Re/max Holdings, Inc. · NYSE:RMAX
Re/max — Q4 2016 Earnings Presentation
33 slides from Re/max's earnings presentation, Feb 23, 2017
Slide 1: Fourth Quarter and Full-Year 2016 Earnings
February 24, 2017 Fourth Quarter and Full - Year 2016 Earnings
Slide 2: Forward-Looking Statements and Non-GAAP Information
2 Forward - Looking Statements and Non - GAAP Information This presentation 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
Slide 3: Focused on Creating Shareholder Value
3 Focused on Creating Shareholder Value Organic Growth Catalysts Shareholder Return Driven By Agent count g rowth +7,089 agents, +6.8% YoY Franchise sales Best year in U.S. & Canada combined since 2010 Increased recurring revenue 1 ~65% in 2016 Delivered margin expansion +200 basis points YoY Strong
Slide 4: Full-Year and Fourth Quarter 2016 Financial Highlights
4 Full - Year and Fourth Quarter 2016 Financial Highlights Business Model Now Generating ~65% Recurring Revenue 1 ▪ Revenue of $176.3 million, increased 6.9% YoY after adjusting for sale of the Company - owned brokerages ▪ Adjusted EBITDA 2 of $94.6 million, Adjusted EBITDA margin 2 of 53.7% ▪ Adjus
Slide 5: Motto Mortgage Update
5 Motto Mortgage Update Growing the Brand with Each New Franchise Sale Sold 19 franchises Became registered to sell franchises in all 50 states Trained first two classes of franchisees & loan originators Completed sales tours of east and west coasts Scaled the team as the business has grown Interest
Slide 6: Q4 2016 Acquisitions Update
6 ▪ On - site visits with franchisees ▪ Continue to provide high - touch support ▪ Illustrate improvements to the network ▪ Focused on integration & growth Q4 2016 Acquisitions Update New Jersey & Regional Services 1 Acquisitions Closed in December Hawaii Acquired in Q4 2016 Washington Oregon Idaho
Slide 7: Growing Our Global Network
7 104,826 79,586 25,240 111,915 82,402 29,513 Total RE/MAX U.S. & Canada Outside U.S. & Canada Growing Our Global Network Agent Count up Almost 7% Year over Year Agent Count Growth 2015 vs. 2016 (+7,089 agents) +6.8% YoY +3.5%YoY (+2,816 agents) +16.9% YoY (+4,273 agents) December 31, 2015 December
Slide 8: Revenue Streams
8 Revenue Streams Agent Growth & Increasing Home Sales Driving Revenue For Q4 2016: ▪ Total revenue would have increased 9.1% after adjusting for the sale of the Company - owned brokerages ▪ Recurring revenue 1 increased to 67.3% of total revenue ▪ Continuing franchise fees increased due to agent co
Slide 9: Selling, Operating and Administrative Expenses
9 Selling, Operating and Administrative Expenses For Q4 2016: ▪ Total SO&A expense decreased to 56.8% of revenue from 58.8% in Q4 2015 ▪ Professional fees increased due to costs incurred related to independent region acquisitions and the credit facility amendment in December 2016 ▪ Rent decreased pr
Slide 10: Adjusted EBITDA
10 50.6% 49.8% 57.4% 57.0% 50.4% $91.4 $94.6 $21.9 $22.4 Adjusted EBITDA 1 ($M) Adjusted EBITDA Margins 1 1 Adjusted EBITDA and Adjusted EBITDA margin are non - GAAP numbers and exclude all adjustments attributable to the non - controlling interest. See slide 30 for a reconciliation of Net Income to
Slide 11: Adjusted Net Income and Adjusted EPS
11 $1.64 $1.74 $0.38 $0.41 2015 2016 Q4 2015 Q4 2016 $49.4 $52.5 $11.5 $12.3 2015 2016 Q4 2015 Q4 2016 Adjusted Net Income 1 ($M) Adjusted Net Income and Adjusted EPS Adjusted Diluted EPS 1 1 Adjusted net income and Adjusted EPS are non - GAAP numbers. Adjusted EPS assumes RE/MAX Holdings owned 100%
Slide 12: Credit Facility Restructured in Q4 2016
12 New Terms of the Debt ▪ New $ 235M Term Loan B, plus a $10M revolving credit facility ▪ Refinanced the prior existing $188M Term Loan B ▪ Priced at LIBOR +275 basis points with a 0.75% LIBOR floor ▪ Extended Term Loan B maturity to December 15, 2023 and revolving credit facility to December 15, 2
Slide 13: Maximizing Returns Through Acquisitions, Re-Investment & Return of Capital
13 Maximizing Returns Through Acquisitions, Re - Investment & Return of Capital to Shareholders Balance Sheet & Leverage ▪ Cash balance of $57.6 million on December 31, 2016, down $52.6 million from December 31, 2015, primarily due to acquisitions in 2016 ▪ $ 230.8 million in term loans 1 and no rev
Slide 14: Positive Forecasts for 2017 & 2018
14 200 250 300 350 400 450 500 550 600 650 Positive Forecasts for 2017 & 2018 Gradual Expansion of the Housing Market Continues 1 Source : Federal Reserve Economic Data – Existing Home Sales, numbers presented are n ot s easonally adjusted ; December 2012 through December 2016 2 Source: NAR (Nationa
Slide 15: Looking Ahead – Q1 2017 Outlook
15 For the first quarter of 2017, RE/MAX expects: ▪ Agent count to increase 5.5% to 6.5% over first quarter 2016; ▪ Revenue in a range of $ 47.0 million to $ 48.5 million; ▪ Selling, operating and administrative expenses in a range of 56.0% to 57.5 % of first quarter 2017 revenue; - Higher SO&A expe
Slide 16: Looking Ahead – FY 2017 Outlook
16 Looking Ahead – FY 2017 Outlook Growing our Network, our Business and our Brand FY 2017 Outlook For the full - year 2017, RE/MAX Holdings expects: ▪ Agent count to increase 4.0% to 5.0% over full - year 2016 ; ▪ Revenue in a range of $194.0 million to $197.0 million; ▪ Selling, operating and admi
Slide 17: Attractive Franchise Model
17 Best - in - class n etwork of more than 110,000 a gents Unmatched global footprint Resilient, recurring fee streams based on agent count High Adjusted EBITDA margins Strong free cash flow generation Low fixed - cost structure Asset - light franchise business Attractive Franchise Model Leading Rea
Slide 18: Additional information on non-GAAP measures
18 Additional information on non - GAAP measures
Slide 19: We are Changing How We Calculate our Non-GAAP Measures
19 We are Changing How We Calculate our Non - GAAP Measures Effective Q1 2017 Change in methodology is in response to SEC guidance on n on - GAAP measures issued in 2016 Q1 2017 and f ull - year 2017 o utlook reflects new methodology of calculating non - GAAP measures ― We will no longer adjust for
Slide 20: Amortization Expense for Franchise Agreements Will Increase in 2017
20 Amortization Expense for Franchise Agreements Will Increase in 2017 The New Jersey and Regional Services acquisitions will increase Amortization expense of franchise agreements in 2017 Also in 2017, franchise agreements related to earlier independent region acquisitions, including California and
Slide 21: Adjusted EBITDA Reconciliation to Net Income (New Methodology)
21 (Unaudited) (Amounts in thousands) RE/MAX Holdings, Inc. (New Methodology) Adjusted EBITDA Reconciliation to Net Income (Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC) (1) Represents gains on the sale or disposition of assets as well as the gains on the sublease of a portion of the Co
Slide 22: Adjusted EBITDA Reconciliation to Net Income (New Methodology)
22 (Unaudited) (Amounts in thousands) RE/MAX Holdings, Inc. ( New Methodology) Adjusted EBITDA Reconciliation to Net Income (Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC) (1) Represents losses (gains) on the sale or disposition of assets as well as the gains on the sublease of a portion
Slide 23: Adjusted Net Income and Adjusted EPS (New Methodology)
23 (Unaudited) (Amounts in thousands) RE/MAX Holdings, Inc. (New Methodology) Adjusted Net Income and Adjusted Earnings per Share ( Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC ) (1) Represents gains on the sale or disposition of assets as well as the gains on the sublease of a portion
Slide 24: Adjusted Net Income and Adjusted EPS (New Methodology)
24 (Unaudited) (Amounts in thousands) RE/MAX Holdings, Inc. (New Methodology) Adjusted Net Income and Adjusted Earnings per Share ( Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC ) (1) Represents losses (gains) on the sale or disposition of assets as well as the gains on the sublease of a
Slide 25: Appendix
25 Appendix
Slide 26: Agent Count in the U.S. and Canada
26 6,553 13,115 6,713 13,959 Company-Owned Independent 45,025 14,893 46,240 15,490 Company-Owned Independent Agent Count in the U.S. and Canada Growth in Company - Owned & Independent Regions Agents in the U.S. 1 Agents in Canada Agent Count Growth Q4 2015 v s . Q4 2016 (+1,215 agents) +2.7% YoY +4.
Slide 27: Revenue by Stream and Geography
27 46% 21% 14% 19% 83% 13% 4% Revenue by Stream and Geography Stable Recurring Revenue Base 2016 Revenue by Stream 2016 Revenue by Geography U.S. Canada Outside U.S. & Canada Franchise sales & Other F ranchise R evenue Broker Fees Annual D ues Continuing Franchise F ees ▪ 2016 Revenue by Geography r
Slide 28: Mortgage Finance Forecasts
28 Mortgage Finance Forecasts Purchase Originations Set to Grow, Rates to Rise Slowly 1 Source: Mortgage Bankers Association – MBA Mortgage Finance Forecast January 2017 Loan Originations 1 Mortgage & Interest Rates 1 3.9% 3.7% 4.5% 4.9% 2.1% 1.8% 2.6% 3.0% 2014 2015 2016 2017e 30-Year Fixed 10-Year
Slide 29: RE/MAX Holdings, Inc. Agent Count
29 RE/MAX Holdings, Inc. Agent Count (1) As of December 31, 2016, U.S. Company - owned Regions include agents in the Georgia, Kentucky/Tennessee and Southern Ohio regions, wh ich converted from Independent Regions to Company - owned Regions in connection with the acquisition of certain assets of RE/
Slide 30: Adjusted EBITDA Reconciliation to Net Income
30 RE/MAX Holdings, Inc. Adjusted EBITDA Reconciliation to Net Income (Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC) (Unaudited) (Amounts in thousands, except percentages) (1) Represents losses (gains) on the sale or disposition of assets as well as the gains on the sublease of a portio
Slide 31: Adjusted Net Income and Adjusted Earnings per Share
31 RE/MAX Holdings, Inc. Adjusted Net Income and Adjusted Earnings per Share ( Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC ) (Unaudited) (Amounts in thousands except shares outstanding and EPS) (1) Represents losses (gains) on the sale or disposition of assets as well as the gains on t
Slide 32: Free Cash Flow and Unencumbered Cash Generation
32 RE/MAX Holdings, Inc. Free Cash Flow and Unencumbered Cash Generation (Unaudited) (Amounts in thousands) (1) Non - GAAP measure . See the end of this presentation for definitions of Non - GAAP measures . 2016 2015 Cash flow from operations 64,379$ 77,358$ Less: Capital expenditures (4,395) (3,546
Slide 33: Non-GAAP Financial Measures
33 Non - GAAP Financial Measures The SEC has adopted rules to regulate the use in filings with the SEC and in public disclosures of financial measures not in accordance with U . S . GAAP, such as Adjusted EBITDA and the ratios related thereto, Adjusted net income, Adjusted basic and diluted earnings