DENVER, March 12, 2015 // PRNewswire // --
Full Year 2014 Highlights
(Compared to full year 2013 unless otherwise noted)
Fourth Quarter 2014 Highlights
(Compared to the fourth quarter 2013 unless otherwise noted)
RE/MAX Holdings, Inc. (the "Company" or "RE/MAX") (NYSE: RMAX), one of the world's leading franchisors of real estate brokerage services, today announced operating results for the fourth quarter and full-year ended December 31, 2014.
"In 2014, we had our largest agent gain since 2006 as nearly 4,800 agents chose to join RE/MAX," stated Dave Liniger, Chief Executive Officer ("CEO") and Co-Founder of RE/MAX. "Our 2014 office franchise sales outpaced every year since 2010 and we expanded our Adjusted EBITDA margin to 49% despite foreign exchange headwinds. With a steadily improving housing market, we believe our agent-centric model will continue to attract more real estate professionals in 2015, allowing us to grow our global agent network by an estimated 4% to 5% over 2014."
Liniger continued, "One of the key strengths of our business model is our significant free cash flow generation, which allows us the capital flexibility to invest in growing the business and return capital to shareholders. Given the inherent stability of our business model and the strength of our balance sheet, our Board doubled our regular quarterly dividend to $0.125 per share and approved a special one-time dividend of $1.50 per share. Our focus is and will continue to be on allocating capital to create value for shareholders."
Total agent count grew by 4,782 agents to 98,010 agents or 5.1% compared to year-end 2013. In the United States ("U.S."), agent count increased by 2,614 agents to 57,105 agents or 4.8% compared to the prior year. Agent count in the U.S. Company-owned and Independent regions grew by 5.6% and 3.5%, respectively, compared to the prior year. In Canada, agent count increased by 118 agents to 19,040 agents or 0.6% compared to the prior year. Outside the U.S. and Canada, agent count increased by 2,050 agents to 21,865 agents or 10.3% compared to the prior year.
RE/MAX generated revenue of $171.0 million for the full-year 2014, a 7.6% increase compared to $158.9 million in 2013, driven by incremental revenue from the Southwest and Central Atlantic regions acquired in October 2013 and an increase in agent count. Recurring revenue streams, which include continuing franchise fees and annual dues, accounted for 60.5% of revenues in 2014 compared to 59.2% in the prior year.
Revenue from continuing franchise fees was $72.7 million, up $8.2 million or 12.8% over the prior year primarily due to growth in agent count and incremental revenue that resulted from the acquisition of the Southwest and Central Atlantic regions.
Revenue from annual dues was $30.7 million, up $1.2 million or 4.1% compared to the prior year. The increase was due to 1) an increase in total agent count of 4,782 from the prior year, of which 2,732 agents were located in the U.S. and Canada, and 2) the January 1, 2014 increase in annual dues membership fees for the Company's U.S. and Canadian agents.
Revenue from broker fees was $28.7 million, up $3.9 million or 15.6% compared to the prior year. The increase was driven by growth in agent count and incremental revenue that resulted from the acquisition of the Southwest and Central Atlantic regions.
Franchise sales and other franchise revenue was $23.4 million, down $0.1 million or 0.6% compared to the prior year driven by a decrease in regional and master franchise sales outside the U.S. and Canada. The decrease was partially offset by an increase in office franchise sales and renewals in U.S. Company-owned regions.
Brokerage revenue, which principally represents fees assessed by the Company's owned brokerages for services provided to their affiliated real estate agents, was $15.4 million, a decrease of $1.1 million or 6.4% from the prior year. The decrease was due to a reduction in the number of owned brokerage offices in the second quarter of 2013, which had a full year impact in 2014, and a reduction in closed transaction sides and home sales volume at the Company's owned brokerage offices.
Total operating expenses were $107.1 million for the full-year 2014, a decrease of $4.6 million or 4.1% compared to the prior year. Selling, operating and administrative expenses were $91.8 million, down $4.4 million or 4.6% from the prior year. Selling, operating and administrative expenses were 53.7% of revenue for 2014 compared to 60.6% in the prior year. The reduction in operating expenses is primarily due to 1) lower professional fees compared to the prior year due to costs incurred in connection with the Company's initial public offering ("IPO") during 2013 and 2) lower rent expense due to a loss recorded in 2013 related to the sublease of office space at the Company's headquarters. The expense reduction was partially offset by one-time severance and other related expenses incurred in the fourth quarter of 2014 in connection with the retirement of the Company's former CEO and a re-organization to improve operating efficiencies at the corporate headquarters.
Adjusted EBITDA margin was 49.0% for 2014 compared to 48.5% in the prior year. Adjusted EBITDA was $83.8 million for 2014, up $6.8 million or 8.8% from the prior year. The increase in Adjusted EBITDA was largely driven by revenue growth attributable to an increase in agent count and incremental contributions from the acquired Southwest and Central Atlantic regions. The continued weakening of the Canadian dollar against the U.S. dollar and the effect of foreign currency transaction losses primarily related to cash held in Canadian dollars decreased Adjusted EBITDA margin by approximately 116 basis points for the year. A reconciliation of Adjusted EBITDA to net income is included in Table 5.
Reported net income was $44.0 million for 2014, an increase of $15.7 million or 55.7% compared to the prior year. The increase was primarily due to higher operating income and lower interest expense as a result of the Company's 2013 debt refinancing, partially offset by foreign currency transaction losses and a higher provision for income taxes.
Adjusted net income2 was $45.3 million for 2014, an increase of $8.2 million or 22.2% compared to the prior year. Adjusted basic and diluted EPS were $1.54 and $1.51 for 2014, respectively, compared to $1.26 and $1.24 for 2013, respectively. The weakening of the Canadian dollar against the U.S. dollar during 2014 negatively impacted 2014 Adjusted basic and diluted EPS by approximately $0.03.
Net income attributable to RE/MAX Holdings, Inc. was $13.4 million for 2014. This amount excludes net income attributable to the non-controlling interest. Reported basic and diluted EPS attributable to RE/MAX Holdings, Inc. were $1.16 and $1.10, respectively. Refer to Table 1 for the share counts used in the calculation of basic and diluted EPS attributable to RE/MAX Holdings, Inc. in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").
The ownership structure used to calculate Adjusted basic and diluted EPS for the three months and twelve months ended December 31, 2014 contemplates RE/MAX owning 100% of RMCO, LLC ("RMCO"). The weighted average ownership RE/MAX had of RMCO was 39.67% and 39.57% for the three months and twelve months ended December 31, 2014, respectively. Refer to Table 6 in this press release for a reconciliation of Adjusted net income to net income and the share counts used in the Adjusted basic and diluted EPS calculations.
As of December 31, 2014, the Company had a cash balance of $107.2 million, an increase of $18.8 million from December 31, 2013. The Company had $211.7 million of term loans outstanding, net of unamortized discount as of December 31, 2014, down from $228.4 million as of December 31, 2013.
The Company announced that its Board of Directors doubled the quarterly dividend to $0.125 per share and approved a special cash dividend of $1.50 per share. The aggregate payment of the special cash dividend will be approximately $45 million and will be funded through existing cash.
The regular quarterly dividend is payable on April 8, 2015 to shareholders of record at the close of business on March 25, 2015. The special cash dividend is payable on April 8, 2015 to shareholders of record at the close of business on March 23, 2015.
Revenue, selling, operating and administrative expenses and Adjusted EBITDA margin are subject to currency exchange rate fluctuations principally related to changes in the Canadian dollar to U.S. dollar exchange rate. In 2014, the Company generated 14% of its revenue in Canada and realized an average exchange of $0.90 U.S. for every $1.00 Canadian. The Company's 2015 outlook reflects an annualized estimated exchange rate of $0.78 U.S. for every $1.00 Canadian.
The Company's expenses are higher and its Adjusted EBITDA margin is lower in the first quarter due to seasonality of the business and expenses associated with the Company's annual convention, which is an important agent and broker engagement and recruitment event.
Subsequent to the IPO, RE/MAX began to operate and control all of the business affairs of RMCO. As a result, RE/MAX began to consolidate RMCO on October 7, 2013, and because RE/MAX and RMCO are entities under common control, such consolidation has been reflected for all periods presented. Unless otherwise noted, the results presented in this press release are consolidated and exclude adjustments attributable to the non-controlling interest.
The Company will host a conference call for interested parties on Friday, March 13, 2015, beginning at 8:30 a.m. Eastern Time. Interested parties are able to access the conference call using the following dial-in numbers:
U.S. 1-877-512-8755
Canada 1-855-669-9657
International 1-412-902-4144
Interested parties can access the live webcast through the Investor Relations section of the Company's website at www.remax.com. Please dial-in or join the webcast 10 minutes before the start of the conference call.
A replay of the call will be available approximately one hour after the end of the call on March 13, 2015 through March 27, 2015, by dialing 1-877-344-7529 (U.S.), 1-855-669-9658 (Canada) or 1-412-317-0088 (International) and entering the pass code 10060939. An archive of the webcast will be available on the Company's website for a limited time as well.
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. Over 98,000 agents provide RE/MAX a global reach of more than 95 countries. Nobody sells more real estate than RE/MAX.
RE/MAX, LLC, one of the world's leading franchisors of real estate brokerage services, is a wholly-owned subsidiary of RMCO, which is controlled and managed by RE/MAX Holdings, Inc. (NYSE: RMAX).
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 may be identified by the use of words such as "anticipate," "believe," "intend," "expect," "estimate," "plan," "outlook," "project" and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. These forward-looking statements include statements regarding the Company's outlook for the first quarter and full fiscal year, expectations regarding agent count and Adjusted EBITDA margins for its full fiscal year, the Company's belief that business fundamentals remain strong, as well as other statements regarding the Company's strategic and operational plans. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will 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. Such risks and uncertainties include, without limitation, (1) changes in business and economic activity in general, (2) changes in the real estate market, including changes due to interest rates and availability of financing, (3) the Company's ability to attract and retain quality franchisees, (4) the Company's franchisees' ability to recruit and retain agents, (5) changes in laws and regulations that may affect the Company's business or the real estate market, (6) failure to maintain, protect and enhance the RE/MAX brand, (7) fluctuations in foreign currency exchange rates, as well as those risks and uncertainties described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the most recent Annual Report or Form 10-K filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent 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 duty, to update this information to reflect future events or circumstances.
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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 Adjusted net income and the ratios related thereto. These measures are derived on the basis of methodologies other than in accordance with U.S. GAAP.
RE/MAX defines Adjusted EBITDA as EBITDA (consolidated net income before depreciation and amortization, interest expense, net and the provision for income taxes, each of which is presented in the Company's consolidated financial statements included elsewhere in this press release), adjusted for the impact of the following items that the Company does not consider representative of the Company's ongoing operating performance: loss or gain on sale or disposition of assets and sublease, loss on early extinguishment of debt, non-recurring equity based compensation, non-cash straight-line rent expense, salaries paid to David Liniger, the Company's Chief Executive Officer, Chairman and Co-Founder, and Gail Liniger, the Company's Vice Chair and Co-Founder, that the Company discontinued subsequent to the completion of the IPO, professional fees and certain non-recurring expenses incurred in connection with the IPO, acquisition integration costs and non-recurring severance and other related charges incurred in connection with the restructuring plan designed to improve operating efficiencies at the Company's corporate headquarters and the retirement of the Company's former Chief Executive Officer on December 31, 2014. During the third quarter of 2014, the Company revised its definition of Adjusted EBITDA to no longer adjust for recurring equity-based compensation expense. During the fourth quarter of 2014, the Company revised its definition of Adjusted EBITDA to adjust for non-recurring severance charges that were recorded during the fourth quarter of 2014. Adjusted EBITDA in prior periods has been revised to reflect this change for consistency of presentation.
RE/MAX defines Adjusted net income as net income, excluding the impact of amortization expense related to the Company's franchise agreements, non-controlling interest income tax expense and RE/MAX Holdings tax provision, loss or gain on sale or disposition of assets and sublease, loss on early extinguishment of debt, non-recurring equity-based compensation, non-cash straight-line rent expense, salaries paid to David and Gail Liniger that the Company discontinued subsequent to the completion of the IPO, acquisition integration costs, expenses incurred in connection with the IPO, and non-recurring severance and other related expenses incurred in connection with the restructuring plan designed to improve operating efficiencies at the Company's corporate headquarters and the retirement of the Company's former Chief Executive Officer onDecember 31, 2014, but reflects income taxes and is presented as if all outstanding common units of RMCO were exchanged for or converted into shares of the Company's Class A common stock on a one-for-one basis. Assuming the full exchange and conversion, all income of RMCO is treated as if it were allocated to RE/MAX, and the adjusted provision for income taxes represents an estimate of income tax expense at an effective rate reflecting assumed federal, state, and local income tax rates. The estimated effective tax rate was 38%.
Because Adjusted EBITDA and Adjusted net income omit certain non-cash items and other non-recurring cash charges or other items, the Company feels that these metrics are less susceptible to variances that affect the Company's operating performance resulting from depreciation, amortization and other non-cash and non-recurring cash charges or other items and is more reflective of other factors that affect the Company's operating performance. The Company presents Adjusted EBITDA and Adjusted net income because it believes the metrics are useful as supplemental measures in evaluating the performance of the Company's operating businesses and provide greater transparency into the Company's results of operations. The Company's management uses Adjusted EBITDA as a factor in evaluating the performance of their business.
Adjusted EBITDA and Adjusted net income have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyzing the results the Company reported under U.S. GAAP. Some of these limitations are:
With respect to the Company's outlook with respect to Adjusted EBITDA margin for the first quarter and the full fiscal year 2015, the Company is not able to provide a reconciliation of this non-GAAP financial measure to U.S. GAAP because it does not provide specific guidance for the various reconciling non-cash items and other non-recurring cash and non-cash charges, such as gain on sale or disposition of assets and sublease and loss on early extinguishment of debt, among others. Certain items that impact these measures have not yet occurred, are out of the Company's control or cannot be reasonably predicted, and as a result, reconciliation of these non-GAAP guidance measures to U.S. GAAP is not available without unreasonable effort.
SOURCE RE/MAX Holdings, Inc.