Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2025

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet at December 31, 2024, 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, 2025 and the results of its operations and comprehensive income (loss), cash flows and changes in its stockholders’ equity (deficit) for the three months ended March 31, 2025 and 2024. 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, 2024 (“2024 Annual Report on Form 10-K”). Please refer to that document for a fuller discussion of all significant accounting policies.

Use of Estimates

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.

Segment Reporting

The Company operates under the following reportable segments: Real Estate, Mortgage, and Marketing Funds. The Company presents all other business activities and operating segments which, due to quantitative insignificance, do not meet the quantitative significance tests for reportable segments under Other.

Revenue Recognition

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

● Continuing franchise fees, which are fixed contractual fees paid monthly by REMAX or Motto franchisees or REMAX Independent Region sub-franchisors based on the number of REMAX agents or Motto open offices.

● Annual dues, which are fees charged directly to REMAX agents.

● Broker fees, which are fees on real estate commissions when a REMAX agent assists a consumer with buying or selling a home.

● Marketing Funds fees, which are fixed contractual fees paid monthly by franchisees based on the number of REMAX agents or Motto open offices, which are obligated to be used for marketing campaigns to build brand awareness and to support agent and loan originator technology.

● Franchise sales and other revenue, which consists of fees from initial sales of REMAX and Motto franchises, renewals of REMAX franchises and REMAX master franchise fees, as well as data services subscription revenue, preferred marketing arrangements, technology products and subscription revenue, events-related revenue from education and other programs, mortgage loan processing revenue, and advertising revenue.

Deferred Revenue and Commissions Related to Franchise Sales

Deferred revenue is primarily driven by Franchise sales and Annual dues, as discussed above, and is included in “Deferred revenue” and “Deferred revenue, net of current portion” on the Condensed Consolidated Balance Sheets. Other deferred revenue is primarily related to events-related revenue. The activity consists of the following (in thousands):
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	Balance at				Revenue		Balance at
	January 1, 2025		New billings		recognized (a)		March 31, 2025
Franchise sales	$	21,282	$	1,116	$	(1,868)	$	20,530
Annual dues		12,261		8,356		(7,789)		12,828
Other		4,083		3,363		(5,607)		1,839
	$	37,626	$	12,835	$	(15,264)	$	35,197

(a) Revenue recognized related to the beginning balance for Franchise sales and Annual dues were $1.9 million and $5.6 million, respectively, for the three months ended March 31, 2025.

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):

			Additions to
	Balance at		contract cost		Expense		Balance at
	January 1, 2025		for new activity		recognized		March 31, 2025
Capitalized contract costs for commissions	$	3,553	$	730	$	(617)	$	3,666

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 2025		2026		2027		2028		2029		2030		Thereafter		Total
Franchise sales	$	4,840	$	5,384	$	4,122	$	2,768	$	1,438	$	560	$	1,418	$	20,530
Annual dues		12,213		615		—		—		—		—		—		12,828
Total	$	17,053	$	5,999	$	4,122	$	2,768	$	1,438	$	560	$	1,418	$	33,358

Disaggregated Revenue

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

	Three Months Ended
	March 31,
	2025		2024
U.S. Company-Owned Regions	$	30,258	$	31,739
U.S. Independent Regions		1,397		1,468
Canada Company-Owned Regions		9,692		9,903
Canada Independent Regions		650		728
Global		4,049		3,468
Fee revenue (a)		46,046		47,306
Franchise sales and other revenue (b)		6,430		7,142
Total Real Estate		52,476		54,448
U.S.		14,247		15,366
Canada		4,373		4,616
Global		244		224
Total Marketing Funds		18,864		20,206
Mortgage (c)		3,127		3,633
Total	$	74,467	$	78,287

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

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

(c) Revenue from Mortgage is derived exclusively within the U.S.

Cash, Cash Equivalents and Restricted Cash

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, 2025		December 31, 2024
Cash and cash equivalents	$	89,107	$	96,619
Restricted cash:
Marketing Funds (a)		22,799		17,668
Settlement Fund (b)		55,000		55,000
Total cash, cash equivalents and restricted cash	$	166,906	$	169,287

(a) All cash held by the Marketing Funds is contractually restricted, pursuant to the applicable franchise agreements.

(b) Represents the amounts held in the Settlement Fund as part of the settlements of certain industry class-action lawsuits. See Note 11, Commitments and Contingencies, for additional information.

Services Provided to the Marketing Funds by Real Estate

Real Estate charges the Marketing Funds for various services it performs or for payments it makes on behalf of the Marketing Funds to third-party vendors. These services are primarily comprised of (a) building and maintaining the remax.com and remax.ca websites and mobile apps, (b) agent and consumer-facing technology via the BoldTrail platform (refer to the Company’s 2024 Annual Report on Form 10-K for further details), (c) dedicated employees focused on consumer-facing marketing initiatives, and (d) various administrative services including customer support of technology, accounting and legal. 

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

	Three Months Ended
	March 31,
	2025		2024
Technology - operating	$	3,591	$	1,050
Marketing staff and administrative services		2,307		1,505
Total	$	5,898	$	2,555

Accounts and Notes Receivable

As of March 31, 2025, and December 31, 2024, the Company had allowances against accounts and notes receivable of $12.6 million and $11.2 million, respectively.

Property and Equipment

As of March 31, 2025, and December 31, 2024 the Company had accumulated depreciation of $15.8 million and $15.5 million, respectively. Depreciation expense for the three months ended March 31, 2025 and 2024 was $0.6 million.

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 of 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.

Foreign Currency Derivatives

The Company is exposed to foreign currency transaction gains and losses related to certain foreign currency denominated asset and liability positions, with the Canadian dollar representing the most significant exposure primarily from an intercompany Canadian loan between RMCO and the Canadian entity for RE/MAX INTEGRA (“INTEGRA”). The Company uses short duration foreign currency forward contracts, generally with maturities ranging from a few days to a few months, to minimize its exposures related to foreign currency exchange rate fluctuations. As none of these contracts are designated as accounting hedges, the underlying currency positions are revalued through “Foreign currency transaction gains (losses)” on the Consolidated Statements of Income (Loss) along with the related derivative contracts. During the three months ended March 31, 2025 and 2024, the Company recognized a net gain of $0.1 million and $1.3 million, respectively.

The Company has a short-term $44.0 million Canadian dollar forward contract that matures in the second quarter of 2025 that net settles in U.S. dollars based on the prevailing spot rates at maturity.

Recently Adopted Accounting Pronouncements

None.

New Accounting Pronouncements Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2024-03, Income Statement (Topic 220) – Disaggregation of Income Statement Expenses, which requires enhanced disclosures around disaggregation of certain income statement expense lines into specified categories. The new standard applies to public business entities and is effective on a prospective basis for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company believes the amendments of ASU 2024-03 will not have a significant impact on the Company’s consolidated financial statements and will include all required disclosures upon adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, which requires greater disaggregation of income tax disclosures related to the income tax reconciliation and income taxes paid. The amendments improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The Company will adopt ASU 2023-09 in the annual financial statements for the twelve months ended December 31, 2025, and for interim periods beginning in 2026. The Company believes the amendments of ASU 2023-09 will not have a significant impact on the Company’s consolidated financial statements and will include all required disclosures upon adoption.