Segment Information

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Segment Information

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

15.  Segment Information

The Company has two reportable segments: Real Estate Franchise Services and Brokerages. Management evaluates the operating results of its reportable 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. The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies.

As a result of changes in management’s process to assess performance and allocate resources, the Company implemented a new segment structure beginning in the second quarter of 2014.  The changes in the Company’s segment structure relate to certain corporate-wide professional services expenses, which were previously reflected in the Brokerage and Other reportable segment and, beginning in the second quarter of 2014, are being reflected in the Real Estate Franchise Services reportable segment. All prior segment information has been reclassified to reflect the Company’s new segment structure and current presentation. Adjusted EBITDA for the reportable segments excludes depreciation, amortization, interest expense, net and the provision for income taxes and is then adjusted for other non-cash and non-recurring cash charges or other items. Adjusted EBITDA for the reportable segments is also a key factor that is used by the Company’s internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of management for purposes of annual and other incentive compensation plans. The additional items that are adjusted to determine Adjusted EBITDA for the reportable segments include loss or gain on the sale or disposition of assets and sublease, loss on early extinguishment of debt, non-cash straight-line rent expense, non-recurring severance and other related expenses and acquisition integration and professional fees expense. The Company’s Real Estate Franchise Services reportable segment comprises the operations of the Company’s owned and independent global franchising operations under the RE/MAX brand name and the Company’s corporate-wide professional services expenses. All of the Company’s brokerage offices in its Real Estate Franchise Services reportable segment are franchised. The Company’s Brokerages reportable segment includes the Company’s brokerage services business and reflects the elimination of intersegment revenue and other consolidation entries.

The following tables present the revenue and Adjusted EBITDA results of the Company’s reportable segments for the three months ended March 31, 2015 and 2014, respectively:

	Revenue (a)
	Three months ended March 31,
	2015		2014
	(in thousands)
Real Estate Franchise Services	$	40,740	$	39,099
Brokerages		3,467		2,781
Consolidated revenue	$	44,207	$	41,880

(a) Transactions between the Real Estate Franchise Services and the Brokerages reportable segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services reportable segment include intercompany amounts paid from the Company’s brokerage services business of $432,000 and $422,000 for the three months ended March 31, 2015 and 2014, respectively. Such amounts are eliminated in the Brokerages reportable segment.

	Adjusted EBITDA
	Three months ended March 31,
	2015			2014
	(in thousands)
Real Estate Franchise Services:
Net income	$	8,972		$	8,370
Depreciation and amortization		3,732			3,868
Interest expense		2,793			2,462
Interest income		(67	)		(81	)
Provision for income taxes		2,120			1,983
EBITDA		17,550			16,602
Gain on sale or disposition of assets and sublease		(83	)		(196	)
Loss on early extinguishment of debt		94			-
Non-cash straight-line rent expense		274			212
Non-recurring severance and other related expenses		451			-
Acquisition integration and professional fees expense		183			18
Adjusted EBITDA	$	18,469		$	16,636
Brokerages:
Net income (loss)	$	158		$	(572	)
Depreciation and amortization		79			70
Interest expense		16			4
Interest income		-			-
Provision (benefit) for income taxes		28			(98	)
EBITDA		281			(596	)
Loss on sale or disposition of assets and sublease		40			18
Non-cash straight-line rent expense		(43	)		(65	)
Adjusted EBITDA	$	278		$	(643	)
Consolidated:
Net income	$	9,130		$	7,798
Depreciation and amortization		3,811			3,938
Interest expense		2,809			2,466
Interest income		(67	)		(81	)
Provision for income taxes		2,148			1,885
EBITDA		17,831			16,006
Gain on sale or disposition of assets and sublease		(43	)		(178	)
Loss on early extinguishment of debt		94			-
Non-cash straight-line rent expense		231			147
Non-recurring severance and other related expenses		451			-
Acquisition integration and professional fees expense		183			18
Adjusted EBITDA	$	18,747		$	15,993