UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): November 5, 2020
 
RE/MAX Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware	001-36101	80-0937145	
(State or other jurisdiction of
incorporation or organization)	(Commission
File Number)	(IRS Employer
Identification No.)	
 
5075 South Syracuse Street
Denver, Colorado 80237
(Address of principal executive offices, including Zip code)
 
(303) 770-5531
(Registrant’s telephone number, including area code)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 	☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 	☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 	☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 	☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

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

Title of each class	 	Trading Symbol(s)	 	Name of Each Exchange on Which Registered	
Class A Common Stock
$0.0001 par value per share	 	RMAX	 	New York Stock Exchange	
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 
Item 2.02. Results of Operations and Financial Conditions. *
 
On November 5, 2020, RE/MAX Holdings, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2020. The full text of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference
 
Item 9.01.    Financial Statements and Exhibits. *  

Exhibit No.	Description	
99.1	Press Release issued on November 5, 2020	
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	
 *   The information contained in Items 2.02 and 9.01 of this Current Report on Form 8-K is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be set forth by specific reference in such filing.

 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 	RE/MAX HOLDINGS, INC.	

Date: November 5, 2020	By:	/s/ Karri Callahan	
 	 	Karri Callahan	
 	 	Chief Financial Officer	

 

Exhibit 99.1
RE/MAX Holdings, Inc. Reports Third Quarter 2020 Results
DENVER, Nov. 5, 2020 /PRNewswire/ --
Third Quarter 2020 Highlights
 (Compared to third quarter 2019 unless otherwise noted)
·	Total agent count increased 5.1% to 134,769 agents
·	U.S. and Canada combined agent count decreased 0.3% to 83,802 agents
·	Total open Motto Mortgage franchises increased 27.9% to 133 offices1
·	Total Revenue of $71.1 million; Revenue excluding the Marketing Funds increased 0.5% to $53.8 million
·	Net income attributable to RE/MAX Holdings, Inc. of $3.6 million and earnings per diluted share (GAAP EPS) of $0.19
·	Adjusted EBITDA2 of $30.3 million, Adjusted EBITDA margin2 of 42.7% and Adjusted earnings per diluted share (Adjusted EPS2) of $0.64
Operating Statistics as of October 31, 2020
 (Compared to October 31, 2019 unless otherwise noted)
·	Total agent count increased 5.9% to 136,222 agents
·	U.S. and Canada combined agent count decreased 133 agents to 84,113 agents
·	Total open Motto Mortgage franchises increased 26.4% to 134 offices1
RE/MAX Holdings, Inc. (the "Company" or "RE/MAX Holdings") (NYSE: RMAX), parent company of RE/MAX, one of the world's leading franchisors of real estate brokerage services, and Motto Mortgage ("Motto"), the first national mortgage brokerage franchise brand in the U.S., today announced operating results for the quarter ended September 30, 2020.
"The continued execution of our strategy, coupled with the U.S. housing market's remarkable run, drove our very encouraging results for the third quarter," stated Adam Contos, RE/MAX Holdings Chief Executive Officer. "RE/MAX agent count in both the U.S. and Canada increased sequentially on a month-to-month basis during the third quarter, particularly in Company-owned regions, after stabilizing at the end of the second quarter. Agent count outside the U.S. and Canada surpassed the 50,000 mark during the quarter, and has now doubled in just five years. Many of our RE/MAX agents and brokers are reporting their best years ever, and our Motto Mortgage business also continues to show impressive growth, as its franchise sales through the first nine months of 2020 nearly matched the full-year total for 2019."
Contos continued, "The strategic acquisitions of wemlo and Gadberry Group during the third quarter both tie directly into our strategy of adding value for the RE/MAX and Motto Mortgage networks while broadening and diversifying our revenue and growth opportunities. These acquisitions benefit our memberships, strengthen our technology and data core, and create promising commercial possibilities beyond our networks."
Third Quarter 2020 Operating Results
Agent Count
The following table compares agent count as of September 30, 2020 and 2019:

					As of September 30,		Change	
					2020		2019		#		%	
U.S.	62,304		62,548		(244)		(0.4)	
Canada	21,498		21,519		(21)		(0.1)	
Subtotal	83,802		84,067		(265)		(0.3)	
Outside the U.S. & Canada	50,967		44,191		6,776		15.3	
Total	134,769		128,258		6,511		5.1	
Revenue
RE/MAX Holdings generated total revenue of $71.1 million in the third quarter of 2020, a decrease of $0.5 million, or 0.7%, compared to $71.5 million in the third quarter of 2019. Total revenue decreased primarily due to previously announced agent recruiting initiatives that reduced both continuing franchise fees and Marketing Funds fees, largely offset by increased broker fees stemming from higher existing home sales, incremental revenue from acquisitions, and Motto growth. Recurring revenue streams, which consist of continuing franchise fees and annual dues, decreased $1.0 million compared to the third quarter of 2019 and accounted for 61.3% of revenue (excluding the Marketing Funds) in the third quarter of 2020, compared to 63.5% in the comparable period in 2019.
Operating Expenses
Total operating expenses were $60.3 million for the third quarter of 2020, an increase of $12.2 million, or 25.3%, compared to $48.1 million in the third quarter of 2019. Third quarter total operating expenses increased primarily due to higher selling, operating and administrative expenses, a non-cash impairment charge and increased depreciation and amortization expenses, partially offset by lower Marketing Fund expenses. Excluding the Marketing Funds from operating expenses, third quarter 2020 operating expenses totaled $43.0 million, an increase of $12.9 million or 42.9% compared to $30.1 million in the third quarter of 2019.
Selling, operating and administrative expenses were $28.2 million in the third quarter of 2020, an increase of $3.7 million, or 15.3%, compared to the third quarter of 2019 and, excluding the Marketing Funds, represented 52.5% of revenue, compared to 45.7% in the prior-year period. Selling, operating and administrative expenses increased primarily due to higher equity-based compensation expense, increased personnel costs primarily from acquisitions, and higher legal fees, partially offset by cost-savings measures implemented in 2020, including a reduction in travel and events spend as well as the elimination of the 2020 Company bonus plan and the temporary suspension of the Company's 401(k) match.
During the third quarter of 2020, the Company recorded a $7.9 million non-cash impairment charge related to its plans to sublease certain floors of the Company's corporate headquarters at market rates below the Company's current lease rate.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $3.6 million for the third quarter of 2020, a decrease of $5.6 million compared to the third quarter of 2019. Reported basic and diluted GAAP EPS were $0.20 and $0.19, respectively, for the third quarter of 2020 compared to $0.51 each in the third quarter of 2019.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $30.3 million for the third quarter of 2020, an increase of $2.2 million or 7.7% from the third quarter of 2019. Adjusted EBITDA increased primarily due to the Company's cost-savings measures and Motto expansion, partially offset by increased headcount primarily from the acquisitions of wemlo and Gadberry Group. Adjusted EBITDA margin was 42.7% in the third quarter of 2020 compared to 39.4% in the third quarter of 2019.
Adjusted basic and diluted EPS were $0.65 and $0.64, respectively, for the third quarter of 2020 compared to adjusted diluted and basic EPS of $0.61 for the third quarter of 2019. The ownership structure used to calculate Adjusted basic and diluted EPS for the quarter ended September 30, 2020 assumes RE/MAX Holdings owned 100% of RMCO, LLC ("RMCO"). The weighted average ownership RE/MAX Holdings had in RMCO was 59.2% for the quarter ended September 30, 2020.
Balance Sheet
As of September 30, 2020, the Company had cash and cash equivalents of $89.1 million. The Company's cash and cash equivalents increased $6.1 million from December 31, 2019. As of September 30, 2020, the Company had $224.1 million of outstanding debt, net of an unamortized debt discount and issuance costs, a decrease of $1.6 million compared to $225.7 million as of December 31, 2019.
Dividend
On November 4, 2020, the Company's Board of Directors approved a quarterly cash dividend of $0.22 per share of Class A common stock. The quarterly dividend is payable on December 2, 2020, to shareholders of record at the close of business on November 18, 2020.
Outlook
The Company's fourth quarter and full-year 2020 Outlook assumes no further currency movements, acquisitions or divestitures.
For the fourth quarter of 2020, RE/MAX Holdings expects:
·	Agent count to increase 4.25% to 5.25% over fourth quarter 2019;
·	Revenue in a range of $69.0 million to $72.0 million (including revenue from the Marketing Funds in a range of $17.5 million to $18.5 million); and
·	Adjusted EBITDA in a range of $20.0 million to $23.0 million.
For the full-year 2020, RE/MAX Holdings expects:
·	Agent count to increase 4.25% to 5.25% over full-year 2019;
·	Revenue in a range of $262.5 million to $265.5 million (including revenue from the Marketing Funds in a range of $64.0 million to $65.0 million), and
·	Adjusted EBITDA in a range of $88.5 million to $91.5 million.
The effective U.S. GAAP tax rate attributable to RE/MAX Holdings is estimated to be between 27% and 29% in 2020.
Webcast and Conference Call
The Company will host a conference call for interested parties on Friday, November 6, 2020, beginning at 8:30 a.m. Eastern Time. Interested parties can access the conference call using the link below:
http://www.directeventreg.com/registration/event/5458229
Interested parties can access a live webcast through the Investor Relations section of the Company's website at http://investors.remax.com. Please dial-in or join the webcast 10 minutes before the start of the conference call. An archive of the webcast will be available on the Company's website for a limited time as well.
Basis of Presentation
Unless otherwise noted, the results presented in this press release are consolidated and exclude adjustments attributable to the non-controlling interest.
Footnotes:
1Total open Motto Mortgage franchises includes only "bricks and mortar" offices with a unique physical address with rights granted by a full franchise agreement with Motto Franchising, LLC and excludes any "virtual" offices or "Branchises".
2Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS are non-GAAP measures. These terms are defined at the end of this release. Please see Tables 5 and 6 appearing later in this release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.
About RE/MAX Holdings, Inc.
RE/MAX Holdings, Inc. (NYSE: RMAX) is one of the world's leading franchisors in the real estate industry, franchising real estate brokerages globally under the RE/MAX® brand, and mortgage brokerages within the U.S. under the Motto® Mortgage brand. RE/MAX was founded in 1973 by David and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. Now with more than 135,000 agents across over 110 countries and territories, nobody in the world sells more real estate than RE/MAX, as measured by total residential transaction sides. Dedicated to innovation and change in the real estate industry, RE/MAX launched Motto Franchising, LLC, a ground-breaking mortgage brokerage franchisor, in 2016. Motto Mortgage has grown to over 125 offices across more than 30 states.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the use of words such as "believe," "intend," "expect," "estimate," "plan," "outlook," "project," "anticipate," "may," "will," "would" and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. Forward-looking statements include statements related to: agent count; franchise sales; revenue; operating expenses; the Company's outlook for the fourth quarter and full year 2020; dividends; non-GAAP financial measures; estimated effective tax rates for 2020; the Company's strategy of adding value for the RE/MAX and Motto Mortgage networks while broadening and diversifying revenue and growth opportunities; the wemlo and Gadberry Group acquisitions benefit to the Company's memberships, technology and data core, and their creation of promising commercial possibilities beyond the Company's networks; housing and mortgage market conditions, including statements about the momentum in the housing market; recruiting efforts; the Company's strategic and operating plans and business models; the impact of the COVID-19 pandemic and the ability of the Company and its franchisees to adapt to the challenges presented by the COVID-19 pandemic; the Company's financial and structural strength and ability to expand its value proposition; the ability of the RE/MAX and Motto networks to find opportunities to grow and build their businesses in this very demanding time; and the local leadership demonstrated by franchisees in both brands by bringing productive agents and loan originators into the Company's networks and helping those individuals get even better at what they do. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily accurately indicate the times at which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include the global COVID-19 pandemic, which poses significant and widespread risks to the Company's business, including the Company's agents, loan originators, franchisees and employees, as well as home buyers and sellers. The duration and magnitude of the impact from the COVID-19 pandemic depends on future developments that cannot be predicted at this time. The Company has already experienced significant disruption to its business as a result of the COVID-19 pandemic and such disruptions may continue. Notwithstanding any mitigation actions the Company has initiated and expects to continue as the crisis is ongoing, sustained material revenue declines relating to this crisis could impact the Company's financial condition, results of operations, stock price and ability to access the capital markets. Other important risks and uncertainties include, without limitation, (1) changes in the real estate market or interest rates and availability of financing, (2) changes in business and economic activity in general, (3) the Company's ability to attract and retain quality franchisees, (4) the Company's franchisees' ability to recruit and retain real estate agents and mortgage loan originators, (5) changes in laws and regulations, (6) the Company's ability to enhance, market, and protect the RE/MAX and Motto Mortgage brands, (7) the Company's ability to implement its technology initiatives, and (8) fluctuations in foreign currency exchange rates, and those risks and uncertainties described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent periodic and current reports filed with the SEC, which are available on the investor relations page of the Company's website at www.remax.com and on the SEC website at www.sec.gov. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no obligation, to update this information to reflect future events or circumstances.
TABLE 1

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

		Three Months Ended
September 30, 		Nine Months Ended
September 30, 	
		2020		2019		2020		2019	
Revenue:													
Continuing franchise fees		$	24,339		$	25,168		$	65,220		$	75,018	
Annual dues			8,638			8,835			26,304			26,508	
Broker fees			15,457			13,292			35,327			35,339	
Marketing Funds fees			17,290			18,034			46,577			54,866	
Franchise sales and other revenue			5,349			6,212			20,124			22,369	
Total revenue			71,073			71,541			193,552			214,100	
Operating expenses:													
Selling, operating and administrative expenses			28,216			24,468			88,241			84,081	
Marketing Funds expenses			17,290			18,034			46,577			54,866	
Depreciation and amortization			6,850			5,595			19,572			16,694	
Impairment charge - leased assets			7,902			—			7,902			—	
Total operating expenses			60,258			48,097			162,292			155,641	
Operating income			10,815			23,444			31,260			58,459	
Other expenses, net:													
Interest expense			(2,159)			(3,089)			(7,028)			(9,398)	
Interest income			25			412			328			1,074	
Foreign currency transaction gains (losses)			94			(50)			(75)			66	
Total other expenses, net			(2,040)			(2,727)			(6,775)			(8,258)	
Income before provision for income taxes			8,775			20,717			24,485			50,201	
Provision for income taxes			(2,051)			(3,453)			(6,547)			(8,547)	
Net income		$	6,724		$	17,264		$	17,938		$	41,654	
Less: net income attributable to non-controlling interest			3,171			8,091			8,265			19,502	
Net income attributable to RE/MAX Holdings, Inc.		$	3,553		$	9,173		$	9,673		$	22,152	
													
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock													
Basic		$	0.20		$	0.51		$	0.53		$	1.24	
Diluted		$	0.19		$	0.51		$	0.53		$	1.24	
Weighted average shares of Class A common stock outstanding													
Basic			18,196,454			17,826,332			18,098,227			17,803,708	
Diluted			18,368,051			17,840,158			18,182,856			17,830,942	
Cash dividends declared per share of Class A common stock		$	0.22		$	0.21		$	0.66		$	0.63	
TABLE 2

RE/MAX Holdings, Inc.	
Condensed Consolidated Balance Sheets	
(In thousands, except share and per share amounts)	
(Unaudited)	

			
		September 30, 		December 31, 	
		2020		2019	
Assets							
Current assets:							
Cash and cash equivalents		$	89,135		$	83,001	
Restricted cash			15,635			20,600	
Accounts and notes receivable, current portion, less allowances of $14,614 and $12,538, respectively			30,003			28,644	
Income taxes receivable			718			896	
Other current assets			12,484			9,638	
Total current assets			147,975			142,779	
Property and equipment, net of accumulated depreciation of $16,408 and $14,940, respectively			6,016			5,444	
Operating lease right of use assets			39,937			51,129	
Franchise agreements, net			76,065			87,670	
Other intangible assets, net			31,424			32,315	
Goodwill			176,302			159,038	
Deferred tax assets, net			49,377			52,595	
Income taxes receivable, net of current portion			1,690			1,690	
Other assets, net of current portion			14,535			9,692	
Total assets		$	543,321		$	542,352	
Liabilities and stockholders' equity							
Current liabilities:							
Accounts payable		$	5,727		$	2,983	
Accrued liabilities			52,073			60,163	
Income taxes payable			7,249			6,854	
Deferred revenue			23,147			25,663	
Current portion of debt			2,489			2,648	
Current portion of payable pursuant to tax receivable agreements			6,478			3,583	
Operating lease liabilities			5,553			5,102	
Total current liabilities			102,716			106,996	
Debt, net of current portion			221,594			223,033	
Payable pursuant to tax receivable agreements, net of current portion			30,745			33,640	
Deferred tax liabilities, net			1,000			293	
Deferred revenue, net of current portion			17,931			18,763	
Operating lease liabilities, net of current portion			51,750			55,959	
Other liabilities, net of current portion			5,408			5,292	
Total liabilities			431,144			443,976	
Commitments and contingencies							
Stockholders' equity:							
Class A common stock, par value $.0001 per share, 180,000,000 shares authorized; 18,372,134 and 17,838,233 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively			2			2	
Class B common stock, par value $.0001 per share, 1,000 shares authorized; 1 share issued and outstanding as of September 30, 2020 and December 31, 2019			—			—	
Additional paid-in capital			485,664			466,945	
Retained earnings			27,951			30,525	
Accumulated other comprehensive income, net of tax			476			414	
Total stockholders' equity attributable to RE/MAX Holdings, Inc.			514,093			497,886	
Non-controlling interest			(401,916)			(399,510)	
Total stockholders' equity			112,177			98,376	
Total liabilities and stockholders' equity		$	543,321		$	542,352	
TABLE 3

RE/MAX Holdings, Inc.	
Condensed Consolidated Statements of Cash Flows	
(In thousands)	
(Unaudited)	
							
		Nine Months Ended September 30, 	
		2020		2019	
Cash flows from operating activities:							
Net income		$	17,938		$	41,654	
Adjustments to reconcile net income to net cash provided by operating activities:							
Depreciation and amortization			19,572			16,694	
Impairment charge - leased assets			7,902			—	
Bad debt expense			4,024			3,420	
Equity-based compensation expense			8,347			4,860	
Deferred income tax expense			1,889			3,630	
Fair value adjustments to contingent consideration			(105)			330	
Other, net			209			1,193	
Changes in operating assets and liabilities			(16,305)			(16,594)	
Net cash provided by operating activities			43,471			55,187	
Cash flows from investing activities:							
Purchases of property, equipment and capitalization of software			(4,575)			(10,093)	
Acquisitions, net of cash acquired			(10,627)			—	
Restricted cash acquired with the Marketing Funds acquisition			—			28,495	
Other			—			(1,200)	
Net cash (used in) provided by investing activities			(15,202)			17,202	
Cash flows from financing activities:							
Payments on debt			(1,986)			(1,964)	
Distributions paid to non-controlling unitholders			(10,566)			(11,460)	
Dividends and dividend equivalents paid to Class A common stockholders			(12,250)			(11,298)	
Payments related to tax withholding for share-based compensation			(2,268)			(836)	
Net cash used in financing activities			(27,070)			(25,558)	
Effect of exchange rate changes on cash			(30)			76	
Net increase in cash, cash equivalents and restricted cash			1,169			46,907	
Cash, cash equivalents and restricted cash, beginning of year			103,601			59,974	
Cash, cash equivalents and restricted cash, end of period		$	104,770		$	106,881	
TABLE 4

RE/MAX Holdings, Inc.	
Agent Count	
(Unaudited)	
																	
		As of	
		September 30,		June 30, 		March 31,		December 31,		September 30,		June 30,		March 31,		December 31,	
		2020		2020		2020		2019		2019		2019		2019		2018	
Agent Count:																	
U.S.																	
Company-Owned Regions		48,263		47,886		48,840		49,267		48,576		48,748		48,904		49,318	
Independent Regions		14,041		13,791		13,828		13,854		13,972		13,952		13,760		13,804	
U.S. Total		62,304		61,677		62,668		63,121		62,548		62,700		62,664		63,122	
Canada																	
Company-Owned Regions		6,135		6,102		6,217		6,338		6,402		6,510		6,549		6,702	
Independent Regions		15,363		15,193		15,306		15,229		15,117		14,923		14,818		14,625	
Canada Total		21,498		21,295		21,523		21,567		21,519		21,433		21,367		21,327	
     U.S. and Canada Total		83,802		82,972		84,191		84,688		84,067		84,133		84,031		84,449	
Outside U.S. and Canada																	
Independent Regions		50,967		48,933		47,625		46,201		44,191		42,887		41,501		39,831	
     Outside U.S. and Canada Total		50,967		48,933		47,625		46,201		44,191		42,887		41,501		39,831	
Total		134,769		131,905		131,816		130,889		128,258		127,020		125,532		124,280	
TABLE 5

RE/MAX Holdings, Inc.	
Adjusted EBITDA Reconciliation to Net Income	
(In thousands, except percentages)	
(Unaudited)	
														
		Three Months Ended 		Nine Months Ended 		
		September 30, 		September 30, 		
(Amounts in 000s)		2020		2019		2020		2019		
Net income		$	6,724		$	17,264		$	17,938		$	41,654		
Depreciation and amortization			6,850			5,595			19,572			16,694		
Interest expense			2,159			3,089			7,028			9,398		
Interest income			(25)			(412)			(328)			(1,074)		
Provision for income taxes			2,051			3,453			6,547			8,547		
EBITDA			17,759			28,989			50,757			75,219		
(Gain) loss on sale or disposition of assets			(11)			(10)			(33)			353		
Impairment charge - leased assets (1)			7,902			—			7,902			—		
Equity-based compensation expense			3,414			(987)			8,347			4,860		
Acquisition-related expense (2)			1,021			181			1,915			268		
Fair value adjustments to contingent consideration (3)			250			(15)			(105)			330		
Adjusted EBITDA (4)		$	30,335		$	28,158		$	68,783		$	81,030		
Adjusted EBITDA Margin (4)			42.7	%		39.4	%		35.5	%		37.8	%	

_______________	
(1)	Represents the impairment recognized on a portion of our corporate headquarters office building.	
(2)	Acquisition-related expense includes legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.	
(3)	Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability.	
(4)	Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures.	
TABLE 6

RE/MAX Holdings, Inc.	
Adjusted Net Income and Adjusted Earnings per Share	
(In thousands, except share and per share amounts)	
(Unaudited)	
													
		Three Months Ended		Nine Months Ended 	
		September 30, 		September 30, 	
(Amounts in 000s)		2020		2019		2020		2019	
Net income		$	6,724		$	17,264		$	17,938		$	41,654	
Amortization of acquired intangible assets			4,851			4,459			14,549			13,390	
Provision for income taxes			2,051			3,453			6,547			8,547	
Add-backs:													
(Gain) loss on sale or disposition of assets			(11)			(10)			(33)			353	
Impairment charge - leased assets (1)			7,902			—			7,902			—	
Equity-based compensation expense			3,414			(987)			8,347			4,860	
Acquisition-related expense (2)			1,021			181			1,915			268	
Fair value adjustments to contingent consideration (3)			250			(15)			(105)			330	
Adjusted pre-tax net income			26,202			24,345			57,060			69,402	
Less: Provision for income taxes at 24% (4)			(6,288)			(5,843)			(13,694)			(16,656)	
Adjusted net income (4)		$	19,914		$	18,502		$	43,366		$	52,746	
													
Total basic pro forma shares outstanding			30,756,054			30,385,932			30,657,827			30,363,308	
Total diluted pro forma shares outstanding			30,927,651			30,399,758			30,742,456			30,390,542	
													
Adjusted net income basic earnings per share (5)		$	0.65		$	0.61		$	1.41		$	1.74	
Adjusted net income diluted earnings per share (5)		$	0.64		$	0.61		$	1.41		$	1.74	

_______________	
(1)	Represents the impairment recognized on a portion of our corporate headquarters office building.	
(2)	Acquisition-related expense includes legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.	
(3)	Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability. 	
(4)	24% is the combined federal and state statutory rate and is an estimate of our long-term tax rate assuming the full exchange of all outstanding non-controlling interests for Class A common stock. It excludes the impacts of (a) our partnership structure, (b) unusual, non-recurring tax matters, such as the conversion of First to an LLC, and (c) lower income for 2020 due to the pandemic, which is causing distorted impacts to differences between tax and GAAP accounting, and causing certain foreign taxes to be nondeductible in 2020 when they otherwise have been and we expect will be again in the future.	
(5)	Non-GAAP measure. See the end of this press release for definitions of non-GAAP measures.	
TABLE 7

RE/MAX Holdings, Inc.	
Pro Forma Shares Outstanding	
(Unaudited)	
									
		Three Months Ended		Nine Months Ended	
		September 30, 		September 30, 	
		2020		2019		2020		2019	
Total basic weighted average shares outstanding:									
Weighted average shares of Class A common stock outstanding		18,196,454		17,826,332		18,098,227		17,803,708	
Remaining equivalent weighted average shares of stock outstanding on a pro forma basis assuming RE/MAX Holdings owned 100% of RMCO		12,559,600		12,559,600		12,559,600		12,559,600	
Total basic pro forma weighted average shares outstanding		30,756,054		30,385,932		30,657,827		30,363,308	
									
Total diluted weighted average shares outstanding:									
Weighted average shares of Class A common stock outstanding		18,196,454		17,826,332		18,098,227		17,803,708	
Remaining equivalent weighted average shares of stock outstanding on a pro forma basis assuming RE/MAX Holdings owned 100% of RMCO		12,559,600		12,559,600		12,559,600		12,559,600	
Dilutive effect of unvested restricted stock units (1)		171,597		13,826		84,629		27,234	
Total diluted pro forma weighted average shares outstanding		30,927,651		30,399,758		30,742,456		30,390,542	

_______________	
(1)	In accordance with the treasury stock method.	
TABLE 8

RE/MAX Holdings, Inc.	
Free Cash Flow & Unencumbered Cash	
(Unaudited)	
							
		Nine months ended	
		September 30, 	
		2020		2019	
Cash flow from operations		$	43,471		$	55,187	
Less: Purchases of property, equipment and capitalization of software			(4,575)			(10,093)	
Decreases in restricted cash of the Marketing Funds (1)			4,965			9,377	
Free cash flow (2)			43,861			54,471	
							
Free cash flow			43,861			54,471	
Less: Tax/Other non-dividend distributions to RIHI			(2,277)			(3,547)	
Free cash flow after tax/non-dividend distributions to RIHI(2)			41,584			50,924	
							
Free cash flow after tax/non-dividend distributions to RIHI			41,584			50,924	
Less: Debt principal payments			(1,986)			(1,964)	
Unencumbered cash generated (2)		$	39,598		$	48,960	
							
Summary							
Cash flow from operations		$	43,471		$	55,187	
Free cash flow (2)		$	43,861		$	54,471	
Free cash flow after tax/non-dividend distributions to RIHI (2)		$	41,584		$	50,924	
Unencumbered cash generated (2)		$	39,598		$	48,960	
							
Adjusted EBITDA		$	68,783		$	81,030	
Free cash flow as % of Adjusted EBITDA (2)			63.8%			67.2%	
Free cash flow less distributions to RIHI as % of Adjusted EBITDA (2)			60.5%			62.8%	
Unencumbered cash generated as % of Adjusted EBITDA (2)			57.6%			60.4%	

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

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