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SOURCE RE/MAX Holdings, Inc.

DENVER. March 12, 2015 /PRNewswire/ —

Full Year 2014 Highlights

(Compared to full year 2013 unless otherwise noted)

• Year-end agent count of 98,010, up 5.1%
• Revenue grew by 7.6% to $171.0 million
• Adjusted EBITDA 1 was $83.8 million. up 8.8%
• Adjusted EBITDA 1 margin of 49.0%, up from 48.5%
• Adjusted basic and diluted earnings per share (EPS) of $1.54 and $1.51. respectively 
• FX negatively impacted full year 2014 Adjusted EBITDA margin by 116 basis points and Adjusted basic and diluted EPS by approximately $0.03
• Doubled regular quarterly dividend to $0.125 per share
• Announced special dividend of $1.50 per share

Fourth Quarter 2014 Highlights

(Compared to the fourth quarter 2013 unless otherwise noted)

• Revenue grew by 5.8% to $42.6 million
• Adjusted EBITDA 1 of $20.3 million. up 11.3%
• Adjusted EBITDA 1 margin of 47.8%, up from 45.4%
• Adjusted basic and diluted EPS of $0.37 and $0.37. respectively 
• FX negatively impacted Q4 Adjusted EBITDA margin by 240 basis points and Adjusted basic and diluted EPS by approximately $0.02

RE/MAX Holdings, Inc. (the Company or RE/MAX) (NYSE: RMAX), one of the worlds leading franchisors of real estate brokerage services, today announced operating results for the fourth quarter and full-year ended December 31. 2014.

In 2014, we had our largest agent gain since 2006 as nearly 4,800 agents chose to join RE/MAX, stated Dave Liniger. Chief Executive Officer (CEO) and Co-Founder of RE/MAX. Our 2014 office franchise sales outpaced every year since 2010 and we expanded our Adjusted EBITDA margin to 49% despite foreign exchange headwinds. With a steadily improving housing market, we believe our agent-centric model will continue to attract more real estate professionals in 2015, allowing us to grow our global agent network by an estimated 4% to 5% over 2014.

Liniger continued, One of the key strengths of our business model is our significant free cash flow generation, which allows us the capital flexibility to invest in growing the business and return capital to shareholders. Given the inherent stability of our business model and the strength of our balance sheet, our Board doubled our regular quarterly dividend to $0.125 per share and approved a special one-time dividend of $1.50 per share. Our focus is and will continue to be on allocating capital to create value for shareholders.

Full Year 2014 Operating Results

Agent Count

Total agent count grew by 4,782 agents to 98,010 agents or 5.1% compared to year-end 2013. In the United States (U.S.), agent count increased by 2,614 agents to 57,105 agents or 4.8% compared to the prior year. Agent count in the U.S. Company-owned and Independent regions grew by 5.6% and 3.5%, respectively, compared to the prior year.  In Canada. agent count increased by 118 agents to 19,040 agents or 0.6% compared to the prior year. Outside the U.S. and Canada. agent count increased by 2,050 agents to 21,865 agents or 10.3% compared to the prior year.

Revenue

RE/MAX generated revenue of $171.0 million for the full-year 2014, a 7.6% increase compared to $158.9 million in 2013, driven by incremental revenue from the Southwest and Central Atlantic regions acquired in October 2013 and an increase in agent count. Recurring revenue streams, which include continuing franchise fees and annual dues, accounted for 60.5% of revenues in 2014 compared to 59.2% in the prior year.

Revenue from continuing franchise fees was $72.7 million. up $8.2 million or 12.8% over the prior year primarily due to growth in agent count and incremental revenue that resulted from the acquisition of the Southwest and Central Atlantic regions.

Revenue from annual dues was $30.7 million. up $1.2 million or 4.1% compared to the prior year. The increase was due to 1) an increase in total agent count of 4,782 from the prior year, of which 2,732 agents were located in the U.S. and Canada. and 2) the January 1, 2014 increase in annual dues membership fees for the Companys U.S. and Canadian agents.

Revenue from broker fees was $28.7 million. up $3.9 million or 15.6% compared to the prior year. The increase was driven by growth in agent count and incremental revenue that resulted from the acquisition of the Southwest and Central Atlantic regions.

Franchise sales and other franchise revenue was $23.4 million. down $0.1 million or 0.6% compared to the prior year driven by a decrease in regional and master franchise sales outside the U.S. and Canada. The decrease was partially offset by an increase in office franchise sales and renewals in U.S. Company-owned regions.

Brokerage revenue, which principally represents fees assessed by the Companys owned brokerages for services provided to their affiliated real estate agents, was $15.4 million. a decrease of $1.1 million or 6.4% from the prior year. The decrease was due to a reduction in the number of owned brokerage offices in the second quarter of 2013, which had a full year impact in 2014, and a reduction in closed transaction sides and home sales volume at the Companys owned brokerage offices.

Operating Expenses

Total operating expenses were $107.1 million for the full-year 2014, a decrease of $4.6 million or 4.1% compared to the prior year. Selling, operating and administrative expenses were $91.8 million. down $4.4 million or 4.6% from the prior year. Selling, operating and administrative expenses were 53.7% of revenue for 2014 compared to 60.6% in the prior year. The reduction in operating expenses is primarily due to 1) lower professional fees compared to the prior year due to costs incurred in connection with the Companys initial public offering (IPO) during 2013 and 2) lower rent expense due to a loss recorded in 2013 related to the sublease of office space at the Companys headquarters. The expense reduction was partially offset by one-time severance and other related expenses incurred in the fourth quarter of 2014 in connection with the retirement of the Companys former CEO and a re-organization to improve operating efficiencies at the corporate headquarters.

Adjusted EBITDA

Adjusted EBITDA margin was 49.0% for 2014 compared to 48.5% in the prior year. Adjusted EBITDA was $83.8 million for 2014, up $6.8 million or 8.8% from the prior year. The increase in Adjusted EBITDA was largely driven by revenue growth attributable to an increase in agent count and incremental contributions from the acquired Southwest and Central Atlantic regions. The continued weakening of the Canadian dollar against the U.S. dollar and the effect of foreign currency transaction losses primarily related to cash held in Canadian dollars decreased Adjusted EBITDA margin by approximately 116 basis points for the year.  A reconciliation of Adjusted EBITDA to net income is included in Table 5.

Net Income

Reported net income was $44.0 million for 2014, an increase of $15.7 million or 55.7% compared to the prior year. The increase was primarily due to higher operating income and lower interest expense as a result of the Companys 2013 debt refinancing, partially offset by foreign currency transaction losses and a higher provision for income taxes.

Adjusted net income 2 was $45.3 million for 2014, an increase of $8.2 million or 22.2% compared to the prior year. Adjusted basic and diluted EPS were $1.54 and $1.51 for 2014, respectively, compared to $1.26 and $1.24 for 2013, respectively. The weakening of the Canadian dollar against the U.S. dollar during 2014 negatively impacted 2014 Adjusted basic and diluted EPS by approximately $0.03 .

Net income attributable to RE/MAX Holdings, Inc. was $13.4 million for 2014. This amount excludes net income attributable to the non-controlling interest. Reported basic and diluted EPS attributable to RE/MAX Holdings, Inc. were $1.16 and $1.10. respectively. Refer to Table 1 for the share counts used in the calculation of basic and diluted EPS attributable to RE/MAX Holdings, Inc. in accordance with U.S. generally accepted accounting principles (U.S. GAAP).

The ownership structure used to calculate Adjusted basic and diluted EPS for the three months and twelve months ended December 31, 2014 contemplates RE/MAX owning 100% of RMCO, LLC (RMCO). The weighted average ownership RE/MAX had of RMCO was 39.67% and 39.57% for the three months and twelve months ended December 31, 2014. respectively. Refer to Table 6 in this press release for a reconciliation of Adjusted net income to net income and the share counts used in the Adjusted basic and diluted EPS calculations.

Balance Sheet

As of December 31, 2014. the Company had a cash balance of $107.2 million. an increase of $18.8 million from December 31, 2013. The Company had $211.7 million of term loans outstanding, net of unamortized discount as of December 31, 2014. down from $228.4 million as of December 31, 2013.

Dividend

The Company announced that its Board of Directors doubled the quarterly dividend to $0.125 per share and approved a special cash dividend of $1.50 per share. The aggregate payment of the special cash dividend will be approximately $45 million and will be funded through existing cash.

The regular quarterly dividend is payable on April 8, 2015 to shareholders of record at the close of business on March 25, 2015. The special cash dividend is payable on April 8, 2015 to shareholders of record at the close of business on March 23, 2015.

Outlook 

Revenue, selling, operating and administrative expenses and Adjusted EBITDA margin are subject to currency exchange rate fluctuations principally related to changes in the Canadian dollar to U.S. dollar exchange rate. In 2014, the Company generated 14% of its revenue in Canada and realized an average exchange of $0.90 U.S. for every $1.00 Canadian. The Companys 2015 outlook reflects an annualized estimated exchange rate of $0.78 U.S. for every $1.00 Canadian.

First Quarter 2015 Outlook:

• Agent count is estimated to increase by 4.5% to 5% over first quarter 2014;
• Revenue is estimated to increase by 4% to 5% over first quarter 2014;
• Selling, operating and administrative expenses are estimated to be 56% to 58% of first quarter 2015 revenue; and
• Adjusted EBITDA margin is estimated to be in the 40% to 41% range.

The Companys expenses are higher and its Adjusted EBITDA margin is lower in the first quarter due to seasonality of the business and expenses associated with the Companys annual convention, which is an important agent and broker engagement and recruitment event.

Full-Year 2015 Outlook:

• Agent count is estimated to increase by 4% to 5% over 2014;
• Revenue is estimated to increase by 3% to 4% over 2014;
• Selling, operating and administrative expenses are estimated to be 50% to 52% of 2015 revenue;
• Adjusted EBITDA margin is estimated to be in the 49% to 50% range; and
• Project related operating and capital expenditures of $3.0 to $3.5 million and $2.0 to $2.5 million. respectively.

Basis of Presentation

Subsequent to the IPO, RE/MAX began to operate and control all of the business affairs of RMCO. As a result, RE/MAX began to consolidate RMCO on October 7, 2013. and because RE/MAX and RMCO are entities under common control, such consolidation has been reflected for all periods presented. Unless otherwise noted, the results presented in this press release are consolidated and exclude adjustments attributable to the non-controlling interest.

Webcast and Conference Call

The Company will host a conference call for interested parties on Friday, March 13, 2015. beginning at 8:30 a.m. Eastern Time. Interested parties are able to access the conference call using the following dial-in numbers: