Segment Information

9 Months Ended

Sep. 30, 2021

Segment Information

Segment Information

14. 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 the Company’s 2020 Amendment No. 1 to Annual Report on Form 10-K/A.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Continuing franchise fees	$	30,416	$	22,799	$	79,064	$	61,471
Annual dues		8,967		8,638		26,508		26,304
Broker fees		19,245		15,457		48,651		35,327
Franchise sales and other revenue		5,995		4,058		17,845		16,126
Total Real Estate		64,623		50,952		172,068		139,228
Continuing franchise fees		2,048		1,540		5,729		3,749
Franchise sales and other revenue		572		366		1,624		685
Total Mortgage		2,620		1,906		7,353		4,434
Marketing Funds fees		23,269		17,290		59,456		46,577
Other		485		925		1,661		3,313
Total revenue	$	90,997	$	71,073	$	240,538	$	193,552

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Adjusted EBITDA: Real Estate	$	36,292	$	30,959	$	92,014	$	71,008
Adjusted EBITDA: Mortgage		(1,282)		(176)		(3,165)		(1,495)
Adjusted EBITDA: Other		(56)		(448)		(238)		(730)
Adjusted EBITDA: Consolidated		34,954		30,335		88,611		68,783
Gain (loss) on sale or disposition of assets, net		—		11		10		33
Loss on contract settlement (a)		(40,500)		—		(40,500)		—
Loss on extinguishment of debt (b)		(264)		—		(264)		—
Impairment charge - leased assets (c)		—		(7,902)		—		(7,902)
Impairment charge - goodwill (d)		(5,123)		—		(5,123)		—
Equity-based compensation expense		(9,008)		(3,414)		(27,315)		(8,347)
Acquisition-related expense (e)		(9,432)		(1,021)		(14,303)		(1,915)
Fair value adjustments to contingent consideration (f)		(320)		(250)		(330)		105
Interest income		19		25		201		328
Interest expense		(3,315)		(2,159)		(7,537)		(7,028)
Depreciation and amortization (g)		(8,582)		(6,730)		(22,236)		(19,154)
Income (loss) before provision for income taxes (g)	$	(41,571)	$	8,895	$	(28,786)	$	24,903

(a) Represents the effective settlement of the pre-existing master franchise agreement with INTEGRA that was recognized with the acquisition. See Note 5, Acquisitions for additional information.

(b) The loss was recognized in connection with the amended and restated Senior Secured Credit Facility. See Note 8, Debt for additional information.

(c) Represents the impairment recognized on a portion of the Company’s corporate headquarters office building in the prior year. See Note 2, Summary of Significant Accounting Policies for additional information.

(d) Lower than expected adoption rates of the First technology resulted in downward revisions to long-term forecasts, resulting in an impairment charge to the First reporting unit goodwill. See Note 6, Intangible Assets and Goodwill for additional information.

(e) Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with the evaluation, due diligence, execution and integration of acquisitions.

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

(g) Prior year amounts have been adjusted to reflect the immaterial correction of amortization for certain acquired Independent Regions. See Note 13, Immaterial Corrections to Prior Period Financial Statements for additional information.