RE/MAX Holdings (RMAX) Tops Q4 EPS by 1c; Offers Q1 & FY20 Revenue Guidance

RE/MAX Holdings (NYSE: RMAX) reported Q4 EPS of $0.47, $0.01 better than the analyst estimate of $0.46. Revenue for the quarter came in at $68.2 million versus the consensus estimate of $68.4 million.

Fourth Quarter 2019 Highlights(Compared to fourth quarter 2018 unless otherwise noted)

• Total Revenue of $68.2 million; Revenue excluding the Marketing Funds decreased 0.2% to $50.8 million
• Net income attributable to RE/MAX Holdings, Inc. of $2.9 million and earnings per diluted share (GAAP EPS) of $0.16
• Adjusted EBITDA2 of $22.5 million, Adjusted EBITDA margin2 of 33.0% and Adjusted earnings per diluted share (Adjusted EPS1) of $0.47

"Recent RE/MAX recruiting initiatives and Motto marketing efforts generated positive results almost immediately, contributing to a bounce back in our U.S. agent count and record Motto Mortgage franchise sales, two of our key leading indicators, in the fourth quarter," stated Adam Contos, RE/MAX Holdings Chief Executive Officer. "Continued global agent count growth, contributions from the strategic initiatives we've undertaken and the investments we've made during the past two years, coupled with the relatively attractive housing markets in both the U.S. and Canada has us entering 2020 with momentum."

Contos continued, "The ongoing technology transformation at RE/MAX continues with the successful completion of the initial release of the booj Platform and the acquisition of First and its mobile app, which helps agents unlock the value of their network to drive more business. Our brokers and agents on the booj Platform are now able to connect better with clients and establish a more effective digital presence through compelling agent, team and office websites, a modern new consumer app, and the refresh of remax.com. On the Motto side, we see continued demand across multiple customer types alongside accelerating franchise sales. Interest in owning a Motto franchise remains high and we expect to surpass our 2019 franchise sales total in 2020."

GUIDANCE:

RE/MAX Holdings sees Q1 2020 revenue of $68-71 million, versus the consensus of $71.54 million.

RE/MAX Holdings sees FY2020 revenue of $285.5-289.5 million, versus the consensus of $288.34 million.

"Looking ahead, we plan to continue to make strategic investments like First that add value to and deepen our connection with our networks," said Karri Callahan, RE/MAX Holdings Chief Financial Officer. "We are excited by First's potential to be a popular and effective tool designed to improve the productivity of those RE/MAX agents who subscribe to it. As we transition off First's legacy customer base and on-board RE/MAX agents, we expect the acquisition to be dilutive to 2020 Adjusted EPS by $0.04 to $0.06 per share, and to be accretive to both 2021 Adjusted EBITDA margin and Adjusted EPS."

Callahan continued, "We also continue to invest in RE/MAX recruiting efforts and initial returns on this investment are encouraging as evidenced by our fourth quarter U.S. agent count improvement. Our fourth quarter recruiting campaign incentivized our RE/MAX broker-owners in part by waiving certain fees on newly recruited agents for a limited time. As a result, we estimate we will forgo $2 million to $3 million in non-Marketing Fund related revenue through the third quarter of this year. These financial incentives are an investment in our franchisees' and agents' businesses and reduce the barriers of changing affiliations."

For the first quarter of 2020, RE/MAX Holdings expects:

• Agent count to increase 4.0% to 5.0% over first quarter 2019;
• Revenue in a range of $68.0 million to $71.0 million (including revenue from the Marketing Funds in a range of $17.5 million to $18.5 million); and
• Adjusted EBITDA in a range of $18.0 million to $20.0 million.

For the full-year 2020, RE/MAX Holdings expects:

• Agent count to increase 3.0% to 5.0% over full-year 2019;
• Revenue in a range of $285.5 million to $289.5 million (including revenue from the Marketing Funds in a range of $73.0 million to $75.0 million); and
• Adjusted EBITDA in a range of $96.0 million to $99.0 million.

The Company\'s first quarter and full-year 2020 Outlook assumes no further currency movements, acquisitions or divestitures.

The effective U.S. GAAP tax rate attributable to RE/MAX Holdings is estimated to be between 18% and 20% in 2020.

For earnings history and earnings-related data on RE/MAX Holdings (RMAX) click here.

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