RE/MAX Holdings, Inc. (RMAX)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying notes thereto (“financial statements”) included elsewhere in this Annual Report on Form 10-K. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See “Forward-Looking Statements” and “Item 1A.—Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any forward-looking statements.

The historical results of operations discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are those of RE/MAX Holdings, Inc. (“Holdings”) and its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “us”).

Executive Summary

Business Overview

We are one of the world’s leading franchisors in the real estate industry. We franchise real estate brokerages globally under the RE/MAX® brand (“RE/MAX”) and mortgage brokerages in the U.S. under the Motto Mortgage brand (“Motto”). We also sell ancillary products and services to our franchise networks, including loan processing services to our Motto network and other third parties through our wemlo® brand. RE/MAX and Motto are 100% franchised. We do not own any of the brokerages that operate under the RE/MAX and Motto brands but provide the right to use our brands and a unique value proposition to support our franchisees as they fund their own growth and development. As a result, we maintain a low fixed-cost structure which, combined with our recurring fee-based models, enables us to capitalize on the economic benefits of the franchising model, yielding high margins and significant cash flow. We are focused on operating our business as efficiently and effectively as possible, maintaining a growth mindset, and delivering the absolute best customer experience. We provide quality education, and innovative technology products, valuable marketing and we leverage our size and scale to continue to build the strength of our brands and enhance our competitive advantages.

To best serve our customers, we are organized into the following segments based on the services we provide:

Financial and Operational Highlights

In 2024, difficult housing and mortgage market conditions, primarily caused by high interest rates and accompanying affordability challenges persisted, resulting in declines in U.S. agent count, open Motto offices and total revenue. Despite the U.S. decline, RE/MAX agent count remained virtually the same in Canada and increased nearly 9% in our global regions, and network-wide agent count was a record high as of December 31, 2024.

We sharpened our focus to drive operational efficiency across the Company, which helped generate better-than-anticipated profit and margin performance during the last three quarters of 2024. Effective cost management and improved collections from across the RE/MAX network were the primary drivers of the 11.2% year over year decrease in selling, administrative, and operating expenses that contributed to our improved results.

We introduced growth initiatives in 2022 and refined them thereafter; however, the results of these initiatives have not been sufficient to offset the adverse recruiting-and-retention impacts from the U.S. and Canadian housing downturns. However, during the second half of 2024, we significantly enhanced the value proposition for North American affiliates through an expanded strategic partnership. We also strengthened our capabilities to improve the agent-consumer experience. These improvements are expected to create future incremental revenue opportunities, including selling advertisements on our remax.com and remax.ca websites and cultivating and monetizing leads.

As previously disclosed, RE/MAX, LLC, a wholly owned subsidiary of RMCO, agreed to settle costly litigation and protect the Company and the RE/MAX network from multiple industry class-action lawsuits in the United States (the “U.S. Settlement Agreement”). Pursuant to the terms of the U.S. Settlement Agreement, RE/MAX, LLC agreed to make certain

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changes to its business practices and to pay a total settlement amount of $55.0 million (the “U.S. Settlement Amount”) into a qualified settlement escrow fund (the “U.S. Settlement Fund”). The first two installments totaling $27.5 million were paid into the U.S. Settlement Fund in the second half of 2023. The court formally approved RE/MAX, LLC’s U.S. Settlement Agreement on May 9, 2024, and the final installment of $27.5 million was deposited into the U.S. Settlement Fund within ten business days thereafter. All amounts deposited into the U.S. Settlement Fund are included in “Restricted cash” within the Consolidated Balance Sheets. Approval of the U.S. Settlement Agreement was appealed, and a briefing schedule has been set. See Note 13, Commitments and Contingencies for additional information.

In early 2025, RE/MAX Ontario-Atlantic Canada Inc. (“RE/MAX OA”), which is a wholly owned subsidiary of RE/MAX, LLC, reached substantial agreement on monetary terms and business practice changes to resolve the Canadian antitrust litigations (as defined in Note 13, Commitments and Contingencies). When the parties finalize the settlement agreement, the Company and RE/MAX sub-franchisors, franchisees and their sales associates in Canada would be released from all claims in the Canadian antitrust litigations. Under the proposed terms, RE/MAX OA would pay a total settlement amount of $7.8 million Canadian dollars (the “Canadian Settlement Amount”) into an interest-bearing account after execution of a finalized settlement agreement. In addition, RE/MAX OA would make certain changes to its business practices similar to those agreed upon in the U.S. Settlement Agreement. Any settlement agreement requires court approval. As of December 31, 2024, the Canadian Settlement Amount payable was approximately $5.4 million in U.S. dollars translated at the balance sheet date. See Note 13, Commitments and Contingencies for additional information.

These factors contributed to the following results for the year ended December 31, 2024:

(Compared to the year ended December 31, 2023, unless otherwise noted)

The Financial and Operational Highlights, Results of Operations and Sources and Uses of Cash, for the years ended December 31, 2023 and 2022 and as compared to the years ended December 31, 2022 and 2021, respectively, has been previously disclosed in Item 7 of our 2023 Annual Report on Form 10-K and in Item 7 of our 2022 Annual Report on Form 10-K, and are incorporated herein by reference.

Key Performance Indicators

Operating Performance Indicators

We believe that agent count (especially in the U.S. and Canada), open Motto offices, and growing franchise sales across both brands are key operating measures of our success.

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Financial Performance Indicators

We believe that revenue growth excluding the Marketing Funds and Adjusted EBITDA (both in dollars and margin) are key financial measures of our success.

Revenue Growth. The Marketing Funds operate at no profit; accordingly, there is no impact to overall profitability of the Company from these revenues. Because the Marketing Funds do not contribute to operating profit, we do not consider Marketing Funds revenue changes a part of our key performance indicators.

We review year-over-year revenue growth excluding the Marketing Funds as a key measure of our success in addressing customer needs. We measure revenue growth in terms of organic, acquisitive, and foreign currency impacts. We define these components as follows:

Adjusted EBITDA. Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. 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. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue.

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Selected Operating and Financial Highlights

The following tables summarize several key performance indicators and our results of operations for the last three years.

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Results of Operations

Year Ended December 31, 2024 vs. Year Ended December 31, 2023

Revenue

A summary of the components of our revenue is as follows (in thousands except percentages):

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RE/MAX Holdings generated revenue of $307.7 million in 2024, a decrease of $18.0 million or 5.5%, compared to $325.7 million in the same period in 2023. Revenue excluding the Marketing Funds was $228.7 million for 2024, a decrease of $13.1 million, or 5.4%, compared to $241.8 million for 2023. This decrease was comprised of negative organic revenue growth of 5.2% and adverse foreign currency movements of 0.2%. Negative organic revenue growth was driven by a decrease in U.S. agent count, a reduction in revenue from our annual RE/MAX agent convention due to lower attendance as compared to the 50th anniversary celebration in the prior year, and a reduction in revenue from previous acquisitions (excluding independent region acquisitions).

Continuing Franchise Fees

Revenue from Continuing franchise fees decreased primarily due to a decrease in U.S. agent count.

Broker Fees

Revenue from Broker fees increased primarily due to an increase in average home sales prices and average transactions per agent in the U.S. and Canada, partially offset by a reduction in U.S. agent count.

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Marketing Funds Fees and Marketing Funds Expenses

Revenue from Marketing Funds fees decreased primarily due to a decrease in U.S. agent count. We recognize an equal and offsetting amount of expenses to revenue such that there is no impact to our overall profitability.

Franchise Sales and Other Revenue

Franchise sales and other revenue decreased primarily due to a reduction in revenue of approximately $3.4 million from our annual RE/MAX agent convention as a result of lower attendance in 2024 due to the 50th anniversary celebration in the prior year and a reduction in revenue from previous acquisitions (excluding independent region acquisitions).

Operating Expenses

A summary of the components of our operating expenses is as follows (in thousands, except percentages):

Selling, Operating and Administrative Expenses

Selling, operating and administrative expenses consist of personnel costs, professional fee expenses, lease costs and other expenses. 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.

A summary of the components of our selling, operating and administrative expenses is as follows (in thousands, except percentages):

Total selling, operating and administrative expenses decreased as follows:

Personnel costs decreased primarily due to higher severance expenses from a workforce reduction and reorganization in the prior year, see Note 2, Summary of Significant Accounting Policies for additional information. This decline was further driven by a reduction in headcount and lower equity-based compensation expenses, partially offset by increased employee retention-related expenses and higher employee benefit costs.

Professional fees decreased primarily due to a decrease in legal expenses. See Note 13, Commitments and

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Contingencies, for additional information.

Other selling, operating and administrative expenses decreased primarily due to a decrease in bad debt expense, a decrease in expenses from our annual RE/MAX agent convention in 2024 as a result of lower attendance due to the 50th anniversary celebration in the prior year, a decrease in other technology expenses, and decreased property taxes.

Depreciation and Amortization

Depreciation and amortization expense decreased primarily due to lower Franchise agreements amortization expense from prior years independent region acquisitions becoming fully amortized and the acceleration of amortization of technology in the prior year, partially offset by higher Mortgage segment amortization expense.

Settlement and Impairment Charges

Settlement Charge (2024)

In early 2025, RE/MAX OA reached substantial agreement on monetary terms and business practice changes to resolve the Canadian antitrust litigations (as defined in Note 13, Commitments and Contingencies), which includes the payment of a total settlement amount of $7.8 million Canadian dollars (the “Canadian Settlement Amount”) into an interest-bearing account. We accrue for matters when losses are both probable and estimable and as a result, during the fourth quarter of 2024, we recorded the total settlement charge of $7.8 million Canadian dollars (approximately $5.5 million U.S. dollars translated at a weighted average exchange rate) to “Settlement and impairment charges” within the Consolidated Statements of Income (Loss) with a corresponding liability recorded to “Accrued liabilities” within the Consolidated Balance Sheets. As of December 31, 2024, the Canadian Settlement Amount payable was approximately $5.4 million in U.S. dollars translated at the balance sheet date. See Note 13, Commitments and Contingencies for additional information.

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Settlement Charge (2023)

During the third quarter of 2023, we agreed to pay a total settlement of $55.0 million to settle the Nationwide Claims, as defined in Note 13, Commitments and Contingencies, which was deposited into the U.S. Settlement Fund in installments. As a result, in the third quarter of 2023, we recorded the total settlement charge of $55.0 million to “Settlement and impairment charges” within the Consolidated Statements of Income (Loss) with a corresponding liability recorded to “Accrued liabilities” within the Consolidated Balance Sheets. In addition, all installments we have paid into the U.S. Settlement Fund are included in “Restricted cash” within the Consolidated Balance Sheets. See Note 13, Commitments and Contingencies for additional information.

Impairment Charge – Goodwill (2023)

During the fourth quarter of 2023, in connection with our annual goodwill impairment test date of October 1, 2023, we concluded that the carrying value of the Mortgage reporting unit within the Mortgage segment exceeded its fair value. The impairment was primarily due to a decline in projected net cash flows resulting from continued macroeconomic pressures and revised franchise sales forecasts. The fair value of the Mortgage reporting unit was valued using a weighted average of the discounted cash flow and guideline public company valuation methodologies. Therefore, we fully impaired the reporting unit’s goodwill and recorded a non-cash impairment charge of $18.6 million. See Note 7, Intangible Assets and Goodwill, for additional information.

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. See Note 7, Intangible Assets and Goodwill, for additional information.

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Impairment Charge – Leased Assets (2022)

During the first and third quarters of 2022, we subleased portions of our corporate headquarters. As a result, we performed impairment tests on the portions subleased and recognized an impairment charge of $3.7 million in the first quarter and $2.5 million in the third quarter. See Note 3, Leases, for additional information about our leases.

Loss on Lease Termination (2022)

During the second quarter of 2022, we terminated an office lease, which was owned by an entity controlled by former employees. As a result, we wrote off a right of use (“ROU”) asset of $2.7 million and derecognized $1.5 million of lease liability associated with the terminated lease. 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.

Change in Estimated Tax Receivable Agreement Liability

During 2024 we recorded an increase to the Tax Receivable Agreements (“TRA”) liability of $1.5 million, which is anticipated to be paid in 2025 for the 2024 and 2023 tax years. During 2023, we recorded an increase of $63.8 million to our valuation allowance on our U.S. net deferred tax assets. In relation to this valuation allowance, we also remeasured the liability under the TRAs as of December 31, 2023, and recorded a $25.3 million change in estimated TRA liability.

Other Expenses, Net

A summary of the components of our operating expenses is as follows (in thousands, except percentages):

Other expenses, net increased primarily due to a decrease in interest income due to lower interest rate yields and declines in investable balances and an increase in interest expense because of rising interest rates. Foreign currency transaction gains (losses) are primarily the result of transactions denominated in the Canadian Dollar and the Canadian dollar has weakened in comparison to the U.S. dollar between the year ended December 31, 2023 and the year ended December 31, 2024.

Provision for Income Taxes

The comparison of effective tax rates for the years ended December 31, 2024 and 2023 is not meaningful. The effective tax rate for the twelve months ended December 31, 2024 is primarily driven by the reversal of a valuation allowance against certain deferred tax assets due to the execution of tax planning opportunities that resulted in an unusually low effective income tax rate. The effective income tax rate for the year ended December 31, 2023 is lower than the statutory rate primarily driven by the establishment of a valuation allowance against our deferred tax assets and other nonrecurring adjustments.

Our effective income tax rate depends on many factors, including a rate benefit attributable to the fact that the portion of RMCO’s earnings attributable to the non-controlling interests are not subject to corporate-level taxes because RMCO is classified as a partnership for U.S. federal income tax purposes and therefore is treated as a “flow-through entity,” as well as annual changes in state and foreign income tax rates and geographic mix of business. See Note 4, Non-controlling Interest, for further details on the allocation of income taxes between Holdings and the non-controlling interest and see Note 11, Income Taxes, for additional information.

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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 was $97.7 million for the year ended December 31, 2024, an increase of $1.4 million from the comparable prior year period. Adjusted EBITDA increased due to a decrease in bad debt expense, lower legal expenses, a reduction in other technology expenses, decreased property taxes, and lower compensation expense due to a reduction in headcount, primarily from the reduction in force and reorganization in the prior year, partially offset by the reorganization in the current year. This increase was partially offset by a decrease in U.S. agent count and a reduction in revenue from previous acquisitions (excluding independent region acquisitions).

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. These measures are derived on the basis of methodologies other than in accordance with U.S. GAAP.

Revenue excluding the Marketing Funds is a non-GAAP measure of financial performance that differs from the U.S. Generally Accepted Accounting Principles. Revenue excluding the Marketing Funds is calculated directly from our consolidated financial statements as Total revenue less Marketing Funds fees.

We define Adjusted EBITDA as EBITDA (consolidated net income (loss) before depreciation and amortization, interest expense, interest income and the provision for income taxes, each of which is presented in our audited financial statements included elsewhere in this Annual Report on Form 10-K), adjusted for the impact of the following items that are either non-cash or that we do not consider representative of our ongoing operating performance: gain or loss on sale or disposition of assets, settlement and impairment charges, equity-based compensation expense, acquisition-related expense, gains or losses from changes in the tax receivable agreement liability, expense or income related to changes in the fair value measurement of contingent consideration, restructuring charges and other non-recurring items.

As Adjusted EBITDA omits certain non-cash items and other non-recurring cash charges or other items, we believe that it is less susceptible to variances that affect our operating performance resulting from depreciation, amortization and other non-cash and non-recurring cash charges or other items. We present Adjusted EBITDA, and the related Adjusted EBITDA margin, because we believe they are useful as supplemental measures in evaluating the performance of our operating businesses and provide greater transparency into our results of operations. Our management uses Adjusted EBITDA and Adjusted EBITDA margin as factors in evaluating the performance of our business.

Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider these measures either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. Some of these limitations are:

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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. 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. GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.

A reconciliation of Adjusted EBITDA to net income (loss) is set forth in the following table (in thousands):

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Liquidity and Capital Resources

Overview of Factors Affecting Our Liquidity

Our liquidity position is influenced by trends in our agent, loan originator, and franchise base, as well as conditions in the real estate and mortgage markets. Our short-term liquidity position has fluctuated and will continue to be impacted by various factors, including agent count in the RE/MAX network—particularly in Company-Owned Regions—and, to a lesser extent, the number of open Motto offices. Additionally, the timing and scale of new revenue diversification opportunities may also affect our and liquidity.

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. We may pursue other sources of capital that may include other forms of external financing, such as additional financing in the public capital markets, in order to increase our cash position and preserve financial flexibility as needs arise.

Financing Resources

RMCO and RE/MAX, LLC, a wholly owned subsidiary of RMCO, have a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and various lenders party thereto (the “Senior Secured Credit Facility”). On July 21, 2021, we amended and restated our Senior Secured Credit Facility to refinance our existing facility. The revised facility provides for a seven-year $460.0 million term loan facility and a five-year $50.0 million revolving loan facility. 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 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 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. We are also required to repay the term loans and reduce revolving commitments with (i) 100% of proceeds of any incurrence of additional debt not permitted by the Senior Secured Credit Facility, (ii) 100% of proceeds of asset sales and 100% of amounts recovered under insurance policies, subject to certain exceptions and a reinvestment right and (iii) 50% of Excess Cash Flow (or “ECF”) as defined in the Senior Secured Credit Facility, at the end of the applicable fiscal year if RE/MAX, LLC’s Total Leverage Ratio (or “TLR”) as defined in the Senior Secured Credit Facility, is in excess of 4.25:1. 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.

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As of December 31, 2024, no ECF payment was required because the TLR was below 3.75:1 pursuant to the terms of the Senior Secured Credit Facility.

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. These restricted payments include declaration or payment of dividends, repurchase of shares, or other distributions. In general, we can make unlimited restricted payments – primarily dividends and share repurchases – if the TLR is below 3.50:1 (both before and after giving effect to such payments). If the TLR exceeds 3.50:1, we are generally limited in the amount of restricted payments we can make up to the greater of $50 million or 50% of consolidated EBITDA on a trailing twelve-month basis (unless we can rely on other restricted payment baskets available under the Senior Secured Credit Facility).

The TLR is calculated quarterly and is based on RE/MAX, LLC’s consolidated indebtedness and consolidated EBITDA on a trailing twelve-month basis, both defined in the Senior Secured Credit Facility. For the twelve-month period ending December 31, 2024, RE/MAX, LLC’s consolidated EBITDA, as defined in the Senior Secured Credit Facility, was $97.4 million and as of December 31, 2024, the TLR was 3.57:1.

With certain exceptions, any default under any of our other agreements evidencing indebtedness in the amount of $15.0 million or more constitutes an event of default under the Senior Secured Credit Facility.

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%. 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. Borrowings under the term loans and revolving loans began accruing interest based on Adjusted Term SOFR, subject to the same floor of 0.50%, plus the same applicable margin of 2.50%. As of December 31, 2024, the interest rate on the term loan facility was 7.0%.

If any amounts are drawn on the $50 million revolving line of credit, the terms of the Senior Secured Credit Facility require the TLR to not exceed 4.50:1. As a result, as long as the TLR remains below 4.50:1, access to borrowings under the revolving line of credit will not be restricted. A commitment fee of 0.5% per annum (subject to reductions) accrues on the amount of unutilized revolving line of credit regardless of our TLR. As of the date of this report, no amounts were drawn on the revolving line of credit.

As of December 31, 2024, we had $440.8 million of term loans outstanding, net of an unamortized discount and issuance costs, and no revolving loans outstanding under our Senior Secured Credit Facility.

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Sources and Uses of Cash

As of December 31, 2024, and 2023, we had $96.6 million and $82.6 million, respectively, in cash and cash equivalents, of which approximately $19.7 million and $32.5 million were denominated in foreign currencies, respectively.

Operating Activities

Cash provided by operating activities increased primarily as a result of:

Investing Activities

For the year ended December 31, 2024, the change in cash used in investing activities was primarily the result of higher spend on property and equipment as compared to the prior year, partially offset by lower spend on capitalizable investments in technology in the current year.

Financing Activities

For the year ended December 31, 2024, cash used in financing activities declined primarily due to the suspension of our quarterly dividend in the prior year, resulting in no dividend payments to Class A common stockholders and no distributions to non-controlling interests in 2024. Additionally, lower capital allocation to our share repurchase program and decreased tax withholding payments for share-based compensation contributed to the change.

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.

Acquisitions

As part of our growth strategy, we may pursue additional acquisitions or investments in complementary businesses, services and technologies that would provide access to new markets, revenue streams, or otherwise complement our existing operations. We may fund any such growth with various sources of capital including existing cash balances and

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cash flow from operations, as well as proceeds from debt financings including under existing credit facilities or new arrangements raised in the public capital markets.

Capital Expenditures

The total aggregate amount for purchases of property and equipment and capitalization of developed software was $6.6 million, $6.4 million and $9.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. These amounts primarily relate to investments in technology and spend on property and equipment. Total capital expenditures for 2025 are expected to be between $5.5 million and $7.5 million. See Financial and Operational Highlights above for additional information.

Return of Capital

In the first three quarters of 2023, as disclosed in Note 5, Earnings Per Share and Dividends, our Board of Directors approved quarterly cash dividends of $0.23 per share on all outstanding shares of Class A common stock. During the fourth quarter 2023 our Board of Directors decided to suspend our quarterly dividend. In light of the settlement of an industry class-action lawsuit (for additional information See Note 13, Commitments and Contingencies) and ongoing challenging housing and mortgage market conditions, we continue to believe this action to preserve our capital is prudent. As such, for 2024 our Board of Directors has not approved any quarterly cash dividends.

During the first quarter of 2022, our Board of Directors authorized a common stock repurchase program of up to $100 million. The share repurchase program does not obligate the Company to purchase any amount of common stock and does not have an expiration date. The share repurchase program may be suspended or discontinued at any time. As of December 31, 2024, $62.5 million remained available under the share repurchase authorization.

Future capital allocation decisions with respect to return of capital either in the form of 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.

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. 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.

As a limited liability company (treated as a partnership for income tax purposes), RMCO does not incur significant domestic federal, state or local income taxes, as these taxes are primarily the obligations of its members. 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. Such distributions are required if any other distributions from RMCO (i.e., in the form of dividend payments) for the relevant period are otherwise insufficient to enable each member to cover its estimated tax liabilities.

Holdings’ only source of cash flow from operations is in the form of distributions from RMCO. Holdings may receive distributions from RMCO on a quarterly basis 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. 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, 2024, the Company reflected a total liability of $1.5 million under the terms of its TRAs, to be paid in 2025. The liability pursuant to the TRAs will increase upon future exchanges by RIHI of RMCO common units or with

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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.

Distributions and other payments pursuant to the RMCO, LLC Agreement and TRAs were comprised of the following (in thousands):

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2024 and the effect such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

Commitments and Contingencies

Our management does not believe there are any matters involving us that could result, individually or in the aggregate, in a material adverse effect on our financial condition, results of operations and cash flows.

Off Balance Sheet Arrangements

We have no material off balance sheet arrangements as of December 31, 2024.

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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. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base estimates on historical experience and other assumptions believed to be reasonable under the circumstances and evaluate these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies. We believe that the accounting policies and estimates discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Mortgage Goodwill

We assess goodwill for impairment at least annually or whenever an event occurs, or circumstances change that would indicate impairment may have occurred at the reporting unit level. Reporting units are driven by the level at which segment management reviews operating results. We perform our required impairment testing annually on October 1. For 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. 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 7, Intangible Assets and Goodwill, for additional information.

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. 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.

We engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets, primarily franchise rights, and in measuring the loss on settlement of pre-existing master franchise contracts (if applicable). The timing and amount of expected future cash flows used in the valuation requires estimates, among other items, of revenue and agent growth rates, operating expenses and expected operating cash flow margins. The development of these cash flows, and the discount rate applied to the cash flows, is subject to inherent uncertainties. Any estimate of loss on settlement is dependent on determining market rates for similar services. We adjust the preliminary purchase price allocation, as necessary, after the acquisition closing date through the end of the measurement period of one year or less as we finalize valuations for the assets acquired and liabilities assumed. 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. 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. When Holdings acquired this ownership in the form of common units, it received a significant step-up in tax basis on the underlying assets held by RMCO. The step-up is principally equivalent to the difference between (1) the fair value of the underlying assets on the date of acquisition of the common units and (2) their tax basis in RMCO, multiplied by the percentage of units acquired. The majority of the step-up in basis relates to intangibles assets, primarily franchise agreements and goodwill, and is included within deferred tax assets on our consolidated balance sheets. The computation of the step-up requires valuations of the intangible assets of RMCO and has the same complexities and estimates as discussed in Purchase Accounting for Acquisitions above. In addition, the step-up is governed by complex IRS rules that

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limit which intangibles are subject to step-up, and also imposes further limits on the amount of step-up. Given the magnitude of the deferred tax assets and complexity of the calculations, small adjustments to our model used to calculate these deferred tax assets can result in material changes to the amounts recognized, especially in years when Holdings acquires ownership interest in RMCO. There were no redemptions of common units in RMCO in the periods presented. However, if more common units of RMCO are redeemed by RIHI, the percentage of RE/MAX Holdings’ ownership of RMCO will increase, and additional deferred tax assets will be created as additional tax basis step-ups occur and such amounts are likely to be material.

Pursuant to the TRA agreements, Holdings makes annual payments to RIHI and Parallaxes Rain Co-Investment, LLC (“Parallaxes”) (a successor to the TRAs prior owners) 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. A TRA liability of $1.5 million exists as of December 31, 2024 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. 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.

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.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying notes thereto (“financial statements”) included elsewhere in this Annual Report on Form 10-K. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See “Forward-Looking Statements” and “Item 1A.—Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any forward-looking statements.

The historical results of operations discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are those of RE/MAX Holdings, Inc. (“Holdings”) and its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “us”).

Executive Summary

Business Overview

We are one of the world’s leading franchisors in the real estate industry. We franchise real estate brokerages globally under the RE/MAX brand and mortgage brokerages in the U.S. under the Motto Mortgage brand. We also sell ancillary products and services to our franchise networks, including loan processing services to our Motto network through our wemlo brand. RE/MAX and Motto are 100% franchised—we do not own any of the brokerages that operate under these brands. We focus on enabling our networks’ success by providing powerful technology, quality education, and valuable marketing to build the strength of the RE/MAX and Motto brands. We support our franchisees in growing their brokerages, although they fund the associated cost of development. As a result, we maintain a relatively low fixed-cost structure which, combined with our primarily recurring fee-based models, enables us to capitalize on the economic benefits of the franchising model, yielding high margins and significant cash flow.

To best serve our customers, we are organized into the following segments based on the services we provide:

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. The acquisition converted these formerly Independent Regions into Company-Owned Regions, allowing us to scale, enhance our ability to deliver value to our affiliates and recapture the value differential of more than 19,000 agents (approximately 12,000 in Canada and 7,000 in the U.S.).

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. 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.

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. Our average revenue per agent on a trailing twelve-month basis in Company-Owned Regions in the U.S. and Canada was approximately $2,550 and $2,750 for the twelve-month periods ended December 31, 2023, and 2022, respectively, of which approximately $675 and $800 was attributable to Broker fees for the same periods, respectively. While we believe the collective health of our two networks remains solid, collections across both our Real Estate and Mortgage segments have also been adversely impacted by the challenging housing and mortgage market conditions. As a result, bad debt expense increased $4.2

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million, respectively during the twelve months ended December 31, 2023, compared to the prior year. In our Mortgage segment, Motto open office count and wemlo loan processing volume increased year over year; however, market conditions negatively impacted the pace of Motto franchise sales and increased the number of terminated offices.

During the third quarter, we streamlined our operations and our structure, and announced a reduction in force and reorganization (the “Reorganization”) that reduced our workforce by approximately 7% but is intended to yield cost savings over the long term. As a result of the Reorganization, we incurred a $4.3 million pre-tax cash charge for one-time termination benefits of severance and related costs and accelerated equity compensation expense of $0.5 million. Separately, RE/MAX, LLC, a wholly owned subsidiary of RMCO, agreed to settle costly litigation and protect the Company and the RE/MAX network from multiple industry class-action lawsuits. Pursuant to the terms of the settlement, which requires court approval, we agreed to make certain changes to our business practices and to pay a total settlement amount of $55.0 million, which was recorded in the third quarter of 2023. See Note 14, Commitments and Contingencies for additional information.

In the fourth quarter of 2023, our Board of Directors decided to suspend our quarterly dividend. In light of the recent litigation settlement and ongoing challenging housing and mortgage market conditions, we believe this action to preserve our capital is prudent. We strongly support returning capital to shareholders. However, given current circumstances and out of an abundance of caution, we believe this decision is optimal for shareholders as we determine how to best position the Company to take advantage of those opportunities that we believe will yield the best long-term returns.

In February 2024, RE/MAX, LLC announced the extension of a modified pilot program designed to attract and grow teams of real estate agents to the majority of the United States as of April 1, 2024. The program was initially launched in pilot form and was only available in five states (California, Florida, Maryland, New Jersey and Texas). The initial pilot program's terms and conditions were later modified and the revised program was extended to Arizona in the fall of 2023. The difference between the pilot offered in the initial five states and the revised pilot offered in Arizona was that the latter required franchisees to recruit new agents and/or teams into their brokerage in order to be eligible for the economic concessions offered by the program. The Arizona version of the teams program is being expanded to the majority of the United States; however, the initial five pilot states will continue to offer the original version of the team programs to qualifying teams in those states.

The expanded program offers an alternative fee structure for eligible teams that is designed to support and encourage growth of medium- to large-sized teams. To activate the program's financial incentives, a brokerage in an eligible state must add any combination of six new team leaders/members. All new agents must be from outside the network and be on an active team; individual agents don't count. The financial incentives are only available to teams that have at least six members (a team leader plus at least five team members or licensed assistants) who market together and operate from the same office at qualifying brokerages. The Company expects to incur fee waivers of approximately $0.5 million to $1.0 million in 2024 related to this teams program expansion.

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)

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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.

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.

Financial Performance Indicators

We believe that revenue growth excluding the Marketing Funds and Adjusted EBITDA (both in dollars and margin) are key financial measures of our success.

Revenue Growth. The Marketing Funds operate at no profit; accordingly, there is no impact to overall profitability of the Company from these revenues. Because the Marketing Funds do not contribute to operating profit, we do not consider Marketing Funds revenue changes a part of our key performance indicators.

We review year-over-year revenue growth excluding the Marketing Funds as a key measure of our success in addressing customer needs. We measure revenue growth in terms of organic, acquisitive, and foreign currency impacts. We define these components as follows:

Adjusted EBITDA. Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. 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. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue.

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Selected Operating and Financial Highlights

The following tables summarize several key performance indicators and our results of operations for the last three years.