RE/MAX HOLDINGS, INC.

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RE/MAX : UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION - Form 8-K/A

12/28/2021 | 04:17pm EDT

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

TABLE OF CONTENTS

Introduction

On July 21, 2021, RE/MAX Holdings, Inc. ("RE/MAX Holdings" or the "Company") acquired Polzler & Schneider Holdings Corporation ("Integra US") and RE/MAX Ontario-Atlantic Canada Inc. ("Integra Canada"), which are the North American operations of RE/MAX INTEGRA. Integra US and Integra Canada are the sub-franchisors of the RE/MAX brand in five Canadian provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island) and nine U.S. states (Connecticut, Indiana, Maine, Massachusetts, Minnesota, New Hampshire, Rhode Island, Vermont, and Wisconsin) (collectively, the "Acquisition" or "Integra").

Pro forma information

The following unaudited pro forma condensed combined financial information of the Company and the Acquisition is presented to illustrate the estimated effects of the Acquisition as described below.

The unaudited pro forma condensed combined balance sheet gives effect to the Acquisition as if it had occurred on March 31, 2021. The unaudited pro forma combined statements of income (loss) give effect to the Acquisition as if it had occurred on January 1, 2020.

The unaudited pro forma condensed combined financial information were prepared using: (a) the Company's consolidated financial statements as of and for the year ended December 31, 2020, as included in the Company's Amendment No. 1 to Annual Report on Form 10-K/A filed with the Securities and Exchange Commission (the "SEC") on December 21, 2021; (b) the audited historical financial statements of Integra US and Integra Canada as of and for the year ended October 31, 2020, as included in the Current Report on Form 8-K/A, filed with the SEC on October 6, 2021; (c) the Company's unaudited consolidated financial statements as of and for the three months ended March 31, 2021, as included in the Company's Quarterly Report on Form 10-Q filed with the SEC on May 6, 2021; and (d) the unaudited historical combined financial statements of Integra US and Integra Canada as of and for the three months ended January 31, 2021.

The unaudited pro forma condensed combined financial information is presented to reflect the Acquisition and does not represent what the Company's results of operations or financial position would actually have been had the Acquisition occurred on the dates noted above, or project the Company's results of operations or financial position for any future periods. The unaudited pro forma condensed combined financial information is intended to provide information about the continuing impact of the Acquisition as if it had been consummated earlier. The pro forma adjustments are based on available information and certain assumptions that management believes are factually supportable and are expected to have a continuing impact on the Company's results of operations. In the opinion of management of the Company, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made. Certain of the Acquisition's historical amounts have been reclassified to conform to the financial statement presentation of the Company.

The Company is developing a plan to integrate the operations of the Company and the Acquisition. The unaudited pro forma condensed combined financial information does not include the realization of any cost savings from operating efficiencies, synergies or other activities that might result from the Acquisition, however, management's estimates of certain cost savings to be realized following closing of the Acquisition are presented in Note 5 to the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes, which describe the assumptions and estimates underlying the adjustments set forth therein. Those assumptions, estimates, and related adjustments are based on information available at the time of this filing and, accordingly, the actual financial condition or performance of the Company following the Acquisition in periods subsequent to the Acquisition may differ materially from that which is reflected in the unaudited pro forma condensed combined financial information.

1

Unaudited Pro Forma Interim Condensed Combined Balance Sheet
(In thousands, except share amounts)

RE/MAX Holdings

Other

(Historical*)

Integra

Transaction

Transaction

*as adjusted

(Historical)

Accounting

Accounting

Pro Forma

March 31, 2021

January 31, 2021

Adjustments

Adjustments

Combined

Assets

(a)

(b)

Current assets:

Cash and cash equivalents

$

102,632

$

12,378

$

(194,500)

(c)

$

187,747

(f)

$

108,257

Restricted cash

21,500

11,388

-

-

32,888

Accounts and notes receivable, current portion, less allowances

29,544

3,957

-

-

33,501

Income taxes receivable

2,158

-

-

-

2,158

Other current assets

14,715

2,210

1,917

(d)

-

18,842

Total current assets

170,549

29,933

(192,583)

187,747

195,646

Property and equipment, net of accumulated depreciation

9,184

815

-

-

9,999

Operating lease right of use assets

37,816

-

-

-

37,816

Franchise agreements, net

66,072

492

96,550

(e)

-

163,114

Other intangible assets, net

28,284

-

9,000

(e)

-

37,284

Goodwill

165,531

-

108,271

(e)

-

273,802

Deferred tax assets, net

51,003

-

-

-

51,003

Income taxes receivable, net of current portion

1,980

-

-

-

1,980

Other assets, net of current portion

17,068

297

-

-

17,365

Total assets

$

547,487

$

31,537

$

21,238

$

187,747

$

788,009

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

5,782

$

1,483

$

4,584

(l)

$

-

$

11,849

Accrued liabilities

67,208

18,160

-

-

85,368

Income taxes payable

9,884

6,135

-

-

16,019

Deferred revenue

24,689

21

-

-

24,710

Current portion of debt

2,356

142

-

2,184

(f)

4,682

Current portion of payable pursuant to tax receivable agreements

3,590

-

-

-

3,590

Operating lease liabilities

5,826

-

-

-

5,826

Total current liabilities

119,335

25,941

4,584

2,184

152,044

Debt, net of current portion

220,676

59

-

228,765

(f)

449,500

Payable pursuant to tax receivable agreements, net of current portion

29,974

-

-

-

29,974

Deferred tax liabilities, net

496

187

20,104

(g)

-

20,787

Deferred revenue, net of current portion

19,601

-

-

-

19,601

Operating lease liabilities, net of current portion

48,794

-

-

-

48,794

Other liabilities, net of current portion

5,411

-

1,900

(h)

-

7,311

Total liabilities

444,287

26,187

26,588

230,949

728,011

Commitments and contingencies

Stockholders' equity:

Class A common stock, par value $.0001 per share, 180,000,000 shares authorized; 18,719,248 issued and outstanding as of March 31, 2021

2

-

-

-

2

Class B common stock, par value $.0001 per share, 1,000 shares authorized; 1 share issued and outstanding as of March 31, 2021

-

-

-

-

-

Net equity investment

-

5,075

(5,075)

(i)

-

-

Additional paid-in capital

498,810

-

-

-

498,810

Retained earnings

21,993

-

-

(43,202)

(k)

(21,209)

Accumulated other comprehensive income, net of tax

653

-

-

-

653

Total stockholders' equity attributable to RE/MAX Holdings, Inc.

521,458

5,075

(5,075)

(43,202)

478,256

Non-controlling interest

(418,258)

275

(275)

(j)

-

(418,258)

Total stockholders' equity

103,200

5,350

(5,350)

(43,202)

59,998

Total liabilities and stockholders' equity

$

547,487

$

31,537

$

21,238

$

187,747

$

788,009

See accompanying notes to unaudited pro forma interim condensed combined financial statements.

2

Unaudited Pro Forma Interim Condensed Combined Statement of Income

(In thousands, except share and per share amounts)

RE/MAX Holdings

(Historical*)

Integra

*as adjusted

(Historical)

Other

Three Months

Three Months

Transaction

Transaction

Ended

Ended

Accounting

Accounting

Pro Forma

March 31, 2021

January 31, 2021

Adjustments

Adjustments

Combined

Revenue:

(m)

(n)

Continuing franchise fees

$

25,374

$

6,940

$

(1,291)

(o)

$

-

$

31,023

Annual dues

8,672

-

-

-

8,672

Broker fees

11,953

2,576

(498)

(o)

-

14,031

Marketing Funds fees

18,145

4,199

-

-

22,344

Franchise sales and other revenue

8,151

514

(514)

(p)

-

8,151

Total revenue

72,295

14,229

(2,303)

-

84,221

Operating expenses:

Selling, operating and administrative expenses

43,676

4,721

(1,789)

(o)

-

46,608

Marketing Funds expenses

18,145

4,199

-

-

22,344

Depreciation and amortization

6,808

88

2,506

(q)

-

9,402

Total operating expenses

68,629

9,008

717

-

78,354

Operating income

3,666

5,221

(3,020)

-

5,867

Other expenses, net:

Interest expense

(2,098)

-

-

(1,567)

(r)

(3,665)

Interest income

163

7

-

-

170

Foreign currency transaction gains (losses)

(20)

20

-

-

-

Total other expenses, net

(1,955)

27

-

(1,567)

(3,495)

Income before provision for income taxes

1,711

5,248

(3,020)

(1,567)

2,372

Provision for income taxes

52

(1,337)

823

(s)

222

(s)

(240)

Net income

$

1,763

$

3,911

$

(2,197)

$

(1,345)

$

2,132

Less: net income attributable to non-controlling interest

600

106

588

(t)

(634)

(t)

660

Net income attributable to RE/MAX Holdings, Inc.

$

1,163

$

3,805

$

(2,785)

$

(711)

$

1,472

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock

Basic

$

0.06

$

0.08

Diluted

$

0.06

$

0.08

Weighted average shares of Class A common stock outstanding

Basic

18,496,532

18,496,532

Diluted

18,866,727

18,866,727

See accompanying notes to unaudited pro forma interim condensed combined financial statements.

3

Unaudited Pro Forma Annual Combined Statement of Income (Loss)

(In thousands, except share and per share amounts)

RE/MAX Holdings

(Historical*)

Integra

Other

*as adjusted

(Historical)

Transaction

Transaction

Year Ended

Year Ended

Accounting

Accounting

Pro Forma

December 31, 2020

October 31, 2020

Adjustments

Adjustments

Combined

Revenue:

(u)

(v)

Continuing franchise fees

$

90,217

$

26,156

$

(4,871)

(o)

$

-

$

111,502

Annual dues

35,075

-

-

-

35,075

Broker fees

50,028

7,731

(1,535)

(o)

-

56,224

Marketing Funds fees

64,402

15,998

-

-

80,400

Franchise sales and other revenue

26,279

1,784

(1,784)

(p)

-

26,279

Total revenue

266,001

51,669

(8,190)

-

309,480

Operating expenses:

Selling, operating and administrative expenses

128,998

29,367

4,028

(o)(w)

2,438

(x)

164,831

Marketing Funds expenses

64,402

15,998

-

-

80,400

Depreciation and amortization

26,106

101

10,076

(q)

-

36,283

Impairment charge - leased assets

7,902

-

-

-

7,902

Settlement charges

-

-

-

40,500

(y)

40,500

Total operating expenses

227,408

45,466

14,104

42,938

329,916

Operating income (loss)

38,593

6,203

(22,294)

(42,938)

(20,436)

Other income (expenses), net:

Interest expense

(9,223)

-

-

(5,437)

(r)

(14,660)

Interest income

340

69

-

-

409

Loss on early extinguishment of debt

-

-

-

(264)

(r)

(264)

Foreign currency transaction gains (losses)

(2)

22

-

-

20

Total other income (expenses), net

(8,885)

91

-

(5,701)

(14,495)

Income (loss) before provision for income taxes

29,708

6,294

(22,294)

(48,639)

(34,931)

Provision for income taxes

(9,162)

(1,983)

3,995

(s)

1,155

(s)

(5,995)

Net income (loss)

$

20,546

$

4,311

$

(18,299)

$

(47,484)

$

(40,926)

Less: net income (loss) attributable to non-controlling interest

9,296

356

(6,072)

(t)

(19,879)

(t)

(16,299)

Net income (loss) attributable to RE/MAX Holdings, Inc.

$

11,250

$

3,955

$

(12,227)

$

(27,605)

$

(24,627)

Net income (loss) attributable to RE/MAX Holdings, Inc. per share of Class A common stock

Basic

$

0.62

$

(1.36)

Diluted

$

0.61

$

(1.34)

Weighted average shares of Class A common stock outstanding

Basic

18,170,348

18,170,348

Diluted

18,324,246

18,324,246

See accompanying notes to unaudited pro forma interim condensed combined financial statements.

4

Notes to Unaudited Pro Forma Interim Condensed Combined Financial Statements

(In thousands)

1. Description of the acquisition

On June 3, 2021, the Company entered into a stock purchase agreement (the "Purchase Agreement") to acquire the North American operations of RE/MAX INTEGRA, which is the sub-franchisor of the RE/MAX brand in five Canadian provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island) and nine U.S. states (Connecticut, Indiana, Maine, Massachusetts, Minnesota, New Hampshire, Rhode Island, Vermont, and Wisconsin) (collectively, the "Acquisition" or "Integra").

The acquisition, closed on July 21, 2021. The Company acquired Integra in order to expand its company-owned regional operations. The consideration paid by the Company was approximately $235.0 million in cash, however, $40.5 million of the consideration was allocated to a loss on the pre-existing master franchise contracts with Integra.

2. Basis of Presentation

The unaudited pro forma condensed combined financial information has been derived from the historical consolidated financial statements of the Company and the historical combined financial statements of Integra, which combine RE/MAX Ontario-Atlantic Canada Inc. ("Integra Canada") and Polzler & Schneider Holdings Corporation ("Integra U.S."). Certain Integra historical amounts have been reclassified to conform to the Company's financial statement presentation. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives effect to the Acquisition as if it had been completed on March 31, 2021. The unaudited pro forma combined statements of income (loss) for the year ended December 31, 2020 and the three months ended March 31, 2021 give effect to the Acquisition as if it had been completed on January 1, 2020.

The unaudited pro forma condensed combined financial information have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, as amended by the final rule, Release No. 33-10786.

The unaudited pro forma condensed combined financial information does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been had the Acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. In addition, future results may differ significantly from those reflected in the pro forma financial statements herein.

Exchange Rates and Reclassifications

The historical financial information of Integra Canada was presented in Canadian dollars. The historical financial information was translated from Canadian dollars to U.S. dollars using the March 31, 2021 spot rate to translate the Balance Sheet and the average daily exchange rate for 2020 and the average daily exchange rate for the three months ended March 31, 2021 to translate the Statement of Operations:

CAD $ / USD $
March 31, 2021 spot rate 0.7941
Three months ended March 31, 2021 average exchange rate 0.7846
Year ended December 31, 2020 average exchange rate 0.7444

These exchange rates may differ from future exchange rates which would have an impact on the Unaudited Pro Forma Condensed Combined Financial Information and would also impact purchase accounting. As an example, utilizing the average daily closing exchange rate at July 21, 2021 of CAD$1/US$0.79116 would decrease the translated amounts for the year ended December 31, 2020 and the three months ended March 31, 2021 by immaterial amounts. Total assets as of March 31, 2021 would also change by an immaterial amount using a foreign exchange rate at close.

3. Preliminary Acquisition Accounting

The acquisition method of accounting for business combinations was used in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations, with the Company treated as the acquirer. The allocation of the preliminary estimated purchase price is based upon management's estimates of and assumptions related to the fair values of assets acquired and liabilities assumed as of July 21, 2021, using currently available information. The purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with any excess purchase price allocated to goodwill. The estimated fair values are based on preliminary and limited reviews of the assets related to the Integra business. Differences between these preliminary estimates and the final acquisition accounting may have a material impact on the accompanying unaudited pro forma condensed combined financial information and the future results of operations and financial position. The Company expects to finalize the acquisition accounting as soon as practicable, which will not extend beyond the one-year measurement period provided under ASC 805.

5

The following is a preliminary estimate of the fair value of assets and liabilities acquired (in thousands):

Current assets

$

31,850

Property, plant and equipment

815

Other assets, net of current portion

214,610

Current liabilities

(30,525)

Other liabilities, net of current portion

(22,250)

Total purchase price allocated to assets and liabilities

194,500

Loss on contract settlement

40,500

Total consideration

$

235,000

4. Pro Forma Adjustments

The actual effects of the Acquisition may differ from the pro forma adjustments. Certain reclassifications were directly applied to the pre-acquisition historical financial statements of Integra to conform to the financial statement presentation of the Company.

Integra reclassifications in the Unaudited Pro Forma Interim Condensed Combined Balance Sheet as of January 31, 2021 are as follows (in thousands):

Remove entities

outside the

Total

Integra U.S.

transaction

Reclassifications

Integra U.S.

Assets

Current assets:

Cash and cash equivalents

$

15,136

$

(321)

$

(6,285)

$

8,530

Restricted cash

-

-

6,285

6,285

Accounts and notes receivable, current portion, net

603

-

-

603

Accounts receivable - related party

88

(88)

-

-

Short term notes receivable

85

-

(85)

-

Current portion of long term note receivable

128

-

(128)

-

Income tax recoverable

38

-

(38)

-

Prepaid expenses

507

-

(507)

-

Other current assets

-

-

758

758

Total current assets

16,585

(409)

-

16,176

Property and equipment, net

234

-

-

234

Franchise agreements, net

486

-

-

486

Long term notes receivable

297

-

-

297

Total assets

$

17,602

$

(409)

$

-

$

17,193

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

301

$

-

$

486

$

787

Accrued liabilities

465

-

5,857

6,322

Due to related parties

280

(58)

(222)

-

Intercompany payables

264

-

(264)

-

Income taxes payable

1,520

3,823

-

5,343

Current maturities of long term debt

142

-

-

142

Deferred revenue

21

-

-

21

Due to brokers

5,857

-

(5,857)

-

Total current liabilities

8,850

3,765

-

12,615

Long term debt

59

-

-

59

Accrued income taxes

3,823

(3,823)

-

-

Deferred tax liabilities, net

129

-

-

129

Total liabilities

12,861

(58)

-

12,803

Shareholders' equity:

Share capital, par value $1 per share, 1,000,000 common shares authorized; 2 shares issued and outstanding as of January 31, 2021

2

-

-

2

Additional paid-in capital

1,071

-

-

1,071

Retained earnings (deficit)

3,393

(351)

-

3,042

Total shareholders' equity

4,466

(351)

-

4,115

Non-controlling interest

275

-

-

275

Total liabilities and stockholders' equity

$

17,602

$

(409)

$

-

$

17,193

6

Total

Integra Canada

Integra Canada

in CAD

in USD

Reclassifications

In USD

Assets

Current assets:

Cash and cash equivalents

$

11,272

$

8,951

$

(5,103)

$

3,848

Restricted cash

-

-

5,103

5,103

Accounts and notes receivable, current portion, less allowances

4,224

3,354

-

3,354

Income tax recoverable

367

291

(291)

-

Prepaid expenses

688

546

(546)

-

Due from related parties

577

460

(460)

-

Due from Shareholder

196

155

(155)

-

Other current assets

-

-

1,452

1,452

Total current assets

17,324

13,757

-

13,757

Property and equipment, net of accumulated depreciation

733

581

-

581

Franchise agreements, net

7

6

-

6

Total assets

$

18,064

$

14,344

$

-

$

14,344

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

875

$

696

$

-

$

696

Accrued liabilities

6,189

4,914

6,924

11,838

Government remittances payable

663

526

(526)

-

Income taxes payable

997

792

-

792

Due to brokers

8,057

6,398

(6,398)

-

Total current liabilities

16,781

13,326

-

13,326

Deferred tax liabilities, net

74

58

-

58

Total liabilities

16,855

13,384

-

13,384

Shareholders' equity:

Share capital, par value $1 per share, 1,000,000 common shares authorized; 2 shares issued and outstanding as of January 31, 2021

-

-

-

-

Retained earnings (deficit)

1,209

960

-

960

Total shareholders' equity

1,209

960

-

960

Total liabilities and stockholders' equity

$

18,064

$

14,344

$

-

$

14,344

7

Integra reclassifications to the Unaudited Pro Forma Interim Condensed Combined Statement of Income for the three months ended January 31, 2021 are as follows (in thousands):

Remove Entities

Outside

Total

Integra U.S.

Transaction

Reclassifications

Integra U.S.

Revenue:

Continuing franchise fees

$

2,653

$

-

$

-

$

2,653

Broker fees

2,409

-

-

2,409

Marketing Funds fees

1,972

-

-

1,972

European royalties

1,433

(1,433)

-

-

Franchise sales and renewal fees

191

-

(191)

-

Other income

33

-

(33)

-

Franchise sales and other revenue

-

-

224

224

Total revenue

8,691

(1,433)

-

7,258

Operating expenses:

Selling, operating and administrative expenses

5,620

(1,153)

(2,581)

1,886

Debt forgiveness income

(547)

-

547

-

Marketing Funds expenses

-

-

1,972

1,972

Depreciation and amortization

-

-

69

69

Total operating expenses

5,073

(1,153)

7

3,927

Operating income

3,618

(280)

(7)

3,331

Other expenses, net:

Interest expense

(7)

-

7

-

Total other expenses, net

(7)

-

7

-

Income before provision for income taxes

3,611

(280)

-

3,331

Provision for income taxes

(860)

59

-

(801)

Net income (loss)

$

2,751

$

(221)

$

-

$

2,530

Less: net income attributable to non-controlling interest

(106)

-

-

(106)

Net income

$

2,645

$

(221)

$

-

$

2,424


​​

8

Total

Integra Canada

Integra Canada

in CAD

in USD

Reclassifications

in USD

Revenue:

Continuing franchise fees

$

5,465

$

4,287

$

-

$

4,287

Broker fees

212

167

-

167

Marketing Funds fees

2,838

2,227

-

2,227

Franchise sales and renewal fees

188

147

(147)

-

Quota deficiency and referral fees

206

162

(162)

-

Franchise sales and other revenue

-

-

290

290

Total revenue

8,909

6,990

(19)

6,971

Direct costs:

Cost of Sales

900

706

(706)

-

Franchise commissions

17

14

(14)

-

Total direct costs

917

720

(720)

-

Operating expenses:

Salaries and benefits

2,324

1,824

(1,824)

-

Media buying

2,123

1,666

(1,666)

-

Events and training

256

200

(200)

-

Travel and entertainment

142

111

(111)

-

General and office

330

259

(259)

-

Rent

183

143

(143)

-

Legal

72

56

(56)

-

Advertising and promotion

53

42

(42)

-

Accounting

6

4

(4)

-

Consulting fee

33

26

(26)

-

Amortization of property and equipment

25

19

(19)

-

Bank charges

11

9

(9)

-

Selling, operating and administrative expenses

-

2

2,833

2,835

Marketing Funds expenses

-

-

2,227

2,227

Depreciation and amortization

-

-

19

19

Total operating expenses

5,558

4,361

720

5,081

Operating income

2,434

1,909

(19)

1,890

Other expenses, net:

Interest income

8

7

-

7

Foreign currency transaction gains (losses)

26

20

-

20

Other income

(24)

(19)

19

-

Total other expenses, net

10

8

19

27

Income before provision for income taxes

2,444

1,917

-

1,917

Provision for income taxes

(683)

(536)

-

(536)

Net income

$

1,761

$

1,381

$

-

$

1,381

9

Integra reclassifications to the Unaudited Pro Forma Annual Combined Statement of Income (loss) for the year ended October 31, 2020 are as follows (in thousands):

Remove Entities

Outside

Total

Integra U.S.

Transaction

Reclassifications

Integra U.S.

Revenue:

Continuing franchise fees

$

10,072

$

-

$

-

$

10,072

Broker fees

7,324

-

-

7,324

Marketing Funds fees

8,219

-

-

8,219

European royalties

4,313

(4,313)

-

-

Franchise sales and renewal fees

808

-

(808)

-

Consulting fees

46

-

(46)

-

Other income

181

-

(181)

-

Franchise sales and other revenue

-

-

1,035

1,035

Total revenue

30,963

(4,313)

-

26,650

Operating expenses:

Selling, operating and administrative expenses

24,321

(4,032)

(8,449)

11,840

Debt forgiveness income

(237)

-

237

-

Marketing Funds expenses

-

-

8,219

8,219

Depreciation and amortization

-

-

30

30

Total operating expenses

24,084

(4,032)

37

20,089

Operating income

6,879

(281)

(37)

6,561

Other expenses, net:

Interest expense

(37)

-

37

-

Total other expenses, net

(37)

-

37

-

Income before provision for income taxes

6,842

(281)

-

6,561

Provision for income taxes

(1,983)

59

-

(1,924)

Net income (loss) from continuing operations

$

4,859

$

(222)

$

-

$

4,637

Net loss from discontinued operations, net of tax

(6)

6

-

-

Net income

4,853

(216)

-

4,637

Less: net income attributable to non-controlling interest

356

-

-

356

Net income

$

4,497

$

(216)

$

-

$

4,281

10

Total

Integra Canada

Integra Canada

in CAD

in USD

Reclassifications

in USD

Revenue:

Continuing franchise fees

$

21,606

$

16,084

$

-

$

16,084

Broker fees

547

407

-

407

Marketing Funds fees

10,450

7,779

-

7,779

Franchise sales and renewal fees

403

300

(300)

-

Quota deficiency and referral fees

578

430

(430)

-

Franchise sales and other revenue

-

-

749

749

Total revenue

33,584

25,000

19

25,019

Direct costs:

Cost of Sales

3,452

2,570

(2,570)

-

Franchise commissions

8

6

(6)

-

Total direct costs

3,460

2,576

(2,576)

-

Operating expenses:

Salaries and benefits

18,252

13,587

(13,587)

-

Media buying

6,861

5,108

(5,108)

-

Events and training

1,461

1,087

(1,087)

-

Travel and entertainment

811

603

(603)

-

General and office

768

572

(572)

-

Rent

677

504

(504)

-

Legal

647

482

(482)

-

Loss on disposal of note receivable

422

314

(314)

-

Advertising and promotion

272

202

(202)

-

Accounting

184

137

(137)

-

Consulting fee

165

123

(123)

-

Amortization of property and equipment

94

70

(70)

-

Bank charges

47

35

(35)

-

Bad debt (recovery)

4

3

(3)

-

Loss (gain) on disposal of assets

2

2

(2)

-

Selling, operating and administrative expenses

-

-

17,527

17,527

Marketing Funds expenses

-

-

7,779

7,779

Depreciation and amortization

-

-

71

71

Total operating expenses

30,667

22,829

2,548

25,377

Operating loss

(543)

(405)

47

(358)

Other expenses, net:

Interest income

92

69

-

69

Government assistance

38

28

(28)

-

Foreign currency transaction gains (losses)

30

22

-

22

Other income

25

19

(19)

-

Total other expenses, net

185

138

(47)

91

Loss before provision for income taxes

(358)

(267)

-

(267)

Provision for income taxes

(79)

(59)

-

(59)

Net loss

$

(437)

$

(326)

$

-

$

(326)

11

Pro Forma Adjustments to the Interim Condensed Combined Balance Sheet as of March 31, 2021 are as follows:

(a) Represents the Company's historical condensed consolidated balance sheet as of March 31, 2021 as adjusted for the immaterial corrections noted in Note 13 of the Company's 2021 Third Quarter Form 10-Q.The following table reflects the impact of the immaterial correction on the Company's previously reported consolidated Balance Sheet (in thousands):

March 31, 2021

As previously

reported

As Adjusted

Franchise agreements, net

$

68,337

$

66,072

Goodwill

$

176,008

$

165,531

Deferred tax assets, net

$

49,162

$

51,003

Total assets

$

558,388

$

547,487

Retained earnings

$

21,433

$

21,993

Non-controlling interest

$

(406,797)

$

(418,258)

Total stockholders' equity

$

114,101

$

103,200

(b) Represents Integra's historical condensed combined (Integra Canada and Integra U.S.) balance sheet as of January 31, 2021.
(c) Represents cash paid, net of the amount of consideration allocated to loss on contract settlement.
(d) Represents an indemnification asset related to uncertain tax positions on Integra's historical financial statements (included as part of income taxes payable).
(e) Represents the preliminary fair value of identifiable intangible assets and goodwill. The franchise agreements and other identifiable intangible assets have weighted average lives of approximately 12 years and 5 years, respectively.
(f) Represents cash received from debt the Company incurred to finance the Acquisition, net of the amount of consideration allocated to loss on contract settlement.
(g) Represents the deferred tax liability for intangible assets recorded as part of the Acquisition. There was no step-up for tax purposes for the U.S. intangible assets acquired and there was a partial step-up for the Canadian intangible assets acquired.
(h) Represents fair value of an unfavorable off market contract.
(i) Eliminates Integra's historical equity balances in accordance with the acquisition method of accounting.
(j) Eliminates Integra's historical non-controlling interest balance.
(k) Represents loss on pre-existing master franchise agreements (see letter "y" below) and loss on debt (see letter "r" below) and related debt transaction fees (see letter "x" below).
(l) Represents the excess net working capital due to Integra.

Pro Forma Adjustments to the Combined Statement of Income (Loss) are as follows:

(m) Represents the Company's historical condensed consolidated statement of income for the three months ended March 31, 2021 as adjusted for the immaterial corrections noted in Note 13 of the Company's 2021 Third Quarter Form 10-Q.The following table reflects the impact of the immaterial correction on the Company's previously reported consolidated Statement of Income (in thousands, except per share information):

Three Months Ended

March 31, 2021

As previously

reported

As Adjusted

Depreciation and amortization

$

6,937

$

6,808

Operating income

$

3,537

$

3,666

Income before provision for income taxes

$

1,582

$

1,711

Provision for income taxes

$

58

$

52

Net income

$

1,640

$

1,763

Less: net income attributable to non-controlling interest

$

548

$

600

Net income attributable to RE/MAX Holdings, Inc.

$

1,092

$

1,163

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic

$

0.06

$

0.06

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted

$

0.06

$

0.06

(n) Represents Integra's historical condensed combined income statement for the three months ended January 31, 2021.
(o) Removes the franchise fee royalties received by RE/MAX Holdings from Integra included in the RE/MAX Holdings (historical) column. The same amounts are removed from the Selling, operating and administrative expenses in the Integra (historical) column.
(p) Removes historical franchise sales balances that would not have been recognized under ASC 606, Revenue from Contracts with Customers.
(q) Represents estimated amortization related to the identifiable intangible assets acquired based upon a preliminary determination of fair value. The franchise agreements and other intangible assets have weighted average lives of approximately 12 years and 5 years, respectively.

12

(r) Represents incremental interest expense related to the new debt assuming a 3.0% interest rate given that the new debt has a London Interbank Offered Rate ("LIBOR") floor of 0.5% and a spread of 2.5%. Also represents the loss on early extinguishment of debt.
(s) Represents the income tax effect of pro forma adjustments presented. The pro forma income tax adjustments were estimated using a combined U.S. federal and state statutory rate of 28.0% and a combined Canadian federal and provincial rate of 26.5%. The effective rate of the post-acquisition combined company could be significantly different (either higher or lower) depending on post merger activities.
(t) Removes the historical income attributable to non-controlling interest from the Integra (historical) column and adjusts net income in the Transaction Accounting Adjustments and the Other Transaction Accounting Adjustments columns for approximately 40% related to the Company's non-controlling interest.
(u) Represents the Company's historical consolidated statement of income for year ended December 31, 2020 as included in the Company's Amendment No. 1 to Annual Report on Form 10-K/A filed with the SEC on December 21, 2021.
(v) Represents Integra's historical combined statement of income for year ended October 31, 2020.
(w) Includes transaction expenses of $10.4 million.
(x) Includes debt transaction fees of $2.4 million.
(y) Represents a loss on the pre-existing master franchise agreements with Integra which were effectively settled with the Acquisition. The loss represents the fair value of the difference between the historical contractual royalty rates paid by Integra and the current market rate.

5. Management Adjustments

Management expects that the post-acquisition company will realize certain cost savings as compared to the historical combined costs of the Company and Integra operating independently. Such cost savings, which are anticipated to result from (i) the elimination of duplicate costs and (ii) the manner in which the post-acquisition company is expected to be integrated and managed prospectively are not reflected in any of (a) the Integra (historical) column, (b) the Transaction Accounting Adjustments column, or (c) the Other Transaction Accounting Adjustments column. Management estimates that, had the acquisition been completed as of January 1, 2020, Selling, operating and administrative expenses of $14.0 million for the year ended December 31, 2020 and $0.7 million for the three months ended March 31, 2021 reflected in the historical combined financial statements of Integra would not have incurred. These expenses primarily relate to lower compensation and management fees to previous owners and headcount savings, offset by incremental costs. The tables below present the estimated effects on the pro forma condensed combined statements of operations from elimination of the identified corporate level expenses and offsets to these savings. These estimates are non-GAAP and do not represent adjustments made for the purposes of presenting the unaudited pro forma interim condensed combined balance sheet as of March 31, 2021 or the unaudited pro forma interim condensed combined statement of income for the three months ended March 31, 2021. These estimates are based upon the expectations and beliefs of Company management and are subject to significant risks and uncertainties. The Company's actual results may differ materially from those set forth in these estimates.

Three Months Ended March 31, 2021

Pro forma

Management

As

combined

Adjustments

Adjusted

Selling, operating and administrative expenses

$

46,608

$

(697)

$

45,911

Net income

$

2,132

$

507

$

2,639

Less: net income attributable to non-controlling interest

$

660

$

205

$

865

Net income attributable to RE/MAX Holdings, Inc.

$

1,472

$

302

$

1,774

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock

Basic

$

0.08

$

0.10

Diluted

$

0.08

$

0.09

Year Ended December 31, 2020

Pro forma

Management

As

combined

Adjustments

Adjusted

Selling, operating and administrative expenses

$

164,831

$

(13,982)

$

150,849

Net loss

$

(40,926)

$

10,172

$

(30,754)

Less: net loss attributable to non-controlling interest

$

(16,299)

$

4,157

$

(12,142)

Net loss attributable to RE/MAX Holdings, Inc.

$

(24,627)

$

6,015

$

(18,612)

Net loss attributable to RE/MAX Holdings, Inc. per share of Class A common stock

Basic

$

(1.36)

$

(1.02)

Diluted

$

(1.34)

$

(1.02)

13

Disclaimer

RE/MAX Holdings Inc. published this content on 28 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 December 2021 21:16:07 UTC.


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Net income 2022 24,6 M - -
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Yield 2022 3,46%
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Stephen P. Joyce Chief Executive Officer & Director
Nicholas R. Bailey President
Karri R. Callahan Chief Financial Officer
David L. Liniger Non-Executive Chairman
Jamie Barcia Vice President-IT, Infrastructure & Operations
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