The accompanying Condensed Consolidated Balance Sheet at December 31, 2020, which was derived from the audited consolidated financial statements at that date, and the unaudited interim condensed consolidated financial statements and notes thereto have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements are presented on a consolidated basis and include the accounts of Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2021 and the results of its operations and comprehensive income, cash flows and changes in its stockholders’ equity for the three months ended March 31, 2021 and 2020. Interim results may not be indicative of full-year performance.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Annual Report on Form 10-K”). Please refer to that document for a fuller discussion of all significant accounting policies.

The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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”.

The Company generates most of its revenue from contracts with customers. The Company’s major streams of revenue are:

Annual Dues

The activity in the Company’s deferred revenue for annual dues consists of the following (in thousands):


	Balance at beginning of period		New billings		Revenue recognized ^(a)		Balance at end of period
Three Months Ended March 31, 2021	$	14,539	$	10,277	$	(8,672)	$	16,144

(a)	Revenue recognized related to the beginning balance was $6.3 million for the three months ended March 31, 2021.

Franchise Sales

The activity in the Company’s franchise sales deferred revenue accounts consists of the following (in thousands):


	Balance at beginning of period		New billings		Revenue recognized ^(a)		Balance at end of period
Three Months Ended March 31, 2021	$	25,069	$	2,005	$	(2,349)	$	24,725

(a)	Revenue recognized related to the beginning balance was $2.3 million for the three months ended March 31, 2021.

Commissions Related to Franchise Sales

Commissions paid on franchise sales are recognized as an asset and amortized over the contract life of the franchise agreement. The activity in the Company’s capitalized contract costs for commissions (which are included in “other current assets” and “other assets, net of current portion” on the Condensed Consolidated Balance Sheets) consist of the following (in thousands):


	Balance at beginning of period		Expense recognized		Additions to contract cost for new activity		Balance at end of period
Three Months Ended March 31, 2021	$	3,690	$	(421)	$	320	$	3,589

Disaggregated Revenue

In the following table, segment revenue is disaggregated by Company-Owned or Independent Regions, where applicable, and by geographical area (in thousands):


	Three Months Ended March 31,
	2021		2020
U.S. Company-Owned Regions	$	32,546	$	30,578
U.S. Independent Regions		3,288		2,996
Canada Company-Owned Regions		3,554		3,081
Canada Independent Regions		2,205		2,039
Global		2,641		2,548
Fee revenue ^(a)		44,234		41,242
Franchise sales and other revenue ^(b)		6,920		8,663
Total Real Estate		51,154		49,905
U.S.		16,182		15,651
Canada		1,737		1,655
Global		226		216
Total Marketing Funds		18,145		17,522
Mortgage ^(c)		2,323		1,458
Other ^(c)		673		1,387
Total	$	72,295	$	70,272

(a)	Fee revenue includes Continuing franchise fees, Annual dues and Broker fees.

(b)	Franchise sales and other revenue is derived primarily within the U.S.

(c)	Revenue from Mortgage and Other are derived exclusively within the U.S.

Transaction Price Allocated to the Remaining Performance Obligations

The following table includes estimated revenue by year, excluding certain other immaterial items, expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in thousands):


	Remainder of 2021		2022		2023		2024		2025		2026		Thereafter		Total
Annual dues	$	15,373	$	771	$	—	$	—	$	—	$	—	$	—	$	16,144
Franchise sales		5,244		5,898		4,533		3,300		2,023		1,049		2,678		24,725
Total	$	20,617	$	6,669	$	4,533	$	3,300	$	2,023	$	1,049	$	2,678	$	40,869

Cash, Cash Equivalents and Restricted Cash

All cash held by the Marketing Funds is contractually restricted. The following table reconciles the amounts presented for cash, both unrestricted and restricted, in the Condensed Consolidated Balance Sheets to the amounts presented in the Condensed Consolidated Statements of Cash Flows (in thousands):


	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	102,632	$	101,355
Restricted cash		21,500		19,872
Total cash, cash equivalents and restricted cash	$	124,132	$	121,227

Services Provided to the Marketing Funds by Real Estate

Real Estate charges the Marketing Funds for various services it performs. These services primarily comprise (a) building and maintaining agent marketing technology, including customer relationship management tools, the www.remax.com website, agent, office and team websites, and mobile apps, (b) dedicated employees focused on marketing campaigns, and (c) various administrative services including customer support of technology, accounting and legal. Because these costs are ultimately paid by the Marketing Funds, they do not impact the net income of Holdings as the Marketing Funds have no reported net income.

Costs charged from Real Estate to the Marketing Funds are as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Technology - operating	$	3,600	$	2,971
Technology - capital		180		644
Marketing staff and administrative services		1,118		1,228
Total	$	4,898	$	4,843

Leases

The Company leases corporate offices, a distribution center, billboards and certain equipment. As all franchisees are independently owned and operated, there are no leases recognized for any offices used by the Company’s franchisees. All the Company’s material leases are classified as operating leases.

The Company acts as the lessor for sublease agreements on its corporate headquarters, consisting solely of operating leases.

The Company has made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from any of its short-term leases. All leases with a term of 12 months or less at commencement, for which the Company is not reasonably certain to exercise available renewal options that would extend the lease term past 12 months, will be recognized on a straight-line basis over the lease term.

Recently Adopted Accounting Pronouncements

None.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which contains temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The new guidance is effective upon issuance and may be adopted on any date on or after March 12, 2020. The relief is temporary and only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company believes the amendments of ASU 2020-04 will not have a significant impact on the Company’s consolidated financial statements

and related disclosures as the Company does not currently engage in interest rate hedging of its LIBOR based debt, nor does it believe it has any material contracts tied to LIBOR other than its Senior Secured Credit Agreement, as discussed in Note 8, Debt. An amendment to the Senior Secured Credit agreement will likely be required, but the Company does not expect any material adverse consequences from this transition.