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What changed in RE/MAX Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RE/MAX Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+398 added−358 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-28)

Top changes in RE/MAX Holdings, Inc.'s 2023 10-K

398 paragraphs added · 358 removed · 294 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

128 edited+33 added−17 removed67 unchanged
Biggest changeThe following table summarizes our employee makeup by function as of December 31 of each year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ % change ​ Employee function ​ ​ ​ ​ ​ ​ ​ Technology ​ 30% ​ 35% ​ (5) % Sales and franchise development ​ 28% ​ 28% ​ — % Marketing, education and events ​ 16% ​ 15% ​ 1 % Shared services ​ 26% ​ 22% ​ 4 % Total ​ 100% ​ 100% ​ ​ ​ The agreement with InsideRE to provide the kvCORE technology platform to RE/MAX affiliates replaced certain functionality previously provided by the internally developed booj platform.
Biggest changeThe following table summarizes the number of employees and employee makeup by function as of December 31 of each year: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ % change Full-time employees ​ 544 ​ 594 ​ (8%) ​ ​ ​ ​ ​ ​ ​ Employee function ​ ​ ​ ​ ​ ​ Technology ​ 28% ​ 30% ​ (2%) Sales and franchise development ​ 28% ​ 28% ​ 0% Marketing, education and events ​ 17% ​ 16% ​ 1% Shared services ​ 27% ​ 26% ​ 1% Total ​ 100% ​ 100% ​ ​ During the third quarter of 2023, the Reorganization reduced our overall workforce by approximately 7% and was largely completed by October 31, 2023.
This model not only creates an ancillary business opportunity for current real estate brokerage firms, but also offers opportunities for mortgage professionals seeking to open their own businesses and other independent investors interested in financial services. The Motto Mortgage model offers value to our franchisees by offering: ● Setup Guidance.
This model not only creates an ancillary business opportunity for current real estate brokerage firms and professionals, but also offers opportunities for mortgage professionals seeking to open their own businesses and other independent investors interested in financial services. The Motto model offers value to our franchisees by offering: ● Setup Guidance.
The majority of brokerages are independent, with the best-known being regional players. At the individual office level, oftentimes our most formidable competition is that of a local, independent brokerage. Brokerages affiliated with franchises tend to be larger, on average, than independents and are part of a national network.
The majority of brokerages are independent, with the best-known independent brokerages being regional players. At the individual office level, oftentimes our most formidable competition is that of a local, independent brokerage. Brokerages affiliated with franchises tend to be larger, on average, than independents and are part of a national network.
You know the company is built on relationships, and you’re serious about maintaining them. You think big, delivering a service that is far beyond the norm. ● Do the R ight Thing. You act with integrity, honesty and transparency, every day. You hold yourself to a higher standard in performance, ethics, accountability and decision quality.
You know the company is built on relationships, and you’re serious about maintaining them. You think big, delivering a service that is far beyond the norm. ● R ight Thing. You act with integrity, honesty and transparency, every day. You hold yourself to a higher standard in performance, ethics, accountability and decision quality.
You own your actions and outcomes, taking smart risks with confidence and decisiveness while keeping an enterprise perspective. ● Together E verybody Wins. You collaborate and communicate, contributing to an environment in which everybody wins. You lead by example, helping others develop their talents and reach their goals. You show gratitude and respect. Everybody’s voice matters.
You own your actions and outcomes, taking smart risks with confidence and decisiveness while keeping an enterprise perspective. ● E verybody Wins. You collaborate and communicate, contributing to an environment in which everybody wins. You lead by example, helping others develop their talents and reach their goals. You show gratitude and respect. Everybody’s voice matters.
As a member of a family of brands with 50 years of franchising experience, we provide best practices to franchisees. Our Motto Mortgage brokerage franchisor, Motto Franchising, LLC, offers seven-year agreements with franchisees. Motto sells franchises directly throughout the U.S. as there are no regional franchise rights in the Motto system.
As a member of a family of brands with 50 years of franchising experience, we provide best practices to franchisees. Our Motto brokerage franchisor, Motto Franchising, LLC, offers seven-year agreements with franchisees. Motto sells franchises directly throughout the U.S. as there are no regional franchise rights in the Motto system.
Independent Regions may contribute to national or pan-regional creative and/or media campaigns to achieve economies of scale in the purchase of advertising but are generally responsible for any regional advertising in their respective areas. ● Agent Sponsored Local Campaigns.
Independent Regions may contribute to regional or pan-regional creative and/or media campaigns to achieve economies of scale in the purchase of advertising but are generally responsible for any regional advertising in their respective areas. ● Agent Sponsored Local Campaigns.
(2) Annual dues are currently a flat fee of US$410/CA$410 per agent annually for our U.S. and Canadian agents. The average per agent for the year ended December 31, 2022 in both Independent Regions and Company-Owned Regions reflects the impact of foreign currency movements related to revenue received from Canadian agents.
(2) Annual dues are currently a flat fee of US$410/CA$410 per agent annually for our U.S. and Canadian agents. The average per agent for the year ended December 31, 2023 in both Independent Regions and Company-Owned Regions reflects the impact of foreign currency movements related to revenue received from Canadian agents.
Motto Open Offices and Average Fee Revenue Per Office 17 Table of Contents ​ Marketing Funds Our revenue is derived primarily from franchisees in Company-Owned Regions based on the number of RE/MAX agents in the respective franchise, with smaller contributions by Independent Region owners and the number of Motto open offices.
Motto Open Offices and Average Fee Revenue Per Office Marketing Funds Our Marketing Funds revenue is derived primarily from RE/MAX franchisees in Company-Owned Regions based on the number of RE/MAX agents in the respective franchise, with smaller contributions by Independent Region owners and the 18 Table of Contents number of Motto open offices.
The RE/MAX global franchise network now has a presence in over 110 countries and territories, resulting in a global footprint that is unmatched by any other real estate brand. On June 25, 2013, RE/MAX Holdings, Inc. (“Holdings”) was formed as a Delaware corporation.
The RE/MAX global franchise network now has a presence in over 110 countries and territories, resulting in a global footprint that is unmatched by any other real estate brand. On June 25, 2013, RE/MAX Holdings, Inc. (“Holdings” or the “Company”) was formed as a Delaware corporation.
The mortgage brokerage industry is usually adversely impacted in periods of decreasing home sales activity, as this results in fewer purchase-money mortgage originations, and periods of less favorable interest rates, making homeowners less likely to refinance. The RE/MAX “Agent-Centric” Franchise Offering .
The mortgage brokerage industry is usually adversely impacted in periods of decreasing home sales activity, as this results in fewer purchase-money mortgage originations, and periods of rising interest rates, making homeowners less likely to refinance. The RE/MAX “Agent-Centric” Franchise Offering .
Built on intuitive technology that leverages artificial intelligence, RE/MAX University offers affiliates a modern, simplified experience as they access relevant educational resources via desktop or mobile devices. RE/MAX University offers on-demand access to thousands of educational videos, downloadable resources, webinars and more. ● RE/MAX Marketing and Promotion .
Built on intuitive technology that leverages artificial intelligence, RE/MAX University offers affiliates a modern, simplified experience as they access relevant educational resources via desktop or mobile devices. RE/MAX University offers on-demand access to thousands of educational videos, downloadable resources, webinars and more.
As a leading franchisor in the residential real estate and mortgage industries in the U.S., Canada and globally, we create shareholder value by: a) growing organically primarily by growing and monetizing our RE/MAX network of over 9,000 offices and over 140,000 agents and our Motto network of over 225 open offices; b) catalyzing growth by reacquiring regional RE/MAX franchise rights and acquiring other businesses complementary to our RE/MAX and Motto franchises; and c) returning capital to shareholders.
As a leading franchisor in the residential real estate industry in the U.S., Canada and globally, as well as a leading franchisor in the residential mortgage industry in the U.S., we create shareholder value by: a) growing organically primarily by growing and monetizing our RE/MAX network of over 9,000 offices and over 140,000 agents and our Motto network of over 225 open offices; b) catalyzing growth by reacquiring regional RE/MAX franchise rights and acquiring other businesses complementary to our RE/MAX and Motto franchises; and c) returning capital to shareholders.
Holdings Ownership of RMCO and Tax Receivable Agreements Holdings has twice acquired significant portions of the ownership in RMCO; first in October 2013 at the time of IPO when Holdings acquired its initial 11.5 million common units of RMCO and, second, in November and December 2015 when it acquired 5.2 million additional common units.
Holdings Ownership of RMCO and Tax Receivable Agreements Holdings has twice acquired significant portions of the ownership in RMCO; first in October 2013 at the time of IPO when Holdings acquired its initial 11.5 million common units of RMCO and, second, in November and December 2015 when it acquired a total of 5.2 million additional common units.
Industry Overview and Trends With approximately 95% of our revenue coming from our real estate franchising operations in the U.S. and Canada, and 100% of our Mortgage revenues being in the U.S., macro developments in the U.S. and Canadian real estate markets significantly influence our business. The U.S. and Canadian Real Estate Industries are Large Markets .
Industry Overview and Trends With approximately 94% of our revenue coming from our real estate franchising operations in the U.S. and Canada, and 100% of our Mortgage revenues being in the U.S., macro developments in the U.S. and Canadian real estate markets significantly influence our business. The U.S. and Canadian Real Estate Industries are Large Markets .
See Competition for additional discussion. ● Alternative business models in residential real estate – While the majority of home buyers and sellers still use full-service agents, there are a number of alternative business models consumers can choose from including iBuyers, discount brokerages that provide fewer services to consumers and technology driven platforms. Increasing U.S.
See Competition for additional discussion. ● Alternative business models in residential real estate – While the majority of home buyers and sellers still use full-service agents, there are a number of alternative business models consumers can choose from including iBuyers, discount brokerages that provide fewer services to consumers and technology driven platforms. 8 Table of Contents Increasing U.S.
With a presence in 110 countries and territories – a global footprint unmatched by any of our competitors, and leading unaided brand awareness in the U.S. and Canada, according to a consumer study by MMR Strategy Group, we reinforce brand awareness through marketing and advertising campaigns that are supported by our franchisees’ and agents’ local marketing. ● Entrepreneurial, High-Performance Culture .
With a presence in over 110 countries and territories – a global footprint unmatched by any of our competitors – and leading unaided brand awareness in the U.S. and Canada, according to a consumer study by MMR Strategy Group, we reinforce brand awareness through marketing and advertising campaigns that are augmented by our franchisees’ and agents’ local marketing. ● Entrepreneurial, High-Performance Culture .
This knowledge allows the agent to customize the pool of potential homes they show to a buyer, as well as help sellers to present their home professionally to best attract potential buyers. 8 Table of Contents ​ The Long-Term Value Proposition for Mortgage Brokerage Services. Likewise, we believe mortgage brokers provide choice and a valuable “concierge” service for consumers.
This knowledge allows the agent to customize the pool of potential homes they show to a buyer, as well as help sellers to present their home professionally to best attract potential buyers. The Long-Term Value Proposition for Mortgage Brokerage Services. Likewise, we believe mortgage brokers provide choice and a valuable “concierge” service for consumers.
In addition, we believe we can establish operational efficiencies and improvements in financial performance of an acquired region by leveraging our existing infrastructure and experience. 20 Table of Contents ​ Flow through Independent Regions Other Acquisitions.
In addition, we believe we can establish operational efficiencies and improvements in financial performance of an acquired region by leveraging our existing infrastructure and experience. 21 Table of Contents Flow through Independent Regions Other Acquisitions.
Our brand and the economics of our model generally attract driven, professional, entrepreneurially minded franchisees, and we allow them autonomy to run their businesses independently, including the freedom to set commission rates and oversee local advertising aligned with RE/MAX brand standards. ● Technology and Marketing Tools. We believe we offer competitive technology.
Our brand and the economics of our model generally attract driven, professional, entrepreneurially minded franchisees, and we allow them autonomy to run their businesses independently, including the freedom to negotiate commission rates and splits and oversee local advertising aligned with RE/MAX brand standards. ● Technology and Marketing Tools. We believe we offer competitive technology.
The residential real estate brokerage business is fragmented and highly competitive. We compete against many different types of competitors - traditional real estate brokerages; non-traditional real estate brokerages, including some that offer deeply discounted commissions to consumers, and other models, including iBuyers. We compete in different ways for franchisees, for agents, and for consumers.
Competition RE/MAX. The residential real estate brokerage business is fragmented and highly competitive. We compete against many different types of competitors - traditional real estate brokerages; non-traditional real estate brokerages, including some that offer deeply discounted commissions to consumers, and other models, including iBuyers. We compete in different ways for franchisees, for agents, and for consumers.
These figures have climbed over the last decade and a half—a period of time during which technology has materially changed the typical home-buying or selling transaction: Percentage of Home Buyers and Sellers Using an Agent ​ ​ ​ ​ ​ ​ ​ ​ ​ Source: NAR Profile of Home Buyers and Sellers ​ ● Competition for agents and listings remains fierce – Competition for agents and listings has always been fierce, and today is no different—especially for highly productive agents.
These figures have climbed over the last two decades—a period of time during which technology has materially changed the typical home-buying or selling transaction: Percentage of Home Buyers and Sellers Using an Agent ​ ​ ​ ​ ​ ​ ​ ​ ​ Source: NAR Profile of Home Buyers and Sellers ​ ● Competition for agents and listings remains fierce – Competition for agents and listings has always been fierce, and today is no different—especially for highly productive agents.
According to Fannie Mae, purchase-money originations are expected to decrease in the next couple of years, however, they are expected to remain consistent with 2019 levels and just below 2020 levels. As compared to competitors, Motto has a significantly higher ratio of purchase-money mortgage originations to refinances.
According to Fannie Mae, purchase-money originations are expected to increase in the next couple of years, however, they are expected to remain consistent with 2019 levels and just below 2020 levels. As compared to competitors, Motto has a higher ratio of purchase-money mortgage originations to refinances.
We may pursue other acquisitions, either of other brands, or of other businesses related to our core competencies of real estate, mortgage and franchising that we believe can help enhance the value proposition that we provide to our affiliates and can diversify and enhance our revenue and growth opportunities.
We may pursue other acquisitions, either of other brands, or of other businesses related to our core competencies of real estate, mortgage and franchising that we believe can help enhance the value proposition that we provide to our affiliates and can diversify and enhance our revenue and growth opportunities. Return of Capital to Shareholders .
In addition, while historically our franchising operations have not been materially adversely affected by such regulation, we cannot predict the effect of any future federal or state legislation or regulation. Real Estate and Mortgage Regulation .
In addition, while historically our franchising 26 Table of Contents operations have not been materially adversely affected by such regulation, we cannot predict the effect of any future federal or state legislation or regulation. Real Estate and Mortgage Regulation .
This model allows high-producing agents to earn a higher commission compared to traditional brokerages where the broker often takes 20% to 30% of the agent’s commission, and it provides brokers with the resources to offer key services and support to their agents. 10 Table of Contents ​ ● Affiliation with the Leading Brand in Residential Real Estate .
This model allows high-producing agents to earn a higher commission 11 Table of Contents compared to traditional brokerages where the broker often takes 10% to 40% of the agent’s commission, and it provides brokers with the resources to offer key services and support to their agents. ● Affiliation with the Leading Brand in Residential Real Estate .
For the year ended December 31, 2022, the average annual revenue per agent (excluding the Marketing Funds fees) was as follows: (1) In Company-Owned Regions we receive approximately $850 less per agent in Canada than we do for agents in the U.S. primarily due to different Broker Fees structures and as a result of foreign exchange differences between the U.S. dollar and the Canadian dollar.
For the year ended December 31, 2023, our average annual revenue per agent (excluding the Marketing Funds fees) was as follows: (1) In Company-Owned Regions we receive approximately $765 less per agent in Canada than we do for agents in the U.S. primarily due to different Broker Fees structures and as a result of foreign exchange differences between the U.S. dollar and the Canadian dollar.
Our largest national competitors in the U.S. and Canada include the brands operated by Anywhere Real Estate Inc. (formerly Realogy Holdings Corporation) and its brands Century 21, Coldwell Banker, ERA, Sotheby’s, Corcoran and Better Homes and Gardens. Berkshire Hathaway Home Services, Keller Williams Realty, Inc., Royal LePage and eXp Realty.
Our largest national competitors in the U.S. and Canada include the brands operated by Anywhere Real Estate Inc. and its brands (Century 21, Coldwell Banker, ERA, Sotheby’s, Corcoran and Better Homes and Gardens), Berkshire Hathaway Home Services, Keller Williams Realty, Inc., Royal LePage and eXp Realty.
The Real Estate Settlement Procedures Act (“RESPA”) and state real estate brokerage laws and mortgage regulations restrict payments which real estate brokers, mortgage brokers, and other service providers in the real estate industry may receive or pay in connection with the sales of residences and the referral of settlement services, such as real estate brokerage, mortgages, homeowners’ insurance and title insurance.
The Real Estate Settlement Procedures Act (“RESPA”) and state real estate brokerage laws and mortgage regulations restrict payments which real estate brokers, mortgage brokers, and other service providers in the real estate industry may receive or pay in connection with the financing of sales of residences, the refinancing of residential mortgage loans and the referral of settlement services, such as real estate brokerage, mortgages, homeowners’ insurance and title insurance.
In Global Regions we provide less value from a marketing, technology and education perspective to our franchisees; however, we believe that enhancing our value proposition profitably internationally is a long-term growth opportunity. 19 Table of Contents ​ ​ ​ ​ ​ RE/MAX Agents by Geography As of Year-end 2022 Real Estate Revenue by Geography (a) Percent of 2022 Revenue ​ (a) Excludes revenues from the Marketing Funds, Mortgage and Other.
In Global Regions we provide less value from a marketing, technology and education perspective to our franchisees; however, we believe that enhancing our value proposition profitably internationally is a long-term growth opportunity. ​ ​ ​ ​ RE/MAX Agents by Geography As of Year-end 2023 Real Estate Revenue by Geography (a) Percent of 2023 Revenue ​ (a) Excludes revenues from the Marketing Funds, Mortgage and Other.
For example, in the history of the Company, two of our six CEOs have been women, and today, two of our six executive officers and seven of our 11 board members are female. Globally, approximately 48% of our RE/MAX franchises have at least one female owner and 52% of RE/MAX agents are women, as of December 31, 2022.
For example, in the history of the Company, two of our seven CEOs have been women, and today, two of our six executive officers and six of our 11 board members are female. Globally, approximately 48% of our RE/MAX franchises have at least one female owner and 53% of RE/MAX agents are women, as of December 31, 2023.
They may enter into joint ventures with lenders for mortgage originations, and they may elect not to enter the mortgage origination business themselves, but instead earn revenue from providing marketing and other services to mortgage lenders.
They may enter into joint ventures with mortgage lenders, brokers or bankers for mortgage originations, and they may elect not to enter the mortgage origination business themselves, but instead earn revenue from providing marketing and other services to mortgage lenders, brokers or bankers.
After declining during the Global Financial Crisis, we returned to a period of net global agent growth in 2012, and our total year-over-year growth in agent count has continued through 2022. During this time, our growth rates have varied by geography. Within U.S.
RE/MAX Agent Count Growth. After declining during the Global Financial Crisis, we returned to a period of net global agent growth in 2012, and our total year-over-year growth in agent count has continued through 2023. During this time, our growth rates have varied by geography. Within U.S.
Tier Time Period Fixed Fee Per Month Tier 1 Months 1 – 6 $0 Tier 2 Months 7 – 9 $2,500 Tier 3 Months 10 – 12 $3,500 Tier 4 Months 13 - remaining term $4,500 We believe the growth and success of our mortgage segment is dependent on providing real estate entrepreneurs with opportunities for revenue and earnings diversification – a strategy we believe is increasingly important in the face of 16 Table of Contents ​ shifting housing market conditions.
Tier Time Period Fixed Fee Per Month Tier 1 Months 1 – 6 $0 Tier 2 Months 7 – 9 $2,650 Tier 3 Months 10 – 12 $3,650 Tier 4 Months 13 - remaining term $4,650 We believe the growth and success of our mortgage segment is dependent on providing real estate and other entrepreneurs with opportunities for revenue and earnings diversification – a strategy we believe is increasingly important in the face of shifting housing market conditions.
We believe full-service brokerages are best suited to address many of the key characteristics of real estate transactions, including: (i) the complexity and large monetary value involved in home sale transactions, (ii) the infrequency of home sale transactions, (iii) the high price variability in the home market, (iv) the intimate local knowledge necessary to advise clients in a fiduciary capacity in general and as it relates to unique neighborhood characteristics, (v) the unique nature of each particular home, and (vi) the consumer’s need for a high degree of personalized advice and support in light of these factors.
We believe full-service brokerages are best suited to address many of the key characteristics of real estate transactions, including: (i) the complexity and large monetary value involved in home sale transactions, (ii) the infrequency of home sale transactions, (iii) the emotional stress associated with purchasing or selling a home; (iv) the high price variability in the home market, (v) the intimate local knowledge necessary to advise clients in a fiduciary capacity in general and as it relates to unique neighborhood characteristics, (vi) the unique nature of each particular home, and (vii) the consumer’s need for a high degree of personalized advice and support in light of these factors.
We believe that the consistent expected purchase-money originations in future years could provide a growth opportunity for Motto franchisees. 9 Table of Contents ​ Purchase Mortgage Originations Our Franchise Model and Offering Introduction to Franchising . Franchising is a distributed model for licensing the use of the franchisor’s brand and technology, tools, and educational resources.
We believe that the consistent expected purchase-money originations in future years could provide a growth opportunity for Motto franchisees. 10 Table of Contents Purchase Mortgage Originations Our Franchise Models and Offerings Introduction to Franchising . Franchising is a distributed model for licensing the use of the franchisor’s brand and technology, tools, and educational resources.
Notable trends impacting residential real estate brokers and agents include: ● Almost 90% of all U.S. homebuyers and sellers use an agent – About 86% of sellers and purchasers were represented by a real estate agent in 2022, according to NAR data.
Notable trends impacting residential real estate brokers and agents include: ● Almost 90% of all U.S. homebuyers and sellers use an agent – About 89% of sellers and purchasers were represented by a real estate agent in 2023, according to NAR data.
We receive the entire amount of the continuing franchise fee, broker fee and initial franchise and renewal fee in Company-Owned Regions, whereas we receive only a portion of these fees in Independent Regions.
We receive the entire amount of the continuing franchise fee, broker fee and initial franchise and renewal fee in Company-Owned Regions, whereas we receive only a portion of these 16 Table of Contents fees in Independent Regions.
Our average revenue per agent in Company-Owned Regions in the U.S. and Canada was approximately $2,750, $2,900 and $2,650 in the three years ended December 31, 2022, 2021 and 2020, respectively. Organic Growth from Global Regions.
Our average revenue per agent in Company-Owned Regions in the U.S. and Canada was approximately $2,550, $2,750, and $2,900 in the three years ended December 31, 2023, 2022 and 2021, respectively. Organic Growth from Global Regions.
Revenue per Agent in Owned versus Independent RE/MAX Regions . We receive a higher amount of revenue per agent in our Company-Owned Regions than in our Independent Regions in the U.S. and Canada, and more in Independent Regions in the U.S. and Canada than in Global Regions.
We receive a higher amount of revenue per agent in our Company-Owned Regions than in our Independent Regions in the U.S. and Canada, and more in Independent Regions in the U.S. and Canada than in Global Regions.
These future benefits are reflected within deferred tax assets on our consolidated balance sheets. If Holdings acquires additional common units of RMCO from RIHI, the percentage of Holdings’ ownership of RMCO will increase, and additional deferred tax assets will be created as additional tax basis step-ups occur.
These future benefits are reflected within deferred tax assets on our consolidated balance sheets. If Holdings acquires additional common units of RMCO from RIHI, the percentage of Holdings’ ownership of RMCO will increase, and additional deferred tax assets will be created assuming sufficient taxable income of the Company as additional tax basis step-ups occur.
Company-Owned regions where we make the most revenue per agent, our annual agent count has slightly but steadily declined since 2017, excluding independent region acquisitions. Conversely, we have experienced steady agent growth in Canada, where we earn approximately 70% of the per-agent revenue in Company-Owned regions as we do in Company-Owned regions in the U.S.
Company-Owned regions where we make the most revenue per agent, our annual agent count has declined since 2017, excluding independent region acquisitions. Conversely, we have experienced slight agent growth in Canada, where we earn approximately 70% of the per-agent revenue in Company-Owned regions as we do in Company-Owned regions in the U.S.
RE/MAX agents at large U.S. brokerages have consistently outsold competing agents on average more than two-to-one over the last twelve years based on data in the REAL Trends 500 survey as noted below. 4 Table of Contents ​ RE/MAX agent productivity continued to outperform the competition as follows: ​ U.S.
RE/MAX agents at large U.S. brokerages have consistently outsold competing agents at large brokerages on average more than two-to-one over the last thirteen years based on data in the REAL Trends 500 survey as noted below. RE/MAX agent productivity continued to outperform the competition as follows: ​ U.S.
Organic Growth . We believe we have multiple opportunities to grow organically, including: a) RE/MAX agent count growth, particularly in Company-Owned Regions in the U.S. and Canada; b) Expansion of our mortgage segment including both Motto open offices and wemlo loan processing services; c) pricing; and d) increases in agent productivity and higher home prices. RE/MAX Agent Count Growth.
Organic Growth . We believe we have multiple opportunities to grow organically, including: a) RE/MAX agent count growth, particularly in Company-Owned Regions in the U.S. and Canada; b) Expansion of our mortgage segment including both Motto open offices and the number of mortgage loans processed by wemlo; c) pricing; and d) increases in agent productivity and higher home prices.
Our franchisees also compete for agents with national brokerage companies like Compass (a national bricks-and-mortar brokerage emphasizing a focus on technology), and the virtual brokerage (no brokerage offices) platform of eXp Realty and Real Brokerage. We also compete against non-traditional real estate brokerages in the U.S. and Canada, such as Redfin. Redfin offers deeply discounted commissions to consumers.
Our franchisees also compete for agents with national brokerage companies like Compass (a national bricks-and-mortar brokerage emphasizing a focus on technology), and the virtual brokerage (no brokerage offices) platform of eXp Realty, Real Brokerage and Fathom. We also compete against non-traditional real estate brokerages in the U.S. and Canada, such as Redfin.
A fundamental question that senior leadership weighs heavily is “I would recommend this company as a great place to work”. Approximately 76% of respondents answered favorably in the most recent employee survey from the third quarter of 2022. Leadership compensation and retention.
A fundamental question that senior leadership weighs heavily is “I would recommend this company as a great place to work”. Approximately 69% of respondents answered favorably in the most recent employee survey from the fourth quarter of 2023. Leadership compensation and retention.
We have registered “RE/MAX” as a trademark in the U.S., Canada, and over 150 other countries and territories, and have registered various versions of the RE/MAX balloon logo and real estate yard sign design in numerous countries and territories as well.
We have registered the RE/MAX trademark in the U.S., Canada, and over 150 other countries and territories, and have registered various versions of the RE/MAX balloon logo and real estate property sign design in numerous countries and territories as well.
Motto Mortgage franchisees work with a pre-vetted group of wholesale lenders to streamline the shopping process and to provide customers with competitive choices. ● Technology. We’ve seamlessly integrated industry leading systems into one, time-saving technological ecosystem including best-in-class mortgage origination, CRM and marketing platforms.
Motto franchisees work with a pre-vetted group of wholesale lenders to streamline the shopping process and to provide customers with competitive choices. ● Technology. We have seamlessly integrated industry leading systems into one time-saving technological ecosystem including intuitive mortgage origination, CRM and marketing platforms.
We also continue to invest in our consumer facing app and remax.com website. ● RE/MAX University ® Educational Programs . In 2022, we partnered with Workman Success Systems to provide tools aimed at increasing the success of our RE/MAX teams. Additionally, our RE/MAX University® platform is an exclusive-to-RE/MAX learning hub designed to help each agent increase their professional expertise.
We also continue to invest in our consumer-facing app and remax.com website. ● RE/MAX University ® Educational Programs . We partner with several industry leaders to provide tools aimed at increasing the success of our RE/MAX teams. Additionally, our RE/MAX University platform is an exclusive-to-RE/MAX learning hub designed to help each agent increase their professional expertise.
We have continued to invest in new collaboration tools and technology to allow our workforce to effectively work remotely. We conduct regular confidential surveys of our employees to determine employee satisfaction and to identify areas of employee engagement that require management attention.
We have continued to invest in new collaboration tools and technology to allow our workforce to effectively work either fully or partially remote. We conduct regular confidential surveys of our employees to determine employee satisfaction and to identify areas of employee engagement that require management attention.
RE/MAX is a 100% franchised business, with all of the RE/MAX branded brokerage office locations being operated by franchisees. We franchise directly in the U.S. and Canada, in what we call 11 Table of Contents ​ “Company-Owned Regions.” Brokerage offices, in turn, enter into independent contractor relationships with real estate sales agents who represent real estate buyers and sellers.
RE/MAX Four-Tier Franchise Structure . RE/MAX is a 100% franchised business, with all RE/MAX branded brokerage office locations being operated by franchisees. We franchise directly in the U.S. and Canada, in what we call “Company-Owned Regions.” Franchisees (or broker-owners), in turn, enter into independent contractor relationships with real estate sales agents who represent real estate buyers and sellers.
Our franchisees also compete to attract and retain agents against real estate franchisors which offer 100% commissions and low fees to agents. These competitors include HomeSmart and Realty ONE Group.
Our franchisees also compete to attract and retain 22 Table of Contents agents against real estate franchisors that offer 100% commissions and low fees to agents. These competitors include HomeSmart and Realty ONE Group.
You stay hungry and are never satisfied, pushing yourself to maximum heights. You bring maximum energy and enthusiasm to everything you do, moving the ball forward as far as you can. You actively learn, listen, improve and evolve. Your growth never stops. ● Customer O bsessed. You put customers first, obsessing on their needs and exceeding their expectations.
You bring maximum energy and enthusiasm to everything you do, moving the ball forward as far as you can. You actively learn, listen, improve and evolve. Your growth never stops. ● O bsessed with Customer Experience. You put customers first, obsessing on their needs and exceeding their expectations.
We have a growing global presence with our agent count outside the U.S. and Canada growing over 6% in 2022 and 12% over the past two years combined and now surpasses 60,000 agents.
We have a growing global presence with our agent count outside the U.S. and Canada growing 7.00% in 2023 and 14.00% over the past two years combined and now surpasses 60,000 agents.
Through its ownership of the Class B common stock, RIHI holds 41.3% of the voting power of the Company’s stock as of December 31, 2022. Mr. Liniger also owns Class A common stock with an additional 1.2% of the voting power of the Company’s stock as of December 31, 2022.
Through its ownership of the Class B common stock, RIHI holds 40.7% of the voting power of the Company’s stock as of December 31, 2023. Mr. Liniger also owns Class A common stock with an additional 1.1% of the voting power of the Company’s stock as of December 31, 2023.
The ratio of U.S. agents to Canadian agents in Independent Regions has increased as a result of the INTEGRA Independent Region acquisition. Mortgage Our revenue is derived in the U.S. from fixed monthly fees, franchise sales and renewals, and mortgage loan processing. We charge our Motto franchises a fixed monthly fee of $4,500, which is included in continuing franchise fees.
The ratio of U.S. agents to Canadian agents in Independent Regions has increased as a result of the INTEGRA Independent Region acquisition. Mortgage Our revenue is derived in the U.S. from fixed monthly fees, franchise sales and renewals, and mortgage loan processing.
The following depicts our franchise structure and the location of our Company-Owned versus Independent Regions: ​ ​ ​ ​ Tier Description Services ​ ​ ​ ​ ​ Franchisor (RE/MAX, LLC) ​ Owns the right to the RE/MAX brand and sells franchises and franchising rights. ​ ● Brand ● Technology ● Marketing ● Educational resources & tools ​ ​ ​ ​ ​ Independent Regional Franchise Owner ​ ​ Owns rights to sell brokerage franchises in a specified region.
We have pursued a strategy to acquire those regional franchise rights from Independent Regions in the U.S. and Canada. 13 Table of Contents The following depicts our franchise structure and the location of our Company-Owned versus Independent Regions: ​ ​ ​ ​ Tier Description Services ​ ​ ​ ​ ​ Franchisor (RE/MAX, LLC) ​ Owns the right to the RE/MAX brand and sells franchises and franchising rights. ​ ● Brand ● Technology ● Marketing ● Educational resources & tools ​ ​ ​ ​ ​ Independent Regional Franchise Owner ​ ​ Owns rights to sell brokerage franchises in a specified region.
The residential real estate markets in the U.S. and Canada are approximately $2.3 trillion and $0.4 trillion, respectively, based on 2022 sales volume data from NAR, the U.S. Census Bureau and the Canadian Real Estate Association (“CREA”). 6 Table of Contents ​ The Residential Real Estate Industry is Cyclical in Nature .
The residential real estate markets in the U.S. and Canada are approximately $1.9 trillion and $0.3 trillion, respectively, based on 2023 sales volume data from NAR, the U.S. Census Bureau and the Canadian Real Estate Association (“CREA”). The Residential Real Estate Industry is Cyclical in Nature . The residential real estate industry is cyclical in nature.
Copyright © 2023 Used with permission. Purchase-money mortgage originations (loans that arise during the purchase of a property) correlate to the overall number of home sales and home prices. Home purchases are driven primarily by the buyer’s personal and professional circumstances, whereas refinances depend mainly upon interest rates.
The volume of purchase-money mortgage originations (loans that arise during the purchase of a property) correlate to the overall number of home sales and home prices. Home purchases are driven primarily by the buyer’s personal and professional circumstances, whereas refinances depend mainly upon interest rates, the unique financial situation of the applicant, and home equity accumulation.
In the early years of our expansion in the U.S. and Canada, we sold regional franchise rights to independent owners for certain geographic regions (“Independent Regions”), pursuant to which those Independent Regions have the exclusive right to sell franchises in those regions.
In general, franchisees do not receive an exclusive territory in the U.S. except under certain limited circumstances. In the early years of our expansion in the U.S. and Canada, we sold regional franchise rights to independent owners for certain geographic regions (“Independent Regions”), pursuant to which those Independent Regions have the exclusive right to sell franchises in those regions.
For our wemlo mortgage loan processing revenue, we charge a fixed processing fee of $725 for each loan closed through a Motto franchise and an average fixed processing fee of $995 for each loan closed through external customers.
For our wemlo mortgage loan processing revenue, we charged a fixed processing fee of $725 for each loan closed through a Motto franchise and a fixed processing fee of $995 for most loans closed through external customers in 2023.
RMCO is a holding company that is the direct or indirect parent of all of our operating businesses, including RE/MAX, LLC and Motto Franchising, LLC. As of December 31, 2022, Holdings owns 58.7% of the common units in RMCO, while RIHI, Inc. (“RIHI”) owns the remaining 41.3% of common units in RMCO.
In that capacity, Holdings operates and controls all of the business and affairs of RMCO. RMCO is a holding company that is the direct or indirect parent of all of our operating businesses, including RE/MAX, LLC and Motto Franchising, LLC. As of December 31, 2023, Holdings owns 59.3% of the common units in RMCO, while RIHI, Inc.
For the years ended December 31, 2022, 2021 and 2020, these recurring revenue streams accounted for 64.3%, 62.3% and 62.1% of our revenue excluding the Marketing Funds, respectively. Broker fees are a variable revenue stream and represents a percentage, generally 1%, of the real estate commissions paid by customers when a RE/MAX agent buys or sells a home.
Broker fees are a variable revenue stream and represent a percentage, generally 1%, of the real estate commissions paid by customers when a RE/MAX agent buys or sells a home. For the years ended December 31, 2023, 2022 and 2021, Broker fees accounted for 21.1%, 23.9% and 26.5% of our revenue excluding the Marketing Funds, respectively.
Mortgage Interest Rates and Economic Slowdown . The U.S. Federal Reserve continues to take action intended to address sharp increases in inflation, including raising the target federal funds rates by a total of 425 basis points during 2022, which has strongly contributed to rising mortgage rates.
Mortgage Interest Rates and Economic Slowdown . The U.S. Federal Reserve continues to take action intended to address sharp increases in inflation, including raising the target federal funds rates by a total of 100 basis points during 2023, which has strongly contributed to rising mortgage rates. Consequently, housing demand softened, prices are flattening, and home sales declined in 2023.
In addition, CREA projects that home sales activity is expected to decline by 0.5% in 2023. However, according to CREA, home sales activity is expected to be in-line with the 10-year average home sales activity, which indicates that the desire for home ownership remains strong.
In addition, CREA projects that home sales activity is expected to increase by 10.4% in 2024 and home sales activity is expected to be in-line with the 10-year average home sales activity, which indicates that the desire for home ownership remains strong.
RE/MAX Agent Count Number of Agents at Quarter-End (1) 18 Table of Contents ​ (1) When we acquire an Independent Region, agents in that region are moved from the Independent Region agent count to the Company-Owned Region agent count during the quarter of the acquisition.
See the related chart entitled RE/MAX Agent Count Year-Over-Year Growth Rate by Geography . 19 Table of Contents RE/MAX Agent Count Number of Agents at Quarter-End (1) (1) When we acquire an Independent Region, agents in that region are moved from the Independent Region agent count to the Company-Owned Region agent count during the quarter of the acquisition.
Transactions Per Agent (Large Brokerages Only) (1) (1) Existing home sales volume data from the National Association of Realtors (“NAR”). Average transaction sides per agent calculated from the 2022 RealTrends 500 reports containing 2010-2021 transaction sides for the largest participating U.S. brokerages. Leading market share.
Transactions Per Agent (Large Brokerages Only) (1) (1) Existing home sales volume data from the National Association of Realtors (“NAR”). Average transaction sides per agent calculated from the RealTrends 500 reports containing 2010-2022 transaction sides for the largest participating U.S. brokerages. Leading market share. Nobody in the world sells more real estate than RE/MAX, as measured by residential transaction sides.
Our model maximizes RE/MAX agents’ productivity by providing the following combination of benefits to our franchisees and agents: ● High Agent Commission Split and Low Franchise Fees . The RE/MAX high commission split concept is a cornerstone of our model and, although not unique, differentiates us in the industry.
Our model maximizes RE/MAX agents’ productivity by providing the following combination of benefits to our franchisees and agents: ● High Agent Commission Split and Low Franchise Fees .
The 2020 acquisition of wemlo combined third-party loan processing capabilities with an all-in-one digital loan processing platform and origination system, which is being tailored to the exacting needs of loan originators operating in the mortgage brokerage channel and will eventually replace the existing mortgage origination technology offering. ● Franchising Expertise.
The 2020 acquisition of wemlo combined third-party loan processing capabilities with an all-in-one digital loan processing platform and origination system, which continues to be tailored to the exacting needs of loan originators operating in the mortgage brokerage channel and in 2023 replaced the existing mortgage origination technology offering for our Motto network. ● Loan Processing.
We evaluate the operating results of our segments based on 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 remainder of our revenue is derived from franchise sales and renewals, preferred marketing arrangements, event-based revenue and mortgage loan processing revenue. We evaluate the operating results of our segments based on 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”).
We may occasionally increase our aggregate fees per agent in our Company-Owned Regions as we enhance the value we offer to our network. We are judicious with respect to the timing and amount of increases in aggregate fees per agent and our strategic focus remains on growing agent count through franchise sales, recruiting programs and retention initiatives.
We are judicious with respect to the timing and amount of increases in 20 Table of Contents aggregate fees per agent and our strategic focus remains on growing agent count through franchise sales, recruiting programs and retention initiatives.
In connection with the initial sale of RMCO common units in October 2013, Holdings entered into Tax Receivable Agreements (“TRAs”) which require that Holdings make annual payments to the TRA holders equivalent to 85% of any tax benefits realized on each year’s tax return from the additional tax deductions arising from the step-up in tax basis.
If the company does not have sufficient taxable income, a valuation allowance could be recorded against the deferred tax asset. 24 Table of Contents In connection with the initial sale of RMCO common units in October 2013, Holdings entered into Tax Receivable Agreements (“TRAs”) which require that Holdings make annual payments to the TRA holders equivalent to 85% of any tax benefits realized on each year’s tax return from the additional tax deductions arising from the step-up in tax basis.
These laws and regulations include (i) the Federal Truth in Lending Act of 1969 (“TILA”), and Regulation Z (“Reg Z”) thereunder; (ii) the Federal Equal Credit Opportunity Act ("ECOA'') and Regulation B thereunder; (iii) the Federal Fair Credit Reporting Act and Regulation V thereunder; (iv) RESPA, and Regulation X thereunder; (v) the Fair Housing Act; (vi) the Home Mortgage Disclosure Act; (vii) the Gramm-Leach-Bliley Act and its implementing regulations; (viii) the Consumer Financial Protection Act and its implementing regulations; (ix) the Fair and Accurate Credit Transactions Act-FACT ACT and its implementing regulations; and (x) the Do Not Call/Do Not Fax Act and other state and federal laws pertaining to the solicitation of consumers. 26 Table of Contents ​ Available Information RE/MAX Holdings, Inc. is a Delaware corporation and its principal executive offices are located at 5075 South Syracuse Street, Denver, Colorado 80237, telephone (303) 770-5531.
These laws and regulations include (i) the Federal Truth in Lending Act of 1969 (“TILA”), and Regulation Z (“Reg Z”) thereunder; (ii) the Federal Equal Credit Opportunity Act ("ECOA'') and Regulation B thereunder; (iii) the Federal Fair Credit Reporting Act and Regulation V thereunder; (iv) RESPA, and Regulation X thereunder; (v) the Fair Housing Act; (vi) the Home Mortgage Disclosure Act; (vii) the Gramm-Leach-Bliley Act and its implementing regulations; (viii) the Consumer Financial Protection Act and its implementing regulations; (ix) the Fair and Accurate Credit Transactions Act-FACT ACT and its implementing regulations; and (x) the Do Not Call/Do Not Fax Act and other state and federal laws pertaining to the solicitation of consumers.
NAR’s January 2023 forecast calls for existing home sales to decrease by 6.8% compared to 2022 and for prices to increase 0.3%. Similarly, the Federal National Mortgage Association (“Fannie Mae”) 2023 housing forecast estimates a 22.4% decrease in existing home sales compared to 2022.
Similarly, the Federal National Mortgage Association (“Fannie Mae”) 2024 housing forecast estimates a 3.1% increase in existing home sales compared to 2023 and for prices to increase in 2024 by 3.2% compared to 2023.
Through the Miracle Home ® program, participating RE/MAX agents donate to Children's Miracle Network Hospitals once a home sale transaction is complete. Our franchisees and their agents fund nearly all the advertising, marketing and promotion supporting the RE/MAX brand, which, in the U.S. and Canada, occurs primarily on two levels: ● Marketing Fund Regional, Pan-Regional and Local Marketing Campaigns .
Our franchisees and their agents fund nearly all the advertising, marketing and promotion supporting the RE/MAX brand, which, in the U.S. and Canada, occurs primarily on two levels: ● Marketing Fund Regional, Pan-Regional and Local Marketing Campaigns .
That differentiation is most evident when our brand advantages and services are factored in as part of the concept. We recommend to our franchisees an agent-favorable commission split of 95%/5%, in exchange for the agent paying fixed fees to share the overhead and other costs of the brokerage.
We recommend to our franchisees an agent-favorable commission split of 95%/5%, in exchange for the agent paying fixed fees to share the overhead and other costs of the brokerage.
Our franchisees are brokers, not lenders, and so neither we nor our franchisees fund or service any loans. As a franchisor, we help our Motto franchisees establish independent mortgage brokerage companies, with a model designed to comply with complex regulations, essentially providing a "mortgage brokerage in a box".
As a franchisor, we help our Motto franchisees establish independent mortgage brokerage companies, with a model designed to comply with complex regulations, essentially providing a "mortgage brokerage in a box".
We also have grown steadily in regions outside the U.S. and Canada where our per-agent revenue is much less than it is in the U.S. or Canada. See the related chart entitled RE/MAX Agent Count Year-Over-Year Growth Rate by Geography .
We also have grown steadily in regions outside the U.S. and Canada where our per-agent revenue is much less than it is in the U.S. or Canada.
Motto Franchise Sales Composition Lifetime-to-date as of December 31, 2022 For the Year-ended December 31, 2022 (1) The Other Real Estate category includes other national franchisees, local brokerages, and teams from other brands.
The fixed processing fee for the Motto network increased to $825 per loan starting January 1, 2024. 17 Table of Contents Motto Franchise Sales Composition Lifetime-to-date as of December 31, 2023 For the Year-ended December 31, 2023 ​ (1) The Other Real Estate category includes other national franchisees, local brokerages, and teams from other brands.
Intellectual Property We regard our RE/MAX trademark, balloon logo and property sign design trademarks as having significant value and as being important factors in the marketing of our brand. We protect the RE/MAX and Motto brands through a combination of trademarks and copyrights.
We regard our RE/MAX trademark, balloon logo and property sign design trademarks as having significant value. We protect the RE/MAX, Motto and wemlo brands through a combination of trademarks and copyrights. We strategically pursue registration of important trademarks and actively protect our brands in the U.S. and internationally against third-party infringement.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuch litigation and other proceedings may include, but are not limited to, the currently pending antitrust litigations as disclosed in Note 14, Commitments and Contingencies, securities litigation including class actions and shareholder derivative litigation, complaints from or litigation by franchisees, usually related to alleged breaches of contract or wrongful termination under the franchise arrangements, actions relating to intellectual property, commercial arrangements and franchising arrangements.
Biggest changeWe cannot predict with certainty the costs of defense, the costs of filing claims, insurance coverage or the ultimate outcome of litigation and other proceedings filed by or against us, including remedies or damage awards, and adverse results in such litigation and other proceedings may harm our business and financial condition. 29 Table of Contents Such litigation and other proceedings may include, but are not limited to, the industry class-action lawsuits as disclosed in Note 14, Commitments and Contingencies, securities litigation including class actions and shareholder derivative litigation, privacy and Telephone Consumer Protection Act litigation including class actions, complaints from or litigation by franchisees, usually related to alleged breaches of contract or wrongful termination under the franchise arrangements, actions relating to intellectual property, commercial arrangements and franchising arrangements.
For example, franchisees, agents or loan originators may become dissatisfied with the fees and dues owed to us, particularly in a period of economic downturn and uncertainty in the event that we increase fees and dues. They may disagree with certain network-wide policies and procedures, including policies dictating brand standards or affecting their marketing efforts.
For example, franchisees, agents or loan originators may become dissatisfied with the fees and dues owed to us, particularly in a period of economic downturn and uncertainty or in the event that we increase fees and dues. They may disagree with certain network-wide policies and procedures, including policies dictating brand standards or affecting their marketing efforts.
Historically, we have realized, and expect to continue to realize, lower profitability in the first and fourth quarters due primarily to the impact of lower broker fees and other revenue primarily as a result of lower overall home sale transactions, and higher selling, operating and administrative expenses in the first quarter for expenses incurred in connection with our RE/MAX annual convention.
Historically, we have realized, and expect to continue to realize, lower profitability in the first and fourth quarters due primarily to the impact of lower broker fees and other revenue primarily as a result of lower overall home sale transactions, and higher selling, operating and administrative expenses in the first quarter for expenses incurred in connection with our RE/MAX annual agent convention.
Competition in the residential real estate franchising business is intense, and we may be unable to grow our business organically, including increasing our agent count, expanding our network of franchises and their agents, and increasing franchise and agent fees, which could adversely affect our brand, our financial performance, and results of operations.
Competition in the residential real estate brokerage franchising and real estate brokerage business is intense, and we may be unable to grow our business organically, including increasing our agent count, expanding our network of franchises and their agents, and increasing franchise and agent fees, which could adversely affect our brand, our financial performance, and results of operations.
These provisions: ● establish a classified Board of Directors so that not all members of our Board of Directors are elected at one time; ● authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; ● provide that our Board of Directors is expressly authorized to make, alter, or repeal our bylaws; ● delegate the sole power to our Board of Directors to fix the number of directors; 35 Table of Contents ​ ● provide the power of our Board of Directors to fill any vacancy on our Board of Directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise; ● eliminate the ability of stockholders to call special meetings of stockholders; and ● establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These provisions: ● establish a classified Board of Directors so that not all members of our Board of Directors are elected at one time; ● authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; ● provide that our Board of Directors is expressly authorized to make, alter, or repeal our bylaws; ● delegate the sole power to our Board of Directors to fix the number of directors; ● provide the power of our Board of Directors to fill any vacancy on our Board of Directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise; ● eliminate the ability of stockholders to call special meetings of stockholders; and ● establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Liniger also personally owns Class A common stock with an additional 1.16% of the voting power of the Company’s stock. Therefore, RIHI has the ability to significantly influence all matters submitted to a vote of our stockholders.
Liniger also personally owns Class A common stock with an additional 1.1% of the voting power of the Company’s stock. Therefore, RIHI has the ability to significantly influence all matters submitted to a vote of our stockholders.
Most of our revenue is derived from recurring fees paid by our franchisees or regional franchise owners based on the number of affiliated agents or offices, dues paid by RE/MAX agents, and recurring franchise fees based on the number of open Motto offices.
Most of our revenue is derived from recurring franchise fees paid by our franchisees or regional franchise owners based on the number of affiliated agents or offices, annual dues paid by RE/MAX agents, and recurring franchise fees based on the number of open Motto offices.
As a franchisor, unlike an integrated corporation, we obtain in fees only a small portion of the revenue of our franchisees, and as a result our capital is limited in comparison with the size of our entire franchise networks.
As a franchisor, unlike an integrated corporation, we obtain only a small portion of the revenue of our franchisees, and as a result our capital is limited in comparison with the size of our entire franchise networks.
RIHI, a company controlled by David Liniger, our current Chairman and Co-Founder, and Gail Liniger, our Vice Chair and Co-Founder, respectively, owns all of our outstanding Class B common stock.
RIHI, a company controlled by David Liniger, our current Chairman and Co-Founder, and Gail Liniger, our Vice Chair Emerita and Co-Founder, respectively, owns all of our outstanding Class B common stock.
In addition, RIHI could have an interest in the structuring of future transactions to take into consideration its tax or other considerations, even in situations where no similar considerations are relevant to us. 34 Table of Contents ​ Our tax receivable agreements require us to make cash payments based upon future tax benefits to which we may become entitled.
In addition, RIHI could have an interest in the structuring of future transactions to take into consideration its tax or other considerations, even in situations where no similar considerations are relevant to us. 35 Table of Contents Our tax receivable agreements require us to make cash payments based upon future tax benefits to which we may become entitled.
Global privacy legislation (including the GDPR regulations in the European Union), enforcement and policy activity are rapidly expanding and creating a complex compliance environment. Changes in these laws may limit our data access, use, and disclosure, and may require increased expenditures by us or may dictate that we not offer certain types of services.
Global privacy legislation (including the GDPR regulations in the European Union), enforcement and policy activity are rapidly expanding and creating a complex compliance environment. Changes in these laws may limit our data collection, use, and disclosure, and may require increased expenditures by us or may dictate that we not offer certain types of services.
The amounts that we may be required to pay could be significant, may be accelerated in certain circumstances and could significantly exceed the actual tax benefits that we ultimately realize. In connection with our IPO, we entered into tax receivable agreements that are currently held by RIHI and Parallaxes Rain Co-Investment, LLC (“Parallaxes” and together, the “TRA Parties”).
The amounts that we may be required to pay could be significant, may be accelerated or deferred in certain circumstances and could significantly exceed the actual tax benefits that we ultimately realize. In connection with our IPO, we entered into tax receivable agreements that are currently held by RIHI and Parallaxes Rain Co-Investment, LLC (“Parallaxes” and together, the “TRA Parties”).
Our mortgage segment businesses may also have regulatory obligations; we may fail to comply with those obligations, and that failure could also subject us to adverse actions from regulators. In addition, residential mortgage brokerage is a highly competitive industry and Motto will suffer if we are unable to attract franchisees.
Our mortgage segment businesses may also have regulatory obligations; we or our franchisees may fail to comply with those obligations, and that failure could also subject us to adverse actions from regulators. In addition, residential mortgage brokerage is a highly competitive industry and Motto will suffer if we are unable to attract and retain franchisees.
These rankings can be affected by a number of factors, such as changes in ranking algorithms which are not under our control and may change frequently. In addition, our websites face competition for audience from real estate portal websites such as Zillow, Redfin, Trulia and Realtor.com.
These rankings can be affected by a number of factors, such as changes in ranking algorithms which are not under our control and may change frequently. In addition, our websites face competition for audience from real estate portal websites such as Zillow, Redfin, Homes.com and Realtor.com.
The residential real estate and mortgage markets were negatively impacted by rising interest rates in 2022, which led to mortgage rates that more than doubled. Increased mortgage rates strained affordability, which resulted in a reduction in existing home sales that began in the second quarter of 2022 and continued throughout the second half of the year.
The residential real estate and mortgage markets were negatively impacted by rising interest rates in 2022, which led to mortgage rates that more than doubled. Increased mortgage rates strained affordability, which resulted in a reduction in existing home sales that began in the second quarter of 2022 and continued throughout the second half of 2022 and throughout 2023.
If one or more of these external parties were not able to perform their functions for a period of time, perform them at an acceptable service level, or handle increased volumes, our business operations could be constrained, disrupted, or otherwise negatively affected.
If one or more of these external parties are not able to perform their functions for a period of time, perform them at an acceptable service level, or handle increased volumes, our business operations could be constrained, disrupted, or otherwise negatively affected.
To remain competitive in the sale of franchises and to retain our existing franchisees at the time of renewal of their franchise agreements, we may have to reduce the cost of renewals and/or the recurring monthly fees we charge our 33 Table of Contents ​ franchisees.
To remain competitive in the sale of franchises and to retain 34 Table of Contents our existing franchisees at the time of renewal of their franchise agreements, we may have to reduce the cost of renewals and/or the recurring monthly fees we charge our franchisees.
We also face competition from web-based companies focused on real estate that have made substantial investments in innovative technology aimed at disrupting the real estate market and making more aspects of the real estate industry digital.
We also face competition from web-based companies focused on real estate that have made substantial investments in new technology aimed at disrupting the real estate market and making more aspects of the real estate industry digital.
The failure of any of these Independent Region owners to do these things, or the termination of an agreement with a regional master franchisee could delay the development of a particular franchised area, interrupt the operation of our brand in a particular market or markets while we seek alternative methods to develop our franchises in 29 Table of Contents ​ the area, and weaken our brand image.
The failure of any of these Independent Region owners to do these things, or the termination of an agreement with a regional master franchisee could delay the development of a particular franchised area, interrupt the operation of our brand in a particular market or markets while we seek alternative methods to develop our franchises in the area, and weaken our brand image.
RE/MAX is a strong brand that we believe has contributed significantly to the success of our business, and the Motto brand continues to gain recognition. Maintaining, protecting and enhancing the RE/MAX brand, as well as our younger brands such as Motto and wemlo, is critical to growing our business.
RE/MAX is a strong brand that we believe has contributed significantly to the success of our business, and the Motto brand continues to gain recognition. Maintaining, protecting and enhancing the RE/MAX brand, as well as our younger 30 Table of Contents brands such as Motto and wemlo, is critical to growing our business.
In addition, several states have “franchise relationship laws” or “business opportunity laws” that limit the ability of franchisors to terminate franchise agreements or to withhold consent to the renewal or transfer of these agreements. 36 Table of Contents ​ In Canada, the sale of franchises is regulated at the provincial level.
In addition, several states have “franchise relationship laws” or “business opportunity laws” that limit the ability of franchisors to terminate franchise agreements or to withhold consent to the renewal or transfer of these agreements. In Canada, the sale of franchises is regulated at the provincial level.
Any reduction in the number of users directed to our websites could adversely impact our business and results of operations. 28 Table of Contents ​ We are vulnerable to certain additional risks and uncertainties associated with websites, which include our lead referral system, remax.com, remax.ca, global.remax.com, theremaxcollection.com, remaxcommercial.com and mottomortgage.com.
Any reduction in the number of users directed to our websites could adversely impact our business and results of operations. 32 Table of Contents We are vulnerable to certain additional risks and uncertainties associated with websites, which include our lead referral system, remax.com, remax.ca, global.remax.com, theremaxcollection.com, remaxcommercial.com, mottomortgage.com, and wemlo.io.
We also rely on third parties for technology that is critical to financial reporting, our franchise and membership tracking and billing, tools to support RE/MAX consumer facing websites, agents and office technology, the Motto loan origination system, and information security. We may enter into other key outsourcing relationships in the future.
We also rely on third parties for technology that is critical to financial reporting, our franchise and membership tracking and billing, tools to support RE/MAX consumer facing websites, agents and office technology, and information security. We may enter into other key outsourcing relationships in the future.
Our brands’ value could diminish significantly if any such incidents or other matters erode consumer confidence in us, which may result in a decrease in our total agent and loan office count and, ultimately, lower revenues, which in turn would materially and adversely affect our business and results of operations.
Our brands’ value could diminish significantly if any such incidents or other matters erode consumer confidence in us, which may result in a decrease in our total agent, loan officer and franchisee office counts and, ultimately, lower revenues, which in turn would materially and adversely affect our business and results of operations.
If we fail to maintain adequate internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their 38 Table of Contents ​ implementation, our business and operating results could be harmed and we could fail to meet our financial reporting obligations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If we fail to maintain adequate internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed and we could fail to meet our financial reporting obligations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We may terminate franchisees more frequently in the future which may, in turn, materially and adversely affect our business and operating results. Our RE/MAX franchisees self-report their agent counts and agent commissions which drive the fees due to us, and we have limited tools to verify these reports.
We may terminate franchisees more frequently in the future which may, in turn, materially and adversely affect our business and operating results. 28 Table of Contents Our RE/MAX franchisees self-report their agent counts and agent commissions which drive the fees due to us, and we have limited tools to verify these reports.
As disclosed in Note 14, Commitments and Contingencies , we are a defendant in class action complaints referred to as the “Moehrl-related antitrust litigations” which allege violations of federal antitrust law.
As disclosed in Note 14, Commitments and Contingencies , we are a defendant in class action complaints referred to as the “Moehrl-related antitrust litigations” which allege violations of federal antitrust law, among other claims.
Risks Related to Our Business We may fail to execute our strategies to grow our business, which could have a material adverse effect on our financial performance and results of operations. We intend to pursue a number of strategies to grow our revenue and earnings and to deploy the cash generated by our business.
Risks Related to Our Business We may fail to execute our strategies to grow our business, which could have a material adverse effect on our financial performance and results of operations. We are pursuing a number of strategies to grow our revenue and earnings and to deploy the cash generated by our business.
Other incidents may arise from events that are or may be beyond our control and may damage our brand, such as actions taken (or not taken) by one or more franchisees or their agents and loan originators relating to health, safety, cybersecurity, welfare or other matters, litigation and claims, failure to maintain high ethical and social standards for all of our operations and activities, failure to comply with local laws and regulations, and illegal activity targeted at us or others.
Other incidents may arise from events that are or may be beyond our control and may damage our brand, such as actions taken (or not taken) by one or more franchisees or their agents and loan originators relating to health, safety, cybersecurity, welfare or other matters, litigation and claims, failure to maintain high ethical and professional standards, failure to comply with local laws and regulations, and illegal activity targeted at us or others.
While the majority of our revenues are derived from continuing franchise fees and annual dues, rather than being directly tied to residential real estate transaction volumes, we anticipate these declines in the residential real estate and mortgage markets will have a negative effect on our financial condition and results of operations, and such effect may be material.
While the majority of our revenues are derived from continuing franchise fees and annual dues, rather than being directly tied to residential real estate transaction volumes, these declines in the residential real estate and mortgage markets have had and are likely to continue to have a negative effect on our financial condition and results of operations, and such effect may be material.
Although RIHI no longer controls a majority of the voting power of RE/MAX Holdings’ common stock, RIHI remains a significant stockholder of the Company and through its ownership of the Class B common stock holds 41.3% of the voting power of the Company’s stock. Mr.
Although RIHI no longer controls a majority of the voting power of RE/MAX Holdings’ common stock, RIHI remains a significant stockholder of the Company and through its ownership of the Class B common stock holds 40.7% of the voting power of the Company’s stock. Mr.
There can 31 Table of Contents ​ be no assurance that we will be able to adequately maintain, enforce, and protect our trademarks or other intellectual property rights. We are commonly involved in numerous proceedings, generally on a small scale, to enforce our intellectual property and protect our brands.
There can be no assurance that we will be able to adequately maintain, enforce, and protect our trademarks or other intellectual property rights. We are commonly involved in numerous legal proceedings, generally on a small scale, to enforce our intellectual property rights and protect our brands.
Integrating acquired businesses involves complex operational and personnel-related challenges and we may encounter unforeseen difficulties and higher than expected integration costs. Delays or difficulties encountered in connection with the integration of any acquired business could lead to prolonged diversion of management’s attention away from other important business activities.
Integration activities involves complex operational and personnel-related challenges and we may encounter unforeseen difficulties and higher than expected integration costs. Delays or difficulties encountered in connection with integration activities could lead to prolonged diversion of management’s attention away from other important business matters.
Any failures by these third-party vendors could disrupt our business operations. We have outsourced certain key aspects of our business to external parties, including providing RE/MAX agent and office technology products, supporting our flagship external websites as well as the Motto loan origination system, all of which are key aspects of our value proposition.
Any failures by these third-party vendors could disrupt our business operations. We have outsourced certain key aspects of our business to external parties, including providing RE/MAX agent and office technology products, supporting our flagship external websites, all of which are key aspects of our value proposition.
The real estate business is highly regulated and any failure to comply with such regulations or any changes in such regulations could adversely affect our business.
The real estate and mortgage businesses are highly regulated and any failure to comply with such regulations or any changes in such regulations could adversely affect our business.
Our strategy hinges on our ability to recruit franchisees and help them recruit loan originators, to develop and maintain strong competencies within the mortgage brokerage market, on favorable conditions in the related regulatory environment and on our success in developing a strong, respected brand.
Our strategy hinges on our ability to recruit franchisees and help them recruit loan originators, on our ability to develop and maintain strong competencies within the mortgage brokerage and loan processing markets, on favorable conditions in the related regulatory environment and on our success in developing strong, respected brands.
If our franchisees are not able to attract and retain agents and loan originators (or successfully manage teams of agents within their brokerages), none of which is within our direct control, our revenue may decline.
If our franchisees are not able to attract and retain agents and loan originators (or successfully manage teams of agents within their brokerages), none of which is within our direct control, our revenue may decline. Our revenue may decline if franchisees are unable to pay the fees owed to us.
Acquisitions may present other challenges and difficulties, including: ● the possible departure of a significant number of key employees; ● the possible defection of franchisees and agents to other brands or independent real estate companies; ● limits on growth due to exclusive territories granted to current franchisees by former region owners; ● the failure to maintain important business relationships and contracts of the acquired business; ● for any technology acquisitions, our ability to implement appropriate cybersecurity controls while concurrently enhancing their platforms; ● legal or regulatory challenges or litigation post-acquisition, which could result in significant costs; ● potential unknown liabilities associated with acquired businesses.
Other challenges and difficulties could also include: ● the possible departure of a significant number of key employees; ● the possible defection of franchisees and agents to other brands or independent real estate companies; ● limits on growth due to exclusive territories granted to current franchisees by former region owners; ● the failure to maintain important business relationships and contracts of the acquired business; ● our ability to implement appropriate cybersecurity controls while concurrently enhancing their platforms; ● legal or regulatory challenges or litigation, which could result in significant costs; ● potential unknown liabilities.
We, or our franchisees, are also subject to various other rules and regulations such as: ● the Gramm-Leach-Bliley Act, which governs the disclosure and safeguarding of consumer financial information; ● the European Union’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act, and various other laws protecting consumer data; ● the USA PATRIOT Act; ● restrictions on transactions with persons on the Specially Designated Nationals and Blocked Persons list promulgated by the Office of Foreign Assets Control of the Department of the Treasury; ● federal and state “Do Not Call,” “Do Not Fax,” and “Do Not E-Mail” laws; ● the Fair Housing Act; ● laws and regulations, including the Foreign Corrupt Practices Act, that impose sanctions on improper payments; ● laws and regulations in jurisdictions outside the U.S. in which we do business; ● state and federal employment laws and regulations, including any changes that would require reclassification of independent contractors to employee status, and wage and hour regulations ; and ● consumer fraud statutes.
We, or our franchisees, are also subject to various other rules and regulations such as: ● the Gramm-Leach-Bliley Act, which governs the disclosure and safeguarding of consumer financial information; ● The Mortgage Acts and Practices (“MAP”) Advertising Rule; ● The Federal Trade Commission’s Franchise Rule; ● State franchise laws and regulations; ● the European Union’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act, the Personal Information Protection and Electronic Documents Act (Canada); and various other laws protecting consumer data; ● the USA PATRIOT Act and the proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada); ● restrictions on transactions with persons on the Specially Designated Nationals and Blocked Persons list promulgated by the Office of Foreign Assets Control of the Department of the Treasury; ● federal, state, and provincial “Do Not Call,” “Do Not Fax,” and “Do Not E-Mail” laws; 38 Table of Contents ● the Fair Housing Act and National Housing Act (Canada); ● laws and regulations, including the Foreign Corrupt Practices Act, that impose sanctions on improper payments; ● laws and regulations in jurisdictions outside the U.S. in which we do business; ● federal, state, and provincial employment, workplace and taxation laws and regulations, including any changes that would require reclassification of independent contractors to employee status, and wage and hour regulations ; and ● consumer fraud statutes.
If we fail to develop, execute, or focus on our business strategy, fail to make good business decisions, fail to enforce a disciplined management process to ensure that our investment of resources aligns with our strategic plan and our core management and franchising competencies, or fail to properly focus and allocate resources or management attention on strategic areas, any of these could negatively impact the overall value of the Company.
If we fail to develop, execute, 27 Table of Contents or focus on our business strategy, fail to make good business decisions, fail to enforce a disciplined management process to ensure that our investment of resources aligns with our strategic plan and our core management and franchising competencies, or fail to properly allocate resources to and focus management attention on strategic areas, any of these could negatively impact our financial performance and results of operations.
As younger businesses, they may carry a higher risk of failure. We sell residential mortgage brokerage franchises in the U.S. under the Motto Mortgage brand and trademarks.
As younger businesses, they may carry a higher risk of failure. We sell residential mortgage brokerage franchises in the U.S. under the Motto Mortgage brand and trademarks and we provide loan processing services through our wemlo brand.
These risks include: ● fluctuations in foreign currency exchange rates, primarily related to changes in the Canadian dollar and Euro to U.S. dollar exchange rates; ● exposure to local economic conditions and local laws and regulations, including those relating to the agents of our franchisees; ● economic and/or credit conditions abroad; ● potential adverse changes in the political stability of foreign countries or in their diplomatic relations with the U.S.; ● restrictions on the withdrawal of foreign investments and earnings; ● government policies against businesses owned by foreigners; ● diminished ability to legally enforce our contractual rights in foreign countries; ● withholding and other taxes on remittances and other payments by subsidiaries; and ● changes in tax laws regarding taxation of foreign profits.
These risks include: ● fluctuations in foreign currency exchange rates, primarily related to changes in the Canadian dollar and Euro to U.S. dollar exchange rates; ● exposure to local economic conditions and local laws and regulations, including those relating to the agents of our franchisees; ● economic and/or credit conditions abroad; ● potential adverse changes in the political stability of foreign countries or in their diplomatic relations with the U.S.; ● restrictions on the withdrawal of foreign investments and earnings; ● government policies against businesses owned by foreigners; ● diminished ability to legally enforce our contractual rights in foreign countries; ● withholding and other taxes on remittances and other payments by subsidiaries; and ● changes in tax laws regarding taxation of foreign profits. 31 Table of Contents We may be unable to execute on strategic acquisitions or transactions, including reacquiring the regional franchise rights of RE/MAX Independent Regions, or successfully integrate acquired companies.
We continue to pursue a growth strategy of reacquiring select RE/MAX independent regional franchises to support our growth. The acquisition of a regional franchise enables us to focus on a consistent delivery of the RE/MAX value proposition, increases our revenue, and provides an opportunity for us to enhance profitability.
We pursue growth initiatives with respect to strategic acquisitions, including the reacquisition of select RE/MAX independent regional franchises. The acquisition of a regional franchise enables us to focus on a consistent delivery of the RE/MAX value proposition, increases our revenue, and provides an opportunity for us to enhance profitability.
The Department of Justice (“DOJ”) had agreed to settle a suit with the National Association of Realtors (“NAR”) in which NAR agreed to adopt certain rule changes, such as increased disclosure of commission offers from sellers’ agents to buyers’ agents, but the DOJ subsequently withdrew from the proposed settlement.
The Department of Justice (“DOJ”) previously agreed to settle a suit with NAR in which NAR agreed to adopt certain rule changes, such as increased disclosure of commission offers from sellers’ agents to buyers’ agents, but the DOJ subsequently withdrew from the proposed settlement and issued a civil investigative demand (“CID”) to NAR.
Our franchise model can be subject to particular litigation risks. Litigation against a franchisee or its affiliated agents or loan originators by third parties, whether in the ordinary course of business or otherwise, may also include claims against us for liability by virtue of the franchise relationship.
Our franchise model can be subject to particular litigation risks. Litigation against a franchisee or its affiliated agents or loan originators, whether in the ordinary course of business or otherwise, may also include claims against us for liability by virtue of the franchise relationship. Franchisees may fail to obtain insurance naming the Company as an additional insured on such claims.
Our ability to monitor the activities or performance of vendors may be constrained, which makes it difficult for us to assess and manage the risks associated with these relationships. Our franchisees and their agents or loan originators could take actions that could harm our reputation and our business.
Our ability to monitor the activities or performance of vendors may be constrained, which makes it difficult for us to assess and manage the risks associated with these relationships.
While we are continuing to evaluate all aspects of legislation, regulations and policies affecting the real estate market, we cannot predict whether or not such legislation, regulation and policies may increase down payment requirements, increase mortgage costs, or result in increased costs and potential litigation for housing market participants, any of which could have a material adverse effect on our financial condition and results of operations.
If mortgage loans are difficult to obtain, the ability and willingness of prospective buyers to finance home purchases or to sell their existing homes could be adversely affected, which would adversely affect our operating results. 37 Table of Contents While we are continuing to evaluate all aspects of legislation, regulations and policies affecting the real estate market, we cannot predict whether or not such legislation, regulation and policies may increase down payment requirements, increase mortgage costs, or result in increased costs and potential litigation for housing market participants, any of which could have a material adverse effect on our financial condition and results of operations.
If our websites fail to rank prominently in unpaid search results, traffic to our websites could decline and our business could be adversely affected. Any disruption to our websites or lead generation tools could harm our business.
We rely on traffic to our websites, including our flagship websites, remax.com, remax.ca, and mottomortgage.com, directed from search engines. If our websites fail to rank prominently in unpaid search results, traffic to our websites could decline and our business could be adversely affected. Any disruption to our websites or lead generation tools could harm our business.
Loss of market leadership, and as a result an inability to tout the same, may hinder public and industry perception of RE/MAX as a leader in the real estate market and hurt agent recruitment and franchise sales as a result.
Loss of market leadership, and as a result an inability to tout the same, may hinder public and industry perception of RE/MAX as a leader in the real estate market and hurt agent recruitment and franchise sales as a result. Our business may be subject to risks related to events and circumstances that have a negative impact on our brands.
Not all the trademarks or service marks that we currently use have been registered in all the countries in which we do business, and they may never be registered in all those countries.
We believe that these and other intellectual property are valuable assets that are critical to our success. Not all the trademarks or service marks that we currently use have been registered in all the countries in which we do business, and they may never be registered in all those countries.
The residential real estate and mortgage markets tend to be cyclical and typically are affected by changes in general economic conditions which are beyond our control.
Our results are tied to the residential real estate and mortgage markets, and we have been and likely will continue to be negatively impacted by downturns in these markets. The residential real estate and mortgage markets tend to be cyclical and typically are affected by changes in general economic conditions which are beyond our control.
The criteria by which companies’ corporate responsibility practices are assessed may change, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. If we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are inadequate.
The criteria by which companies’ corporate responsibility practices are assessed may change, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria.
In addition to increasing franchisees’ costs and limiting the funds available to pay us fees and dues and reducing the execution of new franchise arrangements, claims against us (including vicarious liability claims) divert our management resources and could cause adverse publicity, which may materially and adversely affect us and our brand, regardless of whether such allegations are valid or whether we are liable.
Claims against us (including vicarious liability claims) could result in substantial costs, divert our management resources and could cause adverse publicity, which may materially and adversely affect us and our brand, regardless of whether such allegations are valid or whether we are liable.
The Federal Reserve Board has indicated that it intends to continue to increase interest rates in 2023 which is likely to continue to adversely impact existing home sales.
Although the Federal Reserve Board has indicated that it expects to cut interest rates in 2024, high interest rates are likely to continue to adversely impact existing home sales.
Additionally, we continue to pursue a growth strategy of acquiring businesses that complement our existing businesses and enhance our value proposition. It is possible we may not achieve the expected returns on a given acquisition; and we may not be able to deliver expected cost and growth synergies.
Additionally, our growth strategy may also include pursuing complimentary businesses that enhance our value proposition. It is possible we may not be able to successfully capitalize on a given opportunity and/or achieve the expected returns, including the execution of expected cost and growth synergies.
These events may, in turn, materially and adversely affect our business and operating results. 27 Table of Contents ​ An organized franchisee association could also pose risks to our ability to set the terms of our franchise agreements and our pricing.
These events may, in turn, materially and adversely affect our business and operating results. An organized franchisee association could also pose risks to our ability to set the terms of our franchise agreements and our pricing. Our financial results are affected directly by the operating results of franchisees and their agents and loan originators who operate independently from our control.
Further, some of our largest competitors may have greater financial resources and larger budgets than we do to enhance their value proposition to agents, franchisees and consumers.
Competing businesses may offer fees that are lower than those we charge, or that they perceive as more attractive. Further, some of our largest competitors may have greater financial resources and larger budgets than we do to enhance their value proposition to agents, franchisees and consumers.
Our financial results are affected directly by the operating results of franchisees and their agents and loan originators who operate independently from our control. Our financial results and the financial results of our franchisees are affected by the ability of our franchisees to attract and retain agents and loan originators, which can be impacted by the overall macro-economic environment.
Our financial results and the financial results of our franchisees are affected by the ability of our franchisees to attract and retain agents and loan originators, which can be impacted by the overall macro-economic environment. Our financial results depend upon the operational and financial success of our franchisees and, for RE/MAX, their agents and for Motto Mortgage, their loan originators.
Failure to adequately protect our intellectual property rights could damage our brands and impair our ability to compete effectively.
Effective intellectual property protection may not be available in every market. Failure to adequately protect or defend our intellectual property rights could damage our brands and impair our ability to compete effectively.
We believe that further increased regulation in additional jurisdictions is likely in the area of data privacy. Should we misuse or improperly store the personally identifiable information that we collect, or should we be the victim of a cyberattack that results in improper access to such personally identifiable information, we may be subject to legal claims and regulatory scrutiny.
We may be subject to legal claims and regulatory scrutiny if we misuse or improperly store the personally identifiable information that we collect, if we fail to timely honor consumer rights requests, or if we are the victim of a cyberattack that results in improper access to such personally identifiable information.
We may face reputational damage in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies. Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead.
Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead.
We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business and financial condition.
Such an event could result in lower revenue growth opportunities for us, which would adversely impact our growth prospects. We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business and financial condition.
We regard our RE/MAX trademark, balloon logo and yard sign design trademarks and our Motto trademarks as valuable assets and important factors in the marketing of our brands. We believe that these and other intellectual property are valuable assets that are critical to our success.
If we are exposed to adverse publicity or events that damage our brands’ images, our business may suffer materially. We regard our RE/MAX trademark, balloon logo and property sign design trademarks and our Motto trademarks as valuable assets and important factors in the marketing of our brands.
For example, California enacted the California Consumer Privacy Act on January 1, 2020, which requires covered businesses to, among other things, provide disclosures to California consumers regarding the collection, use and disclosure of such consumers’ personal information and afford such consumers new rights with respect to their personal information, including the right to opt out of certain sales of personal information.
For example, several states in the U.S. such as California, Colorado, Connecticut, Virginia, and Utah, among others, have enacted comprehensive consumer privacy laws which require covered businesses to, among other things, provide disclosures to consumers regarding the collection, use and disclosure of such consumers’ personal information and afford such consumers new rights with respect to their personal information, including the right to opt out of the sale or sharing of personal information and targeted advertising.
Unauthorized uses or other infringement of our trademarks or service marks, including uses that are currently unknown to us, could diminish the value of our brands and may adversely affect our business. Effective intellectual property protection may not be available in every market.
Unauthorized uses or other infringement of our trademarks or service marks, including uses that are currently unknown to us, could diminish the value of our brands and may adversely affect our business. Also, third parties may initiate legal proceedings against us to allege that we infringe their intellectual property rights or to challenge the validity of our intellectual property rights.
Further, RE/MAX agent count is a key performance indicator (KPI), and incomplete information, or information that is not reported in a timely manner could impair our ability to evaluate and forecast key business drivers and financial performance. We rely on traffic to our websites, including our flagship websites, remax.com, remax.ca, and mottomortgage.com, directed from search engines.
Further, RE/MAX agent count is a key performance indicator (KPI), and incomplete information, or information that is not reported in a timely manner could impair our ability to evaluate and forecast key business drivers and financial performance. Our franchisees and their agents or loan originators could take actions that could harm our reputation and our business.
Our franchisees are independent businesses and as such, the agents and loan originators who work within these brokerages are not our employees and we do not exercise control over their day-to-day operations. Franchisees may not operate their real estate and mortgage brokerage businesses consistent with industry standards or may not attract and retain qualified agents and loan originators.
Our franchisees are independently owned and operated businesses and as such, the agents and loan originators who work within those businesses are not our employees and we do not exercise control over their day-to-day operations.
We may not successfully manage the transition associated with the resignation of our previous Chief Executive Officer and the appointment of a new Chief Executive Officer, which could have an adverse impact on us. Our current Chief Executive Officer, Stephen Joyce, is serving on an interim basis following the departure of our former CEO on March 31, 2022.
We may not successfully manage the transition and integration associated with the appointment of our new Chief Executive Officer and other executive officer changes, which could have an adverse impact on us and our stakeholders. We may not successfully manage the transition and integration associated with our new Chief Executive Officer and other executive officer changes.
Any changes to these laws or regulations or any new laws or regulations may make it more difficult for us to operate our business and may have a material adverse effect on our operations. 37 Table of Contents ​ General Risks Cyberattacks, security breaches and improper access to, disclosure or deletion of our data, personally identifiable information we collect, or business records could harm our business, damage our reputation and cause losses.
General Risks Cyberattacks, security breaches and improper access to, disclosure or deletion of our data, personally identifiable information we collect, or business records could harm our business, damage our reputation and cause losses.
Given this autonomy, we have virtually no control over the day-to-day operations of our franchisees and no control over the fees they charge.
Our franchise systems provide substantial autonomy to these independent franchisees, more so than is common in other franchised industries such as hospitality. Given this autonomy, we have virtually no control over the day-to-day operations of our franchisees and no control over the fees they charge.
Our or our franchisees’ failure to comply with any of the foregoing laws and regulations may result in fines, penalties, injunctions and/or potential criminal violations.
Our or our franchisees’ failure to comply with any of the foregoing laws and regulations may result in fines, penalties, injunctions and/or potential criminal charges. Any changes to these laws or regulations or any new laws or regulations may make it more difficult for us to operate our business and may have a material adverse effect on our operations.
Lenders may from time to time tighten their underwriting standards or cease to offer subprime and other alternative mortgage products in the marketplace. If mortgage loans are difficult to obtain, the ability and willingness of prospective buyers to finance home purchases or to sell their existing homes could be adversely affected, which would adversely affect our operating results.
Lenders may from time to time tighten their underwriting standards or cease to offer subprime and other alternative mortgage products in the marketplace.
This could reduce the fees we receive from our franchisees, which, in turn, could adversely affect our financial condition and results of operations. Our results are tied to the residential real estate and mortgage markets, and we have been and likely will continue to be negatively impacted by downturns in these markets.
The amount and structure of commissions that real estate agents receive could be impacted by the outcome of the antitrust litigations, related regulatory matters, and/or increased focus on commissions. This could reduce RE/MAX agent count and/or the fees we receive from our franchisees and agents, which, in turn, could adversely affect our financial condition and results of operations.
If technology platforms do not satisfy the needs of agents, loan originators, and franchisees, or have poorer than expected adoption rates, such platforms may not be effective in attracting and retaining agents, loan originators, or franchisees. 32 Table of Contents ​ Risks Related to Our Industry The real estate market may be negatively impacted by industry changes as the result of certain class action lawsuits.
Risks Related to Our Industry The real estate market may be negatively impacted by industry changes as the result of certain class action lawsuits and potential regulatory changes which could adversely affect our financial condition and results of operations.
Upon the expiration of a franchise agreement, a franchisee may choose to renew their franchise with us, operate as an independent broker or to franchise with one of our competitors. Competing franchisors may offer franchisees fees that are lower than those we charge, or that they perceive as more attractive.
Upon the expiration of a franchise agreement, a franchisee may choose to renew their franchise with us, operate as an independent broker or to franchise with or join one of our competitors. Motto franchise agreements generally have a seven-year term. As Motto was founded in October 2016, 2024 is the first full year Motto has offices up for renewal.
Further, these lawsuits have prompted discussion of regulatory changes to rules established by local or state real estate boards or multiple listing services. The resolution of the Moehrl-related antitrust litigations and/or other regulatory changes may require changes to our or our brokers’ business models, including changes in agent and broker compensation.
Following the trial, on February 1, 2024, Keller Williams entered into a settlement with plaintiffs agreeing to make certain changes to its business practices and to pay a total settlement of $70 million. 33 Table of Contents Further, the Moehrl-related antitrust litigations and other legal proceedings may prompt regulatory changes to rules established by NAR, local or state real estate boards, or multiple listing services.
Our level of indebtedness has important consequences to you and your investment in our Class A common stock. Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
Our level of indebtedness has important consequences to you and your investment in our Class A common stock. We face risks related to our cash position and liquidity if we are unable to access our line of credit or other sources of financing.
Removed
Our financial results depend upon the operational and financial success of our franchisees and, for RE/MAX, their agents and for Motto Mortgage, their loan originators. Our franchise systems provide substantial autonomy to these independent franchisees, more so than is common in other franchised industries such as hospitality.
Added
We terminate franchisees for non-payment, non-reporting and other non-compliance with their franchise agreements.
Removed
If our franchisees’ financial results worsen due to an inability to attract and retain agents and loan originators, a deterioration in the real estate or mortgage industries, or other factors, our revenue may decline if franchisees are unable to pay the fees owed to us. We terminate franchisees for non-payment, non-reporting and other non-compliance with their franchise agreements.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES ​ 39 ​ PART II ​ 39 ​ ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ 39 ​ ITEM 6. RESERVED ​ 40 ​ ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ 41 ​ ITEM 7A.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES ​ 41 ​ PART II ​ 41 ​ ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ 41 ​ ITEM 6. RESERVED ​ 42 ​ ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ 43 ​ ITEM 7A.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK ​ 56 ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ 58 ​
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK ​ 59 ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ 60 ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis number does not include stockholders whose stock is held in nominee or street name by brokers. All shares of Class B common stock are owned by RIHI, Inc. (“RIHI”), and there is no public market for these shares. For each quarter during the calendar years ended December 31, 2022 and 2021, we declared a $0.23 per share dividend.
Biggest changeThis number does not include stockholders whose stock is held in nominee or street name by brokers. All shares of Class B common stock are owned by RIHI, Inc. (“RIHI”), and there is no public market for these shares.
However the timing and amount of those dividends will be subject to approval and declaration by our Board of Directors and will depend on a variety of factors, including the financial results and cash flows of RMCO, LLC and its consolidated subsidiaries (“RMCO”), distributions we receive from RMCO, cash requirements and financial condition, our ability to pay dividends under our senior secured credit facility and any other applicable contracts, and other factors deemed relevant by our Board of Directors.
The timing and amount of dividends are subject to approval and declaration by our Board of Directors and depend on a variety of factors, including the financial results and cash flows of RMCO, LLC and its consolidated subsidiaries (“RMCO”), distributions we receive from RMCO, cash requirements and financial condition, our ability to pay dividends under our senior secured credit facility and any other applicable contracts, and other factors deemed relevant by our Board of Directors.
The graph assumes that $100 was invested at the closing price on December 31, 2017 and that all dividends were reinvested. 39 Table of Contents ​ The performance graph is not intended to be indicative of future performance.
The graph assumes that $100 was invested at the closing price on December 31, 2018 and that all dividends were reinvested. 41 Table of Contents The performance graph is not intended to be indicative of future performance.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUIT Y, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “RMAX”. As of February 27, 2023, we had 40 stockholders of record of our Class A common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUIT Y, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “RMAX”. As of February 21, 2024, we had 34 stockholders of record of our Class A common stock.
All dividends declared and paid will not be cumulative. See Note 5, Earnings Per Share and Dividends to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.
See Note 5, Earnings Per Share and Dividends , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.
Performance Graph The following graph and table depict the total return to stockholders from December 31, 2017 through December 31, 2022, relative to the performance of the S&P SmallCap 600 Index, S&P 500 Index and S&P Homebuilders Select Industry Index.
Performance Graph The following graph and table depict the total return to stockholders from December 31, 2018 through December 31, 2023, relative to the performance of a selected peer group and the S&P SmallCap 600 Index, S&P 500 Index, S&P Homebuilders Select Industry Index, and Russell 2000 Index.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth stock repurchases of our Class A common stock for the three months ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Dollar ​ ​ Total Number of Shares ​ ​ ​ ​ Value of Shares that ​ ​ Purchased as part of ​ ​ ​ ​ May Yet be ​ ​ Publicly Announced ​ Average Price ​ Purchased Under the Period ​ Plans or Programs (a) ​ Paid Per Share ​ Plans or Programs October 1-31 ​ 175,908 ​ $ 18.65 ​ $ 72,924,653 November 1-30 ​ 179,885 ​ $ 19.08 ​ $ 69,492,548 December 1-31 ​ 182,759 ​ $ 19.66 ​ $ 65,899,135 Total ​ 538,552 ​ ​ ​ ​ ​ ​ (a) In January 2022, our Board of Directors authorized a common stock repurchase program of up to $100 million.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth stock repurchases of our Class A common stock for the three months ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Dollar ​ ​ Total Number of Shares ​ ​ ​ ​ Value of Shares that ​ ​ Purchased as part of ​ ​ ​ ​ May Yet be ​ ​ Publicly Announced ​ Average Price ​ Purchased Under the Period ​ Plans or Programs (a) ​ Paid Per Share ​ Plans or Programs Oct 1-31 ​ — ​ $ — ​ $ 62,491,567 Nov 1-30 ​ — ​ $ — ​ $ 62,491,567 Dec 1-31 ​ — ​ $ — ​ $ 62,491,567 Total ​ — ​ ​ ​ ​ ​ ​ (a) In January 2022, our Board of Directors authorized a common stock repurchase program of up to $100 million.
Removed
We intend to continue to pay a cash dividend on shares of Class A common stock on a quarterly basis.
Added
For the first three quarters during the calendar year ended December 31, 2023 and for each quarter during the calendar year ended December 31, 2022, we declared a $0.23 per share dividend, respectively.
Removed
As of December 31, 2022, $65.9 million remains available under the program.
Added
In the fourth quarter of 2023, our Board of Directors decided to suspend the Company’s quarterly dividend. In light of the recent litigation settlement and ongoing challenging housing and mortgage market conditions, the Company’s Board of Directors believes this action to preserve the Company’s capital is prudent. All dividends declared and paid will not be cumulative.
Added
The Company’s selected peer group includes Anywhere Real Estate Inc., Compass, Inc., Douglas Elliman Inc., eXp World Holdings, Inc., Fathom Holdings Inc., Redfin Corporation and The Real Brokerage Inc.
Added
As of December 31, 2023, $62.5 million remains available under the program. All repurchase activity ceased in the first quarter of 2023 in light of the ongoing challenging housing and mortgage market conditions and subsequently the third quarter litigation settlement.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

75 edited+42 added−31 removed49 unchanged
Biggest changeTotal ​ 58,719 ​ 61,327 ​ 62,303 ​ (2,608) ​ (4.3) % ​ (976) ​ (1.6) % Canada ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company-Owned Regions ​ 20,228 ​ 19,596 ​ 6,182 ​ 632 ​ 3.2 % ​ 13,414 ​ n/m % Independent Regions ​ 4,892 ​ 4,548 ​ 15,765 ​ 344 ​ 7.6 % ​ (11,217) ​ n/m % Canada Total ​ 25,120 ​ 24,144 ​ 21,947 ​ 976 ​ 4.0 % ​ 2,197 ​ 10.0 % U.S. and Canada Total ​ 83,839 ​ 85,471 ​ 84,250 ​ (1,632) ​ (1.9) % ​ 1,221 ​ 1.4 % Outside U.S. and Canada ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Independent Regions ​ 60,175 ​ 56,527 ​ 53,542 ​ 3,648 ​ 6.5 % ​ 2,985 ​ 5.6 % Outside U.S. and Canada Total ​ 60,175 ​ 56,527 ​ 53,542 ​ 3,648 ​ 6.5 % ​ 2,985 ​ 5.6 % Total ​ 144,014 ​ 141,998 ​ 137,792 ​ 2,016 ​ 1.4 % ​ 4,206 ​ 3.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ RE/MAX open offices: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. ​ 3,462 ​ 3,534 ​ 3,608 ​ (72) ​ (2.0) % ​ (74) ​ (2.1) % Canada ​ 972 ​ 1,025 ​ 1,011 ​ (53) ​ (5.2) % ​ 14 ​ 1.4 % U.S. and Canada Total ​ 4,434 ​ 4,559 ​ 4,619 ​ (125) ​ (2.7) % ​ (60) ​ (1.3) % Outside U.S. and Canada ​ 4,741 ​ 4,405 ​ 4,045 ​ 336 ​ 7.6 % ​ 360 ​ 8.9 % Total ​ 9,175 ​ 8,964 ​ 8,664 ​ 211 ​ 2.4 % ​ 300 ​ 3.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Motto open offices (1)(2) : ​ 231 ​ 187 ​ 141 ​ 44 ​ 23.5 % ​ 46 ​ 32.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 vs. 2021 ​ ​ 2021 vs. 2020 ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ # ​ % ​ ​ # ​ % ​ RE/MAX franchise sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
Biggest changeTotal ​ 55,131 ​ 58,719 ​ 61,327 ​ (3,588) ​ (6.1) % ​ (2,608) ​ (4.3) % Canada ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company-Owned Regions ​ 20,270 ​ 20,228 ​ 19,596 ​ 42 ​ 0.2 % ​ 632 ​ 3.2 % Independent Regions ​ 4,898 ​ 4,892 ​ 4,548 ​ 6 ​ 0.1 % ​ 344 ​ 7.6 % Canada Total ​ 25,168 ​ 25,120 ​ 24,144 ​ 48 ​ 0.2 % ​ 976 ​ 4.0 % U.S. and Canada Total ​ 80,299 ​ 83,839 ​ 85,471 ​ (3,540) ​ (4.2) % ​ (1,632) ​ (1.9) % Outside U.S. and Canada ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Independent Regions ​ 64,536 ​ 60,175 ​ 56,527 ​ 4,361 ​ 7.2 % ​ 3,648 ​ 6.5 % Outside U.S. and Canada Total ​ 64,536 ​ 60,175 ​ 56,527 ​ 4,361 ​ 7.2 % ​ 3,648 ​ 6.5 % Total ​ 144,835 ​ 144,014 ​ 141,998 ​ 821 ​ 0.6 % ​ 2,016 ​ 1.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ RE/MAX open offices: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. ​ 3,340 ​ 3,462 ​ 3,534 ​ (122) ​ (3.5) % ​ (72) ​ (2.0) % Canada ​ 956 ​ 972 ​ 1,025 ​ (16) ​ (1.6) % ​ (53) ​ (5.2) % U.S. and Canada Total ​ 4,296 ​ 4,434 ​ 4,559 ​ (138) ​ (3.1) % ​ (125) ​ (2.7) % Outside U.S. and Canada ​ 4,726 ​ 4,741 ​ 4,405 ​ (15) ​ (0.3) % ​ 336 ​ 7.6 % Total ​ 9,022 ​ 9,175 ​ 8,964 ​ (153) ​ (1.7) % ​ 211 ​ 2.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Motto open offices (1) : ​ 246 ​ 231 ​ 187 ​ 15 ​ 6.5 % ​ 44 ​ 23.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 vs. 2022 ​ ​ 2022 vs. 2021 ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ # ​ % ​ ​ # ​ % ​ RE/MAX franchise sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. ​ 184 ​ 184 ​ 184 ​ — ​ — % ​ — ​ — % Canada ​ 37 ​ 36 ​ 61 ​ 1 ​ 2.8 % ​ (25) ​ (41.0) % U.S. and Canada Total ​ 221 ​ 220 ​ 245 ​ 1 ​ 0.5 % ​ (25) ​ (10.2) % Outside U.S. and Canada ​ 727 ​ 743 ​ 824 ​ (16) ​ (2.2) % ​ (81) ​ (9.8) % Total ​ 948 ​ 963 ​ 1,069 ​ (15) ​ (1.6) % ​ (106) ​ (9.9) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Motto franchise sales (1) : ​ 27 ​ 40 ​ 64 ​ (13) ​ (32.5) % ​ (24) ​ (37.5) % (1) As of December 31, 2023, 2022 and 2021, there were 56, 58 and 31 offices, respectively, that we were offering short-term fi nancial relief and are temporarily not billed or are deferred. ​ ​ 46 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ Total revenue $ 325,671 ​ $ 353,386 ​ $ 329,701 ​ Total selling, operating and administrative expenses $ 171,548 ​ $ 173,980 ​ $ 179,491 ​ Operating income (loss) $ (10,637) ​ $ 38,212 ​ $ (9,931) ​ Net income (loss) $ (98,486) ​ $ 10,757 ​ $ (24,620) ​ Net income (loss) attributable to RE/MAX Holdings, Inc. $ (69,022) ​ $ 6,110 ​ $ (15,616) ​ Adjusted EBITDA (1) $ 96,288 ​ $ 121,632 ​ $ 119,583 ​ Adjusted EBITDA margin (1) ​ 29.6 % ​ 34.4 % ​ 36.3 % (1) See “—Non-GAAP Financial Measures” for further discussion of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of the differences between Adjusted EBITDA and net income (loss), which is the most comparable U.S.
If the TLR as of the last day of such fiscal year is equal to or less than 4.25:1 but above 3.75:1, the repayment percentage is 25% of ECF and if the TLR as of the last day of such fiscal year is less than 3.75:1, no repayment from ECF is required.
If the TLR as of the last day of such fiscal year is equal to or less than 4.25:1 but above 3.75:1, the repayment percentage is 25% of ECF and if our TLR as of the last day of such fiscal year is less than 3.75:1, no repayment from ECF is required.
(5) During the second quarter of 2022, a loss was recognized in connection with the termination of the booj office lease. See Note 3, Leases for additional information. (6) Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with acquisition activities and integration of acquired companies.
(6) During the second quarter of 2022, a loss was recognized in connection with the termination of the booj office lease. See Note 3, Leases , for additional information. (7) Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with acquisition activities and integration of acquired companies.
Off Balance Sheet Arrangements We have no material off balance sheet arrangements as of December 31, 2022. Critical Accounting Judgments and Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes.
Off Balance Sheet Arrangements We have no material off balance sheet arrangements as of December 31, 2023. Critical Accounting Judgments and Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes.
Borrowings under the term loans and revolving loans accrue interest, at our option on (a) LIBOR, provided LIBOR shall be no less than 0.50% plus an applicable margin of 2.50% and, provided further that such rate shall be adjusted for reserve requirements for eurocurrency liabilities, if any (the “LIBOR Rate”) or (b) the greatest of (i) the prime rate as quoted by the Wall Street Journal, (ii) the NYFRB Rate (as defined in the Senior Secured Credit Facility) plus 0.50% and (iii) the one-month Eurodollar Rate plus 1.00%, (such greatest rate, the “ABR”) plus, in each case, an applicable margin of 1.50%.
Prior to July 2023, borrowings under the term loans and revolving loans accrue interest, at our option on (a) LIBOR, provided LIBOR shall be no less than 0.50% plus an applicable margin of 2.50% and, provided further that such rate shall be adjusted for reserve requirements for eurocurrency liabilities, if any (the “LIBOR Rate”) or (b) the greatest of (i) the prime rate as quoted by the Wall Street Journal, (ii) the NYFRB Rate (as defined in the Senior Secured Credit Facility) plus 0.50% and (iii) the one-month Eurodollar Rate plus 1.00%, (such greatest rate, the “ABR”) plus, in each case, an applicable margin of 1.50%.
Future payments under these leases and commitments, net of payments to be received under sublease agreements of $7.9 million in the aggregate, are included in the table above, See Note 3, Leases , to the accompanying consolidated financial statements for more information.
Future payments under these leases and commitments, net of payments to be received under sublease agreements of $5.9 million in the aggregate, are included in the table above, See Note 3, Leases , to the accompanying consolidated financial statements for more information.
The revised facility also provides for incremental facilities under which RE/MAX, LLC may request to add one or more tranches of term facilities or increase any then existing credit facility in the aggregate principal amount of up to $100 million (or a higher amount subject to the terms and conditions of the Senior Secured Credit Facility), subject to lender participation.
The Senior Secured Credit Facility also provides for incremental facilities under which RE/MAX, LLC may request to add one or more tranches of term facilities or increase any than existing credit facility in the aggregate principal amount of up to $100 million (or a higher amount subject to the terms and conditions of the Senior Secured Credit Facility), subject to lender participation.
Capital Expenditures The total aggregate amount for purchases of property and equipment and capitalization of developed software was $9.9 million, $15.2 million and $6.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. These amounts primarily relate to spend on our corporate headquarters refresh and investments in technology.
Capital Expenditures The total aggregate amount for purchases of property and equipment and capitalization of developed software was $6.4 million, $9.9 million and $15.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. These amounts primarily relate to spend on our corporate headquarters refresh and investments in technology.
The amounts present above are undiscounted. (5) Represents outstanding purchase orders with vendors initiated in the ordinary course of business for operating and capital expenditures, including payments from the Marketing Funds. 54 Table of Contents ​ (6) Represents estimated undiscounted payments to the former owner of Motto and former owners of Gadberry Group as required per the purchase agreements.
The amounts present above are undiscounted. (5) Represents outstanding purchase orders with vendors initiated in the ordinary course of business for operating and capital expenditures, including payments from the Marketing Funds. (6) Represents estimated undiscounted payments to the former owner of Motto and former owners of Gadberry Group as required per the purchase agreements.
Non-GAAP Financial Measures The Securities and Exchange Commission (“SEC”) has adopted rules to regulate the use in filings with the SEC and in public disclosures of financial measures that are not in accordance with U.S. GAAP, such as Revenue excluding the 48 Table of Contents ​ Marketing Funds and Adjusted EBITDA and the ratios related thereto.
Non-GAAP Financial Measures The Securities and Exchange Commission (“SEC”) has adopted rules to regulate the use in filings with the SEC and in public disclosures of financial measures that are not in accordance with U.S. GAAP, such as Revenue excluding the Marketing Funds and Adjusted EBITDA and the ratios related thereto.
(7) Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 11, Fair Value Measurements, to the accompanying consolidated financial statements for additional information.
(8) Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 11, Fair Value Measurements, to the accompanying consolidated financial statements for additional information.
GAAP measure for operating performance. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue. Results of Operations Year Ended December 31, 2022 vs.
GAAP measure for operating performance. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue. Results of Operations Year Ended December 31, 2023 vs.
The liability pursuant to the TRAs will increase upon future exchanges by RIHI of RMCO common units, with the increase representing 85% of the estimated future tax benefits, if any, resulting from such exchanges. Payments are made on this liability as tax benefits are realized by Holdings.
The liability pursuant to the TRAs will increase upon future exchanges by RIHI of RMCO common units or with future reversals of the valuation allowances, with the increase representing 85% of the estimated future tax benefits, if any, resulting from such exchanges. Payments are made on this liability as tax benefits are realized by Holdings.
RMCO is generally required to distribute cash to its members to cover each member’s estimated tax liabilities, if any, with respect to 53 Table of Contents ​ their allocable share of RMCO earnings.
RMCO is generally required to distribute cash to its members to cover each member’s estimated tax liabilities, if any, with respect to their allocable share of RMCO earnings.
In this regard, our short-term liquidity position from time to time has been, and will continue to be, affected by a number of factors including agents in the RE/MAX network, particularly in Company-Owned Regions.
In this regard, our short-term liquidity position from time to time has been, and will continue to be, affected by a number of factors including agents in the RE/MAX network, particularly in Company-Owned Regions and to a lesser degree, open offices in the Motto network.
In order to expand our technology, we plan to continue to re-invest in our business in order to improve operational efficiencies and enhance the tools and services provided to the affiliates in our networks. Total capital expenditures for 2023 are expected to be between $8.0 million and $11.0 million. See Financial and Operational Highlights above for additional information.
In order to expand our technology, we plan to continue to re-invest in our business in order to improve operational efficiencies and enhance the tools and services provided to the affiliates in our networks. Total capital expenditures for 2024 are expected to be between $7.0 million and $9.0 million. See Financial and Operational Highlights above for additional information.
The Senior Secured Credit Facility may require additional prepayments throughout the term of the loan based on the TLR as discussed above. (2) The variable interest rate on the Senior Secured Credit Facility is assumed at the interest rate in effect as of December 31, 2022 of 6.9%. (3) We are obligated under non-cancelable leases for offices and equipment.
The Senior Secured Credit Facility may require additional prepayments throughout the term of the loan based on our TLR as discussed above. (2) The variable interest rate on the Senior Secured Credit Facility is assumed at the interest rate in effect as of December 31, 2023 of 8.0%. (3) We are obligated under non-cancelable leases for offices and equipment.
A TRA liability of $26.6 million exists as of December 31, 2022 for the future cash obligations expected to be paid under the TRAs and is not discounted. The calculation of this liability is a function of the step-up described above and therefore has the same complexities and estimates.
A TRA liability of $0.8 million exists as of December 31, 2023 for the future cash obligations expected to be paid under the TRAs and is not discounted. The calculation of this liability is a function of the step-up described above and therefore has the same complexities and estimates.
Holdings receives distributions from RMCO on a quarterly basis that are equal to the dividend payments Holdings makes to the stockholders of its Class A common stock. As a result, absent any additional distributions, Holdings may have insufficient funds to cover its estimated tax and TRA liabilities.
Holdings received distributions from RMCO on a quarterly basis that were equal to the dividend payments Holdings made to the stockholders of its Class A common stock. As a result, absent any additional distributions, Holdings may have insufficient funds to cover its estimated tax and TRA liabilities.
(4) During the fourth quarter of 2022, in connection with the restructuring of our business and technology offerings, we made the decision to wind down the Gadberry Group, resulting in an impairment charge to the Gadberry Group reporting unit goodwill.
In addition, during the fourth quarter of 2022, in connection with the restructuring of the business and technology offerings, the Company made the decision to wind down the Gadberry Group, resulting in an impairment charge to the Gadberry Group reporting unit goodwill.
We have satisfied these needs primarily through our existing cash balances, cash generated by our operations and funds available under our Senior Secured Credit Facility.
We have satisfied our liquidity requirements primarily through our existing cash balances, cash generated by our operations and funds available under our Senior Secured Credit Facility.
Our cash flows are primarily related to the timing of: (i) cash receipt of revenues; (ii) payment of selling, operating and administrative expenses; (iii) net investments in Mortgage; (iv) cash consideration for acquisitions and acquisition-related expenses; (v) principal payments and related interest payments on our Senior Secured Credit Facility; 50 Table of Contents ​ (vi) dividend payments to stockholders of our Class A common stock; (vii) distributions and other payments to non-controlling unitholders pursuant to the terms of RMCO’s limited liability company operating agreement (“the RMCO, LLC Agreement”); (viii) corporate tax payments paid by the Company; (ix) payments to the TRA parties pursuant to the TRAs; and (x) share repurchases.
Our cash flows and liquidity position are primarily affected by: (i) cash receipt of revenues; (ii) payment of selling, operating and administrative expenses; (iii) net investments in Mortgage; (iv) cash consideration for acquisitions and acquisition-related expenses; (v) principal payments and related interest payments on our Senior Secured Credit Facility; (vi) dividend payments to stockholders of our Class A common stock; (vii) distributions and other payments to non-controlling unitholders pursuant to the terms of RMCO’s limited liability company operating agreement (“the RMCO, LLC Agreement”); (viii) corporate tax payments paid by the Company; (ix) payments to the TRA parties pursuant to the TRAs; (x) payments related to legal settlements including the settlement of the industry class-action lawsuits and other legal settlements; and (xi) share repurchases.
Similar to the deferred tax assets, these liabilities would likely increase materially if RIHI redeems additional common units of RMCO. New Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, for recently issued accounting pronouncements applicable to us and the effect of those standards on our financial statements and related disclosures.
Similar to the deferred tax assets, these liabilities would likely increase materially if RIHI redeems additional common units of RMCO or with future reversals of the valuation allowances. 58 Table of Contents New Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, for recently issued accounting pronouncements applicable to us and the effect of those standards on our financial statements and related disclosures.
See “—Non-GAAP Financial Measures” for further discussion of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of the differences between Adjusted EBITDA and net income (loss), which is the most comparable U.S. generally accepted accounting principles (“U.S. GAAP”) measure for operating performance.
(a) See “—Non-GAAP Financial Measures” for further discussion of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of the differences between Adjusted EBITDA and net income (loss), which is the most comparable U.S. generally accepted accounting principles (“U.S. GAAP”) measure for operating performance. Adjusted EBITDA 44 Table of Contents margin represents Adjusted EBITDA as a percentage of Total revenue).
Return of Capital Our Board of Directors approved quarterly cash dividends of $0.23 per share on all outstanding shares of Class A common stock every quarter in 2022 and 2021, respectively, as disclosed in Note 5, Earnings Per Share and Dividends .
Return of Capital Our Board of Directors approved quarterly cash dividends of $0.23 per share on all outstanding shares of Class A common stock in the first three quarters of 2023 and every quarter in 2022, as disclosed in Note 5, Earnings Per Share and Dividends .
(a) See “—Non-GAAP Financial Measures” for further discussion of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of the differences between Adjusted EBITDA and net income (loss), which is the most comparable U.S. GAAP measure for operating performance. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of Total revenue).
See “—Non-GAAP Financial Measures” for further discussion of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of the differences between Adjusted EBITDA and net income (loss), which is the most comparable GAAP measure for operating performance.
Some of these limitations are: ● these measures do not reflect changes in, or cash requirements for, our working capital needs; ● these measures do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt; ● these measures do not reflect our income tax expense or the cash requirements to pay our taxes; ● these measures do not reflect the cash requirements to pay dividends to stockholders of our Class A common stock and tax and other cash distributions to our non-controlling unitholders; ● these measures do not reflect the cash requirements pursuant to the Tax Receivable Agreements (“TRAs”); ● these measures do not reflect the cash requirements for share repurchases; ● although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements; ● although equity-based compensation is a non-cash charge, the issuance of equity-based awards may have a dilutive impact on earnings per share; and ● other companies may calculate these measures differently, so similarly named measures may not be comparable.
Some of these limitations are: ● these measures do not reflect changes in, or cash requirements for, our working capital needs; ● these measures do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt; ● these measures do not reflect our income tax expense or the cash requirements to pay our taxes; ● these measures do not reflect the cash requirements to pay dividends to stockholders of our Class A common stock and tax and other cash distributions to our non-controlling unitholders; ● these measures do not reflect the cash requirements pursuant to the Tax Receivable Agreements (“TRAs”); ● these measures do not reflect the cash requirements for share repurchases; ● these measures do not reflect the cash requirements for the settlement of the industry class-action lawsuits and other legal settlements; ● although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements; ● although equity-based compensation is a non-cash charge, the issuance of equity-based awards may have a dilutive impact on earnings or loss per share; and ● other companies may calculate these measures differently, so similarly named measures may not be comparable. 51 Table of Contents The adjustments to EBITDA in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods.
We have existing cash balances, cash flows from operating activities, access to our revolving facility and incremental facilities under our Senior Secured Credit Facility available to support the needs of our business. As needs arise, we may seek additional financing in the public capital markets.
Capital Allocation Priorities Liquidity Our objective is to maintain a strong liquidity position. We have existing cash balances, cash flows from operating activities and access to incremental facilities under our Senior Secured Credit Facility available to support the needs of our business. As needs arise, we may seek additional financing in the public capital markets.
These factors contributed to the following results for the year ended December 31, 2022: (Compared to the year ended December 31, 2021, unless otherwise noted) ● Total revenue of $353.4 million, an increase of 7.2%. ● Revenue excluding the Marketing Funds (a) , increased 6.4%, or $15.8 million, which was driven by 7.8% growth from acquisitions, partially offset by negative organic growth of 0.8% and adverse foreign currency movements of 0.6%. ● Net income (loss) attributable to RE/MAX Holdings, Inc. of $6.1 million. ● Adjusted EBITDA (a) of $121.6 million and Adjusted EBITDA margin (a) of 34.4% compared to Adjusted EBITDA (a) of $119.6 million and Adjusted EBITDA margin (a) of 36.3% from the prior year. ● Total agent count increased by 1.4% to 144,014 agents. ● U.S. and Canada combined agent count decreased 1.9% to 83,839 agents with a 4.3% decline in U.S. agent count, partially offset by 4.0% Canadian agent growth. ● Total open Motto Mortgage offices increased 23.5% to 231 offices.
These factors contributed to the following results for the year ended December 31, 2023: (Compared to the year ended December 31, 2022, unless otherwise noted) ● Total revenue decreased 7.8% to $325.7 million. ● Revenue excluding the Marketing Funds (a) , decreased 8.1%, or $21.3 million, which was driven by negative organic growth of 7.4% and adverse foreign currency movements of 0.7%. ● Net income (loss) attributable to RE/MAX Holdings, Inc. of ($69.0) million. ● Adjusted EBITDA (a) of $96.3 million and Adjusted EBITDA margin (a) of 29.6% compared to Adjusted EBITDA (a) of $121.6 million and Adjusted EBITDA margin (a) of 34.4% from the prior year. ● Total agent count increased by 0.6% to 144,835 agents. ● U.S. and Canada combined agent count decreased 4.2% to 80,299 agents with a 6.1% decline in U.S. agent count, partially offset by 0.2% Canadian agent growth. ● Total open Motto Mortgage offices increased 6.5% to 246 offices.
Such a difference would impact future earnings through amortization expense of these intangibles. In addition, if forecasts supporting the valuation of the intangible assets or goodwill are not achieved, impairments could arise, as discussed further above. Deferred Tax Assets and TRA Liability As discussed in Item 1. Business, Holdings has twice acquired significant portions of the ownership in RMCO.
In addition, if forecasts supporting the valuation of the intangible assets or goodwill are not achieved, impairments could arise, as discussed further above. Deferred Tax Assets and TRA Liability As discussed in Item 1. Business, Holdings has twice acquired significant portions of the ownership in RMCO.
Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue. 43 Table of Contents ​ Selected Operating and Financial Highlights The following tables summarize several key performance indicators and our results of operations for the last three years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2022 vs. 2021 ​ ​ 2021 vs. 2020 ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ # ​ % ​ ​ # ​ % ​ Agent Count: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company-Owned Regions ​ 51,491 ​ 53,946 ​ 48,212 ​ (2,455) ​ (4.6) % ​ 5,734 ​ n/m % Independent Regions ​ 7,228 ​ 7,381 ​ 14,091 ​ (153) ​ (2.1) % ​ (6,710) ​ n/m % U.S.
Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue. 45 Table of Contents Selected Operating and Financial Highlights The following tables summarize several key performance indicators and our results of operations for the last three years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2023 vs. 2022 ​ ​ 2022 vs. 2021 ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ # ​ % ​ ​ # ​ % ​ Agent Count: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company-Owned Regions ​ 48,401 ​ 51,491 ​ 53,946 ​ (3,090) ​ (6.0) % ​ (2,455) ​ (4.6) % Independent Regions ​ 6,730 ​ 7,228 ​ 7,381 ​ (498) ​ (6.9) % ​ (153) ​ (2.1) % U.S.
Settlement and Impairment Charges Impairment Charge – Goodwill (2022) During the fourth quarter of 2022, in connection with the restructuring of our business and change to our RE/MAX technology offerings, we made the decision to wind down the Gadberry Group reporting unit in the Real Estate segment.
Impairment Charge – Goodwill (2022) During the fourth quarter of 2022, in connection with the restructuring of our business and change to our RE/MAX technology offerings, we made the decision to wind down the Gadberry Group reporting unit in the Real Estate segment. Therefore, we fully impaired the reporting unit’s goodwill and recorded a non-cash impairment charge of $7.1 million.
The excess of the purchase price over the amount allocated to the identifiable assets less liabilities is recorded as goodwill. Purchase price allocations require management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities primarily using discounted cash flow analysis.
Purchase price allocations require management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities primarily using discounted cash flow analysis.
Marketing Funds Fees and Marketing Funds Expenses Revenue from Marketing Funds fees increased primarily from the INTEGRA acquisition and an increase in Canadian agent count, partially offset by a decrease in U.S. agent count and adverse foreign currency movements. We recognize an equal and offsetting amount of expenses to revenue such that there is no impact to our overall profitability.
Marketing Funds Fees and Marketing Funds Expenses Revenue from Marketing Funds fees decreased primarily from a decrease in U.S. agent count, fee deferrals due to a reduction in collections and adverse foreign currency movements. We recognize an equal and offsetting amount of expenses to revenue such that there is no impact to our overall profitability.
If estimates or assumptions used to complete the 55 Table of Contents ​ initial purchase price allocation and estimate the fair value of acquired assets and liabilities significantly differed from assumptions made in the final valuation, the allocation of purchase price between goodwill and intangibles could significantly differ.
If estimates or assumptions used to complete the initial purchase price allocation and estimate the fair value of acquired assets and liabilities significantly differed from assumptions made in the final valuation, the allocation of purchase price between goodwill and intangibles could significantly differ. Such a difference would impact future earnings through amortization expense of these intangibles.
Investing Activities During the year ended December 31, 2022, the change in cash (used in) investing activities was primarily the result of the INTEGRA acquisition in the prior year and lower spend on our corporate headquarters refresh.
Investing Activities During the year ended December 31, 2023, the change in cash used in investing activities was primarily the result of lower capitalizable investments in technology as compared to the prior year and no spend on our corporate headquarters refresh in the current year .
The Senior Secured Credit Facility includes a provision for transition from LIBOR to the alternative reference rate of Term Secured Overnight Financing Rate (“SOFR”)) on or before June 2023 (the LIBOR Rate cessation date). As of December 31, 2022, the interest rate on the term loan facility was 6.9%.
The Senior Secured Credit Facility includes a provision for transition from LIBOR to the alternative reference rate of Term Secured Overnight Financing Rate (“SOFR”)) on or before June 2023 (the LIBOR Rate cessation date) and we transitioned from LIBOR to Adjusted Term SOFR on July 31, 2023.
Adjusted EBITDA See “—Non-GAAP Financial Measures” for our definition of Adjusted EBITDA and for further discussion of our presentation of Adjusted EBITDA as well as a reconciliation of Adjusted EBITDA to net income (loss), which is the most comparable GAAP measure for operating performance.
Adjusted EBITDA See “—Non-GAAP Financial Measures” for our definition of Adjusted EBITDA and for further discussion of our presentation of Adjusted EBITDA as well as a reconciliation of Adjusted EBITDA to net income (loss), which is the most comparable GAAP measure for operating performance. 50 Table of Contents Adjusted EBITDA was $96.3 million for the year ended December 31, 2023, a decrease of $25.3 million from the comparable prior year period.
Therefore, we fully impaired the reporting unit’s goodwill and recorded a non-cash impairment charge of $7.1 million. See Note 8, Intangible Assets and Goodwill for additional information. Impairment Charge – Leased Assets (2022) During the first and third quarters of 2022, we subleased portions of our corporate headquarters.
See Note 8, Intangible Assets and Goodwill , for additional information. 49 Table of Contents Impairment Charge – Leased Assets (2022) During the first and third quarters of 2022, we subleased portions of our corporate headquarters.
Other selling, operating and administrative expenses increased primarily due to higher travel and events-related expenses, mainly from increased attendance at our annual RE/MAX agent convention and fewer COVID restrictions, an increase in bad debt expense, increased investments in technology and restructuring charges including a $1.2 million write off capitalized software development costs (see Note 2, Summary of Significant Accounting Policies ), partially offset by lower costs associated with acquiring and integrating new companies and changes in the fair value of the contingent consideration liabilities.
Other selling, operating and administrative expenses increased primarily due to an increase in expenses from our annual RE/MAX agent convention and an increase in bad debt expense, partially offset by lower restructuring charges from the prior year including a $1.2 million write off capitalized software development costs (see Note 2, Summary of Significant Accounting Policies , for more information).
Distributions are required to be made by RMCO to its members on a pro-rata basis in accordance with each members’ ownership percentage in RMCO. These distributions have historically been either in the form of payments to cover its members’ estimated tax liabilities, dividend payments, or payments to ensure pro-rata distributions have occurred.
These distributions have historically been either in the form of payments to cover its members’ estimated tax liabilities, dividend payments, or payments to ensure pro-rata distributions have occurred.
During the year ended December 31, 2022, 1,533,728 shares of our Class A common stock were repurchased and retired for $34.1 million, excluding commissions, at an average cost of $22.23 per share. As of December 31, 2022, $65.9 million remained available under the share repurchase authorization.
During the year ended December 31, 2023, 160,405 shares of our Class A common stock were repurchased and retired for $3.4 55 Table of Contents million, excluding commissions, at an average cost of $21.24 per share. As of December 31, 2023, $62.5 million remained available under the share repurchase authorization.
Sources and Uses of Cash As of December 31, 2022, and 2021, we had $108.7 million and $126.3 million, respectively, in cash and cash equivalents, of which approximately $23.5 million and $8.9 million were denominated in foreign currencies, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2022 ​ 2021 Cash provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities ​ $ 71,142 ​ $ 42,442 Investing activities ​ ​ (11,500) ​ ​ (194,922) Financing activities ​ ​ (78,363) ​ ​ 189,352 Effect of exchange rate changes on cash ​ ​ (1,550) ​ ​ 300 Net change in cash, cash equivalents and restricted cash ​ $ (20,271) ​ $ 37,172 Operating Activities Cash provided by operating activities increased primarily as a result of: ● an increase due to the loss on contract settlements of $40.9 million in 2021; ● an increase due to lower costs associated with acquiring and integrating new companies; ● an increase due to lower tax payments in the current year of $8.4 million; ● an increase in Adjusted EBITDA of $2.0 million that more than offset by; ● a decrease due to higher payments of certain employee related liabilities; ● a decrease due to higher interest payments of $9.0 million, due to the increase of our Senior Secured Credit Facility in July 2021 and higher interest rates in the current year; ● a decrease due to severance and related expenses of $7.6 million for the restructure of our business; and ● timing differences on various operating assets and liabilities.
Sources and Uses of Cash As of December 31, 2023, and 2022, we had $82.6 million and $108.7 million, respectively, in cash and cash equivalents, of which approximately $32.5 million and $23.5 million were denominated in foreign currencies, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 Cash provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities ​ $ 28,264 ​ $ 71,142 Investing activities ​ ​ (5,643) ​ ​ (11,500) Financing activities ​ ​ (35,817) ​ ​ (78,363) Effect of exchange rate changes on cash ​ ​ 831 ​ ​ (1,550) Net change in cash, cash equivalents and restricted cash ​ $ (12,365) ​ $ (20,271) Operating Activities Cash provided by operating activities decreased primarily as a result of: ● a decrease in Adjusted EBITDA of $25.3 million; ● a decrease due to increased interest payments of $14.9 million, due to higher interest rates in the current year; 54 Table of Contents ● a decrease due to higher payments of certain employee related liabilities; offset by; ● an increase due to lower costs associated with severance and related restructuring expenses; ● an increase due to a higher cash bonus payout in the prior year; and ● timing differences on various operating assets and liabilities.
We are not able to provide a reconciliation of anticipated non-GAAP financial information for future periods to the corresponding U.S.
The exclusion of these charges and costs in future periods will have a significant impact on our Adjusted EBITDA. We are not able to provide a reconciliation of anticipated non-GAAP financial information for future periods to the corresponding U.S.
Continuing Franchise Fees Revenue from Continuing franchise fees increased primarily due to contributions from the INTEGRA acquisition, Motto growth and RE/MAX growth in Canada and globally, partially offset by a decrease in U.S. agent count and adverse foreign currency movements. 45 Table of Contents ​ Broker Fees Revenue from Broker fees decreased primarily due to lower average transactions per agent, partially offset by rising home prices and contributions from the acquisition of INTEGRA.
Continuing Franchise Fees Revenue from Continuing franchise fees decreased primarily due to a decrease in U.S. agent count, fee deferrals due to a reduction in collections and adverse foreign currency movements partially offset by Mortgage segment growth from an increase in Motto open offices. 47 Table of Contents Broker Fees Revenue from Broker fees decreased primarily due to lower average transactions per agent and from a decrease in U.S. agent count.
Professional fees decreased primarily due to lower costs associated with acquiring and integrating new companies, partially offset by an increase in legal expenses. See Note 14, Commitments and Contingencies , for additional information. We expect to incur $5.0 million to $7.0 million in ongoing legal expenses related to our antitrust litigations in 2023.
Professional fees decreased primarily due to a decrease in legal expenses. See Note 14, Commitments and Contingencies , for additional information. We expect to incur $1.0 million to $2.0 million in ongoing legal expenses related to our antitrust litigations in 2024.
Therefore, as necessary, RMCO makes a separate distribution to Holdings, and because all distributions must be made on a pro-rata basis, RIHI receives a separate payment to ensure such pro-rata distributions have occurred. Payments Pursuant to the Tax Receivable Agreements As of December 31, 2022, the Company reflected a total liability of $26.6 million under the terms of its TRAs.
Therefore, as necessary, RMCO makes a separate distribution to Holdings, and because all distributions must be made on a pro-rata basis, RIHI receives a separate payment to ensure such pro-rata distributions have occurred.
Year Ended December 31, 2021 Revenue A summary of the components of our revenue is as follows (in thousands except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2022 ​ 2021 ​ $ ​ % ​ Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Continuing franchise fees ​ $ 133,389 ​ $ 118,504 ​ $ 14,885 ​ 12.6 % Annual dues ​ ​ 35,676 ​ ​ 35,549 ​ ​ 127 ​ 0.4 % Broker fees ​ ​ 62,939 ​ ​ 65,456 ​ ​ (2,517) ​ (3.8) % Marketing Funds fees ​ ​ 90,319 ​ ​ 82,391 ​ ​ 7,928 ​ 9.6 % Franchise sales and other revenue ​ ​ 31,063 ​ ​ 27,801 ​ ​ 3,262 ​ 11.7 % Total revenue ​ $ 353,386 ​ $ 329,701 ​ $ 23,685 ​ 7.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2022 ​ 2021 ​ $ ​ % ​ Revenue excluding the Marketing Funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ $ 353,386 ​ $ 329,701 ​ $ 23,685 ​ 7.2 % Less: Marketing Funds fees ​ ​ 90,319 ​ ​ 82,391 ​ ​ 7,928 ​ 9.6 % Revenue excluding the Marketing Funds ​ $ 263,067 ​ $ 247,310 ​ $ 15,757 ​ 6.4 % RE/MAX Holdings generated revenue of $353.4 million in 2022, an increase of $23.7, or 7.2%, compared to $329.7 million in the same period in 2021.
Year Ended December 31, 2022 Revenue A summary of the components of our revenue is as follows (in thousands except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2023 ​ 2022 ​ $ ​ % ​ Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Continuing franchise fees ​ $ 127,384 ​ $ 133,389 ​ $ (6,005) ​ (4.5) % Annual dues ​ ​ 33,904 ​ ​ 35,676 ​ ​ (1,772) ​ (5.0) % Broker fees ​ ​ 51,012 ​ ​ 62,939 ​ ​ (11,927) ​ (19.0) % Marketing Funds fees ​ ​ 83,861 ​ ​ 90,319 ​ ​ (6,458) ​ (7.2) % Franchise sales and other revenue ​ ​ 29,510 ​ ​ 31,063 ​ ​ (1,553) ​ (5.0) % Total revenue ​ $ 325,671 ​ $ 353,386 ​ $ (27,715) ​ (7.8) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2023 ​ 2022 ​ $ ​ % ​ Revenue excluding the Marketing Funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ $ 325,671 ​ $ 353,386 ​ $ (27,715) ​ (7.8) % Less: Marketing Funds fees ​ ​ 83,861 ​ ​ 90,319 ​ ​ (6,458) ​ (7.2) % Revenue excluding the Marketing Funds ​ $ 241,810 ​ $ 263,067 ​ $ (21,257) ​ (8.1) % RE/MAX Holdings generated revenue of $325.7 million in 2023, a decrease of $27.7 million or 7.8%, compared to $353.4 million in the same period in 2022.
In general, the Company can make unlimited restricted payments, so long as the TLR is below 3.50:1 (both before and after giving effect to such payments). As of December 31, 2022, our TLR was 3.00:1, as such no ECF payment was required, and the limits on restricted payments were not applicable.
The restricted payments include declaration or payment of dividends, repurchase of shares, or other distributions. In general, we can make unlimited restricted payments, so long as the TLR is below 3.50:1 (both before and after giving effect to such payments). As of December 31, 2023, the TLR was 7.80:1.
The Financial and Operational Highlights, Results of Operations and Sources and Uses of Cash, for the years ended December 31, 2021 and 2020 and as compared to the years ended December 31, 2020 and 2019, respectively, has been previously disclosed in Item 7 of our 2021 Annual Report on Form 10-K and in Item 7 of our 2020 Amendment No. 1 to Annual Report on Form 10-K/A , and are incorporated herein by reference. 42 Table of Contents ​ Key Performance Indicators Operating Performance Indicators We believe that agent count (particularly in the U.S. and Canada) and open Motto offices, and to a lesser extent, RE/MAX and Motto franchise sales, are key operating measures of our success.
The Financial and Operational Highlights, Results of Operations and Sources and Uses of Cash, for the years ended December 31, 2022 and 2021 and as compared to the years ended December 31, 2021 and 2020, respectively, has been previously disclosed in Item 7 of our 2022 Annual Report on Form 10-K and in Item 7 of our 2021 Annual Report on Form 10-K , and are incorporated herein by reference.
See Note 6, Acquisitions and Dispositions for additional information. (2) The loss was recognized in connection with the amended and restated Senior Secured Credit Facility. See Note 10, Debt for additional information. (3) Represents the impairment recognized on portions of our corporate headquarters office building. See Note 3, Leases for additional information.
See Note 10, Debt , for additional information. (4) Represents the impairment recognized on portions of our corporate headquarters office building. See Note 3, Leases , for additional information.
Other Expenses, Net A summary of the components of our operating expenses is as follows (in thousands, except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2022 ​ 2021 ​ $ ​ % ​ Other expenses, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ $ (20,903) ​ $ (11,344) ​ $ (9,559) ​ (84.3) % Interest income ​ ​ 1,460 ​ ​ 217 ​ ​ 1,243 ​ n/m ​ Foreign currency transaction gains (losses) ​ ​ (641) ​ ​ (839) ​ ​ 198 ​ 23.6 % Loss on early extinguishment of debt ​ ​ — ​ ​ (264) ​ ​ 264 ​ 100.0 % Total other expenses, net ​ $ (20,084) ​ $ (12,230) ​ $ (7,854) ​ (64.2) % Percent of revenue ​ ​ 5.7 % ​ 3.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ n/m – not meaningful Other expenses, net increased primarily due to an increase in interest expense because of the refinance of and increase to our Senior Secured Credit Facility (see Note 10, Debt , for more information) in the prior year and rising interest rates.
Other Expenses, Net A summary of the components of our operating expenses is as follows (in thousands, except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2023 ​ 2022 ​ $ ​ % ​ Other expenses, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ $ (35,741) ​ $ (20,903) ​ $ (14,838) ​ (71.0) % Interest income ​ ​ 4,420 ​ ​ 1,460 ​ ​ 2,960 ​ n/m ​ Foreign currency transaction gains (losses) ​ ​ 419 ​ ​ (641) ​ ​ 1,060 ​ n/m ​ Total other expenses, net ​ $ (30,902) ​ $ (20,084) ​ $ (10,818) ​ (53.9) % Percent of revenue ​ ​ 9.5 % ​ 5.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ n/m - not meaningful ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expenses, net increased primarily due to an increase in interest expense because of rising interest rates.
For most of our reporting units, the fair value of the reporting unit significantly exceeded its carrying value at the latest assessment date and only a qualitative impairment test was performed. However, for the Mortgage reporting unit we performed a quantitative impairment test due to the smaller excess of fair value over carrying value in light of macroeconomic trends.
For 57 Table of Contents most of our reporting units, the fair value of the reporting unit exceeds its carrying value at the latest assessment date and only a qualitative impairment test was performed. During the 2023 annual impairment test, we concluded that the carrying value of the Mortgage reporting unit within the Mortgage segment exceeded its fair value.
Operating Expenses A summary of the components of our operating expenses is as follows (in thousands, except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2022 ​ 2021 ​ $ ​ % ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, operating and administrative expenses ​ $ 173,278 ​ $ 179,873 ​ $ 6,595 ​ 3.7 % Marketing Funds expenses ​ ​ 90,319 ​ ​ 82,391 ​ ​ (7,928) ​ (9.6) % Depreciation and amortization ​ ​ 35,769 ​ ​ 31,333 ​ ​ (4,436) ​ (14.2) % Settlement and impairment charges ​ ​ 15,808 ​ ​ 46,035 ​ ​ 30,227 ​ 65.7 % Total operating expenses ​ $ 315,174 ​ $ 339,632 ​ $ 24,458 ​ 7.2 % Percent of revenue ​ ​ 89.2 % ​ 103.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, Operating and Administrative Expenses Selling, operating and administrative expenses consist of personnel costs, professional fee expenses, lease costs and other expenses.
Operating Expenses A summary of the components of our operating expenses is as follows (in thousands, except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2023 ​ 2022 ​ $ ​ % ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, operating and administrative expenses ​ $ 171,548 ​ $ 173,980 ​ $ 2,432 ​ 1.4 % Marketing Funds expenses ​ ​ 83,861 ​ ​ 90,319 ​ ​ 6,458 ​ 7.2 % Depreciation and amortization ​ ​ 32,414 ​ ​ 35,769 ​ ​ 3,355 ​ 9.4 % Settlement and impairment charges ​ ​ 73,783 ​ ​ 15,808 ​ ​ (57,975) ​ n/m ​ Gain on reduction in tax receivable agreement liability ​ ​ (25,298) ​ ​ (702) ​ ​ 24,596 ​ n/m ​ Total operating expenses ​ $ 336,308 ​ $ 315,174 ​ $ (21,134) ​ (6.7) % Percent of revenue ​ ​ 103.3 % ​ 89.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ n/m - not meaningful ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, Operating and Administrative Expenses Selling, operating and administrative expenses consist of personnel costs, professional fee expenses, lease costs and other expenses.
Distributions and other payments pursuant to the RMCO, LLC Agreement and TRAs were comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2022 ​ 2021 Distributions and other payments pursuant to the RMCO, LLC Agreement: ​ ​ ​ ​ ​ ​ Pro rata distributions to RIHI as a result of distributions to RE/MAX Holdings in order to satisfy its estimated tax liabilities ​ $ 2,276 ​ $ 2,650 Dividend distributions ​ ​ 11,556 ​ ​ 11,556 Total distributions to RIHI ​ ​ 13,832 ​ ​ 14,206 Payments pursuant to the TRAs ​ ​ 3,314 ​ ​ 3,444 Total distributions to RIHI and TRA payments ​ $ 17,146 ​ $ 17,650 Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2022 and the effect such obligations are expected to have on our liquidity and cash flows in future periods (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments due by Period ​ ​ Total ​ Less than 1 year ​ 1-3 years ​ 3-5 years ​ After 5 years Senior Secured Credit Facility (including current portion) (1) ​ $ 453,101 ​ $ 4,600 ​ ​ 9,200 ​ ​ 9,200 ​ ​ 430,101 Interest payments on credit facility (2) ​ ​ 172,219 ​ ​ 31,747 ​ ​ 62,611 ​ ​ 61,230 ​ ​ 16,631 Undiscounted lease obligations (3) ​ ​ 45,291 ​ ​ 7,714 ​ ​ 16,705 ​ ​ 18,255 ​ ​ 2,617 Payments pursuant to tax receivable agreements (4) ​ ​ 26,559 ​ ​ 1,642 ​ ​ 6,693 ​ ​ 7,006 ​ ​ 11,218 Vendor contracts (5) ​ ​ 24,812 ​ ​ 16,768 ​ ​ 7,334 ​ ​ 710 ​ ​ — Estimated undiscounted contingent consideration payments (6) ​ ​ 6,976 ​ ​ 1,209 ​ ​ 3,743 ​ ​ 2,024 ​ ​ — ​ ​ $ 728,958 ​ $ 63,680 ​ $ 106,286 ​ $ 98,425 ​ $ 460,567 (1) We have reflected full payment of our Senior Secured Credit Facility in July 2028 at maturity.
Distributions and other payments pursuant to the RMCO, LLC Agreement and TRAs were comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 Distributions and other payments pursuant to the RMCO, LLC Agreement: ​ ​ ​ ​ ​ ​ Pro rata distributions to RIHI as a result of distributions to RE/MAX Holdings in order to satisfy its estimated tax liabilities ​ $ — ​ $ 2,276 Dividend distributions ​ ​ 8,667 ​ ​ 11,556 Other ​ ​ (12) ​ ​ — Total distributions to RIHI ​ ​ 8,655 ​ ​ 13,832 Payments pursuant to the TRAs ​ ​ 440 ​ ​ 3,240 Total distributions to RIHI and TRA payments ​ $ 9,095 ​ $ 17,072 56 Table of Contents Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2023 and the effect such obligations are expected to have on our liquidity and cash flows in future periods (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments due by Period ​ ​ Total ​ Less than 1 year ​ 1-3 years ​ 3-5 years ​ After 5 years Senior Secured Credit Facility (including current portion) (1) ​ $ 448,500 ​ $ 4,600 ​ ​ 9,200 ​ ​ 434,700 ​ ​ — Interest payments on credit facility (2) ​ ​ 161,386 ​ ​ 36,202 ​ ​ 71,090 ​ ​ 54,094 ​ ​ — Undiscounted lease obligations (3) ​ ​ 39,337 ​ ​ 8,007 ​ ​ 18,536 ​ ​ 12,196 ​ ​ 598 Payments pursuant to tax receivable agreements (4) ​ ​ 822 ​ ​ 822 ​ ​ — ​ ​ — ​ ​ — Vendor contracts (5) ​ ​ 8,950 ​ ​ 7,251 ​ ​ 1,699 ​ ​ — ​ ​ — Estimated undiscounted contingent consideration payments (6) ​ ​ 3,253 ​ ​ 1,085 ​ ​ 2,168 ​ ​ — ​ ​ — ​ ​ $ 662,248 ​ $ 57,967 ​ $ 102,693 ​ $ 500,990 ​ $ 598 (1) We have reflected full payment of our Senior Secured Credit Facility in July 2028 at maturity.
The Senior Secured Credit Facility requires RE/MAX, LLC to repay term loans at $1.2 million per quarter.
The Senior Secured Credit Facility is guaranteed by RMCO and is secured by a lien on substantially all of the assets of RE/MAX, LLC and other operating companies. The Senior Secured Credit Facility requires us to repay term loans at approximately $1.2 million per quarter.
The Senior Secured Credit Facility is guaranteed by RMCO and is secured by a lien on substantially all of the assets of RE/MAX, LLC and other operating companies. The Senior Secured Credit Facility provides for customary restrictions on, among other things, additional indebtedness, liens, dispositions of property, dividends, transactions with affiliates and fundamental changes such as mergers, consolidations and liquidations.
In addition, we are limited in the amount of restricted payments we can make as defined in the Senior Secured Credit Facility. 53 Table of Contents The Senior Secured Credit Facility provides for customary restrictions on, among other things, additional indebtedness, liens, dispositions of property, dividends, transactions with affiliates and fundamental changes such as mergers, consolidations, and liquidations.
A commitment fee of 0.5% per annum (subject to reductions) accrues on the amount of unutilized revolving line of credit. As of December 31, 2022, we had $448.3 million of term loans outstanding, net of unamortized discount and issuance costs, and no revolving loans outstanding under our Senior Secured Credit Facility.
As of December 31, 2023, we had $444.6 million of term loans outstanding, net of an unamortized discount and issuance costs, and no revolving loans outstanding under our Senior Secured Credit Facility.
Provision for Income Taxes Our effective income tax rate increased to 40.7% from (11.1)% for the years ended December 31, 2022 and 2021, respectively, primarily driven by the settlement of uncertain tax positions and other nonrecurring adjustments recorded during the twelve months ended December 31, 2021 which resulted in an unusually low effective income tax rate during that period.
The effective tax rate for the twelve months ended December 31, 2023 is primarily driven by the establishment of a valuation allowance against our deferred tax assets and other nonrecurring adjustments recorded during the twelve months ended December 31, 2023 which resulted in an unusually low effective income tax rate.
A summary of the components of our selling, operating and administrative expenses is as follows (in thousands, except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2022 ​ 2021 ​ $ ​ % ​ Selling, operating and administrative expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Personnel ​ $ 101,994 ​ $ 110,748 ​ $ 8,754 ​ 7.9 % Professional fees ​ ​ 17,329 ​ ​ 24,988 ​ ​ 7,659 ​ 30.7 % Lease costs ​ ​ 8,316 ​ ​ 8,428 ​ ​ 112 ​ 1.3 % Other ​ ​ 45,639 ​ ​ 35,709 ​ ​ (9,930) ​ (27.8) % Total selling, operating and administrative expenses ​ $ 173,278 ​ $ 179,873 ​ $ 6,595 ​ 3.7 % Percent of revenue ​ ​ 49.0 % ​ 54.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total selling, operating and administrative expenses decreased as follows: Personnel costs decreased due to lower equity-based compensation expense, excluding the restructuring charges mentioned below, a decrease in the corporate bonus versus the prior year and lower costs associated with acquiring and integrating new companies.
Other expenses within Selling, operating and administrative expenses include certain marketing and production costs that are not paid by the Marketing Funds, including travel and entertainment costs, and costs associated with our annual conventions in the U.S. and other events and technology services. 48 Table of Contents A summary of the components of our selling, operating and administrative expenses is as follows (in thousands, except percentages): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Change ​ ​ ​ December 31, ​ Favorable/(Unfavorable) ​ ​ ​ 2023 ​ 2022 ​ $ ​ % ​ Selling, operating and administrative expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Personnel ​ $ 97,030 ​ $ 101,994 ​ $ 4,964 ​ 4.9 % Professional fees ​ ​ 14,875 ​ ​ 17,329 ​ ​ 2,454 ​ 14.2 % Lease costs ​ ​ 7,601 ​ ​ 8,316 ​ ​ 715 ​ 8.6 % Other ​ ​ 52,042 ​ ​ 46,341 ​ ​ (5,701) ​ (12.3) % Total selling, operating and administrative expenses ​ $ 171,548 ​ $ 173,980 ​ $ 2,432 ​ 1.4 % Percent of revenue ​ ​ 52.7 % ​ 49.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total selling, operating and administrative expenses decreased as follows: Personnel costs decreased due to decreases in average headcount, lower equity-based compensation expense, excluding the restructuring charges mentioned below, a decrease in the corporate bonus versus the prior year and lower costs associated with acquiring and integrating new companies.
GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs. 49 Table of Contents ​ A reconciliation of Adjusted EBITDA to net income (loss) is set forth in the following table (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Year Ended ​ ​ December 31, ​ December 31, ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 ​ 2020 Net income (loss) ​ $ (1,553) ​ $ 5,620 ​ $ 10,757 ​ $ (24,620) ​ $ 20,546 Depreciation and amortization ​ ​ 8,914 ​ ​ 9,097 ​ ​ 35,769 ​ ​ 31,333 ​ ​ 26,106 Interest expense ​ ​ 7,491 ​ ​ 3,807 ​ ​ 20,903 ​ ​ 11,344 ​ ​ 9,223 Interest income ​ ​ (785) ​ ​ (16) ​ ​ (1,460) ​ ​ (217) ​ ​ (340) Provision for income taxes ​ ​ 3,012 ​ ​ 1,005 ​ ​ 7,371 ​ ​ 2,459 ​ ​ 9,162 EBITDA ​ ​ 17,079 ​ ​ 19,513 ​ ​ 73,340 ​ ​ 20,299 ​ ​ 64,697 Loss on contract settlement (1) ​ ​ — ​ ​ 400 ​ ​ — ​ ​ 40,900 ​ ​ — Loss on extinguishment of debt (2) ​ ​ — ​ ​ — ​ ​ — ​ ​ 264 ​ ​ — Impairment charge - leased assets (3) ​ ​ — ​ ​ — ​ ​ 6,248 ​ ​ — ​ ​ 7,902 Impairment charge - goodwill (4) ​ ​ 7,100 ​ ​ — ​ ​ 7,100 ​ ​ 5,123 ​ ​ — Loss on lease termination (5) ​ ​ — ​ ​ — ​ ​ 2,460 ​ ​ — ​ ​ — Equity-based compensation expense ​ ​ 4,038 ​ ​ 6,983 ​ ​ 22,044 ​ ​ 34,298 ​ ​ 16,267 Acquisition-related expense (6) ​ ​ (138) ​ ​ 3,119 ​ ​ 1,859 ​ ​ 17,422 ​ ​ 2,375 Fair value adjustments to contingent consideration (7) ​ ​ (1,436) ​ ​ (21) ​ ​ (133) ​ ​ 309 ​ ​ 814 Restructuring charges (8) ​ ​ 598 ​ ​ — ​ ​ 8,690 ​ ​ — ​ ​ — Other ​ ​ (703) ​ ​ 1,072 ​ ​ 24 ​ ​ 968 ​ ​ 503 Adjusted EBITDA ​ $ 26,538 ​ $ 31,066 ​ $ 121,632 ​ $ 119,583 ​ $ 92,558 (1) Represents the effective settlement of the pre-existing master franchise agreements with INTEGRA that was recognized with the acquisition.
A reconciliation of Adjusted EBITDA to net income (loss) is set forth in the following table (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 ​ 2021 Net income (loss) ​ $ (98,486) ​ $ 10,757 ​ $ (24,620) Depreciation and amortization ​ ​ 32,414 ​ ​ 35,769 ​ ​ 31,333 Interest expense ​ ​ 35,741 ​ ​ 20,903 ​ ​ 11,344 Interest income ​ ​ (4,420) ​ ​ (1,460) ​ ​ (217) Provision for income taxes ​ ​ 56,947 ​ ​ 7,371 ​ ​ 2,459 EBITDA ​ ​ 22,196 ​ ​ 73,340 ​ ​ 20,299 Settlement charge (1) ​ ​ 55,150 ​ ​ — ​ ​ — Loss on contract settlement (2) ​ ​ — ​ ​ — ​ ​ 40,900 Loss on extinguishment of debt (3) ​ ​ — ​ ​ — ​ ​ 264 Impairment charge - leased assets (4) ​ ​ — ​ ​ 6,248 ​ ​ — Impairment charge - goodwill (5) ​ ​ 18,633 ​ ​ 7,100 ​ ​ 5,123 Loss on lease termination (6) ​ ​ — ​ ​ 2,460 ​ ​ — Equity-based compensation expense ​ ​ 19,536 ​ ​ 22,044 ​ ​ 34,298 Acquisition-related expense (7) ​ ​ 263 ​ ​ 1,859 ​ ​ 17,422 Fair value adjustments to contingent consideration (8) ​ ​ (533) ​ ​ (133) ​ ​ 309 Restructuring charges (9) ​ ​ 4,210 ​ ​ 8,690 ​ ​ — Gain on reduction in tax receivable agreement liability (10) ​ ​ (25,298) ​ ​ (702) ​ ​ 382 Other ​ ​ 2,131 ​ ​ 726 ​ ​ 586 Adjusted EBITDA ​ $ 96,288 ​ $ 121,632 ​ $ 119,583 (1) Represents the settlement of the industry class-action lawsuits and other legal settlements.
Revenue excluding the Marketing Funds was $263.1 million for 2022, an increase of $15.8 million, or 6.4%, compared to $247.3 million for 2021. This increase was comprised of growth of 7.8% from acquisitions, partially offset by negative organic revenue growth of 0.8% and adverse foreign currency movements of 0.6%.
Revenue excluding the Marketing Funds was $241.8 million for 2023, a decrease of $21.3 million, or 8.1%, compared to $263.1 million for 2022. This decrease was comprised of negative organic revenue growth of 7.4% and adverse foreign currency movements of 0.7%. Organic growth decreased primarily due to lower Broker fees and declines in RE/MAX U.S. agent count.
Liquidity and Capital Resources Overview of Factors Affecting Our Liquidity Our liquidity position is affected by the growth of our agent and franchise base and conditions in the real estate market.
See Note 4, Non-controlling Interest and Note 12, Income Taxes , for additional information. 52 Table of Contents Liquidity and Capital Resources Overview of Factors Affecting Our Liquidity Our liquidity position is affected by the growth of our agent, loan originator and franchise base as well as conditions in the real estate and mortgage markets.
During 2022, we were able to repurchase shares advantageously and we anticipate we will repurchase shares at a lower rate in 2023. Distributions and Other Payments to Non-controlling Unitholders by RMCO Distributions to Non-Controlling Unitholders Pursuant to the RMCO, LLC Agreement As authorized by the RMCO, LLC Agreement, RMCO makes cash distributions to its members, Holdings and RIHI.
Distributions and Other Payments to Non-controlling Unitholders by RMCO Distributions to Non-Controlling Unitholders Pursuant to the RMCO, LLC Agreement As authorized by the RMCO, LLC Agreement, RMCO makes cash distributions to its members, Holdings and RIHI. Distributions are required to be made by RMCO to its members on a pro-rata basis in accordance with each members’ ownership percentage in RMCO.
Foreign currency transaction gains (losses) are primarily the result of transactions denominated in the Canadian Dollar.
Foreign currency transaction gains (losses) are primarily the result of transactions denominated in the Canadian Dollar. Provision for Income Taxes The comparison of effective tax rates for the years ended December 31, 2023 and 2022 is not meaningful.
Failure to achieve targeted franchise sales (which are currently estimated at between 60 and 140 per year over the next 10 years) could result in an impairment of this goodwill balance. Purchase Accounting for Acquisitions We allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values.
Purchase Accounting for Acquisitions We allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the identifiable assets less liabilities is recorded as goodwill.
Acquisition On July 21, 2021, we acquired the operating companies of the North American regions of RE/MAX INTEGRA (“INTEGRA”) for cash consideration of approximately $235 million. INTEGRA’s regions include 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).
Acquisition On July 21, 2021, we acquired the operating companies of the North American regions of RE/MAX INTEGRA (“INTEGRA”) for cash consideration of approximately $235 million.
Future capital allocation decisions with respect to return of capital either in the form of additional future dividends, and, if declared, the amount of any such future dividend, or in the form of share buybacks, will be subject to our actual future earnings and capital requirements and any amounts authorized will be at the discretion of our Board of Directors.
Future capital allocation decisions with respect to return of capital either in the form of additional future dividends, and if declared, the amount, payment and timing of any such future dividend, or in the form of share buybacks, will be at the sole discretion of our Board of Directors who will take into account general economic, housing and mortgage market conditions, the Company’s financial condition, available cash, current and anticipated cash needs, any applicable restrictions pursuant to the terms of our Senior Secured Credit Facility and any other factors that the Board of Directors considers relevant.
Adjusted EBITDA increased primarily due to contributions from the INTEGRA acquisition during the first half of the year and a decrease in the corporate bonus versus the prior year, partially offset by decreased Broker fees (excluding the contributions from the INTEGRA acquisition), an increase in bad debt expense, net investments in our Mortgage segment, and increased legal expenses.
Adjusted EBITDA decreased due to lower revenue resulting primarily from a decrease in Broker fees and U.S. agent count, as well as an increase in bad debt expense and the net impact of our annual RE/MAX agent convention, p artially offset by a decrease in legal expenses.
We also recognized a loss on termination of $2.5 million, which included a lease termination payment of $1.3 million. See Note 3, Leases for additional information about our leases. Loss on Contract Settlement (2021) We recorded a $40.9 million loss on our contractual relationship with INTEGRA which was settled with the acquisition of INTEGRA.
We also recognized a loss on termination of $2.5 million, which included a lease termination payment of $1.3 million. See Note 3, Leases , for additional information about our leases. Gain on Reduction in Tax Receivable Agreement Liability During 2023, we recorded an increase of $63.8 million to our valuation allowance on our U.S. net deferred tax assets.
Revenue growth from acquisitions was attributable to revenue from the INTEGRA acquisition completed in July 2021. Organic growth decreased primarily due to lower Broker fees and declines in RE/MAX U.S. agent count. These declines were partially offset by agent count growth in Canada and globally, higher attendance at our annual RE/MAX agent convention and Mortgage segment growth.
These declines were partially offset by higher attendance at our annual RE/MAX agent convention and Mortgage segment growth.
Financing Activities During the year ended December 31, 2022, the change in cash provided by (used in) financing activities was primarily due to net cash received from the increase in our term loan in the prior year, the allocation of capital to our share repurchase program that began in the first quarter of 2022, higher payments related to tax withholding for share-based compensation and an increase in principal payments on our Senior Secured Credit Facility. 52 Table of Contents ​ Capital Allocation Priorities Liquidity Our objective is to maintain a strong liquidity position.
Financing Activities During the year ended December 31, 2023, the change in cash used in financing activities was primarily due to lower allocation of capital to our share repurchase program, lower dividends paid to Class A common stockholders and distributions paid to non-controlling interests due to the suspension of our quarterly dividend and lower tax withholding payments for share-based compensation .
Therefore, we performed an interim impairment test on the goodwill of the First reporting unit and recorded a non-cash impairment charge of $5.1 million.
Therefore, we fully impaired the reporting unit’s goodwill and recorded a non-cash impairment charge of $18.6 million. See Note 8, Intangible Assets and Goodwill , for additional information.
We did not record a goodwill impairment for Mortgage reporting unit. The Mortgage reporting unit, which has a carrying value of goodwill as of December 31, 2022 of $18.6 million, fair value is tied primarily to Motto franchise sales over the next several years.
Its fair value is tied primarily to franchise sales over the next several years and the discount rate used in our discounted cash flow analysis. Therefore, we fully impaired the reporting unit’s goodwill and recorded a non-cash impairment charge of $18.6 million. See Note 8, Intangible Assets and Goodwill , for additional information.
Reductions in revenue generally reduce our Operating income and Adjusted EBITDA on an almost dollar-for-dollar basis, negatively affecting our margins, earnings, and cash flow. In July 2022, we announced a series of strategic growth opportunities designed to increase U.S. agent count and accelerate the expansion of our growing Mortgage business.
High interest rates have continued to impact affordability and depress housing supply resulting in fewer transactions and, by extension, lower Broker fees. Reductions in revenue generally reduce our Operating income and Adjusted EBITDA on an almost dollar-for-dollar basis, negatively affecting our margins, earnings, and cash flow.
Removed
Financial and Operational Highlights During 2022, we focused our efforts on increasing RE/MAX agent count; expanding our Motto brand through additional franchise sales and increased office openings and developing and integrating our wemlo offerings. Contributions from our INTEGRA acquisition resulted in incremental growth through July 2022, however, an increasingly difficult housing market impacted our second-half 2022 results.
Added
Financial and Operational Highlights In 2023, difficult housing and mortgage market conditions, primarily caused by high interest rates and limited housing supply, made for a challenging agent recruiting and retention environment, which resulted in declines in U.S. agent count, a slowing pace of Motto franchise sales and total revenue.
Removed
Rising interest rates reduced affordability and weakened housing demand, which contributed to the lowest fourth quarter of U.S. existing home sales in more than a decade, resulting in fewer transactions and, by extension, lower Broker fees.
Added
Outside the U.S., RE/MAX agent count remained virtually the same in Canada and increased over seven percent in our global regions. While we believe we are seeing steady progress from the growth initiatives announced in July 2022 that are designed to improve our U.S. agent count, to date their results have been muted by the difficult industry conditions.
Removed
Consequently, revenue and Adjusted EBITDA declined in the fourth quarter of 2022 by 8.9% and 14.6%, respectively, compared to the same period of the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe currently do not engage in any interest rate hedging activity, but given our variable rate borrowings, we monitor interest rates and if appropriate, may engage in hedging activity prospectively. The interest rate on our Senior Secured Credit Facility is currently based on LIBOR, subject to a floor of 0.50%, plus an applicable margin of 2.50%.
Biggest changeAt December 31, 2023, $448.5 million in term loans were outstanding under our Senior Secured Credit Facility. We currently do not engage in any interest rate hedging activity, but given our variable rate borrowings, we monitor interest rates and if appropriate, may engage in hedging activity prospectively.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK We have operations both within the U.S. and globally and we are exposed to market risks in the ordinary course of our business.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK We have operations within the U.S., Canada and globally and we are exposed to market risks in the ordinary course of our business.
During the year ended December 31, 2022, a hypothetical 5% strengthening/weakening in the value of the U.S. dollar compared to the Canadian dollar would have resulted in a decrease/increase to operating income (loss) of approximately $1.7 million, respectively, related to currency risk (a) above. ​ 57 Table of Contents ​
During the year ended December 31, 2023, a hypothetical 5% strengthening/weakening in the value of the U.S. dollar compared to the Canadian dollar would have resulted in a decrease/increase to operating income (loss) of approximately $1.5 million, respectively, related to currency risk (a) above. ​ 59 Table of Contents
To mitigate a portion of this risk, we invest our cash balances in short-term investments that earn interest at variable rates. Currency Risk We have a network of global franchisees in over 110 countries and territories.
If our rate is above the floor, then each hypothetical 0.25% increase would result in additional annual interest expense of $1.1 million. To mitigate a portion of this risk, we invest our cash balances in short-term investments that earn interest at variable rates. Currency Risk We have a network of global franchisees in over 110 countries and territories.
Interest Rate Risk We are subject to interest rate risk in connection with borrowings under our Senior Secured Credit Facility which bear interest at variable rates. At December 31, 2022, $453.1 million in term loans were outstanding under our Senior Secured Credit Facility.
For the years ended December 31, 2023 and 2022, bad debt expense was 2.0% and 0.7% of revenue, respectively. Interest Rate Risk We are subject to interest rate risk in connection with borrowings under our Senior Secured Credit Facility which bear interest at variable rates.
Removed
For the years ended December 31, 2022 and 2020, bad debt expense was less than approximately 2% of revenue. For the year ended December 31, 2021, we recognized a benefit to bad debt due to significantly improved collections.
Added
As of December 31, 2023, the interest rate on our Senior Secured Credit Facility was based on Adjusted Term SOFR, subject to a floor of 0.50%, plus an applicable margin of 2.50%.
Removed
As of 56 Table of Contents ​ December 31, 2022, the interest rate was 6.9%. If LIBOR rises such that our rate is above the floor, then each hypothetical 0.25% increase would result in additional annual interest expense of $1.1 million.
Added
We transitioned from LIBOR to Adjusted Term SOFR during the third quarter of 2023 and borrowings under the term loans and revolving loans accrued interest based on Adjusted Term SOFR, beginning on July 31, 2023, subject to the same floor of 0.50%, plus the same applicable margin of 2.50%. As of December 31, 2023, the interest rate was 8.0%.

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