RE/MAX Holdings, Inc. Reports Second Quarter 2020 Results
Second Quarter 2020 Highlights
(Compared to second quarter 2019 unless otherwise noted)
- Total agent count increased 3.8% to 131,905 agents
- U.S. and Canada combined agent count decreased 1.4% to 82,972 agents
- Total open Motto Mortgage franchises increased 29.6% to 127 offices1
- Total Revenue of $52.2 million; Revenue excluding the Marketing Funds decreased 24.2% to $40.4 million
- Net income attributable to RE/MAX Holdings, Inc. of $3.5 million and earnings per diluted share (GAAP EPS) of $0.19
- Adjusted EBITDA2 of $18.9 million, Adjusted EBITDA margin2 of 36.2% and Adjusted earnings per diluted share (Adjusted EPS2) of $0.38
Operating Statistics as of July 31, 2020
(Compared to July 31, 2019 unless otherwise noted)
- Total agent count increased 4.4% to 132,687 agents
- U.S. and Canada combined agent count decreased 1.1% to 83,131 agents
- Total open Motto Mortgage franchises increased 25.7% to 127 offices1
August 07, 2020 // Franchising.com // 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”), an innovative mortgage brokerage franchise, today announced operating results for the quarter ended June 30, 2020.
“The U.S. housing market began an encouraging rebound in June after COVID-19 interrupted 2020’s promising start,” stated Adam Contos, RE/MAX Holdings Chief Executive Officer. “We’re well positioned to help our affiliates build on this positive momentum given the financial and structural strength of our business model, which to date has enabled us to keep staff intact and continue to expand our value proposition. In the field, our RE/MAX and Motto professionals have adapted to the current environment exceptionally well, leveraging technology and adhering to social distancing guidelines, to expertly guide consumers in a safe and largely virtual way.”
Contos continued, “Our RE/MAX and Motto networks are finding opportunities to grow and build their businesses in this very demanding time. Motto posted its best second quarter of franchise sales yet, and its franchise sales on a trailing-twelve-month basis are the highest in its four-year history. On the RE/MAX side, global agent count continued to rise, while agent count in the U.S. and Canada stabilized in June and July. Our franchisees in both brands continue to demonstrate their local leadership by bringing productive agents and loan originators into our networks – and then helping those individuals get even better at what they do. Their recruiting efforts – supported by our programs and services – are critical to our ability to succeed in every kind of environment.”
Second Quarter 2020 Operating Results
The following table compares agent count as of June 30, 2020 and 2019:
As of June 30, 2020:
- U.S. agent count: 61,677
- Canada agent count: 21,295
- Subtotal: 82,972
- Outside the U.S. & Canada: 48,933
- Total: 131,905
As of June 30, 2019:
- U.S. agent count: 62,700
- Canada agent count: 21,433
- Subtotal: 84,133
- Outside the U.S. & Canada: 42,887
- Total: 127,020
RE/MAX Holdings generated total revenue of $52.2 million in the second quarter of 2020, a decrease of $19.2 million or 26.9% compared to $71.4 million in the second quarter of 2019. Total revenue decreased primarily due to temporary COVID-19-related financial-support initiatives the Company introduced in April that reduced both continuing franchise fees and Marketing Funds fees, as well as reduced broker fees stemming from lower existing home sales. The COVID-19-related financial-support initiatives were limited to two months of relief in the second quarter. Recurring revenue streams, which consist of continuing franchise fees and annual dues, decreased $8.2 million compared to the second quarter of 2019 and accounted for 63.0% of revenue (excluding the Marketing Funds) in the second quarter of 2020, compared to 63.2% in the comparable period in 2019.
Total operating expenses were $43.5 million for the second quarter of 2020, a decrease of $5.8 million, or 11.7%, compared to $49.3 million in the second quarter of 2019. Second quarter total operating expenses decreased primarily due to lower Marketing Fund expenses, partially offset by increased depreciation and amortization expenses. Marketing Fund expenses decreased primarily due to temporary COVID-19-related financial-support initiatives the Company introduced in April that reduced Marketing Funds fees. Excluding the Marketing Funds from operating expenses, second quarter 2020 operating expenses totaled $31.8 million, an increase of $0.5 million or 1.6% compared to $31.3 million in the second quarter of 2019.
Selling, operating and administrative expenses were $25.3 million in the second quarter of 2020, a decrease of $0.4 million or 1.4% compared to the second quarter of 2019 and, excluding the Marketing Funds, represented 62.7% of revenue, compared to 48.2% in the prior-year period. Selling, operating and administrative expenses decreased primarily due to cost-savings measures implemented in 2020 – including the elimination of the 2020 Company bonus and the temporary suspension of the Company’s 401(k) match, as well as a reduction in travel and events spend –partially offset by increased legal fees and higher equity-based compensation expense.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $3.5 million for the second quarter of 2020, a decrease of $5.1 million over the second quarter of 2019. Reported basic and diluted GAAP EPS were each $0.19 for the second quarter of 2020 compared to $0.48 in the second quarter of 2019.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $18.9 million for the second quarter of 2020, a decrease of $11.0 million or 36.7% from the second quarter of 2019. Adjusted EBITDA decreased primarily due to lower revenue from temporary COVID-19-related financial-support initiatives as well as increased legal fees partially offset by the Company’s cost-savings measures. Adjusted EBITDA margin was 36.2% in the second quarter of 2020 compared to 41.9% in the second quarter of 2019.
Adjusted basic and diluted EPS were each $0.38 for the second quarter of 2020 compared to $0.65 per share each for the second quarter of 2019. The ownership structure used to calculate Adjusted basic and diluted EPS for the quarter ended June 30, 2020 assumes RE/MAX Holdings owned 100% of RMCO, LLC (“RMCO”). The weighted average ownership RE/MAX Holdings had in RMCO was 59.1% for the quarter ended June 30, 2020.
As of June 30, 2020, the Company had cash and cash equivalents of $84.5 million. The Company’s cash and cash equivalents increased $1.5 million from December 31, 2019. As of June 30, 2020, the Company had $224.6 million of outstanding debt, net of an unamortized debt discount and issuance costs, a decrease of $1.1 million compared to $225.7 million as of December 31, 2019.
On August 5, 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 September 2, 2020, to shareholders of record at the close of business on August 19, 2020.
Webcast and Conference Call
The Company will host a conference call for interested parties on Friday, August 7, 2020, beginning at 8:30 a.m. Eastern Time.
Interested parties can access a live webcast through the Investor Relations section of the Company’s website. 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.
1 Total 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”.
2 Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS are non-GAAP measures. These terms are defined at the end of this release. Please see Tables 5 and 6 appearing later in this release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.
About RE/MAX Holdings, Inc.
RE/MAX Holdings, Inc. (NYSE: RMAX) is one of the world’s leading franchisors in the real estate industry, franchising real estate brokerages globally under the RE/MAX® brand, and mortgage brokerages within the U.S. under the Motto® Mortgage brand. RE/MAX was founded in 1973 by David and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. Now with more than 130,000 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 100 offices across more than 30 states.
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; dividends; non-GAAP financial measures; housing and mortgage market conditions, including statements about the housing market rebounding; 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.
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