Segment Information

6 Months Ended

Jun. 30, 2019

16. Segment Information

The Company has two reportable segments: RE/MAX Franchising and the Marketing Funds. The category Other consists of the Motto Franchising and booj operating segments. Management evaluates the operating results of its segments based upon revenue and adjusted earnings before interest, the provision for income taxes, depreciation and amortization and other non-cash and non-recurring cash charges or other items (“Adjusted EBITDA”). The Company’s presentation of Adjusted EBITDA may not be comparable to similar measures used by other companies. The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies.

The following table presents revenue from external customers by segment for the three and six months ended June 30, 2019 and 2018 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Continuing franchise fees	$	23,978	$	24,761	$	48,095	$	49,562
Annual dues		8,819		8,973		17,673		17,669
Broker fees		13,459		13,994		22,047		23,181
Franchise sales and other revenue		4,129		4,382		12,394		13,292
Total RE/MAX Franchising		50,385		52,110		100,209		103,704
Marketing Funds fees		18,060		—		36,832		—
Other		2,936		2,167		5,518		3,215
Total revenue	$	71,381	$	54,277	$	142,559	$	106,919

The following table presents a reconciliation of Adjusted EBITDA by segment to income before provision for income taxes for the three and six months ended June 30, 2019 and 2018 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Adjusted EBITDA: RE/MAX Franchising	$	30,020	$	29,990	$	54,165	$	53,797
Adjusted EBITDA: Other		(138)		(1,245)		(1,293)		(2,208)
Adjusted EBITDA: Consolidated ^(a)		29,882		28,745		52,872		51,589
Gain (loss) on sale or disposition of assets and sublease, net		16		113		(363)		141
Equity-based compensation expense		(1,796)		(2,156)		(5,847)		(3,424)
Acquisition-related expense ^(b)		(15)		(313)		(87)		(1,487)
Special Committee investigation and remediation expense ^(c)		—		(564)		—		(2,650)
Fair value adjustments to contingent consideration ^(d)		(415)		55		(345)		(80)
Interest income		342		98		662		217
Interest expense		(3,154)		(3,171)		(6,309)		(5,895)
Depreciation and amortization		(5,541)		(5,069)		(11,099)		(9,644)
Income before provision for income taxes	$	19,319	$	17,738	$	29,484	$	28,767

(a)

As the revenue for the Marketing Funds are contractually restricted for the benefit of franchisees and the Company has an equal and offsetting amount of expenses such that there is no impact to overall profitability of the Company, there is no Adjusted EBITDA for the Marketing Funds. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for more information on the Company’s presentation of Adjusted EBITDA and a reconciliation of the differences between the Company’s Adjusted EBITDA and net income, which is the most comparable GAAP measure for operating performance.

(b)	Acquisition-related expense includes legal, accounting, advisory and consulting fees incurred in connection with the acquisition and integration of acquired companies.

(c)	Special Committee investigation and remediation expense relates to costs incurred in relation to the previously disclosed investigation by the special committee of independent directors of actions of certain members of our senior management and the implementation of the remediation plan.

(d)	Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability. See Note 10, Fair Value Measurements for additional information.