UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 1, 2019
 
RE/MAX Holdings, Inc. 
(Exact name of registrant as specified in its charter)
 
Delaware	001-36101	80-0937145	
(State or other jurisdiction of
incorporation or organization)	(Commission
File Number)	(IRS Employer
Identification No.)	
 
5075 South Syracuse Street
Denver, Colorado 80237
(Address of principal executive offices, including Zip code)
 
(303) 770-5531
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class	 	Trading Symbol(s)	 	Name of Each Exchange on Which Registered	
Class A Common Stock
$0.0001 par value per share	 	RMAX	 	New York Stock Exchange	
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
	¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
	¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
	¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
	¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth 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. ¨

 

Item 2.02. Results of Operations and Financial Conditions. *
 
On August 1, 2019, RE/MAX Holdings, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2019. The full text of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
 
Item 9.01. Financial Statements and Exhibits. *
 
Exhibit No.	Description	
99.1	Press Release issued on August 1, 2019 by RE/MAX Holdings, Inc.	
 
 * The information contained in Items 2.02 and 9.01 of this Current Report on Form 8-K is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be set forth by specific reference in such filing.

 
 
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 hereunto duly authorized.
 
 	RE/MAX HOLDINGS, INC.	
 	 	 	
Date: August 1, 2019	By:	/s/ Karri Callahan	 	
 	 	Karri Callahan	
 	 	Chief Financial Officer	

 

RE/MAX Holdings Reports Second Quarter 2019 Results
DENVER, Aug. 1, 2019 /PRNewswire/ --
Second Quarter 2019 Highlights
 (Compared to second quarter 2018 unless otherwise noted)
·	Total agent count increased 3.2% to 127,020 agents
·	U.S. and Canada combined agent count decreased 2.0% to 84,133 agents
·	Total open Motto Mortgage franchises increased to 98 offices
·	Revenue of $71.4 million; excluding Marketing Funds revenue, decreased 1.8% to $53.3 million
·	Net income attributable to RE/MAX Holdings, Inc. of $8.6 million and earnings per diluted share (GAAP EPS) of $0.48 
·	Adjusted EBITDA 1 of $29.9 million, Adjusted EBITDA margin 1 of 41.9% and Adjusted earnings per diluted share (Adjusted EPS 1 ) of $0.65
RE/MAX Holdings, Inc. (the "Company" or "RE/MAX Holdings") (NYSE: RMAX), parent company of RE/MAX, one of the world's leading franchisors of real estate brokerage services, and Motto Mortgage ("Motto"), an innovative mortgage brokerage franchise, today announced operating results for the quarter ended June 30, 2019.
"Continued Motto Mortgage expansion and healthy international RE/MAX growth helped offset lower revenue in the second quarter driven by ongoing uneven housing market conditions in the U.S. and Canada," stated Adam Contos, RE/MAX Holdings Chief Executive Officer. "Against this backdrop, we continue to leverage the strength of our business model to deliver profitable growth by prudently managing our cost structure while making the necessary strategic investments in our network, our value proposition and future growth opportunities."
Contos continued, "As we move through the second half of 2019, we remain cautiously optimistic that the U.S. housing market will show signs of improvement. Given lower interest rates, solid demand, and increasing inventory, the ingredients are there to spur increased home sales, but supply and affordability remain overhangs. However, to date the subdued market has persisted longer than we expected, and combined with the competitive environment, has impacted our overall U.S. agent count results and led us to adjust our performance expectations for the full year 2019. Looking ahead, we're very excited about the imminent launch and staged rollout of the next generation of RE/MAX technology. The release of the booj platform is truly a landmark event in the rich history of RE/MAX and one we believe will further extend our leadership position in providing highly productive agents with the very best tools, technology and training to make their businesses even more successful."
Second Quarter 2019 Operating Results
Agent Count
The following table compares agent count as of June 30, 2019 and 2018:

					As of June 30		Change	
					2019		2018		#		%	
U.S.	62,700		64,495		(1,795)		(2.8)	
Canada	21,433		21,366		67		0.3	
Subtotal	84,133		85,861		(1,728)		(2.0)	
Outside the U.S. & Canada	42,887		37,221		5,666		15.2	
Total	127,020		123,082		3,938		3.2	
Revenue
RE/MAX Holdings generated total revenue of $71.4 million in the second quarter of 2019, an increase of $17.1 million or 31.5% compared to $54.3 million in the second quarter of 2018. Revenue increased primarily due to the January 1, 2019 acquisition of the Marketing Funds. Recurring revenue streams, which consist of continuing franchise fees and annual dues, were almost even compared to the second quarter of 2018 and accounted for 63.2% of revenue in the second quarter of 2019, excluding the Marketing Funds, compared to 63.0% in the comparable period in 2018.
Operating Expenses
Total operating expenses were $49.3 million for the second quarter of 2019. Excluding operating expenses from the Marketing Funds, second quarter 2019 operating expenses totaled $31.3 million, a decrease of $2.1 million or 6.3% compared to $33.4 million in the second quarter of 2018. Expenses decreased primarily due to lower selling, operating and administrative expenses partially offset by higher depreciation and amortization expenses.
Selling, operating and administrative expenses were $25.7 million in the second quarter of 2019, a decrease of $2.6 million or 9.1% compared to the second quarter of 2018 and represented 48.2% of revenue excluding the Marketing Funds compared to 52.2% in the prior-year period. Selling, operating and administrative expenses decreased primarily due to changes in equity-based compensation expense, lower legal expenses, partially offset by increases in property taxes and bad debt expense.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $8.6 million for the second quarter of 2019, an increase of $0.9 million over the second quarter of 2018. Reported basic and diluted GAAP EPS were $0.48 for the second quarter of 2019 compared to $0.43 in the second quarter of 2018.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $29.9 million for the second quarter of 2019, an increase of $1.1 million or 4.0% from the second quarter of 2018. Adjusted EBITDA increased primarily due to lower selling, operating and administrative expenses and the expansion of Motto, partially offset by lower organic revenue growth. Adjusted EBITDA margin was 41.9% in the second quarter of 2019 compared to 53.0% in the second quarter of 2018 and decreased primarily due to the acquisition of the Marketing Funds.
Adjusted basic and diluted EPS were each $0.65 for the second quarter of 2019, an increase of $0.03 per share compared to the second quarter of 2018. The ownership structure used to calculate Adjusted basic and diluted EPS for the quarter ended June 30, 2019 assumes RE/MAX Holdings owned 100% of RMCO, LLC ("RMCO"). The weighted average ownership RE/MAX Holdings had in RMCO was 58.6% for the quarter ended June 30, 2019.
Balance Sheet
As of June 30, 2019, the Company had cash and cash equivalents of $72.5 million. The Company's cash and cash equivalents increased $12.5 million from December 31, 2018. As of June 30, 2019, the Company had $226.7 million of outstanding debt, net of an unamortized debt discount and issuance costs, a decrease of $1.1 million compared to $227.8 million as of December 31, 2018.
Dividend
On July 31, 2019, the Company's Board of Directors approved a quarterly cash dividend of $0.21 per share. The quarterly dividend is payable on August 28, 2019, to shareholders of record at the close of business on August 14, 2019.
Outlook
The Company's third quarter and full-year 2019 Outlook assumes no further currency movements, acquisitions or divestitures.
For the third quarter of 2019, RE/MAX Holdings expects:
·	Agent count to increase 2.25% to 3.25% over third quarter 2018;
·	Revenue in a range of $69.0 million to $72.0 million (including revenue from the Marketing Funds in a range of $17.0 million to $18.0 million); and
·	Adjusted EBITDA in a range of $25.5 million to $27.5 million.
For the full-year 2019, RE/MAX Holdings is adjusting its guidance and now expects:
·	Agent count to increase 2.0% to 4.0% over full-year 2018;
·	Revenue in a range of $279.5 million to $283.5 million (including revenue from the Marketing Funds in a range of $71.5 million to $73.5 million), down from $287.0 million to $291.0 million (including revenue from the Marketing Funds in a range of $72.5 million to $74.5 million); and
·	Adjusted EBITDA in a range of $101.0 million to $104.0 million, down from $104.5 million to $107.5 million.
The effective U.S. GAAP tax rate attributable to RE/MAX Holdings is estimated to be between 17% and 19% in 2019.
Webcast and Conference Call
The Company will host a conference call for interested parties on Friday, August 2, 2019, beginning at 8:30 a.m. Eastern Time. Interested parties can access the conference call using the following dial-in numbers:

U.S.	1-833-287-0798	
Canada & International	1-647-689-4457	
Interested parties can access a live webcast through the Investor Relations section of the Company's website at investors.remax.com. Please dial-in or join the webcast 10 minutes before the start of the conference call. An archive of the webcast will be available on the Company's website for a limited time as well.
Basis of Presentation
Unless otherwise noted, the results presented in this press release are consolidated and exclude adjustments attributable to the non-controlling interest.
Footnote:
1 Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS are non-GAAP measures. These terms are defined at the end of this release. Please see Tables 5 and 6 appearing later in this release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.
About RE/MAX Holdings, Inc.
RE/MAX Holdings, Inc. (NYSE: RMAX) is one of the world's leading franchisors in the real estate industry, franchising real estate brokerages globally under the RE/MAX ® brand, and mortgage brokerages within the U.S. under the Motto ® Mortgage brand. RE/MAX was founded in 1973 by David and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. Now with more than 125,000 agents across over 110 countries and territories, nobody in the world sells more real estate than RE/MAX, as measured by total residential transaction sides. Dedicated to innovation and change in the real estate industry, RE/MAX launched Motto Franchising, LLC, a ground-breaking mortgage brokerage franchisor, in 2016.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the use of words such as "believe," "intend," "expect," "estimate," "plan," "outlook," "project," "anticipate," "may," "will," "would" and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. Forward-looking statements include statements related to: agent count; franchise sales; revenue; operating expenses; the Company's outlook for the third quarter and full year 2019; dividends; non-GAAP financial measures; estimated effective tax rates for 2019; housing and mortgage market conditions; economic and demographic trends; competition; potential transactions; future expansion of Motto Mortgage and such expansion's impact on revenue; statements regarding agent productivity; statements regarding the timing and effects of the launch of the next generation of RE/MAX technology; statements regarding managing cost structure; statements regarding the Company's leadership position in the industry; and the Company's strategic and operating plans and business models. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily accurately indicate the times at which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Such risks and uncertainties include, without limitation, (1) changes in the real estate market or interest rates and availability of financing, (2) changes in business and economic activity in general, (3) the Company's ability to attract and retain quality franchisees, (4) the Company's franchisees' ability to recruit and retain real estate agents and mortgage loan originators, (5) changes in laws and regulations, (6) the Company's ability to enhance, market, and protect the RE/MAX and Motto Mortgage brands, (7) the Company's ability to implement its technology initiatives, (8) fluctuations in foreign currency exchange rates, (9) the impact of recent changes to our senior management team, (10) the impact of the findings and recommendations of the previously disclosed Special Committee investigation on the Company and its management and operations, and those risks and uncertainties described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent periodic and current reports filed with the SEC, which are available on the investor relations page of the Company's website at www.remax.com and on the SEC website at www.sec.gov. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no obligation, to update this information to reflect future events or circumstances.

TABLE 1	
RE/MAX Holdings, Inc.	
Condensed Consolidated Statements of Income	
(Amounts in thousands, except share and per share amounts)	
(Unaudited)	

		Three Months Ended 		Year Ended 	
		June 30, 		June 30, 	
		2019		2018		2019		2018	
Revenue:													
Continuing franchise fees		$	24,894		$	25,211		$	49,850		$	50,451	
Annual dues			8,819			8,973			17,673			17,669	
Broker fees			13,459			13,993			22,047			23,181	
Marketing Funds fees			18,060			—			36,832			—	
Franchise sales and other revenue			6,149			6,100			16,157			15,618	
Total revenue			71,381			54,277			142,559			106,919	
Operating expenses:													
Selling, operating and administrative expenses			25,726			28,307			59,250			62,675	
Marketing Funds expenses			18,060			—			36,832			—	
Depreciation and amortization			5,541			5,069			11,099			9,644	
(Gain) loss on sale or disposition of assets, net			(16)			(13)			363			(31)	
Total operating expenses			49,311			33,363			107,544			72,288	
Operating income			22,070			20,914			35,015			34,631	
Other expenses, net:													
Interest expense			(3,154)			(3,171)			(6,309)			(5,895)	
Interest income			342			98			662			217	
Foreign currency transaction gains (losses)			61			(103)			116			(186)	
Total other expenses, net			(2,751)			(3,176)			(5,531)			(5,864)	
Income before provision for income taxes			19,319			17,738			29,484			28,767	
Provision for income taxes			(3,186)			(3,147)			(5,094)			(5,009)	
Net income		$	16,133		$	14,591		$	24,390		$	23,758	
Less: net income attributable to non-controlling interest			7,563			6,943			11,411			11,127	
Net income attributable to RE/MAX Holdings, Inc.		$	8,570		$	7,648		$	12,979		$	12,631	

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock													
Basic		$	0.48		$	0.43		$	0.73		$	0.71	
Diluted		$	0.48		$	0.43		$	0.73		$	0.71	
Weighted average shares of Class A common stock outstanding													
Basic			17,808,321			17,746,042			17,791,942			17,727,671	
Diluted			17,833,958			17,769,641			17,825,880			17,763,592	
Cash dividends declared per share of Class A common stock		$	0.21		$	0.20		$	0.42		$	0.40	

TABLE 2	
RE/MAX Holdings, Inc.	
Condensed Consolidated Balance Sheets	
 (Amounts in thousands, except share and per share amounts)	
(Unaudited)	
							
		June 30,		December 31,	
		2019		2018	
Assets							
Current assets:							
Cash and cash equivalents		$	72,486		$	59,974	
Restricted cash			23,627			—	
Accounts and notes receivable, current portion, less allowances of $9,774 and $7,980, respectively			32,206			21,185	
Income taxes receivable			1,669			533	
Other current assets			8,474			5,855	
Total current assets			138,462			87,547	
Property and equipment, net of accumulated depreciation of $14,117 and $13,280 respectively			5,643			4,390	
Operating lease right of use assets			53,363			—	
Franchise agreements, net			95,407			103,157	
Other intangible assets, net			23,478			22,965	
Goodwill			150,812			150,684	
Deferred tax assets, net			50,997			53,698	
Other assets, net of current portion			5,687			4,399	
Total assets		$	523,849		$	426,840	
Liabilities and stockholders' equity							
Current liabilities:							
Accounts payable		$	3,673		$	1,890	
Accrued liabilities			48,937			13,143	
Income taxes payable			11			208	
Deferred revenue			25,571			25,489	
Current portion of debt			2,637			2,622	
Current portion of payable pursuant to tax receivable agreements			3,578			3,567	
Operating lease liabilities			4,829			—	
Total current liabilities			89,236			46,919	
Debt, net of current portion			224,090			225,165	
Payable pursuant to tax receivable agreements, net of current portion			34,355			37,220	
Deferred tax liabilities, net			313			400	
Deferred revenue, net of current portion			19,121			20,224	
Operating lease liabilities, net of current portion			58,578			—	
Other liabilities, net of current portion			6,231			17,637	
Total liabilities			431,924			347,565	
Commitments and contingencies							
Stockholders' equity:							
Class A common stock, par value $0.0001 per share, 180,000,000 shares authorized; 17,809,119 shares issued and outstanding as of June 30, 2019; 17,754,416 shares issued and outstanding as of December 31, 2018			2			2	
Class B common stock, par value $0.0001 per share, 1,000 shares authorized; 1 share issued and outstanding as of June 30, 2019 and December 31, 2018			—			—	
Additional paid-in capital			463,055			460,101	
Retained earnings			26,595			21,138	
Accumulated other comprehensive income, net of tax			397			328	
Total stockholders' equity attributable to RE/MAX Holdings, Inc.			490,049			481,569	
Non-controlling interest			(398,124)			(402,294)	
Total stockholders' equity			91,925			79,275	
Total liabilities and stockholders' equity		$	523,849		$	426,840	

TABLE 3	
RE/MAX Holdings, Inc.	
Condensed Consolidated Statements of Cash Flow	
(Amounts in thousands)	
(Unaudited)	
							
		Six Months Ended June 30,	
		2019		2018	
Cash flows from operating activities:							
Net income		$	24,390		$	23,758	
Adjustments to reconcile net income to net cash provided by operating activities:							
Depreciation and amortization			11,099			9,644	
Bad debt expense			2,560			823	
Loss (gain) on sale or disposition of assets and sublease, net			363			(141)	
Equity-based compensation expense			5,847			3,424	
Deferred income tax expense			2,521			2,060	
Fair value adjustments to contingent consideration			345			80	
Payments pursuant to tax receivable agreements			(2,854)			—	
Other, net			685			567	
Changes in operating assets and liabilities			(11,973)			(6,285)	
Net cash provided by operating activities			32,983			33,930	
Cash flows from investing activities:							
Purchases of property and equipment and capitalization of developed software and trademark costs			(7,378)			(1,441)	
Acquisitions, net of cash acquired of $0 and $362, respectively			—			(25,888)	
Restricted cash acquired with the Marketing Funds acquisition			28,495			—	
Other			(1,200)			—	
Net cash provided by (used in) investing activities			19,917			(27,329)	
Cash flows from financing activities:							
Payments on debt			(1,311)			(1,554)	
Distributions paid to non-controlling unitholders			(7,306)			(7,818)	
Dividends and dividend equivalents paid to Class A common stockholders			(7,522)			(7,209)	
Payment of payroll taxes related to net settled restricted stock units			(731)			(895)	
Payment of contingent consideration			—			(50)	
Net cash used in financing activities			(16,870)			(17,526)	
Effect of exchange rate changes on cash			109			(43)	
Net increase (decrease) in cash, cash equivalents and restricted cash			36,139			(10,968)	
Cash, cash equivalents and restricted cash, beginning of year			59,974			50,807	
Cash, cash equivalents and restricted cash, end of period		$	96,113		$	39,839	

TABLE 4	
RE/MAX Holdings, Inc.	
Agent Count	
(Unaudited)	
	
		As of	
		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,		December 31,		September 30,	
		2019		2019		2018		2018		2018		2018		2017		2017	
Agent Count:																	
U.S.																	
Company-owned Regions (1)		48,748		48,904		49,318		50,342		50,432		49,760		49,411		47,397	
Independent Regions (1)		13,952		13,760		13,804		13,948		14,063		13,852		13,751		16,152	
U.S. Total		62,700		62,664		63,122		64,290		64,495		63,612		63,162		63,549	
Canada																	
Company-owned Regions		6,510		6,549		6,702		6,858		6,915		6,920		6,882		6,924	
Independent Regions		14,923		14,818		14,625		14,550		14,451		14,297		14,230		14,236	
Canada Total		21,433		21,367		21,327		21,408		21,366		21,217		21,112		21,160	
     U.S. and Canada Total		84,133		84,031		84,449		85,698		85,861		84,829		84,274		84,709	
Outside U.S. and Canada																	
Independent Regions		42,887		41,501		39,831		38,207		37,221		35,992		34,767		32,859	
     Outside U.S. and Canada Total		42,887		41,501		39,831		38,207		37,221		35,992		34,767		32,859	
Total		127,020		125,532		124,280		123,905		123,082		120,821		119,041		117,568	

_________________________________	
(1)	As of each quarter end since December 31, 2017, U.S. Company-owned Regions include agents in the Northern Illinois region, which converted from an Independent Region to a Company-owned Region in connection with the acquisition of certain assets of RE/MAX of Northern Illinois, Inc., including the regional franchise agreements issued by us permitting the sale of RE/MAX franchises in the northern region of the state of Illinois, on November 15, 2017. As of the acquisition date, the Northern Illinois region had 2,266 agents.	

TABLE 5	
RE/MAX Holdings, Inc.	
Adjusted EBITDA Reconciliation to Net Income	
 (Amounts in thousands, except percentages)	
(Unaudited)	
	
	Three Months Ended 		Six Months Ended 		
	June 30, 		June 30, 		
(Amounts in 000s)	2019		2018		2019		2018		
Net income	$	16,133		$	14,591		$	24,390		$	23,758		
Depreciation and amortization		5,541			5,069			11,099			9,644		
Interest expense		3,154			3,171			6,309			5,895		
Interest income		(342)			(98)			(662)			(217)		
Provision for income taxes		3,186			3,147			5,094			5,009		
EBITDA		27,672			25,880			46,230			44,089		
(Gain) loss on sale or disposition of assets and sublease, net		(16)			(113)			363			(141)		
Equity-based compensation expense		1,796			2,156			5,847			3,424		
Acquisition-related expense (1)		15			313			87			1,487		
Special Committee investigation and remediation expense (2)		—			564			—			2,650		
Fair value adjustments to contingent consideration (3)		415			(55)			345			80		
Adjusted EBITDA (4)	$	29,882		$	28,745		$	52,872		$	51,589		
Adjusted EBITDA Margin (4)		41.9	%		53.0	%		37.1	%		48.3	%	

________________________	
(1)	Acquisition-related expense includes legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.	
(2)	Special Committee investigation and remediation expense relates to costs incurred in relation to the previously disclosed investigation by the special committee of independent directors of actions of certain members of our senior management and the implementation of the remediation plan.	
(3)	Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability.	
(4)	Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures.	

TABLE 6	
RE/MAX Holdings, Inc.	
Adjusted Net Income and Adjusted Earnings per Share	
(Amounts in thousands, except share and per share amounts)	
(Unaudited)	
													
		Three Months Ended		Six Months Ended	
		June 30,		June 30,	
(Amounts in 000s)		2019		2018		2019		2018	
Net income		$	16,133		$	14,591		$	24,390		$	23,758	
Amortization of acquired intangible assets			4,466			4,265			8,931			8,195	
Provision for income taxes			3,186			3,147			5,094			5,009	
Add-backs:													
(Gain) loss on sale or disposition of assets and sublease, net			(16)			(113)			363			(141)	
Equity-based compensation expense			1,796			2,156			5,847			3,424	
Acquisition-related expense (1)			15			313			87			1,487	
Special Committee investigation and remediation expense (2)			—			564			—			2,650	
Fair value adjustments to contingent consideration (3)			415			(55)			345			80	
Adjusted pre-tax net income			25,995			24,868			45,057			44,462	
Less: Provision for income taxes at 24%			(6,239)			(5,968)			(10,814)			(10,671)	
Adjusted net income (4)		$	19,756		$	18,900		$	34,243		$	33,791	
													
Total basic pro forma shares outstanding			30,367,921			30,305,642			30,351,542			30,287,271	
Total diluted pro forma shares outstanding			30,393,558			30,329,241			30,385,480			30,323,192	
													
Adjusted net income basic earnings per share (4)		$	0.65		$	0.62		$	1.13		$	1.12	
Adjusted net income diluted earnings per share (4)		$	0.65		$	0.62		$	1.13		$	1.11	

________________________	
(1)	Acquisition-related expense includes legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.	
(2)	Special Committee investigation and remediation expense relates to costs incurred in relation to the previously disclosed investigation by the special committee of independent directors of actions of certain members of our senior management and the implementation of the remediation plan.	
(3)	Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability. 	
(4)	Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures.	

TABLE 7	
RE/MAX Holdings, Inc.	
Pro Forma Shares Outstanding	
(Unaudited)	
	
		Three Months Ended		Six Months Ended	
		June 30,		June 30,	
		2019		2018		2019		2018	
Total basic weighted average shares outstanding:									
Weighted average shares of Class A common stock outstanding		17,808,321		17,746,042		17,791,942		17,727,671	
Remaining equivalent weighted average shares of stock outstanding on a pro forma basis assuming RE/MAX Holdings owned 100% of RMCO		12,559,600		12,559,600		12,559,600		12,559,600	
Total basic pro forma weighted average shares outstanding		30,367,921		30,305,642		30,351,542		30,287,271	
									
Total diluted weighted average shares outstanding:									
Weighted average shares of Class A common stock outstanding		17,808,321		17,746,042		17,791,942		17,727,671	
Remaining equivalent weighted average shares of stock outstanding on a pro forma basis assuming RE/MAX Holdings owned 100% of RMCO		12,559,600		12,559,600		12,559,600		12,559,600	
Dilutive effect of unvested restricted stock units (1)		25,637		23,599		33,938		35,921	
Total diluted pro forma weighted average shares outstanding		30,393,558		30,329,241		30,385,480		30,323,192	

______________________________	
(1)	In accordance with the treasury stock method.	

TABLE 8	
RE/MAX Holdings, Inc.	
Free Cash Flow & Unencumbered Cash	
(Unaudited)	
	
	June 30,	
	2019		2018	
Cash flow from operations	$	32,983		$	33,930	
Less: Purchases of property and equipment and capitalization of developed software and trademark costs		(7,378)			(1,441)	
Decreases (increases) in restricted cash of the Marketing Funds (1)		4,868			-	
Free cash flow (2)		30,473			32,489	
						
Free cash flow		30,473			32,489	
Less: Tax/Other non-dividend distributions to RIHI		(2,031)			(2,794)	
Free cash flow after tax/non-dividend distributions to RIHI (2)		28,442			29,695	
						
Free cash flow after tax/non-dividend distributions to RIHI		28,442			29,695	
Less: Debt principal payments		(1,311)			(1,537)	
Unencumbered cash generated (2)	$	27,131		$	28,158	
						
Summary						
Cash flow from operations	$	32,983		$	33,930	
Free cash flow	$	30,473		$	32,489	
Free cash flow after tax/non-dividend distributions to RIHI	$	28,442		$	29,695	
Unencumbered cash generated	$	27,131		$	28,158	
						
Adjusted EBITDA	$	52,872		$	51,589	
Free cash flow as % of Adjusted EBITDA		57.6%			63.0%	
Free cash flow less distributions to RIHI as % of Adjusted EBITDA		53.8%			57.6%	
Unencumbered cash generated as % of Adjusted EBITDA		51.3%			54.6%	

_______________________	
(1)	In January 2019, the Company acquired all of the regional and pan-regional advertising fund entities previously owned by its founder and Chairman of the Board of Directors, David Liniger, collectively, the "Marketing Funds". Beginning January 1, 2019, all assets and liabilities of the Marketing Funds are reflected in the condensed consolidated financial statements of the Company, including approximately $28.5 million of restricted cash. This line reflects any subsequent changes in the restricted cash balance since the initial acquisition date (which under GAAP reflects as a decrease in cash flow from operations for the six months ended June 30, 2019) so as to remove the impact of changes in restricted cash in determining free cash flow.	
(2)	Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures. 	
Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in filings with the SEC and in public disclosures of financial measures that are not in accordance with U.S. GAAP, such as Adjusted EBITDA and the ratios related thereto, Adjusted net income, Adjusted basic and diluted earnings per share (Adjusted EPS) and free cash flow. These measures are derived on the basis of methodologies other than in accordance with U.S. GAAP.
The Company defines Adjusted EBITDA as EBITDA (consolidated net income before depreciation and amortization, interest expense, interest income and the provision for income taxes, each of which is presented in the unaudited condensed consolidated financial statements included earlier in this press release), adjusted for the impact of the following items that are either non-cash or that the Company does not consider representative of its ongoing operating performance: loss or gain on sale or disposition of assets and sublease, equity-based compensation expense, acquisition-related expense, Special Committee investigation and remediation expense, gain on reduction in tax receivable agreement liability, expense or income related to changes in the estimated fair value measurement of contingent consideration, and other non-recurring items.
Because Adjusted EBITDA and Adjusted EBITDA margin omit certain non-cash items and other non-recurring cash charges or other items, the Company believes that each measure is less susceptible to variances that affect its operating performance resulting from depreciation, amortization and other non-cash and non-recurring cash charges or other items. The Company presents Adjusted EBITDA and the related Adjusted EBITDA margin because the Company believes they are useful as supplemental measures in evaluating the performance of its operating businesses and provides greater transparency into the Company's results of operations. The Company's management uses Adjusted EBITDA and Adjusted EBITDA margin as factors in evaluating the performance of the business.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analyzing the Company's results as reported under U.S. GAAP. Some of these limitations are:
·	these measures do not reflect changes in, or cash requirements for, the Company's working capital needs;
·	these measures do not reflect the Company's interest expense, or the cash requirements necessary to service interest or principal payments on its debt;
·	these measures do not reflect the Company's income tax expense or the cash requirements to pay its taxes;
·	these measures do not reflect the cash requirements to pay dividends to stockholders of the Company's Class A common stock and tax and other cash distributions to its non-controlling unitholders;
·	these measures do not reflect the cash requirements pursuant to the tax receivable agreements;
·	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements;
·	although equity-based compensation is a non-cash charge, the issuance of equity-based awards may have a dilutive impact on earnings per share; and
·	other companies may calculate these measures differently so similarly named measures may not be comparable.
The Company's Adjusted EBITDA guidance does not include certain charges and costs. The adjustments to EBITDA in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior quarters, such as gain on sale or disposition of assets and sublease and acquisition-related expense, among others. The exclusion of these charges and costs in future periods will have a significant impact on the Company's Adjusted EBITDA. The Company is not able to provide a reconciliation of the Company's non-GAAP financial guidance to the corresponding U.S. GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.
Adjusted net income is calculated as Net income attributable to RE/MAX Holdings, assuming the full exchange of all outstanding non-controlling interests for shares of Class A common stock as of the beginning of the period (and the related increase to the provision for income taxes after such exchange), plus primarily non-cash items and other items that management does not consider to be useful in assessing the Company's operating performance (e.g., amortization of acquired intangible assets, gain on sale or disposition of assets and sub-lease, Special Committee investigation and remediation expense, acquisition-related expense and equity-based compensation expense).
Adjusted basic and diluted earnings per share (Adjusted EPS) are calculated as Adjusted net income (as defined above) divided by pro forma (assuming the full exchange of all outstanding non-controlling interests) basic and diluted weighted average shares, as applicable.
When used in conjunction with GAAP financial measures, Adjusted net income and Adjusted EPS are supplemental measures of operating performance that management believes are useful measures to evaluate the Company's performance relative to the performance of its competitors as well as performance period over period. By assuming the full exchange of all outstanding non-controlling interests, management believes these measures:
·	facilitate comparisons with other companies that do not have a low effective tax rate driven by a non-controlling interest on a pass-through entity;
·	facilitate period over period comparisons because they eliminate the effect of changes in Net income attributable to RE/MAX Holdings, Inc. driven by increases in its ownership of RMCO, LLC, which are unrelated to the Company's operating performance; and
·	eliminate primarily non-cash and other items that management does not consider to be useful in assessing the Company's operating performance.
Free cash flow is calculated as cash flows from operations less capital expenditures and any changes in restricted cash of the Marketing Funds, all as reported under GAAP, and quantifies how much cash a company has to pursue opportunities that enhance shareholder value. The restricted cash of the Marketing Funds is limited in use for the benefit of franchisees and any impact to cash flow from operations due to this change is excluded from free cash flow. The Company believes free cash flow is useful to investors as a supplemental measure as it calculates the cash flow available for working capital needs, re-investment opportunities, potential independent region and strategic acquisitions, dividend payments or other strategic uses of cash.
Free cash flow after tax and non-dividend distributions to RIHI is calculated as free cash flow less tax and other non-dividend distributions paid to RIHI (the non-controlling interest holder) to enable RIHI to satisfy its income tax obligations. Similar payments would be made by the Company directly to federal and state taxing authorities as a component of the Company's consolidated provision for income taxes if a full exchange of non-controlling interests occurred in the future. As a result and given the significance of the Company's ongoing tax and non-dividend distribution obligations to its non-controlling interest, free cash flow after tax and non-dividend distributions, when used in conjunction with GAAP financial measures, provides a meaningful view of cash flow available to the Company to pursue opportunities that enhance shareholder value.
Unencumbered cash generated is calculated as free cash flow after tax and non-dividend distributions to RIHI less quarterly debt principal payments less annual excess cash flow payment on debt, as applicable. Given the significance of the Company's excess cash flow payment on debt, when applicable, unencumbered cash generated, when used in conjunction with GAAP financial measures, provides a meaningful view of the cash flow available to the Company to pursue opportunities that enhance shareholder value after considering its debt service obligations.

CONTACT: Investor Contact: Andy Schulz, (303) 796-3287, aschulz@remax.com; Media Contact: Kerry McGovern, (303) 796-3283, kmcgovern@remax.com