Segment Information

12 Months Ended

Dec. 31, 2023

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,
	2023		2022		2021
Continuing franchise fees	$	116,472	$	123,272	$	110,613
Annual dues		33,904		35,676		35,549
Broker fees		51,012		62,939		65,456
Franchise sales and other revenue		25,794		27,385		23,506
Total Real Estate		227,182		249,272		235,124
Continuing franchise fees		10,912		10,117		7,891
Franchise sales and other revenue		3,081		2,271		2,160
Total Mortgage		13,993		12,388		10,051
Marketing Funds fees		83,861		90,319		82,391
Other		635		1,407		2,135
Total revenue	$	325,671	$	353,386	$	329,701

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,
	2023		2022		2021
Adjusted EBITDA: Real Estate	$	104,305	$	128,301	$	125,153
Adjusted EBITDA: Mortgage		(6,920)		(6,368)		(5,321)
Adjusted EBITDA: Other		(1,097)		(301)		(249)
Adjusted EBITDA: Consolidated		96,288		121,632		119,583
Settlement charge (a)		(55,150)		—		—
Loss on contract settlement (b)		—		—		(40,900)
Loss on extinguishment of debt (c)		—		—		(264)
Impairment charge - leased assets (d)		—		(6,248)		—
Impairment charge - goodwill (e)		(18,633)		(7,100)		(5,123)
Loss on lease termination (f)		—		(2,460)		—
Equity-based compensation expense		(19,536)		(22,044)		(34,298)
Acquisition-related expense (g)		(263)		(1,859)		(17,422)
Fair value adjustments to contingent consideration (h)		533		133		(309)
Restructuring charges (i)		(4,210)		(8,690)		—
Gain on reduction in tax receivable agreement liability (j)		25,298		702		(382)
Other		(2,131)		(726)		(586)
Interest income		4,420		1,460		217
Interest expense		(35,741)		(20,903)		(11,344)
Depreciation and amortization		(32,414)		(35,769)		(31,333)
Income (loss) before provision for income taxes	$	(41,539)	$	18,128	$	(22,161)

(a) Represents the settlement of the industry class-action lawsuits and other legal settlements. See Note 14, Commitments and Contingencies, for additional information.

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

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

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

(e) During the fourth quarter of 2023, in connection with our annual goodwill impairment test, we concluded that the carrying value of the Mortgage reporting unit within the Mortgage segment exceeded its fair value, resulting in an impairment charge to the Mortgage reporting unit goodwill. In addition, during the fourth quarter of 2022, in connection with the restructuring of the business and technology offerings, the Company made the decision to wind down the Gadberry Group, resulting in an impairment charge to the Gadberry Group reporting unit goodwill. In addition, during 2021, 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.

(f) During the second quarter of 2022, a loss was recognized in connection with the termination of the booj office lease. See Note 3, Leases, for additional information.

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

(h) 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.

(i) During the third quarter of 2023, the Company announced a reduction in force and reorganization intended to streamline the Company’s operations and yield cost savings over the long term and during the third quarter of 2022, the Company incurred expenses related to a restructuring associated with a shift in its technology offerings strategy. See Note 2, Summary of Significant Accounting Policies, for additional information.

(j) Gain on reduction in tax receivable agreement liability recorded during 2023 is a result of a valuation allowance on deferred tax assets. See Note 4, Non-controlling Interest and Note 12, Income Taxes, for additional information.

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

	As of December 31,
	2023		2022
Real Estate	$	473,659	$	588,216
Marketing Funds		69,710		64,755
Mortgage		33,722		42,143
Other		59		120
Total assets	$	577,150	$	695,234

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