RE/MAX HOLDINGS, INC., 10-K filed on 2/25/2021
Annual Report
v3.20.4
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Jan. 31, 2021
Jun. 30, 2020
Document Information [Line Items]      
Document Type 10-K    
Document Annual Report true    
Document Transition Report false    
Document Period End Date Dec. 31, 2020    
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, par value $0.0001 per share    
Trading Symbol RMAX    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
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 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001581091    
Amendment Flag false    
ICFR Auditor Attestation Flag true    
Entity Public Float     $ 554.4
Common Class A      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding 18,576,222    
Common Class B      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding   1  
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 101,355 $ 83,001
Restricted cash 19,872 20,600
Accounts and notes receivable, current portion, less allowances of $11,724 and $12,538, respectively 29,985 28,644
Income taxes receivable 1,222 896
Other current assets 13,938 9,638
Total current assets 166,372 142,779
Property and equipment, net of accumulated depreciation of $14,731 and $14,940, respectively 7,872 5,444
Operating lease right of use assets 38,878 51,129
Franchise agreements, net 72,196 87,670
Other intangible assets, net 29,969 32,315
Goodwill 175,835 159,038
Deferred tax assets, net 48,855 52,595
Income taxes receivable, net of current portion 1,980 1,690
Other assets, net of current portion 15,435 9,692
Total assets 557,392 542,352
Current liabilities:    
Accounts payable 2,108 2,983
Accrued liabilities 68,571 60,163
Income taxes payable 9,579 6,854
Deferred revenue 25,282 25,663
Current portion of debt 2,428 2,648
Current portion of payable pursuant to tax receivable agreements 3,590 3,583
Operating lease liabilities 5,687 5,102
Total current liabilities 117,245 106,996
Debt, net of current portion 221,137 223,033
Payable pursuant to tax receivable agreements, net of current portion 29,974 33,640
Deferred tax liabilities, net 490 293
Deferred revenue, net of current portion 19,864 18,763
Operating lease liabilities, net of current portion 50,279 55,959
Other liabilities, net of current portion 5,722 5,292
Total liabilities 444,711 443,976
Commitments and contingencies
Stockholders' equity:    
Additional paid-in capital 491,422 466,945
Retained earnings 25,139 30,525
Accumulated other comprehensive income, net of tax 612 414
Total stockholders' equity attributable to RE/MAX Holdings, Inc. 517,175 497,886
Non-controlling interest (404,494) (399,510)
Total stockholders' equity 112,681 98,376
Total liabilities and stockholders' equity 557,392 542,352
Common Class A    
Stockholders' equity:    
Common stock $ 2 $ 2
v3.20.4
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Accounts and notes receivable, allowance $ 11,724 $ 12,538
Property and equipment, accumulated depreciation $ 14,731 $ 14,940
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 18,390,691 17,838,233
Common stock, shares outstanding 18,390,691 17,838,233
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
v3.20.4
Consolidated Statements of Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Revenue:      
Total revenue $ 266,001 $ 282,293 $ 212,626
Operating expenses:      
Selling, operating and administrative expenses 128,998 119,232 120,242
Marketing Funds expenses 64,402 72,299 0
Depreciation and amortization 26,691 22,323 20,678
Impairment charge - leased assets 7,902 0 0
Gain on reduction in tax receivable agreement liability 0 0 (6,145)
Total operating expenses 227,993 213,854 134,775
Operating income 38,008 68,439 77,851
Other expenses, net:      
Interest expense (9,223) (12,229) (12,051)
Interest income 340 1,446 676
Foreign currency transaction gains (losses) (2) 109 (312)
Total other expenses, net (8,885) (10,674) (11,687)
Income before provision for income taxes 29,123 57,765 66,164
Provision for income taxes (9,103) (10,909) (16,342)
Net income 20,020 46,856 49,822
Less: net income attributable to non-controlling interest 9,056 21,816 22,939
Net income attributable to RE/MAX Holdings, Inc. $ 10,964 $ 25,040 $ 26,883
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock      
Basic $ 0.60 $ 1.41 $ 1.52
Diluted 0.60 1.40 1.51
Common Class A      
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock      
Basic 0.60 1.41 1.52
Diluted $ 0.60 $ 1.40 $ 1.51
Weighted average shares of Class A common stock outstanding      
Basic 18,170,348 17,812,065 17,737,649
Diluted 18,324,246 17,867,752 17,767,499
Cash dividends declared per share of Class A common stock $ 0.88 $ 0.84 $ 0.80
Continuing franchise fees      
Revenue:      
Total revenue $ 90,217 $ 99,928 $ 101,104
Annual dues      
Revenue:      
Total revenue 35,075 35,409 35,894
Broker fees      
Revenue:      
Total revenue 50,028 45,990 46,871
Marketing Funds fees      
Revenue:      
Total revenue 64,402 72,299 0
Franchise sales and other revenue      
Revenue:      
Total revenue $ 26,279 $ 28,667 $ 28,757
v3.20.4
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Consolidated Statements of Comprehensive Income      
Net income $ 20,020 $ 46,856 $ 49,822
Change in cumulative translation adjustment 216 166 (253)
Other comprehensive income (loss), net of tax 216 166 (253)
Comprehensive income 20,236 47,022 49,569
Less: comprehensive income attributable to non-controlling interest 9,074 21,896 22,817
Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax $ 11,162 $ 25,126 $ 26,752
v3.20.4
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Common Stock
Common Class A
Common Stock
Common Class B
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss), net of tax
Non-controlling interest
Common Class A
Common Class B
Total
Beginning balance, Value at Dec. 31, 2017 $ 2   $ 451,199 $ 7,982 $ 459 $ (414,234)     $ 45,408
Beginning balance, Shares at Dec. 31, 2017 17,696,991 1              
Net income       26,883   22,939     49,822
Distributions to non-controlling unitholders           (14,559)     (14,559)
Equity-based compensation expense and dividend equivalents, Value     9,314 (112)         9,202
Equity-based compensation expense and dividend equivalents, Shares 73,462                
Dividends to Class A common stockholders       (14,194)         (14,194)
Change in accumulated other comprehensive income         (131) (122)     (253)
Payroll taxes related to net settled restricted stock units, Value     (895)           (895)
Payroll taxes related to net settled restricted stock units, Shares (16,037)                
Other     483           483
Ending balance, Value at Dec. 31, 2018 $ 2   460,101 20,559 328 (405,976)     75,014
Ending balance, Shares at Dec. 31, 2018 17,754,416 1              
Net income       25,040   21,816     46,856
Distributions to non-controlling unitholders           (15,430)     (15,430)
Equity-based compensation expense and dividend equivalents, Value     7,375 (104)         7,271
Equity-based compensation expense and dividend equivalents, Shares 106,390                
Dividends to Class A common stockholders       (14,970)         (14,970)
Change in accumulated other comprehensive income         86 80     166
Payroll taxes related to net settled restricted stock units, Value     (1,110)           (1,110)
Payroll taxes related to net settled restricted stock units, Shares (22,573)                
Other     579           579
Ending balance, Value at Dec. 31, 2019 $ 2   466,945 30,525 414 (399,510)     98,376
Ending balance, Shares at Dec. 31, 2019 17,838,233 1         17,838,233 1  
Net income       10,964   9,056     20,020
Distributions to non-controlling unitholders           (14,058)     (14,058)
Equity-based compensation expense and dividend equivalents, Value     18,108 (310)         17,798
Equity-based compensation expense and dividend equivalents, Shares 394,701                
Dividends to Class A common stockholders       (16,044)         (16,044)
Change in accumulated other comprehensive income         198 18     216
Payroll taxes related to net settled restricted stock units, Value     (2,544)           (2,544)
Payroll taxes related to net settled restricted stock units, Shares (90,414)                
Acquisitions, Value     8,800           8,800
Acquisitions, Shares 248,171                
Other     113 4         117
Ending balance, Value at Dec. 31, 2020 $ 2   $ 491,422 $ 25,139 $ 612 $ (404,494)     $ 112,681
Ending balance, Shares at Dec. 31, 2020 18,390,691 1         18,390,691 1  
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities:      
Net income $ 20,020 $ 46,856 $ 49,822
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 26,691 22,323 20,678
Impairment charge - leased assets 7,902 0 0
Bad debt expense 2,903 4,964 2,257
Equity-based compensation expense 16,267 10,934 9,176
Deferred income tax expense 1,840 2,310 9,511
Fair value adjustments to contingent consideration 814 241 (1,289)
Non-cash change in tax receivable agreements liability 0 0 (6,145)
Non-cash lease expense (benefit) (508) 0 0
Other, net 1,051 1,252 988
Changes in operating assets and liabilities      
Accounts and notes receivable, current portion (3,460) (5,614) (3,241)
Advances from/to affiliates 0 0 581
Other current and noncurrent assets (10,665) (6,084) 2,170
Other current and noncurrent liabilities 9,035 6,737 (3,466)
Payments pursuant to tax receivable agreements (3,562) (3,556) (6,305)
Income taxes receivable/payable 2,109 178 1,099
Deferred revenue, current and noncurrent 410 (1,566) 228
Net cash provided by operating activities 70,847 78,975 76,064
Cash flows from investing activities:      
Purchases of property, equipment and capitalization of software (6,903) (13,226) (7,787)
Acquisitions, net of cash acquired of $867k, $55k and $362k, respectively (10,627) (14,945) (25,888)
Restricted cash acquired with the Marketing Funds acquisition 0 28,495 0
Other 0 (1,200) 0
Net cash used in investing activities (17,530) (876) (33,675)
Cash flows from financing activities:      
Payments on debt (2,634) (2,622) (3,171)
Distributions paid to non-controlling unitholders (14,058) (15,430) (14,559)
Dividends and dividend equivalents paid to Class A common stockholders (16,354) (15,074) (14,306)
Payments related to tax withholding for share-based compensation (2,544) (1,110) (895)
Payment of contingent consideration (409) (306) (221)
Net cash used in financing activities (35,999) (34,542) (33,152)
Effect of exchange rate changes on cash 308 70 (70)
Net increase in cash, cash equivalents and restricted cash 17,626 43,627 9,167
Cash, cash equivalents and restricted cash, beginning of year 103,601 59,974 50,807
Cash, cash equivalents and restricted cash, end of period 121,227 103,601 59,974
Supplemental disclosures of cash flow information:      
Cash paid for interest 8,663 11,690 11,525
Net cash paid for income taxes 4,993 8,429 5,769
Schedule of non-cash investing activities:      
Class A shares issued as consideration for acquisitions 8,800 0 0
Increase (decrease) in accounts payable and accrued liabilities for purchases of property, equipment and capitalization of software $ 1,419 $ (94) $ 1,080
v3.20.4
Business and Organization
12 Months Ended
Dec. 31, 2020
Business and Organization  
Business and Organization

1. Business and Organization

RE/MAX Holdings, Inc. (“Holdings”) completed an initial public offering (the “IPO”) of its shares of Class A common stock on October 7, 2013. Holdings’ only business is to act as the sole manager of RMCO, LLC (“RMCO”). As of December 31, 2020, Holdings owns 59.4% of the common membership units in RMCO, while RIHI, Inc. (“RIHI”) owns the remaining 40.6%. Holdings and its consolidated subsidiaries, including RMCO, are referred to hereinafter as the “Company.”

The Company is a franchisor in the real estate industry, franchising real estate brokerages globally under the RE/MAX brand (“RE/MAX”) and mortgage brokerages within the United States (“U.S.”) under the Motto Mortgage brand (“Motto”). RE/MAX, founded in 1973, has over 135,000 agents operating in over 8,000 offices and a presence in more than 110 countries and territories. The RE/MAX strategy is to sell franchises and help those franchisees recruit and retain the best agents. The RE/MAX brand is built on the strength of the Company’s global franchise network, which is designed to attract and retain the best-performing and most experienced agents by maximizing their opportunity to retain a larger portion of their commissions. The Company focuses on enabling its networks’ success by providing powerful technology, quality education and training, and valuable marketing to build the strength of the RE/MAX and Motto brands.

Motto Mortgage, founded in 2016, has grown to over 125 offices across more than 30 states. The Motto Mortgage franchise model offers U.S. real estate brokers, real estate professionals and other investors access to the mortgage brokerage business, which is highly complementary to our RE/MAX real estate business and is designed to help Motto franchise owners comply with complex mortgage regulations. Motto franchisees offer potential homebuyers an opportunity to find both real estate agents and independent Motto loan originators at the same location or at offices near each other.

RE/MAX and Motto are 100% franchised—the Company does not own any of the brokerages that operate under these brands.

Holdings Capital Structure

Holdings has two classes of common stock, Class A common stock and Class B common stock.

Class A common stock

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

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

Class B common stock

RIHI is the sole holder of Class B common stock and is controlled by David and Gail Liniger, the Company’s founders. Pursuant to the terms of the Company’s Certificate of Incorporation, Class B common stock is entitled to a number of votes on matters presented to Holdings’ stockholders equal to the number of RMCO common units that RIHI holds. Through its ownership of the Class B common stock, RIHI holds 40.6% of the voting power of the Company’s stock as of December 31, 2020. Mr. Liniger also owns Class A common stock with an additional 1.1% of the voting power of the Company’s stock as of December 31, 2020.

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

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

v3.20.4
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements (“financial statements”) and notes thereto included in this Annual Report on Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The accompanying financial statements 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 financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s

financial position as of December 31, 2020 and 2019, the results of its operations and comprehensive income, changes in its stockholders’ equity and its cash flows for the years ended December 31, 2020, 2019 and 2018.

During 2020, the Company completed the acquisitions of Gadberry Group, LLC (“Gadberry”) and Wemlo, Inc. (“wemlo”). During 2019, the Company acquired First Leads, Inc. (“First”), and all of the regional and pan-regional advertising fund entities previously owned by its founder and Chairman of the Board of Directors, David Liniger. During 2018, the Company completed the acquisition of booj. The results of operations, cash flows and financial position of these acquisitions are included in the financial statements from their respective dates of acquisition. See Note 6, Acquisitions, for additional information.

Use of Estimates

The preparation of the accompanying 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 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 segments:

Real Estate – comprises the operations of the Company’s owned and independent global franchising operations under the RE/MAX brand name and technology and data subscription revenue such as for Gadberry and the First app, along with corporate-wide shared services expenses.
Mortgage – comprises the operations of the Company’s mortgage brokerage franchising operations under the Motto Mortgage brand name and mortgage loan processing services and licensed software under the wemlo brand. Mortgage does not include any charges related to the corporate-wide shared services expenses.
Marketing Funds – comprises the operations of the Company’s marketing campaigns designed to build and maintain brand awareness and the development and operation of agent marketing technology. This segment has no net income given the contractual restriction that all funds collected must be spent for designated purposes.
Other – comprises the legacy operations of booj, which, due to quantitative insignificance, do not meet the criteria of a reportable segment.

See Note 17 for additional information about segment reporting.

Principles of Consolidation

Holdings consolidates RMCO and records a non-controlling interest in the accompanying Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Consolidated Statements of Income and Consolidated Statements of Comprehensive Income, respectively.

Revenue Recognition

The Company generates most of its revenue from contracts with customers. The Company’s franchise agreements offer the following benefits to the franchisee: common use and promotion of RE/MAX and Motto trademarks; distinctive sales and promotional materials; access to technology; marketing tools and training; standardized supplies and other materials used in RE/MAX and Motto offices; and recommended procedures for operation of RE/MAX and Motto offices. The Company concluded that these benefits are highly related and all a part of one performance obligation for each franchise agreement, a license of symbolic intellectual property that is billed through a variety of fees including continuing franchise fees, annual dues, broker fees, marketing funds fees and franchise sales, described below. The Company has other performance obligations associated with contracts with customers in other revenue for training, marketing and events, subscription revenue, loan processing revenue, data services revenue, and related to legacy booj customers. The method used to measure progress is over the passage of time for most streams of revenue. The following is a description of principal activities from which the Company generates its revenue.

Continuing Franchise Fees

Continuing franchise fees are fixed contractual fees paid monthly (a) by regional franchise owners in Independent Regions or franchisees in Company-Owned Regions based on the number of RE/MAX agents in the respective franchised region or office or (b) by Motto franchisees based on the number of offices open. Motto offices reach the full monthly billing once the Motto office has been open for 12 to 14 months. This revenue is recognized in the month for which the fee is billed. This revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents or number of Motto open offices.

Annual Dues

Annual dues are a fixed membership fee paid annually by RE/MAX agents directly to the Company to be a part of the RE/MAX network and use the RE/MAX brand. The Company defers the annual dues revenue when billed and recognizes the revenue ratably over the 12-month period to which it relates. Annual dues revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents.

The activity in the Company’s deferred revenue for annual dues is included in “Deferred revenue” and “Deferred revenue, net of current portion” on the Consolidated Balance Sheets, and consists of the following in aggregate (in thousands):

Balance at
beginning of period

New billings

Revenue recognized (a)

Balance at end
of period

Year Ended December 31, 2020

$

15,982

$

33,632

$

(35,075)

$

14,539

(a)Revenue recognized related to the beginning balance was $14.1 million for the year ended December 31, 2020.
(b)

Broker Fees

Broker fees are assessed against real estate commissions paid by customers when a RE/MAX agent sells a home. Generally, the amount paid is 1% of the total commission on the transaction, although in Independent Regions in Canada, it is not charged. Additionally, agents in Company-Owned Regions existing prior to 2004, the year the Company began assessing broker fees, are generally “grandfathered” and continue to be exempt from paying a broker fee. As of December 31, 2020, grandfathered agents represented approximately 16% of total agents in U.S. Company-Owned Regions. Revenue from broker fees is a sales-based royalty and recognized in the month when a home sale transaction occurs. Motto franchisees do not pay any fees based on the number or dollar value of loans brokered.

Marketing Funds Fees

Marketing Funds fees 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. These revenues are obligated to be used for marketing campaigns to build brand awareness and to support agent marketing technology. Amounts received into the Marketing Funds are recognized as revenue in the month for which the fee is billed. This revenue is a usage-based royalty as it is dependent on the number of RE/MAX agents or number of Motto offices.

All assets of the Marketing Funds are contractually restricted for the benefit of franchisees, and the Company recognizes an equal and offsetting liability on the Company’s balance sheet for all amounts received. Additionally, this results in recording an equal and offsetting amount of expenses against all revenues such that there is no impact to overall profitability of the Company from these revenues.

Franchise Sales

Franchise sales comprises revenue from the sale or renewal of franchises. A fee is charged upon a franchise sale or renewal. Those fees are deemed to be a part of the license of symbolic intellectual property and are recognized as revenue over the contractual term of the franchise agreement, which is typically 5 years for RE/MAX and 7 years for Motto franchise agreements. 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

Year Ended December 31, 2020

$

25,884

$

8,615

$

(9,430)

$

25,069

(a)Revenue recognized related to the beginning balance was $8.4 million for the year ended December 31, 2020.

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 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

Year Ended December 31, 2020

$

3,578

$

(1,412)

$

1,524

$

3,690

Other Revenue

Other revenue is primarily revenue from booj’s legacy operations for its external customers as booj continues to provide technology products and services to its legacy customers; technology and data services subscription revenue from the First app and Gadberry, and mortgage loan processing revenue from wemlo. Other revenue also includes event-based revenue from training and other programs and preferred marketing arrangements. Revenue from event-based revenue is recognized when the event occurs and until then amounts collected are included in “Deferred revenue”. Revenue from preferred marketing arrangements involves both flat fees paid in advance as well as revenue sharing, both of which are generally recognized over the period of the arrangement and are recorded net as the Company does not control the good or service provided. First charges a periodic fee to agents who use the app. Wemlo charges a flat fee per transaction which is recognized when a loan is closed. Gadberry’s revenue relates to data and software licenses and is recognized when the control of the products or services has transferred to the customer. Transfer of control may occur at a point in time or over time, depending on the nature of the contract.

Disaggregated Revenue

In the following table, segment revenue is disaggregated by geographical area (in thousands):

Year Ended December 31, 

2020

2019

2018

U.S.

$

157,448

$

164,867

$

170,496

Canada

21,769

23,024

23,771

Global

11,575

11,745

10,237

Total Real Estate

190,792

199,636

204,504

U.S.

57,974

64,906

Canada

5,634

6,559

Global

794

834

Total Marketing Funds

64,402

72,299

Mortgage (a)

6,610

4,542

2,536

Other (a)

4,197

5,816

5,586

Total

$

266,001

$

282,293

$

212,626

(a)Revenue from Mortgage and Other are derived exclusively within the U.S.

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

Year Ended December 31, 

2020

2019

2018

Company-Owned Regions

$

144,616

$

152,218

$

157,873

Independent Regions

34,423

34,467

33,082

Global and Other

11,753

12,951

13,549

Total Real Estate

190,792

199,636

204,504

Marketing Funds

64,402

72,299

Mortgage

6,610

4,542

2,536

Other

4,197

5,816

5,586

Total

$

266,001

$

282,293

$

212,626

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):

2021

2022

2023

2024

2025

Thereafter

Total

Annual dues

$

14,539

$

$

$

$

$

$

14,539

Franchise sales

6,913

5,621

4,243

2,984

1,697

3,611

25,069

Total

$

21,452

$

5,621

$

4,243

$

2,984

$

1,697

$

3,611

$

39,608

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 Consolidated Balance Sheets to the amounts presented in the Consolidated Statements of Cash Flows (in thousands):

As of December 31, 

2020

2019

Cash and cash equivalents

$

101,355

$

83,001

Restricted cash

19,872

20,600

Total cash, cash equivalents and restricted cash

$

121,227

$

103,601

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 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):

Year Ended December 31, 

2020

2019

Technology - operating

$

12,245

$

6,244

Technology - capital

1,017

5,095

Marketing staff and administrative services (a)(b)

4,527

3,763

Total

$

17,789

$

15,102

(a)Costs charged to the Marketing Funds for the year ended December 31, 2018, while the Marketing Funds were a related party, were $3.8 million.
(b)Prior to January 1, 2019, the Marketing Funds were not owned by the Company (see Note 6, Acquisitions). During that time, the Marketing funds still incurred significant technology costs, however, these services were provided by and paid directly to third parties and were not provided by the Company. In 2019, Real Estate (through the booj technology team) began providing these services as noted above.

Selling, Operating and Administrative Expenses

Selling, operating and administrative expenses primarily consist of personnel costs, including salaries, benefits, payroll taxes and other compensation expenses, professional fees, lease costs, as well as expenses for outsourced technology services and expenses for marketing to customers, to expand the Company’s franchises.

Fair Value of Financial Instruments

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

Accounts and Notes Receivable

Accounts receivable arising from monthly billings do not bear interest. The Company provides limited financing of certain franchise sales through the issuance of notes receivable with the associated interest recorded in “Interest income” in the accompanying Consolidated Statements of Income. Amounts collected on notes receivable are included in “Net cash provided by operating activities” in the accompanying Consolidated Statements of Cash Flows.

The Company records estimates of expected credit losses against its accounts and notes receivable based on historical loss experience and reasonable and supportable forecasts. The general economic conditions effecting the Company’s customers, especially existing home sales, are expected to impact customers in a consistent manner. The allowance for doubtful accounts and notes is based on reasonable and supportable forecasts, historical experience, general economic conditions, and the credit quality of specific accounts. Increases and decreases in the allowance for doubtful accounts are established based upon changes in the credit quality of receivables and are included as a component of “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income.

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

Balance at
beginning of period

Additions/charges to cost and expense for allowances for doubtful accounts (a)

Deductions/write-offs

Balance at
end of period

Year Ended December 31, 2020

$

12,538

$

2,903

$

(3,717)

$

11,724

Year Ended December 31, 2019

$

7,980

$

4,964

$

(406)

$

12,538

Year Ended December 31, 2018

$

7,223

$

2,257

$

(1,500)

$

7,980

(a) Includes approximately $0.6 million and $1.5 million of expense attributable to the Marketing Funds for the years ended December 31, 2020 and 2019, respectively.

Accumulated Other Comprehensive Income (Loss) and Foreign Currency Translation

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

As of December 31, 2020, the Company, directly and through its franchisees, conducted operations in over 110 countries and territories, including the U.S. and Canada. The functional currency for the Company’s operations is the U.S. dollar, except for its Canadian subsidiary which is the Canadian Dollar.

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

Foreign currency denominated monetary assets and liabilities and transactions occurring in currencies other than the Company’s or the Company’s consolidated foreign subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Changes in exchange rates with respect to amounts recorded in the

accompanying Consolidated Balance Sheets related to these non-functional currency transactions result in transaction gains and losses that are reflected in the accompanying Consolidated Statements of Income as “Foreign currency transaction (losses) gains.”

Property and Equipment

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

Franchise Agreements and Other Intangible Assets

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

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

The Company reviews its franchise agreements and other intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated from such asset. If not recoverable, the excess of the carrying amount of an asset over its estimated discounted cash flows would be charged to operations as an impairment loss. For each of the years ended December 31, 2020, 2019 and 2018, there were no material impairments indicated for such assets.

Goodwill

Goodwill is an asset representing the future economic benefits arising from the other assets acquired in a business combination that are not individually identified and separately recognized. The Company assesses goodwill for impairment at least annually at the reporting unit level or whenever an event occurs that would indicate impairment may have occurred. Reporting units are driven by the level at which segment management reviews operating results. The Company performs its required impairment testing annually on October 1.

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

The Company did not record any goodwill impairments during the years ended December 31, 2020, 2019 and 2018.

Income Taxes

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

of Income.

RMCO complies with the requirements of the Internal Revenue Code that are applicable to limited liability companies that have elected to be treated as partnerships, which allow for the complete pass-through of taxable income or losses to RMCO’s unitholders, who are individually responsible for any federal tax consequences. The share of U.S. income allocable to Holdings results in a provision for income taxes for the federal and state taxes on that portion of income. The share of U.S. income allocable to RIHI does not result in a provision for income taxes for federal and state taxes given Holdings does not consolidate RIHI. RMCO is subject to certain global withholding taxes, which are ultimately allocated to both Holdings and RIHI since they are paid by RMCO.

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.

Leases

The Company determines if an arrangement is a lease at inception. The Company’s operating lease agreements are primarily for real estate office space and are included within “Operating lease right of use assets”, “Operating lease liabilities” and “Operating lease liabilities, net of current portion’ on the Consolidated Balance Sheets.

The Company’s lease liabilities represent the obligation to make lease payments arising from the leases and right of use (“ROU”) assets are recognized as an offset at lease inception. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Many of the Company’s lessee agreements include options to extend the lease, which is not included in the minimum lease terms unless they are reasonably certain to be exercised. Rent expense for lease payments related to operating leases (which is substantially all of the Company’s leases) is recognized on a straight-line basis over the lease term and is recorded to “Selling, operating and administrative expenses’ in the Consolidated Statements of Income.

The Company has made an accounting policy election not to recognize ROU 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, are recognized on a straight-line basis over the lease term.

Equity-Based Compensation

The Company recognizes compensation expense associated with equity-based compensation as a component of “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income. All equity-based compensation is required to be measured at fair value on the grant date, is expensed over the requisite service, generally over a three-year period, and forfeitures are accounted for as they occur. The Company recognizes compensation expense on awards on a straight-line basis over the requisite service period for the entire award. Refer to Note 13, Equity-Based Compensation, for additional discussion regarding details of the Company’s equity-based compensation plans.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU“) 2018-15, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in the software licensing arrangements under the internal-use software guidance. ASU 2018-15 also clarifies that any capitalized costs should not be recorded to “Depreciation and amortization” in the Consolidated Statements of Income. The Company adopted this standard effective January 1, 2020 prospectively to all new implementation costs incurred after adoption. The amendments of ASU 2018-15 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which eliminates certain disclosure requirements for fair value measurements and requires new or modified disclosures. ASU 2018-13 became effective for

the Company on January 1, 2020. This new guidance was applied on a prospective basis. The amendments of ASU 2018-13 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires earlier recognition of credit losses on loans, held-to-maturity securities, and certain other financial assets. ASU 2016-13 replaces the current incurred loss model with a model requiring entities to estimate expected credit losses over the life of the financial instrument based on both historical information as well as reasonable and supportable forecasts. The FASB requires entities to use a modified retrospective transition approach, in which an adjustment is made to beginning retained earnings for the cumulative effect of adopting the standard. ASU 2016-13 became effective for the Company on January 1, 2020. The standard had an immaterial effect on the Company’s credit losses at transition and no adjustment to retained earnings was required. All periods presented for comparative purposes prior to the adoption date of this standard were not adjusted.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with several subsequent amendments, which requires lessees to recognize the assets and liabilities that arise from operating and finance leases on the consolidated balance sheets, with a few exceptions. ASU 2016-02 became effective for the Company on January 1, 2019 and replaced the existing lease guidance in U.S. GAAP when it became effective. The Company did not retrospectively recast prior periods presented and ASU 2016-02 was applied to all the Company’s leases as of January 1, 2019, resulting in the recording of lease liabilities and ROU assets within the Consolidated Balance Sheet. Adoption of the new standard did not materially affect the Company’s consolidated net earnings and had no impact on cash flows. See the Leases section above and Note 3, Leases, for more information.

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 10, 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.

v3.20.4
Leases
12 Months Ended
Dec. 31, 2020
Leases  
Leases

3. 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. The leases have remaining lease terms ranging from less than a year up to 13 years, some of which include one or more options to renew. Of these renewal options, the Company determined that none are reasonably certain to be exercised. All the Company’s material leases are classified as operating leases.

The Company has a lease for its corporate headquarters office building (the “Headquarters Lease”) that expires in 2028. The Company may, at its option, extend the Headquarters Lease for two renewal periods of 10 years. Under the terms of the Headquarters Lease, the Company pays an annual base rent, which escalates 3% each year, including the first optional renewal period. The second optional renewal period resets to fair market rental value, and the rent escalates 3% each year until expiration. The Company pays for insurance, property taxes and operating expenses of the leased space. The Headquarters Lease is the Company’s only significant lease.

The Company acts as the lessor for four sublease agreements on its corporate headquarters, consisting solely of operating leases, each of which include a renewal option for the lessee to extend the length of the lease. Renewal options for two of the sublease agreements are contingent upon renewal of the Headquarters Lease, which is not reasonably certain to be exercised in 2028. As such, the Company determined these sublease renewal options are not reasonably certain to be exercised. Renewal options for the remaining two sublease agreements have already been exercised and will expire before the end of the corporate headquarters lease in 2028.

Lease Impairment

During the third quarter of 2020, the Company began executing on a plan to both refresh its corporate headquarters and sublease space made available through the refresh. As a result, the Company changed its asset grouping for its headquarters ROU asset to separate the portion that it intends to sublease from the portion it will continue to occupy and

performed an impairment test on the portion it intends to sublease. Based on a comparison of undiscounted cash flows to the ROU asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease rate on the Company’s corporate headquarters and expected sublease rates available in the market. This resulted in an impairment charge of $7.9 million and a reduction to basic earnings per share of $0.20 per share, for the year ended December 31, 2020, which reflects the excess of the ROU asset over its fair value.

The Company used its Senior Secured Credit Facility interest rate to extrapolate a rate for each of its leases to calculate the present value of the lease liability and right-of-use asset. A summary of the Company’s lease cost is as follows (in thousands, except for weighted-averages):

Year Ended December 31, 

2020

2019

Lease Cost

Operating lease cost (a)

$

12,085

$

12,259

Sublease income

(1,434)

(1,508)

Short-term lease cost (b)

5,959

6,495

Total lease cost

$

16,610

$

17,246

Other information

Cash paid for amounts included in the measurement of lease liabilities

Operating cash outflows from operating leases

8,520

8,507

Weighted-average remaining lease term in years - operating leases

7.4

8.4

Weighted-average discount rate - operating leases

6.3

%

6.3

%

(a)Includes approximately $3.6 million and $3.7 million of taxes, insurance and maintenance for the years ended December 31, 2020 and 2019, respectively.
(b)Includes expenses associated with short-term leases of billboard advertisements and is included in “Marketing Funds expenses” on the Consolidated Statements of Income for the years ended December 31, 2020 and 2019.

Maturities under non-cancellable leases were as follows (in thousands):

Rent Payments

Sublease Receipts

Total Cash Outflows

Year ending December 31:

2021

$

9,014

(895)

$

8,119

2022

9,003

(1,200)

7,803

2023

9,174

(1,311)

7,863

2024

9,439

(1,273)

8,166

2025

9,717

(331)

9,386

Thereafter

24,469

(388)

24,081

Total lease payments

$

70,816

$

(5,398)

$

65,418

Less: imputed interest

14,850

Present value of lease liabilities

$

55,966

v3.20.4
Non-controlling Interest
12 Months Ended
Dec. 31, 2020
Noncontrolling Interest  
Non-controlling Interest

4. 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:

As of December 31, 

2020

2019

Shares

Ownership %

Shares

Ownership %

Non-controlling interest ownership of common units in RMCO

12,559,600

40.6

%

12,559,600

41.3

%

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

18,390,691

59.4

%

17,838,233

58.7

%

Total common units in RMCO

30,950,291

100.0

%

30,397,833

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

Year Ended December 31, 

2020

2019

2018

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

    

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

RE/MAX
Holdings,
Inc.

    

Non-controlling
interest

    

Total

Weighted average ownership percentage of RMCO(a)

59.1

%

40.9

%

100.0

%

58.6

%

41.4

%

100.0

%

58.6

%

41.4

%

100.0

%

Income before provision for income taxes(a)

$

17,243

$

11,880

$

29,123

$

33,850

$

23,915

$

57,765

$

41,238

$

24,926

$

66,164

Provision for income taxes(b)(c)

(6,279)

(2,824)

(9,103)

(8,810)

(2,099)

(10,909)

(14,355)

(1,987)

(16,342)

Net income

$

10,964

$

9,056

$

20,020

$

25,040

$

21,816

$

46,856

$

26,883

$

22,939

$

49,822

(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 pass-through income from RMCO. It also includes Holdings’ share of taxes directly incurred by RMCO and its subsidiaries, both taxes in foreign jurisdictions and domestic taxes on subsidiaries which converted to LLCs in 2020. See Note 12, Income Taxes, for additional information.
(c)The provision for income taxes attributable to the non-controlling interest represents its share of taxes directly incurred by RMCO and its subsidiaries, both taxes in foreign jurisdictions and domestic taxes on subsidiaries which converted to LLCs in 2020. 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):

Year Ended

December 31, 

2020

2019

Tax and other distributions

$

3,006

$

4,880

Dividend distributions

11,052

10,550

Total distributions to non-controlling unitholders

$

14,058

$

15,430

On February 17, 2021, the Company declared a distribution to non-controlling unitholders of $2.9 million, which is payable on March 17, 2021.

Holdings Ownership of RMCO and Tax Receivable Agreements

Holdings has twice acquired significant portions of the ownership in RMCO; first in October 2013 at the time of IPO when Holdings acquired its initial 11.5 million common units of RMCO and, second, in November and December 2015 when it acquired 5.2 million additional common units. Holdings issued Class A common stock, which it exchanged for these common units of RMCO. RIHI then sold the Class A common stock to the market.

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

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

In connection with the initial sale of RMCO common units in October 2013, Holdings entered into Tax Receivable

Agreements (“TRAs”) which require that Holdings make annual payments to the TRA holders equivalent to 85% of any tax benefits realized on each year’s tax return from the additional tax deductions arising from the step-up in tax basis. The TRA holders as of December 31, 2020 are RIHI and Parallaxes Rain Co-Investment, LLC (“Parallaxes”). TRA liabilities were established for the future cash obligations expected to be paid under the TRAs and are not discounted. This liability is recorded within “Current portion of payable pursuant to tax receivable agreements” and “Payable pursuant to tax receivable agreement” in the Consolidated Balance Sheets. Similar to the deferred tax assets, the TRA liabilities would increase if Holdings acquired additional common units of RMCO from RIHI.

Both deferred tax assets and TRA liability were substantially reduced by the Tax Cuts and Jobs Act enacted in December 2017. The reduction in the corporate tax rate from 35% to 21% resulted in comparable reductions in both the deferred tax asset amounts and the TRA liabilities. The deferred tax assets and TRA liabilities were further reduced in 2018 as a result of the foreign tax provisions contained in the Tax Cuts and Jobs Act. See Note 12, Income Taxes, for further information on the impact of the Tax Cuts and Jobs Act.

v3.20.4
Earnings Per Share and Dividends
12 Months Ended
Dec. 31, 2020
Earnings Per Share and Dividends  
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 effect of time-based restricted stock units. The dilutive effect of performance-based restricted stock units is measured using the guidance for contingently issuable shares.

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

Year Ended December 31, 

2020

2019

2018

Numerator

Net income attributable to RE/MAX Holdings, Inc.

$

10,964

$

25,040

$

26,883

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

Weighted average shares of Class A common stock outstanding

18,170,348

17,812,065

17,737,649

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

Weighted average shares of Class A common stock outstanding

18,170,348

17,812,065

17,737,649

Add dilutive effect of the following:

Restricted stock

153,898

55,687

29,850

Weighted average shares of Class A common stock outstanding, diluted

18,324,246

17,867,752

17,767,499

Earnings per share of Class A common stock

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

$

0.60

$

1.41

$

1.52

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

$

0.60

$

1.40

$

1.51

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):

Year Ended December 31, 

2020

2019

2018

Quarter end declared

    

Date paid

    

Per share

    

Date paid

    

Per share

Date paid

    

Per share

March 31

March 18, 2020

$

0.22

March 20, 2019

$

0.21

March 21, 2018

$

0.20

June 30

June 2, 2020

0.22

May 29, 2019

0.21

May 30, 2018

0.20

September 30

September 2, 2020

0.22

August 28, 2019

0.21

August 29, 2018

0.20

December 31

December 2, 2020

0.22

November 27, 2019

0.21

November 28, 2018

0.20

$

0.88

$

0.84

$

0.80

On February 17, 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 March 17, 2021 to stockholders of record at the close of business on March 3, 2021.

v3.20.4
Acquisitions
12 Months Ended
Dec. 31, 2020
Acquisitions  
Acquisitions

6. Acquisitions

Gadberry & wemlo

On September 10, 2020, the Company acquired 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 13, 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 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 13, 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 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.

First

On December 16, 2019, the Company acquired First for $15 million in cash generated from operations. First is a mobile app that leverages data science, machine learning and human interaction to help real estate professionals better leverage the value of their personal network and was acquired to complement the Company’s technology offerings and booj Platform.

Marketing Funds

On January 1, 2019, the Company acquired all the regional and pan-regional advertising fund entities previously owned by its founder and Chairman of the Board of Directors, David Liniger, for a nominal amount. As in the past, the Marketing Funds are contractually obligated to use the funds collected to support both regional and pan-regional marketing campaigns designed to build and maintain brand awareness and to support the Company’s agent marketing technology. The Company does not plan for the use of the funds to change because of this acquisition and consolidation. The acquisitions of the Marketing Funds are part of the Company’s succession plan, and ownership of the Marketing Funds by the franchisor is a common structure. Expenses incurred with the acquisition of the Marketing Funds were not material.

The total assets equal the total liabilities of the Marketing Funds and beginning January 1, 2019, are reflected in the consolidated financial statements of the Company. The Company also began recognizing revenue from the amounts collected, which substantially increased its revenues and expenses.

The following table summarizes the Company’s allocation of the purchase price to the fair value of assets acquired and liabilities assumed (in thousands):

Restricted cash

$

28,495

Other current assets

8,472

Property and equipment

788

Other assets, net of current portion

126

Total assets acquired

37,881

Other current liabilities

37,881

Total liabilities assumed

37,881

Total acquisition price

$

The Marketing Funds 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 estimated fair values.

Booj, LLC

On February 26, 2018, the Company acquired all membership interests in booj 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, based on grant date fair value, which will be accounted for as compensation expense in the future (see Note 13, Equity-Based Compensation, for additional information). The Company acquired booj in order to deliver core technology solutions designed for and with RE/MAX affiliates.

The following table summarizes the Company’s allocation of the purchase price to the fair value of assets acquired and liabilities assumed (in thousands):

Cash

$

362

Other current assets

367

Property and equipment

625

Software

7,400

Trademarks

500

Non-compete agreement

1,200

Customer relationships

800

Other intangible assets

1,589

Other assets, net of current portion

336

Total assets acquired, excluding goodwill

13,179

Current portion of debt

(606)

Other current liabilities

(557)

Debt, net of current portion

(805)

Total liabilities assumed

(1,968)

Goodwill

15,039

Total purchase price

$

26,250

Booj 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 estimated fair values. The largest intangible assets acquired were valued using an income approach which utilizes Level 3 inputs and are being amortized over a weighted-average useful life using the straight-line method. The excess of the total purchase price over the fair value of the identifiable assets acquired was recorded as goodwill. The goodwill is attributable to expected synergies and projected long-term revenue growth for the RE/MAX network. All of the goodwill recognized is tax deductible.

Unaudited Pro Forma Financial Information