Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2018 |
Apr. 30, 2018 |
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Entity Registrant Name | RE/MAX Holdings, Inc. | |
Entity Central Index Key | 0001581091 | |
Document Period End Date | Mar. 31, 2018 | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Common Class A | ||
Entity Common Stock, Shares Outstanding | 17,746,184 | |
Common Class B | ||
Entity Common Stock, Shares Outstanding | 1 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
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Accounts Receivable, allowance | $ 7,690 | $ 7,223 |
Property and equipment, accumulated depreciation | $ 12,318 | $ 12,326 |
Common Class A | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 180,000,000 | 180,000,000 |
Common stock, shares issued | 17,733,302 | 17,696,991 |
Common stock, shares outstanding | 17,733,302 | 17,696,991 |
Common Class B | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 1,000 | 1,000 |
Common stock, shares issued | 1 | 1 |
Common stock, shares outstanding | 1 | 1 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Condensed Consolidated Statements of Comprehensive Income | ||
Net income | $ 9,167 | $ 9,388 |
Change in cumulative translation adjustment | (82) | 89 |
Other comprehensive (loss) income, net of tax | (82) | 89 |
Comprehensive income | 9,085 | 9,477 |
Less: comprehensive income attributable to non-controlling interest | 4,145 | 4,899 |
Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax | $ 4,940 | $ 4,578 |
Business and Organization |
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Mar. 31, 2018 | |
Business and Organization | |
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 March 31, 2018, RE/MAX Holdings owns 58.54% of the common membership units in RMCO, while RIHI, Inc. (“RIHI”) owns the remaining 41.46% 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 (“REMAX”) and mortgage brokerages within the United States (“U.S.”) under the Motto Mortgage brand. RE/MAX, founded in 1973, has over 120,000 agents operating in over 7,000 offices and a presence in more than 100 countries and territories. Motto Mortgage (“Motto”), founded in 2016, is the first nationally franchised mortgage brokerage in the U.S. During the first quarter of 2018, the Company acquired all membership interests in booj, LLC, formerly known as Active Website, LLC, (“booj”), a real estate technology company. The Company’s revenue is comprised of continuing franchise fees, annual dues, broker fees and franchise sales and other revenue. See Note 3, Revenue for additional information on revenue streams. |
Summary of Significant Accounting Policies |
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Mar. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation
The accompanying condensed consolidated balance sheet at December 31, 2017, which was derived from the audited consolidated financial statements at that date, and the unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements are presented on a consolidated basis and include the accounts of RE/MAX Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2018 and December 31, 2017 and the results of its operations and comprehensive income, changes in its stockholders’ equity and its cash flows for the three months ended March 31, 2018 and 2017. Interim results may not be indicative of full year performance. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Reclassifications
In addition to the change in accounting principle discussed in Note 3, Revenue certain items in the accompanying condensed consolidated financial statements for the three months ended March 31, 2017 have been reclassified to conform to the current year’s presentation. These reclassifications did not affect the Company’s consolidated results of operations or cash flows.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
As of March 31, 2018, RE/MAX Holdings owns 58.54% 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 Condensed Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income, respectively. Recently Adopted Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 became effective prospectively for the Company on January 1, 2018. The Company concluded that the acquisition of booj meets the definition of a business. See Note 6, Acquisitions for additional information. The Company is still assessing the impact of this standard on any future independent region acquisitions, which have historically been accounted for as an acquisition of a business. 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 statement of cash flow. ASU 2016-15 became effective for the Company on January 1, 2018 and required 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”), a franchisor of mortgage brokerages that created concepts used to develop Motto, are 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 are classified as operating outflows. (See Note 6, Acquisitions). The adoption of this standard had no other material impact on its 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 replaced most existing revenue recognition guidance in U.S. GAAP when it became effective for the Company on January 1, 2018. The Company applied Topic 606 retrospectively which resulted in adjusting each prior reporting period presented. Additionally, the adoption of Topic 606 resulted in net cumulative adjustments to “Retained earnings” of $4.9 million and “Non-controlling interest” of $11.6 million which were recorded to the opening balance sheet as of January 1, 2016. The adoption of the new guidance changed the timing of recognition of franchise sales and franchise renewal revenue. Previously, the Company recognized 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 Revenue” in the Consolidated Statements of Income, are recognized over the contractual term of the franchise agreement. Previously, the Company expensed the commissions upon franchise sale completion. Under the new guidance, the commissions related to franchise sales are recorded as a contract cost and are recognized over the contractual term of the franchise agreement. The adoption of this standard had no material impact on other revenue streams. See Note 3, Revenue for more information. New Accounting Pronouncements Not Yet Adopted In February 2018, the FASB issued 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 the Company beginning January 1, 2019. 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 completed the majority of its accounting for the tax effects of the Tax Cuts and Jobs Act as of December 31, 2017. 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. 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. 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. |
Revenue |
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Revenue | 3. Revenue Changes in Revenue Recognition Policies The Company adopted the new revenue standard on January 1, 2018. The Company applied the new revenue standard retrospectively and has recast the 2017 condensed consolidated financial statements as though the new revenue standard had been applied in all periods presented. The Company’s franchise agreements offer the following benefits to the franchisee: common use and promotion of RE/MAX trademarks; distinctive sales and promotional materials; access to technology; standardized supplies and other materials used in RE/MAX offices; and recommended procedures for operation of RE/MAX offices. The Company concluded that these benefits are all a part of one performance obligation, a license of symbolic intellectual property. Franchise sales is comprised of revenue from the sale or renewal of franchises. The Company previously recognized revenue at the time of sale. Under the new revenue standard, the franchise sale initial fees are considered to be a part of the license of symbolic intellectual property, which is now recognized over the contractual term of the franchise agreement, which is typically 5 years for RE/MAX and 7 years for Motto franchise agreements, respectively. Correspondingly, the commissions related to franchise sales are recorded as an asset (the current portion in “Other current assets” and long term portion in “Other assets, net of current portion”) and are recognized over the contractual term of the franchise agreement in “Selling, operating and administrative expenses”. The following tables summarize the impacts of the new revenue standard adoption on the Company’s condensed consolidated financial statements (in thousands): Condensed Consolidated Balance Sheet
Condensed Consolidated Statement of Income
Condensed Consolidated Statement of Comprehensive Income
Condensed Consolidated Statement of Cash Flows
Revenue Recognition Under the New Revenue Standard The Company generates all of its revenue from contracts with customers. The following is a description of principal activities from which the Company generates its revenue. The franchise agreements provide the franchisees the right to access intellectual property throughout the license period. The method used to measure progress is over the passage of time for most streams of revenue. Continuing Franchise Fees The Company provides an ongoing trademark license, operational, training and administrative services and systems to RE/MAX franchisees, which include systems and tools that are designed to help the Company’s franchisees and their agents serve their customers and help franchisees attract new or retain existing agents. Revenue from continuing franchise fees consists of fixed contractual fees paid monthly by franchise owners and franchisees based on the number of RE/MAX agents in the respective franchised region or office and the number of Motto offices (no significant continuing franchise fees were generated by Motto during the periods presented). This revenue is recognized in the month for which the fee is billed. 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. The activity in the Company’s annual dues deferred revenue consists of the following (in thousands):
(a)Revenue recognized related to the beginning balance was $7.5 million for the three months ended March 31, 2018.
Broker Fees Revenue from broker fees represents fees received from the Company’s RE/MAX franchised regions or franchise offices that are based on a percentage of RE/MAX agents’ gross commission income. Revenue from broker fees is recognized as revenue in the month when a home sale transaction occurs. Franchise Sales The activity in the Company’s deferred revenue is included in “Deferred revenue” and “Deferred revenue, net of current portion” on the Condensed Consolidated Balance Sheets. The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands):
(a)Revenue recognized related to the beginning balance was $2.1 million for the three months ended March 31, 2018.
Commissions Related to Franchise Sales Commissions paid on franchise sales are recognized as an asset and amortized over the contract life of the franchise agreement. The activity in the Company’s capitalized contract costs for commissions (which are included in “other current assets” and “other assets, net of current portion” on the Condensed Consolidated Balance Sheets) consist of the following (in thousands):
Other Revenue Other revenue is primarily revenue from preferred marketing arrangements, approved supplier programs, and event-based revenue from training and other programs. Revenue from preferred marketing arrangement involves both flat fees paid in advance as well as revenue sharing, both of which are generally recognized over the period of the arrangement. Event-based revenue is recognized when the event occurs and until then is included in “Deferred revenue”. Other revenue also includes revenue contributed by booj for web site design, development, implementation, hosting and maintenance for its external customers. Disaggregated Revenue In the following table, revenue is disaggregated by geographical area for each of the three months ended March 31, 2018 and 2017 (in thousands):
In the following table, revenue is disaggregated by owned or independent regions in the U.S. or Canada for each of the three months ended March 31, 2018 and 2017 (in thousands):
Transaction Price Allocated to the Remaining Performance Obligations The following table includes estimated revenue by year expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in thousands):
Using the transition requirements of the new standard, the Company has elected not to disclose the amount of the transaction price allocated to the remaining performance obligations or when the Company expects to recognize that amount as revenue for the year ended December 31, 2017. |
Non-controlling Interest |
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Non-controlling Interest | 4. Non-controlling Interest RE/MAX Holdings is the sole managing member of RMCO and operates and controls all of the business affairs of RMCO. The ownership of the common units in RMCO is summarized as follows:
The weighted average ownership percentages for the applicable reporting periods are used to calculate the net income attributable to RE/MAX Holdings. A reconciliation of “Income before provision for income taxes” to “Net Income attributable to RE/MAX Holdings, Inc.” and “Net Income attributable to non-controlling interest” in the accompanying Condensed Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except for percentages):
*See Note 3, Revenue for more information.
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 non-controlling unitholders are summarized as follows (in thousands):
On May 2, 2018, the Company declared a distribution to non-controlling unitholders of $2.5 million, which is payable on May 30, 2018. |
Earnings Per Share and Dividends |
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Earnings Per Share and Dividends | 5. Earnings Per Share and Dividends Earnings Per Share Basic earnings per share (“EPS”) measures the performance of an entity over the reporting period. Diluted EPS measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The treasury stock method is used to determine the dilutive potential of stock options and restricted stock units. The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except share and per share information):
*See Note 3, Revenue for more information. Outstanding Class B common stock does not share in the earnings of RE/MAX Holdings and is therefore not a participating security. Accordingly, basic and diluted net income per share of Class B common stock has not been presented. Dividends Dividends declared and paid quarterly per share on all outstanding shares of Class A common stock were as follows (in thousands, except share and per share information):
On May 2, 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 May 30, 2018 to stockholders of record at the close of business on May 16, 2018. |
Acquisitions |
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Acquisitions | 6. Acquisitions Booj, LLC On February 26, 2018, RE/MAX, LLC and its consolidated subsidiaries (“RE/MAX, LLC”) acquired all membership interests in booj, a real estate technology company, using $26.3 million in cash generated from operations, plus up to approximately $10.0 million in equity-based compensation to be earned over time, which will be accounted for as compensation expense in the future (see Note 12, Equity-Based Compensation for additional information). RE/MAX, LLC acquired booj in order to deliver core technology solutions designed for RE/MAX affiliates. Booj constitutes a business and was accounted for using the fair value acquisition method. The Company has not completed the analysis necessary to conclude on its purchase price allocation. However, the Company’s best, current estimate is that approximately $18.4 million will be recognized as goodwill with the remainder as amortizable intangibles, with the primary intangibles being related to technology. These amounts are likely to change as the Company completes its purchase price allocation. The goodwill is attributable to expected synergies and projected long term revenue growth. All of the goodwill recognized is tax deductible. Revenue and net income attributable to the acquisition of booj were not material for the three months ended March 31, 2018. RE/MAX of Northern Illinois, Inc. On November 15, 2017, RE/MAX, LLC acquired certain assets of RE/MAX of Northern Illinois, Inc. (“RE/MAX of Northern Illinois”), including the franchise agreements issued by the Company permitting the sale of RE/MAX franchises in the region as well as the franchise agreements between the Independent Region and the franchisees, using $35.7 million in cash generated from operations. RE/MAX, LLC acquired these assets in order to expand its owned and operated regional franchising operations. The following table summarizes the allocation of the purchase price to the fair value of assets acquired for RE/MAX of Northern Illinois (in thousands):
RE/MAX of Northern Illinois constitutes a business and was accounted for using the fair value acquisition method. The total purchase price was allocated to the assets acquired based on their preliminary estimated fair values. The franchise agreements acquired were preliminarily valued using an income approach which utilizes level 3 inputs and are being amortized over a weighted-average useful life using the straight-line method. The 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. The excess of the total purchase price over the preliminary fair value of the identifiable assets acquired was recorded as goodwill. The goodwill recognized is attributable to expected synergies and projected long term revenue growth. All of the goodwill recognized is tax deductible. 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. Revisions or adjustments are not made to any prior period information. Adjustments to the accounting for RE/MAX of Northern Illinois were made during the three months ended March 31, 2018 to the consolidated balance sheet to increase “Goodwill” by $0.7 million with a corresponding decrease to “Franchise agreements, net” of $0.7 million. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the acquisition of booj had occurred on January 1, 2017 and RE/MAX of Northern Illinois had occurred on January 1, 2016. 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.
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Intangible Assets and Goodwill |
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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):
Amortization expense for the three months ended March 31, 2018 and 2017 was $4.3 million and $5.8 million, respectively. As of March 31, 2018 the estimated future amortization expense for the next five years related to intangible assets includes the preliminary intangible assets assumed with the acquisition of booj and is as follows (in thousands):
The following table presents changes to goodwill for the period from January 1, 2018 to March 31, 2018 (in thousands):
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Accrued Liabilities |
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Accrued Liabilities |
8. Accrued Liabilities Accrued liabilities consist of the following (in thousands):
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Debt | 9. Debt Debt, net of current portion, consists of the following (in thousands):
Maturities of debt are as follows (in thousands):
Senior Secured Credit Facility RE/MAX, LLC is party to a credit agreement, dated December 15, 2016, with JPMorgan Chase Bank, N.A., as administrative agent, and various lenders (the “Senior Secured Credit Facility”). Borrowings under the term loans and revolving loans, if any outstanding, accrue interest at LIBOR (as long as LIBOR is not less than the floor of 0.75%) plus a maximum applicable margin of 2.75%. As of March 31, 2018, the interest rate was 5.05%. As of March 31, 2018, the Company had no revolving loans outstanding under its Senior Secured Credit Facility. Whenever amounts are drawn under the revolving line of credit, the 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. |
Fair Value Measurements |
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Fair Value Measurements | 10. Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, the Company follows a three-tier fair value hierarchy, which is described in detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. A summary of the Company’s liabilities measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 is as follows (in thousands):
The Company is required to pay additional purchase consideration totaling eight percent of gross revenues collected by Motto each year (the “Revenue Share Year”), beginning after September 30, 2017 and continuing through September 30, 2026, with no limitation as to the maximum payout. The annual payment to the former owner of Full House is required to be made within 120 days of the end of each Revenue Share Year. Each Revenue Share Year ends September 30. The fair value of the contingent purchase consideration represents the forecasted discounted cash payments that the Company expects to pay Full House with respect to the acquired business. 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 Condensed 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 liabilities of the Company measured at fair value on a recurring basis using significant unobservable inputs for the period from January 1, 2018 to March 31, 2018 (in thousands):
The Company assesses categorization of assets and 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 I, II and III during the three months ended March 31, 2018. The following table summarizes the carrying value and fair value of the Senior Secured Credit Facility as of March 31, 2018 and December 31, 2017 (in thousands):
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Income Taxes |
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Income Taxes | |
Income Taxes |
11. Income Taxes The “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income for the three months ended March 31, 2018 and 2017 is based on an estimate of the Company’s annualized effective income tax rate. 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. As of March 31, 2018, the Company does not believe it has any significant uncertain tax positions. On December 22, 2017, the Tax Cuts and Jobs Act was enacted which includes significant changes to the U.S. corporate tax system. 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 Tax Cuts and Jobs 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. The Company completed the majority of the accounting for the tax effects of the Tax Cuts and Jobs Act as of December 31, 2017. However, the Company’s analysis around the new foreign-derived intangible income (“FDII”) deduction remains incomplete. As such, the Company has 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 the Company has not estimated a provisional amount for deferred tax assets related to qualified property depreciation expense. In addition, the Company re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. The Company is still analyzing certain aspects of the Tax Cuts and Jobs Act and is refining its calculations, which could potentially affect the measurement of these balances. In accordance with current SEC guidance, the Company will report the impact of these items in the reporting period in which the accounting is completed, which will not exceed one year from the date of enactment of the Tax Cuts and Jobs Act. |
Equity-Based Compensation |
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Equity-Based Compensation | 12. Equity-Based Compensation The RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan (the “2013 Incentive Plan”) includes restricted stock units (“RSUs”) which may have time-based or performance-based vesting criteria. The Company recognizes equity-based compensation expense in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income. The Company recognizes corporate income tax benefits relating to the vesting of restricted stock units in “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income. Employee stock-based compensation expense under the Company’s 2013 Incentive Plan was as follows (in thousands):
Time-based Restricted Stock Units Time-based RSUs 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, other than booj employees and former owners, generally vest equally in annual installments over a three year period. Grants awarded to booj employees and former owners vest in three installments over a four 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 as of and for the three months ended March 31, 2018:
At March 31, 2018, there was $11.1 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 3.49 years for time-based restricted stock units. Performance-based Restricted Stock Units Performance-based RSUs for employees, other than booj employees and former owners, 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. Earned performance-based RSUs cliff-vest at the end of the three year performance period. Compensation expense is recognized on a straight line basis over the vesting period based on the Company’s estimated performance. Performance-based RSUs granted to booj employees and former owners are stock-based awards in which the number of shares ultimately received depends on the achievement of certain technology requirements set forth in the agreement. The number of shares that could be issued range from 0% to 100% of the participant’s target award. The awards were valued using the Company’s closing stock price on the date of grant. The Company’s expense will be adjusted based on the estimated achievement of the requirements. As of March 31, 2018, the Company expects full achievement of the requirements. Earned performance-based RSUs vest May 31, 2019 and November 1, 2019 as the corresponding requirements are achieved. Compensation expense is recognized on a straight line basis over the vesting period based on the Company’s estimated performance. The following table summarizes equity-based compensation activity related to performance-based RSUs as of and for the three months ended March 31, 2018:
At March 31, 2018, there was $6.4 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 1.52 years for performance-based RSUs. After giving effect to all outstanding awards (assuming maximum achievement of performance goals for performance-based awards), there were 2,379,333 additional shares available for the Company to grant under the 2013 Incentive Plan as of March 31, 2018. |
Leadership Change |
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Leadership Changes | |
Leadership Changes | 13. Leadership Change On February 9, 2018, the Company announced the retirement of the Company’s President. The Company entered into a Separation Agreement with the President, and pursuant to the terms of this agreement, the Company incurred a total cost of $1.8 million which was recorded to “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income during the three months ended March 31, 2018, which will be paid over a 39-month period.
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Commitments and Contingencies |
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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. Contingencies In connection with the purchase of Full House, the Company entered into an arrangement to pay additional purchase consideration based on Motto’s future gross revenues collected, excluding certain fees, for each year beginning October 1, 2017 through September 30, 2026. As of March 31, 2018, this liability was estimated to be $6.7 million. See Note 10, Fair Value Measurements for additional information. In connection with the sale of the assets and liabilities related to the Company’s previously owned brokerages, the Company entered into three Assignment and Assumption of Lease 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 March 31, 2018, the Company has outstanding lease guarantees of $3.2 million. This amount represents the maximum potential amount of future payments under the respective lease guarantees. In the event of default by the purchaser, the indemnity and default clauses in the Assignment Agreements govern the Company’s ability to pursue and recover damages incurred, if any, against the purchaser. 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. The Company does not reduce these liabilities for potential insurance or third-party recoveries. 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. 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. Management of the Company believes no 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.
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Related-Party Transactions |
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Related Party Transactions | |
Related-Party Transactions | 15. 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 for the three months ended March 31, 2018 and 2017. The Company provides services, such as accounting, legal, marketing, technology, human resources and public relations services, to certain affiliated entities (primarily the Company’s affiliated advertising funds), and it allows these companies to share its leased office space. During the three months ended March 31, 2018 and 2017, the total amounts allocated for services rendered and rent for office space provided on behalf of affiliated entities were $1.0 million and $0.8 million, respectively. Amounts are generally paid within 30 days and no amounts were outstanding at March 31, 2018 or December 31, 2017. Related party advertising funds had current outstanding amounts due from the Company of $0.2 million and $0.1 million as of March 31, 2018 and December 31, 2017, respectively. Such amounts are included in “Accounts payable” in the accompanying Condensed Consolidated Balance Sheets.
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Summary of Significant Accounting Policies (Policies) |
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Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation
The accompanying condensed consolidated balance sheet at December 31, 2017, which was derived from the audited consolidated financial statements at that date, and the unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements are presented on a consolidated basis and include the accounts of RE/MAX Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2018 and December 31, 2017 and the results of its operations and comprehensive income, changes in its stockholders’ equity and its cash flows for the three months ended March 31, 2018 and 2017. Interim results may not be indicative of full year performance. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. |
Reclassifications | Reclassifications
In addition to the change in accounting principle discussed in Note 3, Revenue certain items in the accompanying condensed consolidated financial statements for the three months ended March 31, 2017 have been reclassified to conform to the current year’s presentation. These reclassifications did not affect the Company’s consolidated results of operations or cash flows.
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Use of Estimates | Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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Principles of Consolidation | Principles of Consolidation
As of March 31, 2018, RE/MAX Holdings owns 58.54% 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 Condensed Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income, respectively. |
New Accounting Pronouncements Not Yet Adopted | New Accounting Pronouncements Not Yet Adopted In February 2018, the FASB issued 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 the Company beginning January 1, 2019. 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 completed the majority of its accounting for the tax effects of the Tax Cuts and Jobs Act as of December 31, 2017. 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. 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. 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. |
Revenue (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of capitalized contract costs | The activity in the Company’s capitalized contract costs for commissions (which are included in “other current assets” and “other assets, net of current portion” on the Condensed Consolidated Balance Sheets) consist of the following (in thousands):
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Schedule of Transaction Price Allocated to the Remaining Performance Obligations |
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ASU 2014-09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cumulative impact on financial statements | The following tables summarize the impacts of the new revenue standard adoption on the Company’s condensed consolidated financial statements (in thousands): Condensed Consolidated Balance Sheet
Condensed Consolidated Statement of Income
Condensed Consolidated Statement of Comprehensive Income
Condensed Consolidated Statement of Cash Flows
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Annual dues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of contract liability | The activity in the Company’s annual dues deferred revenue consists of the following (in thousands):
(a)Revenue recognized related to the beginning balance was $7.5 million for the three months ended March 31, 2018. |
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Franchise sales | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of contract liability | The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands):
(a)Revenue recognized related to the beginning balance was $2.1 million for the three months ended March 31, 2018. |
Non-controlling Interest (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Ownership of the Common Units |
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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 Condensed Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except for percentages):
*See Note 3, Revenue for more information.
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Distributions Paid or Payable | The distributions paid or payable to non-controlling unitholders are summarized as follows (in thousands):
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Earnings Per Share and Dividends (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share and Dividends | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Numerator and Denominator used in Basic and Diluted EPS Calculations | The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except share and per share information):
*See Note 3, Revenue for more information. |
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Schedule of Dividends Declared and Paid Quarterly per Share | Dividends declared and paid quarterly per share on all outstanding shares of Class A common stock were as follows (in thousands, except share and per share information):
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Acquisitions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Unaudited Pro Forma Information |
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Re/Max Of Northern Illinois Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the allocation of the purchase price to the fair value of assets acquired | The following table summarizes the allocation of the purchase price to the fair value of assets acquired for RE/MAX of Northern Illinois (in thousands):
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Intangible Assets and Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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):
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Schedule of estimated future amortization of intangible assets, other than goodwill | As of March 31, 2018 the estimated future amortization expense for the next five years related to intangible assets includes the preliminary intangible assets assumed with the acquisition of booj and is as follows (in thousands):
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Schedule of changes to goodwill | The following table presents changes to goodwill for the period from January 1, 2018 to March 31, 2018 (in thousands):
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Accrued Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities | Accrued liabilities consist of the following (in thousands):
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | Debt, net of current portion, consists of the following (in thousands):
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Schedule of Maturities of Debt |
Maturities of debt are as follows (in thousands):
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Fair Value Measurements (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 March 31, 2018 and December 31, 2017 is as follows (in thousands):
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Reconciliation of Assets And Liabilities Measured Using Significant Unobservable Inputs | The table below presents a reconciliation of all liabilities of the Company measured at fair value on a recurring basis using significant unobservable inputs for the period from January 1, 2018 to March 31, 2018 (in thousands):
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Summary of carrying value and fair value of senior secured credit facility | The following table summarizes the carrying value and fair value of the Senior Secured Credit Facility as of March 31, 2018 and December 31, 2017 (in thousands):
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Equity-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Stock-Based Compensation Expense | Employee stock-based compensation expense under the Company’s 2013 Incentive Plan was as follows (in thousands):
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Time-based Restricted Stock Units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units |
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Performance-based Restricted Stock Units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units |
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Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions |
3 Months Ended | ||
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Jan. 01, 2016 |
Mar. 31, 2018 |
Dec. 31, 2017 |
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ASU 2016-15 | |||
Significant Accounting Policies [Line Items] | |||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 6.3 | ||
ASU 2014-09 | |||
Significant Accounting Policies [Line Items] | |||
Cumulative effect adjustment to retained earnings | $ 4.9 | ||
Cumulative effect adjustment to non-controlling interest | $ 11.6 | ||
RMCO, LLC | |||
Significant Accounting Policies [Line Items] | |||
Parent economic interest in RMCO (as a percent) | 58.54% | 58.49% |
Revenue - Condensed Consolidated Statement of Cash Flows (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Net income | $ 9,167 | $ 9,388 |
Changes in operating assets and liabilities | $ (2,614) | (1,685) |
As previously reported | ASU 2014-09 | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Net income | 10,071 | |
Changes in operating assets and liabilities | (2,368) | |
Adjustments | ASU 2014-09 | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Net income | (683) | |
Changes in operating assets and liabilities | $ 683 |
Revenue - Deferred revenue (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Annual dues | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Performance period | 12 months |
Balance at beginning of period | $ 15,297 |
New billings | 10,430 |
Revenue recognized | (8,696) |
Balance at the end of period | 17,031 |
Revenue recognized | 7,500 |
Franchise sales | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Balance at beginning of period | 27,943 |
New billings | 2,534 |
Revenue recognized | (2,344) |
Balance at the end of period | 28,133 |
Revenue recognized | $ 2,100 |
Revenue - Commissions Related to Franchise Sales (Details) - Commissions Related to Franchise Sales $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Capitalized Contract Cost [Line Items] | |
Balance at beginning of period | $ 3,532 |
Expense recognized that is included in beginning balance | (325) |
Additions to contract cost for new activity | 470 |
Balance at end of period | $ 3,677 |
Revenue - Disaggregated revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 52,642 | $ 47,406 |
Owned Regions | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 31,363 | 28,552 |
Independent Regions | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 11,149 | 10,750 |
Global and Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 10,130 | 8,104 |
U.S. | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 36,749 | 34,078 |
Canada | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 5,763 | 5,224 |
Global and Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 10,130 | $ 8,104 |
Non-controlling Interest - Ownership of common units in RMCO (Details) - RMCO, LLC - shares |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Shares [Abstract] | ||
Non-controlling interest ownership of common units in RMCO | 12,559,600 | 12,559,600 |
RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units | 17,733,302 | 17,696,991 |
Total number of common stock units | 30,292,902 | 30,256,591 |
Ownership Percentage [Abstract] | ||
Non-controlling interest ownership of common units in RMCO as a percentage | 41.46% | 41.51% |
RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units | 58.54% | 58.49% |
Total percentage of common stock units | 100.00% | 100.00% |
Non-controlling Interest - Net income reconciliation (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Noncontrolling Interest | ||
Weighted average ownership percentage of controlling interest | 58.51% | 58.44% |
Weighted average ownership percentage of noncontrolling interest | 41.49% | 41.56% |
Total (as a percentage) | 100.00% | 100.00% |
Income before provision for income taxes attributable to RE/MAX Holdings, Inc. | $ 6,453 | $ 7,252 |
Provision for income taxes attributable to RE/MAX Holdings, Inc. | (1,470) | (2,712) |
Net income attributable to RE/MAX Holdings, Inc. | 4,983 | 4,540 |
Income before provision for income taxes: Non-controlling interest | 4,576 | 5,166 |
Provision for income taxes: Non-controlling interest | (392) | (318) |
Net income: Non-controlling interest | 4,184 | 4,848 |
Income before provision for income taxes | 11,029 | 12,418 |
Provision for income taxes | (1,862) | (3,030) |
Net income | $ 9,167 | $ 9,388 |
Non-controlling Interest - Distributions Paid or Payable (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
May 02, 2018 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Dividends Payable [Line Items] | |||
Distributions paid or payable to or on behalf of non-controlling unitholders | $ 4,212 | $ 5,849 | |
Distributions declared to non-controlling unitholders | $ 2,500 | ||
Tax and other distributions | |||
Dividends Payable [Line Items] | |||
Distributions paid or payable to or on behalf of non-controlling unitholders | 1,700 | 3,588 | |
Dividend distributions | |||
Dividends Payable [Line Items] | |||
Distributions paid or payable to or on behalf of non-controlling unitholders | $ 2,512 | $ 2,261 |
Earnings Per Share and Dividends - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
May 02, 2018 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Dividends Payable [Line Items] | |||
Cash dividends declared per share of Class A common stock | $ 0.20 | $ 0.18 | |
Dividends declared and paid | $ 3,547 | ||
Distributions declared to non-controlling unitholders | $ 2,500 | ||
Common Class A | |||
Dividends Payable [Line Items] | |||
Cash dividends declared per share of Class A common stock | $ 0.20 | $ 0.18 | |
Dividends declared and paid | $ 3,547 | $ 3,184 | |
Quarterly dividend | Common Class A | |||
Dividends Payable [Line Items] | |||
Cash dividends declared per share of Class A common stock | $ 0.20 | ||
Non-controlling interest | |||
Dividends Payable [Line Items] | |||
Distributions declared to non-controlling unitholders | $ 2,512 | $ 2,261 |
Acquisitions - Acquisitions (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Feb. 26, 2018 |
Nov. 15, 2017 |
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Business Acquisition [Line Items] | ||||
Goodwill | $ 154,196 | $ 135,213 | ||
Accounting goodwill | ||||
Adjustments to acquisition accounting during the measurement period - goodwill | 700 | |||
booj, LLC | ||||
Business Acquisition [Line Items] | ||||
Cash consideration | $ 26,300 | |||
Equity based compensation | 10,000 | |||
Goodwill | $ 18,400 | |||
Re/Max Of Northern Illinois Inc. | ||||
Business Acquisition [Line Items] | ||||
Cash consideration | $ 35,700 | |||
Franchise agreements | 22,800 | |||
Goodwill | 12,920 | |||
Total purchase price | $ 35,720 | |||
Accounting goodwill | ||||
Adjustments to acquisition accounting during the measurement period - goodwill | 700 | |||
Accounting franchise agreements | ||||
Adjustments to acquisition accounting during the measurement period - franchise agreements | $ (700) |
Acquisitions - Unaudited Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Business Acquisition, Pro Forma Information [Abstract] | |||
Total revenue | $ 53,908 | $ 50,177 | $ 43,820 |
Net income attributable to RE/MAX Holdings, Inc. | $ 4,291 | $ 3,814 | $ 5,010 |
Basic earnings per common share | $ 0.24 | $ 0.22 | $ 0.28 |
Diluted earnings per common share | $ 0.24 | $ 0.22 | $ 0.28 |
Intangible Assets and Goodwill - Estimated Future Amortization of Intangible Assets, Other Than Goodwill (Details) $ in Thousands |
Mar. 31, 2018
USD ($)
|
---|---|
Finite Lived Intangible Assets Future Amortization Expense Current And Five Succeeding Fiscal Years [Abstract] | |
Remainder of 2018 | $ 14,206 |
2019 | 18,762 |
2020 | 18,561 |
2021 | 18,112 |
2022 | 15,797 |
Estimated future amortization expense over next five years | $ 85,438 |
Intangible Assets and Goodwill - Schedule of Changes in Goodwill (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Changes to goodwill | |
Beginning Balance | $ 135,213 |
Goodwill recognized related to current year acquisitions | 18,375 |
Adjustments to acquisition accounting during the measurement period - goodwill | 700 |
Effect of changes in foreign currency exchange rates | (92) |
Ending Balance | $ 154,196 |
Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accrued Liabilities [Line Items] | ||
Accrued payroll and related employee costs | $ 5,106 | $ 3,874 |
Accrued taxes | 1,235 | 1,635 |
Accrued professional fees | 1,506 | 2,339 |
Other | 3,107 | 7,542 |
Accrued liabilities | $ 10,954 | 15,390 |
Tails Inc. | ||
Accrued Liabilities [Line Items] | ||
Other | $ 4,500 |
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt | ||
Senior Secured Credit Facility | $ 231,475 | $ 232,063 |
Less unamortized debt issuance costs | (1,705) | (1,780) |
Less unamortized debt discount | (1,244) | (1,297) |
Less current portion | (2,350) | (2,350) |
Debt, net of current portion | $ 226,176 | $ 226,636 |
Debt - Schedule of Maturities of Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt | ||
Remainder of 2018 | $ 1,763 | |
2019 | 2,350 | |
2020 | 2,350 | |
2021 | 2,350 | |
2022 | 2,350 | |
Thereafter | 220,312 | |
Senior Secured Credit Facility | $ 231,475 | $ 232,063 |
Debt - Additional Information (Details) - Senior Secured Credit Facility |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Debt Instrument [Line Items] | |
Debt instrument, interest rate | 5.05% |
London Interbank Offered Rate (LIBOR) | Maximum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 2.75% |
London Interbank Offered Rate (LIBOR) | Minimum | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 0.75% |
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 |
Fair Value Measurements - Schedule of Senior Secured Credit Facility (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
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 | Senior Secured Credit Facility | ||
Debt Instrument [Line Items] | ||
Long term debt, carrying amount | 228,526,000 | $ 228,986,000 |
Fair Value, Inputs, Level 2 | Estimated fair value | Senior Secured Credit Facility | ||
Debt Instrument [Line Items] | ||
Long term debt, fair value | $ 232,065,000 | $ 232,933,000 |
Income Taxes - Additional Information (Details) |
Mar. 31, 2018
USD ($)
|
---|---|
Income Taxes | |
Uncertain tax positions | $ 0 |
Leadership Change (Details) - Former President $ in Millions |
Feb. 09, 2018
USD ($)
|
---|---|
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |
Accrued costs under Separation Agreement | $ 1.8 |
Period for payment of restructuring cost | 39 months |
Commitments and Contingencies - Contingencies (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
lease
agreement
| |
Assignment and Assumption of Lease Agreements | |
Loss Contingencies [Line Items] | |
Number of leases assigned to purchasers | lease | 21 |
Number of assignment agreements | agreement | 3 |
Outstanding lease guarantees | $ 3.2 |
Full House Mortgage Connection, Inc. | |
Loss Contingencies [Line Items] | |
Contingent consideration liability | $ 6.7 |
Commitments and Contingencies - Litigation (Details) - USD ($) $ in Millions |
1 Months Ended | |||
---|---|---|---|---|
Feb. 28, 2018 |
Feb. 27, 2018 |
Oct. 07, 2013 |
Feb. 28, 2018 |
|
Loss Contingencies [Line Items] | ||||
Payment of legal settlement | $ 4.5 | $ 4.5 | ||
Amount of reimbursement of fees and portion of settlement. | $ 1.9 | |||
Tails Inc. | ||||
Loss Contingencies [Line Items] | ||||
Cash consideration | $ 20.2 |
Related-Party Transactions (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Related party balances and activity | |||
Accounts payable to affiliates | $ 200,000 | $ 100,000 | |
Services rendered and rent for office space provided | |||
Related party balances and activity | |||
Amounts allocated for services rendered and rent for office space | $ 1,000,000 | $ 800,000 | |
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 |