Investor Presentation. May 2017

Transcription

1 Investor Presentation May 2017

2 2 Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of Forward-looking statements may be identified by the use of words such as believe, intend, expect, estimate, plan, outlook, project and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. These forward-looking statements include statements regarding the Company s optimism for agent recruitment, investment, acquisitions (including the integration of regional acquisitions), Motto Mortgage, and improving housing conditions; the factors working to continue the Company s momentum; the Company s channels for long-term organic growth; the productivity of the agent network; the focus on growing the highest quality real estate network in the world; and consistent execution of the Company s plan and continued success; as well as other statements regarding the Company s strategic and operational plans and business models. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Such risks and uncertainties include, without limitation, (1) changes in business and economic activity in general, (2) changes in the real estate market, including changes due to interest rates and availability of financing, (3) the Company s ability to attract and retain quality franchisees, (4) the Company s franchisees ability to recruit and retain real estate agents and mortgage loan originators, (5) changes in laws and regulations that may affect the Company s business or the real estate market, (6) failure to maintain, protect and enhance the RE/MAX and Motto Mortgage brands, (7) fluctuations in foreign currency exchange rates, as well as those risks and uncertainties described in the sections entitled Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations in the most recent Annual Report on Form 10-K filed and Quarterly Report on Form 10-Q with the Securities and Exchange Commission ( SEC ) and similar disclosures in subsequent periodic and current reports filed with the SEC, which are available on the investor relations page of the Company s website at and on the SEC website at Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

3 Investment Highlights Attractive Franchise Model #1 Real-estate franchise brand 1 with unmatched global footprint Highly productive network of more than 110,000 agents The RE/MAX model: Agent-centric is different and better Multiple drivers of shareholder value Stable, recurring fee-based revenue model with strong margins and cash flow 1 According to MMR Strategy Group survey of unaided brand awareness in the U.S. and Canada 3

4 Sustained Growth & Expanding Margins 87,476 Agent Count 111,915 $138.3 Revenue $176.3 $ s in Millions Adjusted EBITDA $94.8 $ Free Cash Flow $60.0 $ % margin 42% margin

5 5 Housing Market Gradually Improving Drivers Steady demand for housing Attractive mortgage rates Housing starts improving Steady jobs growth Household formations forecasted to grow Opportunities First-time homebuyers entering the market Wage growth Constrained inventory Single-family home starts

6 the Real Estate Franchisor 6

7 7 Hallmarks of a Successful Franchise Business Key Success Factors of Franchisors Successful Franchisors Unique product or service offering Brand name and market share Training and productivity tools Group purchasing power

8 RE/MAX is a Premium Franchisor Nobody sells more Real Estate than RE/MAX 1 100% franchised business, delivering the full economic benefits of the model Dual-brand franchisor, focused on our core businesses Among the best-in-class franchisor operating margins 1 As measured by 2016 residential transaction sides 8

9 RE/MAX Agents at Large Brokerages on Average Outsell Competing Agents More Than 2 to 1 Ranking RE/MAX vs. Other National Real Estate Franchise Brands Transactions Per Agent (Large brokerages only) 1 U.S. Residential Transaction Sides 2 Brand Awareness (unaided) 3 Countries and Territories Offices Worldwide Agents Worldwide million+ 27.6% , , , % , , % 49 3,000 88, , % 77 7, , , % 31 2,300 37, , % , , % , Not Released 4.3% 1 1,240 42,747 Realogy Brand Data is full-year or as of year-end 2016, as applicable. Except as noted, Coldwell Banker, Century 21, ERA, Sotheby s and Better Homes and Gardens data is as reported by Realogy Corporation on SEC Form 10-K, Annual Report for 2016; Keller Williams, and Berkshire Hathaway HomeServices data is from company websites and industry reports 1 Transaction sides per agent calculated by RE/MAX based on 2017 REAL Trends 500 data, citing 2016 transaction sides for the 1,705 largest participating U.S. brokerages. Coldwell Banker includes NRT. Berkshire does not include HomeServices of America. ²Keller Williams reports all transaction sides and does not itemize U.S. residential transactions. ³MMR Strategy Group study of unaided awareness among buyers, sellers, and those planning to buy or sell; asked, when they think of real estate brands, which ones come to mind? 9

10 Among Highest Franchisor Adjusted EBITDA Margins 1,2 57% 54% Full-year % 20% 17% 15% 12% 10% Franchisors Real Estate Brokerages 1 Adjusted EBITDA and Adjusted EBITDA margin are Non-GAAP measures. See appendix for definitions and reconciliations of RE/MAX Non-GAAP measures. Other companies may calculate this measure differently so these measures may not be comparable. This chart is for illustrative purposes only. Calculations use financial statements from company public filings. 2 Choice Hotels and Domino s do not report Adjusted EBITDA therefore EBITDA has been used for the calculation of the margin 10

11 the Mortgage Brokerage Franchisor 11

12 12 Motto Mortgage Fact Sheet Motto Mortgage is a mortgage brokerage franchisor Franchises will be independently owned and operated Motto Mortgage is not a lender and will not underwrite loans Offers potential homebuyers the opportunity to find both real estate agents and independent Motto Mortgage loan originators in offices in one location Motto Mortgage loan originators will access a variety of quality loan options from multiple leading wholesalers Ward Morrison will lead Motto Mortgage with an operational team which will scale as Motto grows Motto Mortgage franchises will ultimately be available for purchase by select qualified brokerage owners in the real estate industry outside of RE/MAX

13 13 Motto Mortgage Q Update Focused on Enabling the Success of Initial Group of Franchisees Operational update More than doubled the number of franchises sold since 2/24/17, benefiting from annual convention and sales tours of both coasts Focus is on enabling the success of the initial cohort of franchisees Financial Update Expect to sell tens of franchises in 2017 Expect 2017 Motto revenue in the low single-digit millions of dollars Expect 2017 Motto expenses to exceed related revenue resulting in a net investment Revenue ramp timeline: it should take ~14-17 months after a sale for a franchisee to ramp to paying the full set of monthly fees

14 Agent Count Growth 14

15 Global Agent Network Growing Total Network Agent Count 111, , ,328 from 2011 through Q ,228 98, ,826 Strongest full-year agent gain in 2016 since ,476 89,008 Consistent organic agent count growth for the last five years Q

16 16 Unmatched Global Footprint March 31, 2017 RE/MAX Global Footprint March 31, 2017 Agents by Geography Outside the U.S. and Canada 30,527 Agents 27% U.S. 62,441 Agents 55% RE/MAX Regional or Franchise Presence Canada 20,836 Agents 18% The RE/MAX brand spans over 100 countries and territories

17 17 Growing Our Global Network Q Year-over-Year Agent Count Growth of 6.6% +6.6% YoY (+7,096 agents) Agent Count Growth Year-over-Year March 31, 2016 March 31, , , % YoY (+3,141 agents) 80,136 83, % YoY (+3,955 agents) 26,572 30,527 Total RE/MAX U.S. & Canada Outside U.S. & Canada

18 Q Agent Count in the U.S. and Canada Growth in Company-Owned & Independent Regions +3.1% YoY (+1,392 agents) Agent Count Growth Year-over-Year March 31, 2016 March 31, ,316 46, % YoY (+811 agents) +4.9% YoY (+732 agents) +3.1% YoY (+206 agents) 13,239 14,050 15,001 15,733 6,580 6,786 Company-Owned Independent Company-Owned Independent Agents in the U.S. 1 Agents in Canada 1 Agent counts adjusted for the 2016 Independent Region acquisitions 18

19 19 The Model

20 20 Unique and Effective Agent-Centric RE/MAX Model Traditional Brokerage Owned & operated by brokerage 30-40% of commission goes to broker Commission rate typically determined by brokerage, not agent Lack of autonomy within brokerage Marketing dictated by brokerage The RE/MAX Model 100% franchised Recommended 95% agent commission Ability for agent to set commission rates with sellers in many cases Entrepreneurially driven agents Multiple support channels: brand, marketing & training Revenue Driven by Commission Revenue Driven by Agent Count

21 Differentiated Agent-Centric Approach Attracts Entrepreneurial Agents and Franchisees Our Agents and Franchisees are in Business FOR Themselves, But NOT by Themselves Affiliation with #1 Brand Attractive Agent & Franchise Economics Lead Referral System Training Programs Entrepreneurial Culture #1 name in real estate 1 RE/MAX agents average more than twice as many residential transaction sides compared to the average of all competitors in the 2017 Real Trends 500 survey of the country s largest brokerages 2 Recommended 95% / 5% split with broker vs. 70% / 30% or 60% / 40% at traditional brokerages Sell more, earn more Relatively low initial franchisee fee We believe we generate more free leads than any other brand Global agent network facilitates agent-to-agent referrals #1 real estate franchisor website 3 ; global websites attract buyers and sellers RE/MAX University; 24/7 on demand and certification training courses Successful Momentum agent and broker development program focused on production and profitability Motto Mortgage training program in place for existing and new franchisees Founded by industry mavericks Agent-centric model Freedom to set commission rates, self-promote, etc. 1 MMR Strategy Group survey of unaided brand awareness. 2 Calculated by RE/MAX based on 2017 REAL Trends 500 data, using 2016 transaction sides for the 1,705 largest participating U.S. Brokerages. 3 According to Hitwise data 21

22 22 Franchise Sales Drive Agent Growth Global Franchise Sales Consistently Strong Key Initiatives , ,826 98,010 93,228 89,008 87, , , , , ,000 95,000 90,000 85,000 80,000 75,000 Target underpenetrated geographies in the U.S. and Canada where RE/MAX share is below network average Selling to entrepreneurial brokers who will grow the business Record franchise sales in 2015 Followed 2015 with historically strong franchise sales in 2016 Franchise Sales Agent Count

23 Drivers of Shareholder Value 23

24 Why Invest in RE/MAX Today? Shareholder Return Driven By Organic Growth Catalysts Return of Capital Stable recurring revenue High margin & Strong Free Cash Flow Driven by: 1) Agent growth 2) Franchise sales 3) Motto Mortgage 4) Steadily improving housing market Independent region acquisitions Reinvest in the business Other acquisitions within our core competencies of franchising and real estate Committed to returning capital through dividend payments over time Dividend metrics: ~30% of FCF in ~1.2% current yield 2 FCF Fuels Catalysts and Return of Capital to Create Shareholder Value 1 Free Cash Flow ( FCF ) = Operating Cash Flow Capital Expenditures; $18M 2016 quarterly dividend payments / $60M 2016 FCF = 30%; see Appendix for reconciliation of Non-GAAP measures 2 Yield based on regular quarterly dividend of $0.18 and a stock price of $59.45 per share as of March 31,

25 Reacquiring Independent Regions Increases Revenue Per Agent by ~$1,700 64% of Agents in the U.S. & Canada are in Company-owned Regions 1 U.S./Canada Overview 1 Company-owned Regions Alaska 18 regions Yukon Northwest Territories Nunavut 53,494 agents Independent Regions British Columbia Alberta Manitoba 10 regions Hawaii Washington Oregon Nevada California Idaho Utah Arizona Independent Regions Montana Saskatchewan Wyoming Colorado New Mexico North Dakota South Dakota Texas Illinois Missouri Ohio West Virginia Georgia North Carolina South Carolina Florida New York Pennsylvania New Jersey Delaware Maryland Virginia 29,783 agents Average Annual Revenue per Agent Company-owned regions: ~$2,500 Independent regions: ~$800 Company-owned Regions 1 Agent counts are as of March 31, 2017 and average revenue to RE/MAX, LLC per agent is for the year ended December 31,

26 RE/MAX Four-Tier Structure Drives Strong Recurring Revenues Tiers Description Services Offered RE/MAX, LLC Owns the right to the RE/MAX brand and sells franchises and franchising rights Brand Equity Market Share TV Advertising Marketing Strategies Corporate Communications Region Owner Owns rights to sell brokerage franchises in a specified region 18 Company-owned Regions 10 Independent Regions Typically 20 year agreement with renewal options Local Services Regional Advertising Franchise Sales Franchisee (or Broker / Owner) Owns rights to operate a RE/MAX branded brokerage office, list properties and recruit agents 5-year agreement Office Infrastructure Sales Tools / Management Over 7,300 Offices Worldwide Agent (or Sales Associate) Branded independent contractors who operate out of local franchise brokerage offices 1-year agreement Works with Buyer or Seller Sets Own Commission Rate 26

27 Revenue Model Independent Regions in U.S. & Canada 2016 Revenue Streams from Agent to Franchisee to Independent Region to RE/MAX Annual Revenue per Agent to RE/MAX (U.S. & Canada) RE/MAX 15%-30% of Continuing Franchise / Broker Fee Revenue Independent Regions Implied 70%-85% Upside Through Independent Region Acquisitions ~$800 / Agent Average Continuing Franchise Fee Franchises / Brokerages Fixed Monthly Management Fee 1% of Agent Generated Commissions Recommended 5% of Agent Generated Commissions $400 / Agent Per Year ~$300 / Agent Average ~$100 / Agent Average ~$400 / Agent Agents Continuing Franchise Fees Broker Fee Annual Dues 1 Illustrative of independent regions in the U.S. 27

28 Revenue Model Company-owned Regions in U.S. & Canada 2016 Revenue Streams from Agent to Franchisee to RE/MAX Annual Revenue per Agent to RE/MAX (U.S. & Canada) RE/MAX ~$2,500 / Agent Average $128 / Agent Per Month Increased from $123 July 1, % of Agent Generated Commissions $400 / Agent Per Year Fixed Monthly Management Fee Franchises / Brokerages Recommended 5% of Agent Generated Commissions ~$1,400 / Agent Average ~$700 / Agent Average ~$400 / Agent Agents Continuing Franchise Fees Broker Fee Annual Dues 1 Illustrative of company-owned regions in the U.S. 28

29 Financials 29

30 30 Revenue by Stream and Geographic Area Growing Recurring Revenue Base Revenue Streams Revenue by Geographic Area Outside the U.S. and Canada 19% Annual Dues Canada 13% 4% 14% Franchise Sales & Other Franchise Revenue 46% Continuing Franchise Fees 21% Broker Fees 83% U.S. Recurring fees and dues (i.e. Continuing Franchise Fees and Annual Dues) accounted for 65% of revenue in 2016 ~96% of 2016 revenue was generated in the U.S. and Canada

31 Annual Financial Performance Generating High Margins Revenue Adjusted EBITDA 1 Adjusted Net Income 1 ($M) ($M) ($M) $171 $177 $176 $80 $90 $95 $43 $49 $ Stable, High Adjusted EBITDA Margins 47% 51% 54% 1 Adjusted EBITDA and Adjusted Net Income are Non-GAAP measures. See appendix for definitions and reconciliations of Non-GAAP measures. 31

32 Quarterly Financial Performance Generating High Margins Revenues Adjusted EBITDA 1 Adjusted Net Income 1 ($M) $48 ($M) ($M) $46 $43 $43 $44 $21 $25 $26 $23 $22 $11 $14 $14 $13 $12 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Stable, High Adjusted EBITDA Margins 49% 58% 56% 51% 47% 1 Adjusted EBITDA and Adjusted Net Income are Non-GAAP measures. See appendix for definitions and reconciliations of Non-GAAP measures. 32

33 Low Leverage to Support Strategy Maturities of Debt 1 Balance Sheet $222.7 Credit facility of $235.0 million plus $10.0 million revolving credit facility $1.8 $2.4 $2.4 $2.4 $2.4 Covenant light deal Variable Rate: LIBOR + 275bps with 0.75% floor $ million in term loans and no revolving loans outstanding Cash balance of $64.6 million on March 31, 2017 Total Debt / Adjusted EBITDA of 2.4x 2 Net Debt / Adjusted EBITDA of 1.7x Thereafter 1 Net of unamortized debt discount and debt issuance costs 2 Based on twelve months ended March 31, 2017, Adjusted EBITDA of $96.2M and total debt of $230.4M, net of unamortized debt discount and debt issuance costs 3 Based on twelve months ended March 31, 2017, Adjusted EBITDA of $96.2M and net debt of $165.7 M, net of unamortized debt discount, debt issuance costs and cash balance at March 31,

34 Cash Flow Generation Fuels Capital Allocation Strategy Strong Annual Adjusted EBITDA Conversion to FCF Full-Year 2016 $ s in Millions $64 $60 $50 Capital Allocation Priorities $35 1 Acquire independent regions 2 Reinvest in the business 3 Other strategic acquisitions Operating Cash Flow Free Cash Flow1 Free Cash Flow after Distributions to RIHI2 Unencumbered Cash Generated3 4 Return of capital As % of Adj. EBITDA 63% 52% 37% 1 Free Cash Flow = Operating Cash Flow Capital Expenditures 2 Free Cash Flow after Distributions to RIHI = Free Cash Flow Tax and other non-dividend distributions paid to RIHI to enable RIHI to satisfy its income tax obligations 3 Unencumbered Cash Generated = Free Cash Flow after Distributions to RIHI Quarterly debt principal payments Annual excess cash flow payment on debt, see appendix for reconciliation of Non-GAAP measures 34

35 Leading Real Estate Franchisor #1 Real Estate Franchise Brand 1 with Unmatched Global Footprint Highly Productive Network of More Than 110,000 Agents Agent-Centric Model is Different and Better Stable, Recurring Fee-Based Revenue Model with Strong Margins and Cash Flow 100% Franchised Business Multiple Drivers of Shareholder Value Creation 1 Source: MMR Strategy Group survey of unaided brand awareness in the U.S. and Canada 35

36 Appendix As measured by residential transaction sides

37 37 Corporate & Tax Structure Organizational Structure General Features of Up-C Structure Class A shares of RE/MAX Holdings, Inc. are held by public investors (Class A shares = one vote per share and 100% of economic rights in RE/MAX Holdings, Inc.) Class B shares of RE/MAX Holdings, Inc. are held by RIHI (Class B shares = high vote and no economic rights in RE/MAX Holdings, Inc.) RIHI and RE/MAX Holdings, Inc. hold common units in RMCO, LLC RIHI has redemption rights to redeem RMCO, LLC common units for Class A shares of RE/MAX Holdings, Inc. or cash (at the election of RE/MAX Holdings, Inc.) Continued taxation of RMCO, LLC as a partnership; RE/MAX Holdings, Inc. taxed as a C Corporation at an estimated tax rate of 38% Key Terms of Tax Receivable Agreement Consistent with other Up-C IPO precedents, RE/MAX Holdings, Inc. is party to a Tax Receivable Agreement ( TRA ) with each of RIHI and Oberndorf Investments LLC Under the terms of the TRA, RE/MAX Holdings, Inc. is obligated to make cash payments to RIHI and Oberndorf Investments LLC in respect of 85% of the amount of certain tax savings that RE/MAX Holdings, Inc. may realize as a result of its expected share of amortizable or depreciable tax basis in specified assets of RMCO, LLC RE/MAX Holdings, Inc. will retain 15% of any tax savings that it may realize RE/MAX Holdings, Inc. will fund its payments under the TRA from cash distributions received from RMCO, LLC

38 RE/MAX Holdings, Inc. Adjusted EBITDA Reconciliation to Net Income (Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC) 38 (Unaudited) (Amounts in thousands) Year Ended December 31, Net income $ 47,810 $ 51,350 $ 43,979 $ 28,252 $ 33,324 $ 24,249 Depreciation and amortization 16,094 15,124 15,316 15,166 12,090 14,473 Interest expense 8,596 10,413 9,295 14,647 11,686 12,203 Interest income (160) (178) (313) (321) (286) (372) Provision for income taxes 15,273 12,030 9,948 2,844 2,138 2,172 EBITDA 87,613 88,739 78,225 60,588 58,952 52,725 (Gain) loss on sale or disposition of assets and sublease (1) (171) (3,650) (340) 971 1,352 1,595 Loss on early extinguishment of debt and debt modification expense (2) 2, , Equity-based compensation 2,330 1,453 2,002 2,995 1,089 - Chairman Executive Comp (3) ,261 3,000 3,000 Public offering related expenses (4) 193 1,097-6, Acquisition related expenses (5) 1,899 2, Adjusted EBITDA (6) $ 94,757 $ 90,483 $ 80,378 $ 76,103 $ 64,865 $ 57,704 Adjusted EBITDA Margin (6) 53.7% 51.2% 47.0% 47.9% 45.1% 41.7% (1) Represents gains on the sale or disposition of assets as well as the gains on the sublease of a portion of the Company s corporate headquarters office building. (2) Represents losses incurred on early extinguishment of debt on the Company s credit facility for each full-year period presented as well as costs associated with the refinancing of the Company s credit facility during the year ended December 31, (3) Represents the annual salaries paid to David Liniger, our Chairman and Co-Founder, and Gail Liniger, our Vice Chair and Co-Founder. Such salaries have not been paid subsequent to the IPO, and will not be paid in future periods. (4) Represents costs incurred for compliance services performed in connection with the issuance of shares of Class A common stock as a result of the RIHI, Inc. ( RIHI ) redemption of 5,175,000 common units in RMCO during the fourth quarter of 2015 (the Secondary Offering ). (5) Acquisition-related expenses include fees incurred in connection with the Company s acquisitions of certain assets of HBN, Inc. ( HBN ) and Tails, Inc. ( Tails ) in October 2013, the acquisition of six Independent Regions (New York, Alaska, New Jersey, Georgia, Kentucky/Tennessee and Southern Ohio, collectively, the ( 2016 Acquired Regions ) and the acquisition of Full House Mortgage Connection, Inc., now known as Motto Mortgage ( Motto ). Costs include legal, accounting and advisory fees as well as consulting fees for integration services. (6) Non-GAAP measure. See the end of this presentation for definitions of Non-GAAP measures.

39 RE/MAX Holdings, Inc. Adjusted EBITDA Reconciliation to Net Income (Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC) 39 (Unaudited) (Amounts in thousands) Quarter Ended Q Q Q Q Q Net income $10,071 $ 8,514 $14,520 $14,380 $10,396 Depreciation and amortization 5,995 4,612 3,889 3,872 3,721 Interest expense 2,354 2,103 2,121 2,091 2,281 Interest income (26) (42) (32) (35) (51) Provision for income taxes 3,030 3,097 4,632 4,285 3,259 EBITDA 21,424 18,284 25,130 24,593 19,606 Loss (gain) on sale or disposition of assets and sublease (1) (47) 4 (99) (99) 23 Loss on early extinguishment of debt and debt modification expense (2) - 2, Equity-based compensation Acquisition related expenses (3) 557 1, Public offering related expenses (4) Adjusted EBITDA (5) $22,496 $22,763 $25,701 $25,285 $21,008 Adjusted EBITDA Margin (5) 46.6% 51.2% 56.4% 58.3% 49.0% (1) Represents gains on the sale or disposition of assets as well as the gains on the sublease of a portion of the Company s corporate headquarters office building. (2) Represents losses incurred on early extinguishment of debt on the Company s credit facility for each full-year period presented as well as costs associated with the refinancing of the Company s credit facility during the year ended December 31, (3) Acquisition-related expenses include fees incurred in connection with the Company s acquisitions of certain assets of HBN and Tails in October 2013, the acquisition of six 2016 Acquired Regions and the acquisition Motto. Costs include legal, accounting and advisory fees as well as consulting fees for integration services. (4) Represents costs incurred for compliance services performed in connection with the issuance of shares of Class A common stock as a result of the Secondary Offering (5) Non-GAAP measure. See the end of this presentation for definitions of Non-GAAP measures.

40 RE/MAX Holdings, Inc. Adjusted Net Income (Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC) 40 (Unaudited) (Amounts in thousands) Year Ended December 31, Net income $ 47,810 $ 51,350 $ 43,979 $ 28,252 $ 33,324 $ 24,249 Amortization of franchise agreements 14,590 13,566 13,566 12,274 9,080 11,235 Provision for income taxes 15,273 12,030 9,948 2,844 2,138 2,172 Add backs: (Gain) loss on sale or disposition of assets and sublease (1) (171) (3,650) (340) 971 1,352 1,595 Loss on early extinguishment of debt and debt modification expense (2) 2, , Equity-based compensation 2,330 1,453 2,002 2,995 1,089 - Chairman Executive Compensation (3) ,261 3,000 3,000 Public offering related expenses (4) 193 1,097-6, Acquisition related expenses (5) 1,899 2, Adjusted pre-tax net income 84,817 78,690 69,646 58,885 50,455 42,635 Less: Provision for income taxes at 38% (32,230) (29,902) (26,465) (22,376) (19,173) (16,201) Adjusted net income (6) $ 52,587 $ 48,788 $ 43,181 $ 36,509 $ 31,282 $ 26,434 (1) Represents gains on the sale or disposition of assets as well as the gains on the sublease of a portion of the Company s corporate headquarters office building. (2) Represents losses incurred on early extinguishment of debt on the Company s credit facility for each full-year period presented as well as costs associated with the refinancing of the Company s credit facility during the year ended December 31, (3) Represents the annual salaries paid to David Liniger, our Chairman and Co-Founder, and Gail Liniger, our Vice Chair and Co-Founder. Such salaries have not been paid subsequent to the IPO, and will not be paid in future periods. (4) Represents costs incurred for compliance services performed in connection with the issuance of shares of Class A common stock as a result of the Secondary Offering (5) Acquisition-related expenses include fees incurred in connection with the Company s acquisitions of certain assets of HBN, Inc. HBN and Tails, in October 2013, the 2016 and the acquisition of Full House Mortgage Connection, Inc., now known as Motto. Costs include legal, accounting and advisory fees as well as consulting fees for integration services. (6) Non-GAAP measure. See the end of this presentation for definitions of Non-GAAP measures.

41 RE/MAX Holdings, Inc. Adjusted Net Income (Reflects RE/MAX Holdings with 100% ownership of RMCO, LLC) 41 (Unaudited) (Amounts in thousands) Quarter Ended Q Q Q Q Q Net income $ 10,071 $ 8,514 $ 14,520 $ 14,380 $ 10,396 Amortization of franchise agreements 5,423 4,081 3,534 3,534 3,441 Provision for income taxes 3,030 3,097 4,632 4,285 3,259 Add-backs: Loss (gain) on sale or disposition of assets and sublease (1) (47) 4 (99) (99) 23 Loss on early extinguishment of debt and debt modification expense (2) - 2, Equity-based compensation Acquisition related expenses (3) 557 1, Public offering related expenses (4) Adjusted pre-tax net income 19,596 20,171 23,257 22,891 18,498 Less: Provision for income taxes at 38% (7,446) (7,665) (8,838) (8,699) (7,029) Adjusted net income (5) $ 12,150 $ 12,506 $ 14,419 $ 14,192 $ 11,469 (1) Represents gains on the sale or disposition of assets as well as the gains on the sublease of a portion of the Company s corporate headquarters office building. (2) Represents losses incurred on early extinguishment of debt on the Company s credit facility for each full-year period presented as well as costs associated with the refinancing of the Company s credit facility during the year ended December 31, (3) Acquisition-related expenses include fees incurred in connection with the Company s acquisitions of certain assets of HBN and Tails in October 2013, the acquisition of six the 2016 Acquired Regions and the acquisition of Motto. Costs include legal, accounting and advisory fees as well as consulting fees for integration services. (4) Represents costs incurred for compliance services performed in connection with the issuance of shares of Class A common stock as a result of the Secondary Offering (5) Non-GAAP measure. See the end of this presentation for definitions of Non-GAAP measures.

42 42 Annual Free Cash Flow Year Ended December 31, Cash flow from operations $ 64,379 $ 77,358 $ 64,445 $ 50,069 $ 51,259 $ 43,589 Less: Capital expenditures (4,395) (3,546) (2,026) (1,108) (1,610) (918) Free cash flow (1) $ 59,984 $ 73,812 $ 62,419 $ 48,961 $ 49,649 $ 42,671 (1) Non-GAAP measure. See the end of this presentation for definitions of Non-GAAP measures.

43 43 RE/MAX Holdings, Inc. Free Cash Flow and Unencumbered Cash Generation Year Ended December 31, Cash flow from operations $ 64,379 $ 77,358 Less: Capital expenditures (4,395) (3,546) Free cash flow (1) 59,984 73,812 Free cash flow 59,984 73,812 Less: Tax and Other non-dividend discretionary distributions to RIHI (10,391) (7,358) Free cash flow after tax and non-dividend discretionary distributions to RIHI (1) 49,593 66,454 Free cash flow after tax and non-dividend discretionary distributions to RIHI 49,593 66,454 Less: Quarterly debt principal payments (2,081) (2,080) Less: Annual excess cash flow (ECF) payment (12,727) (7,320) Unencumbered cash generated (1) $ 34,785 $ 57,054 Summary Cash flow from operations $ 64,379 $ 77,358 Free cash flow $ 59,984 $ 73,812 Free cash flow after tax and non-dividend discretionary distributions to RIHI $ 49,593 $ 66,454 Unencumbered cash generated $ 34,785 $ 57,054 Adjusted EBITDA $ 94,647 $ 91,401 Free cash flow as % of Adjusted EBITDA 63.4% 80.8% Free cash flow less distributions to RIHI as % of Adjusted EBITDA 52.4% 72.7% Unencumbered cash generated as % of Adjusted EBITDA 36.8% 62.4% (1) Non-GAAP measure. See the end of this presentation for definitions of non-gaap measures.

44 44 Non-GAAP Financial Measures The 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 Adjusted EBITDA and the ratios related thereto, Adjusted net income, Adjusted basic and diluted earnings per share (Adjusted EPS) and Free cash flow. These measures are derived on the basis of methodologies other than in accordance with U.S. GAAP. The Company defines Adjusted EBITDA as EBITDA (consolidated net income before depreciation and amortization, interest expense, interest income and the provision for income taxes, each of which is presented in the unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q), adjusted for the impact of the following items that the Company does not consider representative of its ongoing operating performance: loss or gain on sale or disposition of assets and sublease, loss on early extinguishment of debt, professional fees and certain expenses incurred in connection with the Secondary Offering, acquisition-related expenses and equity-based compensation expense. During the first quarter of 2017, the Company revised its definition of Adjusted EBITDA to better reflect the performance of our business and comply with SEC guidance. The Company now adjusts for equity-based compensation expense and no longer adjusts for straight-line rent expense and severance-related expenses. Adjusted EBITDA was revised in prior periods to reflect this change for consistency in presentation. Because Adjusted EBITDA omits certain non-cash items and other non-recurring cash charges or other items, the Company believes that it is less susceptible to variances that affect its operating performance resulting from depreciation, amortization and other non-cash and non-recurring cash charges or other items and is more reflective of other factors that affect its operating performance. The Company presents Adjusted EBITDA because the Company believes it is useful as a supplemental measure in evaluating the performance of the operating businesses and provides greater transparency into the Company s results of operations. The Company s management uses Adjusted EBITDA as a factor in evaluating the performance of the business. Adjusted EBITDA has limitations as an analytical tool, and you should not consider Adjusted EBITDA either in isolation or as a substitute for analyzing the Company s results as reported under U.S. GAAP. Some of these limitations are: this measure does not reflect changes in, or cash requirements for, the Company s working capital needs; this measure does not reflect the Company s interest expense, or the cash requirements necessary to service interest or principal payments on its debt; this measure does not reflect the Company s income tax expense or the cash requirements to pay its taxes; this measure does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; this measure does not reflect the cash requirements to pay dividends to stockholders of the Company s Class A common stock and tax and other cash distributions to its non-controlling unitholders; this measure does not reflect the cash requirements to pay RIHI Inc. and Oberndorf pursuant to the tax receivable agreements; 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; and other companies may calculate this measure differently so similarly named measures may not be comparable. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue. Adjusted net income is defined as net income plus primarily non-cash items and other items that management does not consider to be useful in assessing the Company s operating performance (e.g., amortization of franchise agreements, gain on sale or disposition of assets and sub-lease, loss on early debt extinguishment, public-offering related expenses, acquisition-related expenses and equity-based compensation expense). Adjusted basic and diluted earnings per share (Adjusted EPS) are defined as Adjusted net income (as defined above) divided by pro forma basic and diluted weighted average shares, as applicable. Free cash flow is defined as operating cash flow minus capital expenditures. Free cash flow after tax and non-dividend distributions to RIHI is defined as free cash flow minus tax and other non-dividend distributions paid to RIHI to enable RIHI to satisfy its income tax obligations. Unencumbered cash generated is defined as free cash flow after tax and non-dividend distributions to RIHI minus quarterly debt principal payments minus annual excess cash flow payment on debt, as applicable. The Company s Adjusted EBITDA margin guidance does not include certain charges and costs. The adjustments to EBITDA margin in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA margin in prior quarters, such as gain on sale or disposition of assets and sublease and acquisition related expenses, among others. The exclusion of these charges and costs in future periods will have a significant impact on the Company s Adjusted EBITDA margin. The Company is not able to provide a reconciliation of the Company s Non-GAAP financial guidance 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.