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 compares agent count as of September 30, 2020 and 2019:

As of September 30, 2020: • U.S. agent count: 62,304 • Canada agent count: 21,498 • Subtotal: 83,802 • Outside the U.S. and Canada: 50,967 • Total: 134,769

As of September 30, 2019: • U.S. agent count: 62,548 • Canada agent count: 21,519 • Subtotal: 84,067 • Outside the U.S. and Canada: 44,191 • Total: 128,258

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.

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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.

Investor Contact: Andy Schulz (303) 796-3287  aschulz@remax.com

Media Contact: Kerry McGovern (303) 796-3283 kmcgovern@remax.com

To access appendix tables, download a PDF of the press release via the Media Tray.