RE/MAX HOLDINGS, INC., 10-Q filed on 5/6/2021
Quarterly Report
v3.21.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2021
Apr. 30, 2021
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 31, 2021  
Entity File Number 001-36101  
Entity Registrant Name RE/MAX Holdings, Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 80-0937145  
Entity Address Line One 5075 South Syracuse Street  
Entity Address City or Town Denver  
Entity Address State or Province CO  
Entity Address Postal Zip Code 80237  
City Area Code 303  
Local Phone Number 770-5531  
Title of 12(b) Security Class A Common Stock, $0.0001 par value per share  
Trading Symbol RMAX  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Entity Central Index Key 0001581091  
Amendment Flag false  
Common Class A    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   18,890,602
Common Class B    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   1
v3.21.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 102,632 $ 101,355
Restricted cash 21,500 19,872
Accounts and notes receivable, current portion, less allowances of $11,705 and $11,724, respectively 29,544 29,985
Income taxes receivable 2,158 1,222
Other current assets 14,715 13,938
Total current assets 170,549 166,372
Property and equipment, net of accumulated depreciation of $15,292 and $14,731, respectively 9,184 7,872
Operating lease right of use assets 37,816 38,878
Franchise agreements, net 68,337 72,196
Other intangible assets, net 28,284 29,969
Goodwill 176,008 175,835
Deferred tax assets, net 49,162 48,855
Income taxes receivable, net of current portion 1,980 1,980
Other assets, net of current portion 17,068 15,435
Total assets 558,388 557,392
Current liabilities:    
Accounts payable 5,782 2,108
Accrued liabilities 67,208 68,571
Income taxes payable 9,884 9,579
Deferred revenue 24,689 25,282
Current portion of debt 2,356 2,428
Current portion of payable pursuant to tax receivable agreements 3,590 3,590
Operating lease liabilities 5,826 5,687
Total current liabilities 119,335 117,245
Debt, net of current portion 220,676 221,137
Payable pursuant to tax receivable agreements, net of current portion 29,974 29,974
Deferred tax liabilities, net 496 490
Deferred revenue, net of current portion 19,601 19,864
Operating lease liabilities, net of current portion 48,794 50,279
Other liabilities, net of current portion 5,411 5,722
Total liabilities 444,287 444,711
Commitments and contingencies
Stockholders' equity:    
Additional paid-in capital 498,810 491,422
Retained earnings 21,433 25,139
Accumulated other comprehensive income, net of tax 653 612
Total stockholders' equity attributable to RE/MAX Holdings, Inc. 520,898 517,175
Non-controlling interest (406,797) (404,494)
Total stockholders' equity 114,101 112,681
Total liabilities and stockholders' equity 558,388 557,392
Common Class A    
Stockholders' equity:    
Common stock 2 2
Total stockholders' equity $ 2 $ 2
v3.21.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Accounts and notes receivable, allowance $ 11,705 $ 11,724
Property and equipment, accumulated depreciation $ 15,292 $ 14,731
Common Class A    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 180,000,000 180,000,000
Common stock, shares issued 18,719,248 18,390,691
Common stock, shares outstanding 18,719,248 18,390,691
Common Class B    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 1,000 1,000
Common stock, shares issued 1 1
Common stock, shares outstanding 1 1
v3.21.1
Condensed Consolidated Statements of Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Revenue:    
Total revenue $ 72,295 $ 70,272
Operating expenses:    
Selling, operating and administrative expenses 43,676 34,677
Marketing Funds expenses 18,145 17,522
Depreciation and amortization 6,937 6,310
Total operating expenses 68,758 58,509
Operating income 3,537 11,763
Other expenses, net:    
Interest expense (2,098) (2,682)
Interest income 163 269
Foreign currency transaction gains (losses) (20) (270)
Total other expenses, net (1,955) (2,683)
Income before provision for income taxes 1,582 9,080
Provision for income taxes 58 (3,790)
Net income 1,640 5,290
Less: net income attributable to non-controlling interest 548 2,659
Net income attributable to RE/MAX Holdings, Inc. $ 1,092 $ 2,631
Common Class A    
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock    
Basic $ 0.06 $ 0.15
Diluted $ 0.06 $ 0.15
Weighted average shares of Class A common stock outstanding    
Basic 18,496,532 17,974,264
Diluted 18,866,727 18,033,631
Cash dividends declared per share of Class A common stock $ 0.23 $ 0.22
Continuing franchise fees    
Revenue:    
Total revenue $ 25,374 $ 24,143
Annual dues    
Revenue:    
Total revenue 8,672 8,921
Broker fees    
Revenue:    
Total revenue 11,953 9,444
Marketing Funds fees    
Revenue:    
Total revenue 18,145 17,522
Franchise sales and other revenue    
Revenue:    
Total revenue $ 8,151 $ 10,242
v3.21.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Condensed Consolidated Statements of Comprehensive Income    
Net income $ 1,640 $ 5,290
Change in cumulative translation adjustment 79 (230)
Other comprehensive income (loss), net of tax 79 (230)
Comprehensive income 1,719 5,060
Less: comprehensive income attributable to non-controlling interest 586 2,465
Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax $ 1,133 $ 2,595
v3.21.1
Condensed Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Common Class A
Common Class B
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss), net of tax
Non-controlling interest
Total
Beginning balance, Value at Dec. 31, 2019 $ 2   $ 466,945 $ 30,525 $ 414 $ (399,510) $ 98,376
Beginning balance, Shares at Dec. 31, 2019 17,838,233 1          
Net income       2,631   2,659 5,290
Distributions to non-controlling unitholders           (2,777) (2,777)
Equity-based compensation expense and dividend equivalents, Value     5,962 (289)     5,673
Equity-based compensation expense and dividend equivalents, Shares 368,375            
Dividends to Class A common stockholders       (3,986)     (3,986)
Change in accumulated other comprehensive income         (36) (194) (230)
Payroll taxes related to net settled restricted stock units, Value     (2,268)       (2,268)
Payroll taxes related to net settled restricted stock units, Shares (82,645)            
Ending balance, Value at Mar. 31, 2020 $ 2   470,639 28,881 378 (399,822) 100,078
Ending balance, Shares at Mar. 31, 2020 18,123,963 1          
Beginning balance, Value at Dec. 31, 2020 $ 2   491,422 25,139 612 (404,494) 112,681
Beginning balance, Shares at Dec. 31, 2020 18,390,691 1          
Net income       1,092   548 1,640
Distributions to non-controlling unitholders           (2,889) (2,889)
Equity-based compensation expense and dividend equivalents, Value     12,679 (472)     12,207
Equity-based compensation expense and dividend equivalents, Shares 459,330            
Dividends to Class A common stockholders       (4,326)     (4,326)
Change in accumulated other comprehensive income         41 38 79
Payroll taxes related to net settled restricted stock units, Value     (5,291)       (5,291)
Payroll taxes related to net settled restricted stock units, Shares (130,773)            
Ending balance, Value at Mar. 31, 2021 $ 2   $ 498,810 $ 21,433 $ 653 $ (406,797) $ 114,101
Ending balance, Shares at Mar. 31, 2021 18,719,248 1          
v3.21.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash flows from operating activities:    
Net income $ 1,640 $ 5,290
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 6,937 6,310
Bad debt expense 287 3,435
Equity-based compensation expense 12,054 2,186
Deferred income tax expense (320) 2,241
Fair value adjustments to contingent consideration (280) (505)
Non-cash lease expense (benefit) (284)  
Other, net 87 (504)
Changes in operating assets and liabilities 711 (4,804)
Net cash provided by operating activities 20,832 13,649
Cash flows from investing activities:    
Purchases of property, equipment and capitalization of software (4,381) (1,965)
Net cash used in investing activities (4,381) (1,965)
Cash flows from financing activities:    
Payments on debt (660) (660)
Distributions paid to non-controlling unitholders (2,889) (2,777)
Dividends and dividend equivalents paid to Class A common stockholders (4,798) (4,275)
Payments related to tax withholding for share-based compensation (5,291) (2,268)
Net cash used in financing activities (13,638) (9,980)
Effect of exchange rate changes on cash 92 (205)
Net increase in cash, cash equivalents and restricted cash 2,905 1,499
Cash, cash equivalents and restricted cash, beginning of period 121,227 103,601
Cash, cash equivalents and restricted cash, end of period 124,132 105,100
Supplemental disclosures of cash flow information:    
Cash paid for interest 1,970 2,556
Net cash paid for income taxes $ 926 $ 1,079
v3.21.1
Business and Organization
3 Months Ended
Mar. 31, 2021
Business and Organization  
Business and Organization

1. Business and Organization

RE/MAX Holdings, Inc. (“Holdings”) and its consolidated subsidiaries, including RMCO, LLC (“RMCO”), are referred to hereinafter as the “Company.”

The Company is a franchisor in the real estate industry, franchising real estate brokerages globally under the RE/MAX brand (“RE/MAX”) and mortgage brokerages within the United States (“U.S.”) under the Motto Mortgage brand (“Motto”). RE/MAX, founded in 1973, has nearly 140,000 agents operating in over 8,000 offices and a presence in more than 110 countries and territories. Motto, founded in 2016, is the first nationally franchised mortgage brokerage in the U.S. RE/MAX and Motto are 100% franchised—the Company does not own any of the brokerages that operate under these brands.

v3.21.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
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, 2020, which was derived from the audited consolidated financial statements at that date, and the unaudited interim condensed consolidated financial statements and notes thereto have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements are presented on a consolidated basis and include the accounts of Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2021 and the results of its operations and comprehensive income, cash flows and changes in its stockholders’ equity for the three months ended March 31, 2021 and 2020. 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, 2020 (“2020 Annual Report on Form 10-K”). Please refer to that document for a fuller discussion of all significant accounting policies.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Segment Reporting

The Company operates under the following four operating segments: Real Estate, Mortgage, Marketing Funds and booj. Due to quantitative insignificance, the booj operating segment does not meet the criteria of a reportable segment and is included in “Other”.

Revenue Recognition

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

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

Annual Dues

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

Balance at
beginning of period

New billings

Revenue recognized (a)

Balance at end
of period

Three Months Ended March 31, 2021

$

14,539

$

10,277

$

(8,672)

$

16,144

(a)

Revenue recognized related to the beginning balance was $6.3 million for the three months ended March 31, 2021.

Franchise Sales

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

Balance at
beginning of period

New billings

Revenue recognized (a)

Balance at end
of period

Three Months Ended March 31, 2021

$

25,069

$

2,005

$

(2,349)

$

24,725

(a)

Revenue recognized related to the beginning balance was $2.3 million for the three months ended March 31, 2021.

Commissions Related to Franchise Sales

Commissions paid on franchise sales are recognized as an asset and amortized over the contract life of the franchise agreement. The activity in the Company’s capitalized contract costs for commissions (which are included in “other current assets” and “other assets, net of current portion” on the Condensed Consolidated Balance Sheets) consist of the following (in thousands):

Balance at
beginning of period

Expense
recognized

Additions to contract
cost for new activity

Balance at end
of period

Three Months Ended March 31, 2021

$

3,690

$

(421)

$

320

$

3,589

Disaggregated Revenue

In the following table, segment revenue is disaggregated by Company-Owned or Independent Regions, where applicable, and by geographical area (in thousands):

Three Months Ended March 31, 

2021

2020

U.S. Company-Owned Regions

$

32,546

$

30,578

U.S. Independent Regions

3,288

2,996

Canada Company-Owned Regions

3,554

3,081

Canada Independent Regions

2,205

2,039

Global

2,641

2,548

Fee revenue (a)

44,234

41,242

Franchise sales and other revenue (b)

6,920

8,663

Total Real Estate

51,154

49,905

U.S.

16,182

15,651

Canada

1,737

1,655

Global

226

216

Total Marketing Funds

18,145

17,522

Mortgage (c)

2,323

1,458

Other (c)

673

1,387

Total

$

72,295

$

70,272

(a)Fee revenue includes Continuing franchise fees, Annual dues and Broker fees.
(b)Franchise sales and other revenue is derived primarily within the U.S.
(c)Revenue from Mortgage and Other are derived exclusively within the U.S.

Transaction Price Allocated to the Remaining Performance Obligations

The following table includes estimated revenue by year, excluding certain other immaterial items, expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in thousands):

Remainder of 2021

2022

2023

2024

2025

2026

Thereafter

Total

Annual dues

$

15,373

$

771

$

$

$

$

$

$

16,144

Franchise sales

5,244

5,898

4,533

3,300

2,023

1,049

2,678

24,725

Total

$

20,617

$

6,669

$

4,533

$

3,300

$

2,023

$

1,049

$

2,678

$

40,869

Cash, Cash Equivalents and Restricted Cash

All cash held by the Marketing Funds is contractually restricted. The following table reconciles the amounts presented for cash, both unrestricted and restricted, in the Condensed Consolidated Balance Sheets to the amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands):

March 31, 2021

December 31, 2020

Cash and cash equivalents

$

102,632

$

101,355

Restricted cash

21,500

19,872

Total cash, cash equivalents and restricted cash

$

124,132

$

121,227

Services Provided to the Marketing Funds by Real Estate

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

Costs charged from Real Estate to the Marketing Funds are as follows (in thousands):

Three Months Ended March 31, 

2021

2020

Technology - operating

$

3,600

$

2,971

Technology - capital

180

644

Marketing staff and administrative services

1,118

1,228

Total

$

4,898

$

4,843

Leases

The Company leases corporate offices, a distribution center, billboards and certain equipment. As all franchisees are independently owned and operated, there are no leases recognized for any offices used by the Company’s franchisees. All the Company’s material leases are classified as operating leases.

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

The Company has made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from any of its short-term leases. All leases with a term of 12 months or less at commencement, for which the Company is not reasonably certain to exercise available renewal options that would extend the lease term past 12 months, will be recognized on a straight-line basis over the lease term.

Recently Adopted Accounting Pronouncements

None.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which contains temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The new guidance is effective upon issuance and may be adopted on any date on or after March 12, 2020. The relief is temporary and only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company believes the amendments of ASU 2020-04 will not have a significant impact on the Company’s consolidated financial statements

and related disclosures as the Company does not currently engage in interest rate hedging of its LIBOR based debt, nor does it believe it has any material contracts tied to LIBOR other than its Senior Secured Credit Agreement, as discussed in Note 8, Debt. An amendment to the Senior Secured Credit agreement will likely be required, but the Company does not expect any material adverse consequences from this transition.

v3.21.1
Non-controlling Interest
3 Months Ended
Mar. 31, 2021
Noncontrolling Interest  
Non-controlling Interest

3. Non-controlling Interest

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

March 31, 2021

December 31, 2020

Shares

Ownership %

Shares

Ownership %

Non-controlling interest ownership of common units in RMCO

12,559,600

40.2

%

12,559,600

40.6

%

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

18,719,248

59.8

%

18,390,691

59.4

%

Total common units in RMCO

31,278,848

100.0

%

30,950,291

100.0

%

The weighted average ownership percentages for the applicable reporting periods are used to calculate the “Net income attributable to RE/MAX Holdings, Inc.” A reconciliation of “Income before provision for income taxes” to “Net income attributable to RE/MAX Holdings, Inc.” and “Net Income attributable to non-controlling interest” in the accompanying Condensed Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except percentages):

Three Months Ended March 31, 

2021

2020

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

Weighted average ownership percentage of RMCO(a)

59.6

%

40.4

%

100

%

58.9

%

41.1

%

100.0

%

Income before provision for income taxes(a)

$

942

$

640

$

1,582

$

5,552

$

3,528

$

9,080

Provision for income taxes(b)(c)

150

(92)

58

(2,921)

(869)

(3,790)

Net income

$

1,092

$

548

$

1,640

$

2,631

$

2,659

$

5,290

(a)The weighted average ownership percentage of RMCO differs from the allocation of income before provision for income taxes between RE/MAX Holdings and the non-controlling interest due to certain relatively insignificant items recorded at RE/MAX Holdings.
(b)The provision for income taxes attributable to Holdings is primarily comprised of U.S. federal and state income taxes on its proportionate share of the flow-through income from RMCO. It also includes Holdings’ share of taxes directly incurred by RMCO and its subsidiaries, related primarily to tax liabilities in certain foreign jurisdictions.
(c)The provision for income taxes attributable to the non-controlling interest represents its share of taxes related primarily to tax liabilities in certain foreign jurisdictions directly incurred by RMCO and its subsidiaries. Otherwise, because RMCO is a flow-through entity, there is no U.S. federal and state income tax provision recorded on the non-controlling interest.

Distributions and Other Payments to Non-controlling Unitholders

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

Three Months Ended March 31, 

2021

2020

Tax and other distributions

$

$

14

Dividend distributions

2,889

2,763

Total distributions to non-controlling unitholders

$

2,889

$

2,777

v3.21.1
Earnings Per Share and Dividends
3 Months Ended
Mar. 31, 2021
Earnings Per Share and Dividends  
Earnings Per Share and Dividends

4. Earnings Per Share and Dividends

Earnings Per Share

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

Three Months Ended March 31, 

2021

2020

Numerator

Net income attributable to RE/MAX Holdings, Inc.

$

1,092

$

2,631

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

Weighted average shares of Class A common stock outstanding

18,496,532

17,974,264

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

Weighted average shares of Class A common stock outstanding

18,496,532

17,974,264

Add dilutive effect of the following:

Restricted stock

370,195

59,367

Weighted average shares of Class A common stock outstanding, diluted

18,866,727

18,033,631

Earnings per share of Class A common stock

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

$

0.06

$

0.15

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

$

0.06

$

0.15

Outstanding Class B common stock does not share in the earnings of Holdings and is therefore not a participating security. Accordingly, basic and diluted net income per share of Class B common stock has not been presented.

Dividends

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

Three Months Ended March 31, 

2021

2020

Quarter end declared

    

Date paid

    

Per share

    

Amount paid to Class A
stockholders

    

Amount paid to Non-controlling
unitholders

    

Date paid

    

Per share

    

Amount paid to Class A
stockholders

    

Amount paid to Non-controlling
unitholders

March 31

March 17, 2021

$

0.23

$

4,326

$

2,889

March 18, 2020

$

0.22

$

3,986

$

2,763

On May 5, 2021, the Company’s Board of Directors declared a quarterly dividend of $0.23 per share on all outstanding shares of Class A common stock, which is payable on June 2, 2021 to stockholders of record at the close of business on May 19, 2021.

v3.21.1
Acquisitions
3 Months Ended
Mar. 31, 2021
Acquisitions  
Acquisitions

5. Acquisitions

Gadberry & wemlo

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

On August 25, 2020, the Company acquired Wemlo, Inc. (“wemlo”) for $6.1 million in cash, net of cash acquired, and $3.3 million in Class A common stock, plus approximately $6.7 million of equity-based compensation, which will be accounted for as compensation expense in the future over three years (see Note 11, Equity-Based Compensation for additional

information). Wemlo is a fintech company that has developed its cloud service for mortgage brokers, combining third-party loan processing services with an all-in-one digital platform.

The total purchase price for both of the aforementioned acquisitions was allocated to the assets and liabilities acquired based on their preliminary estimated fair values. The Company recorded $14.4 million in goodwill, virtually all of which is deductible for tax purposes, and $6.3 million in other intangibles as a result of these acquisitions.

v3.21.1
Intangible Assets and Goodwill
3 Months Ended
Mar. 31, 2021
Intangible Assets and Goodwill  
Intangible Assets and Goodwill

6. Intangible Assets and Goodwill

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

Weighted

    

    

    

    

    

    

Average

As of March 31, 2021

As of December 31, 2020

Amortization

Initial

Accumulated

Net

Initial

Accumulated

Net

Period

Cost

Amortization

Balance

Cost

Amortization

Balance

Franchise agreements

12.6

$

180,867

$

(112,530)

$

68,337

$

180,867

$

(108,671)

$

72,196

Other intangible assets:

Software (a)

4.5

$

45,876

$

(21,519)

$

24,357

$

44,389

$

(18,926)

$

25,463

Trademarks

8.3

2,325

(1,341)

984

2,325

(1,274)

1,051

Non-compete agreements

5.1

3,920

(3,110)

810

3,920

(2,814)

1,106

Training materials

5.0

2,400

(1,240)

1,160

2,400

(1,120)

1,280

Other

5.3

1,670

(697)

973

1,670

(601)

1,069

Total other intangible assets

4.7

$

56,191

$

(27,907)

$

28,284

$

54,704

$

(24,735)

$

29,969

(a)As of March 31, 2021 and December 31, 2020, capitalized software development costs of $1.6 million and $1.4 million, respectively, were related to technology projects not yet complete and ready for their intended use and thus were not subject to amortization.

Amortization expense was $6.4 million and $5.9 million for the three months ended March 31, 2021 and 2020, respectively.

The estimated future amortization expense related to intangible assets includes the estimated amortization expense associated with the Company’s intangible assets assumed with the Company’s acquisitions (in thousands):

As of March 31, 2021:

Remainder of 2021

$

19,238

2022

23,444

2023

17,512

2024

14,513

2025

10,467

Thereafter

11,447

$

96,621

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

Real Estate

Mortgage

Total

Balance, January 1, 2021

157,202

18,633

175,835

Purchase price adjustments

133

133

Effect of changes in foreign currency exchange rates

40

40

Balance, March 31, 2021

$

157,375

$

18,633

$

176,008

v3.21.1
Accrued Liabilities
3 Months Ended
Mar. 31, 2021
Accrued Liabilities.  
Accrued Liabilities

7. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

March 31, 2021

December 31, 2020

Marketing Funds (a)

$

50,675

$

48,452

Accrued payroll and related employee costs

7,101

10,692

Accrued taxes

2,019

2,491

Accrued professional fees

2,545

1,806

Other

4,868

5,130

$

67,208

$

68,571

(a)Consists primarily of liabilities recognized to reflect the contractual restriction that all funds collected in the Marketing Funds must be spent for designated purposes. See Note 2, Summary of Significant Accounting Policies for additional information.
v3.21.1
Debt
3 Months Ended
Mar. 31, 2021
Debt  
Debt

8. Debt

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

March 31, 2021

December 31, 2020

Senior Secured Credit Facility

$

224,425

$

225,013

Other long-term financing

6

78

Less unamortized debt issuance costs

(809)

(882)

Less unamortized debt discount costs

(590)

(644)

Less current portion

(2,356)

(2,428)

$

220,676

$

221,137

Maturities of debt are as follows (in thousands):

As of March 31, 2021

Remainder of 2021

$

1,768

2022

2,350

2023

220,313

$

224,431

Senior Secured Credit Facility

The Senior Secured Credit Facility consists of a $235.0 million term loan facility which matures on December 15, 2023 and a $10.0 million revolving loan facility which must be repaid on December 15, 2021. As of March 31, 2021, the Company had no revolving loans outstanding under its Senior Secured Credit Facility and the interest rate on the term loan facility was 3.5%.

v3.21.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2021
Fair Value Measurements  
Fair Value Measurements

9. 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 is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, the Company follows a three-tier fair value hierarchy, which is described in detail in the 2020 Annual Report on Form 10-K.

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

As of March 31, 2021

As of December 31, 2020

Fair Value

    

Level 1

    

Level 2

    

Level 3

Fair Value

    

Level 1

    

Level 2

    

Level 3

Liabilities

Motto contingent consideration

$

4,700

$

$

$

4,700

$

4,750

$

$

$

4,750

Gadberry contingent consideration

1,360

1,360

1,590

1,590

Contingent consideration (a)

$

6,060

$

$

$

6,060

$

6,340

$

$

$

6,340

(a)Recorded as a component of “Accrued liabilities” and “Other liabilities, net of current portion” in the accompanying Condensed Consolidated Balance Sheets.

The Company is required to pay additional purchase consideration totaling 8% of gross receipts collected by Motto each year (the “Revenue Share Year”) through September 30, 2026, with no limitation as to the maximum payout. The annual payment is required to be made within 120 days of the end of each Revenue Share Year. The fair value of the contingent purchase consideration represents the forecasted discounted cash payments that the Company expects to pay. Increases or decreases in the fair value of the contingent purchase consideration can result from changes in discount rates as well as the timing and amount of forecasted revenues. The forecasted revenue growth assumption that is most sensitive is the assumed franchise sales count for which the forecast assumes between 70 and 80 franchises sold annually. This assumption is based on historical sales and an assumption of growth over time. A 10% reduction in the number of franchise sales would decrease the liability by $0.2 million. A 1% change to the discount rate applied to the forecast changes the liability by approximately $0.1 million. As of March 31, 2021, contingent consideration also includes an amount recognized in connection with the acquisition of Gadberry (see Note 6, Acquisitions, for more information on this acquisition).The Company measures these liabilities each reporting period and recognizes changes in fair value, if any, in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income.

The table below presents a reconciliation of the contingent consideration (in thousands):

Total

Balance at January 1, 2021

$

6,340

Fair value adjustments

(280)

Cash payments

Balance at March 31, 2021

$

6,060

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

March 31, 2021

December 31, 2020

Carrying
Amount

    

Fair Value
Level 2

    

Carrying
Amount

    

Fair Value
Level 2

Senior Secured Credit Facility

$

223,026

$

223,303

$

223,487

$

223,887

v3.21.1
Income Taxes
3 Months Ended
Mar. 31, 2021
Income Taxes  
Income Taxes

10. Income Taxes

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

v3.21.1
Equity-Based Compensation
3 Months Ended
Mar. 31, 2021
Equity-Based Compensation  
Equity-Based Compensation

11. Equity-Based Compensation

Employee equity-based compensation expense under the RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan (the “Incentive Plan”), net of the amount capitalized in internally developed software, is as follows (in thousands):

Three Months Ended March 31, 

2021

2020

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

$

9,821

$

2,137

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

796

81

Expense from bonus to be settled in shares (d)

1,437

Equity-based compensation capitalized

(32)

Equity-based compensation expense

$

12,054

$

2,186