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RH

RE/MAX Holdings, Inc. (RMAX)·Q3 2021 Earnings Summary

Executive Summary

  • Record Q3 with revenue of $91.0M (+28% YoY), adjusted EBITDA of $35.0M, and record adjusted diluted EPS of $0.71; strength was driven by the RE/MAX INTEGRA North American acquisition, core ops, and a healthy U.S./Canada housing market .
  • Mix improved: recurring revenue excluding Marketing Funds was 61.2%; organic growth was ~6.9%, aided by fewer recruiting incentives, increased broker fees from rising home prices, a RE/MAX continuing franchise fee price increase, and Motto growth .
  • Guidance shifts: FY’21 revenue range tightened to $326.5–$330.5M (from $321–$336M) and adjusted EBITDA raised to $116–$119M (from $113–$118M); agent count growth cut to +2.5–3.5% (from +5–6%) on franchisee terminations and global COVID headwinds .
  • Mortgage segment momentum: Motto franchises up 32% YoY to 176 open; wemlo Loan Brokering System (LBS) launching industry-wide Jan’22; mortgage business expected to be profitable in 2022 .
  • Board declared a $0.23 quarterly dividend payable Dec 1, 2021; accounting review of prior region purchase accounting did not impact revenue/Adj EBITDA/Adj EPS and was proceeding to completion .

What Went Well and What Went Wrong

  • What Went Well

    • “Record financial results” with adjusted EBITDA of $35M and adjusted diluted EPS of $0.71; acquisitions (notably INTEGRA) and core operations outperformed expectations .
    • Organic growth “almost 7%” ex-Marketing Funds, underpinned by agent count growth, pricing, Motto strength, and more targeted recruiting incentives; recurring revenue remained over 61% ex-Marketing Funds .
    • Strategic progress: G73 (Gadberry) delivered a quarterly profit; RE/MAX University was relaunched; wemlo LBS unveiled to strengthen the mortgage broker workflow and drive processing capture .

  • What Went Wrong

    • FY agent growth guidance reduced to +2.5–3.5% (from +5–6%) due to terminations of underperforming U.S. franchisees (e.g., CA, IN, NJ) and persistent international lockdowns .
    • SO&A elevated to $51.1M with comparisons “not particularly meaningful” vs 2020; included INTEGRA acquisition expenses and resuming in-person activity—margin headwind even as top line hit a record .
    • Incremental amortization from INTEGRA ($2–3M per quarter) will affect adjusted EPS; revenue per agent stability is a strength, but sustained macro normalization could temper broker fee tailwinds .

Financial Results

MetricQ1 2021Q2 2021Q3 2021
Revenue ($M)$72.3 $77.2 $91.0
Adjusted EBITDA ($M)$23.2 $30.5 $35.0
Adjusted Diluted EPS ($)$0.46 $0.63 $0.71
Adjusted EBITDA Margin (%)32.1% (23.2/72.3) 39.5% (30.5/77.2) 38.5% (35.0/91.0)

YoY comparison (Q3):

  • Revenue YoY: +28.0% vs $71.1M in Q3’20 .

Q3 revenue composition:

MetricQ3 2021
Total Revenue ($M)$91.0
Revenue ex-Marketing Funds ($M)$67.7
Marketing Funds Revenue ($M)$23.3 (calc from total – ex-MF)

Q3 KPIs:

  • Total agent count: 140,936; U.S. & Canada: 85,656; Canada agent growth: +10% YoY .
  • Motto open franchises: 176 (+32.3% YoY) .
  • Organic revenue growth (ex-MF): ~6.9%; recurring revenue ex-MF: 61.2% .
  • Revenue per agent (owned regions): ~$2,600–$2,700 (recurring model stability) .

Estimates vs Actuals:

  • S&P Global consensus estimates were unavailable at time of analysis due to API limits; therefore, we cannot provide beat/miss analysis for revenue or EPS this quarter.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Agent Count Growth (YoY)FY 2021+5% to +6% +2.5% to +3.5% Lowered
Revenue ($M)FY 2021$321–$336 $326.5–$330.5 Tightened (midpoint slightly up)
Marketing Funds Revenue ($M)FY 2021$80.5–$83.5 $81.5–$83.5 Slight raise/tighten
Adjusted EBITDA ($M)FY 2021$113–$118 $116–$119 Raised
Revenue ($M)Q4 2021n/a$86–$90 New
Adjusted EBITDA ($M)Q4 2021n/a$27.5–$30.5 New
Agent Count Growth (YoY)Q4 2021n/a+2.5% to +3.5% New
Dividendn/an/a$0.23 declared (payable Dec 1, 2021) Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Technology & Data (booj, First, G73)Q1: Adoption growing; First app boosts productivity; G73 launched combining legacy data and Gadberry . Q2: First recruiting functionality unveiled .RE/MAX University reinvented; G73 (Gadberry) profitable ahead of plan .Positive momentum, expanding platform utility .
Mortgage (Motto & wemlo)Q1: >150 open; aiming for 200 by YE; wemlo processing ramp . Q2: 164 open; 60–80 franchise sales; wemlo ramp; mortgage expected to reach profitability in 2022 .176 open (+32% YoY); wemlo LBS to launch Jan’22; mortgage unit expected profitable in 2022 .Accelerating scale, new SaaS vector via LBS .
Macro/HousingQ1: Hot market; tight inventory . Q2: Record June sales and prices; first inventory uptick since Mar’20 .Seasonal cool-down; 1.3 months supply; builders constrained by supply chain .Normalizing from extreme heat; inventory still tight .
M&A/INTEGRA integrationQ2: Closed; contributes 20–25% of “doubling revenue” goal; leverage ~3x net .Integration “terrific,” exceeding expectations; incremental amortization $2–$3M/quarter .On track; cost amortization flowing through .
Agent Growth & RecruitingQ1: Global +6% YoY; Canada acceleration . Q2: Canada +8% YoY; pivot away from fee waivers; organic growth drivers broadening .Total agents 140,936 (+4.6% YoY); FY agent growth cut due to terminations and global lockdowns; less use of recruiting fee waivers .Growth with discipline; guidance shifted lower .
Accounting/Regulatoryn/aPurchase accounting review ongoing; no impact to revenue/Adj EBITDA/Adj EPS; potential balance sheet/net income effects; no misconduct identified .One-time review, contained .

Management Commentary

  • “We generated record adjusted EBITDA of $35 million and record adjusted diluted EPS of $0.71.”
  • “Our recent acquisition of RE/MAX INTEGRA’s North American regions is off to a great start… exceeding our expectations.”
  • “Excluding the marketing funds, our core business generated almost 7% organic revenue growth in the third quarter… We believe we’ll see continued mid-single digit organic growth.”
  • “Motto… open office count was up more than 30% year-over-year… We expect Motto to start generating a profit beginning next year.”
  • “We recently announced a complete reinvention of our RE/MAX University platform…”

Q&A Highlights

  • Revenue per agent stability underscores recurring model: ~$2,600–$2,700 per agent in owned regions; broker fee and home price appreciation support modest increases .
  • Agent growth guidance cut tied to termination of underperforming U.S. franchisees and global COVID lockdowns; management does not expect similar magnitude of terminations going forward .
  • INTEGRA amortization will add ~$2–$3M per quarter and will affect adjusted EPS; equity comp noise from INTEGRA also noted .
  • wemlo LBS economics: provided at no incremental cost to Motto vs prior platform; expected to drive wemlo processing capture and opens a SaaS revenue channel outside Motto starting Jan’22 .
  • Recruiting incentives: shift away from fee waivers toward delivering value proposition; fewer waivers supported revenue growth .

Estimates Context

  • S&P Global consensus estimates for Q3’21 revenue and EPS were unavailable at time of analysis due to API limits; therefore, we cannot provide beat/miss analysis versus Wall Street expectations. Management characterized the quarter as “record” and raised FY adjusted EBITDA guidance, suggesting outperformance versus internal plans .

Key Takeaways for Investors

  • Quality of earnings: High recurring revenue (61% ex-MF) and stable revenue per agent underpin defensibility as the housing market normalizes .
  • Synergy and scale: INTEGRA integration is tracking ahead, supporting record profitability and a raised FY’21 adjusted EBITDA outlook; watch amortization headwind to adjusted EPS .
  • Mortgage optionality: Motto network growth plus wemlo LBS rollout create dual recurring and transactional revenue levers; mortgage segment targeted to turn profitable in 2022—an incremental multiple driver if executed .
  • Guidance dynamics: FY revenue tightened and FY adjusted EBITDA raised; agent growth lowered due to deliberate pruning and international constraints, which could improve network quality mix .
  • Macro normalization watch: Inventory remains tight but cooling is underway; broker fee tailwinds from home price appreciation may moderate into 2022, but recurring fee mix should cushion volatility .
  • Dividend maintained: $0.23 quarterly dividend highlights cash generation and commitment to capital returns even during an accounting review period .
  • Execution priorities: Deliver INTEGRA integration, monetize tech stack (First, G73) and mortgage ecosystem (Motto + wemlo), and sustain mid-single digit organic growth ex-MF to support margin expansion .

Appendix: Additional Details

  • Q4 2021 outlook: Revenue $86–$90M; adjusted EBITDA $27.5–$30.5M; agent count +2.5–3.5% YoY .
  • Q3 market color: Seasonal cool-down with 1.3 months of inventory; supply chain constraints impacting builders; potential path to a more balanced housing market .