Segment Information

6 Months Ended

Jun. 30, 2020

13. Segment Information

The Company operates under the following four operating segments: RE/MAX Franchising, Motto Franchising, Marketing Funds and booj. Due to quantitative insignificance, the booj operating segment does not meet the criteria of a reportable segment and is included in “Other”. Motto Franchising does not meet the quantitative significance test; however, management has chosen to report results for the segment as it believes it will be a key driver of future success for Holdings. 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. Except for the adjustments identified below in arriving at Adjusted EBITDA, the accounting policies of the reportable segments are the same as those described in the Company’s 2019 Annual Report on Form 10-K.

The following table presents revenue from external customers by segment (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Continuing franchise fees ^(a)	$	15,795	$	23,978	$	38,672	$	48,095
Annual dues		8,745		8,819		17,666		17,673
Broker fees ^(a)		10,426		13,459		19,870		22,047
Franchise sales and other revenue		3,405		4,129		12,068		12,394
Total RE/MAX Franchising		38,371		50,385		88,276		100,209
Continuing franchise fees		943		916		2,209		1,755
Franchise sales and other revenue		127		114		319		234
Total Motto Franchising		1,070		1,030		2,528		1,989
Marketing Funds fees ^(a)		11,765		18,060		29,287		36,832
Other		1,001		1,906		2,388		3,529
Total revenue	$	52,207	$	71,381	$	122,479	$	142,559

(a)	Continuing franchise fees and Marketing Funds fees declined primarily due to the temporary COVID-19 related financial support programs offered to franchisees. Broker fees declined primarily due to reductions in home sale transactions due to the COVID-19 pandemic.

The following table presents a reconciliation of Adjusted EBITDA by segment to income before provision for income taxes (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Adjusted EBITDA: RE/MAX Franchising	$	19,318	$	30,021	$	40,049	$	54,165
Adjusted EBITDA: Motto Franchising		(741)		(719)		(1,319)		(1,460)
Adjusted EBITDA: Other		332		580		(282)		167
Adjusted EBITDA: Consolidated		18,909		29,882		38,448		52,872
Gain (loss) on sale or disposition of assets		11		16		22		(363)
Equity-based compensation expense		(2,747)		(1,796)		(4,933)		(5,847)
Acquisition-related expense ^(a)		(328)		(15)		(894)		(87)
Gain on reduction in tax receivable agreement liability		(500)		—		—		—
Fair value adjustments to contingent consideration ^(b)		(150)		(415)		355		(345)
Interest income		34		342		303		662
Interest expense		(2,187)		(3,154)		(4,869)		(6,309)
Depreciation and amortization		(6,412)		(5,541)		(12,722)		(11,099)
Income before provision for income taxes	$	6,630	$	19,319	$	15,710	$	29,484

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

(b)	Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liability. See Note 9, Fair Value Measurements for additional information.