RE/MAX HOLDINGS, INC., 10-K filed on 3/15/2018
Annual Report
v3.8.0.1
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2017
Feb. 28, 2018
Jun. 30, 2017
Entity Registrant Name RE/MAX Holdings, Inc.    
Entity Central Index Key 0001581091    
Document Period End Date Dec. 31, 2017    
Current Fiscal Year End Date --12-31    
Document Type 10-K    
Document Fiscal Year Focus 2017    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Current Reporting Status No    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Filer Category Large Accelerated Filer    
Entity Public Float     $ 988.5
Common Class A      
Entity Common Stock, Shares Outstanding   17,696,991  
Common Class B      
Entity Common Stock, Shares Outstanding   1  
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 50,807 $ 57,609
Accounts and notes receivable, current portion, net 21,304 19,419
Income taxes receivable 870  
Other current assets 6,924 4,186
Total current assets 79,905 81,214
Property and equipment, net 2,905 2,691
Franchise agreements, net 119,349 109,140
Other intangible assets, net 8,476 9,811
Goodwill 135,213 126,633
Deferred tax assets, net 59,151 105,770
Other assets, net of current portion 1,563 1,894
Total assets 406,562 437,153
Current liabilities:    
Accounts payable 517 1,000
Accrued liabilities 15,390 13,268
Income taxes payable 133 379
Deferred revenue and deposits 18,918 16,306
Current portion of debt 2,350 2,350
Current portion of payable pursuant to tax receivable agreements 6,252 13,235
Total current liabilities 43,560 46,538
Debt, net of current portion 226,636 228,470
Payable pursuant to tax receivable agreements, net of current portion 46,923 85,574
Deferred tax liabilities, net 151 133
Other liabilities, net of current portion 19,897 15,729
Total liabilities 337,167 376,444
Commitments and contingencies (Note 14)
Stockholders' equity:    
Additional paid-in capital 451,199 448,713
Retained earnings 16,027 16,005
Accumulated other comprehensive income (loss), net of tax 515 (28)
Total stockholders' equity attributable to RE/MAX Holdings, Inc. 467,743 464,692
Non-controlling interest (398,348) (403,983)
Total stockholders' equity 69,395 60,709
Total liabilities and stockholders' equity 406,562 437,153
Common Class A    
Stockholders' equity:    
Common stock 2 2
Common Class B    
Stockholders' equity:    
Common stock
v3.8.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2017
Dec. 31, 2016
Common Class A | Common Stock    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 180,000,000 180,000,000
Common stock, shares issued 17,696,991 17,652,548
Common stock, shares outstanding 17,696,991 17,652,548
Common Class B    
Common stock, shares outstanding 1  
Common Class B | Common Stock    
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
v3.8.0.1
Consolidated Statements of Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenue:      
Continuing franchise fees $ 93,694 $ 81,197 $ 73,750
Annual dues 33,767 32,653 31,758
Broker fees 43,801 37,209 32,334
Franchise sales and other franchise revenue 24,667 25,131 25,468
Brokerage revenue   112 13,558
Total revenue 195,929 176,302 176,868
Operating expenses:      
Selling, operating and administrative expenses 107,268 88,213 91,561
Depreciation and amortization 20,512 16,094 15,124
Loss (gain) on sale or disposition of assets, net 660 178 (3,397)
Gain on reduction in tax receivable agreement liability (note 11) (32,736)    
Total operating expenses 95,704 104,485 103,288
Operating income 100,225 71,817 73,580
Other expenses, net:      
Interest expense (9,996) (8,596) (10,413)
Interest income 352 160 178
Foreign currency transaction gains (losses) 174 (86) (1,661)
Loss on early extinguishment of debt   (796) (94)
Equity in earnings of investees     1,215
Total other expenses, net (9,470) (9,318) (10,775)
Income before provision for income taxes 90,755 62,499 62,805
Provision for income taxes (55,576) (15,273) (12,030)
Net income 35,179 47,226 50,775
Less: net income attributable to non-controlling interest (note 3) 22,364 24,830 34,363
Net income attributable to RE/MAX Holdings, Inc. $ 12,815 $ 22,396 $ 16,412
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock      
Basic $ 0.72 $ 1.27 $ 1.30
Diluted $ 0.72 $ 1.27 $ 1.28
Weighted average shares of Class A common stock outstanding      
Basic 17,688,533 17,628,741 12,671,051
Diluted 17,731,800 17,677,768 12,829,214
Cash dividends declared per share of Class A common stock $ 0.72 $ 0.60 $ 2.00
Common Class A      
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock      
Basic 0.72 1.27 1.30
Diluted $ 0.72 $ 1.27 $ 1.28
Weighted average shares of Class A common stock outstanding      
Basic 17,688,533 17,628,741 12,671,051
Diluted 17,731,800 17,677,768 12,829,214
Cash dividends declared per share of Class A common stock $ 0.72 $ 0.60 $ 2.00
v3.8.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]      
Net income $ 35,179 $ 47,226 $ 50,775
Change in cumulative translation adjustment 1,074 165 (1,289)
Other comprehensive income (loss), net of tax 1,074 165 (1,289)
Comprehensive income 36,253 47,391 49,486
Less: comprehensive income attributable to non-controlling interest 22,895 24,918 34,065
Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax $ 13,358 $ 22,473 $ 15,421
v3.8.0.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Common Stock
Common Class A
Common Stock
Common Class B
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Non-controlling interest
Common Class A
Common Class B
Total
Beginning balance, Value at Dec. 31, 2014 $ 1   $ 242,435 $ 11,822 $ 886 $ (215,861)     $ 39,283
Beginning balance, Shares at Dec. 31, 2014 11,768,041 1              
Net income       16,412   34,363     50,775
Distributions to non-controlling unitholders           (42,827)     (42,827)
Equity-based compensation expense and related dividend equivalents, value     1,453           1,453
Dividends to Class A common stockholders       (24,003)     $ (24,000)   (24,003)
Change in accumulated other comprehensive (loss) income         (991) (298)     (1,289)
Excess tax benefit realized on exercise of stock options and delivery of vested restricted stock units     2,770           2,770
Payroll taxes related to net settled restricted stock units     (327)           (327)
Payroll taxes related to net settled restricted stock units (in shares) (8,873)                
Issuance of Class A common stock, equity-based compensation plans, value     2,248           $ 2,248
Issuance of Class A common stock, equity-based compensation plans, shares 650,183                
Issuance of Class A common stock, net of underwriters discount and expenses, value $ 1   186,299     (186,300)      
Issuance of Class A common stock, net of underwriters discount and expenses, shares 5,175,000               5,200,000
Equity effect of establishment of payable pursuant to tax receivable agreements     (33,018)           $ (33,018)
Equity effect of step-up in tax basis and share of RE/MAX Holdings' inside tax basis     43,774           43,774
Other     575           575
Ending balance, Value at Dec. 31, 2015 $ 2   446,209 4,231 (105) (410,923)     39,414
Ending balance, Shares at Dec. 31, 2015 17,584,351 1              
Net income       22,396   24,830     47,226
Distributions to non-controlling unitholders           (17,927)     (17,927)
Equity-based compensation expense and related dividend equivalents, value     2,330           2,330
Dividends to Class A common stockholders       (10,578)     (10,600)   (10,578)
Change in accumulated other comprehensive (loss) income         77 88     165
Payroll taxes related to net settled restricted stock units     (516)           (516)
Payroll taxes related to net settled restricted stock units (in shares) (13,639)                
Issuance of Class A common stock, equity-based compensation plans, value     101           101
Issuance of Class A common stock, equity-based compensation plans, shares 81,836                
Other     466           466
Ending balance, Value at Dec. 31, 2016 $ 2   448,713 16,005 (28) (403,983)     60,709
Ending balance, Shares at Dec. 31, 2016 17,652,548 1              
Cumulative effect adjustment from change in accounting principle     123 (44)   (51)     28
Net income       12,815   22,364     35,179
Distributions to non-controlling unitholders           (17,260)     (17,260)
Equity-based compensation expense and related dividend equivalents, value     2,900 (53)         2,847
Equity-based compensation expense and related dividend equivalents, shares 58,426                
Dividends to Class A common stockholders       (12,740)     $ (12,700)   (12,740)
Change in accumulated other comprehensive (loss) income         543 531     1,074
Payroll taxes related to net settled restricted stock units     (816)           (816)
Payroll taxes related to net settled restricted stock units (in shares) (13,983)                
Other     402           402
Ending balance, Value at Dec. 31, 2017 $ 2   $ 451,199 $ 16,027 $ 515 $ (398,348)     $ 69,395
Ending balance, Shares at Dec. 31, 2017 17,696,991 1           1  
v3.8.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from operating activities:      
Net income $ 35,179 $ 47,226 $ 50,775
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 20,512 16,094 15,124
Bad debt expense 1,109 1,195 433
Loss (gain) on sale or disposition of assets and sublease, net 4,260 (171) (3,650)
Loss on early extinguishment of debt   796 94
Equity in earnings of investees     (1,215)
Distributions received from equity investees     1,178
Equity-based compensation expense 2,900 2,330 1,453
Deferred income tax expense 46,494 3,473 2,531
Fair value adjustments to contingent consideration 180 100  
Payments pursuant to tax receivable agreements (13,371) (1,344)  
Non-cash change in tax receivable agreement liability (32,736)    
Other 1,145 1,029 1,014
Changes in operating assets and liabilities:      
Accounts and notes receivable, current portion (2,924) (3,841) (999)
Advances from/to affiliates (106) 71 (771)
Other current and noncurrent assets (2,414) 362 502
Other current and noncurrent liabilities 1,583 (2,616) 7,253
Income taxes receivable/payable (1,133) (71) 2,770
Deferred revenue and deposits, current portion 2,610 (254) 866
Net cash provided by operating activities 63,288 64,379 77,358
Cash flows from investing activities:      
Purchases of property, equipment and software and capitalization of trademark costs (2,198) (4,502) (3,628)
Acquisitions, net of cash acquired of $0, $131 and $0, respectively (35,720) (112,934)  
Dispositions   200 5,650
Other investing activity, net   (96) (358)
Net cash (used in) provided by investing activities (37,918) (117,332) 1,664
Cash flows from financing activities:      
Proceeds from issuance of debt, net   233,825  
Payments on debt (2,366) (203,298) (9,722)
Capitalized debt amendment costs   (1,379) (555)
Distributions paid to non-controlling unitholders (17,260) (17,927) (42,827)
Dividends and dividend equivalents paid to Class A common stockholders (12,793) (10,578) (24,003)
Proceeds from exercise of stock options   101 2,248
Payment of payroll taxes related to net settled restricted stock units (816) (516) (327)
Net cash (used in) provided by financing activities (33,235) 228 (75,186)
Effect of exchange rate changes on cash 1,063 122 (823)
Net (decrease) increase in cash and cash equivalents (6,802) (52,603) 3,013
Cash and cash equivalents, beginning of year 57,609 110,212 107,199
Cash and cash equivalents, end of period 50,807 57,609 110,212
Supplemental disclosures of cash flow information:      
Cash paid for interest 9,972 7,797 9,319
Net cash paid for income taxes 10,078 11,912 5,841
Schedule of non-cash investing and financing activities:      
Establishment of amounts payable under tax receivable agreements     33,018
Establishment of deferred tax assets     43,774
Note receivable received as consideration for sale of brokerage operations assets   150 851
Increase in accounts payable for capitalization of trademark costs and purchases of property, equipment and software $ 295 150 $ 667
Contingent consideration issued in a business acquisition   $ 6,300  
v3.8.0.1
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Consolidated Statements of Cash Flows      
Cash acquired $ 0 $ 131 $ 0
v3.8.0.1
Business and Organization
12 Months Ended
Dec. 31, 2017
Business and Organization  
Business and Organization

1. Business and Organization

RE/MAX Holdings, Inc. (“RE/MAX Holdings”) was formed as a Delaware corporation on June 25, 2013. On October 7, 2013, RE/MAX Holdings completed an initial public offering (the “IPO”) of its shares of Class A common stock. RE/MAX Holdings’ only business is to act as the sole manager of RMCO, LLC (“RMCO”). As of December 31, 2017, RE/MAX Holdings owns 58.49% of the common membership units in RMCO, while RIHI, Inc. (“RIHI”) owns the remaining 41.51% of common membership units in RMCO. RE/MAX Holdings and its consolidated subsidiaries, including 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 115,000 agents operating in over 7,000 offices located in more than 100 countries and territories. Motto, founded in 2016, is the first nationally franchised mortgage brokerage in the U.S. The Company sold certain operating assets and liabilities of its owned brokerage offices during 2015 and the first quarter of 2016 to existing RE/MAX franchisees. (See Note 5, Acquisitions and Dispositions). Since then, the Company is 100% franchised, no longer operates any real estate brokerage offices and no longer recognizes brokerage revenue (which consisted of fees assessed by the Company’s owned brokerages for services provided to their affiliated real estate agents).

The Company’s revenue is derived as follows:

·

Continuing franchise fees which consist of 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 (no significant continuing franchise fees were generated by Motto during the periods presented);

·

Annual dues from RE/MAX agents;

·

Broker fees, which consist of fees paid on real estate commissions when an agent sells a home;

·

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; and

·

Brokerage revenue prior to the sale of the Company’s brokerage offices in January 2016.

RE/MAX Holdings Capital Structure

RE/MAX Holdings has two classes of common stock, Class A common stock and Class B common stock, which are described as follows:

Class A common stock

Holders of shares of Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Additionally, holders of shares of Class A common stock are entitled to receive dividends when and if declared by the Company’s Board of Directors, subject to any statutory or contractual restrictions on the payment of dividends.

Holders of shares of Class A common stock do not have preemptive, subscription, redemption or conversion rights.

Class B common stock

RIHI is the sole holder of Class B common stock and is controlled by David Liniger, the Company’s Chairman and Co-Founder, and Gail Liniger, the Company’s Vice Chair and Co-Founder. The holder of Class B common stock is entitled to two votes for each Common Unit in RMCO held by the holder, without regard to the number of shares of Class B common stock held. Accordingly, Common Unitholders of RMCO collectively have a number of votes in RE/MAX Holdings that is equal to two times the aggregate number of Common Units that they hold.

The voting rights of the Class B common stock will be reduced to one times the aggregate number of RMCO Common Units held after any of the following events: (i) October 7, 2018; (ii) the death of David Liniger, the Company’s Chairman and Co-Founder; or (iii) at such time as RIHI’s ownership of RMCO Common Units falls below 30% of the number of RMCO common units held by RIHI immediately after the IPO. Additionally, if any Common Units of RMCO are validly transferred in accordance with the terms of the New RMCO, LLC Agreement, the voting rights of the corresponding shares of Class B common stock transferred will also be reduced to one times the aggregate number of RMCO Common Units held by such transferee, unless the transferee is David Liniger.

Holders of shares of Class A common stock and Class B common stock vote together as a single class on all matters presented to the Company’s stockholders for their vote or approval, except as otherwise required by applicable law.

Holders of Class B common stock do not have any right to receive dividends or to receive a distribution upon a dissolution or liquidation or the sale of all or substantially all of the Company’s assets. Additionally, holders of shares of Class B common stock do not have preemptive, subscription, redemption or conversion rights.

v3.8.0.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2017
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements and notes thereto included in this Annual Report on Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The accompanying consolidated financial statements are presented on a consolidated basis and include the accounts of RE/MAX Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of December 31, 2017 and 2016, the results of its operations and comprehensive income, changes in its stockholders’ equity and its cash flows for the years ended December 31, 2017, 2016 and 2015.

During 2017 and 2016, the Company completed the acquisitions of various independent regions. Their results of operations, cash flows and financial positions are included in the consolidated financial statements from their respective dates of acquisition. See Note 5, Acquisitions and Dispositions for additional information.

Reclassifications

Certain items in the accompanying consolidated financial statements as of and for the years ended December 31, 2016 and 2015 have been reclassified to conform to the current year’s presentation. These reclassifications did not affect the Company’s consolidated results of operations.  

Use of Estimates

The preparation of the accompanying 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant areas in which management uses assumptions include, among other things, the allowance for doubtful accounts, the estimated lives of intangible assets, amounts accrued for litigation matters, the fair value of assets acquired and liabilities assumed in business combinations, the accounting for income taxes, the fair value of reporting units used in the annual assessment of goodwill, the fair value of the contingent consideration and the amounts due to RIHI and Oberndorf Investments LLC (“Oberndorf”) pursuant to the terms of the tax receivable agreements (the “TRAs”) discussed in more detail in Note 3, Non-controlling Interest. Actual results could differ from those estimates.

Principles of Consolidation

As of December 31, 2017, RE/MAX Holdings owns 58.49% of the common membership units in RMCO, and, as its managing member, RE/MAX Holdings controls RMCO’s operations, management and activities. As a result, RE/MAX Holdings consolidates RMCO and records a non-controlling interest in the accompanying Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Consolidated Statements of Income and Consolidated Statements of Comprehensive Income, respectively.

Segment Reporting

Since the first quarter of 2016, the Company has operated in one reportable segment, Real Estate Franchise Services. The Company launched Motto in October 2016, and, while we operate through both RE/MAX and Motto as of December 31, 2017, due to the immateriality of revenue earned by Motto, we disclose only one reportable segment. 

Revenue Recognition

The Company generates revenue from continuing franchise fees, annual dues, broker fees, franchise sales and other franchise revenue and, through January 2016, brokerage revenue. Revenue is recognized when there is persuasive evidence of an arrangement, the service has been rendered, the price is fixed or determinable and collection of the fees is reasonably assured.

Continuing Franchise Fees

The Company provides an ongoing trademark license, operational, training and administrative services and systems to franchisees, which include technology and tools designed to help the Company’s franchisees attract new or retain existing agents.  In addition, training, technology and other tools are provided to the agents within the network to enable them to enhance the service provided to home buyers and sellers.  RE/MAX continuing franchise fees principally consists of fixed fees earned monthly from franchisees on a per agent basis.  Motto continuing franchise fees are fixed contractual fees paid monthly by Motto franchisees.  Revenue from continuing franchise fees is recognized in income when it is earned and becomes due and payable, as stipulated in the related franchise agreements.

Annual Dues

Annual dues revenue represents amounts assessed to agents for membership affiliation in the RE/MAX network. The Company defers the annual dues revenue when billed and recognizes the revenue ratably over the 12-month period to which it relates. As of December 31, 2017 and 2016, the Company had deferred annual dues revenue totaling approximately $15.3 million and $14.2 million, respectively. Loan originators employed by Motto franchisees do not pay annual dues.

The activity in the Company’s annual dues deferred revenue consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

New billings

 

Revenue recognized

 

Balance at end of period

Year ended December 31, 2017

 

$

14,227

 

$

34,837

 

$

(33,767)

 

$

15,297

Year ended December 31, 2016

    

$

13,106

 

$

33,774

 

$

(32,653)

 

$

14,227

Year ended December 31, 2015

 

$

12,912

 

$

31,952

 

$

(31,758)

 

$

13,106

Broker Fees

Revenue from broker fees represents fees received from the Company’s franchise offices that are primarily based on a percentage of agents’ gross commission income. Revenue from broker fees is determined upon close of the home-sale transaction and recognized as revenue when the fees become due and payable, as stipulated in the related franchise agreements. Agents in certain regions existing prior to 2004, the year the Company began assessing broker fees, are generally “grandfathered” and continue to be exempt from paying a broker fee. As of December 31, 2017 grandfathered agents represented approximately 20% of total U.S. Company-owned agents. Motto franchisees do not pay any fees based on the number or dollar value of loans brokered.

Franchise Sales and Other Franchise Revenue

Franchise sales and other franchise revenue is primarily comprised of revenue from the sale or renewal of franchises, as well as other revenue including revenue from preferred marketing arrangements and with approved suppliers, and registration revenue from conventions held for agents and broker owners in the RE/MAX network.

Upon the sale of a franchise, the Company recognizes revenue from franchise sales when it has no significant continuing operational obligations, substantially all of the initial services have been performed by the Company and other conditions affecting consummation of the sale have been met. In the event the franchisee fails to perform under the franchise agreement or defaults on the purchase obligations, the Company has the right to reacquire the franchise and to resell or operate that specific franchise. Franchise sales revenue recognized during the years ended December 31, 2017,  2016 and 2015 was $10.8 million,  $8.8 million and $9.7 million, respectively.

Brokerage Revenue

As discussed in Note 5, Acquisitions and Dispositions the Company sold certain operating assets and liabilities of brokerage offices during 2015 and the first quarter of 2016 and, subsequent thereto, no longer operates any real estate brokerage offices and no longer recognizes brokerage revenue. Prior to the sale of the Company’s brokerage offices, brokerage revenue principally represented fees assessed by the Company-owned brokerages for services provided to their affiliated real estate agents. Because the independent contractors in the Company-owned brokerage offices operated as agents in a real estate transaction, the commissions earned and the related commission expenses paid to the agents were recorded on a net basis.  

Selling, Operating and Administrative Expenses

Selling, operating and administrative expenses primarily consist of personnel costs, including salaries, benefits, payroll taxes and other compensation expenses, professional fees, rent and related facility operations expense, as well as expenses for marketing, expanding and supporting the Company’s franchise and, through January 2016, brokerage operations. 

Cash and Cash Equivalents

Cash and cash equivalents include bank deposits and other highly liquid investments purchased with an original purchase maturity of three months or less. 

Fair Value of Financial Instruments

The carrying amounts of financial instruments, net of any allowances, including cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximate fair value due to their short-term nature.  

Accounts and Notes Receivable

Accounts receivable from the Company’s franchise operations are recorded at the time the Company bills under the terms of the franchise agreements and other contractual arrangements and do not bear interest. The Company provides limited financing of certain franchise sales through the issuance of notes receivable that either bear interest at a rate of prime plus 2% or at a stated amount, which is fixed at the inception of the note with the associated earnings recorded in “Interest income” in the accompanying Consolidated Statements of Income. Amounts collected on notes receivable are included in “Net cash provided by operating activities” in the accompanying Consolidated Statements of Cash Flows.

In circumstances where the Company has the contractual right to bill its franchisees, but where collectability is not sufficiently assured, the Company records a receivable and deferred revenue, which amounted to $1.2 and $1.0 million as of December 31, 2017 and 2016, respectively.

The Company records allowances against its accounts and notes 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 and are included as a component of “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. The allowance for doubtful accounts and notes receivable are the Company’s best estimate of the amount of probable credit losses, and is based on historical experience, industry and general economic conditions, and the attributes of specific accounts.

The activity in the Company’s allowances against accounts and notes receivable consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions/charges

 

 

 

 

 

 

Balance at

 

to cost and expense for

 

 

 

 

 

 

beginning of period

 

allowances for doubtful accounts

 

Deductions/write-offs

 

Balance at end of period

Year ended December 31, 2017

 

$

5,535

 

$

1,159

 

$

(491)

 

$

6,203

Year ended December 31, 2016

    

$

4,483

 

$

1,325

 

$

(273)

 

$

5,535

Year ended December 31, 2015

 

$

4,495

 

$

353

 

$

(365)

 

$

4,483

For the years ended December 31, 2017,  2016 and 2015, bad debt expense related to trade accounts and notes receivable was $1.1 million,  $1.2 million and $0.4 million, respectively, and is reflected in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. 

Accumulated Other Comprehensive Income (Loss), Foreign Operations and Foreign Currency Translation

Accumulated other comprehensive income (loss) includes all changes in equity during a period that have yet to be recognized in income, except those resulting from transactions with stockholders and is comprised of foreign currency translation adjustments.

As of December 31, 2017,  the Company, directly and through its franchisees, conducted operations in over 100 countries and territories, including the U.S. and Canada.  

The functional currency for the Company’s domestic operations is the U.S. dollar and for its Canadian subsidiary is the Canadian Dollar. Assets and liabilities of the Canadian subsidiary are translated at the spot rate in effect at the applicable reporting date, and the consolidated statements of income and cash flows are translated at the average exchange rates in effect during the applicable period. Exchange rate fluctuations on translating consolidated foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are recorded as a component of “Accumulated other comprehensive income,” a separate component of stockholders’ equity, and periodic changes are included in comprehensive income. When the Company sells a part or all of its investment in a foreign entity resulting in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, it releases any related cumulative translation adjustment into net income.

Foreign currency denominated monetary assets and liabilities and transactions occurring in currencies other than the Company’s or the Company’s consolidated foreign subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Changes in exchange rates with respect to amounts recorded in the accompanying Consolidated Balance Sheets related to these non-functional currency transactions result in transaction gains and losses that are reflected in the accompanying Consolidated Statements of Income as “Foreign currency transaction gains (losses).” 

Property and Equipment

Property and equipment, including leasehold improvements, are initially recorded at cost. Depreciation is provided for on a straight-line method over the estimated useful lives of each asset class and commences when the property is placed in service. Amortization of leasehold improvements is provided for on a straight-line method over the estimated benefit period of the related assets or the lease term, if shorter.

Franchise Agreements and Other Intangible Assets

The Company’s franchise agreements result from franchise rights acquired from Independent Region acquisitions and are initially recorded at fair value. The Company amortizes the franchise agreements over their estimated useful life on a straight-line basis.

The Company also purchases and develops software for internal use. Software development costs incurred during the application development stage as well as upgrades and enhancements that result in additional functionality are capitalized. Costs incurred during the preliminary project and post-implementation-operation stages are expensed as incurred. Software development costs are generally amortized over a term of three to five years. Purchased software licenses are amortized over their estimated useful lives.

In addition, the Company owns the principal trademarks, service marks and trade names that it uses in conjunction with operating its business. These intangible assets increase when the Company pays to file trademark applications in the U.S. and certain other jurisdictions globally. The Company’s trademarks are amortized on a straight-line basis over their estimated useful lives.

The Company reviews its franchise agreements and other intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated from such asset. If not recoverable, the excess of the carrying amount of an asset over its estimated discounted cash flows would be charged to operations as an impairment loss. For each of the years ended December 31, 2017,  2016 and 2015, there were no impairments indicated for such assets.

Goodwill

Goodwill is an asset representing the future economic benefits arising from the other assets acquired in a business combination that are not individually identified and separately recognized. The Company assesses goodwill for impairment at least annually or whenever an event occurs or circumstances change that would indicate impairment may have occurred at the reporting unit level. Reporting units are driven by the level at which segment management reviews operating results. The Company performs its required impairment testing annually on August 31.

The Company’s impairment assessment begins with a qualitative assessment to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount. The initial qualitative assessment includes comparing the overall financial performance of the reporting units against the planned results as well as other factors which might indicate that the reporting unit’s value has declined since the last assessment date. If it is determined in the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the standard two-step quantitative impairment test is performed. The first step of the quantitative impairment test consists of comparing the estimated fair value of each reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, then it is not considered impaired and no further analysis is required. If the first step of the quantitative impairment test indicates that the estimated fair value of a reporting unit is less than its carrying value, then impairment potentially exists and the second step of the quantitative impairment test is performed to measure the amount of goodwill impairment. Goodwill impairment exists when the estimated implied fair value of a reporting unit’s goodwill is less than its carrying value.

During 2017, 2016 and 2015, the Company performed the qualitative impairment assessment for all of its reporting units by evaluating, among other things, market and general economic conditions, entity-specific events, events affecting a reporting unit and the Company’s results of operations and key performance measures. Except for Motto, the fair value of our reporting units significantly exceeded their carrying values at our latest assessment date. Motto is a startup business and its fair value is tied primarily to franchise sales over the next several years. Failure to achieve targeted franchise sales would result in an impairment of this goodwill balance. 

The Company did not record any goodwill impairments during the years ended December 31, 2017,  2016 and 2015.

Income Taxes

The Company accounts for income taxes under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Management periodically assesses the recoverability of its deferred tax assets based upon expected future earnings, future deductibility of the asset and changes in applicable tax laws and other factors. If management determines that it is not probable that the deferred tax asset will be fully recoverable in the future, a valuation allowance may be established for the difference between the asset balance and the amount expected to be recoverable in the future. The allowance will result in a charge to the Company’s Consolidated Statements of Income. Further, the Company records its income taxes receivable and payable based upon its estimated income tax liability.

RMCO complies with the requirements of the Internal Revenue Code that are applicable to limited liability companies that have elected to be treated as partnerships, which allow for the complete pass-through of taxable income or losses to RMCO’s unitholders, who are individually responsible for any federal tax consequences. Provision for Income Taxes includes the federal income tax obligation related to RE/MAX Holdings’ allocated portion of RMCO’s income. RMCO is subject to certain state and local taxes, and its global subsidiaries are subject to tax in certain jurisdictions.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. 

Equity-Based Compensation

The Company recognizes compensation expense associated with equity-based compensation as a component of “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. All equity-based compensation is required to be measured at fair value on the grant date, is expensed over the requisite service, generally over a three-year period, and forfeitures are accounted for as they occur. The Company recognizes compensation expense on awards on a straight-line basis over the requisite service period for the entire award. Refer to Note 12, Equity-Based Compensation for additional discussion regarding details of the Company’s equity-based compensation plans.

New Accounting Pronouncements Not Yet Adopted

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220), which adjusts the classification of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.  The standard is to be applied either in the period of adoption or retrospectively to each period effected by the Tax Cuts and Jobs Act.  The Company plans to adopt this ASU on January 1, 2019. As of December 31, 2017, the Company completed the majority of its accounting for the tax effects of the Tax Cuts and Jobs Act. The Company believes the amendments of ASU 2018-02 will not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. ASU 2017-04 is effective for annual and interim impairment tests beginning January 1, 2020 for the Company and is required to be adopted using a prospective approach. Early adoption is allowed for annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements and related disclosures.

Also in January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies when transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years, and interim reporting periods within those years, beginning January 1, 2018 for the Company and is required to be adopted using a prospective approach. Early adoption is permitted for transactions not previously reported in issued financial statements. The Company will determine the effect of the standard on its consolidated financial statements and related disclosures based on the facts and circumstances of each individual acquisition or disposal.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies classification for certain cash receipts and cash payments on the consolidated statements of cash flow. ASU 2016-15 is effective for fiscal years, and interim reporting periods within those years, beginning January 1, 2018 for the Company. The standard requires a retrospective transition method for each period presented. Under the new guidance, the contingent consideration payments related to the purchase of Full House Mortgage Connection, Inc. (“Full House”) will be classified as financing outflows up to the $6.3 million acquisition date fair value and any cash payments paid in excess of the acquisition date fair value will be classified as operating outflows. (See Note 5, Acquisitions and Dispositions.) The Company expects no material impact on its financial statements and related disclosures upon the adoption of this standard.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize the assets and liabilities that arise from all leases on the consolidated balance sheets. ASU 2016-02 is required to be adopted by the Company on January 1, 2019. Early adoption is permitted in any interim or annual reporting period. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company has not yet determined the effect of the standard on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), with several subsequent amendments, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The Company adopted this standard on January 1, 2018. The Company will use the modified retrospective transition method, which will result in restating each prior reporting period presented, fiscal years 2016 and 2017, in the year of adoption. Additionally, a cumulative effect adjustment will be recorded to the opening balance sheet as of the first day of fiscal year 2016, the earliest period presented.  The adoption of the new guidance will change the timing of recognition of franchise sales and franchise renewal revenue. Currently, the Company recognizes revenue upon completion of a sale or renewal. Under the new guidance, franchise sales and renewal revenue, which are included in “Franchise Sales and Other Franchise Revenue” in the Consolidated Statements of Income, will be recognized over the contractual term of the franchise agreement. The impact to both “Franchise Sales and Other Franchise Revenue” and “Operating Income” in the Consolidated Statements of Income for 2017 from this change will be a decrease of less than $2.0 million.  However, the Consolidated Balance Sheet as of December 31, 2017 will be adjusted in the first quarter of 2018 to reflect an increase in “Deferred revenue and deposits” of approximately $26.0 million.  The commissions related to franchise sales will be recorded as a contract asset and be recognized over the contractual term of the franchise agreement. Currently, the Company expenses the commissions upon franchise sale completion. The impact from this change to “Selling, operating and administrative expenses” and “Operating Income” in the Consolidated Statements of Income for 2017 is immaterial and the Consolidated Balance Sheet as of December 31, 2017 will be adjusted in the first quarter of 2018 to reflect an increase in “Total assets” of approximately $4.0 million.  The Company does not expect the adoption of the standard to have a material impact on other revenue streams.    

v3.8.0.1
Non-controlling Interest
12 Months Ended
Dec. 31, 2017
Noncontrolling Interest  
Non-controlling Interest

3. Non-controlling Interest

RE/MAX Holdings is the sole managing member of RMCO and operates and controls all of the business affairs of RMCO. The ownership of the common units in RMCO is summarized as follows:

d

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 

2017

 

 

2016

 

 

    

Shares

    

Ownership %

    

 

Shares

    

Ownership %

 

Non-controlling interest ownership of common units in RMCO

 

12,559,600

 

41.51

%

 

12,559,600

 

41.57

%

RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO)

 

17,696,991

 

58.49

%

 

17,652,548

 

58.43

%

Total common units in RMCO

 

30,256,591

 

100.00

%

 

30,212,148

 

100.00

%

The weighted average ownership percentages for the applicable reporting periods are used to calculate the net income attributable to RE/MAX Holdings. In 2015 RE/MAX Holdings’ economic interest in RMCO significantly increased as a result of RIHI’s redemption of 5.2 million common units in RMCO and issuance of 5.2 million shares of Class A common stock.  

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 Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except percentages): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

2017

 

 

2016

 

 

2015

 

 

RE/MAX Holdings, Inc.

 

Non-controlling interest

 

Total

 

 

RE/MAX Holdings, Inc.

 

Non-controlling interest

 

Total

 

 

RE/MAX Holdings, Inc.

 

Non-controlling interest

 

Total

 

Weighted average ownership percentage of RMCO (a)

 

58.48

%

 

41.52

%

 

100.00

%

 

 

58.40

%

 

41.60

%

 

100.00

%

 

 

42.33

%

 

57.67

%

 

100.00

%

Income before provision for income taxes

$

66,599

 

$

24,156

 

$

90,755

 

 

$

36,446

 

$

26,053

 

$

62,499

 

 

$

26,554

 

$

36,251

 

$

62,805

 

Provision for income taxes (b)(c)

 

(53,784)

 

 

(1,792)

 

 

(55,576)

 

 

 

(14,050)

 

 

(1,223)

 

 

(15,273)

 

 

 

(10,142)

 

 

(1,888)

 

 

(12,030)

 

Net income

$

12,815

 

$

22,364

 

$

35,179

 

 

$

22,396

 

$

24,830

 

$

47,226

 

 

$

16,412

 

$

34,363

 

$

50,775

 


(a)

The weighted average ownership percentage of RMCO differs from the allocation of income before provision for income taxes between RE/MAX Holdings and the non-controlling interest due to certain relatively insignificant expenses and the gain on reduction in TRA liability in 2017 being recorded at RE/MAX Holdings.

(b)

The provision for income taxes attributable to RE/MAX Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the pass-through income from RMCO. However, it also includes its share of taxes directly incurred by RMCO and its subsidiaries, related primarily to tax liabilities in certain foreign jurisdictions. 

(c)

The provision for income taxes attributable to the non-controlling interest represents its share of taxes related primarily to tax liabilities in certain foreign jurisdictions directly incurred by RMCO or its subsidiaries.  Because RMCO is a pass-through entity there is no U.S. federal and state income tax provision recorded on the non-controlling interest.

Distributions and Other Payments to Non-controlling Unitholders

Under the terms of RMCO’s fourth amended and restated limited liability company operating agreement (the “New RMCO, LLC Agreement”), RMCO makes cash distributions to non-controlling unitholders on a pro-rata basis.  The distributions paid or payable to or on behalf of non-controlling unitholders are summarized as follows (in thousands):

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31, 

 

 

2017

 

2016

Tax and other distributions

 

$

8,217

 

$

10,391

Dividend distributions

 

 

9,043

 

 

7,536

Total distributions to non-controlling unitholders

 

$

17,260

 

$

17,927

On February 21, 2018, the Company declared a distribution to non-controlling unitholders of $2.5 million, which is payable on March 21, 2018.

RE/MAX Holdings ownership of RMCO and Tax Receivable Agreements

RE/MAX Holdings has twice acquired significant portions of the ownership in RMCO; first in October 2013 at the time of IPO when RE/MAX Holdings acquired its initial 11.6 million common units of RMCO and, second, in November and December 2015 when it acquired 5.2 million additional common units. RE/MAX Holdings sold Class A common stock, which it exchanged for these common units of RMCO. RIHI then sold the Class A common stock to the market.

When RE/MAX Holdings has acquired common units in RMCO, it received a step-up in tax basis on the underlying assets held by RMCO. The step-up is principally equivalent to the difference between (1) the fair value of the underlying assets on the date of acquisition of the common units and (2) their tax basis in RMCO, multiplied by the percentage of units acquired. The majority of the step-up in basis relates to intangibles assets, primarily franchise agreements and goodwill, and the step-up is often substantial. These assets are amortizable under IRS rules and result in deductions on the Company’s tax return for many years and consequently, RE/MAX Holdings receives a future tax benefit. These future benefits are reflected within deferred tax assets of approximately $59.2 million on the Company’s consolidated balance sheets as of December 31, 2017. 

If RE/MAX Holdings acquires additional common units of RMCO from RIHI, the percentage of RE/MAX Holdings’ ownership of RMCO will increase, and additional deferred tax assets will be created as additional tax basis step-ups occur.

In connection with the initial sale of RMCO common units in October 2013, RE/MAX Holdings entered into TRAs which require that RE/MAX Holdings make annual payments to RIHI and Oberndorf Investments LLC (a successor to the other previous owner of RMCO) equivalent to 85% of any tax benefits realized on each year’s tax return from the additional tax deductions arising from the step-up in tax basis.  A TRA liability was established for the future cash obligations expected to be paid under the TRAs and is not discounted. As of December 31, 2017, this liability was $53.2 million. Similar to the deferred tax assets, these liabilities would increase if RE/MAX Holdings acquires additional common units of RMCO from RIHI.

Both these deferred tax assets and TRA liability were substantially reduced by the Tax Cuts and Jobs Act enacted in December 2017. The reduction in the corporate tax rate from 35% to 21% resulted in comparable reductions in both the deferred tax asset amounts and the TRA liabilities. See Note 11, Income Taxes for further information on the impact of the Tax Cuts and Jobs Act.

v3.8.0.1
Earnings Per Share and Dividends
12 Months Ended
Dec. 31, 2017
Earnings Per Share and Dividends  
Earnings Per Share and Dividends

 

4. Earnings Per Share and Dividends

Earnings Per Share

Basic earnings per share (“EPS”) measures the performance of an entity over the reporting period. Diluted EPS measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The treasury stock method is used to determine the dilutive potential of stock options and restricted stock units.

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

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31, 

 

    

2017

    

2016

    

2015

Numerator

 

 

   

 

 

 

 

 

 

Net income attributable to RE/MAX Holdings, Inc.

 

$

12,815

 

$

22,396

 

$

16,412

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

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

17,688,533

 

 

17,628,741

 

 

12,671,051

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

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

17,688,533

 

 

17,628,741

 

 

12,671,051

Add dilutive effect of the following:

 

 

 

 

 

 

 

 

 

Stock options

 

 

 —

 

 

5,059

 

 

130,001

Restricted stock units

 

 

43,267

 

 

43,968

 

 

28,162

Weighted average shares of Class A common stock outstanding, diluted

 

 

17,731,800

 

 

17,677,768

 

 

12,829,214

Earnings per share of Class A common stock

 

 

 

 

 

 

 

 

 

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

 

$

0.72

 

$

1.27

 

$

1.30

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

 

$

0.72

 

$

1.27

 

$

1.28

There were no anti-dilutive shares for the years ended December 31, 2017, 2016 and 2015. The one share of Class B common stock outstanding does not share in the earnings of RE/MAX Holdings and is therefore not a participating security. Accordingly, basic and diluted net income per share of Class B common stock has not been presented.

Dividends

Dividends declared and paid to holders of the Company’s Class A common stock during the years ended December 31, 2017, 2016 and 2015 were $12.7 million, $10.6 million and $24.0 million, respectively. Dividends declared and paid quarterly per share on all outstanding shares of Class A common stock during the years ended December 31, 2017, 2016 and 2015 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2017

 

2016

 

2015

 

 

Date paid

 

Per share

 

Date paid

 

Per share

 

Date paid

 

Per share

Dividend declared during quarter ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31

 

March 22, 2017

 

$

0.18

 

 

March 23, 2016

 

$

0.15

 

April 8, 2015

 

$

1.625

June 30

 

May 31, 2017

 

 

0.18

 

 

June 2, 2016

 

 

0.15

 

June 4, 2015

 

 

0.125

September 30

 

August 30, 2017

 

 

0.18

 

 

August 31, 2016

 

 

0.15

 

September 3, 2015

 

 

0.125

December 31

 

November 29, 2017

 

 

0.18

 

 

December 1, 2016

 

 

0.15

 

November 27, 2015

 

 

0.125

 

 

 

 

$

0.72

 

 

 

 

$

0.60

 

 

 

$

2.00

On February 21, 2018, the Company’s Board of Directors declared a quarterly dividend of $0.20 per share on all outstanding shares of Class A common stock, which is payable on March 21, 2018 to stockholders of record at the close of business on March 7, 2018.

v3.8.0.1
Acquisitions and Dispositions
12 Months Ended
Dec. 31, 2017
Acquisitions and Dispositions  
Acquisitions and Dispositions

5. Acquisitions and Dispositions

Independent Region Acquisitions

RE/MAX, LLC has acquired certain key assets of several Independent Regions, including the franchise agreements issued by the Company permitting the sale of RE/MAX franchises in the corresponding regions as well as the franchise agreements between those Independent Regions and the franchisees.  RE/MAX, LLC acquired these assets in order to expand its owned and operated regional franchising operations.  Details of these acquisitions are outlined in the tables below. 

The Company funded RE/MAX of Georgia, Inc., RE/MAX of Kentucky/Tennessee, Inc., and RE/MAX of Southern Ohio, Inc., collectively (“RE/MAX Regional Services”) by refinancing its 2013 Senior Secured Credit Facility (See Note 9, Debt) and using cash from operations.  The Company used cash generated from operations to fund all other Independent Region acquisitions. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RE/MAX of Northern Illinois, Inc.

 

RE/MAX Regional Services

 

RE/MAX of New Jersey, Inc.

 

RE/MAX of Alaska, Inc.

 

RE/MAX of New York, Inc.

 

Acquisition date

 

November 15, 2017

 

December 15, 2016

 

December 1, 2016

 

April 1, 2016

 

February 22, 2016

 

Cash consideration (in thousands)

 

35,720

 

50,400

 

45,000

 

1,500

 

8,500

 

Status of accounting for the business combination

 

Preliminary(a)

 

Final as of December 31, 2017(b)

 

Final as of December 31, 2017(b)

 

Final as of December 31, 2016

 

Final as of December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions occurring during the current reporting period:

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related costs (in thousands)(c)

 

333

 

 

 

 

 

 

 

 

 

Revenue since acquisition date (in thousands)(d)

 

595

 

 

 

 

 

 

 

 

 

Weighted-average useful life of franchise agreements acquired

 

12.4

 

 

 

 

 

 

 

 


(a)

The preliminary estimated fair value of the assets acquired is subject to adjustments based on the Company’s final assessment of the fair values of the franchise agreements, which is the acquired asset with the highest likelihood of changing upon finalization of the valuation process.

(b)

As of December 31, 2017, the Company finalized its purchase allocations related to the acquisitions of RE/MAX Regional Services and RE/MAX of New Jersey.  Adjustments recorded during the measurement-period are calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined. The Company does not revise or adjust any prior period information. In finalizing the accounting for these acquisitions, adjustments were made during the year ended December 31, 2017 to the consolidated balance sheet to decrease “Goodwill” by $4.2 million with a corresponding increase to “Franchise agreements, net” of $4.2 million. The Company recognized a reduction in depreciation and amortization expense of $0.8 million during the year ended December 31, 2017 in connection with these measurement adjustments.

(c)

Includes transaction and integration costs such as legal, accounting, advisory and consulting fees for the year ended December 31, 2017 that are included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income.

(d)

Includes the amount of revenue of the acquiree since the acquisition date through the year ended December 31, 2017 that is included in the accompanying Consolidated Statements of Income. 

The franchise agreements acquired were valued using an income approach which utilizes level 3 inputs and are being amortized over a weighted-average useful life using the straight-line method. 

Full House Mortgage Connection, Inc.

Motto Franchising, LLC (“Motto Franchising”), a wholly-owned subsidiary of RE/MAX, LLC, was formed and developed to franchise mortgage brokerages. On September 12, 2016, Motto Franchising acquired certain assets of Full House Mortgage Connection, Inc. (“Full House”), a franchisor of mortgage brokerages that created concepts used to develop Motto, for initial cash consideration of $8.0 million. Motto Franchising, as a franchisor, grants each franchisee a license to use the Motto Mortgage brand, trademark, promotional and operating materials and concepts. The Company used cash generated from operations to initially fund the acquisition. Additional cash consideration may be required based on future revenues generated. The contingent purchase consideration and its subsequent valuation is more fully described in Note 10, Fair Value Measurements.

The following table summarizes the estimated consideration transferred at the acquisition (in thousands):

 

 

 

Cash consideration

$

8,000

Contingent purchase consideration (See note 10)

 

6,300

Total purchase price

$

14,300

The following table summarizes the allocation of the purchase price to the fair value of assets acquired for the aforementioned acquisitions (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RE/MAX of Northern Illinois

 

RE/MAX Regional Services

 

RE/MAX of New Jersey

 

Full House

 

RE/MAX of Alaska

 

RE/MAX of New York

 

Total

Cash and cash equivalents

 

$

 -

 

$

 -

 

$

335

 

$

 -

 

$

 -

 

$

131

 

$

466

Franchise agreements

 

 

23,500

 

 

30,700

 

 

29,700

 

 

 -

 

 

529

 

 

5,000

 

 

89,429

Non-compete agreement

 

 

 -

 

 

 -

 

 

 -

 

 

2,500

 

 

 -

 

 

 -

 

 

2,500

Other assets

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

340

 

 

340

Goodwill

 

 

12,220

 

 

19,700

 

 

15,300

 

 

11,800

 

 

971

 

 

3,029

 

 

63,020

Other liabilities

 

 

 -

 

 

 -

 

 

(335)

 

 

 -

 

 

 -

 

 

 -

 

 

(335)

Total purchase price

 

$

35,720

 

$

50,400

 

$

45,000

 

$

14,300

 

$

1,500

 

$

8,500

 

$

155,420

Each of these constitute a business and were accounted for using the fair value acquisition method.  The total purchase price for all acquisitions was allocated to the assets acquired based on their estimated fair values. The excess of the total purchase price over the estimated fair value of the identifiable assets acquired was recorded as goodwill. The goodwill recognized for all acquisitions is attributable to expected synergies and projected long-term revenue growth. All of the goodwill recognized is tax deductible.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the acquisition of RE/MAX of Northern Illinois had occurred on January 1, 2016 and the acquisitions of RE/MAX Regional Services, RE/MAX of New Jersey, RE/MAX of Alaska and RE/MAX of New York had occurred on January 1, 2015.  The historical financial information has been adjusted to give effect to events that are (1) directly attributed to the acquisitions, (2) factually supportable and (3) expected to have a continuing impact on the combined results, including additional amortization expense associated with the valuation of the acquired franchise agreements. This unaudited pro forma information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the acquisitions had actually occurred on that date, nor of the results that may be obtained in the future.

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

2017

 

2016

 

2015

 

(in thousands, except per share amounts)

Total revenue

$

199,769

 

$

192,594

 

$

189,397

Net income attributable to RE/MAX Holdings, Inc. (a)

$

13,035

 

$

23,533

 

$

16,746

Basic earnings per common share

$

0.74

 

$

1.33

 

$

1.32

Diluted earnings per common share

$

0.74

 

$

1.33

 

$

1.31


(a)

Year ended December 31, 2016 includes the net impact of $1.0 million in professional fees and debt extinguishment costs incurred related to the amendment of the Company’s credit facility. See Note 9, Debt for a discussion of the credit facility.

Dispositions

Sacagawea, LLC d/b/a RE/MAX Equity Group

On December 31, 2015, the Company sold certain operating assets and liabilities related to 12 owned brokerage offices located in the U.S., of Sacagawea, LLC d/b/a RE/MAX Equity Group (“RE/MAX Equity Group”), a wholly owned subsidiary of the Company. The Company recognized a gain on the sale of the assets of approximately $2.8 million during the fourth quarter of 2015, which is reflected in “Loss (gain) on sale or disposition of assets, net” in the accompanying Consolidated Statements of Income. In connection with this sale, the Company transferred separate office franchise agreements to the purchaser, under which the Company will receive ongoing monthly continuing franchise fees, broker fees and franchise sales revenue. During the third quarter of 2017, the Company recognized a loss of approximately $0.5 million as a revised estimate of the final settlement on certain provisions of the asset sale agreement which is reflected in the “Loss (gain) on sale or disposition of assets, net” in the accompanying Consolidated Statements of Income.

RB2B, LLC d/b/a RE/MAX 100

On April 10, 2015, the Company sold certain operating assets and liabilities related to six owned brokerage offices located in the U.S., of RB2B, LLC d/b/a RE/MAX 100 (“RE/MAX 100”), a wholly owned subsidiary of the Company. The Company recognized a gain on the sale of the assets and the liabilities transferred of $0.6 million during the second quarter of 2015, which is reflected in “Loss (gain) on sale or disposition of assets, net” in the accompanying Consolidated Statements of Income. In connection with this sale, the Company transferred separate office franchise agreements to the purchaser, under which the Company will receive ongoing monthly continuing franchise fees, broker fees and franchise sales revenue. 

v3.8.0.1
Property and Equipment
12 Months Ended
Dec. 31, 2017
Property and Equipment  
Property and Equipment

6. Property and Equipment

Property and equipment consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 

 

    

Depreciable Life

    

2017

    

2016

Leasehold improvements

    

Shorter of estimated useful life or life of lease

 

$

3,227

 

$

3,063

Office furniture, fixtures and equipment

 

1 - 10 years

 

 

12,004

 

 

11,824

 

 

 

 

 

15,231

 

 

14,887

Less accumulated depreciation

 

 

 

 

(12,326)

 

 

(12,196)

 

 

 

 

$

2,905

 

$

2,691

Depreciation expense was $0.9 million,  $0.9 million and $1.0 million for the years ended December 31, 2017,  2016 and 2015, respectively.

v3.8.0.1
Intangible Assets and Goodwill
12 Months Ended
Dec. 31, 2017
Intangible Assets and Goodwill  
Intangible Assets and Goodwill

7. Intangible Assets and Goodwill

The following table provides the components of the Company’s intangible assets (in thousands, except weighted average amortization period in years):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Weighted

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Average

 

As of December 31, 2017

 

As of December 31, 2016

 

 

Amortization

 

Initial

 

Accumulated

 

Net

 

Initial

 

Accumulated

 

Net

 

 

Period

 

Cost

 

Amortization

 

Balance

 

Cost

 

Amortization

 

Balance

Franchise agreements

 

12.5

 

$

181,567

 

$

(62,218)

 

$

119,349

 

$

224,167

 

$

(115,027)

 

$

109,140

Other intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software (a)

 

4.6

 

$

13,762

 

$

(8,111)

 

$

5,651

 

$

13,207

 

$

(7,154)

 

$

6,053

Trademarks

 

10.2

 

 

1,539

 

 

(902)

 

 

637

 

 

3,102

 

 

(1,782)

 

 

1,320

Non-compete

 

10.0

 

 

2,500

 

 

(312)

 

 

2,188

 

 

2,500

 

 

(62)

 

 

2,438

Total other intangible assets

 

6.4

 

$

17,801

 

$

(9,325)

 

$

8,476

 

$

18,809

 

$

(8,998)

 

$

9,811


(a)

As of December 31, 2017 and December 31, 2016, capitalized software development costs of $0.6 million and $0.4 million, respectively, were recorded in “Other intangible assets” in the accompanying Consolidated Balance Sheets. As of these dates, the associated information technology infrastructure projects were not complete and ready for their intended use and thus were not subject to amortization.

Amortization expense was $19.6 million,  $15.2 million and $14.1 million for the years ended December 31, 2017,  2016 and 2015, respectively. Amounts for the year ended December 31, 2017 include the franchise agreement measurement period adjustment of $0.8 million. Refer to Note 5, Acquisitions and Dispositions for additional information.

As of December 31, 2017, the estimated future amortization expense for the next five years related to intangible assets with definite lives is as follows (in thousands):

 

 

 

 

Year ending December 31:

    

 

 

2018

 

$

17,614

2019

    

 

17,482

2020

 

 

17,288

2021

 

 

16,775

2022

 

 

14,511

 

 

$

83,670

The following table presents changes to goodwill for the period from January 1, 2016 to December 31, 2017 (in thousands):

 

 

 

 

Balance, January 1, 2016

 

$

71,871

Goodwill recognized related to acquisitions

 

 

54,665

Effect of changes in foreign currency exchange rates

 

 

97

Balance, December 31, 2016

    

 

126,633

Goodwill recognized related to current year acquisitions

 

 

12,220

Adjustments to acquisition accounting during the measurement period

 

 

(3,865)

Effect of changes in foreign currency exchange rates

 

 

225

Balance, December 31, 2017

 

$

135,213

 

v3.8.0.1
Accrued Liabilities
12 Months Ended
Dec. 31, 2017
Accrued Liabilities.  
Accrued Liabilities

8. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

 

 

 

 

 

 

 

 

    

As of December 31,

 

 

2017

 

2016

Accrued payroll and related employee costs

 

$

3,874

 

$

7,035

Accrued taxes

 

 

1,635

 

 

1,554

Accrued professional fees

 

 

2,339

 

 

1,382

Other(a)

 

 

7,542

 

 

3,297

 

 

$

15,390

 

$

13,268


(a)

Other accrued liabilities include a $4.5 million payable in connection with the February 13, 2018 settlement resulting from the litigation matter concerning the Company’s 2013 acquisition of the net assets of Tails, Inc. (“Tails”), as discussed in Note 14, Commitments and Contingencies.

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Debt
12 Months Ended
Dec. 31, 2017
Debt  
Debt

9. Debt

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

 

 

 

 

 

 

 

 

 

    

As of December 31,

 

 

2017

 

2016

2016 Senior Secured Credit Facility

    

$

232,063

 

$

234,412

Less unamortized debt issuance costs

 

 

(1,780)

 

 

(2,076)

Less unamortized debt discount costs

 

 

(1,297)

 

 

(1,516)

Less current portion

 

 

(2,350)

 

 

(2,350)

 

 

$

226,636

 

$

228,470

Maturities of debt are as follows (in thousands):

 

 

 

 

Year Ending December 31:

 

 

2018

$

2,350

2019

 

2,350

2020

 

2,350

2021

 

2,350

2022

 

2,350

Thereafter

 

220,313

 

$

232,063

Senior Secured Credit Facility

On July 31, 2013, the Company entered into a new credit agreement with several lenders and administered by a bank, referred to herein as the “2013 Senior Secured Credit Facility.” The 2013 Senior Secured Credit Facility consisted of a $230.0 million term loan facility and a $10.0 million revolving loan facility.

On March 11, 2015, the 2013 Senior Secured Credit Facility was amended, providing for an increase to the maximum applicable margin for both London Interbank Offered Rate (“LIBOR”) and Alternate Base Rate (“ABR”) loans by 0.25%, and a modification of certain liquidity covenants in order to increase the amounts the Company may distribute in the form of dividends to its non-controlling unitholders and stockholders of its Class A common stock, referred to herein as the “First Amendment.” In connection with the First Amendment, the Company incurred costs of $1.1 million during the year ended December 31, 2015, of which $0.6 million was recorded as an unamortized debt discount and is being amortized over the remaining term of the 2013 Senior Secured Credit Facility and the remaining $0.5 million was expensed as incurred.

On November 22, 2016, the 2013 Senior Secured Credit Facility was further amended, providing for an increase in the revolving commitment by $20.0 million to a total of $30.0 million effective upon the acquisition of RE/MAX Regional Services, and also waived certain limitations on acquisitions in order to enable us to consummate such acquisition.

On December 15, 2016, the 2013 Senior Secured Credit Facility was amended and restated, referred to herein as the “2016 Senior Secured Credit Facility.” The 2016 Senior Secured Credit Facility consists of a $235.0 million term loan facility which matures on December 15, 2023 and a $10.0 million revolving loan facility which must be repaid on December 15, 2021. The proceeds provided by the term loan were used to refinance and repay existing indebtedness and fund the acquisition of RE/MAX Regional Services. In connection with the 2016 Senior Secured Credit Facility, the Company incurred costs of $3.5 million during the year ended December 31, 2016, of which $1.4 million was recorded in “Debt, net of current portion” in the accompanying Consolidated Balance Sheets and is being amortized to interest expense over the term of the 2016 Senior Secured Credit Facility and the remaining $2.1 million was expensed as incurred.

Borrowings under the term loans and revolving loans accrue interest, at our option on (a) LIBOR provided that LIBOR shall be no less than 0.75% plus a maximum applicable margin of 2.75% and, provided further, that LIBOR shall be adjusted for reserve requirements for eurocurrency liabilities, if any (the “Eurodollar Rate”) or (b) the greatest of (i) JPMorgan Chase Bank N.A.’s prime rate, (ii) the NYFRB Rate (as defined in the 2016 Senior Secured Credit Facility) plus 0.50% and (iii) the one-month Eurodollar Rate plus 1%, (such greatest rate, the “ABR”) plus, in each case, the applicable margin. The applicable margin for Eurodollar Rate loans is 2.75% and for ABR loans is 1.75%.

The 2013 Senior Secured Credit Facility required RE/MAX, LLC to repay term loans with 50% of excess cash flow at the end of the applicable year if its total leverage ratio as defined therein was in excess of 2.50:1.00, with such percentage decreasing as RE/MAX, LLC’s leverage ratio decreased. Under the 2013 Senior Secured Credit Facility, the Company was required to make principal payments out of excess cash flow, as well as from the proceeds of certain asset sales, proceeds from the issuance of indebtedness and from insurance recoveries. The Company made excess cash flow prepayments of $12.7 million and $7.3 million during the years ended December 31, 2016 and 2015, respectively. The Company accounted for the mandatory principal excess cash flow prepayments as early extinguishments of debt and recorded a loss during each of the years ended December 31, 2016 and 2015 of $0.1 million related to unamortized debt discount and issuance costs. 

The 2016 Senior Secured Credit Facility requires RE/MAX, LLC to repay term loans and reduce revolving commitments with (i) 100.0% of proceeds of any incurrence of additional debt not permitted by the 2016 Senior Secured Credit Facility, (ii) 100.0% of proceeds of asset sales and 100.0% of amounts recovered under insurance policies, subject to certain exceptions and a reinvestment right and (iii) 50.0% of excess cash flow at the end of the applicable fiscal year if RE/MAX, LLC’s total leverage ratio as defined in the 2016 Senior Secured Credit Facility is in excess of 3.25:1.00, with such percentage decreasing as RE/MAX, LLC’s leverage ratio decreases. No mandatory prepayment and commitment reduction is required if the total leverage ratio as defined by the 2016 Senior Secured Credit Facility as of the last day of such fiscal year is less than 2.75 to 1.0. The Company’s total leverage ratio was less than 2.75 to 1.0 as of December 31, 2017, and as a result, the Company does not expect to make an excess cash flow principal prepayment within the next 12-month period. Mandatory principal payments of approximately $0.6 million are due quarterly until the facility matures on December 15, 2023. The Company may make optional prepayments on the term loan facility at any time without penalty; however, no such optional prepayments were made during the year ended December 31, 2017.

As of December 31, 2017, the Company had $229.0 million of term loans outstanding, net of an unamortized discount and issuance costs, and no revolving loans outstanding under our 2016 Senior Secured Credit Facility. Whenever amounts are drawn under the revolving line of credit, the 2016 Senior Secured Credit Facility requires compliance with a leverage ratio and an interest coverage ratio. A commitment fee of 0.5% per annum accrues on the amount of unutilized revolving line of credit. As of December 31, 2017, no amounts were drawn on the revolving line of credit.

The 2016 Senior Secured Credit Facility requires compliance with certain operational and financial covenants to the extent the Company has an outstanding balance on its revolving loan facility at the end of each quarter. The Company did not have an outstanding balance on the revolving loan facility as of December 31, 2017 and 2016, as such, no operational or financial covenants were in effect.  The Company received certain limited waivers and extensions related to its obligation to deliver timely financial information.

v3.8.0.1
Fair Value Measurements
12 Months Ended
Dec. 31, 2017
Fair Value Measurements  
Fair Value Measurements

10. Fair Value Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, the Company follows a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

·

Level 1: Quoted prices for identical instruments in active markets.

·

Level 2: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations, in which all significant inputs are observable in active markets. The fair value of the Company’s debt reflects a Level 2 measurement and was estimated based on the amount that the Company would pay to enter into the identical liability, since quoted prices for the Company’s debt instruments are not available.

·

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Level 3 liabilities that are measured at fair value on a recurring basis consist of the Company’s contingent consideration related to the acquisition of Full House.

A summary of the Company’s liabilities measured at fair value on a recurring basis as of December 31, 2017 and 2016 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017

 

As of December 31, 2016

 

 

Fair Value

 

Level 1

 

Level 2

 

Level 3

 

Fair Value

 

Level 1

 

Level 2

 

Level 3

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

6,580

 

$

 -

 

$

 -

 

$

6,580

 

$

6,400

 

$

 -

 

$

 -

 

$

6,400

The Company is required to pay additional purchase consideration totaling eight percent of gross revenues generated by Motto for each year beginning October 1, 2017 through September 30, 2026 with no limitation as to the maximum payout. The fair value of the contingent purchase consideration represents the discounted cash payments that the Company expects to pay the former owner of Full House with respect to Motto. The Company measures this liability each reporting period and recognizes changes in fair value, if any, in earnings of the Company. Any changes are included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. 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 cash payments derived from anticipated gross revenues.

The table below presents a reconciliation of all assets and liabilities of the Company measured at fair value on a recurring basis using significant unobservable inputs for the period from January 1, 2016 to December 31, 2017 (in thousands): 

 

 

 

 

 

 

Fair Value of Contingent Consideration Liability

Balance at January 1, 2016

 

$

 -

Full House acquisition

 

 

6,300

Fair value adjustments

 

 

100

Balance at December 31, 2016

 

 

6,400

Fair value adjustments

 

 

180

Balance at December 31, 2017

 

$

6,580

The Company assesses categorization of liabilities by level at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer. There were no transfers between Levels 1,  2 and 3 during the year ended December 31, 2017.

The following table summarizes the carrying values and estimated fair value of the 2016 Senior Secured Credit Facility as of December 31, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

2017

 

2016

 

    

Carrying Amount

    

Fair Value     Level 2

    

Carrying Amount

    

Fair Value     Level 2

Senior Secured Credit Facility

    

$

228,986

 

$

232,933

 

$

230,820

 

$

233,240

 

v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Taxes  
Income Taxes

11. Income Taxes

“Income before provision for income taxes” as shown in the accompanying Consolidated Statements of Income is comprised of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

    

2017

 

2016

    

2015

Domestic

    

$

78,812

 

$

51,194

 

$

51,552

Foreign

 

 

11,943

 

 

11,305

 

 

11,253

Total

 

$

90,755

 

$

62,499

 

$

62,805

Components of the “Provision for income taxes” in the accompanying Consolidated Statements of Income consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

    

2017

    

2016

    

2015

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

3,568

 

$

8,002

 

$

5,451

Foreign

 

 

4,345

 

 

2,855

 

 

3,019

State and local

 

 

1,169

 

 

943

 

 

1,029

Total current expense

 

 

9,082

 

 

11,800

 

 

9,499

Deferred expense

 

 

 

 

 

 

 

 

 

Federal

 

 

45,934

 

 

3,222

 

 

2,333

Foreign

 

 

(9)

 

 

13

 

 

25

State and local

 

 

569

 

 

238

 

 

173

Total deferred expense

 

 

46,494

 

 

3,473

 

 

2,531

Provision for income taxes

 

$

55,576

 

$

15,273

 

$

12,030

The provision for income taxes is comprised of a provision for income taxes attributable to RE/MAX Holdings and to entities other than RE/MAX Holdings. The provision for income taxes attributable to RE/MAX Holdings includes all U.S. federal and state income taxes on RE/MAX Holdings’ proportionate share of RMCO’s net income. The provision for income taxes attributable to entities other than RE/MAX Holdings represents taxes imposed directly on RMCO and its subsidiaries, primarily foreign taxes that are allocated to the non-controlling interest.

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

    

 

2017

    

 

2016

    

 

2015

 

U.S. statutory tax rate

 

 

35.0

%

 

35.0

%

 

35.0

%

Increase due to state and local taxes, net of federal benefit

 

 

2.6

 

 

2.6

 

 

2.6

 

Effect of permanent differences

 

 

(0.1)

 

 

(0.2)

 

 

1.2

 

Income attributable to non-controlling interests

 

 

(12.5)

 

 

(14.1)

 

 

(19.7)

 

Other

 

 

0.2

 

 

1.1

 

 

0.1

 

Subtotal

 

 

25.2

 

 

24.4

 

 

19.2

 

Impact of reduction in TRA liability on non-controlling interests(a)

 

 

4.5

 

 

 -

 

 

 -

 

Effect of permanent difference – reduction in TRA liability(b)

 

 

(13.6)

 

 

 -

 

 

 -

 

Tax Cuts and Jobs Act rate change(c)

 

 

45.1

 

 

 -

 

 

 -

 

 

 

 

61.2

%

 

24.4

%

 

19.2

%


(a)

Reflects additional impact of non-controlling interest adjustment being on a larger base of income that includes the gain on reduction in TRA liability.

(b)

Reflects the impact of gain on TRA liability reduction, which is not taxable.

(c)

Reflects reduction in deferred tax assets and resulting increase in deferred tax expense due to U.S. Federal rate declining from 35% to 21%.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted.  The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a federal corporate rate reduction from 35% to 21%.  The Company’s effective tax rate includes a rate benefit attributable to the fact that the Company’s subsidiaries operate as a series of limited liability companies which are not themselves subject to federal income tax. Accordingly, the portion of the Company’s subsidiaries earnings attributable to the non-controlling interest are subject to tax when reported as a component of the non-controlling interests’ taxable income and are excluded from the Provision for Income Taxes. The reduction in the corporate tax rate from 35% to 21% resulted in substantial reductions to the Company’s deferred tax assets and the TRA liability. The deferred tax asset was reduced for the impact of the lower rate, resulting in a charge to “Provision for income taxes” in the accompanying Consolidated Statements of Income of $40.9 million. Correspondingly, the TRA liability was also reduced for the rate change, resulting in a benefit to operating income of $32.7 million. The net effect on net income was $8.2 million. 

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin 118, which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act for which the accounting under ASC 740, Income Taxes (“ASC 740”) is incomplete. To the extent that a company's accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before enactment of the Tax Cuts and Jobs Act.

As of December 31, 2017, we have completed the majority of our accounting for the tax effects of the Tax Cuts and Jobs Act. However, our analysis around the new foreign-derived intangible income (“FDII”) deduction is incomplete. As such, we have not estimated or included a provisional adjustment for deferred tax assets related to the FDII deduction.  Also, there is uncertainty around the depreciable life of qualified property as well as eligibility for accelerated depreciation after September 27, 2017. Therefore we have not estimated a provisional amount for deferred tax assets related to qualified property depreciation expense.  In addition, we also re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. However, we are still analyzing certain aspects of the Tax Cuts and Jobs Act and are refining our calculations, which could potentially affect the measurement of these balances.

Income taxes receivable (payable) were $0.7 million and $(0.4) million at December 31, 2017 and 2016, respectively.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the accompanying Consolidated Balance Sheets.

These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are summarized as follows (in thousands):

 

 

 

 

 

 

 

 

 

As of December 31, 

 

    

2017

    

2016

Long-term deferred tax assets

 

 

 

 

 

 

Goodwill, other intangibles and other assets

 

$

52,385

 

$

90,686

Imputed interest deduction pursuant to tax receivable agreements

 

 

3,052

 

 

8,483

Rent liabilities

 

 

1,878

 

 

2,037

Compensation and benefits

 

 

526

 

 

1,606

Allowance for doubtful accounts

 

 

687

 

 

979

Motto contingent liability

 

 

929

 

 

1,405

Deferred Revenue

 

 

171

 

 

 —

Other

 

 

393

 

 

855

Total long-term deferred tax assets

 

 

60,021

 

 

106,051

Long-term deferred tax liabilities

 

 

 

 

 

 

Property and equipment and other long lived assets

 

 

(1,021)

 

 

(414)

Total long-term deferred tax liabilities

 

 

(1,021)

 

 

(414)

Net long-term deferred tax assets

 

 

59,000

 

 

105,637

Total deferred tax assets and liabilities

 

$

59,000

 

$

105,637

Net deferred tax assets are also recorded related to differences between the financial reporting basis and the tax basis of RE/MAX Holdings’ proportionate share of the net assets of RMCO. Based on the Company’s historical taxable income and its expected future earnings, management evaluates the uncertainty associated with booking tax benefits and determined that the deferred tax assets are more likely than not to be realized, including evaluation of deferred tax liabilities and the expectation of future taxable income.

The Company does not believe it has any significant uncertain tax positions. Accordingly, the Company did not record any adjustments or recognize interest expense for uncertain tax positions for the years ended December 31, 2017, 2016 and 2015. In the future, if uncertain tax positions arise, interest and penalties will be accrued and included in the “Provision for income taxes” in the accompanying Consolidated Statements of Income.

The Company and its subsidiaries file, or will file, income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. RE/MAX Holdings will file its 2017 income tax return by October 15, 2018. RMCO is not subject to domestic federal income taxes as it is a flow-through entity; however, RMCO is still required to file an annual U.S. Return of Partnership Income.  With respect to state and local jurisdictions and countries outside of the U.S., the Company and its subsidiaries are typically subject to examination for three to four years after the income tax returns have been filed. As such, income tax returns filed since 2013 are subject to examination.

 

v3.8.0.1
Equity-Based Compensation
12 Months Ended
Dec. 31, 2017
Equity-Based Compensation  
Equity-Based Compensation

12. Equity-Based Compensation

The Company’s Board of Directors adopted the RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan (the “2013 Incentive Plan”), under which 3,576,466 shares are currently authorized. (See below for shares available for grant at December 31, 2017.) The 2013 Incentive Plan provides for the grant of incentive stock options to the Company’s employees, and for the grant of shares of the RE/MAX Holdings Class A common stock, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) which may have time-based or performance-based vesting criteria, dividend equivalent rights, cash-based awards and any combination thereof to employees, directors and consultants of the Company.

The Company recognizes equity-based compensation expense in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. The Company recognizes corporate income tax benefits relating to the exercise of options and vesting of restricted stock units in “Provision for income taxes” in the accompanying Consolidated Statements of Income.

Employee stock-based compensation expense under the Company’s 2013 Incentive Plan was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

2017

 

2016

 

2015

Expense from Time-based RSUs

$

2,523

 

$

2,330

 

$

1,453

Expense from Performance-based RSUs

 

377

 

 

 -

 

 

 -

Equity-based compensation expense

 

2,900

 

 

2,330

 

 

1,453

Tax benefit from equity-based compensation

 

(637)

 

 

(511)

 

 

(231)

Excess tax benefit from equity-based compensation

 

(324)

 

 

(261)

 

 

(2,770)

Net compensation cost

$

1,939

 

$

1,558

 

$

(1,548)

Time-based Restricted Stock Units

Time-based RSUs granted under the 2013 Incentive Plan are valued using the Company’s closing stock price on the date of grant. Grants awarded to the Company’s Board of Directors generally vest over a one year period. Grants awarded to the Company’s employees generally vest in annual installments over a three year period. Compensation expense is recognized on a straight line basis over the vesting period.

The following table summarizes equity-based compensation activity related to time-based RSUs for the year ended December 31, 2017:

 

 

 

 

 

 

 

    

Time-based restricted stock units

    

 

Weighted average grant date fair value per share

Balance, January 1, 2017

 

127,011

 

$

33.00

Granted

 

43,450

 

$

55.45

Shares vested (including tax withholding)(a)

 

(58,426)

 

$

33.03

Forfeited

 

(6,173)

 

$

41.94

Balance, December 31, 2017

 

105,862

 

$

41.67

 

 

 

 

 

 


(a)

Pursuant to the terms of the 2013 Incentive Plan, RSUs withheld by the Company for the payment of the employee's tax withholding related to an RSU vesting are added back to the pool of shares available for future awards.

The following table summarizes information about our RSU grants during the years ended December 31, 2017, 2016 and 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

 

2017

 

 

 

2016

 

 

2015

Weighted average grant date fair value per RSU granted

 

$

55.45

 

 

$

33.24

 

$

32.45

At December 31, 2017, there was $2.2 million of total unrecognized time-based RSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.52 years for time-based restricted stock units.

Performance-based Restricted Stock Units

Performance-based RSUs granted under the 2013 Incentive Plan are stock-based awards in which the number of shares ultimately received depends on the Company’s achievement of a specified revenue as well as the Company’s total shareholder return (“TSR”) relative to the TSR of all companies in the S&P SmallCap 600 Index over a three-year performance period. The number of shares that could be issued range from 0% to 150% of the participant’s target award.  Performance-based RSUs are valued on the date of grant using a Monte Carlo simulation for the TSR element of the award. The Company’s expense will be adjusted based on the estimated achievement of revenue versus target. Performance-based RSUs cliff-vest at the end of the three-year performance period. Compensation expense is recognized over the vesting period based on the Company’s estimated achievement against the revenue target. 

The following table summarizes equity-based compensation activity related to performance-based RSUs for year ended December 31, 2017:

 

 

 

 

 

 

 

    

Performance-based restricted stock units

    

 

Weighted average grant date fair value per share

Balance, January 1, 2017

 

 —

 

$

 —

Granted (a)

 

33,961

 

$

57.88

Forfeited

 

(2,130)

 

$

57.88

Balance, December 31, 2017

 

31,831

 

$

57.88


(a)

Represents the total participant target award.

At December 31, 2017 there was $0.9 million of total unrecognized performance-based RSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 2.00 years for performance-based RSUs.

After giving effect to all outstanding awards (assuming maximum achievement of performance goals for performance-based awards), there were 2,400,857 additional shares available for the Company to grant under the 2013 Incentive Plan as of December 31, 2017.

Stock Options

The 2013 Incentive Plan provides for the grant of stock options. As of December 31, 2017, there are no stock options outstanding. The Company received $0.1 million and $2.2 million in cash proceeds related to the exercise of stock options during the years ended December 31, 2016 and 2015, respectively. Upon the exercise of stock options, shares of Class A common stock are issued from authorized common shares. For the year ended December 31, 2017, there were no options exercised. The total intrinsic value of stock options exercised during the years ended December 31, 2016 and 2015 were $0.9 million and $19.2 million, respectively. As there were no  stock options exercised during the year ended December 31, 2017, there was no intrinsic value.

v3.8.0.1
Leadership Changes
12 Months Ended
Dec. 31, 2017
Leadership Changes  
Leadership Changes

 

13. Leadership Changes

On January 7, 2016, the Company’s former Chief Financial Officer and Chief Operating Officer entered into a separation and transition agreement pursuant to which he separated from the Company effective March 31, 2016. The Company incurred a total cost of $1.0 million, including $0.3 million of equity-based compensation expense, which was recorded to “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income during the year ended December 31, 2016.

On May 4, 2015, the Company’s former President entered into a retirement agreement with the Company pursuant to which he retired on August 10, 2015 and the Company agreed to provide retirement benefits over a 24-month period, beginning in September 2015. The Company recorded a liability for payments that will be made with a corresponding charge to “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. The Company incurred a total cost of $0.9 million, including $0.2 million of equity-based compensation expense, during the year ended December 31, 2015. 

On December 31, 2014, the Company’s former Chief Executive Officer retired and the Company agreed to provide severance and other related benefits over a 36-month period. The Company recorded a liability for payments that will be made with a corresponding charge to “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Income. The Company incurred a total cost of $3.6 million, including $1.0 million of equity-based compensation expense related to this retirement in 2014.

The Company’s severance and other related expenses incurred for leadership changes and restructuring activities were $1.1 million for each of the years ended December 31, 2016 and 2015, which is included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. No such expenses were recorded for the year ended December 31, 2017.

The following table presents a rollforward of the liability for the aforementioned leadership changes (in thousands):

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

2017

 

2016

Balance, January 1

    

$

964

    

$

1,973

Severance and other related expenses

 

 

 —

 

 

1,055

Accretion

 

 

19

 

 

59

Cash payments

 

 

(983)

 

 

(1,792)

Non-cash adjustment (a)

 

 

 —

 

 

(331)

Balance, December 31

 

$

 —

 

$

964


(a)   For the year ended December 31, 2016, the non-cash adjustment represents the non-cash equity-based compensation expense recorded for the accelerated vesting of restricted stock units pursuant to the terms of the separation and transition agreement entered into with the Company’s former Chief Financial Officer and Chief Operating Officer on January 7, 2016.

v3.8.0.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies.  
Commitments and Contingencies

14. Commitments and Contingencies

Commitments

The Company leases offices and equipment under noncancelable leases, subject to certain provisions for renewal options and escalation clauses.  Future minimum payments (including those allocated to an affiliate) under these leases and commitments, net of payments under sublease agreements, are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Rent Payments

 

Sublease Receipts

 

Total Cash Outflows

Year ending December 31:

 

 

 

 

 

 

 

 

 

2018

    

$

8,669

 

$

(847)

 

$

7,822

2019

 

 

8,783

 

 

(1,087)

 

 

7,696

2020

 

 

9,039

 

 

(873)

 

 

8,166

2021

 

 

8,868

 

 

(775)

 

 

8,093

2022

 

 

8,757

 

 

(804)

 

 

7,953

Thereafter

 

 

50,695

 

 

(2,209)

 

 

48,486

 

 

$

94,811

 

$

(6,595)

 

$

88,216

Minimum rent payments under noncancelable operating leases are recognized on a straight-line basis over the terms of the leases. Rent expense, excluding amounts related to gain or loss on sublease, was $7.8 million,  $7.5 million and $10.6 million for the years ended December 31, 2017,  2016 and 2015, respectively, net of amounts recorded under sublease agreements of $1.0 million,  $1.1 million and $1.2 million for the years ended December 31, 2017,  2016 and 2015, respectively.

In April 2010, the Company entered into an 18-year lease for its corporate headquarters office building (the “Master Lease”). The Company may, at its option, extend the Master Lease for two renewal periods of 10 years. Under the terms of the Master Lease, the Company pays an annual base rent, which escalates 3% each year, including the first optional renewal period. The first year of the second optional renewal period is at a fair market rental value, and the rent escalates 3% each year until expiration. The Company pays for operating expenses in connection with the ownership, maintenance, operation, upkeep and repair of the leased space. The Company may assign or sublet an interest in the Master Lease only with the approval of the landlord.

Upon entering into the Master Lease, the Company became the primary lessee for all facilities located on the headquarters property.  The following subleases resulted in a gain (loss) on sublease during the year ended December 31, 2017:

 

 

 

 

 

 

 

Execution Date

 

End Date

 

2017 (Loss) Gain on Sublease
(in thousands)

 

May 2017

 

April 2028

 

$

(173)

 

August 2017

 

January 2025

 

 

(3,725)

 

September 2017

 

August 2024

 

 

294

(a)

 

 

 

 

$

(3,604)

 


(a)

During the year ended December 31, 2013 the Company entered into a sublease agreement with a tenant and recognized a loss related to the subleased office space of $1.2 million.  In September 2017 the Company amended this sublease agreement and the existing liability was reduced, resulting in a net gain of $0.3 million during the year ended December 31, 2017.

As of December 31, 2017 and 2016, the liability related to the aforementioned sublease agreements was approximately $3.9 million and $0.8 million, respectively, and is included in “Other liabilities, net of current portion” in the accompanying Consolidated Balance Sheets.

Contingencies 

In connection with the Purchase of Full House, as described in Note 5, Acquisitions and Dispositions the Company entered into an arrangement to pay additional purchase consideration based on Motto’s future gross revenues, excluding certain fees, for each year beginning October 1, 2017 through September 30, 2026.  As of December 31, 2017, the short term portion of this liability was estimated to be $0.3 million and is recorded in “Accrued liabilities” in the accompanying Consolidated Balance Sheets. The long-term portion of this liability was estimated to be $6.3 million and is recorded in “Other liabilities, net of current portion” in the accompanying Consolidated Balance Sheets.

In connection with the sale of the assets and liabilities related to the Company’s owned brokerage offices as described in Note 5, Acquisitions and Dispositions the Company entered into three Assignment and Assumption of Leases Agreements (the “Assignment Agreements”) pursuant to which the Company assigned its obligations under and rights, title and interest in 21 leases to the respective purchasers. For certain leases, the Company remains secondarily liable for future lease payments through July 2021 under the respective lease agreements and accordingly, as of December 31, 2017, the Company has outstanding lease guarantees of $3.7 million. This amount represents the maximum potential amount of future payments under the respective lease guarantees.

In addition, the Company maintains a self-insurance program for health benefits. As of December 31, 2017 and 2016, the Company recorded a liability of $0.4 million and $0.3 million, respectively, related to this program.

Litigation

The Company is subject to litigation claims arising in the ordinary course of business. The Company believes that it has adequately accrued for legal matters as appropriate. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred.

On October 7, 2013, RE/MAX Holdings acquired the net assets, excluding cash, of Tails for consideration paid of $20.2 million. Following earlier litigation that was dismissed, several shareholders of Tails filed a complaint entitled Robert B. Fisher, Carla L. Fisher, Bradley G. Rhodes and James D. Schwartz v. Gail Liniger, Dave Liniger, Bruce Benham, RE/MAX Holdings, Inc. and Tails Holdco, Inc. in Denver District Court ("Tails II").  On February 13, 2018, the parties signed a formal Settlement Agreement and Mutual General Release resulting in the Company recording a charge of $2.6 million in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income during the year ended December 31, 2017.  On February 27, 2018 the Company received $1.9 million from its insurance carriers as reimbursement of attorneys’ fees and a portion of the settlement.  On February 28, 2018, the Company paid $4.5 million to satisfy the terms of the Settlement Agreement.  As a result of the settlement, the litigation was dismissed with prejudice on March 1, 2018. 

The Company believes other such litigation matters involving a reasonably possible chance of loss will not, individually or in the aggregate, result in a material adverse effect on the Company's financial condition, results of operations and cash flows.

v3.8.0.1
Defined-Contribution Savings Plan
12 Months Ended
Dec. 31, 2017
Defined-Contribution Savings Plan.  
Defined-Contribution Savings Plan

 

15. Defined-Contribution Savings Plan

The Company sponsors an employee retirement plan (the “401(k) Plan”) that provides certain eligible employees of the Company an opportunity to accumulate funds for retirement. The Company provides matching contributions on a discretionary basis. During the years ended December 31, 2017,  2016 and 2015, the Company recognized expense of $1.5 million,  $1.4 million and $1.3 million, respectively, for matching contributions to the 401(k) Plan.

v3.8.0.1
Related-Party Transactions
12 Months Ended
Dec. 31, 2017
Related Party Transactions  
Related-Party Transactions

 

16. Related-Party Transactions

The majority stockholders of RIHI, including the Company’s current Chairman and Co-Founder and the Company’s Vice Chair and Co-Founder have made and continue to make a golf course they own available to the Company for business purposes. The Company used the golf course and related facilities for business purposes at minimal charge in 2017, 2016 and 2015.  Additionally, the Company recorded expense of $0.5 million, $0.5 million and $0.4 million for the value of the benefits provided to Company personnel for the complimentary use of the golf course during the years ended December 31, 2017, 2016 and 2015, respectively, with an offsetting increase in additional paid in capital.  See Note 18, Immaterial Corrections to Prior Period Financial Statements for further discussion regarding the amounts recorded for the years ended December 31, 2016 and 2015.

The Company provides services, such as accounting, legal, marketing, technology, human resources and public relations services, to certain affiliated entities (primarily the advertising funds), and it allows these companies to share its leased office space. During the years ended December 31, 2017, 2016 and 2015, the total amounts allocated for services rendered and rent for office space provided on behalf of affiliated entities were $3.4 million, $2.0 million and $1.7 million, respectively.  Amounts are generally paid within 30 days and no material amounts were outstanding to or from these affiliated entities at December 31, 2017 and 2016. 

Related party advertising funds had current outstanding amounts due from the Company of $0.1 million as of both December 31, 2017 and 2016. Such amounts are included in “Accounts payable” in the accompanying Consolidated Balance Sheets.

v3.8.0.1
Quarterly Financial Information
12 Months Ended
Dec. 31, 2017
Quarterly Financial Information (unaudited)  
Quarterly Financial Information (unaudited)

 

17. Quarterly Financial Information (unaudited)

Summarized quarterly results for the years ended December 31, 2017 and 2016 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Quarter Ended

 

    

March 31, 2017

    

June 30, 2017

    

September 30, 2017

    

December 31, 2017(a)

 

 

 

(in thousands, except shares and per share amounts)

Total revenue

 

$

48,229

 

$

48,819

 

$

49,377

 

$

49,504

Total operating expenses

 

 

32,777

 

 

26,022

 

 

36,569

 

 

336

Operating income

 

 

15,452

 

 

22,797

 

 

12,808

 

 

49,168

Total other expenses, net

    

 

(2,351)

 

 

(2,398)

 

 

(2,180)

 

 

(2,541)

Income before provision for income taxes

 

 

13,101

 

 

20,399

 

 

10,628

 

 

46,627

Provision for income taxes

 

 

(3,030)

 

 

(4,762)

 

 

(3,091)

 

 

(44,693)

Net income

 

 

10,071

 

 

15,637

 

 

7,537

 

 

1,934

Less: net income attributable to non-controlling interest

 

 

5,159

 

 

8,108

 

 

3,702

 

 

5,395

Net income (loss) attributable to RE/MAX Holdings, Inc.

 

$

4,912

 

$

7,529

 

$

3,835

 

$

(3,461)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.43

 

$

0.22

 

$

(0.20)

Diluted

 

$

0.28

 

$

0.42

 

$

0.22

 

$

(0.20)

Weighted average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,662,842

 

 

17,696,842

 

 

17,696,991

 

 

17,696,991

Diluted

 

 

17,716,013

 

 

17,723,802

 

 

17,737,786

 

 

17,747,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Quarter Ended

 

    

March 31, 2016

    

June 30, 2016

    

September 30, 2016

    

December 31, 2016

 

 

 

(in thousands, except shares and per share amounts)

Total revenue

 

$

42,917

 

$

43,404

 

$

45,559

 

$

44,422

Total operating expenses

 

 

27,061

 

 

22,955

 

 

24,417

 

 

30,052

Operating income

 

 

15,856

 

 

20,449

 

 

21,142

 

 

14,370

Total other expenses, net

 

 

(2,202)

 

 

(2,036)

 

 

(2,204)

 

 

(2,876)

Income before provision for income taxes

 

 

13,654

 

 

18,413

 

 

18,938

 

 

11,494

Provision for income taxes

 

 

(3,259)

 

 

(4,285)

 

 

(4,632)

 

 

(3,097)

Net income

 

 

10,395

 

 

14,128

 

 

14,306

 

 

8,397

Less: net income attributable to non-controlling interest

 

 

5,456

 

 

7,314

 

 

7,520

 

 

4,540

Net income attributable to RE/MAX Holdings, Inc.

 

$

4,939

 

$

6,814

 

$

6,786

 

$

3,857

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.39

 

$

0.38

 

$

0.22

Diluted

 

$

0.28

 

$

0.39

 

$

0.38

 

$

0.22

Weighted average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,584,351

 

 

17,636,590

 

 

17,645,696

 

 

17,647,930

Diluted

 

 

17,638,667

 

 

17,668,995

 

 

17,691,641

 

 

17,706,070


(a)  The quarterly results for the quarter ended December 31, 2017 were impacted by the Tax Cuts and Jobs Act enacted in December 2017.  The reduction in the corporate tax rate from 35% to 21% resulted in comparable reductions in both the deferred tax asset amounts and the TRA liabilities. See Note 11, Income Taxes for further information on the impact of the Tax Cuts and Jobs Act.

 

v3.8.0.1
Subsequent Events
12 Months Ended
Dec. 31, 2017
Subsequent Events  
Subsequent Events

19. Subsequent Events

Separation Agreement

On February 9, 2018, the Company announced the retirement of the Company’s President. The President will remain with the Company as a Senior Advisor through June 30, 2018. The Company entered into a Separation Agreement with the President, and pursuant to the terms of this agreement, the Company accrued a total cost of approximately $1.9 million in the first quarter of 2018, which will be paid over a 39-month period.

Booj Acquisition

On February 26, 2018, RE/MAX, LLC acquired certain assets of booj, a real estate technology company, for cash consideration of $26.3 million, plus up to $10.0 million in equity-based compensation to be earned over time.  RE/MAX, LLC acquired these assets in order to deliver core technology solutions designed for and with RE/MAX affiliates.  The Company used cash generated from operations to fund the acquisition. The assets acquired constitute a business that will be accounted for using the fair value acquisition method.  The total purchase price will be allocated to the assets acquired and liabilities assumed based on their estimated fair values. Due to the timing of this acquisition, the Company has not completed a preliminary purchase price allocation.

v3.8.0.1
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2017
Summary of Significant Accounting Policies  
Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements and notes thereto included in this Annual Report on Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The accompanying consolidated financial statements are presented on a consolidated basis and include the accounts of RE/MAX Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of December 31, 2017 and 2016, the results of its operations and comprehensive income, changes in its stockholders’ equity and its cash flows for the years ended December 31, 2017, 2016 and 2015.

During 2017 and 2016, the Company completed the acquisitions of various independent regions. Their results of operations, cash flows and financial positions are included in the consolidated financial statements from their respective dates of acquisition. See Note 5, Acquisitions and Dispositions for additional information.

Reclassifications

Reclassifications

Certain items in the accompanying consolidated financial statements as of and for the years ended December 31, 2016 and 2015 have been reclassified to conform to the current year’s presentation. These reclassifications did not affect the Company’s consolidated results of operations.

Use of Estimates

Use of Estimates

The preparation of the accompanying 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant areas in which management uses assumptions include, among other things, the allowance for doubtful accounts, the estimated lives of intangible assets, amounts accrued for litigation matters, the fair value of assets acquired and liabilities assumed in business combinations, the accounting for income taxes, the fair value of reporting units used in the annual assessment of goodwill, the fair value of the contingent consideration and the amounts due to RIHI and Oberndorf Investments LLC (“Oberndorf”) pursuant to the terms of the tax receivable agreements (the “TRAs”) discussed in more detail in Note 3, Non-controlling Interest. Actual results could differ from those estimates.

Principles of Consolidation

Principles of Consolidation

As of December 31, 2017, RE/MAX Holdings owns 58.49% of the common membership units in RMCO, and, as its managing member, RE/MAX Holdings controls RMCO’s operations, management and activities. As a result, RE/MAX Holdings consolidates RMCO and records a non-controlling interest in the accompanying Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Consolidated Statements of Income and Consolidated Statements of Comprehensive Income, respectively.

Segment Reporting

Segment Reporting

Since the first quarter of 2016, the Company has operated in one reportable segment, Real Estate Franchise Services. The Company launched Motto in October 2016, and, while we operate through both RE/MAX and Motto as of December 31, 2017, due to the immateriality of revenue earned by Motto, we disclose only one reportable segment. 

Revenue Recognition

Revenue Recognition

The Company generates revenue from continuing franchise fees, annual dues, broker fees, franchise sales and other franchise revenue and, through January 2016, brokerage revenue. Revenue is recognized when there is persuasive evidence of an arrangement, the service has been rendered, the price is fixed or determinable and collection of the fees is reasonably assured.

Continuing Franchise Fees

The Company provides an ongoing trademark license, operational, training and administrative services and systems to franchisees, which include technology and tools designed to help the Company’s franchisees attract new or retain existing agents.  In addition, training, technology and other tools are provided to the agents within the network to enable them to enhance the service provided to home buyers and sellers.  RE/MAX continuing franchise fees principally consists of fixed fees earned monthly from franchisees on a per agent basis.  Motto continuing franchise fees are fixed contractual fees paid monthly by Motto franchisees.  Revenue from continuing franchise fees is recognized in income when it is earned and becomes due and payable, as stipulated in the related franchise agreements.

Annual Dues

Annual dues revenue represents amounts assessed to agents for membership affiliation in the RE/MAX network. The Company defers the annual dues revenue when billed and recognizes the revenue ratably over the 12-month period to which it relates. As of December 31, 2017 and 2016, the Company had deferred annual dues revenue totaling approximately $15.3 million and $14.2 million, respectively. Loan originators employed by Motto franchisees do not pay annual dues.

The activity in the Company’s annual dues deferred revenue consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

New billings

 

Revenue recognized

 

Balance at end of period

Year ended December 31, 2017

 

$

14,227

 

$

34,837

 

$

(33,767)

 

$

15,297

Year ended December 31, 2016

    

$

13,106

 

$

33,774

 

$

(32,653)

 

$

14,227

Year ended December 31, 2015

 

$

12,912

 

$

31,952

 

$

(31,758)

 

$

13,106

Broker Fees

Revenue from broker fees represents fees received from the Company’s franchise offices that are primarily based on a percentage of agents’ gross commission income. Revenue from broker fees is determined upon close of the home-sale transaction and recognized as revenue when the fees become due and payable, as stipulated in the related franchise agreements. Agents in certain regions existing prior to 2004, the year the Company began assessing broker fees, are generally “grandfathered” and continue to be exempt from paying a broker fee. As of December 31, 2017 grandfathered agents represented approximately 20% of total U.S. Company-owned agents. Motto franchisees do not pay any fees based on the number or dollar value of loans brokered.

Franchise Sales and Other Franchise Revenue

Franchise sales and other franchise revenue is primarily comprised of revenue from the sale or renewal of franchises, as well as other revenue including revenue from preferred marketing arrangements and with approved suppliers, and registration revenue from conventions held for agents and broker owners in the RE/MAX network.

Upon the sale of a franchise, the Company recognizes revenue from franchise sales when it has no significant continuing operational obligations, substantially all of the initial services have been performed by the Company and other conditions affecting consummation of the sale have been met. In the event the franchisee fails to perform under the franchise agreement or defaults on the purchase obligations, the Company has the right to reacquire the franchise and to resell or operate that specific franchise. Franchise sales revenue recognized during the years ended December 31, 2017,  2016 and 2015 was $10.8 million,  $8.8 million and $9.7 million, respectively.

Brokerage Revenue

As discussed in Note 5, Acquisitions and Dispositions the Company sold certain operating assets and liabilities of brokerage offices during 2015 and the first quarter of 2016 and, subsequent thereto, no longer operates any real estate brokerage offices and no longer recognizes brokerage revenue. Prior to the sale of the Company’s brokerage offices, brokerage revenue principally represented fees assessed by the Company-owned brokerages for services provided to their affiliated real estate agents. Because the independent contractors in the Company-owned brokerage offices operated as agents in a real estate transaction, the commissions earned and the related commission expenses paid to the agents were recorded on a net basis.

Selling, Operating and Administrative Expenses

Selling, Operating and Administrative Expenses

Selling, operating and administrative expenses primarily consist of personnel costs, including salaries, benefits, payroll taxes and other compensation expenses, professional fees, rent and related facility operations expense, as well as expenses for marketing, expanding and supporting the Company’s franchise and, through January 2016, brokerage operations.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include bank deposits and other highly liquid investments purchased with an original purchase maturity of three months or less.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of financial instruments, net of any allowances, including cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximate fair value due to their short-term nature.

Accounts and Notes Receivable

Accounts and Notes Receivable

Accounts receivable from the Company’s franchise operations are recorded at the time the Company bills under the terms of the franchise agreements and other contractual arrangements and do not bear interest. The Company provides limited financing of certain franchise sales through the issuance of notes receivable that either bear interest at a rate of prime plus 2% or at a stated amount, which is fixed at the inception of the note with the associated earnings recorded in “Interest income” in the accompanying Consolidated Statements of Income. Amounts collected on notes receivable are included in “Net cash provided by operating activities” in the accompanying Consolidated Statements of Cash Flows.

In circumstances where the Company has the contractual right to bill its franchisees, but where collectability is not sufficiently assured, the Company records a receivable and deferred revenue, which amounted to $1.2 and $1.0 million as of December 31, 2017 and 2016, respectively.

The Company records allowances against its accounts and notes 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 and are included as a component of “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. The allowance for doubtful accounts and notes receivable are the Company’s best estimate of the amount of probable credit losses, and is based on historical experience, industry and general economic conditions, and the attributes of specific accounts.

The activity in the Company’s allowances against accounts and notes receivable consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions/charges

 

 

 

 

 

 

Balance at

 

to cost and expense for

 

 

 

 

 

 

beginning of period

 

allowances for doubtful accounts

 

Deductions/write-offs

 

Balance at end of period

Year ended December 31, 2017

 

$

5,535

 

$

1,159

 

$

(491)

 

$

6,203

Year ended December 31, 2016

    

$

4,483

 

$

1,325

 

$

(273)

 

$

5,535

Year ended December 31, 2015

 

$

4,495

 

$

353

 

$

(365)

 

$

4,483

For the years ended December 31, 2017,  2016 and 2015, bad debt expense related to trade accounts and notes receivable was $1.1 million,  $1.2 million and $0.4 million, respectively, and is reflected in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income.

Accumulated Other Comprehensive Income (Loss), Foreign Operations and Foreign Currency Translation

Accumulated Other Comprehensive Income (Loss), Foreign Operations and Foreign Currency Translation

Accumulated other comprehensive income (loss) includes all changes in equity during a period that have yet to be recognized in income, except those resulting from transactions with stockholders and is comprised of foreign currency translation adjustments.

As of December 31, 2017,  the Company, directly and through its franchisees, conducted operations in over 100 countries and territories, including the U.S. and Canada.  

The functional currency for the Company’s domestic operations is the U.S. dollar and for its Canadian subsidiary is the Canadian Dollar. Assets and liabilities of the Canadian subsidiary are translated at the spot rate in effect at the applicable reporting date, and the consolidated statements of income and cash flows are translated at the average exchange rates in effect during the applicable period. Exchange rate fluctuations on translating consolidated foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are recorded as a component of “Accumulated other comprehensive income,” a separate component of stockholders’ equity, and periodic changes are included in comprehensive income. When the Company sells a part or all of its investment in a foreign entity resulting in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, it releases any related cumulative translation adjustment into net income.

Foreign currency denominated monetary assets and liabilities and transactions occurring in currencies other than the Company’s or the Company’s consolidated foreign subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Changes in exchange rates with respect to amounts recorded in the accompanying Consolidated Balance Sheets related to these non-functional currency transactions result in transaction gains and losses that are reflected in the accompanying Consolidated Statements of Income as “Foreign currency transaction gains (losses).” 

Property and Equipment

Property and Equipment

Property and equipment, including leasehold improvements, are initially recorded at cost. Depreciation is provided for on a straight-line method over the estimated useful lives of each asset class and commences when the property is placed in service. Amortization of leasehold improvements is provided for on a straight-line method over the estimated benefit period of the related assets or the lease term, if shorter.

Franchise Agreements and Other Intangible Assets

Franchise Agreements and Other Intangible Assets

The Company’s franchise agreements result from franchise rights acquired from Independent Region acquisitions and are initially recorded at fair value. The Company amortizes the franchise agreements over their estimated useful life on a straight-line basis.

The Company also purchases and develops software for internal use. Software development costs incurred during the application development stage as well as upgrades and enhancements that result in additional functionality are capitalized. Costs incurred during the preliminary project and post-implementation-operation stages are expensed as incurred. Software development costs are generally amortized over a term of three to five years. Purchased software licenses are amortized over their estimated useful lives.

In addition, the Company owns the principal trademarks, service marks and trade names that it uses in conjunction with operating its business. These intangible assets increase when the Company pays to file trademark applications in the U.S. and certain other jurisdictions globally. The Company’s trademarks are amortized on a straight-line basis over their estimated useful lives.

The Company reviews its franchise agreements and other intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated from such asset. If not recoverable, the excess of the carrying amount of an asset over its estimated discounted cash flows would be charged to operations as an impairment loss. For each of the years ended December 31, 2017,  2016 and 2015, there were no impairments indicated for such assets.

Goodwill

Goodwill

Goodwill is an asset representing the future economic benefits arising from the other assets acquired in a business combination that are not individually identified and separately recognized. The Company assesses goodwill for impairment at least annually or whenever an event occurs or circumstances change that would indicate impairment may have occurred at the reporting unit level. Reporting units are driven by the level at which segment management reviews operating results. The Company performs its required impairment testing annually on August 31.

The Company’s impairment assessment begins with a qualitative assessment to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount. The initial qualitative assessment includes comparing the overall financial performance of the reporting units against the planned results as well as other factors which might indicate that the reporting unit’s value has declined since the last assessment date. If it is determined in the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the standard two-step quantitative impairment test is performed. The first step of the quantitative impairment test consists of comparing the estimated fair value of each reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, then it is not considered impaired and no further analysis is required. If the first step of the quantitative impairment test indicates that the estimated fair value of a reporting unit is less than its carrying value, then impairment potentially exists and the second step of the quantitative impairment test is performed to measure the amount of goodwill impairment. Goodwill impairment exists when the estimated implied fair value of a reporting unit’s goodwill is less than its carrying value.

During 2017, 2016 and 2015, the Company performed the qualitative impairment assessment for all of its reporting units by evaluating, among other things, market and general economic conditions, entity-specific events, events affecting a reporting unit and the Company’s results of operations and key performance measures. Except for Motto, the fair value of our reporting units significantly exceeded their carrying values at our latest assessment date. Motto is a startup business and its fair value is tied primarily to franchise sales over the next several years. Failure to achieve targeted franchise sales would result in an impairment of this goodwill balance. 

The Company did not record any goodwill impairments during the years ended December 31, 2017,  2016 and 2015.

Income Taxes

Income Taxes

The Company accounts for income taxes under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Management periodically assesses the recoverability of its deferred tax assets based upon expected future earnings, future deductibility of the asset and changes in applicable tax laws and other factors. If management determines that it is not probable that the deferred tax asset will be fully recoverable in the future, a valuation allowance may be established for the difference between the asset balance and the amount expected to be recoverable in the future. The allowance will result in a charge to the Company’s Consolidated Statements of Income. Further, the Company records its income taxes receivable and payable based upon its estimated income tax liability.

RMCO complies with the requirements of the Internal Revenue Code that are applicable to limited liability companies that have elected to be treated as partnerships, which allow for the complete pass-through of taxable income or losses to RMCO’s unitholders, who are individually responsible for any federal tax consequences. Provision for Income Taxes includes the federal income tax obligation related to RE/MAX Holdings’ allocated portion of RMCO’s income. RMCO is subject to certain state and local taxes, and its global subsidiaries are subject to tax in certain jurisdictions.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Equity Based Compensation

Equity-Based Compensation

The Company recognizes compensation expense associated with equity-based compensation as a component of “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. All equity-based compensation is required to be measured at fair value on the grant date, is expensed over the requisite service, generally over a three-year period, and forfeitures are accounted for as they occur. The Company recognizes compensation expense on awards on a straight-line basis over the requisite service period for the entire award. Refer to Note 12, Equity-Based Compensation for additional discussion regarding details of the Company’s equity-based compensation plans.

New Accounting Pronouncements Not Yet Adopted

New Accounting Pronouncements Not Yet Adopted

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220), which adjusts the classification of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.  The standard is to be applied either in the period of adoption or retrospectively to each period effected by the Tax Cuts and Jobs Act.  The Company plans to adopt this ASU on January 1, 2019. As of December 31, 2017, the Company completed the majority of its accounting for the tax effects of the Tax Cuts and Jobs Act. The Company believes the amendments of ASU 2018-02 will not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. ASU 2017-04 is effective for annual and interim impairment tests beginning January 1, 2020 for the Company and is required to be adopted using a prospective approach. Early adoption is allowed for annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements and related disclosures.

Also in January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies when transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years, and interim reporting periods within those years, beginning January 1, 2018 for the Company and is required to be adopted using a prospective approach. Early adoption is permitted for transactions not previously reported in issued financial statements. The Company will determine the effect of the standard on its consolidated financial statements and related disclosures based on the facts and circumstances of each individual acquisition or disposal.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies classification for certain cash receipts and cash payments on the consolidated statements of cash flow. ASU 2016-15 is effective for fiscal years, and interim reporting periods within those years, beginning January 1, 2018 for the Company. The standard requires a retrospective transition method for each period presented. Under the new guidance, the contingent consideration payments related to the purchase of Full House Mortgage Connection, Inc. (“Full House”) will be classified as financing outflows up to the $6.3 million acquisition date fair value and any cash payments paid in excess of the acquisition date fair value will be classified as operating outflows. (See Note 5, Acquisitions and Dispositions.) The Company expects no material impact on its financial statements and related disclosures upon the adoption of this standard.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize the assets and liabilities that arise from all leases on the consolidated balance sheets. ASU 2016-02 is required to be adopted by the Company on January 1, 2019. Early adoption is permitted in any interim or annual reporting period. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company has not yet determined the effect of the standard on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), with several subsequent amendments, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The Company adopted this standard on January 1, 2018. The Company will use the modified retrospective transition method, which will result in restating each prior reporting period presented, fiscal years 2016 and 2017, in the year of adoption. Additionally, a cumulative effect adjustment will be recorded to the opening balance sheet as of the first day of fiscal year 2016, the earliest period presented.  The adoption of the new guidance will change the timing of recognition of franchise sales and franchise renewal revenue. Currently, the Company recognizes revenue upon completion of a sale or renewal. Under the new guidance, franchise sales and renewal revenue, which are included in “Franchise Sales and Other Franchise Revenue” in the Consolidated Statements of Income, will be recognized over the contractual term of the franchise agreement. The impact to both “Franchise Sales and Other Franchise Revenue” and “Operating Income” in the Consolidated Statements of Income for 2017 from this change will be a decrease of less than $2.0 million.  However, the Consolidated Balance Sheet as of December 31, 2017 will be adjusted in the first quarter of 2018 to reflect an increase in “Deferred revenue and deposits” of approximately $26.0 million.  The commissions related to franchise sales will be recorded as a contract asset and be recognized over the contractual term of the franchise agreement. Currently, the Company expenses the commissions upon franchise sale completion. The impact from this change to “Selling, operating and administrative expenses” and “Operating Income” in the Consolidated Statements of Income for 2017 is immaterial and the Consolidated Balance Sheet as of December 31, 2017 will be adjusted in the first quarter of 2018 to reflect an increase in “Total assets” of approximately $4.0 million.  The Company does not expect the adoption of the standard to have a material impact on other revenue streams.    

v3.8.0.1
Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2017
Summary of Significant Accounting Policies  
Schedule of Annual Dues Deferred Revenue

The activity in the Company’s annual dues deferred revenue consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

New billings

 

Revenue recognized

 

Balance at end of period

Year ended December 31, 2017

 

$

14,227

 

$

34,837

 

$

(33,767)

 

$

15,297

Year ended December 31, 2016

    

$

13,106

 

$

33,774

 

$

(32,653)

 

$

14,227

Year ended December 31, 2015

 

$

12,912

 

$

31,952

 

$

(31,758)

 

$

13,106

 

Schedule of Allowances Against Accounts and Notes Receivable

The activity in the Company’s allowances against accounts and notes receivable consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions/charges

 

 

 

 

 

 

Balance at

 

to cost and expense for

 

 

 

 

 

 

beginning of period

 

allowances for doubtful accounts

 

Deductions/write-offs

 

Balance at end of period

Year ended December 31, 2017

 

$

5,535

 

$

1,159

 

$

(491)

 

$

6,203

Year ended December 31, 2016

    

$

4,483

 

$

1,325

 

$

(273)

 

$

5,535

Year ended December 31, 2015

 

$

4,495

 

$

353

 

$

(365)

 

$

4,483

 

v3.8.0.1
Non-controlling Interest (Tables)
12 Months Ended
Dec. 31, 2017
Noncontrolling Interest  
Summary of Ownership of the Common Units

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 

2017

 

 

2016

 

 

    

Shares

    

Ownership %

    

 

Shares

    

Ownership %

 

Non-controlling interest ownership of common units in RMCO

 

12,559,600

 

41.51

%

 

12,559,600

 

41.57

%

RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO)

 

17,696,991

 

58.49

%

 

17,652,548

 

58.43

%

Total common units in RMCO

 

30,256,591

 

100.00

%

 

30,212,148

 

100.00

%

 

Reconciliation from Income Before Provision for Income Taxes to Net Income

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 Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except percentages): 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

2017

 

 

2016

 

 

2015

 

 

RE/MAX Holdings, Inc.

 

Non-controlling interest

 

Total

 

 

RE/MAX Holdings, Inc.

 

Non-controlling interest

 

Total

 

 

RE/MAX Holdings, Inc.

 

Non-controlling interest

 

Total

 

Weighted average ownership percentage of RMCO (a)

 

58.48

%

 

41.52

%

 

100.00

%

 

 

58.40

%

 

41.60

%

 

100.00

%

 

 

42.33

%

 

57.67

%

 

100.00

%

Income before provision for income taxes

$

66,599

 

$

24,156

 

$

90,755

 

 

$

36,446

 

$

26,053

 

$

62,499

 

 

$

26,554

 

$

36,251

 

$

62,805

 

Provision for income taxes (b)(c)

 

(53,784)

 

 

(1,792)

 

 

(55,576)

 

 

 

(14,050)

 

 

(1,223)

 

 

(15,273)

 

 

 

(10,142)

 

 

(1,888)

 

 

(12,030)

 

Net income

$

12,815

 

$

22,364

 

$

35,179

 

 

$

22,396

 

$

24,830

 

$

47,226

 

 

$

16,412

 

$

34,363

 

$

50,775

 


(a)

The weighted average ownership percentage of RMCO differs from the allocation of income before provision for income taxes between RE/MAX Holdings and the non-controlling interest due to certain relatively insignificant expenses and the gain on reduction in TRA liability in 2017 being recorded at RE/MAX Holdings.

(b)

The provision for income taxes attributable to RE/MAX Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the pass-through income from RMCO. However, it also includes its share of taxes directly incurred by RMCO and its subsidiaries, related primarily to tax liabilities in certain foreign jurisdictions. 

The provision for income taxes attributable to the non-controlling interest represents its share of taxes related primarily to tax liabilities in certain foreign jurisdictions directly incurred by RMCO or its subsidiaries.  Because RMCO is a pass-through entity there is no U.S. federal and state income tax provision recorded on the non-controlling interest.

Distributions Paid or Payable

The distributions paid or payable to or on behalf of non-controlling unitholders are summarized as follows (in thousands):

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31, 

 

 

2017

 

2016

Tax and other distributions

 

$

8,217

 

$

10,391

Dividend distributions

 

 

9,043

 

 

7,536

Total distributions to non-controlling unitholders

 

$

17,260

 

$

17,927

 

v3.8.0.1
Earnings Per Share and Dividends (Tables)
12 Months Ended
Dec. 31, 2017
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):

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

December 31, 

 

    

2017

    

2016

    

2015

Numerator

 

 

   

 

 

 

 

 

 

Net income attributable to RE/MAX Holdings, Inc.

 

$

12,815

 

$

22,396

 

$

16,412

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

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

17,688,533

 

 

17,628,741

 

 

12,671,051

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

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

17,688,533

 

 

17,628,741

 

 

12,671,051

Add dilutive effect of the following:

 

 

 

 

 

 

 

 

 

Stock options

 

 

 —

 

 

5,059

 

 

130,001

Restricted stock units

 

 

43,267

 

 

43,968

 

 

28,162

Weighted average shares of Class A common stock outstanding, diluted

 

 

17,731,800

 

 

17,677,768

 

 

12,829,214

Earnings per share of Class A common stock

 

 

 

 

 

 

 

 

 

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

 

$

0.72

 

$

1.27

 

$

1.30

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

 

$

0.72

 

$

1.27

 

$

1.28

 

Schedule of Dividends Declared and Paid Quarterly per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2017

 

2016

 

2015

 

 

Date paid

 

Per share

 

Date paid

 

Per share

 

Date paid

 

Per share

Dividend declared during quarter ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31

 

March 22, 2017

 

$

0.18

 

 

March 23, 2016

 

$

0.15

 

April 8, 2015

 

$

1.625

June 30

 

May 31, 2017

 

 

0.18

 

 

June 2, 2016

 

 

0.15

 

June 4, 2015

 

 

0.125

September 30

 

August 30, 2017

 

 

0.18

 

 

August 31, 2016

 

 

0.15

 

September 3, 2015

 

 

0.125

December 31

 

November 29, 2017

 

 

0.18

 

 

December 1, 2016

 

 

0.15

 

November 27, 2015

 

 

0.125

 

 

 

 

$

0.72

 

 

 

 

$

0.60

 

 

 

$

2.00

 

v3.8.0.1
Acquisitions and Dispositions (Tables)
12 Months Ended
Dec. 31, 2017
Acquisitions and Dispositions  
Schedule of details of acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RE/MAX of Northern Illinois, Inc.

 

RE/MAX Regional Services

 

RE/MAX of New Jersey, Inc.

 

RE/MAX of Alaska, Inc.

 

RE/MAX of New York, Inc.

 

Acquisition date

 

November 15, 2017

 

December 15, 2016

 

December 1, 2016

 

April 1, 2016

 

February 22, 2016

 

Cash consideration (in thousands)

 

35,720

 

50,400

 

45,000

 

1,500

 

8,500

 

Status of accounting for the business combination

 

Preliminary(a)

 

Final as of December 31, 2017(b)

 

Final as of December 31, 2017(b)

 

Final as of December 31, 2016

 

Final as of December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions occurring during the current reporting period:

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related costs (in thousands)(c)

 

333

 

 

 

 

 

 

 

 

 

Revenue since acquisition date (in thousands)(d)

 

595

 

 

 

 

 

 

 

 

 

Weighted-average useful life of franchise agreements acquired

 

12.4

 

 

 

 

 

 

 

 


(a)

The preliminary estimated fair value of the assets acquired is subject to adjustments based on the Company’s final assessment of the fair values of the franchise agreements, which is the acquired asset with the highest likelihood of changing upon finalization of the valuation process.

(b)

As of December 31, 2017, the Company finalized its purchase allocations related to the acquisitions of RE/MAX Regional Services and RE/MAX of New Jersey.  Adjustments recorded during the measurement-period are calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined. The Company does not revise or adjust any prior period information. In finalizing the accounting for these acquisitions, adjustments were made during the year ended December 31, 2017 to the consolidated balance sheet to decrease “Goodwill” by $4.2 million with a corresponding increase to “Franchise agreements, net” of $4.2 million. The Company recognized a reduction in depreciation and amortization expense of $0.8 million during the year ended December 31, 2017 in connection with these measurement adjustments.

(c)

Includes transaction and integration costs such as legal, accounting, advisory and consulting fees for the year ended December 31, 2017 that are included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income.

Includes the amount of revenue of the acquiree since the acquisition date through the year ended December 31, 2017 that is included in the accompanying Consolidated Statements of Income.

Summary of Estimated Fair Value of Assets at Acquisition Date

The following table summarizes the allocation of the purchase price to the fair value of assets acquired for the aforementioned acquisitions (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RE/MAX of Northern Illinois

 

RE/MAX Regional Services

 

RE/MAX of New Jersey

 

Full House

 

RE/MAX of Alaska

 

RE/MAX of New York

 

Total

Cash and cash equivalents

 

$

 -

 

$

 -

 

$

335

 

$

 -

 

$

 -

 

$

131

 

$

466

Franchise agreements

 

 

23,500

 

 

30,700

 

 

29,700

 

 

 -

 

 

529

 

 

5,000

 

 

89,429

Non-compete agreement

 

 

 -

 

 

 -

 

 

 -

 

 

2,500

 

 

 -

 

 

 -

 

 

2,500

Other assets

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

340

 

 

340

Goodwill

 

 

12,220

 

 

19,700

 

 

15,300

 

 

11,800

 

 

971

 

 

3,029

 

 

63,020

Other liabilities

 

 

 -

 

 

 -

 

 

(335)

 

 

 -

 

 

 -

 

 

 -

 

 

(335)

Total purchase price

 

$

35,720

 

$

50,400

 

$

45,000

 

$

14,300

 

$

1,500

 

$

8,500

 

$

155,420

 

Summary of Unaudited Pro Forma Information

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

2017

 

2016

 

2015

 

(in thousands, except per share amounts)

Total revenue

$

199,769

 

$

192,594

 

$

189,397

Net income attributable to RE/MAX Holdings, Inc. (a)

$

13,035

 

$

23,533

 

$

16,746

Basic earnings per common share

$

0.74

 

$

1.33

 

$

1.32

Diluted earnings per common share

$

0.74

 

$

1.33

 

$

1.31


(a)

Year ended December 31, 2016 includes the net impact of $1.0 million in professional fees and debt extinguishment costs incurred related to the amendment of the Company’s credit facility. See Note 9, Debt for a discussion of the credit facility.

Full House Mortgage Connection, Inc.  
Acquisitions and Dispositions  
Consideration Transferred

The following table summarizes the estimated consideration transferred at the acquisition (in thousands):

 

 

 

Cash consideration

$

8,000

Contingent purchase consideration (See note 10)

 

6,300

Total purchase price

$

14,300

 

v3.8.0.1
Property and Equipment (Tables)
12 Months Ended
Dec. 31, 2017
Property and Equipment  
Property and Equipment

Property and equipment consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 

 

    

Depreciable Life

    

2017

    

2016

Leasehold improvements

    

Shorter of estimated useful life or life of lease

 

$

3,227

 

$

3,063

Office furniture, fixtures and equipment

 

1 - 10 years

 

 

12,004

 

 

11,824

 

 

 

 

 

15,231

 

 

14,887

Less accumulated depreciation

 

 

 

 

(12,326)

 

 

(12,196)

 

 

 

 

$

2,905

 

$

2,691

 

v3.8.0.1
Intangible Assets and Goodwill (Tables)
12 Months Ended
Dec. 31, 2017
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 December 31, 2017

 

As of December 31, 2016

 

 

Amortization

 

Initial

 

Accumulated

 

Net

 

Initial

 

Accumulated

 

Net

 

 

Period

 

Cost

 

Amortization

 

Balance

 

Cost

 

Amortization

 

Balance

Franchise agreements

 

12.5

 

$

181,567

 

$

(62,218)

 

$

119,349

 

$

224,167

 

$

(115,027)

 

$

109,140

Other intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software (a)

 

4.6

 

$

13,762

 

$

(8,111)

 

$

5,651

 

$

13,207

 

$

(7,154)

 

$

6,053

Trademarks

 

10.2

 

 

1,539

 

 

(902)

 

 

637

 

 

3,102

 

 

(1,782)

 

 

1,320

Non-compete

 

10.0

 

 

2,500

 

 

(312)

 

 

2,188

 

 

2,500

 

 

(62)

 

 

2,438

Total other intangible assets

 

6.4

 

$

17,801

 

$

(9,325)

 

$

8,476

 

$

18,809

 

$

(8,998)

 

$

9,811


(a)

As of December 31, 2017 and December 31, 2016, capitalized software development costs of $0.6 million and $0.4 million, respectively, were recorded in “Other intangible assets” in the accompanying Consolidated Balance Sheets. As of these dates, the associated information technology infrastructure projects were not 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

As of December 31, 2017, the estimated future amortization expense for the next five years related to intangible assets with definite lives is as follows (in thousands):

 

 

 

 

Year ending December 31:

    

 

 

2018

 

$

17,614

2019

    

 

17,482

2020

 

 

17,288

2021

 

 

16,775

2022

 

 

14,511

 

 

$

83,670

 

Schedule of changes to goodwill

The following table presents changes to goodwill for the period from January 1, 2016 to December 31, 2017 (in thousands):

 

 

 

 

Balance, January 1, 2016

 

$

71,871

Goodwill recognized related to acquisitions

 

 

54,665

Effect of changes in foreign currency exchange rates

 

 

97

Balance, December 31, 2016

    

 

126,633

Goodwill recognized related to current year acquisitions

 

 

12,220

Adjustments to acquisition accounting during the measurement period

 

 

(3,865)

Effect of changes in foreign currency exchange rates

 

 

225

Balance, December 31, 2017

 

$

135,213

 

v3.8.0.1
Accrued Liabilities (Tables)
12 Months Ended
Dec. 31, 2017
Accrued Liabilities.  
Schedule of Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

 

 

 

 

 

 

 

 

    

As of December 31,

 

 

2017

 

2016

Accrued payroll and related employee costs

 

$

3,874

 

$

7,035

Accrued taxes

 

 

1,635

 

 

1,554

Accrued professional fees

 

 

2,339

 

 

1,382

Other(a)

 

 

7,542

 

 

3,297

 

 

$

15,390

 

$

13,268


(a)

Other accrued liabilities include a $4.5 million payable in connection with the February 13, 2018 settlement resulting from the litigation matter concerning the Company’s 2013 acquisition of the net assets of Tails, Inc. (“Tails”), as discussed in Note 14, Commitments and Contingencies.

v3.8.0.1
Debt (Tables)
12 Months Ended
Dec. 31, 2017
Debt  
Schedule of debt

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

 

 

 

 

 

 

 

 

 

    

As of December 31,

 

 

2017

 

2016

2016 Senior Secured Credit Facility

    

$

232,063

 

$

234,412

Less unamortized debt issuance costs

 

 

(1,780)

 

 

(2,076)

Less unamortized debt discount costs

 

 

(1,297)

 

 

(1,516)

Less current portion

 

 

(2,350)

 

 

(2,350)

 

 

$

226,636

 

$

228,470

 

Schedule of Maturities of Debt

Maturities of debt are as follows (in thousands):

 

 

 

 

Year Ending December 31:

 

 

2018

$

2,350

2019

 

2,350

2020

 

2,350

2021

 

2,350

2022

 

2,350

Thereafter

 

220,313

 

$

232,063

 

v3.8.0.1
Fair Value Measurements (Tables)
12 Months Ended
Dec. 31, 2017
Fair Value Measurements  
Liabilities Measured at Fair Value on a Recurring Basis

A summary of the Company’s liabilities measured at fair value on a recurring basis as of December 31, 2017 and 2016 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017

 

As of December 31, 2016

 

 

Fair Value

 

Level 1

 

Level 2

 

Level 3

 

Fair Value

 

Level 1

 

Level 2

 

Level 3

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

6,580

 

$

 -

 

$

 -

 

$

6,580

 

$

6,400

 

$

 -

 

$

 -

 

$

6,400

 

Reconciliation of Assets And Liabilities Measured Using Significant Unobservable Inputs

The table below presents a reconciliation of all assets and liabilities of the Company measured at fair value on a recurring basis using significant unobservable inputs for the period from January 1, 2016 to December 31, 2017 (in thousands): 

 

 

 

 

 

 

Fair Value of Contingent Consideration Liability

Balance at January 1, 2016

 

$

 -

Full House acquisition

 

 

6,300

Fair value adjustments

 

 

100

Balance at December 31, 2016

 

 

6,400

Fair value adjustments

 

 

180

Balance at December 31, 2017

 

$

6,580

 

Summary of carrying value and fair value of senior secured credit facility

The following table summarizes the carrying values and estimated fair value of the 2016 Senior Secured Credit Facility as of December 31, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

2017

 

2016

 

    

Carrying Amount

    

Fair Value     Level 2

    

Carrying Amount

    

Fair Value     Level 2

Senior Secured Credit Facility

    

$

228,986

 

$

232,933

 

$

230,820

 

$

233,240

 

v3.8.0.1
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2017
Income Taxes  
Schedule of Income Before Provision for Income Taxes

Income before provision for income taxes” as shown in the accompanying Consolidated Statements of Income is comprised of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

    

2017

 

2016

    

2015

Domestic

    

$

78,812

 

$

51,194

 

$

51,552

Foreign

 

 

11,943

 

 

11,305

 

 

11,253

Total

 

$

90,755

 

$

62,499

 

$

62,805

 

Schedule of Components of Provision for Income Taxes

Components of the “Provision for income taxes” in the accompanying Consolidated Statements of Income consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

    

2017

    

2016

    

2015

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

3,568

 

$

8,002

 

$

5,451

Foreign

 

 

4,345

 

 

2,855

 

 

3,019

State and local

 

 

1,169

 

 

943

 

 

1,029

Total current expense

 

 

9,082

 

 

11,800

 

 

9,499

Deferred expense

 

 

 

 

 

 

 

 

 

Federal

 

 

45,934

 

 

3,222

 

 

2,333

Foreign

 

 

(9)

 

 

13

 

 

25

State and local

 

 

569

 

 

238

 

 

173

Total deferred expense

 

 

46,494

 

 

3,473

 

 

2,531

Provision for income taxes

 

$

55,576

 

$

15,273

 

$

12,030

 

Schedule of Reconciliation of U.S. Statutory Income Tax Rate to Company's Effective Tax Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

    

 

2017

    

 

2016

    

 

2015

 

U.S. statutory tax rate

 

 

35.0

%

 

35.0

%

 

35.0

%

Increase due to state and local taxes, net of federal benefit

 

 

2.6

 

 

2.6

 

 

2.6

 

Effect of permanent differences

 

 

(0.1)

 

 

(0.2)

 

 

1.2

 

Income attributable to non-controlling interests

 

 

(12.5)

 

 

(14.1)

 

 

(19.7)

 

Other

 

 

0.2

 

 

1.1

 

 

0.1

 

Subtotal

 

 

25.2

 

 

24.4

 

 

19.2

 

Impact of reduction in TRA liability on non-controlling interests(a)

 

 

4.5

 

 

 -

 

 

 -

 

Effect of permanent difference – reduction in TRA liability(b)

 

 

(13.6)

 

 

 -

 

 

 -

 

Tax Cuts and Jobs Act rate change(c)

 

 

45.1

 

 

 -

 

 

 -

 

 

 

 

61.2

%

 

24.4

%

 

19.2

%


(a)

Reflects additional impact of non-controlling interest adjustment being on a larger base of income that includes the gain on reduction in TRA liability.

(b)

Reflects the impact of gain on TRA liability reduction, which is not taxable.

(c)

Reflects reduction in deferred tax assets and resulting increase in deferred tax expense due to U.S. Federal rate declining from 35% to 21%.

Summary of Deferred Tax Assets and Liabilities

These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are summarized as follows (in thousands):

 

 

 

 

 

 

 

 

 

As of December 31, 

 

    

2017

    

2016

Long-term deferred tax assets

 

 

 

 

 

 

Goodwill, other intangibles and other assets

 

$

52,385

 

$

90,686

Imputed interest deduction pursuant to tax receivable agreements

 

 

3,052

 

 

8,483

Rent liabilities

 

 

1,878

 

 

2,037

Compensation and benefits

 

 

526

 

 

1,606

Allowance for doubtful accounts

 

 

687

 

 

979

Motto contingent liability

 

 

929

 

 

1,405

Deferred Revenue

 

 

171

 

 

 —

Other

 

 

393

 

 

855

Total long-term deferred tax assets

 

 

60,021

 

 

106,051

Long-term deferred tax liabilities

 

 

 

 

 

 

Property and equipment and other long lived assets

 

 

(1,021)

 

 

(414)

Total long-term deferred tax liabilities

 

 

(1,021)

 

 

(414)

Net long-term deferred tax assets

 

 

59,000

 

 

105,637

Total deferred tax assets and liabilities

 

$

59,000

 

$

105,637

 

v3.8.0.1
Equity-Based Compensation (Tables)
12 Months Ended
Dec. 31, 2017
Employee Stock-Based Compensation Expense

Employee stock-based compensation expense under the Company’s 2013 Incentive Plan was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

2017

 

2016

 

2015

Expense from Time-based RSUs

$

2,523

 

$

2,330

 

$

1,453

Expense from Performance-based RSUs

 

377

 

 

 -

 

 

 -

Equity-based compensation expense

 

2,900

 

 

2,330

 

 

1,453

Tax benefit from equity-based compensation

 

(637)

 

 

(511)

 

 

(231)

Excess tax benefit from equity-based compensation

 

(324)

 

 

(261)

 

 

(2,770)

Net compensation cost

$

1,939

 

$

1,558

 

$

(1,548)

 

Time-based Restricted Stock Units  
Restricted Stock Units

The following table summarizes equity-based compensation activity related to time-based RSUs for the year ended December 31, 2017:

 

 

 

 

 

 

 

    

Time-based restricted stock units

    

 

Weighted average grant date fair value per share

Balance, January 1, 2017

 

127,011

 

$

33.00

Granted

 

43,450

 

$

55.45

Shares vested (including tax withholding)(a)

 

(58,426)

 

$

33.03

Forfeited

 

(6,173)

 

$

41.94

Balance, December 31, 2017

 

105,862

 

$

41.67

 

 

 

 

 

 


(a)

Pursuant to the terms of the 2013 Incentive Plan, RSUs withheld by the Company for the payment of the employee's tax withholding related to an RSU vesting are added back to the pool of shares available for future awards.

The following table summarizes information about our RSU grants during the years ended December 31, 2017, 2016 and 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

 

2017

 

 

 

2016

 

 

2015

Weighted average grant date fair value per RSU granted

 

$

55.45

 

 

$

33.24

 

$

32.45

 

Performance-based Restricted Stock Units  
Restricted Stock Units

 

 

 

 

 

 

 

    

Performance-based restricted stock units

    

 

Weighted average grant date fair value per share

Balance, January 1, 2017

 

 —

 

$

 —

Granted (a)

 

33,961

 

$

57.88

Forfeited

 

(2,130)

 

$

57.88

Balance, December 31, 2017

 

31,831

 

$

57.88


Represents the total participant target award.

v3.8.0.1
Leadership Changes (Tables)
12 Months Ended
Dec. 31, 2017
Leadership Changes  
Rollforward of Estimated Fair Value Liability Established for the Aforementioned Leadership Changes And Restructuring Activities

The following table presents a rollforward of the liability for the aforementioned leadership changes (in thousands):

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

2017

 

2016

Balance, January 1

    

$

964

    

$

1,973

Severance and other related expenses

 

 

 —

 

 

1,055

Accretion

 

 

19

 

 

59

Cash payments

 

 

(983)

 

 

(1,792)

Non-cash adjustment (a)

 

 

 —

 

 

(331)

Balance, December 31

 

$

 —

 

$

964


(a)   For the year ended December 31, 2016, the non-cash adjustment represents the non-cash equity-based compensation expense recorded for the accelerated vesting of restricted stock units pursuant to the terms of the separation and transition agreement entered into with the Company’s former Chief Financial Officer and Chief Operating Officer on January 7, 2016

v3.8.0.1
Commitments and Contingencies (Tables)
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies.  
Operating Leases Future Minimum Payments

Future minimum payments (including those allocated to an affiliate) under these leases and commitments, net of payments under sublease agreements, are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Rent Payments

 

Sublease Receipts

 

Total Cash Outflows

Year ending December 31:

 

 

 

 

 

 

 

 

 

2018

    

$

8,669

 

$

(847)

 

$

7,822

2019

 

 

8,783

 

 

(1,087)

 

 

7,696

2020

 

 

9,039

 

 

(873)

 

 

8,166

2021

 

 

8,868

 

 

(775)

 

 

8,093

2022

 

 

8,757

 

 

(804)

 

 

7,953

Thereafter

 

 

50,695

 

 

(2,209)

 

 

48,486

 

 

$

94,811

 

$

(6,595)

 

$

88,216

 

Schedule of gain (loss) on sublease

 

 

 

 

 

 

 

Execution Date

 

End Date

 

2017 (Loss) Gain on Sublease
(in thousands)

 

May 2017

 

April 2028

 

$

(173)

 

August 2017

 

January 2025

 

 

(3,725)

 

September 2017

 

August 2024

 

 

294

(a)

 

 

 

 

$

(3,604)

 


(a)

During the year ended December 31, 2013 the Company entered into a sublease agreement with a tenant and recognized a loss related to the subleased office space of $1.2 million.  In September 2017 the Company amended this sublease agreement and the existing liability was reduced, resulting in a net gain of $0.3 million during the year ended December 31, 2017.

v3.8.0.1
Quarterly Financial Information (Tables)
12 Months Ended
Dec. 31, 2017
Quarterly Financial Information (unaudited)  
Schedule of Quarterly Financial Information

 

 

For the Quarter Ended

 

    

March 31, 2017

    

June 30, 2017

    

September 30, 2017

    

December 31, 2017(a)

 

 

 

(in thousands, except shares and per share amounts)

Total revenue

 

$

48,229

 

$

48,819

 

$

49,377

 

$

49,504

Total operating expenses

 

 

32,777

 

 

26,022

 

 

36,569

 

 

336

Operating income

 

 

15,452

 

 

22,797

 

 

12,808

 

 

49,168

Total other expenses, net

    

 

(2,351)

 

 

(2,398)

 

 

(2,180)

 

 

(2,541)

Income before provision for income taxes

 

 

13,101

 

 

20,399

 

 

10,628

 

 

46,627

Provision for income taxes

 

 

(3,030)

 

 

(4,762)

 

 

(3,091)

 

 

(44,693)

Net income

 

 

10,071

 

 

15,637

 

 

7,537

 

 

1,934

Less: net income attributable to non-controlling interest

 

 

5,159

 

 

8,108

 

 

3,702

 

 

5,395

Net income (loss) attributable to RE/MAX Holdings, Inc.

 

$

4,912

 

$

7,529

 

$

3,835

 

$

(3,461)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.43

 

$

0.22

 

$

(0.20)

Diluted

 

$

0.28

 

$

0.42

 

$

0.22

 

$

(0.20)

Weighted average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,662,842

 

 

17,696,842

 

 

17,696,991

 

 

17,696,991

Diluted

 

 

17,716,013

 

 

17,723,802

 

 

17,737,786

 

 

17,747,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Quarter Ended

 

    

March 31, 2016

    

June 30, 2016

    

September 30, 2016

    

December 31, 2016

 

 

 

(in thousands, except shares and per share amounts)

Total revenue

 

$

42,917

 

$

43,404

 

$

45,559

 

$

44,422

Total operating expenses

 

 

27,061

 

 

22,955

 

 

24,417

 

 

30,052

Operating income

 

 

15,856

 

 

20,449

 

 

21,142

 

 

14,370

Total other expenses, net

 

 

(2,202)

 

 

(2,036)

 

 

(2,204)

 

 

(2,876)

Income before provision for income taxes

 

 

13,654

 

 

18,413

 

 

18,938

 

 

11,494

Provision for income taxes

 

 

(3,259)

 

 

(4,285)

 

 

(4,632)

 

 

(3,097)

Net income

 

 

10,395

 

 

14,128

 

 

14,306

 

 

8,397

Less: net income attributable to non-controlling interest

 

 

5,456

 

 

7,314

 

 

7,520

 

 

4,540

Net income attributable to RE/MAX Holdings, Inc.

 

$

4,939

 

$

6,814

 

$

6,786

 

$

3,857

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.39

 

$

0.38

 

$

0.22

Diluted

 

$

0.28

 

$

0.39

 

$

0.38

 

$

0.22

Weighted average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,584,351

 

 

17,636,590

 

 

17,645,696

 

 

17,647,930

Diluted

 

 

17,638,667

 

 

17,668,995

 

 

17,691,641

 

 

17,706,070


(a)  The quarterly results for the quarter ended December 31, 2017 were impacted by the Tax Cuts and Jobs Act enacted in December 2017.  The reduction in the corporate tax rate from 35% to 21% resulted in comparable reductions in both the deferred tax asset amounts and the TRA liabilities. See Note 11, Income Taxes for further information on the impact of the Tax Cuts and Jobs Act.

v3.8.0.1
Business and Organization (Details)
shares in Millions
12 Months Ended
Dec. 31, 2017
segment
country
Vote
Office
class
item
Dec. 31, 2017
country
Vote
Office
class
item
Dec. 31, 2015
shares
Dec. 31, 2016
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]        
Common stock issued at initial public offering | shares     5.2  
Number of offices | Office 7,000 7,000    
Number of countries in which entity operates | country 100 100    
Percentage of Company consisting of franchises   100.00%    
Number Of Reportable Segments | segment 1      
Ownership percentage 30.00% 30.00%    
Number of votes for common class holders, as a multiple of the aggregate number of Common Units in RMCO held by the holder upon occurrence of certain events (as a percent) 1 1    
Number of classes of common stock | class 2 2    
RMCO, LLC        
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]        
Parent economic interest in RMCO (as a percent) 58.49% 58.49%   58.43%
Non-controlling unitholders ownership of common units in RMCO as a percentage 41.51% 41.51%   41.57%
RIHI | RMCO, LLC        
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]        
Non-controlling unitholders ownership of common units in RMCO as a percentage 41.51% 41.51%    
Common Class A        
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]        
Number of votes per share held 1 1    
Common Units | RMCO, LLC        
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]        
Number of votes for common class holders, as a multiple of the aggregate number of Common Units in RMCO held by the holder (as a percent)   1    
Common Class B | RMCO, LLC        
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]        
Ratio of votes in parent company to number of L L C common units held 2 2    
Number of votes for common class holders, for each Common Unit in RMCO held by the holder (in votes)   2    
Minimum        
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]        
Number of agents | item 115,000 115,000    
v3.8.0.1
Summary of Significant Accounting Policies - Additional Information (Details)
12 Months Ended
Dec. 31, 2017
segment
Dec. 31, 2017
USD ($)
country
Dec. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Significant Accounting Policies [Line Items]        
Number of reportable segments | segment 1      
Approximate percentage of grandfathered agents   20.00%    
Franchise revenue recognized   $ 24,667,000 $ 25,131,000 $ 25,468,000
Deferred revenue, additions   $ 1,200,000 1,000,000  
Number of countries and territories operations conducted | country   100    
Impairment of franchise agreements and other intangible assets subject to amortization   $ 0 0 0
Impairment of goodwill   $ 0 0 0
Equity-based compensation vesting period   3 years    
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification   $ 6,300,000    
Software and Software Development Costs | Minimum        
Significant Accounting Policies [Line Items]        
Useful life of intangible assets   3 years    
Software and Software Development Costs | Maximum        
Significant Accounting Policies [Line Items]        
Useful life of intangible assets   5 years    
Accounts Receivable | Prime plus        
Significant Accounting Policies [Line Items]        
Accounts and notes receivable interest rate percentage 2.00% 2.00%    
Franchise Agreements        
Significant Accounting Policies [Line Items]        
Franchise revenue recognized   $ 10,800,000 $ 8,800,000 $ 9,700,000
RMCO, LLC        
Significant Accounting Policies [Line Items]        
Parent economic interest in RMCO (as a percent) 58.49% 58.49% 58.43%  
v3.8.0.1
Summary of Significant Accounting Policies - Schedule of Annual Dues Deferred Revenue (Details) - Annual Dues - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Deferred Revenue Arrangement [Line Items]      
Deferred revenue recognition period 12 months    
Balance at beginning of period $ 14,227 $ 13,106 $ 12,912
New billings 34,837 33,774 31,952
Revenue recognized (33,767) (32,653) (31,758)
Balance at end of period $ 15,297 $ 14,227 $ 13,106
v3.8.0.1
Summary of Significant Accounting Policies - Schedule of Allowances Against Accounts and Notes Receivable (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Receivables [Abstract]      
Balance at beginning of period $ 5,535 $ 4,483 $ 4,495
Additions/charges to cost and expense for doubtful accounts 1,159 1,325 353
Additions and charges to cost and expense for allowances for doubtful accounts 1,109 1,195 433
Deductions/ write-offs (491) (273) (365)
Balance at end of period $ 6,203 $ 5,535 $ 4,483
v3.8.0.1
Summary of Significant Accounting Policies - (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]                        
Franchise sales and other franchise revenue                   $ 24,667 $ 25,131 $ 25,468
Operating income   $ 49,168 $ 12,808 $ 22,797 $ 15,452 $ 14,370 $ 21,142 $ 20,449 $ 15,856 100,225 71,817 $ 73,580
Increase in Total assets   $ 406,562       $ 437,153       406,562 $ 437,153  
Forecast | Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09                        
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]                        
Franchise sales and other franchise revenue $ (2,000)                      
Increase in deferred revenue and deposits 26,000                      
Increase in Total assets $ 4,000                      
Maximum | Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09                        
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]                        
Franchise sales and other franchise revenue                   (2,000)    
Operating income                   $ (2,000)    
v3.8.0.1
Non-controlling Interest - Narrative (Details) - USD ($)
$ in Thousands, shares in Millions
1 Months Ended 2 Months Ended 12 Months Ended
Jan. 01, 2018
Oct. 31, 2013
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Significant Accounting Policies [Line Items]            
Minority Interest           5.2
Common stock issued at initial public offering           5.2
Deferred tax assets, net       $ 59,151 $ 105,770  
Corporate tax rate       35.00% 35.00% 35.00%
Forecast            
Significant Accounting Policies [Line Items]            
Corporate tax rate 21.00%          
RIHI            
Significant Accounting Policies [Line Items]            
Common stock issued at initial public offering   11.6 5.2      
RIHI and Oberndorf Investments LLC            
Significant Accounting Policies [Line Items]            
Tax benefit realized       85.00%    
RMCO, LLC | RIHI            
Significant Accounting Policies [Line Items]            
Deferred tax assets and liability       $ 53,200    
v3.8.0.1
Non-controlling Interest - Ownership of common units in RMCO (Details) - RMCO, LLC - shares
Dec. 31, 2017
Dec. 31, 2016
Shares [Abstract]    
Non-controlling unitholders ownership of common units in RMCO 12,559,600 12,559,600
RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units 17,696,991 17,652,548
Total number of common stock units 30,256,591 30,212,148
Ownership Percentage [Abstract]    
Non-controlling unitholders ownership of common units in RMCO as a percentage 41.51% 41.57%
RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units 58.49% 58.43%
Total percentage of common stock units 100.00% 100.00%
v3.8.0.1
Non-controlling Interest - Net income reconciliation (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Minority Interest [Line Items]                      
Weighted average ownership percentage of controlling interest                 58.48% 58.40% 42.33%
Weighted average ownership percentage of noncontrolling interest                 41.52% 41.60% 57.67%
Total (as a percentage)                 100.00% 100.00% 100.00%
Income before provision for income taxes attributable to RE/MAX Holdings, Inc.                 $ 66,599 $ 36,446 $ 26,554
Provision for income taxes attributable to RE/MAX Holdings, Inc.                 (53,784) (14,050) (10,142)
Net income attributable to RE/MAX Holdings, Inc. $ (3,461) $ 3,835 $ 7,529 $ 4,912 $ 3,857 $ 6,786 $ 6,814 $ 4,939 12,815 22,396 16,412
Income before provision for income taxes: Non-controlling interest                 24,156 26,053 36,251
Provision for income taxes: Non-controlling interest                 (1,792) (1,223) (1,888)
Net income: Non-controlling interest 5,395 3,702 8,108 5,159 4,540 7,520 7,314 5,456 22,364 24,830 34,363
Income before provision for income taxes 46,627 10,628 20,399 13,101 11,494 18,938 18,413 13,654 90,755 62,499 62,805
Provision for income taxes (44,693) (3,091) (4,762) (3,030) (3,097) (4,632) (4,285) (3,259) (55,576) (15,273) (12,030)
Net income $ 1,934 $ 7,537 $ 15,637 $ 10,071 $ 8,397 $ 14,306 $ 14,128 $ 10,395 35,179 47,226 50,775
Non-controlling interest                      
Minority Interest [Line Items]                      
Net income                 $ 22,364 $ 24,830 $ 34,363
v3.8.0.1
Non-controlling Interest - Distributions Paid or Payable (Details) - USD ($)
$ in Thousands
12 Months Ended
Feb. 21, 2018
Dec. 31, 2017
Dec. 31, 2016
Dividends Payable [Line Items]      
Distributions paid or payable to or on behalf of non-controlling unitholders   $ 17,260 $ 17,927
Tax and other distributions      
Dividends Payable [Line Items]      
Distributions paid or payable to or on behalf of non-controlling unitholders   8,217 10,391
Dividend distributions      
Dividends Payable [Line Items]      
Distributions paid or payable to or on behalf of non-controlling unitholders   $ 9,043 $ 7,536
Subsequent Event | Quarterly distribution      
Dividends Payable [Line Items]      
Distributions declared to non-controlling unitholders $ 2,500    
v3.8.0.1
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 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Numerator                      
Net income attributable to RE/MAX Holdings, Inc. $ (3,461) $ 3,835 $ 7,529 $ 4,912 $ 3,857 $ 6,786 $ 6,814 $ 4,939 $ 12,815 $ 22,396 $ 16,412
Denominator for basic net income per share of common stock                      
Weighted average shares of Class A common stock outstanding 17,696,991 17,696,991 17,696,842 17,662,842 17,647,930 17,645,696 17,636,590 17,584,351 17,688,533 17,628,741 12,671,051
Denominator for diluted net income per share of common stock                      
Weighted average shares of Class A common stock outstanding 17,696,991 17,696,991 17,696,842 17,662,842 17,647,930 17,645,696 17,636,590 17,584,351 17,688,533 17,628,741 12,671,051
Add dilutive effect of the following:                      
Weighted average shares of Class A common stock outstanding, diluted 17,747,744 17,737,786 17,723,802 17,716,013 17,706,070 17,691,641 17,668,995 17,638,667 17,731,800 17,677,768 12,829,214
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock                      
Anti-dilutive shares                 0 0 0
Basic $ (0.20) $ 0.22 $ 0.43 $ 0.28 $ 0.22 $ 0.38 $ 0.39 $ 0.28 $ 0.72 $ 1.27 $ 1.30
Diluted $ (0.20) $ 0.22 $ 0.42 $ 0.28 $ 0.22 $ 0.38 $ 0.39 $ 0.28 $ 0.72 $ 1.27 $ 1.28
Common Class A                      
Denominator for basic net income per share of common stock                      
Weighted average shares of Class A common stock outstanding                 17,688,533 17,628,741 12,671,051
Denominator for diluted net income per share of common stock                      
Weighted average shares of Class A common stock outstanding                 17,688,533 17,628,741 12,671,051
Add dilutive effect of the following:                      
Weighted average shares of Class A common stock outstanding, diluted                 17,731,800 17,677,768 12,829,214
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock                      
Basic                 $ 0.72 $ 1.27 $ 1.30
Diluted                 $ 0.72 $ 1.27 $ 1.28
Common Class B                      
Share Outstanding Abstract                      
Common stock, shares outstanding 1               1    
Employee Stock Option | Common Class A                      
Add dilutive effect of the following:                      
Dilutive effect                   5,059 130,001
Restricted Stock Units (RSUs) | Common Class A                      
Add dilutive effect of the following:                      
Dilutive effect                 43,267 43,968 28,162
v3.8.0.1
Earnings Per Share and Dividends - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Feb. 21, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dividends Payable [Line Items]                                
Dividends declared and paid                           $ 12,740 $ 10,578 $ 24,003
Cash dividends declared per share of Class A common stock                           $ 0.72 $ 0.60 $ 2.00
Common Class A                                
Dividends Payable [Line Items]                                
Dividends declared and paid                           $ 12,700 $ 10,600 $ 24,000
Cash dividends declared per share of Class A common stock                           $ 0.72 $ 0.60 $ 2.00
Quarterly dividend | Common Class A                                
Dividends Payable [Line Items]                                
Cash dividends declared per share of Class A common stock $ 0.20 $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.125 $ 0.125 $ 0.125 $ 1.625      
v3.8.0.1
Acquisitions and Dispositions - Acquisitions (Details) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Nov. 15, 2017
Dec. 15, 2016
Dec. 01, 2016
Sep. 12, 2016
Apr. 01, 2016
Feb. 22, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Purchase Price Allocation                  
Decrease to goodwill             $ (3,865)    
Goodwill             135,213 $ 126,633 $ 71,871
Reduction in depreciation and amortization             800    
Finalized accounting goodwill                  
Decrease to goodwill             (3,865)    
Pro Forma Information                  
Total revenue             199,769 192,594 189,397
Net income attributable to RE/MAX Holdings, Inc.             $ 13,035 $ 23,533 $ 16,746
Basic earnings per common share             $ 0.74 $ 1.33 $ 1.32
Diluted earnings per common share             $ 0.74 $ 1.33 $ 1.31
Professional fees and debt extinguishment costs related to amendment of credit facility               $ 1,000  
Franchise agreements | Weighted Average                  
Purchase Price Allocation                  
Useful life of intangible assets             12 years 6 months    
Remax Of Northern Illinois Inc                  
Acquisitions and Dispositions                  
Cash consideration $ 35,720                
Purchase Price Allocation                  
Franchise agreements 23,500                
Goodwill 12,220                
Total purchase price 35,720                
Acquisition-related costs 333                
Revenue since acquisition date $ 595                
Remax Of Northern Illinois Inc | Franchise agreements | Weighted Average                  
Acquisitions and Dispositions                  
Useful life of intangible assets 12 years 4 months 24 days                
RE/MAX Regional Services                  
Acquisitions and Dispositions                  
Cash consideration   $ 50,400              
Purchase Price Allocation                  
Franchise agreements   30,700              
Goodwill   19,700              
Total purchase price   $ 50,400              
RE/MAX of New Jersey                  
Acquisitions and Dispositions                  
Cash consideration     $ 45,000            
Purchase Price Allocation                  
Cash and cash equivalents     335            
Franchise agreements     29,700            
Goodwill     15,300            
Other liabilities     (335)            
Total purchase price     $ 45,000            
RE Max Regional Services And RE Max Of New Jersey Inc [Member]                  
Purchase Price Allocation                  
Decrease to goodwill             $ (4,200)    
Reduction in depreciation and amortization             800    
Finalized accounting goodwill                  
Decrease to goodwill             (4,200)    
Finalized accounting franchise agreements                  
Increase to franchise agreements             4,200    
Full House Mortgage Connection, Inc.                  
Acquisitions and Dispositions                  
Cash consideration       $ 8,000          
Purchase Price Allocation                  
Non-compete agreement       2,500          
Goodwill       11,800          
Total purchase price       14,300          
Contingent consideration liability       $ 6,300          
RE/MAX of Alaska, Inc.                  
Acquisitions and Dispositions                  
Cash consideration         $ 1,500        
Purchase Price Allocation                  
Franchise agreements         529        
Goodwill         971        
Total purchase price         $ 1,500        
Re/Max of New York, Inc.                  
Acquisitions and Dispositions                  
Cash consideration           $ 8,500      
Purchase Price Allocation                  
Cash and cash equivalents           131      
Franchise agreements           5,000      
Other assets           340      
Goodwill           3,029      
Total purchase price           $ 8,500      
RE Max Of Northern Illinois RE Max Regional Services RE Max Of New Jersey Full House RE Max Of Alaska RE Max Of New York [Member]                  
Purchase Price Allocation                  
Cash and cash equivalents             466    
Franchise agreements             89,429    
Non-compete agreement             2,500    
Other assets             340    
Goodwill             63,020    
Other liabilities             (335)    
Total purchase price             $ 155,420    
v3.8.0.1
Acquisitions and Dispositions - Dispositions (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Apr. 10, 2015
item
Sep. 30, 2017
USD ($)
Dec. 31, 2015
USD ($)
Jun. 30, 2015
USD ($)
Dec. 31, 2017
USD ($)
Dec. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
item
Summary of dispositions              
Gain (loss) on sale or disposition of assets         $ (4,260) $ 171 $ 3,650
RE/MAX Equity Group              
Summary of dispositions              
Number of brokerages having assets and liabilities sold | item             12
RE/MAX 100              
Summary of dispositions              
Number of brokerages having assets and liabilities sold | item 6            
Gain Loss On Sale Or Disposition Of Assets Net | RE/MAX Equity Group              
Summary of dispositions              
Gain (loss) on sale or disposition of assets   $ (500) $ 2,800        
Gain Loss On Sale Or Disposition Of Assets Net | RE/MAX 100              
Summary of dispositions              
Gain (loss) on sale or disposition of assets       $ 600      
v3.8.0.1
Property and Equipment - Property and Equipment (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Property Plant And Equipment [Line Items]      
Property and equipment, gross $ 15,231 $ 14,887  
Less accumulated depreciation (12,326) (12,196)  
Property and equipment, net 2,905 2,691  
Depreciation expense 900 900 $ 1,000
Leasehold Improvements      
Property Plant And Equipment [Line Items]      
Property and equipment, gross 3,227 3,063  
Office furniture, fixtures and equipment      
Property Plant And Equipment [Line Items]      
Property and equipment, gross $ 12,004 $ 11,824  
Office furniture, fixtures and equipment | Minimum      
Property Plant And Equipment [Line Items]      
Depreciable life 1 year    
Office furniture, fixtures and equipment | Maximum      
Property Plant And Equipment [Line Items]      
Depreciable life 10 years    
v3.8.0.1
Intangible Assets and Goodwill - Components of Company's Intangible Assets (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Finite Lived Intangible Assets [Line Items]      
Net Balance $ 119,349 $ 109,140  
Amortization expense 19,600 15,200 $ 14,100
Reduction in depreciation and amortization 800    
Franchise agreements      
Finite Lived Intangible Assets [Line Items]      
Initial Cost 181,567 224,167  
Accumulated Amortization (62,218) (115,027)  
Net Balance $ 119,349 109,140  
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 $ 17,801 18,809  
Accumulated Amortization (9,325) (8,998)  
Net Balance $ 8,476 9,811  
Other Intangible Assets | Weighted Average      
Finite Lived Intangible Assets [Line Items]      
Useful life of intangible assets 6 years 4 months 24 days    
Software and Software Development Costs      
Finite Lived Intangible Assets [Line Items]      
Software development costs, not yet completed $ 600 400  
Trademarks      
Finite Lived Intangible Assets [Line Items]      
Initial Cost 1,539 3,102  
Accumulated Amortization (902) (1,782)  
Net Balance $ 637 1,320  
Trademarks | Weighted Average      
Finite Lived Intangible Assets [Line Items]      
Useful life of intangible assets 10 years 2 months 12 days    
Software Development      
Finite Lived Intangible Assets [Line Items]      
Initial Cost $ 13,762 13,207  
Accumulated Amortization (8,111) (7,154)  
Net Balance $ 5,651 6,053  
Software Development | Weighted Average      
Finite Lived Intangible Assets [Line Items]      
Useful life of intangible assets 4 years 7 months 6 days    
Non-compete      
Finite Lived Intangible Assets [Line Items]      
Initial Cost $ 2,500 2,500  
Accumulated Amortization (312) (62)  
Net Balance $ 2,188 $ 2,438  
Non-compete | Weighted Average      
Finite Lived Intangible Assets [Line Items]      
Useful life of intangible assets 10 years    
v3.8.0.1
Intangible Assets and Goodwill - Estimated Future Amortization of Intangible Assets, Other Than Goodwill (Details)
$ in Thousands
Dec. 31, 2017
USD ($)
Finite Lived Intangible Assets Future Amortization Expense Current And Five Succeeding Fiscal Years [Abstract]  
2018 $ 17,614
2019 17,482
2020 17,288
2021 16,775
2022 14,511
Estimated future amortization expense over next five years $ 83,670
v3.8.0.1
Intangible Assets and Goodwill - Schedule of Changes in Goodwill (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Changes to goodwill    
Beginning Balance $ 126,633 $ 71,871
Goodwill recognized related to acquisitions 12,220 54,665
Adjustments to acquisition accounting during the measurement period (3,865)  
Effect of changes in foreign currency exchange rates 225 97
Ending Balance $ 135,213 $ 126,633
v3.8.0.1
Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Accrued Liabilities [Line Items]    
Accrued payroll and related employee costs $ 3,874 $ 7,035
Accrued taxes 1,635 1,554
Accrued professional fees 2,339 1,382
Other 7,542 3,297
Accrued liabilities 15,390 $ 13,268
Tails Inc.    
Accrued Liabilities [Line Items]    
Other $ 4,500  
v3.8.0.1
Debt - Schedule of Debt (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Debt Instrument [Line Items]    
Senior Secured Credit Facility $ 232,063 $ 234,412
Less unamortized debt issuance costs (1,780) (2,076)
Less unamortized debt discount (1,297) (1,516)
Less current portion (2,350) (2,350)
Debt, net of current portion $ 226,636 $ 228,470
v3.8.0.1
Debt - Schedule of Maturities of Debt (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Debt    
2018 $ 2,350  
2019 2,350  
2020 2,350  
2021 2,350  
2022 2,350  
Thereafter 220,313  
Senior Secured Credit Facility $ 232,063 $ 234,412
v3.8.0.1
Debt - Additional Information (Details)
$ in Thousands
12 Months Ended
Nov. 22, 2016
USD ($)
Mar. 11, 2015
Dec. 31, 2017
USD ($)
Dec. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Dec. 15, 2016
USD ($)
Jul. 31, 2013
USD ($)
Debt Instrument [Line Items]              
Unamortized debt discount     $ 1,297 $ 1,516      
Loss on early extinguishment of debt       796 $ 94    
Excess cash flow payment       12,700 7,300    
Borrowings drawn during the period     $ 0 $ 0      
London Interbank Offered Rate (LIBOR) | Maximum              
Debt Instrument [Line Items]              
Basis spread on variable rate     2.75%        
2013 Senior Secured Credit Facility              
Debt Instrument [Line Items]              
Excess cash flow repayment (as a percent)       50.00%      
Leverage ratio under debt covenant       2.50      
2013 Senior Secured Credit Facility First amendment | London Interbank Offered Rate (LIBOR) | Maximum              
Debt Instrument [Line Items]              
Increase to the maximum applicable margin   0.25%          
2013 Senior Secured Credit Facility Second amendment              
Debt Instrument [Line Items]              
Increase in borrowing capacity $ 20,000            
2016 Senior Secured Credit Facility              
Debt Instrument [Line Items]              
Debt issuance costs incurred       $ 3,500      
Debt Instrument, expense incurred       2,100      
Excess cash flow repayment (as a percent)     50.00%        
Leverage ratio under debt covenant     3.25        
Percentage of proceeds of additional debt incurred not permitted by credit facility required to repay term loans     100.00%        
Percentage of proceeds of assets sales required to repay term loans and reduce revolving commitments     100.00%        
Percentage of amounts recovered under insurance policies required to repay term loans and reduce revolving commitments     100.00%        
First periodic payment from current period     12 months        
Mandatory principal payments     $ 600        
Additional mandatory prepayment if total leverage ratio is not achieved     0        
Additional mandatory commitment reduction if total leverage ratio is not achieved     $ 0        
2016 Senior Secured Credit Facility | Maximum              
Debt Instrument [Line Items]              
Leverage ratio under debt covenant     2.75        
2016 Senior Secured Credit Facility | Federal Reserve Bank of New York              
Debt Instrument [Line Items]              
Basis spread on variable rate     0.50%        
2016 Senior Secured Credit Facility | London Interbank Offered Rate (LIBOR) | Minimum              
Debt Instrument [Line Items]              
Basis spread on variable rate     0.75%        
2016 Senior Secured Credit Facility | Base Rate              
Debt Instrument [Line Items]              
Basis spread on variable rate     1.75%        
2016 Senior Secured Credit Facility | Eurodollar              
Debt Instrument [Line Items]              
Basis spread on variable rate     2.75%        
Debt Net Of Current Portion | 2016 Senior Secured Credit Facility              
Debt Instrument [Line Items]              
Debt issuance costs incurred       1,400      
2013 Senior Secured Credit Facility | 2013 Senior Secured Credit Facility First amendment              
Debt Instrument [Line Items]              
Debt issuance costs incurred         1,100    
Unamortized debt discount         600    
Debt Instrument, expense incurred         500    
Loss on early extinguishment of debt       $ 100 $ 100    
Term loan | 2013 Senior Secured Credit Facility              
Debt Instrument [Line Items]              
Credit facility, borrowing capacity             $ 230,000
Term loan | 2016 Senior Secured Credit Facility              
Debt Instrument [Line Items]              
Notes Payable to Bank           $ 235,000  
Term loans outstanding, net of unamortized discount and issuance costs     $ 229,000        
Revolving loan facility              
Debt Instrument [Line Items]              
Revolving loan facility commitment fee on average daily amount of unused portion     0.50%        
Amounts drawn on line of credit     $ 0        
Revolving loan facility | 2013 Senior Secured Credit Facility              
Debt Instrument [Line Items]              
Credit facility, borrowing capacity             $ 10,000
Revolving loan facility | 2013 Senior Secured Credit Facility Second amendment              
Debt Instrument [Line Items]              
Credit facility, borrowing capacity $ 30,000            
Revolving loan facility | 2016 Senior Secured Credit Facility              
Debt Instrument [Line Items]              
Credit facility, borrowing capacity           $ 10,000  
Borrowings drawn during the period     $ 0        
ABR loans | 2016 Senior Secured Credit Facility | Eurodollar              
Debt Instrument [Line Items]              
Basis spread on variable rate     1.00%        
v3.8.0.1
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Full House Mortgage Connection, Inc. - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Sep. 12, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Contingent consideration liability     $ 6,300
Percentage of gross revenues to be paid yearly 8.00%    
Measured on a recurring basis | Contingent consideration      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Contingent consideration liability $ 6,580 $ 6,400  
Level 3 | Measured on a recurring basis | Contingent consideration      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Contingent consideration liability $ 6,580 $ 6,400  
v3.8.0.1
Fair Value Measurements - Reconciliation of Assets and Liabilities Measured Using Significant Unboservable Inputs (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value adjustment $ (180) $ (100)
Full House Mortgage Connection, Inc. | Measured on a recurring basis | Contingent consideration    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Balance at Beginning 6,400  
Full House Acquisition   6,300
Fair value adjustment 180 100
Balance at Ending $ 6,580 $ 6,400
v3.8.0.1
Fair Value Measurements - Schedule of Senior Secured Credit Facility (Details) - USD ($)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Debt Instrument [Line Items]    
Transfer of asset fair value Level 1 to 2 $ 0  
Transfer of liability fair value Level 1 to 2 0  
Transfer of asset fair value Level 2 to 1 0  
Transfer of liability fair value Level 2 to 1 0  
Transfers of assets or liabilities between the fair value measurement levels 3 0  
Carrying amounts | 2016 Senior Secured Credit Facility    
Debt Instrument [Line Items]    
Long term debt, carrying amount 228,986,000 $ 230,820,000
Level 2 | Estimated fair value | 2016 Senior Secured Credit Facility    
Debt Instrument [Line Items]    
Long term debt, fair value $ 232,933,000 $ 233,240,000
v3.8.0.1
Income Taxes - Schedule of Income Before Provision for Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Taxes                      
Domestic                 $ 78,812 $ 51,194 $ 51,552
Foreign                 11,943 11,305 11,253
Income before provision for income taxes $ 46,627 $ 10,628 $ 20,399 $ 13,101 $ 11,494 $ 18,938 $ 18,413 $ 13,654 $ 90,755 $ 62,499 $ 62,805
v3.8.0.1
Income Taxes - Schedule of Components of Provision for Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Current                      
Federal                 $ 3,568 $ 8,002 $ 5,451
Foreign                 4,345 2,855 3,019
State and local                 1,169 943 1,029
Total current expense                 9,082 11,800 9,499
Deferred expense                      
Federal                 45,934 3,222 2,333
Foreign                 (9) 13 25
State and local                 569 238 173
Total deferred expense                 46,494 3,473 2,531
Provision for income tax expense $ 44,693 $ 3,091 $ 4,762 $ 3,030 $ 3,097 $ 4,632 $ 4,285 $ 3,259 $ 55,576 $ 15,273 $ 12,030
v3.8.0.1
Income Taxes - Schedule of Reconciliation of U.S. Statutory Income Tax Rate to Company's Effective Tax Rate (Details) - USD ($)
$ in Millions
12 Months Ended
Jan. 01, 2018
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
U.S. statutory tax rate   35.00% 35.00% 35.00%
Increase due to state and local taxes, net of federal benefit   2.60% 2.60% 2.60%
Effect of permanent differences   (0.10%) (0.20%) 1.20%
Income attributable to non-controlling interests   (12.50%) (14.10%) (19.70%)
Other   0.20% 1.10% 0.10%
Subtotal   25.20% 24.40% 19.20%
Impact of reduction in TRA liability on non-controlling interests   4.50%    
Effect of permanent difference – reduction in TRA liability   (13.60%)    
Tax Cuts and Jobs Act rate change   45.10%    
Effective tax rate   61.20% 24.40% 19.20%
Income tax expense benefit   $ 40.9    
Benefit as a result of reduction in TRA Liability   32.7    
Net effect on net income   8.2    
Income taxes receivables   $ 0.7    
Income taxes payable     $ 0.4  
Forecast        
U.S. statutory tax rate 21.00%      
v3.8.0.1
Income Taxes - Summary of Deferred Tax Assets and Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Long-term deferred tax assets    
Goodwill, other intangibles and other assets and liabilities $ 52,385 $ 90,686
Imputed interest deduction pursuant to tax receivable agreements 3,052 8,483
Rent liabilities 1,878 2,037
Compensation and benefits 526 1,606
Allowance for doubtful accounts 687 979
Motto contingent liability 929 1,405
Deferred revenue 171  
Other 393 855
Total long term deferred tax assets US and Canada 60,021 106,051
Long-term deferred tax liabilities    
Property and equipment and other long-lived assets (1,021) (414)
Net long-term deferred tax assets 59,000 105,637
Total long-term deferred tax liabilities (1,021) (414)
Total deferred tax assets and liabilities $ 59,000 $ 105,637
v3.8.0.1
Income Taxes - Additional Information (Details)
12 Months Ended
Dec. 31, 2017
Minimum  
Minority Interest [Line Items]  
Income tax examination, period 3 years
Maximum  
Minority Interest [Line Items]  
Income tax examination, period 4 years
v3.8.0.1
Equity-Based Compensation - (Details) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Employee stock-based compensation expense      
Equity-based compensation expense $ 2,900 $ 2,330 $ 1,453
Restricted Stock Units      
Vesting Period 3 years    
Proceeds from exercise of stock options   101 2,248
Aggregate Intrinsic Value, Options Outstanding $ 0 900 19,200
Options, Exercised 0    
Options exercised 0    
2013 Stock Incentive Plan      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Number of shares authorized 3,576,466    
Employee stock-based compensation expense      
Equity-based compensation expense $ 2,900 2,330 1,453
Tax benefit from share-based compensation (637) (511) (231)
Excess tax benefit from share-based compensation (324) (261) (2,770)
Net compensation cost $ 1,939 $ 1,558 $ (1,548)
Time-based Restricted Stock Units      
Restricted Stock Units      
Nonvested at beginning of period 127,011    
Granted 43,450    
Shares vested (including tax withholding) (58,426)    
Forfeited (6,173)    
Nonvested at end of period 105,862 127,011  
Nonvested at beginning of period, Weighted average grant date fair value per share $ 33.00    
Granted, Weighted average grant date fair value per share 55.45 $ 33.24 $ 32.45
Shares vested (including tax withholding), Weighted average grant date fair value per share 33.03    
Forfeited, Weighted average grant date fair value per share 41.94    
Nonvested at end of period, Weighted average grant date fair value per share $ 41.67 $ 33.00  
Unrecognized compensation cost $ 2,200    
Period for recognition of RSU compensation expense 1 year 6 months 7 days    
Time-based Restricted Stock Units | 2013 Stock Incentive Plan      
Employee stock-based compensation expense      
Equity-based compensation expense $ 2,523 $ 2,330 $ 1,453
Time-based Restricted Stock Units | Directors      
Restricted Stock Units      
Vesting Period 1 year    
Time-based Restricted Stock Units | Employees      
Restricted Stock Units      
Vesting Period 3 years    
Performance-based Restricted Stock Units      
Restricted Stock Units      
Granted 33,961    
Forfeited (2,130)    
Nonvested at end of period 31,831    
Granted, Weighted average grant date fair value per share $ 57.88    
Forfeited, Weighted average grant date fair value per share 57.88    
Nonvested at end of period, Weighted average grant date fair value per share $ 57.88    
Period of performance measurement 3 years    
Unrecognized compensation cost $ 900    
Period for recognition of RSU compensation expense 2 years    
Performance-based Restricted Stock Units | Minimum      
Restricted Stock Units      
Shares issued upon participants target award 0.00%    
Performance-based Restricted Stock Units | Maximum      
Restricted Stock Units      
Shares issued upon participants target award 150.00%    
Performance-based Restricted Stock Units | 2013 Stock Incentive Plan      
Employee stock-based compensation expense      
Equity-based compensation expense $ 377    
Restricted Stock Units (RSUs)      
Restricted Stock Units      
Additional shares available to grant under plan (in shares) 2,400,857    
v3.8.0.1
Leadership Changes and Restructuring Activities (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Equity-based compensation expense $ 2,900 $ 2,330 $ 1,453  
Selling, General and Administrative Expenses [Member]        
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Severance and other related expenses $ 0 1,100 $ 1,100  
Retirement Agreement        
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Severance period     24 months  
Separation And Transition Agreement Or Retirement Agreement [Member]        
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Severance and other related expenses   1,055    
Equity-based compensation expense   331    
Former Chief Financial Officer and Chief Operating Officer | Separation And Transition Agreement | Selling, General and Administrative Expenses [Member]        
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Severance and other related expenses   1,000    
Equity-based compensation expense   $ 300    
Former President | Retirement Agreement | Selling, General and Administrative Expenses [Member]        
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Severance and other related expenses     $ 900  
Equity-based compensation expense     $ 200  
Former Chief Executive Officer | Selling, General and Administrative Expenses [Member]        
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Severance and other related expenses       $ 3,600
Equity-based compensation expense       $ 1,000
Former Chief Executive Officer | Separation Agreement        
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]        
Severance period       36 months
v3.8.0.1
Leadership Changes and Restructuring Activities - Rollforward of Estimated Fair Value Liability Established for Total Severance and Other Related Costs (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Restructuring Cost and Reserve [Line Items]      
Non-cash adjustment $ (2,900) $ (2,330) $ (1,453)
Separation And Transition Agreement Or Retirement Agreement [Member]      
Restructuring Cost and Reserve [Line Items]      
Balance, January 1 964 1,973  
Severance and other related expenses   1,055  
Accretion 19 59  
Cash payments $ (983) (1,792)  
Non-cash adjustment   (331)  
Ending Balance   $ 964 $ 1,973
v3.8.0.1
Commitments and Contingencies - Operating Leases Future Minimum Payments (Details)
$ in Thousands
Dec. 31, 2017
USD ($)
Commitments and Contingencies.  
2018 $ 8,669
2019 8,783
2020 9,039
2021 8,868
2022 8,757
Thereafter 50,695
Total Rent Payments 94,811
2018 (847)
2019 (1,087)
2020 (873)
2021 (775)
2022 (804)
Thereafter (2,209)
Total Sublease receipts (6,595)
2018 7,822
2019 7,696
2020 8,166
2021 8,093
2022 7,953
Thereafter 48,486
Total Cash Outflows $ 88,216
v3.8.0.1
Commitments and Contingencies - Contingencies (Details)
$ in Thousands
1 Months Ended 12 Months Ended
Feb. 28, 2018
USD ($)
Sep. 12, 2016
USD ($)
Oct. 07, 2013
USD ($)
Apr. 30, 2010
item
Dec. 31, 2017
USD ($)
lease
Dec. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Dec. 31, 2013
USD ($)
Loss Contingencies [Line Items]                
Rent expense, excluding amounts related to gain or loss on sublease         $ 7,800 $ 7,500 $ 10,600  
Operating sublease income         1,000 1,100 $ 1,200  
Loss recorded related to subleased office space               $ 1,200
Gain recognized on amendment of sublease agreement         $ 300      
Number of leases assigned to purchasers | lease         21      
Self insurance program liability         $ 400 300    
Payment of legal settlement $ 4,500              
Assignment and Assumption of Lease Agreements                
Loss Contingencies [Line Items]                
Outstanding lease guarantees         3,700      
Master Lease                
Loss Contingencies [Line Items]                
Lease initial term       18 years        
Number of renewal periods | item       2        
Renewal of lease period       10 years        
Annual rent escalation in initial lease period and in first renewal period       3.00%        
Gain (Loss) on Sublease         (3,604)      
Master Lease | May 2017                
Loss Contingencies [Line Items]                
Gain (Loss) on Sublease         (173)      
Master Lease | August 2017                
Loss Contingencies [Line Items]                
Gain (Loss) on Sublease         (3,725)      
Master Lease | September 2017                
Loss Contingencies [Line Items]                
Gain (Loss) on Sublease         294      
Second Optional Renewal Period                
Loss Contingencies [Line Items]                
Percentage of increase in rent each year       3.00%        
Tails Inc.                
Loss Contingencies [Line Items]                
Cash consideration     $ 20,200          
Full House Mortgage Connection, Inc.                
Loss Contingencies [Line Items]                
Contingent consideration liability   $ 6,300            
Cash consideration   $ 8,000            
Accrued liabilities | Full House Mortgage Connection, Inc.                
Loss Contingencies [Line Items]                
Short-term portion of liability         300      
Other liabilities                
Loss Contingencies [Line Items]                
Long-term portion of liability         3,900 $ 800    
Other liabilities | Full House Mortgage Connection, Inc.                
Loss Contingencies [Line Items]                
Long-term portion of liability         $ 6,300      
v3.8.0.1
Commitments and Contingencies - Litigation (Details) - USD ($)
$ in Millions
Feb. 28, 2018
Feb. 27, 2018
Feb. 13, 2018
Oct. 07, 2013
Loss Contingencies [Line Items]        
Payment of legal settlement $ 4.5      
Amount of reimbursement of attorneys fees and portion of settlement.   $ 1.9    
Tails Inc.        
Loss Contingencies [Line Items]        
Cash consideration       $ 20.2
Selling, General and Administrative Expenses [Member]        
Loss Contingencies [Line Items]        
Charges on settlement     $ 2.6  
v3.8.0.1
Defined-Contribution Savings Plan (Details) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Defined-Contribution Savings Plan      
Matching contribution Expenses $ 1.5 $ 1.4 $ 1.3
v3.8.0.1
Related-Party Transactions (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Related party balances and activity      
Expenses recorded for benefits provided by related party $ 500 $ 500 $ 400
Accounts payable to affiliates 100 100  
Services rendered and rent for office space provided      
Related party balances and activity      
Amounts allocated for services rendered and rent for office space $ 3,400 2,000 $ 1,700
Affiliated Entity | Services rendered and rent for office space provided      
Related party balances and activity      
General payment period 30 days    
Accounts receivable from affiliates $ 0 $ 0  
v3.8.0.1
Quarterly Financial Information - Schedule of Quarterly Financial Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Jan. 01, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Quarterly Financial Information [Line Items]                        
Total revenue   $ 49,504 $ 49,377 $ 48,819 $ 48,229 $ 44,422 $ 45,559 $ 43,404 $ 42,917 $ 195,929 $ 176,302 $ 176,868
Total operating expenses   336 36,569 26,022 32,777 30,052 24,417 22,955 27,061 95,704 104,485 103,288
Operating income   49,168 12,808 22,797 15,452 14,370 21,142 20,449 15,856 100,225 71,817 73,580
Total other expenses, net   (2,541) (2,180) (2,398) (2,351) (2,876) (2,204) (2,036) (2,202) (9,470) (9,318) (10,775)
Income before provision for income taxes   46,627 10,628 20,399 13,101 11,494 18,938 18,413 13,654 90,755 62,499 62,805
Provision for income taxes   (44,693) (3,091) (4,762) (3,030) (3,097) (4,632) (4,285) (3,259) (55,576) (15,273) (12,030)
Net income   1,934 7,537 15,637 10,071 8,397 14,306 14,128 10,395 35,179 47,226 50,775
Less: net income attributable to non-controlling interest (note 3)   5,395 3,702 8,108 5,159 4,540 7,520 7,314 5,456 22,364 24,830 34,363
Net income attributable to RE/MAX Holdings, Inc.   $ (3,461) $ 3,835 $ 7,529 $ 4,912 $ 3,857 $ 6,786 $ 6,814 $ 4,939 $ 12,815 $ 22,396 $ 16,412
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock                        
Basic   $ (0.20) $ 0.22 $ 0.43 $ 0.28 $ 0.22 $ 0.38 $ 0.39 $ 0.28 $ 0.72 $ 1.27 $ 1.30
Diluted   $ (0.20) $ 0.22 $ 0.42 $ 0.28 $ 0.22 $ 0.38 $ 0.39 $ 0.28 $ 0.72 $ 1.27 $ 1.28
Weighted average shares of Class A common stock outstanding                        
Basic   17,696,991 17,696,991 17,696,842 17,662,842 17,647,930 17,645,696 17,636,590 17,584,351 17,688,533 17,628,741 12,671,051
Diluted   17,747,744 17,737,786 17,723,802 17,716,013 17,706,070 17,691,641 17,668,995 17,638,667 17,731,800 17,677,768 12,829,214
U.S. statutory tax rate                   35.00% 35.00% 35.00%
Forecast                        
Weighted average shares of Class A common stock outstanding                        
U.S. statutory tax rate 21.00%                      
Common Class A                        
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock                        
Basic                   $ 0.72 $ 1.27 $ 1.30
Diluted                   $ 0.72 $ 1.27 $ 1.28
Weighted average shares of Class A common stock outstanding                        
Basic                   17,688,533 17,628,741 12,671,051
Diluted                   17,731,800 17,677,768 12,829,214
v3.8.0.1
Immaterial Corrections to Prior Period Financial Statements (Details) - USD ($)
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Quantifying Misstatement in Current Year Financial Statements [Line Items]                        
Increase in selling, operating and administrative expenses                 $ 107,268,000 $ 88,213,000 $ 91,561,000  
Decrease in net income $ (1,934,000) $ (7,537,000) $ (15,637,000) $ (10,071,000) $ (8,397,000) $ (14,306,000) $ (14,128,000) $ (10,395,000) (35,179,000) (47,226,000) (50,775,000)  
Increase in additional paid-in capital 451,199,000       448,713,000       451,199,000 448,713,000    
Decrease in retained earnings (16,027,000)       (16,005,000)       (16,027,000) (16,005,000)    
Decrease in non controlling interest $ 398,348,000       403,983,000       $ 398,348,000 403,983,000    
Revision Of Selling Operating And Administrative Expense [Member] | Restatement Adjustment [Member]                        
Quantifying Misstatement in Current Year Financial Statements [Line Items]                        
Increase in selling, operating and administrative expenses                   584,000 575,000  
Decrease in net income                   584,000 $ 575,000  
Increase in additional paid-in capital         1,712,000         1,712,000    
Decrease in retained earnings         803,000         803,000    
Decrease in non controlling interest         $ 909,000         $ 909,000    
Adjustment to consolidated balance sheet                       $ 553,000
v3.8.0.1
Subsequent Events (Details) - Subsequent Event - USD ($)
$ in Millions
Feb. 26, 2018
Feb. 09, 2018
Booj    
Subsequent events    
Cash consideration $ 26.3  
Former President    
Subsequent events    
Accrued cost under Separation Agreement   $ 1.9
The period for payment of costs incurred under the Separation Agreement   39 months
Maximum | Booj    
Subsequent events    
Equity-based compensation $ 10.0