Segment Information

12 Months Ended

Dec. 31, 2021

Segment Information

Segment Information

16. Segment Information

The Company operates under the following four operating segments: Real Estate, Mortgage, Marketing Funds, and 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 the Company’s future success. 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,
	2021		2020		2019
Continuing franchise fees (a)	$	110,613	$	84,863	$	95,854
Annual dues		35,549		35,075		35,409
Broker fees		65,456		50,028		45,990
Franchise sales and other revenue		23,506		20,826		22,383
Total Real Estate		235,124		190,792		199,636
Continuing franchise fees		7,891		5,354		4,074
Franchise sales and other revenue		2,160		1,256		468
Total Mortgage		10,051		6,610		4,542
Marketing Funds fees (a)		82,391		64,402		72,299
Other		2,135		4,197		5,816
Total revenue	$	329,701	$	266,001	$	282,293

(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 (loss) before provision for income taxes (in thousands):

	Year Ended
	December 31,
	2021		2020		2019
Adjusted EBITDA: Real Estate	$	125,247	$	96,079	$	106,810
Adjusted EBITDA: Mortgage		(5,321)		(2,255)		(2,709)
Adjusted EBITDA: Other		(249)		(1,266)		(586)
Adjusted EBITDA: Consolidated		119,677		92,558		103,515
Gain (loss) on sale or disposition of assets, net		(5)		(600)		(342)
Loss on contract settlement (a)		(40,900)		—		—
Loss on extinguishment of debt (b)		(264)		—		—
Impairment charge - leased assets (c)		—		(7,902)		—
Impairment charge - goodwill (d)		(5,123)		—		—
Equity-based compensation expense		(34,298)		(16,267)		(10,934)
Acquisition-related expense (e)		(17,422)		(2,375)		(1,127)
Fair value adjustments to contingent consideration (f)		(309)		(814)		(241)
Other		(1,057)		97		—
Interest income		217		340		1,446
Interest expense		(11,344)		(9,223)		(12,229)
Depreciation and amortization		(31,333)		(26,106)		(21,792)
Income (loss) before provision for income taxes	$	(22,161)	$	29,708	$	58,296

(a) Represents the effective settlement of the pre-existing master franchise agreement with INTEGRA that was recognized with the acquisition. See Note 6, Acquisitions for additional information.

(b) The loss was recognized in connection with the amended and restated Senior Secured Credit Facility. See Note 10, Debt for additional information.

(c) Represents the impairment recognized on a portion of the Company’s corporate headquarters office building. See Note 3, Leases 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 8, 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 11, Fair Value Measurements for additional information.

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

	As of December 31,
	2021		2020
Real Estate	$	674,034	$	462,036
Marketing Funds		63,313		48,728
Mortgage		38,359		32,248
Other		427		3,356
Total assets	$	776,133	$	546,368

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