RE/MAX Holdings, Inc. Reports First Quarter 2021 Results
First Quarter 2021 Highlights
(Compared to first quarter 2020 unless otherwise noted)
- Total agent count increased 6.4% to 140,214 agents
- U.S. and Canada combined agent count increased 0.7% to 84,771 agents
- Total open Motto Mortgage franchises increased 27.1% to 150 offices1
- Total Revenue of $72.3 million; Revenue excluding the Marketing Funds increased 2.7% to $54.2 million
- Net income attributable to RE/MAX Holdings, Inc. of $1.1 million and earnings per diluted share (GAAP EPS) of $0.06
- Adjusted EBITDA2 of $23.2 million, Adjusted EBITDA margin2 of 32.0% and Adjusted earnings per diluted share (Adjusted EPS2) of $0.46
Operating Statistics as of April 30, 2021
(Compared to April 30, 2020 unless otherwise noted)
- Total agent count increased 6.7% to 139,862 agents
- U.S. and Canada combined agent count increased 2.0% to 85,076 agents
- Total open Motto Mortgage franchises increased 27.9% to 156 offices1
May 07, 2021 // 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”), the first national mortgage brokerage franchise brand in the U.S., today announced operating results for the first quarter ended March 31, 2021.
“A robust housing market and record Motto growth helped drive strong financial results for the first quarter,” stated Adam Contos, RE/MAX Holdings Chief Executive Officer. “During this period, we also saw our largest year-over-year increase in agent count in over a decade, adding more than 8,000 new agents, led by healthy agent growth in Canada and double-digit agent growth globally. Motto continued its record pace of franchise sales, selling the most franchises in its history for the trailing twelve month period ended March 31, 2021. We now have over 150 open Motto offices in almost 40 states. We are encouraged that many of the strong tailwinds we saw in the first quarter continued in April.”
Contos continued, “We continue to increase and enhance our value proposition for both of our franchise networks. At our recent RE/MAX agent conference, we introduced an opportunity for virtually all U.S. RE/MAX affiliates to access health benefits as well as new tools, technology, and educational resources for the exclusive benefit of our agents, teams and brokers. Within our mortgage business we continue to ramp up our wemlo acquisition, offering affordable, dependable loan processing services to more of our Motto franchises each week.”
First Quarter 2021 Operating Results
The following compares agent count as of March 31, 2021 and 2020:
As of March 31, 2021:
- U.S. agent count: 62,261
- Canada agent count: 22,510
- Subtotal: 84,771
- Outside the U.S. and Canada: 55,443
- Total: 140,214
As of March 31, 2020:
- U.S. agent count: 62,668
- Canada agent count: 21,523
- Subtotal: 84,191
- Outside the U.S. and Canada: 47,625
- Total: 131,816
RE/MAX Holdings generated total revenue of $72.3 million in the first quarter of 2021, an increase of $2.0 million, or 2.9%, compared to $70.3 million in the first quarter of 2020. Total revenue grew primarily due to increased broker fees stemming from higher total transactions per agent and rising home prices, incremental revenue from acquisitions, Motto growth, and lower agent recruiting initiatives. Revenue growth was partially offset by lower events-related revenue due to COVID-19 restrictions and continued attrition of booj’s legacy customer base. Recurring revenue streams, which consist of continuing franchise fees and annual dues, increased $1.0 million, or 3.0%, compared to the first quarter of 2020 and accounted for 62.9% of revenue (excluding the Marketing Funds) in the first quarter of 2021, compared to 62.7% in the comparable period in 2020.
Total operating expenses were $68.8 million for the first quarter of 2021, an increase of $10.2 million, or 17.5%, compared to $58.5 million in the first quarter of 2020. First quarter total operating expenses increased primarily due to higher selling, operating and administrative expenses. Excluding the Marketing Funds, first quarter 2021 operating expenses totaled $50.6 million, an increase of $9.6 million or 23.5% compared to $41.0 million in the first quarter of 2020.
Selling, operating and administrative expenses were $43.7 million in the first quarter of 2021, an increase of $9.0 million, or 26.0%, compared to the first quarter of 2020 and, excluding the Marketing Funds, represented 80.7% of revenue, compared to 65.7% in the prior-year period. Selling, operating and administrative expenses increased primarily due to higher equity-based compensation expense related to acquisitions, including $5.5 million from the acceleration of the expense of certain awards; higher bonus expense due to the elimination of the corporate bonus in 2020; and increased personnel costs largely from acquisitions. First quarter 2021 selling, operating and administrative expenses were partially offset by a reduction in travel and events expenses and lower bad debt expense due to strong collections.
Depreciation and amortization expenses increased primarily due to placing internally developed software into service and incremental acquisition-related amortization expense.
Net Income and GAAP EPS
Net income attributable to RE/MAX Holdings was $1.1 million for the first quarter of 2021, a decrease of $1.5 million compared to the first quarter of 2020. Reported basic and diluted GAAP EPS were each $0.06 for the first quarter of 2021 compared to $0.15 each in the first quarter of 2020.
Adjusted EBITDA and Adjusted EPS
Adjusted EBITDA was $23.2 million for the first quarter of 2021, an increase of $3.6 million or 18.5% from the first quarter of 2020. Adjusted EBITDA increased primarily due to higher broker fee revenue as well as reduced bad expense from improved collections, partially offset by higher bonus expense due to the elimination of the corporate bonus in the prior year, and higher legal fees. Adjusted EBITDA margin was 32.0% in the first quarter of 2021, up compared to 27.8% in the first quarter of 2020.
Adjusted basic and diluted EPS were $0.47 and $0.46, respectively, for the first quarter of 2021 compared to Adjusted basic and diluted EPS of $0.39 for the first quarter of 2020. The ownership structure used to calculate Adjusted basic and diluted EPS for the quarter ended March 31, 2021 assumes RE/MAX Holdings owned 100% of RMCO, LLC (“RMCO”). The weighted average ownership RE/MAX Holdings had in RMCO was 59.6% for the quarter ended March 31, 2021.
As of March 31, 2021, the Company had cash and cash equivalents of $102.6 million, an increase of $1.3 million from December 31, 2020. As of March 31, 2021, the Company had $223.0 million of outstanding debt, net of an unamortized debt discount and issuance costs, a decrease of $0.6 million compared to $223.6 million as of December 31, 2020.
On May 5, 2021, the Company’s Board of Directors approved a quarterly cash dividend of $0.23 per share of Class A common stock. The quarterly dividend is payable on June 2, 2021, to shareholders of record at the close of business on May 19, 2021.
The Company’s second quarter and full-year 2021 Outlook assumes no further currency movements, acquisitions or divestitures.
For the second quarter of 2021, RE/MAX Holdings expects:
- Agent count to increase 7.0% to 8.0% over second quarter 2020;
- Revenue in a range of $74.0 million to $78.0 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 $25.5 million to $28.5 million.
For the full-year 2021, RE/MAX Holdings is increasing its agent count guidance and expects:
- Agent count to increase 5.0% to 6.0% over full-year 2020, up from 4.0% to 5.0%;
- Revenue in a range of $300.0 million to $310.0 million (including revenue from the Marketing Funds in a range of $71.0 million to $74.0 million), and
- Adjusted EBITDA in a range of $103.0 million to $107.0 million.
The effective U.S. GAAP tax rate attributable to RE/MAX Holdings is estimated to be between 22% and 24% in 2021.
Webcast and Conference Call
The Company will host a conference call for interested parties on Friday, May 7, 2021, beginning at 8:30 a.m. Eastern Time.
Basis of Presentation
Unless otherwise noted, the results presented in this press release are consolidated and exclude adjustments attributable to the non-controlling interest.
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.
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 second quarter and full year 2021; dividends; non-GAAP financial measures; estimated effective tax rates for 2021; housing and mortgage market conditions; the rollout of booj in Canada; the enhancement of the Company’s value proposition; the continued ramp up of the Company’s wemlo acquisition; and the Company’s strategic and operating plans and business models. 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 continues to pose 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. 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 its brands, including 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 and on the SEC website. 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.
SOURCE RE/MAX Holdings, Inc.
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