Segment Information

12 Months Ended

Dec. 31, 2020

Segment Information

Segment Information

17. Segment Information

The Company operates under the following four operating segments: Real Estate, Mortgage, 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”. Mortgage 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 Note 2, Summary of Significant Accounting Policies.

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

	Year Ended December 31,
	2020		2019		2018
Continuing franchise fees (a)	$	84,863	$	95,854	$	98,828
Annual dues		35,075		35,409		35,894
Broker fees		50,028		45,990		46,871
Franchise sales and other revenue		20,826		22,383		22,911
Total Real Estate		190,792		199,636		204,504
Continuing franchise fees		5,354		4,074		2,276
Franchise sales and other revenue		1,256		468		260
Total Mortgage		6,610		4,542		2,536
Marketing Funds fees (a)		64,402		72,299		—
Other		4,197		5,816		5,586
Total revenue	$	266,001	$	282,293	$	212,626

(a) During the year ended December 31, 2020, Continuing franchise fees and Marketing Funds fees declined primarily due to the temporary COVID-19 related financial support programs offered to franchisees.

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

	Year Ended December 31,
	2020		2019		2018
Adjusted EBITDA: Real Estate	$	96,079	$	106,810	$	108,669
Adjusted EBITDA: Mortgage		(2,255)		(2,709)		(3,436)
Adjusted EBITDA: Other		(1,266)		(586)		(917)
Adjusted EBITDA: Consolidated		92,558		103,515		104,316
Gain (loss) on sale or disposition of assets, net		(503)		(342)		139
Impairment charge - leased assets (a)		(7,902)		—		—
Equity-based compensation expense		(16,267)		(10,934)		(9,176)
Acquisition-related expense (b)		(2,375)		(1,127)		(1,634)
Gain on reduction in tax receivable agreement liability (c)		—		—		6,145
Special Committee investigation and remediation expense (d)		—		—		(2,862)
Fair value adjustments to contingent consideration (e)		(814)		(241)		1,289
Interest income		340		1,446		676
Interest expense		(9,223)		(12,229)		(12,051)
Depreciation and amortization		(26,691)		(22,323)		(20,678)
Income before provision for income taxes	$	29,123	$	57,765	$	66,164

(a) Represents the impairment recognized on a portion of the Company’s corporate headquarters office building. See Note 3, Leases, for additional information.

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

(c) Gain on reduction in tax receivable agreement liability is a result of the Tax Cuts and Jobs Act enacted in December 2017 and further clarified in 2018. See Note 12, Income Taxes, for additional information.

(d) 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.

(e) Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 11, Fair Value Measurements for additional information.

The following table presents total assets of the Company’s segments (in thousands):

	As of December 31,
	2020		2019
Real Estate	$	473,060	$	473,645
Marketing Funds		48,728		41,090
Mortgage		32,248		20,161
Other		3,356		7,456
Total assets	$	557,392	$	542,352

Virtually all long-lived assets are within the United States.