lease costs

2,296

2,168

(128)

(5.9)

%

Other

5,777

7,897

2,120

26.8

%

Total selling, operating and administrative expenses

$

28,216

$

24,468

$

(3,748)

(15.3)

%

Percent of revenue

39.7

%  

34.2

%  

Total Selling, operating and administrative expenses increased as follows:

Personnel costs increased due to higher equity-based compensation expense of $4.4 million (See Note 11, Equity-Based Compensation), increased headcount primarily from acquisitions and higher acquisition-related expenses, partially offset by the elimination of the 2020 corporate bonus plan and suspension of the 401(k) match.
Professional fees increased primarily due to an increase in legal fees related to the Moehrl-related suits (See section titled “Legal Proceedings,” set forth in Part II, Item 1 of this Quarterly Report on Form 10-Q) and acquisition related expenses. We expect approximately $0.5 million more in legal expenses in the fourth quarter of 2020 compared to the prior year period, and between $2.0 million and $2.5 million more in the year ended December 31, 2020 compared to the prior year because of this ongoing litigation.
Other selling, operating and administrative expenses decreased primarily due to lower travel and events expenses as part of our cost mitigation plan and additional training expenses for the launch of the booj technology platform in the prior year.

Marketing Funds Expenses

We recognize an equal and offsetting amount of expenses to revenue such that there is no impact to our overall profitability.

Depreciation and Amortization

Depreciation and amortization expense increased primarily due to placing the booj Platform in service and new amortization related to our acquisitions.

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Table of Contents

Impairment charge - leased assets

During the third quarter of 2020, we began executing on a plan to both refresh our corporate headquarters and sublease space made available through the refresh. As a result, we performed an impairment test on the portion of our headquarters we intend to sublease and recognized an impairment charge of $7.9 million. See Note 2, Summary of Significant Accounting Policies for additional information about our leases.

Other Expenses, Net

A summary of the components of our Other expenses, net is as follows (in thousands, except percentages):  

Three Months Ended

Change

September 30, 

Favorable/(Unfavorable)

    

2020

    

2019

    

$

    

%

Other expenses, net:

Interest expense

$

(2,159)

$

(3,089)

$

930

30.1

%

Interest income

25

412

(387)

(93.9)

%

Foreign currency transaction gains (losses)

94

(50)

144

n/m

Total other expenses, net

$

(2,040)

$

(2,727)

$

687

25.2

%

Percent of revenue

2.9

%  

3.8

%  

Other expenses, net decreased primarily due to a decrease in interest expense as a result of decreasing interest rates on

our Senior Secured Credit Facility (as defined in Note 8, Debt), partially offset by lower interest earnings on our cash balances from lower interest rates.

Provision for Income Taxes

Our effective income tax rate increased to 23.4% from 16.7% for the three months ended September 30, 2020 and 2019, respectively, primarily driven by the impact of lower pre-tax income compared to certain non-creditable foreign taxes which have not decreased. Our effective income tax rate depends on many factors, including a rate benefit attributable to the fact that the portion of RMCO’s earnings attributable to the non-controlling interests are not subject to corporate-level taxes because RMCO is classified as a partnership for U.S. federal income tax purposes and therefore is treated as a “flow-through entity,” as well as annual changes in state and foreign income tax rates. See Note 3, Non-controlling Interest to the accompanying unaudited condensed consolidated financial statements for further details on the allocation of income taxes between Holdings and the non-controlling interest and see Note 10, Income Taxes for additional information.

Adjusted EBITDA

See “—Non-GAAP Financial Measures” for our definition of Adjusted EBITDA and for further discussion of our presentation of Adjusted EBITDA as well as a reconciliation of Adjusted EBITDA to net income, which is the most comparable GAAP measure for operating performance.

Adjusted EBITDA was $30.3 million for the three months ended September 30, 2020, an increase of $2.1 million from the comparable prior year period. Adjusted EBITDA increased primarily due to higher broker fees, lower travel and events expenses, lower bonus and 401(k) expense from our cost mitigation plan in response to the COVID-19 pandemic and Motto expansion, partially offset by previously announced agent recruiting initiatives and increased headcount primarily from acquisitions.

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Table of Contents

Comparison of the Nine Months Ended September 30, 2020 and 2019

Revenue

A summary of the components of our revenue is as follows (in thousands except percentages):

Nine Months Ended

Change

September 30, 

Favorable/(Unfavorable)

2020

2019

$

%

Revenue:

Continuing franchise fees

$

65,220

$

75,018

$

(9,798)

(13.1)

%

Annual dues

26,304

26,508

(204)

(0.8)

%

Broker fees

35,327

35,339

(12)

(0.0)

%

Marketing Funds fees

46,577

54,866

(8,289)

(15.1)

%

Franchise sales and other revenue

20,124

22,369

(2,245)

(10.0)

%

Total revenue

$

193,552

$

214,100

$

(20,548)

(9.6)

%

Consolidated revenue decreased primarily due to temporary COVID-19 related financial support initiatives the Company provided in the second quarter and, to a lesser extent, agent recruiting initiatives that reduced both Continuing franchise fees and Marketing Funds fees for a limited period of time.

Continuing Franchise Fees

Revenue from Continuing franchise fees decreased primarily due to temporary COVID-19 related financial support initiatives and previously announced recruiting initiatives which waived Continuing franchise fees for a limited period of time, partially offset by Motto expansion.

Broker Fees

Revenue from Broker fees remained flat as agent count decreases in the Company-Owned regions in the U.S. and Canada and lower total transactions per agent during the second quarter in conjunction with the economic slowdown caused by COVID-19 were mostly offset by rising home prices.

Marketing Funds fees

Revenue from the Marketing Funds fees decreased primarily due to temporary COVID-19 related financial support initiatives and previously announced recruiting initiatives which waived Marketing Funds fees for a limited period of time.

Franchise Sales and Other Revenue

Franchise sales and other revenue decreased primarily due to continued attrition of booj’s legacy customer base and lower approved supplier revenue, partially offset by incremental revenue from acquisitions.

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Table of Contents

Operating Expenses

A summary of the components of our operating expenses is as follows (in thousands, except percentages):

Nine Months Ended

Change

September 30, 

Favorable/(Unfavorable)

2020

2019

$

%

Operating expenses:

Selling, operating and administrative expenses

$

88,241

$

84,081

$

(4,160)

(4.9)

%

Marketing Funds expenses

46,577

54,866

8,289

15.1

%

Depreciation and amortization

19,572

16,694

(2,878)

(17.2)

%

Impairment charge - leased assets

7,902

(7,902)

n/m

%

Total operating expenses

$

162,292

$

155,641

$

(6,651)

(4.3)

%

Percent of revenue

83.8

%  

72.7

%  


Selling, operating and administrative expenses consists of personnel costs, professional fee expenses, lease costs and other expenses. Other expenses within selling, operating and administrative expenses include certain marketing and production costs that are not paid by the Marketing Funds, including travel and entertainment costs, and costs associated with our annual conventions in the U.S. and other events and technology services.

Nine Months Ended

Change

September 30, 

Favorable/(Unfavorable)

2020

2019

$

%

Selling, operating and administrative expenses:

Personnel

$

47,419

$

43,396

$

(4,023)

(9.3)

%

Professional fees

9,370

7,333

(2,037)

(27.8)

%

Lease costs

6,899

6,603

(296)

(4.5)

%

Other

24,553

26,749

2,196

8.2

%

Total selling, operating and administrative expenses

$

88,241

$

84,081

$

(4,160)

(4.9)

%

Percent of revenue

45.6

%  

39.3

%  

Total Selling, operating and administrative expenses decreased as follows:

Personnel costs increased primarily due higher equity-based compensation expense of $3.5 million (See Note 11, Equity-Based Compensation), increased headcount primarily from acquisitions and higher acquisition-related expenses, partially offset by the elimination of the 2020 corporate bonus plan and suspension of the 401(k) match.
Professional fees increased primarily due to an increase in legal fees related to the Moehrl-related suits (See section titled “Legal Proceedings,” set forth in Part II, Item 1 of this Quarterly Report on Form 10-Q) and acquisition related expenses.
Other selling, operating and administrative expenses decreased primarily due to lower travel and events expenses as part of our cost mitigation plan, additional training expenses for the launch of the booj technology platform in the prior year and fair value adjustments of our contingent consideration liability (See Note 9, Fair Value Measurements), partially offset by an increase in bad debt expense driven by increasing our bad debt allowance for past-due receivables in light of COVID-19.

Marketing Funds Expenses

We recognize an equal and offsetting amount of expenses to revenue such that there is no impact to our overall profitability.

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Table of Contents

Depreciation and Amortization

Depreciation and amortization expense increased primarily due to placing the booj Platform in service and new amortization related to our acquisitions.

Other Expenses, Net

A summary of the components of our Other expenses, net is as follows (in thousands, except percentages):

Nine Months Ended

Change

September 30, 

Favorable/(Unfavorable)

2020

    

2019

    

$

    

%

 

Other expenses, net:

Interest expense

$

(7,028)

$

(9,398)

$

2,370

25.2

%

Interest income

328

1,074

(746)

(69.5)

%

Foreign currency transaction gains (losses)

(75)

66

(141)

n/m

Total other expenses, net

$

(6,775)

$

(8,258)

$

1,483

18.0

%

Percent of revenue

3.5

%  

3.9

%  

Other expenses, net decreased primarily due to a decrease in interest expense as a result of decreasing interest rates on

our Senior Secured Credit Facility partially offset by lower interest earnings on our cash balances from lower interest rates.

Provision for Income Taxes

Our effective income tax rate increased to 26.7% from 17.0% for the nine months ended September 30, 2020 and 2019, respectively, primarily due to (a) nonrecurring taxes arising from the conversion of First from a C Corporation to a flow-through entity (which is expected to provide long-term tax amortization benefits), and (b) the impact of lower pre-tax income compared to certain non-creditable foreign taxes which have not decreased.

Our effective income tax rate depends on many factors, including a rate benefit attributable to the fact that the portion of RMCO’s earnings attributable to the non-controlling interests are not subject to corporate-level taxes because RMCO is classified as a partnership for U.S. federal income tax purposes and therefore is treated as a “flow-through entity,” as well as annual changes in state and foreign income tax rates. See Note 3, Non-controlling Interest to the accompanying unaudited condensed consolidated financial statements for further details on the allocation of income taxes between Holdings and the non-controlling interest and see Note 10, Income Taxes for additional information.

Adjusted EBITDA

See “—Non-GAAP Financial Measures” for our definition of Adjusted EBITDA and for further discussion of our presentation of Adjusted EBITDA as well as a reconciliation of Adjusted EBITDA to net income, which is the most comparable GAAP measure for operating performance.

Adjusted EBITDA was $68.8 million for the nine months ended September 30, 2020, a decrease of $12.2 million from the comparable prior year period. Adjusted EBITDA decreased primarily due to revenue decreases from the temporary COVID-19 related financial support initiatives in the second quarter, increased headcount primarily from acquisitions and higher legal fees, partially offset by lower bonus and 401(k) expenses and lower travel and events expenses from cost mitigation steps in response to the COVID-19 pandemic.

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Table of Contents

Non-GAAP Financial Measures

The Securities and Exchange Commission (“SEC”) has adopted rules to regulate the use in filings with the SEC and in public disclosures of financial measures that are not in accordance with U.S. GAAP, such as Adjusted EBITDA and the ratios related thereto. These measures are derived on the basis of methodologies other than in accordance with U.S. GAAP.

We define Adjusted EBITDA as EBITDA (consolidated net income before depreciation and amortization, interest expense, interest income and the provision for income taxes, each of which is presented in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), adjusted for the impact of the following items that are either non-cash or that we do not consider representative of our ongoing operating performance: gain or loss on sale or disposition of assets and sublease, impairment charge on leased assets, equity-based compensation expense, acquisition-related expense, gain on reduction in tax receivable agreement (“TRA”) liability, expense or income related to changes in the estimated fair value measurement of contingent consideration and other non-recurring items.

As Adjusted EBITDA omits certain non-cash items and other non-recurring cash charges or other items, we believe that it is less susceptible to variances that affect our operating performance resulting from depreciation, amortization and other non-cash and non-recurring cash charges or other items. We present Adjusted EBITDA, and the related Adjusted EBITDA margin, because we believe they are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our results of operations. Our management uses Adjusted EBITDA and Adjusted EBITDA margin as factors in evaluating the performance of our business.

Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider these measures either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. Some of these limitations are:

these measures do not reflect changes in, or cash requirements for, our working capital needs;
these measures do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
these measures do not reflect our income tax expense or the cash requirements to pay our taxes;
these measures do not reflect the cash requirements to pay dividends to stockholders of our Class A common stock and tax and other cash distributions to our non-controlling unitholders;
these measures do not reflect the cash requirements pursuant to the TRAs;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements;
although equity-based compensation is a non-cash charge, the issuance of equity-based awards may have a dilutive impact on earnings per share; and
other companies may calculate these measures differently, so similarly named measures may not be comparable.

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A reconciliation of Adjusted EBITDA to net income is set forth in the following table (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Net income

$

6,724

$

17,264

$

17,938

$

41,654

Depreciation and amortization

6,850

5,595

19,572

16,694

Interest expense

2,159

3,089

7,028

9,398

Interest income

(25)

(412)

(328)

(1,074)

Provision for income taxes

2,051

3,453

6,547

8,547

EBITDA

17,759

28,989

50,757

75,219

(Gain) loss on sale or disposition of assets

(11)

(10)

(33)

353

Impairment charge - leased assets (1)

7,902

7,902

Equity-based compensation expense

3,414

(987)

8,347

4,860

Acquisition-related expense (2)

1,021

181

1,915

268

Fair value adjustments to contingent consideration (3)

250

(15)

(105)

330

Adjusted EBITDA

$

30,335

$

28,158

$

68,783

$

81,030

(1)Represents the impairment recognized on a portion of our corporate headquarters office building. See Note 2, Summary of Significant Accounting Policies to the accompanying unaudited condensed consolidated financial statements for additional information.
(2)Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.
(3)Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 9, Fair Value Measurements to the accompanying unaudited condensed consolidated financial statements for additional information.

Liquidity and Capital Resources

Overview of Factors Affecting Our Liquidity

Our liquidity position is affected by the growth of our agent base and conditions in the real estate market. In this regard, our short-term liquidity position from time to time has been, and will continue to be, affected by a number of factors including agents in the RE/MAX network, particularly in Company-Owned Regions. Our cash flows are primarily related to the timing of:

(i)cash receipt of revenues, including any declines in Continuing franchise fees driven by the temporary COVID-19-related financial support initiatives the Company introduced in April, and any similar programs offered by the Independent regions in the U.S. and Canada, as well as significant variability in Broker fees revenue due to home sale volatility during COVID-19;
(ii)payment of selling, operating and administrative expenses;
(iii)investments in technology and Motto;
(iv)cash consideration for acquisitions and acquisition-related expenses;
(v)principal payments and related interest payments on our Senior Secured Credit Facility;
(vi)dividend payments to stockholders of our Class A common stock;
(vii)distributions and other payments to non-controlling unitholders pursuant to the terms of RMCO’s limited liability company operating agreement (“the RMCO, LLC Agreement”);
(viii)corporate tax payments paid by the Company; and
(ix)payments to the TRA parties pursuant to the TRAs.

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We have satisfied these needs primarily through our existing cash balances, cash generated by our operations and funds available under our Senior Secured Credit Facility.

Our liquidity has been impacted by the COVID-19 pandemic. Notwithstanding our cost mitigation plan and deferral of the payment under the TRA, our net cash provided by operating activities decreased from $55.2 million for the nine months ended September 30, 2019 to $43.5 million for the nine months ended September 30, 2020, primarily as a result of a decrease in revenue due to temporary COVID-19 related financial support initiatives. The future impact of the COVID-19 pandemic on our liquidity and financial condition is unknown, and its impact may be variable over time as government regulations, market conditions and consumer behavior changes positively or negatively in response to developments with respect to the pandemic. We may utilize our Senior Secured Credit Facility, and we may pursue other sources of capital that may include other forms of external financing, in order to increase our cash position and preserve financial flexibility in response to the uncertainty in the United States and global markets resulting from COVID-19.

Financing Resources

RMCO and RE/MAX, LLC, a wholly owned subsidiary of RMCO, have 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 provides to RE/MAX, LLC $235.0 million in term loans and a $10.0 million revolving facility. Borrowings under the term loans and revolving loans accrue interest, at London Interbank Offered Rate (“LIBOR”), provided LIBOR shall be no less than 0.75% plus an applicable margin of 2.75%. As of September 30, 2020, the interest rate on the term loan facility was 3.50%. As of September 30, 2020, RE/MAX, LLC had $223.9 million of term loans outstanding, net of an unamortized discount and issuance costs, and no revolving loans outstanding under our Senior Secured Credit Facility. The Company has not borrowed any additional term loans under its Senior Secured Credit Facility. If the Company had any loan or other amounts outstanding under the revolving facility, the Senior Secured Credit Facility would require compliance with a leverage ratio and an interest coverage ratio as defined in the Senior Secured Credit Facility at the end of each calendar quarter on a trailing twelve-month basis. No loans or other amounts were outstanding under the revolving facility, and therefore, the Company is not currently subject to the leverage ratio and the interest coverage ratio. See our 2019 Annual Report on Form 10-K for more information.

The Senior Secured Credit Facility requires RE/MAX, LLC, among other requirements, to repay term loans and reduce revolving commitments with 50% of excess cash flow (as defined in the Senior Secured Credit Facility) at the end of the applicable fiscal year if RE/MAX, LLC’s total leverage ratio as defined in the Senior Secured Credit Facility is in excess of 3.25:1. If the total leverage ratio as of the last day of such fiscal year is less than 3.25:1 but above 2.75:1, the repayment percentage is 25% of excess cash flow and if the total leverage ratio as of the last day of such fiscal year is less than 2.75:1, no repayment from excess cash flow is required. Any such payment would be due no later than March 31, 2021. As of September 30, 2020, the aforementioned leverage ratio for RE/MAX LLC on a trailing twelve-month basis is less than 2.0:1.

As needs arise, we may seek additional financing in the public capital markets. On October 15, 2019 we filed a registration statement on Form S-3 (“shelf registration”) allowing for the sale of up to $400 million in additional financing. The SEC declared the shelf registration effective on December 30, 2019.

Sources and Uses of Cash

As of September 30, 2020 and December 31, 2019, we had $89.1 million and $83.0 million, respectively, of cash and cash equivalents, of which approximately $2.6 million and $0.9 million, respectively, were denominated in foreign currencies.

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The following table summarizes our cash flows from operating, investing, and financing activities (in thousands):

Nine Months Ended

September 30, 

    

2020

    

2019

    

Change

Cash provided by (used in):

Operating activities

$

43,471

$

55,187

$

(11,716)

Investing activities

(15,202)

17,202

(32,404)

Financing activities

(27,070)

(25,558)

(1,512)

Effect of exchange rate changes on cash

(30)

76

(106)

Net change in cash, cash equivalents and restricted cash

$

1,169

$

46,907

$

(45,738)

Operating Activities

Cash provided by operating activities decreased primarily as a result of:

a decrease in Adjusted EBITDA of $12.2 million;
payment of certain employee related accruals of $6.1 million;
partially offset by $4.9 million in tax payment deferrals including a decrease in taxes payable due to lower taxable income; and
timing differences on various operating assets and liabilities.

Investing Activities

During the nine months ended September 30, 2020 the change in cash (used in) provided by investing activities was primarily the result of restricted cash acquired in connection with the acquisition of the Marketing Funds during 2019 versus the cash used in the acquisitions of wemlo and Gadberry, as well as lower capitalizable investments in technology as compared to the prior year.

Financing Activities

During the nine months ended September 30, 2020 cash used in financing activities increased primarily due to an increase in payments related to tax withholding for share-based compensation, primarily due to half of the corporate bonus plan being settled in stock, and an increase in dividends per Class A share and non-controlling unit to $0.22 per share/unit during each of the first three quarters of 2020 as compared to $0.21 per share/unit for the first three quarters of 2019, partially offset by decreases in tax distributions paid to non-controlling unitholders.

Capital Allocation Priorities

Liquidity

Our objective is to maintain a strong liquidity position. We have existing cash balances, cash flows from operating activities, access to our revolving facility and incremental facilities under our Senior Secured Credit Facility available to support the needs of our business. Should additional liquidity needs arise, our filed shelf registration would permit access to public capital markets if such financing would be available.

Acquisitions

As part of our growth strategy we may pursue reacquisitions of Independent Regions in the U.S. and Canada as well as additional acquisitions or investments in complementary businesses, services and technologies that would provide access to new markets, revenue streams, or otherwise complement our existing operations. We may fund any such growth with various sources of capital including existing cash balances and cash flow from operations, as well as proceeds from debt financings including under existing credit facilities or new arrangements raised in the public capital markets.

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Capital Expenditures

The total aggregate amount for purchases of property and equipment and capitalization of developed software was $4.6 million and $10.1 million during the nine months ended September 30, 2020 and 2019, respectively. These amounts primarily relate to investments in technology. In order to expand our technology, we plan to continue to re-invest in our business in order to improve operational efficiencies and enhance the tools and services provided to the affiliates in our networks. Total capital expenditures for 2020 are now expected to be between $8 million and $11 million versus $17 million and $19 million at the beginning of the year as a result of deferring large portions of our corporate headquarters remodel and lower capitalizable investments. See Financial and Operational Highlights above for additional information.

Dividends

Our Board of Directors declared and we paid quarterly cash dividends of $0.22 per share on all outstanding shares of Class A common stock during the first three quarters of 2020, as disclosed in Note 4, Earnings Per Share and Dividends to the accompanying unaudited condensed consolidated financial statements. On November 4, 2020, our Board of Directors declared a quarterly cash dividend of $0.22 per share on all outstanding shares of Class A common stock, which is payable on December 2, 2020 to stockholders of record at the close of business on November 18, 2020. The declaration of additional future dividends, and, if declared, the amount of any such future dividend, will be subject to our actual future earnings and capital requirements and will be at the discretion of our Board of Directors.

Distributions and Other Payments to Non-controlling Unitholders by RMCO

Distributions and other payments pursuant to the RMCO, LLC Agreement and TRAs were comprised of the following (in thousands):

Nine Months Ended

September 30, 

   

2020

   

2019

Distributions and other payments pursuant to the RMCO, LLC Agreement:

Required distributions for taxes and pro rata distributions as a result of distributions to RE/MAX Holdings in order to satisfy its estimated tax liabilities

$

2,277

$

3,547

Dividend distributions

8,289

7,913

Total distributions to RIHI

10,566

11,460

Payments pursuant to the TRAs (a)

2,854

Total distributions to RIHI and TRA payments

$

10,566

$

14,314

(a)In connection with capital preservation measures taken in response to the COVID-19 pandemic, in 2020 we deferred the payments pursuant to our TRAs to the fourth quarter upon final completion of our federal income tax returns.

Commitments and Contingencies

Our management does not believe there are any matters involving us that could result, individually or in the aggregate, in a material adverse effect on our financial condition, results of operations and cash flows. See Note 12, Commitments and Contingencies to the accompanying unaudited condensed consolidated financial statements for additional information.

Off Balance Sheet Arrangements

We have no material off balance sheet arrangements as of September 30, 2020.

Critical Accounting Judgments and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes. Actual results could differ from those estimates.

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Allowance for Doubtful Accounts

The Company records allowances against its accounts receivable balances for estimated probable losses.

Increases and decreases in the allowance for doubtful accounts are established based upon changes in the credit quality

of receivables. The allowance for doubtful accounts is based primarily on historical experience and the credit quality of specific accounts, but also on general economic conditions. Estimating our allowance for doubtful accounts became more challenging given the COVID-19 pandemic. We placed more emphasis on current economic conditions and the impact they may have on amounts unpaid. Should the severity of the pandemic worsen or the housing market take another downturn similar to what we experienced in April and May 2020, then we may need to increase our allowance for doubtful accounts.

Our Critical Accounting Judgments and Estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Judgments and Estimates” in our 2019 Annual Report on Form 10-K for which there were no material changes, included:

Franchise Agreements and Other Intangible Assets
Purchase Accounting for Acquisitions
Income Tax Accounting
Deferred Tax Assets and TRA Liability
Motto Goodwill and Contingent Consideration
General Litigation Matters

New Accounting Pronouncements

There have been no new accounting pronouncements not yet effective that we believe have a significant impact, or potential significant impact, to our consolidated financial statements. See Note 2, Summary of Significant Accounting Policies to the accompanying unaudited condensed consolidated financial statements for additional information.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

We have operations both within the U.S. and globally and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange and inflation risks, as well as risks relating to changes in the general economic conditions in the countries where we conduct business. To reduce certain of these risks, we monitor the financial condition of our large franchisees. In addition, our investment strategy has been to invest in financial instruments that are highly liquid and mature within three months from the date of purchase. We do not currently use derivative instruments to mitigate the impact of our market risk exposures nor do we use derivatives for trading or speculative purposes.

Interest Rate Risk

We are subject to interest rate risk in connection with borrowings under our Senior Secured Credit Facility which bear interest at variable rates. At September 30, 2020, $225.6 million in term loans were outstanding under our Senior Secured Credit Facility. We currently do not engage in any interest rate hedging activity, but given our variable rate borrowings, we monitor interest rates and if appropriate, may engage in hedging activity prospectively. The interest rate on our Senior Secured Credit Facility is currently based on LIBOR, subject to a floor of 0.75%, plus an applicable margin of 2.75%. As of September 30, 2020, the interest rate was 3.50%. If LIBOR rises such that our rate is above the floor, then each hypothetical 0.25% increase would result in additional annual interest expense of $0.6 million. To mitigate a portion of this risk, we invest our cash balances in short-term investments that earn interest at variable rates.

Currency Risk

We have a network of global franchisees in over 110 countries and territories. Fluctuations in exchange rates of the U.S. dollar against foreign currencies can result, and have resulted, in fluctuations in (a) revenue and operating income due to a portion of our revenue being denominated in foreign currencies and (b) foreign exchange transaction gains and losses

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due primarily to cash and accounts receivable balances denominated in foreign currencies, with the Canadian dollar representing the most significant exposure. We currently do not engage in any foreign exchange hedging activity of our revenues but may do so in the future; however, we actively convert cash balances into U.S. dollars to mitigate currency risk on cash positions. During the three and nine months ended September 30, 2020, a hypothetical 5% strengthening/weakening in the value of the U.S. dollar compared to the Canadian dollar would have resulted in a decrease/increase to operating income of approximately $0.3 million and $0.7 million, respectively.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that as of September 30, 2020 our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are involved in litigation, claims and other proceedings relating to the conduct of our business, and the disclosures set forth in Note 12, Commitments and Contingencies relating to certain legal matters is incorporated herein by reference. Such litigation and other proceedings may include, but are not limited to, actions relating to intellectual property, commercial arrangements, franchising arrangements, brokerage disputes, vicarious liability based upon conduct of individuals or entities outside of our control including franchisees and independent agents, and employment law claims. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant time and resources from management. Although we do not believe any currently pending litigation will have a material adverse effect on our business, financial condition or operations, there are inherent uncertainties in litigation and other claims and regulatory proceedings and such pending matters could result in unexpected expenses and liabilities and might materially adversely affect our business, financial condition or operations, including our reputation.

Item 1A. Risk Factors

Due to developments relating to the global coronavirus (“COVID-19”) pandemic, the Company is supplementing the risk factors previously disclosed in Part I, Item 1A, “Risk Factors” of its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report on Form 10-K”), filed with the Securities and Exchange

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Commission on February 21, 2020, to include the following risk factor under the heading “Risks Related to Our Business and Industry”.

The effects of the COVID-19 pandemic have caused and will likely continue to cause significant disruption to our normal business operations, and the severity and duration of these impacts on future financial performance and results of operations remain uncertain.

The COVID-19 pandemic has spread across the globe and is impacting economic activity worldwide. The pandemic poses significant risks to our business and our employees, franchisees, agents, and loan originators.

The COVID-19 pandemic has negatively impacted our business and that of our franchisees. The pandemic poses the risk of an extended disruption to our business, that of our franchisees and other business partners, and housing and mortgage markets generally, due to the impact of the disease itself, actions intended to limit or slow its spread, and other factors. These include restrictions on travel or transportation, social distancing requirements, limitations on the size of gatherings, policies that ban or severely limit in-person showings of properties, closures of work facilities, schools, public buildings and businesses, cancellation of events, curtailing other activities, quarantines and lock-downs.

In addition, our results are tied to the residential real estate and mortgage markets. Disruptions related to the COVID-19 pandemic resulted in a downturn in the residential real estate and mortgage markets and future developments related to COVID-19 may cause further disruptions to the economy and real estate and mortgage markets that may negatively impact our business. Such disruptions may include a downturn in economic conditions generally, declines in consumer confidence and spending, and tightening of credit or instability in the financial markets. These same factors may impair the ability of our franchisees (a) to continue their operations resulting in larger numbers of failures and (b) to pay the fees that are due to us under their franchise agreements. We provided financial support to our franchisees during this time, which resulted in a decline in our revenues during the nine months ended September 30, 2020. We are unable to estimate the effectiveness of that support on the ongoing financial health and stability of our franchisees, whether we will determine to offer support in future periods as the COVID-19 pandemic continues to evolve, or the ultimate effect of such support on our results of operations and financial condition.

Nearly all of the Company’s employees are currently working remotely and may continue to do so for an undetermined amount of time. This may impair the ability of the Company’s management team to successfully implement the Company’s business plans. We cannot predict when or how we will begin to lift the actions put in place as part of our business continuity plans, including work from home requirements and travel restrictions.

The duration and magnitude of the impact from the COVID-19 pandemic depends on future developments that cannot be predicted at this time. There remains significant uncertainty regarding the continuing impact of COVID-19 on our business and the overall economy as a whole throughout the world, including in the United States and Canada. In particular, there is significant concern regarding the possibility of additional waves of COVID-19 cases that could cause state and local governments to reinstate more restrictive measures, which could impact our business and housing markets. There is also uncertainty regarding how the housing market will respond to any reduction in the health risks relating to COVID-19 in the future for example as a result of viable treatment options or a vaccine.

The Company has already experienced significant disruption to its business as a result of the COVID-19 pandemic and such disruptions may continue, particularly if ongoing mitigation actions by government authorities remain in place for a significant amount of time. For example, our liquidity has been impacted by the COVID-19 pandemic. Notwithstanding our cost mitigation plan and deferral of the payment under the TRA, our net cash provided by operating activities decreased from $55.2 million for the nine months ended September 30, 2019 to $43.5 million for the nine months ended September 30, 2020, primarily as a result of a decrease in revenue due to temporary COVID-19 related financial support initiatives. The future impact of the COVID-19 pandemic on our liquidity and financial condition is unknown, and its impact may be variable over time as government regulations, market conditions and consumer behavior changes in response to developments with respect to the pandemic. Notwithstanding any mitigation actions, sustained material revenue declines relating to this crisis could impact our financial condition, results of operations, stock price and ability to access the capital markets. Substantial declines in our profitability could trigger the excess cash flow requirements of our Senior Secured Credit Facility (described above in Item 2) requiring us to make incremental principal payments that would not otherwise be required.

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The pandemic and any severe or long-term economic downturn in the housing market or long-term mitigation efforts by government authorities could heighten other important risks and uncertainties including, without limitation, (i) changes in the real estate market or interest rates and availability of financing for homebuyers, (ii) changes in business and economic activity in general, (iii) the Company’s ability to attract and retain quality franchisees, (iv) the Company’s franchisees’ ability to recruit and retain real estate agents and mortgage loan originators and their ability to continue as a going concern, (v) changes in laws and regulations, (vi) adverse legal interpretations of contractual provisions within our franchise agreements, (vii) the Company’s ability to enhance, market, and protect the RE/MAX and Motto Mortgage brands, (viii) the Company’s ability to implement its technology initiatives, (ix) fluctuations in foreign currency exchange rates, and (x) the Company’s ability to obtain any required additional financing in the future on acceptable terms or at all.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 25, 2020, the Company acquired all of the equity interests in wemlo. A portion of the consideration for the acquisition was the issuance by the Company to the founders of wemlo of 91,097 shares of Class A common stock. The shares of common stock issued to the founders in connection with the acquisition were offered and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act.

On September 10, 2020, the Company acquired all of the equity interests in Gadberry. A portion of the consideration for the acquisition was the issuance by the Company to the founders of Gadberry of 157,074 shares of Class A common stock. The shares of common stock issued to the founders in connection with the acquisition were offered and sold in a transaction exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit No.

  

Exhibit Description

  

Form

  

File
Number

  

Date of
First Filing

  

Exhibit
Number

  

Filed
Herewith

3.1

Amended and Restated Certificate of Incorporation

10-Q

001-36101

11/14/2013

3.1

3.2

Bylaws of RE/MAX Holdings, Inc.

8-K

001-36101

2/22/2018

3.1

4.1

Form of RE/MAX Holdings, Inc.’s Class A common stock certificate.

S-1

333-190699

9/27/2013

4.1

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

X

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

X

32.1

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS

XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

X

104

Cover Page Interactive Data File – The cover page XBRL tags are embedded within the Inline XBRL document.

X

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

RE/MAX Holdings, Inc.

(Registrant)

Date:

November 5, 2020

By:

/s/ Adam M. Contos

Adam M. Contos

Director and Chief Executive Officer

(Principal Executive Officer)

Date:

November 5, 2020

By:

/s/ Karri R. Callahan

Karri R. Callahan

Chief Financial Officer

(Principal Financial Officer)

Date:

November 5, 2020

By:

/s/ Brett A. Ritchie

Brett A. Ritchie

Chief Accounting Officer

(Principal Accounting Officer)

42

Exhibit 31.1

Certification

I, Adam M. Contos, certify that:

1.I have reviewed this quarterly report on Form 10-Q of RE/MAX Holdings, Inc.;
2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and
d.Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 5, 2020

/s/ Adam M. Contos

Adam M. Contos

Director and Chief Executive Officer

(Principal Executive Officer)


Exhibit 31.2

Certification

I, Karri R. Callahan certify that:

1.I have reviewed this quarterly report on Form 10-Q of RE/MAX Holdings, Inc.;
2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and
d.Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 5, 2020

/s/ Karri R. Callahan

Karri R. Callahan

Chief Financial Officer

(Principal Financial Officer)


Exhibit 32.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of RE/MAX Holdings, Inc., a Delaware corporation (the "Company"), does hereby certify, to such officer's knowledge, that:

The Quarterly Report on Form 10-Q for the period ended September 30, 2020 (the "Form 10-Q") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of September 30, 2020 and December 31, 2019, and for the three and nine months ended September 30, 2020 and 2019.

Date: November 5, 2020

/s/ Adam M. Contos

Adam M. Contos

Director and Chief Executive Officer

(Principal Executive Officer)

Date: November 5, 2020

/s/ Karri R. Callahan

Karri R. Callahan

Chief Financial Officer

(Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.


v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Oct. 31, 2020
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2020  
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, $0.0001 par value per share  
Trading Symbol RMAX  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001581091  
Amendment Flag false  
Common Class A    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   18,557,201
Common Class B    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   1
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 89,135 $ 83,001
Restricted cash 15,635 20,600
Accounts and notes receivable, current portion, less allowances of $14,614 and $12,538, respectively 30,003 28,644
Income taxes receivable 718 896
Other current assets 12,484 9,638
Total current assets 147,975 142,779
Property and equipment, net of accumulated depreciation of $16,408 and $14,940, respectively 6,016 5,444
Operating lease right of use assets 39,937 51,129
Franchise agreements, net 76,065 87,670
Other intangible assets, net 31,424 32,315
Goodwill 176,302 159,038
Deferred tax assets, net 49,377 52,595
Income taxes receivable, net of current portion 1,690 1,690
Other assets, net of current portion 14,535 9,692
Total assets 543,321 542,352
Current liabilities:    
Accounts payable 5,727 2,983
Accrued liabilities 52,073 60,163
Income taxes payable 7,249 6,854
Deferred revenue 23,147 25,663
Current portion of debt 2,489 2,648
Current portion of payable pursuant to tax receivable agreements 6,478 3,583
Operating lease liabilities 5,553 5,102
Total current liabilities 102,716 106,996
Debt, net of current portion 221,594 223,033
Payable pursuant to tax receivable agreements, net of current portion 30,745 33,640
Deferred tax liabilities, net 1,000 293
Deferred revenue, net of current portion 17,931 18,763
Operating lease liabilities, net of current portion 51,750 55,959
Other liabilities, net of current portion 5,408 5,292
Total liabilities 431,144 443,976
Commitments and contingencies (note 12)
Stockholders' equity:    
Additional paid-in capital 485,664 466,945
Retained earnings 27,951 30,525
Accumulated other comprehensive income, net of tax 476 414
Total stockholders' equity attributable to RE/MAX Holdings, Inc. 514,093 497,886
Non-controlling interest (401,916) (399,510)
Total stockholders' equity 112,177 98,376
Total liabilities and stockholders' equity 543,321 542,352
Common Class A    
Stockholders' equity:    
Common stock 2 2
Common Class B    
Stockholders' equity:    
Common stock $ 0 $ 0
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Accounts and notes receivable, allowance $ 14,614 $ 12,538
Property and equipment, accumulated depreciation $ 16,408 $ 14,940
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 18,372,134 17,838,233
Common stock, shares outstanding 18,372,134 17,838,233
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
v3.20.2
Condensed Consolidated Statements of Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Revenue:        
Total revenue $ 71,073 $ 71,541 $ 193,552 $ 214,100
Operating expenses:        
Selling, operating and administrative expenses 28,216 24,468 88,241 84,081
Marketing Funds expenses 17,290 18,034 46,577 54,866
Depreciation and amortization 6,850 5,595 19,572 16,694
Impairment charge - leased assets 7,902 0 7,902 0
Total operating expenses 60,258 48,097 162,292 155,641
Operating income 10,815 23,444 31,260 58,459
Other expenses, net:        
Interest expense (2,159) (3,089) (7,028) (9,398)
Interest income 25 412 328 1,074
Foreign currency transaction gains (losses) 94 (50) (75) 66
Total other expenses, net (2,040) (2,727) (6,775) (8,258)
Income before provision for income taxes 8,775 20,717 24,485 50,201
Provision for income taxes (2,051) (3,453) (6,547) (8,547)
Net income 6,724 17,264 17,938 41,654
Less: net income attributable to non-controlling interest (note 3) 3,171 8,091 8,265 19,502
Net income attributable to RE/MAX Holdings, Inc. $ 3,553 $ 9,173 $ 9,673 $ 22,152
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock        
Basic $ 0.20 $ 0.51 $ 0.53 $ 1.24
Diluted 0.19 0.51 0.53 1.24
Common Class A        
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock        
Basic 0.20 0.51 0.53 1.24
Diluted $ 0.19 $ 0.51 $ 0.53 $ 1.24
Weighted average shares of Class A common stock outstanding        
Basic 18,196,454 17,826,332 18,098,227 17,803,708
Diluted 18,368,051 17,840,158 18,182,856 17,830,942
Cash dividends declared per share of Class A common stock $ 0.22 $ 0.21 $ 0.66 $ 0.63
Continuing franchise fees        
Revenue:        
Total revenue $ 24,339 $ 25,168 $ 65,220 $ 75,018
Annual dues        
Revenue:        
Total revenue 8,638 8,835 26,304 26,508
Broker fees        
Revenue:        
Total revenue 15,457 13,292 35,327 35,339
Marketing Funds fees        
Revenue:        
Total revenue 17,290 18,034 46,577 54,866
Franchise sales and other revenue        
Revenue:        
Total revenue $ 5,349 $ 6,212 $ 20,124 $ 22,369
v3.20.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Condensed Consolidated Statements of Comprehensive Income        
Net income $ 6,724 $ 17,264 $ 17,938 $ 41,654
Change in cumulative translation adjustment 70 (39) (43) 95
Other comprehensive income (loss), net of tax 70 (39) (43) 95
Comprehensive income 6,794 17,225 17,895 41,749
Less: comprehensive income attributable to non-controlling interest 3,205 8,070 8,160 19,546
Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax $ 3,589 $ 9,155 $ 9,735 $ 22,203
v3.20.2
Condensed Consolidated Statements of Stockholders' Equity - USD ($)
Common Stock
Common Class A
Common Stock
Common Class B
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, 2018 $ 2,000 $ 0 $ 460,101,000 $ 21,138,000 $ 328,000 $ (402,294,000)     $ 79,275,000
Beginning balance, Shares at Dec. 31, 2018 17,754,416 1              
Net income $ 0 $ 0 0 4,409,000 0 3,848,000     8,257,000
Distributions to non-controlling unitholders 0 0 0 0 0 (2,693,000)     (2,693,000)
Equity-based compensation expense and related dividend equivalents, value $ 0 $ 0 3,213,000 (42,000) 0 0     3,171,000
Equity-based compensation expense and related dividend equivalents, shares 70,797 0              
Dividends to Class A common stockholders $ 0 $ 0 0 (3,740,000) 0 0     (3,740,000)
Change in accumulated other comprehensive income 0 0 0 0 36,000 33,000     69,000
Payroll taxes related to net settled restricted stock units, value $ 0 $ 0 (713,000) 0 0 0     (713,000)
Payroll taxes related to net settled restricted stock units, shares (17,265) 0              
Ending balance, Value at Mar. 31, 2019 $ 2,000 $ 0 462,601,000 21,765,000 364,000 (401,106,000)     83,626,000
Ending balance, Shares at Mar. 31, 2019 17,807,948 1              
Beginning balance, Value at Dec. 31, 2018 $ 2,000 $ 0 460,101,000 21,138,000 328,000 (402,294,000)     79,275,000
Beginning balance, Shares at Dec. 31, 2018 17,754,416 1              
Net income                 41,654,000
Change in accumulated other comprehensive income                 95,000
Ending balance, Value at Sep. 30, 2019 $ 2,000 $ 0 462,245,000 31,992,000 379,000 (394,208,000)     100,410,000
Ending balance, Shares at Sep. 30, 2019 17,835,719 1              
Beginning balance, Value at Mar. 31, 2019 $ 2,000 $ 0 462,601,000 21,765,000 364,000 (401,106,000)     83,626,000
Beginning balance, Shares at Mar. 31, 2019 17,807,948 1              
Net income $ 0 $ 0 0 8,570,000 0 7,563,000     16,133,000
Distributions to non-controlling unitholders 0 0 0 0 0 (4,613,000)     (4,613,000)
Equity-based compensation expense and related dividend equivalents, value $ 0 $ 0 182,000 (1,000) 0 0     181,000
Equity-based compensation expense and related dividend equivalents, shares 1,740 0              
Dividends to Class A common stockholders $ 0 $ 0 0 (3,739,000) 0 0     (3,739,000)
Change in accumulated other comprehensive income 0 0 0 0 33,000 32,000     65,000
Payroll taxes related to net settled restricted stock units, value $ 0 $ 0 (18,000) 0 0 0     (18,000)
Payroll taxes related to net settled restricted stock units, shares (569) 0              
Other $ 0 $ 0 290,000 0 0 0     290,000
Ending balance, Value at Jun. 30, 2019 $ 2,000 $ 0 463,055,000 26,595,000 397,000 (398,124,000)     91,925,000
Ending balance, Shares at Jun. 30, 2019 17,809,119 1              
Net income $ 0 $ 0 0 9,173,000 0 8,091,000     17,264,000
Distributions to non-controlling unitholders 0 0 0 0 0 (4,154,000)     (4,154,000)
Equity-based compensation expense and related dividend equivalents, value $ 0 $ 0 (888,000) (31,000) 0 0     (919,000)
Equity-based compensation expense and related dividend equivalents, shares 30,278 0              
Dividends to Class A common stockholders $ 0 $ 0 0 (3,745,000) 0 0     (3,745,000)
Change in accumulated other comprehensive income 0 0 0 0 (18,000) (21,000)     (39,000)
Payroll taxes related to net settled restricted stock units, value $ 0 $ 0 (105,000) 0 0 0     (105,000)
Payroll taxes related to net settled restricted stock units, shares (3,678) 0              
Other $ 0 $ 0 183,000 0 0 0     183,000
Ending balance, Value at Sep. 30, 2019 $ 2,000 $ 0 462,245,000 31,992,000 379,000 (394,208,000)     100,410,000
Ending balance, Shares at Sep. 30, 2019 17,835,719 1              
Beginning balance, Value at Dec. 31, 2019 $ 2,000 $ 0 466,945,000 30,525,000 414,000 (399,510,000)     98,376,000
Beginning balance, Shares at Dec. 31, 2019 17,838,233 1         17,838,233 1  
Net income $ 0 $ 0 0 2,631,000 0 2,659,000     5,290,000
Distributions to non-controlling unitholders 0 0 0 0 0 (2,777,000)     (2,777,000)
Equity-based compensation expense and related dividend equivalents, value $ 0 $ 0 5,962,000 (289,000) 0 0     5,673,000
Equity-based compensation expense and related dividend equivalents, shares 368,375 0              
Dividends to Class A common stockholders $ 0 $ 0 0 (3,986,000) 0 0     (3,986,000)
Change in accumulated other comprehensive income 0 0 0 0 (36,000) (194,000)     (230,000)
Payroll taxes related to net settled restricted stock units, value $ 0 $ 0 (2,268,000) 0 0 0     (2,268,000)
Payroll taxes related to net settled restricted stock units, shares (82,645) 0              
Ending balance, Value at Mar. 31, 2020 $ 2,000 $ 0 470,639,000 28,881,000 378,000 (399,822,000)     100,078,000
Ending balance, Shares at Mar. 31, 2020 18,123,963 1              
Beginning balance, Value at Dec. 31, 2019 $ 2,000 $ 0 466,945,000 30,525,000 414,000 (399,510,000)     98,376,000
Beginning balance, Shares at Dec. 31, 2019 17,838,233 1         17,838,233 1  
Net income                 17,938,000
Change in accumulated other comprehensive income                 (43,000)
Ending balance, Value at Sep. 30, 2020 $ 2,000 $ 0 485,664,000 27,951,000 476,000 (401,916,000)     112,177,000
Ending balance, Shares at Sep. 30, 2020 18,372,134 1         18,372,134 1  
Beginning balance, Value at Mar. 31, 2020 $ 2,000 $ 0 470,639,000 28,881,000 378,000 (399,822,000)     100,078,000
Beginning balance, Shares at Mar. 31, 2020 18,123,963 1              
Net income $ 0 $ 0 0 3,489,000 0 2,435,000     5,924,000
Distributions to non-controlling unitholders 0 0 0 0 0 (2,789,000)     (2,789,000)
Equity-based compensation expense and related dividend equivalents, value $ 0 $ 0 2,812,000 0 0 0     2,812,000
Equity-based compensation expense and related dividend equivalents, shares 0 0              
Dividends to Class A common stockholders $ 0 $ 0 0 (3,987,000) 0 0     (3,987,000)
Change in accumulated other comprehensive income 0 0 0 0 62,000 55,000     117,000
Other 0 0 0 2,000 0 0     2,000
Ending balance, Value at Jun. 30, 2020 $ 2,000 $ 0 473,451,000 28,385,000 440,000 (400,121,000)     102,157,000
Ending balance, Shares at Jun. 30, 2020 18,123,963 1              
Net income $ 0 $ 0 0 3,553,000 0 3,171,000     6,724,000
Distributions to non-controlling unitholders 0 0 0 0 0 (5,000,000)     (5,000,000)
Equity-based compensation expense and related dividend equivalents, value $ 0 $ 0 3,413,000 0 0 0     3,413,000
Equity-based compensation expense and related dividend equivalents, shares 0 0              
Dividends to Class A common stockholders $ 0 $ 0 0 (3,988,000) 0 0     (3,988,000)
Change in accumulated other comprehensive income 0 0 0 0 36,000 34,000     70,000
Acquisitions $ 0 $ 0 8,800,000 0 0 0     8,800,000
Acquisitions, (in Shares) 248,171 0              
Other $ 0 $ 0 0 1,000 0 0     1,000
Ending balance, Value at Sep. 30, 2020 $ 2,000 $ 0 $ 485,664,000 $ 27,951,000 $ 476,000 $ (401,916,000)     $ 112,177,000
Ending balance, Shares at Sep. 30, 2020 18,372,134 1         18,372,134 1  
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash flows from operating activities:    
Net income $ 17,938 $ 41,654
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 19,572 16,694
Impairment charge - leased assets 7,902 0
Bad debt expense 4,024 3,420
Equity-based compensation expense 8,347 4,860
Deferred income tax expense 1,889 3,630
Fair value adjustments to contingent consideration (105) 330
Other, net 209 1,193
Changes in operating assets and liabilities (16,305) (16,594)
Net cash provided by operating activities 43,471 55,187
Cash flows from investing activities:    
Purchases of property, equipment and capitalization of software (4,575) (10,093)
Acquisitions, net of cash acquired of $867k and $, respectively (10,627) 0
Restricted cash acquired with the Marketing Funds acquisition 0 28,495
Other 0 (1,200)
Net cash (used in) provided by investing activities (15,202) 17,202
Cash flows from financing activities:    
Payments on debt (1,986) (1,964)
Distributions paid to non-controlling unitholders (10,566) (11,460)
Dividends and dividend equivalents paid to Class A common stockholders (12,250) (11,298)
Payments related to tax withholding for share-based compensation (2,268) (836)
Net cash used in financing activities (27,070) (25,558)
Effect of exchange rate changes on cash (30) 76
Net increase in cash, cash equivalents and restricted cash 1,169 46,907
Cash, cash equivalents and restricted cash, beginning of year 103,601 59,974
Cash, cash equivalents and restricted cash, end of period 104,770 106,881
Supplemental disclosures of cash flow information:    
Cash paid for interest 6,638 9,004
Net cash paid for income taxes 3,963 6,032
Payments pursuant to tax receivable agreements 0 2,854
Schedule of non-cash investing activities:    
Class A shares issued as consideration for acquisitions $ 8,800 $ 0
v3.20.2
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Condensed Consolidated Statements of Cash Flows    
Cash acquired $ 867 $ 0
v3.20.2
Business and Organization
9 Months Ended
Sep. 30, 2020
Business and Organization  
Business and Organization

1. Business and Organization

RE/MAX Holdings, Inc. (“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 (“Motto”). RE/MAX, founded in 1973, has over 130,000 agents operating in over 8,000 offices and a presence in more than 110 countries and territories. Motto, founded in 2016, is the first nationally franchised mortgage brokerage in the U.S. RE/MAX and Motto are 100% franchised and do not operate any real estate or mortgage brokerage offices.

v3.20.2
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2020
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Balance Sheet at December 31, 2019, 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 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 September 30, 2020 and the results of its operations and comprehensive income, cash flows and changes in its stockholders’ equity for the three and nine months ended September 30, 2020 and 2019. 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, 2019 (“2019 Annual Report on Form 10-K”). Please refer to that document for a fuller discussion of all significant accounting policies.

Use of Estimates

The preparation of the accompanying 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.

Revenue Recognition

The Company generates the substantial majority of its revenue from contracts with customers. The Company’s major streams of revenue are:

Continuing franchise fees, which are fixed contractual fees paid monthly by regional franchise owners and franchisees based on the number of RE/MAX agents in the respective franchised region or office and the number of Motto offices.
Annual dues, which are fees charged directly to RE/MAX agents.
Broker fees, which are fees paid on real estate commissions when a RE/MAX agent assists a consumer to buy or sell a home.
Marketing Funds fees, which are fixed contractual fees paid monthly by franchisees based on the number of RE/MAX agents in the respective franchised region or office or the number of Motto offices.
Franchise sales and other franchise revenue, which consist of fees from initial sales of RE/MAX and Motto franchises, renewals of RE/MAX franchises, master franchise fees, preferred marketing arrangements, approved supplier programs and event-based revenue from training and other programs.

Annual Dues

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
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

15,982

$

24,840

$

(26,304)

$

14,518

(a)

Revenue recognized related to the beginning balance was $2.4 million and $13.7 million for the three and nine months ended September 30, 2020, respectively.

Franchise Sales

The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands):

    

Balance at
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

25,884

$

6,029

$

(7,130)

$

24,783

(a)

Revenue recognized related to the beginning balance was $2.0 million and $6.6 million for the three and nine months ended September 30, 2020, 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

Expense

Additions to contract

Balance at end

    

beginning of period

    

recognized

    

cost for new activity

    

of period

Nine Months Ended September 30, 2020

$

3,578

$

(1,076)

$

1,142

$

3,644

Disaggregated Revenue

In the following table, segment revenue is disaggregated by geographical area (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

U.S.

$

42,257

$

42,013

$

114,786

$

125,437

Canada

5,898

5,886

15,833

17,128

Global

2,797

3,182

8,609

8,725

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

U.S.

15,701

16,163

41,948

49,216

Canada

1,405

1,644

4,075

5,029

Global

184

227

554

621

Total Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising (a)

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

(a)Revenue from the Motto Franchising segment is derived exclusively within the U.S.

In the following table, segment revenue is disaggregated by Company-Owned or Independent Regions in the U.S., Canada and Global (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Company-Owned Regions

$

40,226

$

39,693

$

104,632

$

115,423

Independent Regions

8,792

8,954

25,357

25,726

Global and Other

1,934

2,434

9,239

10,141

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

Certain items in the table above have been reclassified in the three and nine months ended September 30, 2019 to conform with the current year presentation.

Transaction Price Allocated to the Remaining Performance Obligations

The following table includes estimated revenue by year, excluding certain other immaterial items, 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):

    

Remainder of 2020

    

2021

    

2022

    

2023

    

2024

    

2025

    

Thereafter

    

Total

Annual dues

$

6,500

$

8,018

$

$

$

$

$

$

14,518

Franchise sales

1,846

6,572

5,230

3,831

2,555

1,350

3,399

24,783

Total

$

8,346

$

14,590

$

5,230

$

3,831

$

2,555

$

1,350

$

3,399

$

39,301

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):

September 30, 

December 31,

    

2020

2019

Cash and cash equivalents

$

89,135

$

83,001

Restricted cash

15,635

20,600

Total cash, cash equivalents and restricted cash

$

104,770

$

103,601

Services Provided to the Marketing Funds by RE/MAX Franchising

RE/MAX Franchising charges the Marketing Funds for various services it performs. These services primarily comprise (a) building and maintaining agent marketing technology, including customer relationship management tools, the remax.com website, agent, office and team websites, and mobile apps, (b) dedicated employees focused on marketing campaigns, and (c) various administrative services including customer support of technology, accounting and legal. Because these costs are ultimately paid by the Marketing Funds, they do not impact the net income of Holdings as the Marketing Funds have no reported net income.

Costs charged from RE/MAX Franchising to the Marketing Funds are as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Technology development - operating

$

2,721

$

1,523

$

9,414

$

3,687

Technology development - capital

104

1,420

864

3,884

Marketing staff and administrative services

988

589

3,199

2,638

Total

$

3,813

$

3,532

$

13,477

$

10,209

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. All of the Company’s material leases are classified as operating leases.

The Company acts as the lessor for four sublease agreements on its corporate headquarters, consisting solely of operating leases.

The Company has made an accounting policy election not to recognize right-of-use (“ROU”) 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.

During the third quarter of 2020, the Company began executing on a plan to both refresh its corporate headquarters and sublease space made available through the refresh. As a result, the Company changed its asset grouping for its headquarters ROU asset to separate the portion that it intends to sublease from the portion it will continue to occupy and performed an impairment test on the portion it intends to sublease. Based on a comparison of undiscounted cash flows to the ROU asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease rate on the Company’s corporate headquarters and expected sublease rates available in the market. This resulted in an impairment charge of $7.9 million, which reflects the excess of the ROU asset over its fair value.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU“) 2018-15, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for

Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in the software licensing arrangements under the internal-use software guidance. ASU 2018-15 also clarifies that any capitalized costs should not be recorded to “Depreciation and amortization” in the Consolidated Statements of Income. The Company adopted this standard effective January 1, 2020 prospectively to all new implementation costs incurred after adoption. The amendments of ASU 2018-15 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which eliminates certain disclosure requirements for fair value measurements and requires new or modified disclosures. ASU 2018-13 became effective for the Company on January 1, 2020. This new guidance was applied on a prospective basis. The amendments of ASU 2018-13 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires earlier recognition of credit losses on loans, held-to-maturity securities, and certain other financial assets. ASU 2016-13 replaces the current incurred loss model with a model requiring entities to estimate expected credit losses over the life of the financial instrument based on both historical information as well as reasonable and supportable forecasts. The FASB requires entities to use a modified retrospective transition approach, in which an adjustment is made to beginning retained earnings for the cumulative effect of adopting the standard. ASU 2016-13 became effective for the Company on January 1, 2020. The standard had an immaterial effect on the Company’s credit losses at transition and no adjustment to retained earnings was required. All periods presented for comparative purposes prior to the adoption date of this standard were not adjusted.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which contains temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The new guidance is effective upon issuance and may be adopted on any date on or after March 12, 2020. The relief is temporary and only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company believes the amendments of ASU 2020-04 will not have a significant impact on the Company’s consolidated financial statements and related disclosures as the Company does not currently engage in interest rate hedging of its LIBOR based debt, nor does it believe it has any material contracts tied to LIBOR other than its Senior Secured Credit Agreement, as defined in Note 8, Debt.

v3.20.2
Non-controlling Interest
9 Months Ended
Sep. 30, 2020
Noncontrolling Interest  
Non-controlling Interest

3. Non-controlling Interest

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:

September 30, 2020

December 31, 2019

    

Shares

    

Ownership %

    

Shares

    

Ownership %

 

Non-controlling interest ownership of common units in RMCO

12,559,600

40.6

%  

12,559,600

41.3

%

Holdings outstanding Class A common stock (equal to Holdings common units in RMCO)

18,372,134

59.4

%  

17,838,233

58.7

%

Total common units in RMCO

30,931,734

100.0

%  

30,397,833

100.0

%

The weighted average ownership percentages for the applicable reporting periods are used to calculate the “Net income attributable to RE/MAX Holdings, Inc.” 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 percentages):

Three Months Ended September 30, 

2020

2019

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

Weighted average ownership percentage of RMCO(a)

59.2

%  

40.8

%  

100.0

%  

58.7

%  

41.3

%  

100.0

%

Income before provision for income taxes(a)

$

5,142

$

3,633

$

8,775

$

12,152

$

8,565

$

20,717

Provision for income taxes(b)(c)

(1,589)

(462)

(2,051)

(2,979)

(474)

(3,453)

Net income

$

3,553

$

3,171

$

6,724

$

9,173

$

8,091

$

17,264

Nine Months Ended September 30, 

2020

2019

RE/MAX
Holdings,
Inc.

Non-controlling
interest

Total

RE/MAX
Holdings,
Inc.

Non-controlling
interest

Total

Weighted average ownership percentage of RMCO(a)

59.0

%

41.0

%

100.0

%

58.6

%

41.4

%

100.0

%

Income before provision for income taxes(a)

$

14,589

$

9,896

$

24,485

$

29,438

$

20,763

$

50,201

Provision for income taxes(b)(c)

(4,916)

(1,631)

(6,547)

(7,286)

(1,261)

(8,547)

Net income

$

9,673

$

8,265

$

17,938

$

22,152

$

19,502

$

41,654

(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 items recorded at RE/MAX Holdings.
(b)The provision for income taxes attributable to Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the flow-through income from RMCO. It also includes 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. Otherwise, because RMCO is a flow-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 limited liability company operating 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):

Nine Months Ended

September 30, 

2020

2019

Tax and other distributions

$

2,277

$

3,547

Dividend distributions

8,289

7,913

Total distributions to non-controlling unitholders

$

10,566

$

11,460

v3.20.2
Earnings Per Share and Dividends
9 Months Ended
Sep. 30, 2020
Earnings Per Share and Dividends  
Earnings Per Share and Dividends

4. Earnings Per Share and Dividends

Earnings Per Share

The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except shares and per share information):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Numerator

Net income attributable to RE/MAX Holdings, Inc.

$

3,553

$

9,173

$

9,673

$

22,152

Denominator for basic net income per share of Class A common stock

Weighted average shares of Class A common stock outstanding

18,196,454

17,826,332

18,098,227

17,803,708

Denominator for diluted net income per share of Class A common stock

Weighted average shares of Class A common stock outstanding

18,196,454

17,826,332

18,098,227

17,803,708

Add dilutive effect of the following:

Restricted stock

171,597

13,826

84,629

27,234

Weighted average shares of Class A common stock outstanding, diluted

18,368,051

17,840,158

18,182,856

17,830,942

Earnings per share of Class A common stock

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic

$

0.20

$

0.51

$

0.53

$

1.24

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted

$

0.19

$

0.51

$

0.53

$

1.24

Outstanding Class B common stock does not share in the earnings of 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 during each quarter ended per share on all outstanding shares of Class A common stock were as follows (in thousands, except per share information):

Nine Months Ended September 30, 

2020

2019

Quarter end declared

    

Date paid

    

Per share

    

Amount paid
to Class A
stockholders

    

Amount paid
to non-controlling
unitholders

    

Date paid

    

Per share

    

Amount paid
to Class A
stockholders

    

Amount paid
to non-controlling
unitholders

March 31

March 18, 2020

$

0.22

$

3,986

$

2,763

March 20, 2019

$

0.21

$

3,740

$

2,638

June 30

June 2, 2020

0.22

3,987

2,763

May 29, 2019

0.21

3,739

2,637

September 30

September 2, 2020

0.22

3,988

2,763

August 28, 2019

0.21

3,745

2,638

$

0.66

$

11,961

$

8,289

$

0.63

$

11,224

$

7,913

On November 4, 2020, the Company’s Board of Directors declared a quarterly dividend of $0.22 per share on all outstanding shares of Class A common stock, which is payable on December 2, 2020 to stockholders of record at the close of business on November 18, 2020.

v3.20.2
Acquisitions
9 Months Ended
Sep. 30, 2020
Acquisitions  
Acquisitions

5. Acquisitions

Technology Acquisitions

On September 10, 2020, the Company acquired The Gadberry Group, LLC (“Gadberry”) for $4.6 million in cash, net of cash acquired, and $5.5 million in Class A common stock, plus approximately $9.9 million of equity-based compensation, which will be accounted for as compensation expense in the future over two to three years (see Note 11, Equity-Based Compensation for additional information). In addition, the Company recorded a contingent consideration liability in connection with the purchase of Gadberry, which had an acquisition date fair value of $0.9 million, measured at the present value of the probability weighted consideration expected to be transferred. Gadberry is a location intelligence data company whose products have been instrumental in the success of the Company’s consumer website, www.remax.com. Founded in 2000, Gadberry specializes in building products that help clients solve geospatial

challenges through location data. Gadberry plans to expand its non-RE/MAX clients while maintaining their contributions to the RE/MAX technology offering.

On August 25, 2020, the Company acquired Wemlo, Inc. (“wemlo”) for $6.1 million in cash, net of cash acquired, and $3.3 million in Class A in common stock, plus approximately $6.7 million of equity-based compensation, which will be accounted for as compensation expense in the future over three years (see Note 11, Equity-Based Compensation for additional information). Wemlo is a fintech company that has developed its cloud service for mortgage brokers, combining third-party loan processing services with an all-in-one digital platform.

The total purchase price was allocated to the assets and liabilities acquired based on their preliminary estimated fair values. The Company recorded $14.4 million in goodwill, of which approximately 50% is deductible for tax purposes, and $6.3 million in other intangibles as a result of these 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 acquisitions of the Marketing Funds were part of the Company’s succession plan, and ownership of the Marketing Funds by the franchisor is a common structure. Expenses incurred with the acquisition of the Marketing Funds were not material.

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 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.

v3.20.2
Intangible Assets and Goodwill
9 Months Ended
Sep. 30, 2020
Intangible Assets and Goodwill  
Intangible Assets and Goodwill

6. 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 September 30, 2020

As of December 31, 2019

Amortization

Initial

Accumulated

Net

Initial

Accumulated

Net

Period

Cost

Amortization

Balance

Cost

Amortization

Balance

Franchise agreements

12.5

$

180,867

$

(104,802)

$

76,065

$

180,867

$

(93,197)

$

87,670

Other intangible assets:

Software (a)

4.4

$

42,251

$

(15,952)

$

26,299

$

36,680

$

(9,653)

$

27,027

Trademarks

8.3

2,311

(1,204)

1,107

1,904

(1,037)

867

Non-compete agreements

4.4

3,920

(2,479)

1,441

3,700

(1,546)

2,154

Training materials

5.0

2,400

(1,000)

1,400

2,400

(640)

1,760

Other

3.8

1,670

(493)

1,177

800

(293)

507

Total other intangible assets

4.6

$

52,552

$

(21,128)

$

31,424

$

45,484

$

(13,169)

$

32,315

(a)As of September 30, 2020 and December 31, 2019, capitalized software development costs of $0.8 million and $10.5 million, respectively, were related to technology projects not yet complete and ready for their intended use and thus were not subject to amortization.

Amortization expense was $6.4 million and $5.2 million for the three months ended September 30, 2020 and 2019, respectively, and $18.3 million and $15.5 million for the nine months ended September 30, 2020 and 2019, respectively.

The estimated future amortization expense for the next five years related to intangible assets is as follows (in thousands):

As of September 30, 2020:

Remainder of 2020

$

7,271

2021

27,622

2022

21,004

2023

16,817

2024

14,150

Thereafter

20,625

$

107,489

The following table presents changes to goodwill (in thousands), by segment:

RE/MAX
Franchising

Motto Franchising

    

Other

    

Total

Balance, January 1, 2020

$

147,238

$

11,800

$

$

159,038

Goodwill recognized from acquisitions

2,926

6,837

7,586

17,349

Effect of changes in foreign currency exchange rates

(85)

(85)

Balance, September 30, 2020

$

150,079

$

18,637

$

7,586

$

176,302

v3.20.2
Accrued Liabilities
9 Months Ended
Sep. 30, 2020
Accrued Liabilities.  
Accrued Liabilities

7. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

September 30, 

December 31, 

2020

2019

Marketing Funds (a)

$

41,709

$

39,672

Accrued payroll and related employee costs

3,443

11,900

Accrued taxes

1,833

2,451

Accrued professional fees

1,895

2,047

Other

3,193

4,093

$

52,073

$

60,163

(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.
v3.20.2
Debt
9 Months Ended
Sep. 30, 2020
Debt  
Debt

8. Debt

Debt, net of current portion, consists of the following (in thousands):

September 30, 

    

December 31, 

2020

2019

Senior Secured Credit Facility

$

225,600

$

227,363

Other long-term financing(a)

139

362

Less unamortized debt issuance costs

(957)

(1,182)

Less unamortized debt discount costs

(699)

(862)

Less current portion(a)

(2,489)

(2,648)

$

221,594

$

223,033

(a)Includes financing assumed with the acquisition of booj. As of September 30, 2020, the carrying value of this financing approximates the fair value.

Maturities of debt are as follows (in thousands):

As of September 30, 2020

    

Remainder of 2020

$

663

2021

2,414

2022

2,350

2023

220,312

$

225,739

Senior Secured Credit Facility

In July 2013, the Company entered into a credit agreement with several lenders and administered by a bank, referred to herein as the “2013 Senior Secured Credit Facility.” In December 2016, the 2013 Senior Secured Credit Facility was amended and restated, referred to herein as 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 for which any loans outstanding must be repaid on December 15, 2021. As of September 30, 2020, the Company had no revolving loans outstanding under its Senior Secured Credit Facility. As of September 30, 2020, the interest rate on the term loan facility was 3.50%.

v3.20.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2020
Fair Value Measurements  
Fair Value Measurements

9. Fair Value Measurements

Fair value is a market-based measurement that is 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 2019 Annual Report on Form 10-K.

A summary of the Company’s liabilities measured at fair value on a recurring basis is as follows (in thousands):

September 30, 2020

December 31, 2019

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Fair Value

    

Level 1

    

Level 2

    

Level 3

Liabilities

Contingent consideration

$

5,830

$

$

$

5,830

$

5,005

$

$

$

5,005

The Company is required to pay additional purchase consideration totaling 8% 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 60-80 franchises sold annually, with a weighted average of approximately 75. The model also assumes a discount rate of approximately 15%. A 10% reduction in the number of franchise sales would decrease the liability by $0.2 million. A 1% change to the discount rate applied to the forecast would change the liability by approximately $0.1 million. As of September 30, 2020, contingent consideration also includes an amount recognized in connection with the acquisition of Gadberry (see Note 5, Acquisitions for more information on this acquisition).

The Company measures these contingent consideration liabilities 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 and recorded as a component of “Accrued liabilities” and “Other liabilities, net of current portion” in the accompanying Condensed Consolidated Balance Sheets.

The table below presents a reconciliation of this liability (in thousands):

Total

Balance at January 1, 2020

$

5,005

Fair value adjustments

(105)

Acquisitions - Gadberry

930

Balance at September 30, 2020

$

5,830

The following table summarizes the carrying value and fair value of the Senior Secured Credit Facility (in thousands):

    

September 30, 2020

December 31, 2019

Carrying
Amount

    

Fair Value
Level 2

    

Carrying
Amount

    

Fair Value
Level 2

Senior Secured Credit Facility

$

223,944

$

222,216

$

225,319

$

227,363

v3.20.2
Income Taxes
9 Months Ended
Sep. 30, 2020
Income Taxes  
Income Taxes

10. Income Taxes

The “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income is based on an estimate of the Company’s annualized effective income tax rate.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted which includes several significant business tax provisions. The Company recognized the effect of this change in tax law during the first quarter, which was not significant. The CARES Act provides a five-year carryback of net operating losses generated in tax years beginning after December 31, 2017 and before January 1, 2020. Based upon this change in law, any 2020 tax loss, if realized, will be able to be carried back five years.

v3.20.2
Equity-Based Compensation
9 Months Ended
Sep. 30, 2020
Equity-Based Compensation  
Equity-Based Compensation

11. Equity-Based Compensation

Employee equity-based compensation expense, net of the amount capitalized in internally developed software, is as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Expense from time-based awards (a)

$

3,040

$

1,883

$

7,535

$

5,846

Expense from performance-based awards (a)(b)

374

(3,582)

844

(3,332)

Expense from bonus to be settled in shares (c)

687

2,505

Equity-based compensation capitalized

25

(32)

(159)

Equity-based compensation expense

$

3,414

$

(987)

$

8,347

$

4,860

(a)Includes awards granted to booj, First, wemlo and Gadberry 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. The Company granted certain performance awards to booj employees that were modified in September 2019 to extend the due date resulting in a significant reversal of expense in the third quarter of 2019. These awards substantially vested on December 31, 2019 and have no comparable amounts in 2020.
(c)In 2019, the Company revised its annual bonus plan so that a portion of the bonus for most employees would be settled in shares if the Company met certain performance metrics. The Company eliminated the 2020 corporate bonus plan as part of cost savings measures in connection with the COVID-19 pandemic.

Time-based Restricted Stock

The following table summarizes equity-based compensation activity related to time-based restricted stock units and restricted stock awards:

    

Shares

    

Weighted average
grant date fair
value per share

Balance, January 1, 2020

455,452

$

46.15

Granted

769,750

$

33.05

Shares vested (including tax withholding) (a)

(163,028)

$

45.58

Forfeited

(14,778)

$

37.20

Balance, September 30, 2020

1,047,396

$

36.73

(a)Pursuant to the terms of the RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan, shares withheld by the Company for the payment of the employee's tax withholding related to shares vesting are added back to the pool of shares available for future awards.

As of September 30, 2020, there was $30.0 million of total unrecognized expense, all of which is related to unvested awards, which is expected to be recognized over the weighted-average remaining vesting period of 2.2 years.

Performance-based Restricted Stock

The following table summarizes equity-based compensation activity related to performance-based restricted stock units:

    

Shares

    

Weighted average
grant date fair
value per share

Balance, January 1, 2020

139,964

$

45.31

Granted

205,188

$

28.34

Shares vested (including tax withholding) (a)

(6,331)

$

38.49

Forfeited

(8,629)

$

39.77

Balance, September 30, 2020

330,192

$

35.04

(a)Represents the total participant target award.

As of September 30, 2020, there was $2.9 million of total unrecognized expense, all of which is related to unvested awards, which is expected to be recognized over the weighted-average remaining vesting period of 2.0 years.

v3.20.2
Commitments and Contingencies
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies  
Commitments and Contingencies

12. Commitments and Contingencies

In March 2019, a putative class action complaint was filed that, as amended, brings claims against National Association of Realtors (“NAR”), Realogy Holdings Corp., HomeServices of America, Inc, RE/MAX, LLC, and Keller Williams Realty, Inc by plaintiff Christopher Moehrl in the Northern District of Illinois. The Company has since been named as a defendant in other cases that make similar allegations and seek similar relief. For convenience all of these lawsuits are collectively referred to as the “Moehrl-related suits.” The plaintiffs in the Moehrl-related suits allege that a NAR rule requires brokers to make a blanket, non-negotiable offer of buyer broker compensation when listing a property, and that this results in inflated costs to buyers and/or sellers in violation of antitrust and other federal and state laws. Some actions allege that buyer brokers steered their clients toward listings offering those brokers higher compensation. The Moehrl-related suits further allege that the Company and other franchisor defendants use their agreements with franchisees to require them to follow the NAR rule. Plaintiffs seek damages from the defendants and an injunction against defendants requiring sellers to pay the buyer broker. The Company intends to vigorously defend against all of these claims. The Company may become involved in additional litigation or other legal proceedings concerning the same or similar allegations.

v3.20.2
Segment Information
9 Months Ended
Sep. 30, 2020
Segment Information  
Segment Information

13. Segment Information

The Company operates under the following four operating segments: RE/MAX Franchising, Motto Franchising, Marketing Funds and booj. Due to quantitative insignificance, the booj operating segment does not meet the criteria of a reportable segment and is included in “Other”. Motto Franchising does not meet the quantitative significance test; however, management has chosen to report results for the segment as it believes it will be a key driver of future success for Holdings. 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. Except for the adjustments identified below in arriving at Adjusted EBITDA, the accounting policies of the reportable segments are the same as those described in the Company’s 2019 Annual Report on Form 10-K.


The following table presents revenue from external customers by segment (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Continuing franchise fees (a)

$

22,799

$

24,096

$

61,471

$

72,191

Annual dues

8,638

8,835

26,304

26,508

Broker fees

15,457

13,292

35,327

35,339

Franchise sales and other revenue

4,058

4,858

16,126

17,252

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

Continuing franchise fees

1,540

1,072

3,749

2,827

Franchise sales and other revenue

366

106

685

340

Total Motto Franchising

1,906

1,178

4,434

3,167

Marketing Funds fees (a)

17,290

18,034

46,577

54,866

Other

925

1,248

3,313

4,777

Total revenue

$

71,073

$

71,541

$

193,552

$

214,100

(a)For the Nine Months ended September 30, 2020, Continuing franchise fees and Marketing Funds fees declined primarily due to the temporary COVID-19 related financial support programs offered to franchisees.

The following table presents a reconciliation of Adjusted EBITDA by segment to income before provision for income taxes (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Adjusted EBITDA: RE/MAX Franchising

$

30,959

$

29,134

$

71,008

$

83,299

Adjusted EBITDA: Motto Franchising

(176)

(652)

(1,495)

(2,112)

Adjusted EBITDA: Other

(448)

(324)

(730)

(157)

Adjusted EBITDA: Consolidated

30,335

28,158

68,783

81,030

Gain (loss) on sale or disposition of assets

11

10

33

(353)

Impairment charge - leased assets (a)

(7,902)

(7,902)

Equity-based compensation expense

(3,414)

987

(8,347)

(4,860)

Acquisition-related expense (b)

(1,021)

(181)

(1,915)

(268)

Fair value adjustments to contingent consideration (c)

(250)

15

105

(330)

Interest income

25

412

328

1,074

Interest expense

(2,159)

(3,089)

(7,028)

(9,398)

Depreciation and amortization

(6,850)

(5,595)

(19,572)

(16,694)

Income before provision for income taxes

$

8,775

$

20,717

$

24,485

$

50,201

(a)Represents the impairment recognized on a portion of the Company’s corporate headquarters office building. See Note 2, Summary of Significant Accounting Policies for additional information.
(b)Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.
(c)Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 9, Fair Value Measurements for additional information.
v3.20.2
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2020
Summary of Significant Accounting Policies  
Basis of Presentation

Basis of Presentation

The accompanying Consolidated Balance Sheet at December 31, 2019, 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 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 September 30, 2020 and the results of its operations and comprehensive income, cash flows and changes in its stockholders’ equity for the three and nine months ended September 30, 2020 and 2019. 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, 2019 (“2019 Annual Report on Form 10-K”). Please refer to that document for a fuller discussion of all significant accounting policies.

Use of Estimates

Use of Estimates

The preparation of the accompanying 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.

Revenue Recognition

Revenue Recognition

The Company generates the substantial majority of its revenue from contracts with customers. The Company’s major streams of revenue are:

Continuing franchise fees, which are fixed contractual fees paid monthly by regional franchise owners and franchisees based on the number of RE/MAX agents in the respective franchised region or office and the number of Motto offices.
Annual dues, which are fees charged directly to RE/MAX agents.
Broker fees, which are fees paid on real estate commissions when a RE/MAX agent assists a consumer to buy or sell a home.
Marketing Funds fees, which are fixed contractual fees paid monthly by franchisees based on the number of RE/MAX agents in the respective franchised region or office or the number of Motto offices.
Franchise sales and other franchise revenue, which consist of fees from initial sales of RE/MAX and Motto franchises, renewals of RE/MAX franchises, master franchise fees, preferred marketing arrangements, approved supplier programs and event-based revenue from training and other programs.

Annual Dues

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
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

15,982

$

24,840

$

(26,304)

$

14,518

(a)

Revenue recognized related to the beginning balance was $2.4 million and $13.7 million for the three and nine months ended September 30, 2020, respectively.

Franchise Sales

The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands):

    

Balance at
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

25,884

$

6,029

$

(7,130)

$

24,783

(a)

Revenue recognized related to the beginning balance was $2.0 million and $6.6 million for the three and nine months ended September 30, 2020, 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

Expense

Additions to contract

Balance at end

    

beginning of period

    

recognized

    

cost for new activity

    

of period

Nine Months Ended September 30, 2020

$

3,578

$

(1,076)

$

1,142

$

3,644

Disaggregated Revenue

In the following table, segment revenue is disaggregated by geographical area (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

U.S.

$

42,257

$

42,013

$

114,786

$

125,437

Canada

5,898

5,886

15,833

17,128

Global

2,797

3,182

8,609

8,725

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

U.S.

15,701

16,163

41,948

49,216

Canada

1,405

1,644

4,075

5,029

Global

184

227

554

621

Total Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising (a)

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

(a)Revenue from the Motto Franchising segment is derived exclusively within the U.S.

In the following table, segment revenue is disaggregated by Company-Owned or Independent Regions in the U.S., Canada and Global (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Company-Owned Regions

$

40,226

$

39,693

$

104,632

$

115,423

Independent Regions

8,792

8,954

25,357

25,726

Global and Other

1,934

2,434

9,239

10,141

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

Certain items in the table above have been reclassified in the three and nine months ended September 30, 2019 to conform with the current year presentation.

Transaction Price Allocated to the Remaining Performance Obligations

The following table includes estimated revenue by year, excluding certain other immaterial items, 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):

    

Remainder of 2020

    

2021

    

2022

    

2023

    

2024

    

2025

    

Thereafter

    

Total

Annual dues

$

6,500

$

8,018

$

$

$

$

$

$

14,518

Franchise sales

1,846

6,572

5,230

3,831

2,555

1,350

3,399

24,783

Total

$

8,346

$

14,590

$

5,230

$

3,831

$

2,555

$

1,350

$

3,399

$

39,301

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):

September 30, 

December 31,

    

2020

2019

Cash and cash equivalents

$

89,135

$

83,001

Restricted cash

15,635

20,600

Total cash, cash equivalents and restricted cash

$

104,770

$

103,601

Cash, Cash Equivalents and Restricted Cash

    

Remainder of 2020

    

2021

    

2022

    

2023

    

2024

    

2025

    

Thereafter

    

Total

Annual dues

$

6,500

$

8,018

$

$

$

$

$

$

14,518

Franchise sales

1,846

6,572

5,230

3,831

2,555

1,350

3,399

24,783

Total

$

8,346

$

14,590

$

5,230

$

3,831

$

2,555

$

1,350

$

3,399

$

39,301

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 primarily comprise (a) building and maintaining agent marketing technology, including customer relationship management tools, the remax.com website, agent, office and team websites, and mobile apps, (b) dedicated employees focused on marketing campaigns, and (c) various administrative services including customer support of technology, accounting and legal. Because these costs are ultimately paid by the Marketing Funds, they do not impact the net income of Holdings as the Marketing Funds have no reported net income.

Costs charged from RE/MAX Franchising to the Marketing Funds are as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Technology development - operating

$

2,721

$

1,523

$

9,414

$

3,687

Technology development - capital

104

1,420

864

3,884

Marketing staff and administrative services

988

589

3,199

2,638

Total

$

3,813

$

3,532

$

13,477

$

10,209

Leases

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. All of the Company’s material leases are classified as operating leases.

The Company acts as the lessor for four sublease agreements on its corporate headquarters, consisting solely of operating leases.

The Company has made an accounting policy election not to recognize right-of-use (“ROU”) 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.

During the third quarter of 2020, the Company began executing on a plan to both refresh its corporate headquarters and sublease space made available through the refresh. As a result, the Company changed its asset grouping for its headquarters ROU asset to separate the portion that it intends to sublease from the portion it will continue to occupy and performed an impairment test on the portion it intends to sublease. Based on a comparison of undiscounted cash flows to the ROU asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease rate on the Company’s corporate headquarters and expected sublease rates available in the market. This resulted in an impairment charge of $7.9 million, which reflects the excess of the ROU asset over its fair value.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU“) 2018-15, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for

Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in the software licensing arrangements under the internal-use software guidance. ASU 2018-15 also clarifies that any capitalized costs should not be recorded to “Depreciation and amortization” in the Consolidated Statements of Income. The Company adopted this standard effective January 1, 2020 prospectively to all new implementation costs incurred after adoption. The amendments of ASU 2018-15 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which eliminates certain disclosure requirements for fair value measurements and requires new or modified disclosures. ASU 2018-13 became effective for the Company on January 1, 2020. This new guidance was applied on a prospective basis. The amendments of ASU 2018-13 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires earlier recognition of credit losses on loans, held-to-maturity securities, and certain other financial assets. ASU 2016-13 replaces the current incurred loss model with a model requiring entities to estimate expected credit losses over the life of the financial instrument based on both historical information as well as reasonable and supportable forecasts. The FASB requires entities to use a modified retrospective transition approach, in which an adjustment is made to beginning retained earnings for the cumulative effect of adopting the standard. ASU 2016-13 became effective for the Company on January 1, 2020. The standard had an immaterial effect on the Company’s credit losses at transition and no adjustment to retained earnings was required. All periods presented for comparative purposes prior to the adoption date of this standard were not adjusted.

New Accounting Pronouncements Not Yet Adopted

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which contains temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The new guidance is effective upon issuance and may be adopted on any date on or after March 12, 2020. The relief is temporary and only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company believes the amendments of ASU 2020-04 will not have a significant impact on the Company’s consolidated financial statements and related disclosures as the Company does not currently engage in interest rate hedging of its LIBOR based debt, nor does it believe it has any material contracts tied to LIBOR other than its Senior Secured Credit Agreement, as defined in Note 8, Debt.

v3.20.2
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2020
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

Expense

Additions to contract

Balance at end

    

beginning of period

    

recognized

    

cost for new activity

    

of period

Nine Months Ended September 30, 2020

$

3,578

$

(1,076)

$

1,142

$

3,644

Schedule of disaggregated revenue

In the following table, segment revenue is disaggregated by geographical area (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

U.S.

$

42,257

$

42,013

$

114,786

$

125,437

Canada

5,898

5,886

15,833

17,128

Global

2,797

3,182

8,609

8,725

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

U.S.

15,701

16,163

41,948

49,216

Canada

1,405

1,644

4,075

5,029

Global

184

227

554

621

Total Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising (a)

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

(a)Revenue from the Motto Franchising segment is derived exclusively within the U.S.

In the following table, segment revenue is disaggregated by Company-Owned or Independent Regions in the U.S., Canada and Global (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Company-Owned Regions

$

40,226

$

39,693

$

104,632

$

115,423

Independent Regions

8,792

8,954

25,357

25,726

Global and Other

1,934

2,434

9,239

10,141

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

Marketing Funds

17,290

18,034

46,577

54,866

Motto Franchising

1,906

1,178

4,434

3,167

Other

925

1,248

3,313

4,777

Total

$

71,073

$

71,541

$

193,552

$

214,100

Schedule of transaction price allocated to the remaining performance obligations

The following table includes estimated revenue by year, excluding certain other immaterial items, 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):

    

Remainder of 2020

    

2021

    

2022

    

2023

    

2024

    

2025

    

Thereafter

    

Total

Annual dues

$

6,500

$

8,018

$

$

$

$

$

$

14,518

Franchise sales

1,846

6,572

5,230

3,831

2,555

1,350

3,399

24,783

Total

$

8,346

$

14,590

$

5,230

$

3,831

$

2,555

$

1,350

$

3,399

$

39,301

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):

September 30, 

December 31,

    

2020

2019

Cash and cash equivalents

$

89,135

$

83,001

Restricted cash

15,635

20,600

Total cash, cash equivalents and restricted cash

$

104,770

$

103,601

Schedule of cost charges to intersegment

Costs charged from RE/MAX Franchising to the Marketing Funds are as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Technology development - operating

$

2,721

$

1,523

$

9,414

$

3,687

Technology development - capital

104

1,420

864

3,884

Marketing staff and administrative services

988

589

3,199

2,638

Total

$

3,813

$

3,532

$

13,477

$

10,209

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
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

15,982

$

24,840

$

(26,304)

$

14,518

(a)

Revenue recognized related to the beginning balance was $2.4 million and $13.7 million for the three and nine months ended September 30, 2020, respectively.

Franchise sales  
Schedule of contract liability

The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands):

    

Balance at
beginning of period

    

New billings

    

Revenue recognized(a)

    

Balance at end
of period

Nine Months Ended September 30, 2020

$

25,884

$

6,029

$

(7,130)

$

24,783

(a)

Revenue recognized related to the beginning balance was $2.0 million and $6.6 million for the three and nine months ended September 30, 2020, respectively.

v3.20.2
Non-controlling Interest (Tables)
9 Months Ended
Sep. 30, 2020
Noncontrolling Interest  
Summary of Ownership of the Common Units

September 30, 2020

December 31, 2019

    

Shares

    

Ownership %

    

Shares

    

Ownership %

 

Non-controlling interest ownership of common units in RMCO

12,559,600

40.6

%  

12,559,600

41.3

%

Holdings outstanding Class A common stock (equal to Holdings common units in RMCO)

18,372,134

59.4

%  

17,838,233

58.7

%

Total common units in RMCO

30,931,734

100.0

%  

30,397,833

100.0

%

Reconciliation from Income Before Provision for Income Taxes to Net Income

Three Months Ended September 30, 

2020

2019

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

Weighted average ownership percentage of RMCO(a)

59.2

%  

40.8

%  

100.0

%  

58.7

%  

41.3

%  

100.0

%

Income before provision for income taxes(a)

$

5,142

$

3,633

$

8,775

$

12,152

$

8,565

$

20,717

Provision for income taxes(b)(c)

(1,589)

(462)

(2,051)

(2,979)

(474)

(3,453)

Net income

$

3,553

$

3,171

$

6,724

$

9,173

$

8,091

$

17,264

Nine Months Ended September 30, 

2020

2019

RE/MAX
Holdings,
Inc.

Non-controlling
interest

Total

RE/MAX
Holdings,
Inc.

Non-controlling
interest

Total

Weighted average ownership percentage of RMCO(a)

59.0

%

41.0

%

100.0

%

58.6

%

41.4

%

100.0

%

Income before provision for income taxes(a)

$

14,589

$

9,896

$

24,485

$

29,438

$

20,763

$

50,201

Provision for income taxes(b)(c)

(4,916)

(1,631)

(6,547)

(7,286)

(1,261)

(8,547)

Net income

$

9,673

$

8,265

$

17,938

$

22,152

$

19,502

$

41,654

(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 items recorded at RE/MAX Holdings.
(b)The provision for income taxes attributable to Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the flow-through income from RMCO. It also includes 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. Otherwise, because RMCO is a flow-through entity, there is no U.S. federal and state income tax provision recorded on the non-controlling interest.
Distributions Paid or Payable

Nine Months Ended

September 30, 

2020

2019

Tax and other distributions

$

2,277

$

3,547

Dividend distributions

8,289

7,913

Total distributions to non-controlling unitholders

$

10,566

$

11,460

v3.20.2
Earnings Per Share and Dividends (Tables)
9 Months Ended
Sep. 30, 2020
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 shares and per share information):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Numerator

Net income attributable to RE/MAX Holdings, Inc.

$

3,553

$

9,173

$

9,673

$

22,152

Denominator for basic net income per share of Class A common stock

Weighted average shares of Class A common stock outstanding

18,196,454

17,826,332

18,098,227

17,803,708

Denominator for diluted net income per share of Class A common stock

Weighted average shares of Class A common stock outstanding

18,196,454

17,826,332

18,098,227

17,803,708

Add dilutive effect of the following:

Restricted stock

171,597

13,826

84,629

27,234

Weighted average shares of Class A common stock outstanding, diluted

18,368,051

17,840,158

18,182,856

17,830,942

Earnings per share of Class A common stock

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic

$

0.20

$

0.51

$

0.53

$

1.24

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted

$

0.19

$

0.51

$

0.53

$

1.24

Schedule of Dividends Declared and Paid Quarterly per Share

Dividends declared and paid during each quarter ended per share on all outstanding shares of Class A common stock were as follows (in thousands, except per share information):

Nine Months Ended September 30, 

2020

2019

Quarter end declared

    

Date paid

    

Per share

    

Amount paid
to Class A
stockholders

    

Amount paid
to non-controlling
unitholders

    

Date paid

    

Per share

    

Amount paid
to Class A
stockholders

    

Amount paid
to non-controlling
unitholders

March 31

March 18, 2020

$

0.22

$

3,986

$

2,763

March 20, 2019

$

0.21

$

3,740

$

2,638

June 30

June 2, 2020

0.22

3,987

2,763

May 29, 2019

0.21

3,739

2,637

September 30

September 2, 2020

0.22

3,988

2,763

August 28, 2019

0.21

3,745

2,638

$

0.66

$

11,961

$

8,289

$

0.63

$

11,224

$

7,913

v3.20.2
Acquisitions (Tables)
9 Months Ended
Sep. 30, 2020
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

$

-

v3.20.2
Intangible Assets and Goodwill (Tables)
9 Months Ended
Sep. 30, 2020
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 September 30, 2020

As of December 31, 2019

Amortization

Initial

Accumulated

Net

Initial

Accumulated

Net

Period

Cost

Amortization

Balance

Cost

Amortization

Balance

Franchise agreements

12.5

$

180,867

$

(104,802)

$

76,065

$

180,867

$

(93,197)

$

87,670

Other intangible assets:

Software (a)

4.4

$

42,251

$

(15,952)

$

26,299

$

36,680

$

(9,653)

$

27,027

Trademarks

8.3

2,311

(1,204)

1,107

1,904

(1,037)

867

Non-compete agreements

4.4

3,920

(2,479)

1,441

3,700

(1,546)

2,154

Training materials

5.0

2,400

(1,000)

1,400

2,400

(640)

1,760

Other

3.8

1,670

(493)

1,177

800

(293)

507

Total other intangible assets

4.6

$

52,552

$

(21,128)

$

31,424

$

45,484

$

(13,169)

$

32,315

(a)As of September 30, 2020 and December 31, 2019, capitalized software development costs of $0.8 million and $10.5 million, respectively, were related to technology projects not yet complete and ready for their intended use and thus were not subject to amortization.
Schedule of estimated future amortization of intangible assets, other than goodwill

The estimated future amortization expense for the next five years related to intangible assets is as follows (in thousands):

As of September 30, 2020:

Remainder of 2020

$

7,271

2021

27,622

2022

21,004

2023

16,817

2024

14,150

Thereafter

20,625

$

107,489

Schedule of changes to goodwill

The following table presents changes to goodwill (in thousands), by segment:

RE/MAX
Franchising

Motto Franchising

    

Other

    

Total

Balance, January 1, 2020

$

147,238

$

11,800

$

$

159,038

Goodwill recognized from acquisitions

2,926

6,837

7,586

17,349

Effect of changes in foreign currency exchange rates

(85)

(85)

Balance, September 30, 2020

$

150,079

$

18,637

$

7,586

$

176,302

v3.20.2
Accrued Liabilities (Tables)
9 Months Ended
Sep. 30, 2020
Accrued Liabilities.  
Schedule of Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

September 30, 

December 31, 

2020

2019

Marketing Funds (a)

$

41,709

$

39,672

Accrued payroll and related employee costs

3,443

11,900

Accrued taxes

1,833

2,451

Accrued professional fees

1,895

2,047

Other

3,193

4,093

$

52,073

$

60,163

(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.
v3.20.2
Debt (Tables)
9 Months Ended
Sep. 30, 2020
Debt  
Schedule of debt

Debt, net of current portion, consists of the following (in thousands):

September 30, 

    

December 31, 

2020

2019

Senior Secured Credit Facility

$

225,600

$

227,363

Other long-term financing(a)

139

362

Less unamortized debt issuance costs

(957)

(1,182)

Less unamortized debt discount costs

(699)

(862)

Less current portion(a)

(2,489)

(2,648)

$

221,594

$

223,033

(a)Includes financing assumed with the acquisition of booj. As of September 30, 2020, 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 September 30, 2020

    

Remainder of 2020

$

663

2021

2,414

2022

2,350

2023

220,312

$

225,739

v3.20.2
Fair Value Measurements (Tables)
9 Months Ended
Sep. 30, 2020
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 is as follows (in thousands):

September 30, 2020

December 31, 2019

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Fair Value

    

Level 1

    

Level 2

    

Level 3

Liabilities

Contingent consideration

$

5,830

$

$

$

5,830

$

5,005

$

$

$

5,005

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 (in thousands):

Total

Balance at January 1, 2020

$

5,005

Fair value adjustments

(105)

Acquisitions - Gadberry

930

Balance at September 30, 2020

$

5,830

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 (in thousands):

    

September 30, 2020

December 31, 2019

Carrying
Amount

    

Fair Value
Level 2

    

Carrying
Amount

    

Fair Value
Level 2

Senior Secured Credit Facility

$

223,944

$

222,216

$

225,319

$

227,363

v3.20.2
Equity-Based Compensation (Tables)
9 Months Ended
Sep. 30, 2020
Employee Stock-Based Compensation Expense

Employee equity-based compensation expense, net of the amount capitalized in internally developed software, is as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Expense from time-based awards (a)

$

3,040

$

1,883

$

7,535

$

5,846

Expense from performance-based awards (a)(b)

374

(3,582)

844

(3,332)

Expense from bonus to be settled in shares (c)

687

2,505

Equity-based compensation capitalized

25

(32)

(159)

Equity-based compensation expense

$

3,414

$

(987)

$

8,347

$

4,860

(a)Includes awards granted to booj, First, wemlo and Gadberry 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. The Company granted certain performance awards to booj employees that were modified in September 2019 to extend the due date resulting in a significant reversal of expense in the third quarter of 2019. These awards substantially vested on December 31, 2019 and have no comparable amounts in 2020.
(c)In 2019, the Company revised its annual bonus plan so that a portion of the bonus for most employees would be settled in shares if the Company met certain performance metrics. The Company eliminated the 2020 corporate bonus plan as part of cost savings measures in connection with the COVID-19 pandemic.
Time-based Restricted Stock  
Restricted Stock Units

    

Shares

    

Weighted average
grant date fair
value per share

Balance, January 1, 2020

455,452

$

46.15

Granted

769,750

$

33.05

Shares vested (including tax withholding) (a)

(163,028)

$

45.58

Forfeited

(14,778)

$

37.20

Balance, September 30, 2020

1,047,396

$

36.73

(a)Pursuant to the terms of the RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan, shares withheld by the Company for the payment of the employee's tax withholding related to shares vesting are added back to the pool of shares available for future awards.
Performance-based Restricted Stock  
Restricted Stock Units

    

Shares

    

Weighted average
grant date fair
value per share

Balance, January 1, 2020

139,964

$

45.31

Granted

205,188

$

28.34

Shares vested (including tax withholding) (a)

(6,331)

$

38.49

Forfeited

(8,629)

$

39.77

Balance, September 30, 2020

330,192

$

35.04

(a)Represents the total participant target award.
v3.20.2
Segment Information (Tables)
9 Months Ended
Sep. 30, 2020
Segment Information  
Schedule of Revenue from External Customers By Segment The following table presents revenue from external customers by segment (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Continuing franchise fees (a)

$

22,799

$

24,096

$

61,471

$

72,191

Annual dues

8,638

8,835

26,304

26,508

Broker fees

15,457

13,292

35,327

35,339

Franchise sales and other revenue

4,058

4,858

16,126

17,252

Total RE/MAX Franchising

50,952

51,081

139,228

151,290

Continuing franchise fees

1,540

1,072

3,749

2,827

Franchise sales and other revenue

366

106

685

340

Total Motto Franchising

1,906

1,178

4,434

3,167

Marketing Funds fees (a)

17,290

18,034

46,577

54,866

Other

925

1,248

3,313

4,777

Total revenue

$

71,073

$

71,541

$

193,552

$

214,100

(a)For the Nine Months ended September 30, 2020, Continuing franchise fees and Marketing Funds fees declined primarily due to the temporary COVID-19 related financial support programs offered to franchisees.
Schedule of Revenue and Adjusted EBITDA of the Company's Reportable Segment

The following table presents a reconciliation of Adjusted EBITDA by segment to income before provision for income taxes (in thousands):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2020

2019

2020

2019

Adjusted EBITDA: RE/MAX Franchising

$

30,959

$

29,134

$

71,008

$

83,299

Adjusted EBITDA: Motto Franchising

(176)

(652)

(1,495)

(2,112)

Adjusted EBITDA: Other

(448)

(324)

(730)

(157)

Adjusted EBITDA: Consolidated

30,335

28,158

68,783

81,030

Gain (loss) on sale or disposition of assets

11

10

33

(353)

Impairment charge - leased assets (a)

(7,902)

(7,902)

Equity-based compensation expense

(3,414)

987

(8,347)

(4,860)

Acquisition-related expense (b)

(1,021)

(181)

(1,915)

(268)

Fair value adjustments to contingent consideration (c)

(250)

15

105

(330)

Interest income

25

412

328

1,074

Interest expense

(2,159)

(3,089)

(7,028)

(9,398)

Depreciation and amortization

(6,850)

(5,595)

(19,572)

(16,694)

Income before provision for income taxes

$

8,775

$

20,717

$

24,485

$

50,201

(a)Represents the impairment recognized on a portion of the Company’s corporate headquarters office building. See Note 2, Summary of Significant Accounting Policies for additional information.
(b)Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.
(c)Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 9, Fair Value Measurements for additional information.
v3.20.2
Business and Organization (Details)
9 Months Ended
Sep. 30, 2020
country
Office
item
Minimum  
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]  
Number of agents | item 130,000
Number of offices | Office 8,000
Number of countries in which entity operates | country 110
REMAX  
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]  
Percentage of Company consisting of franchises 100.00%
v3.20.2
Summary of Significant Accounting Policies - Schedule of Deferred Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2020
Annual dues    
Disaggregation of Revenue [Line Items]    
Balance at beginning of period   $ 15,982
New billings   24,840
Revenue recognized   (26,304)
Balance at the end of period $ 14,518 14,518
Revenue recognized 2,400 13,700
Franchise sales    
Disaggregation of Revenue [Line Items]    
Balance at beginning of period   25,884
New billings   6,029
Revenue recognized   (7,130)
Balance at the end of period 24,783 24,783
Revenue recognized $ 2,000 $ 6,600
v3.20.2
Summary of Significant Accounting Policies - Commissions Related to Franchise Sales (Details) - Commissions Related to Franchise Sales
$ in Thousands
9 Months Ended
Sep. 30, 2020
USD ($)
Capitalized Contract Cost [Line Items]  
Balance at beginning of period $ 3,578
Expense recognized 1,076
Additions to contract cost for new activity 1,142
Balance at end of period $ 3,644
v3.20.2
Summary of Significant Accounting Policies - Disaggregated revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Disaggregation of Revenue [Line Items]        
Total revenue $ 71,073 $ 71,541 $ 193,552 $ 214,100
Company -owned Regions        
Disaggregation of Revenue [Line Items]        
Total revenue 40,226 39,693 104,632 115,423
Independent Regions        
Disaggregation of Revenue [Line Items]        
Total revenue 8,792 8,954 25,357 25,726
Global and Other        
Disaggregation of Revenue [Line Items]        
Total revenue 1,934 2,434 9,239 10,141
RE/MAX Franchising        
Disaggregation of Revenue [Line Items]        
Total revenue 50,952 51,081 139,228 151,290
Total Marketing Funds        
Disaggregation of Revenue [Line Items]        
Total revenue 17,290 18,034 46,577 54,866
Motto Franchising        
Disaggregation of Revenue [Line Items]        
Total revenue 1,906 1,178 4,434 3,167
Other        
Disaggregation of Revenue [Line Items]        
Total revenue 925 1,248 3,313 4,777
U.S. | RE/MAX Franchising        
Disaggregation of Revenue [Line Items]        
Total revenue 42,257 42,013 114,786 125,437
U.S. | Total Marketing Funds        
Disaggregation of Revenue [Line Items]        
Total revenue 15,701 16,163 41,948 49,216
Canada | RE/MAX Franchising        
Disaggregation of Revenue [Line Items]        
Total revenue 5,898 5,886 15,833 17,128
Canada | Total Marketing Funds        
Disaggregation of Revenue [Line Items]        
Total revenue 1,405 1,644 4,075 5,029
Global | RE/MAX Franchising        
Disaggregation of Revenue [Line Items]        
Total revenue 2,797 3,182 8,609 8,725
Global | Total Marketing Funds        
Disaggregation of Revenue [Line Items]        
Total revenue $ 184 $ 227 $ 554 $ 621
v3.20.2
Summary of Significant Accounting Policies - Transaction Price (Details)
$ in Thousands
Sep. 30, 2020
USD ($)
Annual Dues And Franchise Sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 39,301
Annual dues  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue 14,518
Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue 24,783
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01 | Annual Dues And Franchise Sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 8,346
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01 | Annual dues  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 6,500
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01 | Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 1,846
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 3 months
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 $ 14,590
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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 $ 8,018
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 6,572
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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 $ 5,230
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 5,230
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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 $ 3,831
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 3,831
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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 $ 2,555
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 2,555
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 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 $ 1,350
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 1 year
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
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 1,350
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | Annual Dues And Franchise Sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 3,399
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | Annual dues  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | Franchise sales  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation revenue $ 3,399
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1
v3.20.2
Summary of Significant Accounting Policies - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Sep. 30, 2019
Dec. 31, 2018
Cash, Cash Equivalents and Restricted Cash        
Cash and cash equivalents $ 89,135 $ 83,001    
Restricted cash 15,635 20,600    
Total cash, cash equivalents and restricted cash 104,770 103,601 $ 106,881 $ 59,974
Marketing funds        
Cash, Cash Equivalents and Restricted Cash        
Cash and cash equivalents 89,135 83,001    
Restricted cash 15,635 20,600    
Total cash, cash equivalents and restricted cash $ 104,770 $ 103,601    
v3.20.2
Summary of Significant Accounting Policies - Services Provided to Marketing Funds by RE/MAX Franchising (Details) - Marketing funds - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Cost charges $ 3,813 $ 3,532 $ 13,477 $ 10,209
Technology development - operating        
Cost charges 2,721 1,523 9,414 3,687
Technology development - capital        
Cost charges 104 1,420 864 3,884
Marketing staff and administrative services        
Cost charges $ 988 $ 589 $ 3,199 $ 2,638
v3.20.2
Summary of Significant Accounting Policies - Leases (Details)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
lease
Sep. 30, 2019
USD ($)
Sep. 30, 2020
USD ($)
lease
Sep. 30, 2019
USD ($)
Leases        
Number of franchisees' leases recognized by the Company 0   0  
Number of sublease agreements     4  
Impairment charge - leased assets | $ $ 7,902 $ 0 $ 7,902 $ 0
v3.20.2
Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements (Details)
$ in Thousands
Jan. 01, 2020
USD ($)
Restatement Adjustment | ASU 2016-13  
New Accounting Pronouncements or Change in Accounting Principle [Line Items]  
Cumulative effect adjustment from change in accounting principle $ 0
v3.20.2
Non-controlling Interest - Ownership of common units in RMCO (Details) - RMCO, LLC - shares
Sep. 30, 2020
Dec. 31, 2019
Shares    
Non-controlling interest ownership of common units in RMCO 12,559,600 12,559,600
Holdings outstanding Class A common stock (equal to Holdings common units in RMCO) 18,372,134 17,838,233
Total number of common stock units in RMCO 30,931,734 30,397,833
Ownership Percentage    
Non-controlling interest ownership of common units in RMCO as a percentage 40.60% 41.30%
Holdings outstanding Class A common stock (equal to Holdings common units in RMCO) 59.40% 58.70%
Total percentage of common stock units 100.00% 100.00%
v3.20.2
Non-controlling Interest - Net income reconciliation (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Minority Interest [Line Items]                
Weighted average ownership percentage of noncontrolling interest 40.80%     41.30%     41.00% 41.40%
Total (as a percentage) 100.00%     100.00%     100.00% 100.00%
Income before provision for income taxes: Non-controlling interest $ 3,633     $ 8,565     $ 9,896 $ 20,763
Income before provision for income taxes 8,775     20,717     24,485 50,201
Provision for income taxes: Non-controlling interest (462)     (474)     (1,631) (1,261)
Provision for income taxes (2,051)     (3,453)     (6,547) (8,547)
Net income attributable to RE/MAX Holdings, Inc. 3,553     9,173     9,673 22,152
Net income: Non-controlling interest 3,171     8,091     8,265 19,502
Net income $ 6,724 $ 5,924 $ 5,290 $ 17,264 $ 16,133 $ 8,257 $ 17,938 $ 41,654
RMCO, LLC                
Minority Interest [Line Items]                
Weighted average ownership percentage of controlling interest 59.20%     58.70%     59.00% 58.60%
Income before provision for income taxes attributable to RE/MAX Holdings, Inc. $ 5,142     $ 12,152     $ 14,589 $ 29,438
Provision for income taxes attributable to RE/MAX Holdings, Inc. (1,589)     (2,979)     (4,916) (7,286)
Net income attributable to RE/MAX Holdings, Inc. $ 3,553     $ 9,173     $ 9,673 $ 22,152
v3.20.2
Non-controlling Interest - Distributions Paid or Payable (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Dividends Payable [Line Items]    
Distributions paid or payable to or on behalf of non-controlling unitholders $ 10,566 $ 11,460
Tax and other distributions    
Dividends Payable [Line Items]    
Distributions paid or payable to or on behalf of non-controlling unitholders 2,277 3,547
Dividend distributions    
Dividends Payable [Line Items]    
Distributions paid or payable to or on behalf of non-controlling unitholders $ 8,289 $ 7,913
v3.20.2
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 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Numerator        
Net income attributable to RE/MAX Holdings, Inc. $ 3,553 $ 9,173 $ 9,673 $ 22,152
Earnings per share of Class A common stock        
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic $ 0.20 $ 0.51 $ 0.53 $ 1.24
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted $ 0.19 $ 0.51 $ 0.53 $ 1.24
RMCO, LLC        
Numerator        
Net income attributable to RE/MAX Holdings, Inc. $ 3,553 $ 9,173 $ 9,673 $ 22,152
Common Class A        
Denominator for basic net income per share of Class A common stock        
Weighted average shares of Class A common stock outstanding 18,196,454 17,826,332 18,098,227 17,803,708
Denominator for diluted net income per share of Class A common stock        
Weighted average shares of Class A common stock outstanding 18,196,454 17,826,332 18,098,227 17,803,708
Add dilutive effect of the following:        
Weighted average shares of Class A common stock outstanding, diluted 18,368,051 17,840,158 18,182,856 17,830,942
Earnings per share of Class A common stock        
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic $ 0.20 $ 0.51 $ 0.53 $ 1.24
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted $ 0.19 $ 0.51 $ 0.53 $ 1.24
Restricted stock        
Add dilutive effect of the following:        
Restricted stock 171,597 13,826 84,629 27,234
v3.20.2
Earnings Per Share and Dividends - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Nov. 04, 2020
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Dividends Payable [Line Items]                  
Dividends to Class A common stockholders   $ 3,988 $ 3,987 $ 3,986 $ 3,745 $ 3,739 $ 3,740    
Common Class A                  
Dividends Payable [Line Items]                  
Cash dividends declared per share of Class A common stock   $ 0.22     $ 0.21     $ 0.66 $ 0.63
Quarterly dividend                  
Dividends Payable [Line Items]                  
Dividend to non-controlling unitholders   $ 2,763 $ 2,763 $ 2,763 $ 2,638 $ 2,637 $ 2,638 $ 8,289 $ 7,913
Quarterly dividend | Common Class A                  
Dividends Payable [Line Items]                  
Cash dividends declared per share of Class A common stock   $ 0.22 $ 0.22 $ 0.22 $ 0.21 $ 0.21 $ 0.21 $ 0.66 $ 0.63
Dividends to Class A common stockholders   $ 3,988 $ 3,987 $ 3,986 $ 3,745 $ 3,739 $ 3,740 $ 11,961 $ 11,224
Quarterly dividend | Common Class A | Subsequent Event                  
Dividends Payable [Line Items]                  
Cash dividends declared per share of Class A common stock $ 0.22                
v3.20.2
Acquisitions (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 10, 2020
Aug. 25, 2020
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Jan. 01, 2019
Business Acquisition [Line Items]            
Cash consideration     $ 10,627 $ 0    
Goodwill     $ 176,302   $ 159,038  
Gadberry            
Business Acquisition [Line Items]            
Cash consideration $ 4,600          
Maximum amount of equity based compensation to be earned over time 9,900          
Contingent consideration liability $ 900          
Gadberry | Minimum            
Business Acquisition [Line Items]            
Period over which equity based compensation will be accounted for into the future (in years) 2 years          
Gadberry | Maximum            
Business Acquisition [Line Items]            
Period over which equity based compensation will be accounted for into the future (in years) 3 years          
Gadberry | Common Class A            
Business Acquisition [Line Items]            
Consideration transferred $ 5,500          
Wemlo            
Business Acquisition [Line Items]            
Cash consideration   $ 6,100        
Maximum amount of equity based compensation to be earned over time   $ 6,700        
Period over which equity based compensation will be accounted for into the future (in years)   3 years        
Goodwill   $ 14,400        
Other intangible assets   6,300        
Wemlo | Common Class A            
Business Acquisition [Line Items]            
Consideration transferred   $ 3,300        
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
v3.20.2
Intangible Assets and Goodwill - Components of Company's Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Finite Lived Intangible Assets [Line Items]          
Net Balance $ 76,065   $ 76,065   $ 87,670
Amortization expense 6,400 $ 5,200 18,300 $ 15,500  
Franchise agreements          
Finite Lived Intangible Assets [Line Items]          
Initial Cost 180,867   180,867   180,867
Accumulated Amortization (104,802)   (104,802)   (93,197)
Net Balance 76,065   $ 76,065   87,670
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 52,552   $ 52,552   45,484
Accumulated Amortization (21,128)   (21,128)   (13,169)
Net Balance 31,424   $ 31,424   32,315
Other intangible assets | Weighted Average          
Finite Lived Intangible Assets [Line Items]          
Useful life of intangible assets     4 years 7 months 6 days    
Software          
Finite Lived Intangible Assets [Line Items]          
Initial Cost 42,251   $ 42,251   36,680
Accumulated Amortization (15,952)   (15,952)   (9,653)
Net Balance 26,299   $ 26,299   27,027
Software | Weighted Average          
Finite Lived Intangible Assets [Line Items]          
Useful life of intangible assets     4 years 4 months 24 days    
Trademarks          
Finite Lived Intangible Assets [Line Items]          
Initial Cost 2,311   $ 2,311   1,904
Accumulated Amortization (1,204)   (1,204)   (1,037)
Net Balance 1,107   $ 1,107   867
Trademarks | Weighted Average          
Finite Lived Intangible Assets [Line Items]          
Useful life of intangible assets     8 years 3 months 18 days    
Software Development          
Finite Lived Intangible Assets [Line Items]          
Capitalized software development costs 800   $ 800   10,500
Non-compete agreements          
Finite Lived Intangible Assets [Line Items]          
Initial Cost 3,920   3,920   3,700
Accumulated Amortization (2,479)   (2,479)   (1,546)
Net Balance 1,441   $ 1,441   2,154
Non-compete agreements | Weighted Average          
Finite Lived Intangible Assets [Line Items]          
Useful life of intangible assets     4 years 4 months 24 days    
Training materials          
Finite Lived Intangible Assets [Line Items]          
Initial Cost 2,400   $ 2,400   2,400
Accumulated Amortization (1,000)   (1,000)   (640)
Net Balance 1,400   $ 1,400   1,760
Training materials | Weighted Average          
Finite Lived Intangible Assets [Line Items]          
Useful life of intangible assets     5 years    
Other          
Finite Lived Intangible Assets [Line Items]          
Initial Cost 1,670   $ 1,670   800
Accumulated Amortization (493)   (493)   (293)
Net Balance $ 1,177   $ 1,177   $ 507
Other | Weighted Average          
Finite Lived Intangible Assets [Line Items]          
Useful life of intangible assets     3 years 9 months 18 days    
v3.20.2
Intangible Assets and Goodwill - Estimated Future Amortization of Intangible Assets, Other Than Goodwill (Details)
$ in Thousands
Sep. 30, 2020
USD ($)
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]  
Remainder of 2020 $ 7,271
2021 27,622
2022 21,004
2023 16,817
2024 14,150
Thereafter 20,625
Estimated future amortization expense over next five years $ 107,489
v3.20.2
Intangible Assets and Goodwill - Schedule of Changes in Goodwill (Details)
$ in Thousands
9 Months Ended
Sep. 30, 2020
USD ($)
Changes to goodwill  
Beginning Balance $ 159,038
Goodwill recognized from acquisitions 17,349
Effect of changes in foreign currency exchange rates (85)
Ending Balance 176,302
RE/MAX Franchising  
Changes to goodwill  
Beginning Balance 147,238
Goodwill recognized from acquisitions 2,926
Effect of changes in foreign currency exchange rates (85)
Ending Balance 150,079
Motto Franchising  
Changes to goodwill  
Beginning Balance 11,800
Goodwill recognized from acquisitions 6,837
Effect of changes in foreign currency exchange rates 0
Ending Balance 18,637
Other  
Changes to goodwill  
Beginning Balance 0
Goodwill recognized from acquisitions 7,586
Effect of changes in foreign currency exchange rates 0
Ending Balance $ 7,586
v3.20.2
Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Accrued Liabilities.    
Marketing Funds $ 41,709 $ 39,672
Accrued payroll and related employee costs 3,443 11,900
Accrued taxes 1,833 2,451
Accrued professional fees 1,895 2,047
Other 3,193 4,093
Accrued liabilities $ 52,073 $ 60,163
v3.20.2
Debt - Schedule of Debt (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Senior Secured Credit Facility $ 225,739  
Other long-term financing 139 $ 362
Less unamortized debt issuance costs (957) (1,182)
Less unamortized debt discount costs (699) (862)
Less current portion (2,489) (2,648)
Debt, net of current portion 221,594 223,033
Senior Secured Credit Facility    
Debt Instrument [Line Items]    
Senior Secured Credit Facility $ 225,600 $ 227,363
v3.20.2
Debt - Schedule of Maturities of Debt (Details)
$ in Thousands
Sep. 30, 2020
USD ($)
Debt  
Remainder of 2020 $ 663
2021 2,414
2022 2,350
2023 220,312
Long term debt $ 225,739
v3.20.2
Debt - Additional Information (Details) - USD ($)
$ in Millions
Sep. 30, 2020
Dec. 31, 2016
Term loan    
Debt Instrument [Line Items]    
Debt instrument, interest rate 3.50%  
Term loan | Senior Secured Credit Facility    
Debt Instrument [Line Items]    
Notes Payable to Bank   $ 235.0
Revolving loan facility    
Debt Instrument [Line Items]    
Amounts drawn on line of credit $ 0.0  
Revolving loan facility | Senior Secured Credit Facility    
Debt Instrument [Line Items]    
Credit facility, borrowing capacity   $ 10.0
v3.20.2
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details)
$ in Thousands
9 Months Ended
Sep. 30, 2020
USD ($)
item
Sep. 10, 2020
USD ($)
Dec. 31, 2019
USD ($)
Measured on a recurring basis      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Contingent consideration liability $ 5,830   $ 5,005
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 $ 5,830   $ 5,005
Gadberry      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Contingent consideration liability   $ 900  
Minimum      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Assumed number of franchises sold annually | item 60    
Maximum      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Assumed number of franchises sold annually | item 80    
Weighted Average      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Assumed number of franchises sold annually | item 75    
Gross Receipts 8 Percent [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Percentage of gross revenues to be paid yearly 8.00%    
Franchise Sale Reduction, Percentage 10    
Change in discount rate 1.00%    
Business Combination, Contingent Consideration, Liability, Measurement Input [Extensible List] us-gapp:MeasurementInputDiscountRateMember    
Business Combination, Contingent Consideration, Liability, Measurement Input 15    
Gross Receipts 8 Percent [Member] | Ten Percent Reduction In Franchise Sales [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Deferred revenue, current and noncurrent $ 200    
Gross Receipts 8 Percent [Member] | One Percent Change To Discount Rate [Member]      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Deferred revenue, current and noncurrent $ 100    
v3.20.2
Fair Value Measurements - Reconciliation of Assets and Liabilities Measured Using Significant Unobservable Inputs (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Sep. 10, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Fair value adjustment $ 250 $ (15) $ (105) $ 330  
Measured on a recurring basis          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Balance at Beginning     5,005    
Contingent consideration liability 5,830   5,005    
Balance at Ending 5,830   5,830    
Gadberry          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Contingent consideration liability         $ 900
Level 3 | Measured on a recurring basis          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Balance at Beginning     5,005    
Fair value adjustment     (105)    
Contingent consideration liability 5,830   5,005    
Balance at Ending $ 5,830   5,830    
Level 3 | Gadberry | Measured on a recurring basis          
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]          
Fair value adjustment     $ 930    
v3.20.2
Fair Value Measurements - Schedule of Senior Secured Credit Facility (Details) - Senior Secured Credit Facility - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Carrying amounts    
Debt Instrument [Line Items]    
Long term debt, carrying amount $ 223,944 $ 225,319
Level 2 | Estimated fair value    
Debt Instrument [Line Items]    
Long term debt, fair value $ 222,216 $ 227,363
v3.20.2
Equity-Based Compensation (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Employee stock-based compensation expense        
Equity-based compensation capitalized $ 0 $ 25 $ (32) $ (159)
Equity-based compensation expense 3,414 (987) 8,347 4,860
Time-based Restricted Stock        
Employee stock-based compensation expense        
Equity-based compensation expense $ 3,040 1,883 $ 7,535 5,846
Restricted Stock Units        
Nonvested at beginning of period     455,452  
Granted     769,750  
Shares vested (including tax withholding)     (163,028)  
Forfeited     (14,778)  
Nonvested at end of period 1,047,396   1,047,396  
Nonvested at beginning of period, Weighted average grant date fair value per share     $ 46.15  
Granted, Weighted average grant date fair value per share     33.05  
Shares vested (including tax withholding) , Weighted average grant date fair value per share     45.58  
Forfeited, Weighted average grant date fair value per share     37.20  
Nonvested at end of period, Weighted average grant date fair value per share $ 36.73   $ 36.73  
Unrecognized compensation cost $ 30,000   $ 30,000  
Period for recognition of RSU compensation expense     2 years 2 months 12 days  
Performance-based Restricted Stock        
Employee stock-based compensation expense        
Equity-based compensation expense $ 374 (3,582) $ 844 (3,332)
Restricted Stock Units        
Nonvested at beginning of period     139,964  
Granted     205,188  
Shares vested (including tax withholding)     (6,331)  
Forfeited     (8,629)  
Nonvested at end of period 330,192   330,192  
Nonvested at beginning of period, Weighted average grant date fair value per share     $ 45.31  
Granted, Weighted average grant date fair value per share     28.34  
Shares vested (including tax withholding) , Weighted average grant date fair value per share     38.49  
Forfeited, Weighted average grant date fair value per share     39.77  
Nonvested at end of period, Weighted average grant date fair value per share $ 35.04   $ 35.04  
Unrecognized compensation cost $ 2,900   $ 2,900  
Period for recognition of RSU compensation expense     2 years  
Bonus settled in shares        
Employee stock-based compensation expense        
Equity-based compensation expense $ 0 $ 687 $ 0 $ 2,505
v3.20.2
Segment Information (Details)
9 Months Ended
Sep. 30, 2020
segment
Segment Information  
Number of Operating Segments 4
v3.20.2
Segment Information - Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Segment Reporting Information        
Total revenue $ 71,073 $ 71,541 $ 193,552 $ 214,100
Other        
Segment Reporting Information        
Total revenue 925 1,248 3,313 4,777
Operating Segments | RE/MAX Franchising        
Segment Reporting Information        
Total revenue 50,952 51,081 139,228 151,290
Operating Segments | Motto Franchising        
Segment Reporting Information        
Total revenue 1,906 1,178 4,434 3,167
Operating Segments | Marketing Funds fees        
Segment Reporting Information        
Total revenue 17,290 18,034 46,577 54,866
Operating Segments | Other        
Segment Reporting Information        
Total revenue 925 1,248 3,313 4,777
Continuing franchise fees        
Segment Reporting Information        
Total revenue 24,339 25,168 65,220 75,018
Continuing franchise fees | Operating Segments | RE/MAX Franchising        
Segment Reporting Information        
Total revenue 22,799 24,096 61,471 72,191
Continuing franchise fees | Operating Segments | Motto Franchising        
Segment Reporting Information        
Total revenue 1,540 1,072 3,749 2,827
Annual dues        
Segment Reporting Information        
Total revenue 8,638 8,835 26,304 26,508
Annual dues | Operating Segments | RE/MAX Franchising        
Segment Reporting Information        
Total revenue 8,638 8,835 26,304 26,508
Broker fees        
Segment Reporting Information        
Total revenue 15,457 13,292 35,327 35,339
Broker fees | Operating Segments | RE/MAX Franchising        
Segment Reporting Information        
Total revenue 15,457 13,292 35,327 35,339
Franchise sales and other revenue        
Segment Reporting Information        
Total revenue 5,349 6,212 20,124 22,369
Franchise sales and other revenue | Operating Segments | RE/MAX Franchising        
Segment Reporting Information        
Total revenue 4,058 4,858 16,126 17,252
Franchise sales and other revenue | Operating Segments | Motto Franchising        
Segment Reporting Information        
Total revenue $ 366 $ 106 $ 685 $ 340
v3.20.2
Segment Information - Reconciliation (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated        
Adjusted EBITDA $ 30,335 $ 28,158 $ 68,783 $ 81,030
Gain (loss) on sale or disposition of assets 11 10 33 (353)
Impairment charge - leased assets (7,902) 0 (7,902) 0
Equity-based compensation expense (3,414) 987 (8,347) (4,860)
Acquisition-related expense (1,021) (181) (1,915) (268)
Fair value adjustments to contingent consideration (250) 15 105 (330)
Interest income 25 412 328 1,074
Interest expense (2,159) (3,089) (7,028) (9,398)
Depreciation and amortization (6,850) (5,595) (19,572) (16,694)
Income before provision for income taxes 8,775 20,717 24,485 50,201
RE/MAX Franchising        
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated        
Adjusted EBITDA 30,959 29,134 71,008 83,299
Motto Franchising        
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated        
Adjusted EBITDA (176) (652) (1,495) (2,112)
Other        
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated        
Adjusted EBITDA $ (448) $ (324) $ (730) $ (157)