TableofContents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Forthefiscalyearended:December31,2019
OR
☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Forthetransitionperiodfromto
CommissionFileNumber001-36101
RE/MAX Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 80-0937145
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
5075 South Syracuse Street
Denver, Colorado
80237
(Address of principal executive offices) (Zip code)
(303) 770-5531
(Registrants’ telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share RMAX New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicatebycheckmarkiftheregistrantiswell-knownseasonedissuers,asdefinedinRule405oftheSecuritiesAct.Yes☐No☒
IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheExchangeAct.Yes☐No☒
Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934during
thepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsfor
thepast90days.Yes☒No☐
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobesubmittedpursuanttoRule405of
RegulationS-T(§232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitsuchfiles).
Yes☒No☐
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,asmallerreportingcompany,oran
emerginggrowthcompany.Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler”,“smallerreportingcompany”,and“emerginggrowthcompany”in
Rule12b-2oftheExchangeAct.
LargeAcceleratedFiler☒ AcceleratedFiler☐ Non-AcceleratedFiler☐ SmallerReportingCompany☐
Emerginggrowthcompany☐
Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanynewor
revisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.☐
Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).Yes☐No☒
AsofJune30,2019,thelastbusinessdayoftheregistrant’smostrecentlycompletedsecondquarter,theaggregatevalueoftheregistrant’scommonstockheld
bynon-affiliateswasapproximately$534.2million,basedonthenumberofsharesheldbynon-affiliatesasofJune30,2019andtheclosingpriceofthe
registrant’scommonstockontheNewYorkStockExchangeonJune30,2019.Sharesofcommonstockheldbyeachexecutiveofficeranddirectorhavebeen
excludedsincethosepersonsmayundercertaincircumstancesbedeemedtobeaffiliates.Thisdeterminationofaffiliatestatusisnotnecessarilyaconclusive
determinationforotherpurposes.
Thenumberofoutstandingsharesoftheregistrant’sClassAcommonstock,parvalue$0.0001pershare,andClassBcommonstock,parvalue$0.0001,asof
January31,2020was17,909,545and1,respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portionsoftheregistrant’sProxyStatementforthe2019AnnualMeetingofStockholdersareincorporatedintoPartIIIofthisAnnualReportonForm10-K
whereindicated.SuchproxystatementwillbefiledwiththeSecuritiesandExchangeCommissionwithin120daysoftheregistrant’sfiscalyearended
December31,2019.
TableofContents
2
RE/MAX HOLDINGS, INC.
2019 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PARTI  4
ITEM1.BUSINESS 4
ITEM1A.RISKFACTORS 28
ITEM1B.UNRESOLVEDSTAFFCOMMENTS 42
ITEM2.PROPERTIES 42
ITEM3.LEGALPROCEEDINGS 42
ITEM4.MINESAFETYDISCLOSURES 42
PARTII 43
ITEM5.MARKETFORREGISTRANT’SCOMMONEQUITY,RELATEDSTOCKHOLDERMATTERSAND
ISSUERPURCHASESOFEQUITYSECURITIES 43
ITEM6.SELECTEDFINANCIALDATA 44
ITEM7.MANAGEMENT’SDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOF
OPERATIONS 47
ITEM7A.QUALITATIVEANDQUANTITATIVEDISCLOSURESABOUTMARKETRISK 65
ITEM8.FINANCIALSTATEMENTSANDSUPPLEMENTARYDATA 67
ITEM9.CHANGESINANDDISAGREEMENTSWITHACCOUNTANTSONACCOUNTINGANDFINANCIAL
DISCLOSURE 106
ITEM9A.CONTROLSANDPROCEDURES 106
PARTIII 107
ITEM10.DIRECTORS,EXECUTIVEOFFICERSANDCORPORATEGOVERNANCE 107
ITEM11.EXECUTIVECOMPENSATION 107
ITEM12.SECURITYOWNERSHIPOFCERTAINBENEFICIALOWNERSANDMANAGEMENTANDRELATED
STOCKHOLDERMATTERS 107
ITEM13.CERTAINRELATIONSHIPSANDRELATEDTRANSACTIONSANDDIRECTORINDEPENDENCE 107
ITEM14.PRINCIPALACCOUNTINGFEESANDSERVICES 107
PARTIV 108
ITEM15.EXHIBITSANDFINANCIALSTATEMENTSCHEDULES 108
ITEM16.FORM10-KSUMMARY 108
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3
FORWARD-LOOKING STATEMENTS
ThisAnnualReportonForm10-Kcontainsforward-lookingstatementsthataresubjecttorisksanduncertainties.Forward-
lookingstatementsgiveourcurrentexpectationsandprojectionsrelatingtoourfinancialcondition,resultsofoperations,plans,
objectives,futureperformanceandbusiness.Youcanidentifyforward-lookingstatementsbythefactthattheydonotrelate
strictlytohistoricalorcurrentfacts.Thesestatementsareoftenidentifiedbytheuseofwordssuchas“believe,”“intend,”
“expect,”“estimate,”“plan,”“outlook,”“project,”“anticipate,”“may,”“will,”“would”andothersimilarwordsandexpressions
thatpredictorindicatefutureeventsortrendsthatarenotstatementsofhistoricalmatters.Forward-lookingstatementsinclude
statementsrelatedto:
● ourexpectationsregardingconsumertrendsinresidentialrealestatetransactions;
● ourexpectationsregardingoveralleconomicanddemographictrends,includingthehealthoftheUnitedStates(“U.S.”)
andCanadianresidentialrealestatemarkets,andhowtheyaffectourperformance;
● ourgrowthstrategiesofgrowingourRE/MAXandMottoMortgagebrands,including(a)increasingRE/MAXagent
count,increasingthenumberofclosedtransactionsidesandtransactionsidesperRE/MAXagent,and(b)increasingthe
numberofopenMottoMortgageoffices;
● theanticipatedbenefitsofourtechnologyinitiatives;
● thecontinuedstrengthofourbrandsbothintheU.S.andCanadaandintherestoftheworld;
● thepursuitoffutureacquisitionsofIndependentRegions;
● ourintentiontopaydividends;
● ourfuturefinancialperformanceincludingourabilitytoappropriatelyforecast;
● theeffectsoflawsapplyingtoourbusinessandourfuturecompliancewithlaws;
● ourabilitytoretainourseniormanagementandotherkeyemployees;
● otherplansandobjectivesforfutureoperations,growth,initiatives,acquisitionsorstrategies,includinginvestmentsin
ourtechnology;
● ourabilitytoeffectivelyimplementandaccountforchangesintaxlaws;
● theanticipatedoutcomeoftheMoehrl/Sitzerlitigation,includinganyrisksoruncertaintieswithregardtoanyfavorable
orunfavorablejudgementsandimplicationstoourindustry.
Theseandotherforward-lookingstatementsaresubjecttorisksanduncertaintiesthatmaycauseactualresultstodiffermaterially
fromthosethatweexpected.Wederivemanyofourforward-lookingstatementsfromouroperatingbudgetsandforecasts,which
arebaseduponmanydetailedassumptions.Whilewebelievethatourassumptionsarereasonable,wecautionthatitisvery
difficulttopredicttheimpactofknownfactorsanditisimpossibleforustoanticipateallfactorsthatcouldaffectouractual
results.Importantfactorsthatcouldcauseactualresultstodiffermateriallyfromourexpectations,orcautionarystatements,are
disclosedin“Item1A.—RiskFactors”andin“Item7.—Management’sDiscussionandAnalysisofFinancialConditionand
ResultsofOperations”includedelsewhereinthisAnnualReportonForm10-K.
Wecautionyouthattheimportantfactorsreferencedabovemaynotcontainallofthefactorsthatareimportanttoyou.In
addition,wecannotassureyouthatwewillrealizetheresultsordevelopmentsweexpectoranticipateor,evenifsubstantially
realized,thattheywillresultintheconsequencesoraffectusorouroperationsinthewayweexpect.Theforward-looking
statementsincludedinthisAnnualReportonForm10-Karemadeonlyasofthedateofthisreport.Weundertakenoobligation
topubliclyupdateorreviseanyforward-lookingstatementasaresultofnewinformation,futureeventsorotherwise,exceptas
requiredbylaw.
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4
PART I
ITEM 1. BUSINESS
Overview
Weareoneoftheworld’sleadingfranchisorsintherealestateindustrywithtwobrandsandthreereportablesegments,
franchisingrealestatebrokeragesgloballyundertheRE/MAXbrand(“RE/MAX”)andmortgagebrokerageswithintheU.S.
undertheMottoMortgagebrand(“Motto”)andreportingourcollectivefranchisemarketingoperationsastheMarketingFunds.
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franchisees’,RE/MAXagents’andMottoloanoriginators’successbyprovidingpowerfultechnology,quality
educationandtraining,andvaluablemarketingtobuildthestrengthoftheRE/MAXandMottobrands.Althoughwepartnerwith
ourfranchiseestoassistthemingrowingtheirbrokerages,theyfundthecostofdevelopingtheirbrokerages.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.
Our History.RE/MAXwasfoundedin1973withaninnovative,entrepreneurialcultureaffordingourfranchiseesandtheiragents
theflexibilitytooperatetheirbusinesseswithgreatindependence.IntheearlyyearsofourexpansionintheU.S.andCanada,we
acceleratedthebrand’sgrowthbysellingregionalfranchiserightstoindependentownersforcertaingeographicregions,a
practicewestillemployincountriesoutsideoftheU.S.andCanada.RE/MAXhasheldthenumberonemarketshareintheU.S.
andCanadacombinedsince1999,asmeasuredbytotalresidentialtransactionsidescompletedbyouragents.OnJune25,2013,
RE/MAXHoldings,Inc.(“Holdings”)wasformedasaDelawarecorporation.OnOctober7,2013,wecompletedaninitialpublic
offeringofourClassAcommonstock,whichtradesontheNewYorkStockExchangeunderthesymbol“RMAX”.InOctober
2016,welaunchedMotto,thefirstnationalmortgagebrokeragefranchiseofferingintheUnitedStates.
Our Brands
RE/MAX. TheRE/MAXstrategyistosellfranchisestorealestatebrokersandhelpthosefranchiseesrecruitandretainthebest
agents.TheRE/MAXbrandisbuiltonthestrengthofourglobalfranchisenetwork,whichisdesignedtoattractandretainthe
best-performingandmostexperiencedagentsbymaximizingtheiropportunitytoretainalargerportionoftheircommissions.As
aresultofouruniqueagent-centricapproach,wehaveestablishedanearly50-yeartrackrecordofhelpingmillionsof
homebuyersandsellersachievetheirgoals,creatingseveralcompetitiveadvantagesintheprocess:
● Leading agent productivity.RE/MAXagentsare,onaverage,substantiallymoreproductivethantheindustryaverage.
RE/MAXagentsatlargebrokeragesonaverageoutsellcompetingagentsmorethantwo-to-onebasedonasurveyofthe
largestparticipatingU.S.brokeragesperthe2019REALTrendsU.S.500Survey.
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5
U.S. Transactions Per Agent
(LargeBrokeragesOnly)
(1)


(1)TransactionsidesperagentarecalculatedbyRE/MAXbasedon2019REALTrends500
data,citing2018transactionsidesforthe1,757largestparticipatingU.S.
● Technology, Tools and Training. WehaveintroducedthepowerfulboojPlatform,afullyintegratedtechnology
platformcustom-builtforRE/MAX'suniqueentrepreneurialculture,inourU.S.Company-ownedRegionswith
additionalrolloutstoU.S.IndependentRegionsandCanadascheduledin2020.Weareenhancingtheplatformovertime
andwillprovideadditionalpremiumofferingsandbolt-onssuchasourrecentacquisitionofFirst.Wealsoprovide
agentsandbrokersthetoolstohelpmaximizetheirproductivitythroughapprovedsupplierarrangementsandtop-quality
educationandtraining.
● Leading market share.NobodyintheworldsellsmorerealestatethanRE/MAX,asmeasuredbyresidentialtransaction
sides.
● Leading brand awareness. TheRE/MAXbrandhasthehighestlevelofunaidedbrandawarenessinrealestateinthe
U.S.andCanadaaccordingtoaconsumerstudyconductedbyMMRStrategyGroup,andouriconicred,whiteandblue
RE/MAXhotairballoonisoneofthemostrecognizedrealestatelogosintheworld.
● Leading global presence.WehaveagrowingglobalpresenceandouragentcountoutsidetheU.S.andCanada
continuestoincrease.Today,theRE/MAXbrandhasover130,000agentsoperatinginover8,000offices,anda
presenceinmorethan110countriesandterritories—aglobalfootprintbiggerthananyotherrealestatebrokeragebrand
intheworld.
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ThemajorityofRE/MAXrevenue—66%in2019—isderivedfromfixed,contractualfeesandduespaidtousbasedonthe
numberofagentsinourfranchisenetwork,soagentcount,primarilyintheU.S.andCanada,isakeymeasureofourbusiness
performance.
130,889 Agents 8,629 Offices 118 Countries and Territories
AsofDecember31,2019
Motto Mortgage.TheMottoMortgagefranchisemodeloffersU.S.realestatebrokers,realestateprofessionalsandother
investorsaccesstothemortgagebrokeragebusiness,whichishighlycomplementarytoourRE/MAXrealestatebusinessandis
designedtohelpMottofranchiseownerscomplywithcomplexmortgageregulations.Mottofranchiseesofferpotential
homebuyersanopportunitytofindbothrealestateagentsandindependentMottoloanoriginatorsatofficesneareachother.
Further,Mottoloanoriginatorsprovidehomebuyerswithfinancingchoicesbyprovidingaccesstoavarietyofqualityloan
optionsfrommultipleleadingwholesalelenders.Inaddition,Mottoprovidespowerfultechnologytoitsfranchiseesthat
simplifiesthemortgageprocess.Mottofranchiseesaremortgagebrokersandnotmortgagebankers.Likewise,wefranchisethe
Mottosystemandarenotlendersorbrokers.
Motto’srevenuemodelconsistsoffixed,contractualfeespaidmonthlybythebrokeronaper-officebasisforbeingapartofthe
MottonetworkandforuseoftheMottobrandandtechnology,andfromsalesofindividualfranchises.Weareintheearlystages
ofofferingsupplementalfranchisingmodelstoexistingMotto“bricksandmortar”franchiseswhichareofficeswithaunique
physicaladdresswithrightsgrantedbyafullfranchiseagreement.Thenew“virtual”officesand“branchises”arenotrequiredto
havethesamephysicalfootprint.AvirtualofficeisarightgrantedbyMottotoafranchiseetooperateinanadditionalstate.The
rightsforuptotwovirtualofficesaregrantedtoaMottofranchiseeatthetimeofpurchase;thevirtualofficeconceptallowsthat
franchiseetotakeadvantageofbusinessopportunitiesinanadditional,sometimesadjoining,state.Therearenoincremental
franchisefeesormonthlyroyaltyfeesdirectlyassociatedwithavirtualoffice.AbranchiseisascaleddownMottofranchise.
BranchisesaredesignedforanexistingMottofranchiseownerwhodesirestoexpandtoanadditionallocationwherethe
franchiseeisuncertainwhetheranticipatedloanoriginationvolumewillsupportfullfranchisefees.Mottofranchiseespaya
reducedfranchisefeeandmonthlyroyaltyrateforabranchise.MottoMortgagehasgrowntoover100officesacrossmorethan
30statesandweexpectMottotocontinuetogrowasweexpecttosellmoreMottofranchisesin2020thanwedidin2019.
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Number of Open Motto Offices*
*onlyincludesfullphysicalMottooffices;excludesvirtualofficesandbranchises
Industry Overview and Trends
Weareafranchisorofbusinessesintwofacetsoftherealestateindustry—realestatebrokeragesandmortgagebrokerages.With
approximately95%ofourrevenue,approximately65%ofourRE/MAXagentcountcomingfromourfranchisingoperationsin
theU.S.andCanada,and100%ofourMottooperationsbeingintheU.S.,wearesignificantlyaffectedbytherealestatemarkets
intheU.S.andCanada.
The U.S. and Canadian Real Estate Industries are Large Markets.TheresidentialrealestatemarketsintheU.S.andCanadaare
approximately$1.9trillionand$0.2trillion,respectively,basedon2019salesvolume,accordingtoexistinghomesales
informationfromtheNationalAssociationofRealtors(“NAR”)andtheCanadianRealEstateAssociation(“CREA”).
The Residential Real Estate Industry is Cyclical in Nature.Theresidentialrealestateindustryiscyclicalinnaturebuthas
shownstronglong-termgrowth.Asillustratedbelow,thenumberofexistinghomesalestransactionsintheU.S.andCanadahas
generallyincreasedduringperiodsofeconomicgrowth:
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U.S. Existing Home Sales
U.S. Housing Trends.TheU.S.housingmarkethadmixedresultsduring2019astheexistinghomesalesdeclinesof2018
continuedinthefirsthalfof2019.Salesrecoveredinthesecondhalfof2019withfullyearexistinghomesalesendingatthe
samelevelas2018,accordingtoNAR.Persistentpriceappreciationandlowhousinginventory,especiallyatthelowerendofthe
market,continuedtochallengehomebuyersseekingaffordableinventorydespitehistoricallymoderateinterestrates.NAR’s
January2020forecastcalledforexistinghomesalestoincreaseanaverageof3.4%in2020.
Asweentered2020,thegrowthinhomesalestransactionscontinueddespiteongoingconstraintsrelatedtoshrinkinginventory
andaffordability.Althoughmoderateinterestrates,lowunemploymentandwageappreciationremainpositiveforU.S.housing
trends,continuedconstrictiontoinventorylevelscouldstallthecurrentmomentum.
Canadian Existing Home Sales
Canadian Housing Trends. MostindividualmarketssurveyedacrossCanadaexperiencedmoderatepriceincreasesyear-over-
yearfrom2018to2019.Weexpectthemarkettogrowin2020withtheoverallrateofpriceincreasestobegreaterthanin2019.
CREAprojectstheaverageresidentialsalepriceforCanadawillincrease6.2%in2020,whichindicatesthatthedesireforhome
ownershipremainsstrong,particularlyamongCanadianmillennials.Andaccordingtothe2020RE/MAXHousingMarket
OutlookReport,51%ofCanadiansareconsideringbuyingapropertyinthenextfiveyears,upfrom36%intheprioryear.
Favorable Long-Term Demand.Webelievelong-termdemandforhousingintheU.S.andCanadaisdrivenbymanyfactors
includingtheeconomichealthofthedomesticeconomy,demographictrends,affordability,interestratesandlocalfactorssuchas
demandrelativetosupply.WealsobelievetheresidentialrealestatemarketintheU.S.andCanadawillbenefitfrom
fundamentaldemographicshiftsoverthelongterm,including:
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9
● An increase in demand from rising household formations,includingasaresultofimmigration,populationgrowthand
wealthaccumulationandwagegrowthofminorities.AccordingtoTheStateoftheNation’sHousingReport2019
compiledbytheJointCenterforHousingStudiesofHarvardUniversity(the“JCHSReport”),U.S.household
formationsareprojectedtoreach12.0millionbetween2018and2028.Likewise,theU.S.CensusBureauprojectsthat
theU.S.willcontinuetoexperiencelong-termpopulationgrowthandpredictsnetimmigrationof36millionindividuals
from2014to2060.AndinCanada,StatisticsCanadareportsthatCanadahasthehighestannualpopulationgrowthrate
ofG7nationsandexpectsthenation’spopulationtogrowtomorethan40millionindividualsby2068eveninitslow-
growthscenario.
● An increase in demand from generational shifts. Webelievethereispent-upbuyingdemandamongadultsinthe
millennialgeneration,currentlythenation’slargestlivinggeneration.Themillennialgenerationismovingintotheir
primehome-buyingyearsastheyformhouseholdsandaresupportedbystrongemployment,relativelylowinterest
rates,andrisingconsumerconfidence.Similarly,wealsobelievethereispent-upsellingdemandfromgenerational
shifts,suchasmanyretirementagehomeowners,fromthe“babyboom”generation,whoarelikelytotakeadvantageof
improvedhousingmarketconditionsinordertoselltheirexistingresidencesandretireinnewareasofthecountryor
purchasesmallerhomes.
● Pent-up demand from supply shortages.Suppliesofsingle-familyhomesforsaleremainrelativelyscarce,particularly
atthelower-costendofthespectrum.Theconversionofsingle-familyhomestorentalproperties,theongoingdeclinein
residentialmobilityratesandthelowlevelofsingle-familyconstructionarelikelycontributorstothelowlevelof
supply,accordingtotheJCHSReport.Additionally,whileaffordabilitypressureshaveeased,theJCHSReportnotes
thisissueremainswidespread,along-termtrendwhichhasnotbeensolved.Canadaisfacedwithsimilarchallenges
withStatisticsCanadanotingmorethan5%ormorethan700thousandhouseholdsareinhousingthatisnotsuitablefor
theirneedsandnearly20%ofhouseholdsdonotreportbeingsatisfiedwiththeirhousing.Shouldthesesupply
constraintsberemedied,webelievetherealestateindustrywouldseeasubstantialbenefit.
Notable Broker and Agent Trends.Notabletrendsimpactingresidentialrealestatebrokersandagentsinclude:
● Almost 90% of all U.S. homebuyers and sellers use an agent–About89%ofsellersandpurchaserswererepresented
byarealestateagentin2019,accordingtoNARdata.Thesefigureshaveclimbedoverthelastdecadeandahalf—a
periodoftimeduringwhichtechnologyhasmateriallychangedthetypicalhome-buyingorsellingtransaction:
Percentage of Home Buyers and Sellers Using an Agent
Source:NARProfileofHomeBuyersandSellers
● Competition for agents and listings remains fierce–Competitionforagents,especiallyhighlyproductiveagents,and
listingshasalwaysbeenfierceandtodayisnodifferent.Franchisorsandbrokersarecontinuallyrefiningandfine-tuning
theireconomicmodelsinordertocraftwhattheybelievetobethemostcompellingvaluepropositioninordertoattract
andretainthemostproductiveagentsandtocaptureconsumerlistings.Theyear2019remainedheatedinthisregardas
theindustrywitnessedthecontinuationofsignificantcapital
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10
investedinrelativelynewentrantstoourindustry,resultinginmanywell-financedcompetitorsofferingawidevariety
ofbusinessmodels.SeeCompetitionforadditionaldiscussion.
● The importance of technology continues to increase–Webelieveindustrymarketparticipantswillcontinuetofocus
ontechnologyinvestmentsasevidencedbyincreasedcapitalflowingintotheindustry.Webelievemobileplatforms,
artificialintelligenceandpredictiveanalyticsareincreasinglybecomingapointoffocusastheindustrylookstouse
technologytosimplifyandstreamlinetheprocessofleadcultivationandcompletingtransactions.Inresponse,many
establishedbrokersarefavoringproprietarytechnologyasopposedtopurchasingitfromthirdparties.
● Alternate business models increase amid record venture capital investment–Whilethemajorityofhomebuyersand
sellersstilluseagents,thenumberofalternatebusinessmodelscontinuestoexpand.Furthermore,investmentsintoreal
estatetechnology,especiallyasitrelatestoalternatemodels,continuestoincrease.AccordingtoanOctober2019Real
EstateFundingReportbyT360,investmentinresidentialrealestatetechnologythroughthethirdquarterof2019totaled
$2.14billion,or121%offull-year2018levels.Nearly$1.5billion,or69%oftotalresidentialfundingin2019through
September,wenttofouriBuyercompanies.iBuyersarecompaniesthatmakeanonline,all-cashoffertoapotential
homesellerandiftheofferisaccepted,theiBuyertakesownershipofthepropertyandisresponsibleforresellingthe
home.AstheiBuyermodelisaquickeralternativetoatraditionalrealestatetransaction,thosesellerswhoneedorwant
toselltheirhomequicklyfinditparticularlyattractive.SomebrokerageshavebeguntopartnerwithiBuyersoroffer
theirowniBuyerprogram.MostiBuyeractivitytendstobebelowthemedianpricerange.InadditiontoiBuyerswho
operateasdiscussedabove,otheralternatebusinessmodelsexistincludingthosecompanieswhoseektopurchasean
existinghomeowner’s“move-up”or“dream”homeforcashandthensubsequentlysellthecurrentlyoccupiedproperty.
The Long-Term Value Proposition for Real Estate Brokerage Services.Webelievethetraditionalagent-assistedbusiness
model,especiallythosesupportedbyprofessionalandhighlyproductiveagents,comparesfavorablytoalternativechannelsofthe
residentialbrokerageindustry,suchasdiscountbrokers,“forsalebyowner”listings,iBuyers,andlower-feebrokeragescatering
toconsumerswhousetechnologyforsomeoftheservicestraditionallyprovidedbybrokers,becausefull-servicebrokeragesare
bestsuitedtoaddressmanyofthekeycharacteristicsofrealestatetransactions,including:
(i) thecomplexityandlargemonetaryvalueinvolvedinhomesaletransactions,
(ii) theinfrequencyofhomesaletransactions,
(iii) thehighpricevariabilityinthehomemarket,
(iv) theintimatelocalknowledgenecessarytoadviseclientsonneighborhoodcharacteristics,
(v) theuniquenatureofeachparticularhome,and
(vi) theconsumer’sneedforahighdegreeofpersonalizedadviceandsupportinlightofthesefactors.
Forthesereasons,webelievethatconsumerswillcontinuetofavorthefull-serviceagentmodelforresidentialrealestate
transactions.Infact,a2019surveywecommissionedfromCamp&Kingofover5,000consumersacrosstheU.S.andCanada
notedthatmorethanthreequartersofhomebuyersandsellersstillseethevalueofafull-serviceagent.Inaddition,although
listingsareavailableforviewingonawidevarietyofrealestatewebsites,webelieveanagent’slocalmarketexpertiseprovides
theabilitytobetterunderstandtheinventoryoffor-salehomesandtheinterestsofpotentialbuyers.Thisknowledgeallowsthe
agenttocustomizethepoolofpotentialhomestheyshowtoabuyer,aswellashelpsellerstopresenttheirhomeprofessionallyto
bestattractpotentialbuyers.
The Long-Term Value Proposition for Mortgage Brokerage Services.Likewise,webelievemortgagebrokersprovidechoice
andavaluable“concierge”serviceforconsumers.Mortgagebrokersarefamiliarwiththelatestloanprogramsandchoices
availablethroughvariouswholesalelenders.Aprofessionalmortgagebrokercanintroduceconsumerstoloanprogramsfrom
severallenders,providingchoiceandinformationconsumersmaybeunlikelytolocateontheirown.In2019,thepercentageof
mortgageoriginationshandledbymortgagebrokerageswasstillbelowaveragehistoricallevels,whichwebelieveshows
potentialforgrowthinthemortgagebrokerageproductionchannel.In2019,webeganto
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realizethatpotentialasthepercentageofmortgageoriginationshandledbymortgagebrokeragesbegantorise.Webelievethere
isroomforadditionalgrowthasthepercentageofmortgageoriginationshandledbymortgagebrokeragesin2019hasstillnot
reachedmaximumlevelsseeninthepast.
Total Mortgage Originations
Source:InsideMortgageFinancePublications,Inc.Copyright©2020Usedwithpermission.
Purchase-moneymortgageoriginationscorrelatetotheoverallnumberofhomesalesandhomeprices.Homepurchasesare
drivenprimarilybythebuyer’spersonalandprofessionalcircumstances,whereasrefinancesdependmainlyuponinterestrates.
AccordingtoFederalHomeLoanMortgageCorporation(knownas“FreddieMac”),purchase-moneyoriginationsareexpectedto
increasegraduallyinthenextfewyears.Ascomparedtocompetitors,Mottohasasignificantlyhigherratioofpurchase-money
mortgageoriginationstorefinancesatanapproximately80/20split.Webelievethattheexpectedincreaseinpurchase-money
originationswillprovideagrowthopportunityforaMottofranchise.
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Purchase Mortgage Originations
Our Franchise Model and Offering
Introduction to Franchising.Franchisingisadistributedmodelforlicensingtheuseofthefranchisor’sbrandandtechnology,
tools,andtraining.Inreturn,thefranchiseeretainsownershipandsoleresponsibilityforthelocalbusinessanditsrisks,and
thereforeasubstantialportionoftheprofitsitgenerates.Thesuccessfulfranchisorprovidesitsfranchisees:i)auniqueproductor
serviceoffering;ii)adistinctivebrandname,andasthesystemgainsmarketshare,thefavorableconsumerrecognitionthatbrand
comestosymbolize;andiii)technology,toolsandtrainingtohelpfranchiseesoperatetheirbusinesseffectively,efficientlyand
successfully.Becausefranchisinginvolvesprincipallythedevelopmentandlicensingofintellectualproperty,andthecostsof
retailspaceandemployeesarebornebytheindividualunitowner,ithasalowfixed-coststructuretypifiedbyhighgrossmargins,
allowingthefranchisortofocusoninnovation,franchiseetrainingandsupport,andmarketingtogrowbrandreputation.
How Brokerages Make Money.Residentialrealestatebrokeragestypicallyrealizerevenuebychargingacommissionbasedona
percentageofthepriceofthehomesoldand/orbychargingtheiragents,whoareindependentcontractors,feesforservices
rendered.Therealestatebrokerageindustrygenerallybenefitsinperiodsofrisinghomepricesandtransactionactivity(withthe
numberoflicensedrealestateagentsgenerallyincreasingduringsuchperiods)andistypicallyadverselyimpactedinperiodsof
fallingpricesandhomesaletransactions(withthenumberoflicensedrealestateagentsgenerallydecreasingduringsuch
periods).
Residentialmortgagebrokeragestypicallyrealizerevenuebychargingfeesfortheirservice,whichisbasedonapercentageofthe
mortgageloanamount.Themortgagebrokerageindustrygenerallybenefitsfromperiodsofincreasinghomesalesactivityand
risinghomeprices,asthisgenerallyresultsinincreasedpurchase-moneymortgageoriginations(loansthatariseduringtheinitial
saleofahouse),andperiodswhenhomeownersrefinancetotakeadvantageoflowerinterestrates.Themortgagebrokerage
industryisusuallyadverselyimpactedinperiodsofdecreasinghomesalesactivity,asthisresultsinlesspurchase-money
mortgageoriginations,andperiodsoflessfavorableinterestratesmakinghomeownerslesslikelytorefinance.
The RE/MAX “Agent-Centric” Franchise Offering. Webelievethatour“agent-centric”approachisacompellingofferinginthe
realestatebrokerageindustry,anditenablesustoattractandretainhighlyproductiveagentsandmotivatedfranchiseestoour
networkanddrivegrowthinourbusinessandprofitability.Ourmodelmaximizesouragent’sproductivitybyprovidingthe
followingcombinationofbenefitstoourfranchiseesandagents:
● High Agent Commission Fee Split and Low Franchise Fees.TheRE/MAXhighcommissionsplitconceptisa
cornerstoneofourmodeland,althoughnotunique,differentiatesusintheindustry.Thatdifferentiationismostevident
whenourbrandadvantagesandservicesarefactoredinaspartoftheconcept.Werecommendtoourfranchiseesan
agent-favorablecommissionsplitof95%/5%,inexchangefortheagentpayingfixedfeestosharetheoverheadand
othercostsofthebrokerage.Thismodelallowshigh-producingagentstoearnahigher
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commissioncomparedtotraditionalbrokerageswherethebrokertypicallytakes30%to40%oftheagent’scommission,
anditprovidesbrokerswiththeresourcestoofferkeyservicesandsupporttotheiragents.
● Affiliation with the Best Brand in Residential Real Estate.WithnumberonemarketshareintheU.S.andCanada
combinedasmeasuredbytotalresidentialtransactionsidescompletedbyRE/MAXagents,andleadingunaidedbrand
awarenessintheU.S.andCanada,accordingtoaconsumerstudybyMMRStrategyGroup,wereinforcebrand
awarenessthroughmarketingandadvertisingcampaignsthataresupportedbyourfranchisees’andagents’local
marketing.
● Entrepreneurial, High-Performance Culture.Ourbrandandtheeconomicsofourmodelgenerallyattractdriven,
professional,entrepreneurially-mindedfranchisees,andweallowthemautonomytoruntheirbusinessesindependently,
includingthefreedomtosetcommissionratesandoverseelocaladvertisingalignedwithRE/MAXstandards.
● Powerful Technology and Marketing Tools. Webelieveweofferindustry-leadingtechnologyhighlightedbyour
proprietaryboojPlatform,Firstmobileapp,andtherecentlyenhancedconsumerfacingappandremax.com.Thehighly-
customizedboojPlatformintegratesasuiteofdigitalproductsthatempowerhigh-producingagents,brokersandteams
toproactivelyestablish,manageandgrowclientrelationships.WithCustomerRelationshipManagement(“CRM”)at
thecoreofthisecosystem,theboojPlatformutilizesdealmanagementandleadcultivationtoolstostreamlinethework
ofagentsfromleadgenerationtopost-closenurturingandbeyond,whileintegratingkeypartnershipsthatarewidely
adoptedacrosstheindustry.TheFirstmobileappleveragesdatascience,machinelearningandhumaninteractionto
helprealestateprofessionalsbetterleveragethevalueoftheirpersonalnetwork.Photofy+RE/MAXgivesouragentsan
exclusivesocialmarketingtooltocomplementthevarietyofmarketingtoolsweofferouragents.
● RE/MAX University
®
Training Programs.RE/MAXUniversity
®
offerson-demandaccesstoindustryinformationand
advancedtraininginareassuchasdistressedproperties,luxuryproperties,seniorclients,buyeragencyandmanyother
specialtyareasofrealestate.
● RE/MAX Marketing and Promotion. WebelievethewidespreadrecognitionoftheRE/MAXbrandandouriconicred,
whiteandblueRE/MAXhotairballoonlogoandpropertysignsisakeyaspectofourvaluepropositiontoagentsand
franchisees.RepresentingthemajorityofourMarketingFundsactivities,avarietyofadvertising,marketingand
promotionprogramsbuildourbrandandgenerateleadsforouragents,includingleadingwebsitessuchasremax.com,
advertisingcampaignsusingtelevision,digitalmarketing,socialmedia,print,billboardsandsigns,andappearancesof
thewell-knownRE/MAXhotairballoon.
Event-basedmarketingprograms,sponsorships,sportingactivitiesandothersimilarfunctionsalsopromoteourbrand.
Theseincludeoursupport,since1992forChildren'sMiracleNetworkHospitalsintheU.S.andChildren'sMiracle
NetworkinCanada,tohelpsickandinjuredchildren.ThroughtheMiracleHomeprogram,participatingRE/MAX
agentsdonatetoChildren'sMiracleNetworkHospitalsonceahomesaletransactioniscomplete.
Ourfranchiseesandtheiragentsfundnearlyalloftheadvertising,marketingandpromotionsupportingtheRE/MAX
brand,which,intheU.S.andCanada,occursprimarilyontwolevels:
● Marketing Fund Regional, Pan-Regional and Local Marketing Campaigns.Fundsarecollectedfrom
franchiseesbyourMarketingFundsentitiesinCompany-ownedRegionstosupportbothregionalandpan-
regionalmarketingcampaignstobuildbrandawarenessandtosupporttheCompany’sagentandbroker
technology.Theuseofthefundbalancesisrestrictedbythetermsofourfranchiseagreements.Independent
Regionsmaycontributetonationalorpan-regionalcreativeand/ormediacampaignstoachieveeconomiesof
scaleinthepurchaseofadvertisingbutaregenerallyresponsibleforanyregionaladvertisingintheirrespective
areas.
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● Agent Sponsored Local Campaigns. Ourfranchiseesandagentsengageinextensivepromotionaleffortswithin
theirlocalmarketstoattractcustomersanddriveagentandbrandawarenesslocally.Theseprogramsare
subjecttoourbrandguidelinesandqualitystandardsforuseoftheRE/MAXbrand,butweallowour
franchiseesandagentssubstantialflexibilitytocreateadvertising,marketingandpromotionprogramsthatare
tailoredtolocalmarketconditions.
RE/MAX “Growth Engine.”TheRE/MAXGrowthEngineisavirtuouscirclewherebyallofthekeystakeholdersinour
franchisenetwork—RE/MAX,ourfranchisees,agentsandconsumers—benefitfrommutualinvestmentandparticipationinthe
RE/MAXnetworkor,aswesayinRE/MAX,“Everybodywins.”Bybuildingourleadingbrandaroundanagent-centricmodel,
webelieveweareabletoattractandretainhighlyproductiveagentsandmotivatedfranchisees.Asaresult,ouragentsand
franchiseeshelptofurtherenhanceourbrandandmarketshare,expandourfranchisenetwork,andultimatelygrowourrevenue,
asillustratedbelow:
TheRE/MAXGrowthEngineleadstothefollowinguniquebenefitsforourfranchiseesandagentsandRE/MAX:
RE/MAX Franchisee and Agent Benefits

RE/MAX Benefits
•Affiliationwiththebestbrandintherealestateindustry
•Entrepreneurialculture
•Highagentcommissionsplit,lowfranchisefeesandhighly
productiveagents
•Accesstoourtechnologyandtools
•Comprehensive,award-winningtrainingprograms

•Networkeffectdrivesbrandawareness
•Franchisefeestructureprovidesrecurringrevenue
streams
•Franchisemodel—highlyprofitablewithlowcapital
requirements—leadstostrongcashflowgeneration
andhighmargins
RE/MAX Four-Tier Franchise Structure.RE/MAXisa100%franchisedbusiness,withalloftheRE/MAXbrandedbrokerage
officelocationsbeingoperatedbyfranchisees.WefranchisedirectlyintheU.S.andCanada,inwhatwecall“Company-owned
Regions.”Brokerageoffices,inturn,enterintoindependentcontractorrelationshipswithrealestatesalesagentswhorepresent
realestatebuyersandsellers.IntheearlyyearsofourexpansionintheU.S.andCanada,wesoldregionalfranchiserightsto
independentownersforcertaingeographicregions(“IndependentRegions”),pursuanttowhichthoseIndependentRegionshave
theexclusiverighttosellfranchisesinthoseregions.Wehavepursuedastrategytoacquirethoseregionalfranchiserightsfrom
IndependentRegionsintheU.S.andCanada.
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15
ThefollowingdepictsourfranchisestructureandthelocationofourCompany-ownedversusIndependentRegions:
Tier Description
Services
Franchisor
(RE/MAX, LLC)
OwnstherighttotheRE/MAXbrandandsellsfranchisesand
franchisingrights.
● Brand
● Technology
● Marketing
● Training&tools
Independent
Regional
Franchise
Owner
Ownsrightstosellbrokeragefranchisesinaspecifiedregion.
Typically, 20-year agreement with up to three renewal options.
RE/MAX, LLC franchises directly in Company-owned Regions, in
the rest of the U.S. and Canada.
● LocalServices
● RegionalAdvertising
● FranchiseSales
In Company-owned Regions in the U.S. and
Canada, RE/MAX,LLC performs these
services.
Franchisee
(Broker-Owner)
OperatesaRE/MAX-brandedbrokerageoffice,listsproperties
andrecruitsagents.
Typically, 5-year agreement.
● OfficeInfrastructure
● SalesTools/Management
● Development&Coaching
● BrokerofRecord
Agent
Brandedindependentcontractorswhooperateoutoflocal
franchisebrokerageoffices.
● Representsrealestatebuyerorseller
● Typicallysetsowncommissionrate
Company-owned
Independent
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16
Ingeneral,thefranchisees(orbroker-owners)donotreceiveanexclusiveterritoryintheU.S.exceptundercertainlimited
circumstances.Priortoopeninganoffice,afranchiseeorprincipalownerisrequiredtoattendafour-tofive-daytrainingprogram
atourglobalheadquarters.
The Motto Mortgage Franchise Offering.ThroughourMottobusiness,weareamortgagebrokeragefranchisor,notalenderor
mortgagebrokerage.Ourfranchiseesarebrokers,notlenders,andsoneitherwenorourfranchiseesfundorserviceanyloans.As
afranchisor,wehelpourMottofranchiseesestablishindependentmortgagebrokeragecompanies,withamodeldesignedto
complywithcomplexregulations,essentiallyprovidinga"mortgagebrokerageinabox".Thismodelnotonlycreatesanancillary
businessopportunityforcurrentrealestatebrokeragefirms,butalsooffersopportunitiesformortgageprofessionalsseekingto
opentheirownbusinessesandotherindependentinvestorsinterestedinfinancialservices.TheMottoMortgagemodeloffers
valuetoourfranchiseesbyoffering:
● Setup Guidance.Weguideownersthrougheverystepofthesetupprocess.
● Compliance, Training, and Support.Weproviderobustcompliancesupport,includingexaminationassistanceanda
systembuiltwithtransparencyinmind.Tohelpeachfranchiseowner,weprovidesupportstructuresthatallowthemto
spendtheirtimegettingmorebusiness.
● Access to multiple lenders.MottoMortgagefranchiseesworkwithapre-vettedgroupofwholesalelenderstostreamline
theshoppingprocessandtoprovidecustomerswithcompetitivechoices.
● Technology.We’veseamlesslyintegratedindustryleadingsystemsintoone,time-savingtechnologicalecosystem
includingbestinclassmortgageorigination,CRMandmarketingplatforms.
● Franchising Expertise.Asamemberofafamilyofcompanieswithover45yearsoffranchisingexperience,weprovide
bestpracticestofranchisees.
OurMottoMortgagebrokeragefranchisor,MottoFranchising,LLC,offersseven-yearagreementswithfranchisees.Mottosells
franchisesdirectlythroughouttheU.S.astherearenoregionalfranchiserightsintheMottosystem.Ourcustomersareboth
RE/MAXandnon-RE/MAXrealestatebrokers,realestateprofessionalsandotherinvestorsseekingaccesstothemortgage
brokeragebusiness.WearealsointheearlystagesofofferingsupplementalfranchisingmodelsinwhichMottooffersbrokers
withanexistingMottofranchisetheabilitytoexpandtheirphysicalandvirtualpresenceforareducedcontractualfee(aka
“branchise”).Theaimofthesenewmodelsistogivefranchiseestheflexibilitytoexpandtheirbusinesstoplaceswhereitwould
nothavebeenfeasibletosupportafulladditionalfranchisewhilekeepingofficescompliantwithstatebranchregulations.These
alternativemodelsarenotincludedinourcountofopenMottooffices.Therearenotpresentlyanyothernationalmortgage
brokeragefranchisorsintheU.S.
Financial Model
Asafranchisor,wemaintainalowfixed-coststructure.Inaddition,ourstable,fee-basedmodelderivesamajorityofourrevenue
fromrecurringfeespaidbyourRE/MAXandMottofranchisees,RE/MAXIndependentRegionfranchise
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17
ownersandRE/MAXagents.Thiscombinationhelpsusdrivesignificantoperatingleveragethroughincrementalrevenuegrowth,
yieldinghealthymarginsandsignificantcashflow.
(1) Revenue(lessMarketingFundsfees)andAdjustedEBITDAarenon-GAAPmeasuresoffinancialperformancethatdifferfromU.S.
GenerallyAcceptedAccountingPrinciples.Revenue(lessMarketingFundfees)iscalculateddirectlyfromourconsolidatedfinancial
statementsasTotal revenue lessMarketing Funds Fees.See“Item7.—Management’sDiscussionandAnalysisofFinancialCondition
andResultsofOperations”forfurtherdiscussionofAdjustedEBITDAandareconciliationofthedifferencesbetweenAdjusted
EBITDAandnetincome.
(2) Excludesadjustmentsattributabletothenon-controllinginterest.See"CorporateStructureandOwnership”below.
Revenue Streams.
Holdings.Thechartbelowillustratesourrevenuestreams:
Holdings Revenue Streams as Percentage of 2019 Total Revenue*
*ExcludingMarketingFunds
RE/MAX
TheamountofthevariousRE/MAXfeetypeswillvarysignificantlydependingonwhethercomingfromCompany-owned
Regions,IndependentRegions,orGlobalRegions,withthegreatestamountsinCompany-ownedRegions.Seediscussionof
revenueperagentbelow.
TableofContents
18
Continuing Franchise Fees.Continuingfranchisefeesarefixedcontractualfeespaidmonthlybyregionalfranchiseownersin
IndependentRegionsorfranchiseesinCompany-ownedRegionsbasedonthenumberofRE/MAXagentsintherespective
franchisedregionorofficeorpaidbyMottofranchiseesbasedonthenumberofofficesopen.
Annual Dues.AnnualduesareafixedmembershipfeepaidannuallybyRE/MAXagentsdirectlytoustobeapartofthe
RE/MAXnetworkandtousetheRE/MAXbrand.Annualduesareaflatfeeperagent.
Broker Fees.BrokerfeesareassessedagainstrealestatecommissionspaidbycustomerswhenaRE/MAXagentsellsahome.
Generally,theamountpaidis1%ofthetotalcommissiononthetransaction,althoughthepercentagecanvarybasedonthe
specifictermsofthebrokerfeeagreementandincertainlocations(mainlyCanadaandTexas)iscappedatacertainlevelof
commissions,andinIndependentRegionsinCanadaisnotcharged.Theamountofcommissioncollectedbybrokersisbased
primarilyonthesalesvolumeofRE/MAXagents,homesalepricesinsuchsalesandrealestatecommissionsearnedbyagentson
thesetransactions.Brokerfees,therefore,varybasedupontheoverallhealthoftherealestateindustryandthevolumeofexisting
homesales.Additionally,agentsinCompany-ownedRegionsexistingpriorto2004,theyearwebeganassessingbrokerfees,are
generally“grandfathered”andcontinuetobeexemptfrompayingabrokerfee.AsofDecember31,2019,grandfatheredagents
representedapproximately17%oftotalagentsinU.S.Company-ownedRegions.Weexpectthatovertime,exemptagentswillbe
replacedbynewagentswhowillpaybrokerfees,whichwillhaveapositiveimpactonourbrokerfeerevenueindependentof
changesinagentcount,salesvolumeandhomesaleprices.Mottofranchiseesdonotpayanyfeesbasedonthenumberordollar
valueofloansbrokered.
Franchise Sales and Other Revenue.Franchisesalesandotherrevenueprimarilyconsistsof:
● Franchise Sales.RevenuefromsalesandrenewalsofindividualfranchisesinRE/MAXCompany-ownedRegions,
IndependentRegions,aswellasRE/MAXregionalandcountrymasterfranchisesforIndependentRegionsinglobal
marketsoutsideofNorthAmerica(“GlobalRegions”).Wereceiveonlyaportionoftherevenuefromthesalesand
renewalsofindividualfranchisesfromIndependentandGlobalRegions.Thefranchisesaleinitialfeesandcommissions
relatedtofranchisesalesarerecognizedoverthecontractualtermofthefranchiseagreement.
● Other Revenue.Revenuefrom(a)preferredmarketingarrangementsandapprovedsupplierprogramswithsuchrevenue
beingeitheraflatfeeorapercentageofrevenuefromproductsandservicessoldtoRE/MAXagents),(b)event-based
revenuefromtrainingandconventions,includingourRE/MAXannualconvention,(c)revenuefrombooj’slegacy
businessofsupplyingwebsitesandothertechnologytoindependentrealestatebrokeragesand(d)technology
subscriptionrevenuesuchasfortheFirstapp.
TableofContents
19
Revenue per Agent in Owned versus Independent RE/MAX Regions.Wereceiveahigheramountofrevenueperagentinour
Company-ownedRegionsthaninourIndependentRegionsintheU.S.andCanada,andmoreinIndependentRegionsintheU.S.
andCanadathaninGlobalRegions.Wereceivetheentireamountofthecontinuingfranchisefee,brokerfeeandinitialfranchise
andrenewalfeeinCompany-ownedRegions,whereaswereceiveonlyaportionofthesefeesinIndependentRegions.We
generallyreceive15%,20%or30%oftheamountofsuchfeesinIndependentRegions,whichisafixedrateineachparticular
IndependentRegionestablishedbythetermsoftheapplicableregionalfranchiseagreement.Webaseourcontinuingfranchise
fees,agentduesandbrokerfeesoutsidetheU.S.andCanadaonthesamestructureasourIndependentRegions,exceptthatthe
aggregatelevelofsuchfeesissubstantiallylowerinthesemarkets.In2019,theaverageannualrevenueperagentwasasfollows:
(1)
AnnualduesarecurrentlyaflatfeeofUS$410/CA$410peragentannuallyforourU.S.andCanadianagents.Theaverageperagentfor
theyearendedDecember31,2019inbothIndependentRegionsandCompany-ownedRegionsreflectstheimpactofforeigncurrency
movementsrelatedtorevenuereceivedfromCanadianagents.TheratioofCanadianagentstoU.S.agentsinIndependentRegionshas
increasedasaresultofU.S.IndependentRegionacquisitions.
Motto.OurMottorevenueisderivedfromcontinuingfranchisefeesandfranchisesales.
● Continuing Franchise Fees.MottocontinuingfranchisefeesarefixedcontractualfeespaidmonthlybyMotto
franchisees.Themonthlyfeespaidbythebrokersareinitiallydiscountedandtakeapproximately12to14monthsafter
thesaleofaMottofranchiseforafranchiseetorampuptopayingafullsetofmonthlyfees.Mottofranchiseesdonot
payanyfeesbasedonthenumberordollarvalueofloansbrokered.
● Franchise Sales.Revenuefromsalesandrenewalsofindividualfranchises.Thefranchisesaleinitialfeesand
commissionsrelatedtofranchisesalesarerecognizedoverthecontractualtermofthefranchiseagreement.
Value Creation and Growth Strategy
Asafranchisor,wegeneratefavorablemarginsandhealthyamountsofcashflow,whichfacilitatesourvaluecreationandgrowth
strategy.AsaleadingfranchisorintheresidentialrealestateindustryintheU.S.,Canadaandglobally,wecreateshareholder
valueby:
a) growingorganicallybybuildingonournetworkofover8,000RE/MAXfranchiseesand130,000agentsandour
networkofover100openMottomortgagebrokeragefranchises;
b) catalyzinggrowthbyreacquiringregionalRE/MAXfranchiserightsandacquiringotherbusinessescomplementaryto
ourRE/MAXandMottofranchises;and
c) returningcapitaltoshareholders.
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Organic Growth.Webelievewehavemultipleopportunitiestogroworganically,includingprincipallythrough:a)RE/MAX
agentcountgrowthintheU.S.andCanada;b)RE/MAXandMottofranchisesales;c)organicgrowthfromglobalregions;d)
pricing;ande)increasesinagentproductivityorhigherhomeprices.Otherpotentialorganicgrowthopportunitiesinclude
monetizingourtechnologyofferingsanddevelopingourapprovedsupplierrelationshipstodriveadditionalrevenue.
RE/MAX Agent Count Growth. WithrespecttoRE/MAXagentcountgrowth,weexperiencedagentlossesduringthedownturn,
butwereturnedtoaperiodofnetglobalagentgrowthin2012andourtotalyear-over-yeargrowthinagentcountcontinuedfrom
2013through2019.
RE/MAX Agent Count
NumberofAgentsatQuarter-End
(1)
(1) AgentsthatconvertedfromanIndependentRegiontoaCompany-ownedRegionaremovedfromtheIndependentRegionagentcount
totheCompany-ownedRegionagentcountduringthequarteroftheacquisition.
Asshowninthefollowingtable,duringthesecondhalfof2018ouragentcountgrowthinU.S.deceleratedasU.S.existinghome
salesdecelerated,acorrelationwehaveseenpreviously.Thisdecelerationposeschallengestoorganicgrowthfromagentcount
whichwehaverespondedtowithrecruitinginitiatives,includingtemporaryfeewaiversamongotherthings,thatimprovedthe
trendinthefourthquarterof2019.
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RE/MAX Agent Count Year-Over-Year Growth Rate by Geography
ContemporaneouswithanabruptdeclineinexistingU.S.homesalesinlate2018,weexperiencedadeclineinourU.S.agent
countfromthefourthquarterof2018throughthethirdquarterof2019.ToreinvigorateU.S.agentgrowth,weintroducedseveral
recruitmentprogramsincludingsomethatincentivizedrecruitmentthroughtemporarywaiversoffeesfornewagents.Wehave
severalinitiativesdesignedtoimprovethevaluepropositionofferedtobothfranchiseesandagents,whichwebelievewillhelp
recruitingandretention.Twokeyinitiativesin2020are:
● Technology.WehaveintroducedthepowerfulboojPlatform,whichisacustom-built,integratedplatformwithproducts
thatinteractandevolvewithoneanother.WithCustomerRelationshipManagement(“CRM”)atthecoreofthis
ecosystem,theboojPlatformisaholisticrealestatetechnologysolutionthatallowsagentstobemorestrategicintheir
interactionswithcurrenttransactionsandnewpotentialbusiness,ultimatelyimprovingouragents’productivity.
Currently,theplatformisrolledouttoU.S.Company-ownedRegionsandbeginningin2020,weplantoofferthe
platformtoCanadaandparticipatingU.S.IndependentRegions,withtheultimateplantooffertheboojPlatform
throughoutourglobalnetwork.AswecontinuetorollouttheboojPlatform,successfuladoptionandtrainingofour
brokersandagentsarekeyprioritiesin2020.Inaddition,wewillcontinuetofocusonenhancingandinvestinginthe
boojtechnologyandevaluatingcomplementarytechnologythroughpartnershipsorsmalleracquisitions.Providingthe
bestonlineandofflineexperienceforRE/MAXandMottoaffiliatesandconsumersisoneofourprimarystrategic
technologygoalsandweexpecttocontinuetoinvestmeaningfullyintechnologyasweseektoenhanceouroverall
valueproposition,aswiththerecentacquisitionofFirst.
● Agent Count Growth and Retention.Wehaveincreasedourfocusontherecruitingandretentionofouragentsby
partneringwithourfranchiseowners.Inlate2019,welaunchedanincentive-basedgrowthcampaignthatfocusedon
maintainingandrecruitingnewagents.Thiscampaignreinvigoratedrecruitingeffortswithinthenetworkandwaswell
receivedastheoverallparticipationoffranchiseownersinthecampaignexceededourexpectations.Headinginto2020,
wewillcontinuetoexpandourrecruitinginitiativesandwillincorporateotherdirectcontactopportunities(suchasthe
RE/MAXannualconvention,speakingtours,andothercompanyevents)withvariouscontactpointsthroughout2020.
RE/MAX and Motto Franchise Sales.Weintendtocontinueaddingfranchisesinnewandexistingmarkets,andasaresult,
increaseourglobalmarketshareandbrandawareness.Eachincrementalfranchiseleveragesourexistinginfrastructure,allowing
ustodriveadditionalrevenueatlittleincrementalcost.Wearecommittedtoreinvestinginthebusinesstoenhanceourvalue
propositionthrougharangeofnewandexistingprogramsandtools.
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RE/MAX Office Franchise Sales
Number of Motto Franchises Sold*
*onlyincludesfullphysicalMottooffices;excludesvirtualofficesandbranchises
Organic Growth from Global Regions.WehaveagrowingglobalpresencewithouragentcountoutsidetheU.S.andCanada
growingalmost16%in2019and33%overthepasttwoyears.Overthelasttwodecades,thesizeoftheRE/MAXnetwork
outsideoftheU.S.andCanadahasgrowntorepresentapproximatelyathirdoftotalRE/MAXagentcount.Webelieveoffering
theboojPlatforminternationallyisanothergrowthopportunityweplantotakeadvantageof.However,weearnsubstantially
moreofourrevenueintheU.S.thaninothercountriesasaresultofthehigheraveragerevenueperagentearnedinCompany-
ownedRegionsthaninIndependentRegions,andintheU.S.andCanadaascomparedtotherestoftheworld:
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23
RE/MAX Agents by Geography
AsofYear-end2019 
RE/MAX Revenue by Geography
(a)
Percentof2019Revenue
(a) ExcludesrevenuesfromtheMarketingFunds,Mottoandbooj.
Pricing. GiventhelowfixedinfrastructurecostofourRE/MAXfranchisemodel,modestincreasesinaggregatefeesperagent
shouldpositivelyaffectourprofitability.WemayoccasionallyincreaseouraggregatefeesperagentinourCompany-owned
Regionsasweenhancethevalueweoffertoournetwork.Wearejudiciouswithrespecttothetimingandamountofincreasesin
aggregatefeesperagentandourstrategicfocusremainsongrowingagentcountthroughfranchisesales,recruitingprogramsand
retentioninitiatives.Followingaretheannualizedaveragepriceincreasesforthepreviousfiveyears,reflectedintheyearin
whichtheincreasewaseffective.
2015 2016 2017 2018 2019
Continuing Franchise Fees
Company-ownedRegions-U.S. - 3.9% - - -
Company-ownedRegions-Canada - 1.9% 1.9% - -
Annual Dues
Company-ownedRegions-U.S. - - 2.5% - -
Company-ownedRegions-Canada - - 2.5% - -
Growth Catalysts through Acquisitions.WeintendtocontinuetopursueacquisitionsoftheregionalRE/MAXfranchiserightsin
anumberofIndependentRegionsintheU.S.andCanada,aswellasotheracquisitionsinrelatedareasthatbuildonorsupport
ourcorecompetenciesinfranchisingandrealestateandarecomplementarytoourRE/MAXandMottobusinesses.
Independent Region Acquisitions. TheacquisitionofanIndependentRegionfranchisesubstantiallyincreasesourrevenueper
agentandprovidesanopportunityforustodriveenhancedprofitability,aswereceiveahigheramountofrevenueperagentin
ourCompany-ownedRegionsthaninourIndependentRegions.WhilebothCompany-ownedRegionsandIndependentRegions
chargerelativelysimilarfeestotheirbrokeragesandagents,weonlyreceiveapercentageofthecontinuingfranchisefee,broker
feeandinitialfranchiseandrenewalfeeinIndependentRegions.Byacquiringregionalfranchiserights,wecancapture100%of
thesefeesandsubstantiallyincreasetheaveragerevenueperagentforagentsintheacquiredregion,which,asaresultofourlow
fixed-coststructure,furtherincreasesouroverallmargins.Inaddition,webelievewecanestablishoperationalefficienciesand
improvementsinfinancialperformanceofanacquiredregionbyleveragingourexistinginfrastructureandexperience.
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Flow through Independent Regions
Other Acquisitions.Wemaypursueotheracquisitions,eitherofotherbrands,orofotherbusinessesthatwebelievecanhelp
enhancethevaluepropositionthatweprovidetothefranchiseesandtheiragentsinourexistingbusinesses,suchasourrecent
acquisitionofFirst.WemayconsiderstrategicacquisitionstocomplimentthefunctionalityoftheboojPlatformandenhancethe
valueproposition.
Return of Capital to Shareholders.Wearecommittedtoreturningcapitaltoshareholdersaspartofourvaluecreationstrategy.
Wehavepaidquarterlydividendssincethecompletionofourfirstfullfiscalquarterasapubliclytradedcompany,orAprilof
2014.Wehaveannuallyincreasedourquarterlydividendssincethen,aswehavedeemedappropriate.OnFebruary19,2020,our
BoardofDirectorsannouncedaquarterlydividendof$0.22pershare.
Quarterly Dividends
Ourdisciplinedapproachtoallocatingcapitalallowsustoreturncapitaltoshareholderswhileinvestingtodrivefutureorganic
growthandcatalyzinggrowththroughacquisitions.
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Competition
RE/MAX.Theresidentialrealestatebrokeragebusinessisfragmentedandhighlycompetitive.Wecompeteagainstmany
differenttypesofcompetitors-traditionalrealestatebrokerages;non-traditionalrealestatebrokerages,includingsomethatoffer
deeplydiscountedcommissionstoconsumers,andothernewerentrants,includingiBuyers.Wecompeteindifferentwaysfor
franchisees,foragents,andforconsumers.
Themajorityofbrokeragesareindependent,withthebest-knownbeingregionalplayers.Attheindividualofficelevel,oftentimes
ourmostformidablecompetitionisthatofalocal,independentbrokerage.Brokeragesaffiliatedwithfranchisestendtobelarger,
onaverage,thanindependentsandarepartofanationalnetwork.OurlargestnationalcompetitorsintheU.S.andCanadainclude
thebrandsoperatedbyRealogyHoldingsCorp.(includingCentury21,ColdwellBanker,ERA,Sotheby’sandBetterHomesand
Gardens),BerkshireHathawayHomeServices,KellerWilliamsRealty,Inc.andRoyalLePage.Ourfranchiseesalsocompeteto
attractandretainagentsagainstrealestatefranchisorswhichoffer100%commissionsandlowfeestoagents.Thesecompetitors
includeHomeSmartandRealtyONEGroup.
Wealsocompeteagainstnon-traditionalrealestatebrokeragesintheU.S.andCanadasuchasRedfinthatofferdeeplydiscounted
commissionstoconsumers.Evenamongcompetitorswithtraditionalmodels,therearevariationssuchasthe“hybrid”
classificationofCompass(anationalbricks-and-mortarbrokeragefocusingontechnologyandfundedbyventurecapital),andthe
virtualbrokerage(nobrokerageoffices)platformofeXpRealty.
OureffortstotargetconsumersandconnectthemwithaRE/MAXagentviaourwebsitesalsofacecompetitionfrommajorreal
estateportals,suchasZillowandRealtor.com.
Wealsocompeteforhomesalesagainstnewerentrants,oftenreferredtoasiBuyers,whichoffertobuyhomesdirectlyfrom
homeownersatbelow-marketratesinexchangeforspeedandconvenience,andthenresellthemshortlythereafteratmarket
prices.OurlargestnationalcompetitorsintheU.S.inthiscategoryincludeOpendoor,Offerpad,RedfinandZillow.Some
traditionalbrokerageshavebeguntoadapttoiBuyersbyeitherpartneringtheiragentswithaniBuyerdirectlyorbylaunching
theirowniBuyerprogram.AgentsmostofteninteractwithiBuyersbyevaluatingiBuyeroffersforhomesellers(comparingto
whatthesellermightreceivebysellingtheirhomeontheMLS),referringhomesellerstoaniBuyerforareferralfeeorlisting
homesthatareownedbyiBuyers.
Likewise,thesupportservicesweprovidetoRE/MAXfranchiseesandagentsalsofacecompetitionfromvariousprovidersof
training,backofficemanagement,marketing,socialintegrationandleadgenerationservices.Webelievethatcompetitioninthe
realestatebrokeragefranchisebusinessisbasedprincipallyuponthereputationalstrengthofthebrand,thequalityoftheservices
offeredtofranchisees,andtheamountoffranchise-relatedfeestobepaidbyfranchisees.
Theabilityofourfranchiseestocompetewithotherrealestatebrokerages,bothfranchisedandunaffiliated,isanimportant
aspectofourgrowthstrategy.Afranchisee’sabilitytocompetemaybeaffectedbyavarietyoffactors,includingthenumberand
qualityofthefranchisee’sindependentagentsandthepresenceandmarketspanofthefranchisee’soffices.Afranchisee’s
successmayalsobeaffectedbygeneral,regionalandlocalhousingconditions,aswellasoveralleconomicconditions.
Motto.Mottodoesnotoriginateloans,andthereforedoesnotcompeteinthemortgageoriginationbusiness.Themortgage
originationbusinessinwhichMottofranchiseesparticipateishighlycompetitive.Whiletherearenonationalmortgagebrokerage
franchisorsintheUnitedStatesatthepresenttimeotherthanMotto,themortgageoriginationbusinessischaracterizedbya
varietyofbusinessmodels.WhilerealestatebrokerageownersareourcoremarketforthepurchaseofMottofranchises,such
ownersmayformindependent,non-franchisedmortgagebrokerages.Theymayenter
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intojointventureswithlendersformortgageoriginations,andtheymayelectnottoenterthemortgageoriginationbusiness
themselves,butinsteadearnrevenuefromprovidingmarketingandotherservicestomortgagelenders.
Intellectual Property
WeregardourRE/MAXtrademark,balloonlogoandyardsigndesigntrademarksashavingsignificantvalueandasbeingan
importantfactorinthemarketingofourbrand.WeprotecttheRE/MAXandMottobrandsthroughacombinationoftrademarks
andcopyrights.Wehaveregistered“RE/MAX”asatrademarkintheU.S.,Canada,andover150othercountriesandterritories,
andhaveregisteredvariousversionsoftheRE/MAXballoonlogoandrealestateyardsigndesigninnumerouscountriesand
territoriesaswell.Wealsoaretheregisteredholderofavarietyofdomainnamesthatinclude“remax,”“motto,”andsimilar
variations.
Corporate Structure and Ownership
HoldingsisaholdingcompanyincorporatedinDelawareanditsonlybusinessistoactasthesolemanagerofRMCO,LLC,
(“RMCO”).Inthatcapacity,HoldingsoperatesandcontrolsallofthebusinessandaffairsofRMCO.RMCOisaholding
companythatisthedirectorindirectparentofallofouroperatingbusinesses,includingRE/MAX,LLCandMottoFranchising,
LLC.AsofDecember31,2019,Holdingsowns58.7%ofthecommonunitsinRMCO,whileRIHI,Inc.(“RIHI”)ownsthe
remaining41.3%ofcommonunitsinRMCO.RIHI,Inc.ismajorityownedandcontrolledbyDavidLiniger,ourChairmanand
Co-Founder,andbyGailLiniger,ourViceChairandCo-Founder.
Thediagrambelowdepictsourorganizationalstructure:
TheholdersofHoldingsClassAcommonstockcollectivelyown100%oftheeconomicinterestsinHoldings,whileRIHIowns
100%oftheoutstandingsharesofHoldingsClassBcommonstock.
OnOctober7,2018,pursuanttothetermsoftheCompany’sCertificateofIncorporation,RIHIlostitspreviouseffectivecontrol
ofamajorityofthevotingpowerofHoldingscommonstock.RIHIownsallofHoldings’ClassBcommonstockwhich,priorto
October7,2018,entitledRIHItoanumberofvotesonmatterspresentedtoHoldingsstockholdersequaltotwotimesthenumber
ofRMCOcommonunitsthatRIHIheld.EffectiveOctober7,2018,thevotingpowerofClassBcommonstockwasreducedto
equalthenumberofRMCOcommonunitsheld,andthereforeRIHIlostthecontrollingvoteofHoldings.Asaresultofthis
changeinthevotingrightsoftheClassBcommonstock,RIHInolongercontrolsamajorityofthevotingpowerofHoldings’
commonstock,andHoldingsnolongerconstitutesa“controlledcompany”
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underthecorporategovernancestandardsoftheNewYorkStockExchange(the“NYSE”).RIHIremainsasignificant
stockholderoftheCompany,andthroughitsownershipoftheClassBcommonstock,holdsapproximately41.3%ofthevoting
poweroftheCompany’sstock.Mr.LinigeralsoownsClassAcommonstockwithanadditional1.2%ofthevotingpowerofthe
Company’sstock.
Holdings ownership of RMCO and Tax Receivable Agreements
HoldingshastwiceacquiredsignificantportionsoftheownershipinRMCO;firstinOctober2013atthetimeofIPOwhen
Holdingsacquireditsinitial11.5millioncommonunitsofRMCOand,second,inNovemberandDecember2015whenit
acquired5.2millionadditionalcommonunits.HoldingsissuedClassAcommonstock,whichitexchangedforthesecommon
unitsofRMCO.RIHIthensoldtheClassAcommonstocktothemarket.
WhenHoldingsacquiredcommonunitsinRMCO,itreceiveda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intangibleassets,primarilyfranchiseagreementsandgoodwill,andthestep-upisoftensubstantial.Theseassets
areamortizableunderIRSrulesandresultindeductionsonourtaxreturnformanyyearsand,consequently,Holdingsreceivesa
futuretaxbenefit.Thesefuturebenefitsarereflectedwithindeferredtaxassetsonourconsolidatedbalancesheets.
IfHoldingsacquiresadditionalcommonunitsofRMCOfromRIHI,thepercentageofHoldings’ownershipofRMCOwill
increase,andadditionaldeferredtaxassetswillbecreatedasadditionaltaxbasisstep-upsoccur.
InconnectionwiththeinitialsaleofRMCOcommonunitsinOctober2013,HoldingsenteredintoTaxReceivableAgreements
(“TRAs”)whichrequirethatHoldingsmakeannualpaymentstotheTRAholdersequivalentto85%ofanytaxbenefitsrealized
oneachyear’staxreturnfromtheadditionaltaxdeductionsarisingfromthestep-upintaxbasis.Webelieve85%iscommonfor
taxreceivableagreements.TheTRAholdersasofDecember31,2019areRIHIandParallaxesRainCo-Investment,LLC
(“Parallaxes”).TRAliabilitieswereestablishedforthefuturecashobligationsexpectedtobepaidundertheTRAsandarenot
discounted.AsofDecember31,2019,thisliabilitywas$37.2million.Similartothedeferredtaxassets,theTRAliabilitieswould
increaseifHoldingsacquiresadditionalcommonunitsofRMCOfromRIHI.
Employees
AsofDecember31,2019,wehadapproximately500employees.Ourfranchiseesareindependentbusinesses.Theiremployees
andindependentcontractorsalesagentsarethereforenotincludedinouremployeecount.Noneofouremployeesarerepresented
byaunion.
Seasonality
Theresidentialhousingmarketisseasonal,withtransactionalactivityintheU.S.andCanadapeakinginthesecondandthird
quarterofeachyear.Ourresultsofoperationsaresomewhataffectedbytheseseasonaltrends.OurAdjustedEBITDAmargins
areoftenlowerinthefirstandfourthquartersdueprimarilytotheimpactoflowerbrokerfeesandotherrevenueasaresultof
loweroverallsalesvolume,aswellashigherselling,operatingandadministrativeexpensesinthefirstquarterforexpenses
incurredinconnectionwiththeRE/MAXannualconvention.
Government Regulation
Franchise Regulation.Thesaleoffranchisesisregulatedbyvariousstatelaws,aswellasbytheFederalTradeCommission
(“FTC”).TheFTCrequiresthatfranchisorsmakeextensivedisclosurestoprospectivefranchiseesbutdoesnotrequire
registration.Anumberofstatesrequireregistrationordisclosurebyfranchisorsinconnectionwithfranchiseoffersandsales.
Severalstatesalsohave“franchiserelationshiplaws”or“businessopportunitylaws”thatlimittheabilityofthefranchisorto
terminatefranchiseagreementsortowithholdconsenttotherenewalortransferoftheseagreements.Thestateswithrelationship
orotherstatutesgoverningtheterminationoffranchisesincludeArkansas,
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California,Connecticut,Delaware,Hawaii,Illinois,Indiana,Iowa,Michigan,Minnesota,Mississippi,Missouri,Nebraska,New
Jersey,Virginia,WashingtonandWisconsin.Somefranchiserelationshipstatutesrequireamandatednoticeperiodfor
termination;somerequireanoticeandcureperiod;andsomerequirethatthefranchisordemonstrategoodcausefortermination.
Althoughwebelievethatourfranchiseagreementscomplywiththesestatutoryrequirements,failuretocomplywiththeselaws
couldresultinourcompanyincurringcivilliability.Inaddition,whilehistoricallyourfranchisingoperationshavenotbeen
materiallyadverselyaffectedbysuchregulation,wecannotpredicttheeffectofanyfuturefederalorstatelegislationor
regulation.
Real Estate and Mortgage Regulation.TheRealEstateSettlementProceduresAct(“RESPA”)andstaterealestatebrokerage
lawsandmortgageregulationsrestrictpaymentswhichrealestatebrokers,mortgagebrokers,andotherserviceprovidersinthe
realestateindustrymayreceiveorpayinconnectionwiththesalesofresidencesandreferralofsettlementservices,suchasreal
estatebrokerage,mortgages,homeowners’insuranceandtitleinsurance.Suchlawsaffectthetermsthatwemayofferinour
franchiseagreementswithMottofranchiseesandmaytosomeextentrestrictpreferredvendorprograms,bothforMottoand
RE/MAX.Federal,stateandlocallaws,regulationsandordinancesrelatedtotheoriginationofmortgages,mayaffectother
aspectsoftheMottobusiness,includingtheextenttowhichwecanobtaindataonMottofranchisees’compliancewiththeir
franchiseagreements.Theselawsandregulationsinclude(i)theFederalTruthinLendingActof1969(“TILA”),andRegulation
Z(“RegZ”)thereunder;(ii)theFederalEqualCreditOpportunityAct("ECOA'')andRegulationBthereunder;(iii)theFederal
FairCreditReportingActandRegulationVthereunder;(iv)RESPA,andRegulationXthereunder;(v)theFairHousingAct;(vi)
theHomeMortgageDisclosureAct;(vii)theGramm-Leach-BlileyActanditsimplementingregulations;(viii)theConsumer
FinancialProtectionActanditsimplementingregulations;(ix)theFairandAccurateCreditTransactionsAct-FACTACTandits
implementingregulations;and(x)theDoNotCall/DoNotFaxActandotherstateandfederallawspertainingtothesolicitation
ofconsumers.
Available Information
RE/MAXHoldings,Inc.isaDelawarecorporationanditsprincipalexecutiveofficesarelocatedat5075SouthSyracuseStreet,
Denver,Colorado80237,telephone(303)770-5531.TheCompany’sAnnualReportonForm10-K,quarterlyreportsonForm
10-Q,currentreportsonForm8-K,andamendmentstothosereportsareavailablefreeofchargethroughthe“InvestorRelations”
portionoftheCompany’swebsite,www.remax.com,assoonasreasonablypracticalaftertheyarefiledwiththeSecuritiesand
ExchangeCommission(“SEC”).ThecontentoftheCompany’swebsiteisnotincorporatedintothisreport.TheSECmaintainsa
website,www.sec.gov,whichcontainsreports,proxyandinformationstatements,andotherinformationfiledelectronicallywith
theSECbytheCompany.
ITEM 1A. RISK FACTORS
RE/MAX Holdings, Inc. and its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “us”) could be adversely
impacted by various risks and uncertainties. An investment in our Class A common stock involves a high degree of risk. You
should carefully consider the following risk factors, as well as all of the other information contained in this Annual Report on
Form 10-K, including our audited consolidated financial statements and the related notes thereto before making an investment
decision. If any of these risks actually occur, our business, financial condition, operating results, cash flow and prospects may be
materially and adversely affected. As a result, the trading price of our Class A common stock could decline and you could lose
some or all of your investment.
We have grouped our risks according to:
● RisksRelatedtoOurBusinessandIndustry;
● RisksRelatedtoOurOrganizationalStructure;and
● RisksRelatedtoOwnershipofOurClassACommonStock.
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29
Risks Related to Our Business and Industry
Our results are tied to the residential real estate market and we may be negatively impacted by downturns in this market and
general global economic conditions.
Theresidentialrealestatemarkettendstobecyclicalandtypicallyisaffectedbychangesingeneraleconomicconditionswhich
arebeyondourcontrol.Theseconditionsincludefluctuationsinshort-termandlong-terminterestrates,inflation,fluctuationsin
debtandequitycapitalmarkets,wageandjobgrowth,levelsofunemployment,homeaffordability,downpaymentrequirements,
inventorylevels,consumerconfidence,demographicchanges,localorregionaleconomicconditionsandthegeneralconditionof
theU.S.,Canadianandglobaleconomies.Theresidentialrealestatemarketalsodependsuponthestrengthoffinancial
institutions,whicharesensitivetochangesinthegeneralmacroeconomicandregulatoryenvironment.Lackofavailablecreditor
lackofconfidenceinthefinancialsectorcouldimpacttheresidentialrealestatemarket.Theresidentialrealestatemarketcould
alsobenegativelyimpactedbyactsofnature,suchasfires,hurricanes,earthquakes,andsucheventsmayleadustowaivefeesin
certainimpactedareas.Climatechangemaynegativelyaffecttheresidentialrealestatemarket.Changesinlocal,stateandfederal
lawsorregulationsthataffectresidentialrealestatetransactionsorencourageownership,includingbutnotlimitedtochangesin
taxlawinlate2017thatlimitthedeductibilityofcertainmortgageinterestexpensesandincreasethestandarddeduction(thereby
potentiallydecreasingthetaxbenefitsofhomeownership)andpotentialfuturetaxlawchanges,suchasfurtherlimitingor
eliminatingthedeductibilityofcertainmortgageinterestexpense,theapplicationofthealternativeminimumtax,and
deductibilityofrealpropertytaxes,couldimpacttheresidentialrealestatemarket.
Anyoftheabovefactors,andotherfactorsdiscussedinthisAnnualReportonForm10-Kcouldcauseadeclineinthehousingor
mortgagemarketsandhaveamaterialadverseeffectonourbusinessbycausingperiodsoflowergrowthoradeclineinthe
numberofhomesalesand/orhomeprices.Thiscouldleadtoadecreaseofthenumberofagentsorfranchisesinournetworksand
reducethefeeswereceivefromourfranchiseesandagents,which,inturn,couldadverselyaffectourfinancialconditionand
resultsofoperations.
A lack of financing for homebuyers in the U.S. residential real estate market at favorable rates and on favorable terms could
have a material adverse effect on our financial performance and results of operations.
Ourbusinessissignificantlyimpactedbytheavailabilityoffinancingatfavorableratesoronfavorabletermsforhomebuyers,
whichmaybeaffectedbygovernmentregulationsandpolicies.
TheDodd-FrankAct,whichwaspassedtomorecloselyregulatethefinancialservicesindustry,createdtheConsumerFinancial
ProtectionBureau(“CFPB”),anindependentfederalbureau,whichwasdesignedtoenforceconsumerprotectionlaws,including
variouslawsregulatingmortgagefinance.TheDodd-FrankActalsoestablishednewstandardsandpracticesformortgage
lending,includingarequirementtodetermineaprospectiveborrower’sabilitytorepayaloan,removingperceivedincentivesto
originatehighercostmortgages,requiringadditionaldisclosurestopotentialborrowersandrestrictingthefeesthatmortgage
originatorsmaycollect.Rulesimplementingmanyofthesechangesprotectcreditorsfromcertainliabilitiesforloansthatmeet
therequirementsfor“qualifiedmortgages.”(“QMloans”).Therulesplacedseveralrestrictionsonqualifiedmortgages,including
capsoncertainclosingcostsaswellaslimitsondebttoincome(“DTI”)ratiosforqualifiedmortgages.
CertainpotentialregulatorychangessuchastheterminationbytheCFPBofaregulatoryexemptionknownasthe“QMpatch”for
loansbackedbyFannieMaeorFreddieMac,therequirementtoimplementanewuniformresidentialloanapplication(“URLA”)
whichmayincreaseEqualCreditOpportunityAct(“ECOA”)andotheroperationalrisks,andmoreactivistsupervisionand
regulationofhousingfinanceatthestatelevelmayadverselyimpactthehousingindustry,includinghomebuyers’abilityto
financeandpurchasehomes.
ThemonetarypolicyoftheU.S.government,andparticularlytheFederalReserveBoard,whichregulatesthesupplyofmoney
andcreditintheU.S.,significantlyaffectstheavailabilityoffinancingatfavorableratesandonfavorableterms,whichinturn
affectsthedomesticrealestatemarket.ChangesintheFederalReserveBoard’spoliciesarebeyondourcontrol,aredifficultto
predict,andcouldrestricttheavailabilityoffinancingonreasonabletermsatfavorableinterest
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30
ratesforhomebuyers,whichcouldhaveamaterialadverseeffectonourbusiness,resultsofoperationsandfinancialcondition.
Inaddition,areductioningovernmentsupportforhomefinancing,includingthepossiblewindingdownorprivatizationofGSEs
couldfurtherreducetheavailabilityoffinancingforhomebuyersintheU.S.residentialrealestatemarket.Noconsensushas
emergedinCongressconcerningpotentialreformsrelatingtoFannieMaeandFreddieMacandapotentialtransitionto
alternativestructuresforthesecondarymarket,sowecannotpredicteithertheshortorlongterm-effectsofsuchregulationandits
impactonhomebuyers’abilitytofinanceandpurchasehomes.
Furthermore,manylendershavetightenedtheirunderwritingstandardssincetherealestatedownturn,andmanysubprimeand
otheralternativemortgageproductsarenolongerascommoninthemarketplace.Whilesomelooseningofcreditstandardsanda
resurgenceofalternativemortgageproducts,includingnon-qualifiedmortgageshasoccurred,ifthesemortgageloanscontinueto
besomewhatmoredifficulttoobtain,includinginthejumbomortgagemarkets,theabilityandwillingnessofprospectivebuyers
tofinancehomepurchasesortoselltheirexistinghomescouldbeadverselyaffected,whichwouldadverselyaffectouroperating
results.
Whilewearecontinuingtoevaluateallaspectsoflegislation,regulationsandpoliciesaffectingthedomesticrealestatemarket,
wecannotpredictwhetherornotsuchlegislation,regulationandpoliciesmayincreasedownpaymentrequirements,increase
mortgagecosts,orresultinincreasedcostsandpotentiallitigationforhousingmarketparticipants,anyofwhichcouldhavea
materialadverseeffectonourfinancialconditionandresultsofoperations.
We may fail to execute our strategies to grow our business, which could have a material adverse effect on our financial
performance and results of operations.
Weintendtopursueanumberofdifferentstrategiestogrowourrevenueandearningsandtodeploythecashgeneratedbyour
business.Weconstantlystrivetoincreasethevaluepropositionforouragentsandbrokers.Ifwedonotreinvestinourbusinessin
waysthatsupportouragentsandbrokersandmaketheRE/MAXnetworkattractivetoagentsandbrokers,wemaybecomeless
competitive.Additionally,weareexploringopportunitiestoacquireotherbusinesses,includingselectRE/MAXindependent
regionalfranchises,orotherbusinessesintheU.S.andCanadathatarecomplementarytoourcorebusiness,particularlythose
offeringdifferentiatedtechnology.Ifwefailtodevelop,execute,orfocusonourbusinessstrategy,failtomakegoodbusiness
decisions,failtoenforceadisciplinedmanagementprocesstoensurethatourinvestmentofresourcesalignswithourstrategic
planandourcoremanagementandfranchisingcompetenciesorfailtoproperlyfocusresourcesormanagementattentionon
strategicareas,anyofthesecouldnegativelyimpacttheoverallvalueoftheCompany.
We may fail to continue our booj Platform rollout as expected or its effectiveness in attracting & retaining agents may be more
limited than anticipated.
Duringthefirstquarterof2018,weacquiredbooj,arealestatetechnologycompany,primarilytodevelopanddelivercore
technologysolutionsdesignedforRE/MAXaffiliates.WeanticipatethatthisnewtechnologywillimprovetheRE/MAXvalue
propositionandultimatelyassistinattractingandretainingagentsandfranchisees.Thetechnologyplatformdevelopedbybooj
hasbeendeliveredtoourU.S.Company-ownedRegionsin2019.IftheboojPlatformis(a)deliveredtoadditionalregionslater
thanexpected,or(b)doesnotcreateadistinctcompetitiveedgeforfranchiseesandagents,or(c)hasapoorerthanexpected
adoptionratebyourfranchiseesandagents,theintroductionofsuchplatformsmaynotbeeffectiveinattractingandretaining
agentsandfranchisees.
We may be unable to acquire regional franchise rights in independent RE/MAX regions in the U.S. and Canada or
successfully integrate the independent RE/MAX regions that we have acquired.
WecontinuetopursueagrowthstrategyofreacquiringselectRE/MAXindependentregionalfranchisesintheU.S.andCanada
tosupportourgrowth.TheacquisitionofaregionalfranchiseenablesustofocusonaconsistentdeliveryoftheRE/MAXvalue
proposition,increasesourrevenueandprovidesanopportunityforustoenhanceprofitability.Thisgrowthstrategydependson
ourabilitytofindregionalfranchiseeswillingtosellthefranchiserightsintheirregionsonfavorableterms,aswellasourability
tofinance,completeandintegratethesetransactions.Thenumberofremaining
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31
independentregionsintheUnitedStatesandCanadaislimitedandthereforewemayhavedifficultyfindingsuitableregional
franchiseacquisitionopportunitiesatanacceptableprice.Further,intheeventweacquirearegionalfranchise,wemaynotbe
abletoachievetheexpectedreturnsonouracquisitionafterweintegratetheacquiredregionintoourbusiness.
Integratingacquiredregionsinvolvescomplexoperationalandpersonnel-relatedchallengesandwemayencounterunforeseen
difficultiesandhigherthanexpectedintegrationcostsorwemaynotbeabletodeliverexpectedcostandgrowthsynergies.
Futureacquisitionsmaypresentotherchallengesanddifficulties,including:
● thepossibledepartureofasignificantnumberofkeyemployees;
● regulatoryconstraintsandcostsofexecutingourgrowthstrategymayvarybygeography;
● thepossibledefectionoffranchiseesandagentstootherbrandsorindependentrealestatecompanies;
● limitsongrowthduetoexclusiveterritoriesgrantedtocurrentfranchiseesbyformerregionowners;
● thefailuretomaintainimportantbusinessrelationshipsandcontractsofthesellingregion;
● legalorregulatorychallengesorlitigationpost-acquisition,whichcouldresultinsignificantcosts;
● potentialunknownliabilitiesassociatedwithacquiredbusinesses.
Aprolongeddiversionofmanagement’sattentionandanydelaysordifficultiesencounteredinconnectionwiththeintegrationof
anyacquiredregionorregionthatwemayacquireinthefuturecouldpreventusfromrealizinganticipatedcostsavingsand
revenuegrowthfromouracquisitions.
The failure to attract and retain highly qualified franchisees could compromise our ability to expand the RE/MAX and Motto
networks.
Ourmostimportantassetisthepeopleinournetwork,andthesuccessofourfranchiseesdependslargelyontheeffortsand
abilitiesoffranchiseestoattractandretainhighqualityagentsandloanoriginators.Ifourfranchiseesfailtoattractandretain
agentsandloanoriginators,theymayfailtogeneratetherevenuenecessarytopaythecontractualfeesowedtous.
Additionally,althoughwebelieveourrelationshipwithourfranchiseesandtheiragentsandloanoriginatorsisopenandstrong,
thenatureofsuchrelationshipscangiverisetoconflict.Forexample,franchiseesoragents/loanoriginatorsmaybecome
dissatisfiedwiththeamountofcontractualfeesandduesowedunderfranchiseorotherapplicablearrangements,particularlyin
theeventthatweincreasefeesanddues.Theymaydisagreewithcertainnetwork-widepoliciesandprocedures,including
policiesdictatingbrandstandardsoraffectingtheirmarketingefforts.Theymayalsobedisappointedwithourmarketing
campaigns.Ifweexperienceanyconflictswithourfranchiseesonalargescale,ourfranchiseesmaydecidenottorenewtheir
franchiseagreementsuponexpirationormayfilelawsuitsagainstusortheymayseektodisaffiliatewithus,whichcouldalso
resultinlitigation.Theseeventsmay,inturn,materiallyandadverselyaffectourbusinessandoperatingresults.
Our financial results are affected by the ability of our franchisees to attract and retain agents and loan originators.
OurfinancialresultsareheavilydependentuponthenumberofRE/MAXagentsandMottoofficesinourglobalnetworks.The
majorityofourrevenueisderivedfromrecurringduespaidbyourfranchisee’sagentsandcontractualfeespaidbyour
franchiseesorregionalfranchiseownersbasedonthenumberofagentsorofficeswithintheirrespectivenetworks.Competition
forrealestateagentsandloanoriginatorsisfierce.Ourcompetitorsmayattempttorecruittheagentsandloanoriginatorsofour
franchisees.Ifourfranchiseesarenotabletoattractandretainagentsandloanoriginators(whichisnotwithinourdirectcontrol),
ouragentcountandrevenuemaydecline.
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Competition in the residential real estate franchising business is intense, and we may be unable to grow our business
organically, including increasing our agent count, expanding our network of franchises and their agents, and increasing
franchise and agent fees, which could adversely affect our brand, our financial performance, and results of operations.
Wegenerallyfacestrongcompetitionintheresidentialrealestateservicesbusinessfromotherfranchisorsandbrokerages(i.e.
national,regional,independent,boutique,discountandweb-basedbrokerages),aswellasweb-basedcompaniesfocusedonreal
estate.Therehasrecentlybeensubstantialinvestmentinrealestatetechnology,includingcompaniesaimingtouseinnovative
technologytodisrupttherealestatemarket.Upontheexpirationofafranchiseagreement,afranchiseemaychoosetorenewtheir
franchisewithus,operateasanindependentbrokerortofranchisewithoneofourcompetitors.Competingfranchisorsmayoffer
franchiseesfeesthatarelowerthanthosewecharge,orthataremoreattractiveinparticularmarkets.Further,someofourlargest
competitorsmayhavegreaterfinancialresourcesandlargerbudgetsthanwedotoinvestintechnologyandenhancetheirvalue
propositiontoagents,brokersandconsumers.Toremaincompetitiveinthesaleoffranchisesandtoretainourexisting
franchiseesatthetimeoftherenewaloftheirfranchiseagreements,wemayhavetoreducethecostofrenewalsand/orthe
recurringmonthlyfeeswechargeourfranchisees.Wemayhavetoofferincentivestoencouragefranchiseestorecruitnew
agents.Inaddition,evenwiththesemeasures,franchiseesmaychoosenottorenewtheirfranchise,ormaynotrecruitnewagents.
Asaresultofthiscompetition,wemayfacemanychallengesinaddingfranchisesandattractingagentsinnewandexisting
marketstoexpandournetwork,aswellasotherchallengessuchas:
● selectionandavailabilityofsuitablemarkets;
● findingqualifiedfranchiseesinthesemarketswhoareinterestedinopeningfranchisesontermsthatarefavorableto
us;
● increasingourlocalbrandawarenessinnewmarkets;
● attractingandtrainingofqualifiedlocalagents;and
● generaleconomicandbusinessconditions.
The real estate market may be negatively impacted by industry changes as the result of certain class action lawsuits.
InMarchandAprilof2019,threeputativeclassactioncomplaintswerefiledagainstNationalAssociationofRealtors(“NAR”),
RealogyHoldingsCorp.,HomeServicesofAmerica,Inc,RE/MAXHoldings,andKellerWilliamsRealty,Inc.Thefirstwasfiled
onMarch6,2019,byplaintiffChristopherMoehrlintheNorthernDistrictofIllinois.ThesecondwasfiledonApril15,2019,by
plaintiffSawbillStrategies,Inc.,alsointheNorthernDistrictofIllinois.Thesetwoactionshavenowbeenconsolidated.Athird
actionwasfiledbyplaintiffsJoshuaSitzerandfourotherindividualplaintiffsintheWesternDistrictofMissouri.Thecomplaints
(collectively“Moehrl/Sitzersuits”)makesubstantiallysimilarallegationsandseeksubstantiallysimilarrelief.Theplaintiffs
allegethataNARrulerequiresbrokerstomakeablanket,non-negotiableofferofbuyerbrokercompensationwhenlistinga
property,resultingininflatedcoststosellersinviolationoffederalantitrustlaw.Theyfurtherallegethatcertaindefendantsuse
theiragreementswithfranchiseestorequireadherencetotheNARruleinviolationoffederalantitrustlaw.Amendedcomplaints
addallegationsregardingbuyersteeringandnon-disclosureofbuyer-brokercompensationtothebuyer.Theselawsuitshavealso
prompteddiscussionofregulatorychangesbyvariousgovernmentsorrulesestablishedbylocalorstaterealestateboardsor
multiplelistingservices.Theresolutionofthesecomplaintsand/orsuchregulatorychangesmayrequirechangestoourorour
brokersbusinessmodel,includingchangesinbrokercompensation.Thiscouldreducethefeeswereceivefromourfranchisees,
which,inturn,couldadverselyaffectourfinancialconditionandresultsofoperations.
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A significant adoption by consumers of alternatives to full-service agents or loan originators could have a material adverse
effect on our business, prospects and results of operations.
Asignificantincreaseinconsumeruseoftechnologythateliminatesorminimizestheroleoftherealestateagentormortgage
loanoriginatorcouldhaveamateriallyadverseeffectonourbusiness,prospectsandresultsofoperations.Theseoptionsinclude
direct-buyercompanies(alsocallediBuyers)thatpurchasedirectlyfromtheselleratbelow-marketratesinexchangeforspeed
andconvenience,andthenresellthemshortlythereafteratmarketprices,anddiscounterswhoreducetheroleoftheagentin
ordertooffersellersalowcommissionoraflatfeewhilegivingrebatestobuyers.Howconsumerswanttobuyorsellhousesand
financetheirpurchasewilldetermineifthesemodelsreduceorreplacethelong-standingpreferenceforfull-serviceagentsand
loanoriginators.
Our financial results are affected directly by the operating results of franchisees and their agents and loan originators, over
whom we do not have direct control.
Ourfinancialresultsdependupontheoperationalandfinancialsuccessofourfranchiseesand,forRE/MAX,theiragentsandfor
MottoMortgage,theirloanoriginators.Wehavelimitedcontrolovertheseparties,particularlyinIndependentRegionswherewe
exerciselesscontroloverfranchiseesthaninCompany-ownedRegions.Ourfranchiseesoperateinintenselycompetitivemarkets
andwehavelittlevisibilityintotheresultsoftheiroperations.Ifourfranchisees’financialresultsworsen,ourrevenuemay
decline.Weterminatefranchiseesfornon-payment,non-reportingandothernon-compliancewiththeirfranchiseagreementsand
wemayterminatefranchiseesmorefrequentlyinthefuture.
Our franchisees and their agents or loan originators could take actions that could harm our business.
Ourfranchiseesareindependentbusinessesandtheagentsandloanoriginatorswhoworkwithinthesebrokeragesare
independentcontractorsoremployeesofthebrokeragesand,assuch,arenotouremployees,andwedonotexercisecontrolover
theirday-to-dayoperations.Franchiseesmaynotoperaterealestateandmortgagebrokeragebusinessesinamannerconsistent
withindustrystandards,ormaynotattractandretainqualifiedindependentcontractoragentsandloanoriginators.Iffranchisees
andagentsandloanoriginatorsweretoprovidediminishedqualityofservicetocustomers,engageinfraud,misconduct,
negligenceorotherwiseviolatethelaworrealtorcodesofethics,ourimageandreputationmaysuffermateriallyandwemay
becomesubjecttoliabilityclaimsbaseduponsuchactions.Anysuchincidentscouldadverselyaffectourresultsofoperations.
Brandvaluecanbeseverelydamagedevenbyisolatedincidents,particularlyiftheincidentsreceiveconsiderablenegative
publicityorresultinlitigation.Someoftheseincidentsmayrelatetothewaywemanageourrelationshipwithourfranchisees,
ourgrowthstrategiesortheordinarycourseofourbusinessorourfranchisees’business.Otherincidentsmayarisefromevents
thatareormaybebeyondourcontrolandmaydamageourbrand,suchasactionstaken(ornottaken)byoneormorefranchisees
ortheiragentsandloanoriginatorsrelatingtohealth,safety,welfareorothermatters;litigationandclaims;failuretomaintain
highethicalandsocialstandardsforallofouroperationsandactivities;failuretocomplywithlocallawsandregulations;and
illegalactivitytargetedatusorothers.Ourbrandvaluecoulddiminishsignificantlyifanysuchincidentsorothermatterserode
consumerconfidenceinus,whichmayresultinadecreaseinourtotalagentandloanofficecountand,ultimately,lower
revenues,whichinturnwouldmateriallyandadverselyaffectourbusinessandresultsofoperations.
Anorganizedfranchiseeassociationcouldposeriskstoourabilitytosetthetermsofourfranchiseagreementsandourpricing.A
groupofbroker/ownersfromaroundthecountryhavefoundedandcommittedtothecontinuedsuccessandfundingoftheRMX
Association(RMXA),anindependentassociationofRE/MAXfranchisees,whosegoalistoworkinpartnershipwithRE/MAX,
LLCandeachothertoimprove,enhanceandgrowthebrandintothefutureandprotectassetsandgrowprofitabilityas
franchisees.
The failure of Independent Region owners to successfully develop or expand within their respective regions could adversely
impact our revenue and earnings.
WehavesoldregionalmasterfranchisesintheU.S.andCanadaandhavesoldandcontinuetosellregionalmasterfranchisesin
ourgloballocationsoutsideofCanada.Whilewearepursuingastrategytoacquireselectregional
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franchiserightsintheU.S.andCanada,westillrelyonindependentregionalmasterfranchisesinIndependentRegions,andinall
regionslocatedoutsidetheU.S.andCanada.WedependonIndependentRegions,whichhavetheexclusiverighttogrant
franchiseswithinaparticularregion,tosuccessfullydeveloporexpandwithintheirrespectiveregionsandtomonitorfranchisees’
useofourbrand.ThefailureofanyoftheseIndependentRegionownerstodothesethings,ortheterminationofanagreement
witharegionalmasterfranchiseecoulddelaythedevelopmentofaparticularfranchisedarea,interrupttheoperationofourbrand
inaparticularmarketormarketswhileweseekalternativemethodstodevelopourfranchisesinthearea,andweakenourbrand
image.Suchaneventcouldresultinlowerrevenueforus,whichwouldadverselyimpactourbusinessandresultsofoperations.
The real estate business is highly regulated and any failure to comply with such regulations or any changes in such
regulations could adversely affect our business.
Thebusinessesofourfranchiseesarehighlyregulatedandaresubjecttorequirementsgoverningthelicensingandconductofreal
estatebrokerageandbrokerage-relatedbusinessesinthejurisdictionsinwhichtheydobusiness.
Ourfranchisees(otherthanincommercialbrokeragetransactions)mustcomplywithRESPA.RESPAandcomparablestate
statutes,amongotherthings,restrictpaymentswhichrealestatebrokers,agentsandothersettlementserviceprovidersmay
receiveforthereferralofbusinesstoothersettlementserviceprovidersinconnectionwiththeclosingofrealestatetransactions.
Suchlawsmaytosomeextentrestrictpreferredvendorarrangementsinvolvingourfranchisees.RESPAandsimilarstatelaws
alsorequiretimelydisclosureofcertainrelationshipsorfinancialintereststhatabrokerhaswithprovidersofrealestate
settlementservices.
Thereisariskthatweandourfranchiseescouldbeadverselyaffectedbycurrentlaws,regulationsorinterpretationsorthatmore
restrictivelaws,regulationsorinterpretationswillbeadoptedinthefuturethatcouldmakecompliancemoredifficultor
expensive.
We,orourfranchisees,arealsosubjecttovariousotherrulesandregulationssuchas:
● theGramm-Leach-BlileyAct,whichgovernsthedisclosureandsafeguardingofconsumerfinancialinformation;
● theEuropeanUnion’sGeneralDataProtectionRegulation(“GDPR”),theCaliforniaConsumerPrivacyAct,and
variousotherlawsprotectingconsumerdata;
● theUSAPATRIOTAct;
● restrictionsontransactionswithpersonsontheSpeciallyDesignatedNationalsandBlockedPersonslistpromulgated
bytheOfficeofForeignAssetsControloftheDepartmentoftheTreasury;
● federalandstate“DoNotCall,”“DoNotFax,”and“DoNotE-Mail”laws;
● theFairHousingAct;
● lawsandregulations,includingtheForeignCorruptPracticesAct,thatimposesanctionsonimproperpayments;
● lawsandregulationsinjurisdictionsoutsidetheU.S.inwhichwedobusiness;
● stateandfederalemploymentlawsandregulations,includinganychangesthatwouldrequirereclassificationof
independentcontractorstoemployeestatus,andwageandhourregulations;
● and
● consumerfraudstatutes.
Ourorourfranchisees’failuretocomplywithanyoftheforegoinglawsandregulationsmayresultinfines,penalties,injunctions
and/orpotentialcriminalviolations.Anychangestotheselawsorregulationsoranynewlawsorregulationsmaymakeitmore
difficultforustooperateourbusinessandmayhaveamaterialadverseeffectonouroperations.
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Our franchising activities are subject to a variety of state and federal laws and regulations regarding franchises, and any
failure to comply with such existing or future laws and regulations could adversely affect our business.
ThesaleoffranchisesisregulatedbyvariousstatelawsaswellasbytheFederalTradeCommission(“FTC”).TheFTCrequires
thatfranchisorsmakeextensivedisclosuretoprospectivefranchiseesbutdoesnotrequireregistration.Anumberofstatesrequire
registrationand/ordisclosureinconnectionwithfranchiseoffersandsales.Inaddition,severalstateshave“franchiserelationship
laws”or“businessopportunitylaws”thatlimittheabilityoffranchisorstoterminatefranchiseagreementsortowithholdconsent
totherenewalortransferoftheseagreements.Webelievethatourfranchisingprocedures,aswellasanyapplicablestate-specific
procedures,complyinallmaterialrespectswithboththeFTCguidelinesandallapplicablestatelawsregulatingfranchisingin
thosestatesinwhichweoffernewfranchisearrangements.However,noncompliancecouldreduceanticipatedrevenue,whichin
turnmaymateriallyandadverselyaffectourbusinessandoperatingresults.
Most of our RE/MAX franchisees self-report their agent counts and agent commissions which drives the fees due to us, and we
have limited tools to validate or verify these reports. This could impact our ability to collect revenue owed to us by our
Independent Regions, franchisees, and agents, and could affect our ability to forecast our performance accurately.
Underourfranchiseagreements,franchisees,includingindependentregions,self-report(a)thenumberofagentsand(b)gross
commissionsandotherstatisticsfromhomesaletransactions.Thisdataisusedtodetermineourbillingsforcontinuingfranchise
fees,annualduesandbrokerfees.Wemayhavelimitedmethodsofvalidatingthedataandmustrelyonreportssubmittedandour
internalprotocolsforverifyingthereasonablenessofthedata.Iffranchiseesweretounderreportorerroneouslyreportsuchdata,
evenifunintentionally,wemaynotreceivealloftherevenuesduetous.Inaddition,totheextentthatwewereunderpaid,we
maynothaveadefinitivemethodfordeterminingsuchunderpayment.Ifamaterialnumberofourfranchiseeswereto
underreportorerroneouslyreporttheiragentcounts,agentcommissionsorfeesduetous,itcouldhaveamaterialadverseeffect
onourfinancialperformanceandresultsofoperations.Further,agentcountisakeyperformanceindicator(KPI),andincomplete
information,orinformationthatisnotreportedinatimelymannercouldimpairourabilitytoevaluateandforecastkeybusiness
driversandfinancialperformance.
Attrition of legacy booj customers could have an adverse effect on our financial results.
TheboojbusinessweacquiredinFebruary2018continuestoservicelegacycustomers,unrelatedtoRE/MAX.Severallegacy
customershavediscontinuedtheirrelationshipwithbooj,causingrevenuetodecrease.Thereisariskthattheremaininglegacy
customersleaveatafasterpacethananticipatedresultinginanacceleratingdeclineinrevenue.
We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business and
financial condition.
Wecannotpredictwithcertaintythecostsofdefense,thecostsofprosecution,insurancecoverageortheultimateoutcomeof
litigationandotherproceedingsfiledbyoragainstus,includingremediesordamageawards,andadverseresultsinsuchlitigation
andotherproceedingsmayharmourbusinessandfinancialcondition.
Suchlitigationandotherproceedingsmayinclude,butarenotlimitedto,securitieslitigationincludingclassactionsand
shareholderderivativelitigation,complaintsfromorlitigationbyfranchisees,usuallyrelatedtoallegedbreachesofcontractor
wrongfulterminationunderthefranchisearrangements,actionsrelatingtointellectualproperty,commercialarrangementsand
franchisingarrangements.
Inaddition,litigationagainstafranchiseeoritsaffiliatedsalesagentsbythirdparties,whetherintheordinarycourseofbusiness
orotherwise,mayalsoincludeclaimsagainstusforliabilitybyvirtueofthefranchiserelationship.Franchiseesmayfailtoobtain
insurancenamingtheCompanyasanadditionalinsuredonsuchclaims.Inadditiontoincreasingfranchisees’costsandlimiting
thefundsavailabletopayuscontractualfeesandduesandreducingtheexecutionofnewfranchisearrangements,claimsagainst
us(includingvicariousliabilityclaims)divertourmanagementresourcesandcouldcauseadversepublicity,whichmay
materiallyandadverselyaffectusandourbrand,regardlessofwhethersuchallegationsarevalidorwhetherweareliable.
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Ourglobaloperationsmaybesubjecttoadditionalrisksrelatedtolitigation,includingdifficultiesinenforcementofcontractual
obligationsgovernedbyforeignlawduetodifferinginterpretationsofrightsandobligations,compliancewithmultipleand
potentiallyconflictinglaws,newandpotentiallyuntestedlawsandjudicialsystemsandreducedprotectionofintellectual
property.Asubstantialunsatisfiedjudgmentagainstusoroneofoursubsidiariescouldresultinbankruptcy,whichwould
materiallyandadverselyaffectourbusinessandoperatingresults.
Our global operations, including those in Canada, are subject to risks not generally experienced by our U.S. operations.
Therisksinvolvedinourglobaloperationsandrelationshipscouldresultinlossesagainstwhichwearenotinsuredandtherefore
affectourprofitability.Theserisksinclude:
● fluctuationsinforeigncurrencyexchangerates,primarilyrelatedtochangesintheCanadiandollarandEurotoU.S.
dollarexchangerates;
● exposuretolocaleconomicconditionsandlocallawsandregulations,includingthoserelatingtotheagentsofour
franchisees;
● economicand/orcreditconditionsabroad;
● potentialadversechangesinthepoliticalstabilityofforeigncountriesorintheirdiplomaticrelationswiththeU.S.;
● restrictionsonthewithdrawalofforeigninvestmentandearnings;
● governmentpoliciesagainstbusinessesownedbyforeigners;
● diminishedabilitytolegallyenforceourcontractualrightsinforeigncountries;
● withholdingandothertaxesonremittancesandotherpaymentsbysubsidiaries;and
● changesintaxlawsregardingtaxationofforeignprofits.
OurglobaloperationsoutsideCanadagenerallygeneratesubstantiallyloweraveragerevenueperagentthanourU.S.and
Canadianoperations.
Our business depends on strong brands, and any failure to maintain, protect and enhance our brand would hurt our ability to
grow our business, particularly in new markets where we have limited brand recognition.
RE/MAXisastrongbrandthatwebelievehascontributedsignificantlytothesuccessofourbusiness,andtheMottobrandis
gainingrecognition.Maintaining,protectingandenhancingthe“RE/MAX”andMottobrandsiscriticaltogrowingourbusiness.
Ifwedonotsuccessfullybuildandmaintainstrongbrands,ourbusinesscouldbemateriallyharmed.
Wederivesignificantbenefitfromourmarketshareleadershipandourabilitytomakeclaimsregardingthesame,including
throughuseofoursloganthat“NobodyintheworldsellsmorerealestatethanRE/MAX”asmeasuredbyresidentialtransaction
sides.Lossofmarketleadership,andasaresultaninabilitytotoutthesame,mayhinderpublicandindustryperceptionof
RE/MAXasaleaderintherealestatemarketandhurtagentrecruitmentandfranchisesalesasaresult.
Inasmuchasourbusinessisinpartdependentonstrongbrands,ourbusinessmaybesubjecttorisksrelatedtoeventsand
circumstancesthathaveanegativeimpactonourbrands.Ifweareexposedtoadversepublicityoreventsthatdodamagetoour
brandsand/orimage,ourbusinessmaysuffermaterialadverseeffectsfromthedeteriorationinourbrandandimage.
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Infringement, misappropriation or dilution of our intellectual property could harm our business.
WeregardourRE/MAXtrademark,balloonlogoandyardsigndesigntrademarksandourMottotrademarksashavingsignificant
valueandasbeinganimportantfactorinthemarketingofourbrands.Webelievethatthisandotherintellectualpropertyare
valuableassetsthatarecriticaltooursuccess.Notallofthetrademarksorservicemarksthatwecurrentlyusehavebeen
registeredinallofthecountriesinwhichwedobusiness,andtheymayneverberegisteredinallofthosecountries.Therecanbe
noassurancethatwewillbeabletoadequatelymaintain,enforceandprotectourtrademarksorotherintellectualpropertyrights.
Wearecommonlyinvolvedinnumerousproceedings,generallyonasmallscale,toenforceourintellectualpropertyandprotect
ourbrands.Unauthorizedusesorotherinfringementofourtrademarksorservicemarks,includingusesthatarecurrently
unknowntous,coulddiminishthevalueofourbrandandmayadverselyaffectourbusiness.Effectiveintellectualproperty
protectionmaynotbeavailableineverymarket.Failuretoadequatelyprotectourintellectualpropertyrightscoulddamageour
brandandimpairourabilitytocompeteeffectively.
Inaddition,franchiseenoncompliancewiththetermsandconditionsofourfranchiseagreementsandourbrandstandardsmay
reducetheoverallgoodwillofourbrand,whetherthroughdiminishedconsumerperceptionofourbrand,dilutionofour
intellectualproperty,thefailuretomeettheFTCguidelinesorapplicablestatelaws,orthroughtheparticipationinimproperor
objectionablebusinesspractices.
Our business is heavily reliant on technology and product development for certain key aspects of our operations.
Thesystemsmaynotperformasdesiredorwemayexperiencecostoverages,delays,orotherfactorsthatmaydistractour
managementfromourbusiness,whichcouldhaveanadverseimpactonourresultsofoperations.Further,wemaynotbeableto
obtainfuturenewtechnologiesandsystems,ortoreplaceorintroducenewtechnologiesandsystemsasquicklyasour
competitorsorinacost-effectivemanner.Also,wemaynotachievethebenefitsanticipatedorrequiredfromanynewtechnology
orsystem,includingthoserelatedtoourrecenttechnologyacquisitions.
We rely on traffic to our websites, including our flagship websites, remax.com and mottomortgage.com, directed from search
engines. If our websites fail to rank prominently in unpaid search results, traffic to our websites could decline and our
business could be adversely affected.
Oursuccessdependsinpartonourabilitytoattracthomebuyersandsellerstoourwebsites,includingourflagshipwebsites,
remax.comandmottomortgage.comthroughunpaidInternetsearchresultsonsearchengines.Thenumberofusersweattract
fromsearchenginesisdueinlargeparttohowandwhereourwebsitesrankinunpaidsearchresults.Theserankingscanbe
affectedbyanumberoffactors,suchaschangesinrankingalgorithms,manyofwhicharenotunderourdirectcontrol,andthey
maychangefrequently.Inaddition,ourwebsitefacesincreasingcompetitionforaudiencefromrealestateportalwebsites,such
asZillow,TruliaandRealtor.com.Ourwebsiteshaveexperiencedfluctuationsinsearchresultrankingsinthepast,andwe
anticipatefluctuationsinthefuture.Anyreductioninthenumberofusersdirectedtoourwebsitescouldadverselyimpactour
businessandresultsofoperations.
Cyberattacks, security breaches and improper access to, disclosure or deletion of our data, personally identifiable information
we collect, or business records could harm our business, damage our reputation and cause losses.
Ourinformationtechnologiesandsystemsandthoseofourthird-partyhostedservicesarevulnerabletobreach,damageor
interruptionfromvariouscauses,including:(i)naturaldisasters,warandactsofterrorism,(ii)powerlosses,computersystems
failure,Internetandtelecommunicationsordatanetworkfailures,operatorerror,lossesandcorruptionofdata,andsimilarevents,
and(iii)employeeerror,malfeasanceorotherwise.Ofparticularriskandfocusinrecentyearsisthepotentialpenetrationof
internaloroutsourcedsystemsbyindividualsseekingtodisruptoperationsormisappropriateinformation(aka,cyberattacks).
Cyberattacks,includingtheuseofphishingandmalware,continuetogrowinsophisticationmakingitimpossibleforusto
mitigatealloftheserisks.Anyextendedinterruptionofoursystemsorexposureofsensitivedatatothirdpartiescouldcause
significantdamagetoourbusinessorourbrand,forwhichourbusinessinterruptioninsurancemaybeinsufficienttocompensate
usforlossesthatmayoccur.
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Inaddition,werelyonthecollectionanduseofpersonallyidentifiableinformationfromfranchisees,agentsandconsumersto
conductourbusinessandincertaininstancessuchdatamayincludesocialsecuritynumbers,paymentcardnumbers,orcustomer
financialinformation.Globalprivacylegislation(includingtherecentlyenactedGDPRregulationsintheEuropeanUnion),
enforcementandpolicyactivityarerapidlyexpandingandcreatingacomplexcomplianceenvironment.Changesintheselaws
maylimitourdataaccess,use,anddisclosure,andmayrequireincreasedexpendituresbyusormaydictatethatwenotoffer
certaintypesofservices.Forexample,CaliforniarecentlyenactedtheCaliforniaConsumerPrivacyAct,whichbecameeffective
onJanuary1,2020andrequirescoveredbusinessesto,amongotherthings,providedisclosurestoCaliforniaconsumersregarding
thecollection,useanddisclosureofsuchconsumers’personalinformationandaffordsuchconsumersnewrightswithrespectto
theirpersonalinformation,includingtherighttooptoutofcertainsalesofpersonalinformation.Webelievethatfurtherincreased
regulationinadditionaljurisdictionsislikelyintheareaofdataprivacy.Shouldwemisuseorimproperlystorethepersonally
identifiableinformationthatwecollect,orshouldwebethevictimofacyberattackthatresultsinimproperaccesstosuch
personallyidentifiableinformation,wemaybesubjecttolegalclaimsandregulatoryscrutiny.Anylegalclaims,government
actionordamagetoourreputationduetoactions,ortheperceptionthatwearetakingactions,inconsistentwiththetermsofour
privacystatement,consumerexpectations,orprivacy-relatedordataprotectionlawsandregulations,couldexposeustoliability
andadverselyimpactourbusinessandresultsofoperations.
Any disruption to our websites or lead generation tools could harm our business.
Wearevulnerabletocertainadditionalrisksanduncertaintiesassociatedwithwebsites,whichincludeourleadreferralsystem,
remax.com,global.remax.com,theremaxcollection.com,remaxcommercial.comandmottomortgage.com.Theserisksinclude
changesinrequiredtechnologyinterfaces,websitedowntimeandothertechnicalfailures,securitybreachesandconsumerprivacy
concerns.Wemayexperienceservicedisruptions,outagesandotherperformanceproblemsduetoavarietyoffactors,including
relianceonourthird-partyhostedservices,infrastructurechanges,humanorsoftwareerrors,capacityconstraintsduetoan
overwhelmingnumberofusersaccessingourplatformsimultaneously,anddenialofservice,fraudorattacks.Ourfailureto
addresstheserisksanduncertaintiessuccessfullycouldreduceourInternetpresence,generatefewerleadsforouragentsand
damageourbrand.Manyoftherisksrelatingtoourwebsiteoperationsarebeyondourcontrol.
We only have two primary facilities, one of which serves as our corporate headquarters. If we encounter difficulties associated
with these facilities, we could face management issues that could have a material adverse effect on our business operations.
WehavetwoprimaryfacilitiesbothlocatedinDenver,Colorado,wheremostofouremployeesarelocated.Asignificantportion
ofourownedcomputerequipment,ITteamfocusedonagenttechnology,andourmanagementislocatedinthesefacilities.Our
managementandemployeeswouldneedtofindanalternativelocationifweweretoencounterdifficultiesatourcorporate
headquarters,includingbyfireorothernaturaldisaster,whichwouldcausedisruptionandexpensetoourbusinessand
operations.
We rely on third parties for certain important functions and technology. Any failures by those vendors could disrupt our
business operations.
Wehaveoutsourcedcertainkeyfunctionstoexternalparties,includingsomethatarecriticaltofinancialreporting,ourfranchise
andmembershiptracking/billing,theMottoloanoriginationsystem,andanumberofcriticalconsumer-andfranchise/agent-
facingwebsites.Wemayenterintootherkeyoutsourcingrelationshipsinthefuture.Ifoneormoreoftheseexternalpartieswere
notabletoperformtheirfunctionsforaperiodoftime,performthematanacceptableservicelevel,orhandleincreasedvolumes,
ourbusinessoperationscouldbeconstrained,disrupted,orotherwisenegativelyaffected.Ourabilitytomonitortheactivitiesor
performanceofvendorsmaybeconstrained,whichmakesitdifficultforustoassessandmanagetherisksassociatedwiththese
relationships.
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We are relatively new to the mortgage brokerage industry, which, along with the intense competition within the industry, may
hinder our efforts to establish and grow our new mortgage brokerage franchising business, Motto Mortgage, which could have
implications to the goodwill on our Consolidated Balance Sheet.
WearepursuingagrowthstrategytoofferandsellresidentialmortgagebrokeragefranchisesintheU.Sunderthe“Motto
Mortgage”brandandtrademarks.Wecontinuetodevelopoperatingexperienceinthemortgagebrokerageindustry.Ourstrategy
hingesonourabilitytorecruitfranchiseesandhelpthemrecruitloanoriginators,todevelopandmaintainstrongcompetencies
withinthemortgagebrokeragemarket,onfavorableconditionsintherelatedregulatoryenvironmentandonoursuccessin
developingastrong,respectedbrand.Wemayfailtounderstand,interpret,implementand/ortrainfranchiseesadequately
concerningcompliancerequirementsrelatedtothemortgagebrokerageindustryortherelationshipbetweenusandour
franchisees,anyofwhichfailurescouldsubjectusorourfranchiseestoadverseactionsfromregulators.MottoFranchising,LLC,
mayalsohaveregulatoryobligationsarisingfromitsrelationshipwithMottofranchisees;wemayfailtocomplywiththose
obligations,andthatfailurecouldalsosubjectustoadverseactionsfromregulators.TheMottoMortgagebrand’slackofbrand
recognitionmayhamperfranchisesalesefforts.Inaddition,residentialmortgagebrokerageisahighlycompetitiveindustryand
Mottowillsufferifweareunabletoattractfranchisees,whichwilladverselyaffectMotto’sgrowth,operationsandprofitability.
We have significant debt service obligations and may incur additional indebtedness in the future.
Wehavesignificantdebtserviceobligations,includingprincipal,interestandcommitmentfeepaymentsduequarterlypursuantto
RE/MAX,LLC’sSeniorSecuredCreditFacility.Ourcurrentlyexistingindebtedness,oranyadditionalindebtednesswemay
incur,couldrequireustodivertfundsidentifiedforotherpurposesfordebtserviceandimpairourliquidityposition.Ifwecannot
generatesufficientcashflowfromoperationstoserviceourdebt,wemayneedtorefinanceourdebt,disposeofassetsorissue
additionalequitytoobtainnecessaryfunds.Wedonotknowwhetherwewouldbeabletotakesuchactionsonatimelybasis,on
termssatisfactorytous,oratall.Futureindebtednessmayimposeadditionalrestrictionsonus,whichcouldlimitourabilityto
respondtomarketconditions,tomakecapitalinvestmentsortotakeadvantageofbusinessopportunities.Ourlevelof
indebtednesshasimportantconsequencestoyouandyourinvestmentinourClassAcommonstock.
The discontinuation of London Interbank Offered Rate ("LIBOR") may adversely affect our borrowing costs.
ThevariableinterestrateonourSeniorSecuredCreditFacilitycanbebasedonLIBORatouroption,andwehavechosenthe
LIBORoptiononaregularbasis.In2017,theChiefExecutiveoftheU.K.FinancialConductAuthority(the“FCA”),which
regulatesLIBOR,announcedthattheFCAwillnolongerpersuadeorcompelbankstosubmitratesforthecalculationofLIBOR
after2021.ThediscontinuationofLIBORasareferenceratemaycauseinterestratesunderourcurrentorfuturedebtagreements
toperformdifferentlythaninthepast.Thereplacementwithanalternativereferenceratemaycauseunanticipatedconsequences
andourfutureborrowingcostsmaybeadverselyaffected.Atthistime,weareunabletopredictwhateffectthediscontinuanceof
LIBORandtheestablishmentofalternativereferencerateswillhaveonourborrowingcostsandresultsofoperations.
Our operating results are subject to quarterly fluctuations due to home sales, and results for any quarter may not necessarily
be indicative of the results that may be achieved for the full fiscal year.
Historically,wehaverealized,andexpecttocontinuetorealize,lowerAdjustedEBITDAmarginsinthefirstandfourthquarters
dueprimarilytotheimpactoflowerbrokerfeesandotherrevenueprimarilyasaresultofloweroverallhomesaletransactions,
andhigherselling,operatingandadministrativeexpensesinthefirstquarterforexpensesincurredinconnectionwithour
RE/MAXannualconvention.Accordingly,ourresultsofoperationsmayfluctuateonaquarterlybasis,whichwouldcauseperiod
toperiodcomparisonsofouroperatingresultstonotbenecessarilymeaningfulandcannotberelieduponasindicatorsoffuture
annualperformance.
Expectations of the Company relating to environmental, social and governance factors may impose additional costs
and expose us to new risks.
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Thereisanincreasingfocusfromcertaininvestors,employeesandotherstakeholdersconcerningcorporateresponsibility,
specificallyrelatedtoenvironmental,socialandgovernancefactors.Someinvestorsmayusethesefactorstoguidetheir
investmentstrategiesand,insomecases,maychoosenottoinvestinusiftheybelieveourpoliciesrelatingtocorporate
responsibilityareinadequate.Third-partyprovidersofcorporateresponsibilityratingsandreportsoncompanieshaveincreasedto
meetgrowinginvestordemandformeasurementofcorporateresponsibilityperformance.Thecriteriabywhichcompanies’
corporateresponsibilitypracticesareassessedmaychange,whichcouldresultingreaterexpectationsofusandcauseusto
undertakecostlyinitiativestosatisfysuchnewcriteria.Ifweelectnottoorareunabletosatisfysuchnewcriteria,investorsmay
concludethatourpolicieswithrespecttocorporateresponsibilityareinadequate.Wemayfacereputationaldamageintheevent
thatourcorporateresponsibilityproceduresorstandardsdonotmeetthestandardssetbyvariousconstituencies.Furthermore,if
ourcompetitors’corporateresponsibilityperformanceisperceivedtobegreaterthanours,potentialorcurrentinvestorsmayelect
toinvestwithourcompetitorsinstead.Inaddition,intheeventthatwecommunicatecertaininitiativesandgoalsregarding
environmental,socialandgovernancematters,wecouldfail,orbeperceivedtofail,inourachievementofsuchinitiativesor
goals,orwecouldbecriticizedforthescopeofsuchinitiativesorgoals.Ifwefailtosatisfytheexpectationsofinvestors,
employeesandotherstakeholdersorourinitiativesarenotexecutedasplanned,ourreputationandfinancialresultscouldbe
materiallyandadverselyaffected.
Risks Related to Our Organizational Structure
RIHI has substantial influence over us including over decisions that require the approval of stockholders, and its interest in
our business may conflict with yours.
RIHI,acompanycontrolledbyDavidLiniger,ourcurrentChairmanandCo-Founder,andGailLiniger,ourViceChairandCo-
Founder,respectively,ownsallofouroutstandingClassBcommonstock.AlthoughRIHInolongercontrolsamajorityofthe
votingpowerofRE/MAXHoldings’commonstock,RIHIremainsasignificantstockholderoftheCompanyandthroughits
ownershipoftheClassBcommonstockholdsapproximately41.3%ofthevotingpoweroftheCompany’sstock.Mr.Liniger
alsoownsClassAcommonstockwithanadditional1.2%ofthevotingpoweroftheCompany’sstock.Therefore,RIHIhasthe
abilitytosignificantlyinfluenceallmatterssubmittedtoavoteofourstockholders.
Inaddition,RIHI’sentireeconomicinterestinusisintheformofitsdirectinterestinRMCOthroughtheownershipofRMCO
commonunits,thepaymentsitmayreceivefromusunderitstaxreceivableagreementandtheproceedsitmayreceiveuponany
redemptionofitsRMCOcommonunits,includingissuanceofsharesofourClassAcommonstock,uponanysuchredemption
andanysubsequentsaleofsuchClassAcommonstock.Asaresult,RIHI’sinterestsmayconflictwiththeinterestsofourClass
Acommonstockholders.Forexample,RIHImayhaveadifferenttaxpositionfromuswhichcouldinfluenceitsdecisions
regardingcertaintransactions,especiallyinlightoftheexistenceofthetaxreceivableagreementsthatweenteredintoin
connectionwithourIPO,includingwhetherandwhenweshouldterminatethetaxreceivableagreementsandaccelerateour
obligationsthereunder.Inaddition,RIHIcouldhaveaninterestinthestructuringoffuturetransactionstotakeintoconsideration
itstaxorotherconsiderations,eveninsituationswherenosimilarconsiderationsarerelevanttous.
Our tax receivable agreements require us to make cash payments based upon future tax benefits to which we may become
entitled. The amounts that we may be required to pay could be significant, may be accelerated in certain circumstances and
could significantly exceed the actual tax benefits that we ultimately realize.
InconnectionwithourIPO,weenteredintotaxreceivableagreementswithourhistoricalowners.Afteroneofthesehistorical
ownersassigneditsinterestinitstaxreceivableagreement,thesetaxreceivableagreementsarenowheldbyRIHIandParallaxes
RainCo-Investment,LLC(“Parallaxes”andtogether,the“TRAParties”).Theamountofthecashpaymentsthatwemaybe
requiredtomakeunderthetaxreceivableagreementscouldbesignificantandwilldepend,inpart,uponfactsandcircumstances
thatarebeyondourcontrol.
Thetaxreceivableagreementsprovidethatifcertainmergers,assetsales,otherformsofbusinesscombination,orotherchanges
ofcontrolweretooccur,orthatif,atanytime,weelectanearlyterminationofthetaxreceivableagreements,thenour
obligations,oroursuccessor’sobligations,tomakepaymentsunderthetaxreceivableagreementswouldbe
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basedoncertainassumptions,includinganassumptionthatwewouldhavesufficienttaxableincometofullyutilizeallpotential
futuretaxbenefitsthataresubjecttothetaxreceivableagreements.
Asaresult,(i)wecouldberequiredtomakecashpaymentstotheTRAPartiesthataregreaterthanthespecifiedpercentageof
theactualbenefitsweultimatelyrealizeinrespectofthetaxbenefitsthataresubjecttothetaxreceivableagreements,and(ii)if
weelecttoterminatethetaxreceivableagreementsearly,wewouldberequiredtomakeanimmediatecashpaymentequaltothe
presentvalueoftheanticipatedfuturetaxbenefitsthatarethesubjectofthetaxreceivableagreements,whichpaymentmaybe
madesignificantlyinadvanceoftheactualrealization,ifany,ofsuchfuturetaxbenefits.
WewillalsonotbereimbursedforanycashpaymentspreviouslymadetotheTRAParties(ortheirpredecessors)pursuanttothe
taxreceivableagreementsifanytaxbenefitsinitiallyclaimedbyusaresubsequentlychallengedbyataxingauthorityandare
ultimatelydisallowed.Instead,anyexcesscashpaymentsmadebyustoeitheroftheTRAPartieswillbenettedagainstany
futurecashpaymentsthatwemightotherwiseberequiredtomakeunderthetermsofthetaxreceivableagreements.However,we
mightnotdeterminethatwehaveeffectivelymadeanexcesscashpaymenttoeitheroftheTRAPartiesforanumberofyears
followingtheinitialtimeofsuchpayment.Asaresult,itispossiblethatwecouldmakecashpaymentsunderthetaxreceivable
agreementsthataresubstantiallygreaterthanouractualcashtaxsavings.
Risks Related to Ownership of Our Class A Common Stock
We cannot assure you that we will have the available cash to make dividend payments.
Weintendtocontinuetopaycashdividendsquarterly.Whetherwewilldoso,however,andthetimingandamountofthose
dividends,willbesubjecttoapprovalanddeclarationbyourBoardofDirectorsandwilldependupononavarietyoffactors,
includingourfinancialresults,cashrequirementsandfinancialcondition,ourabilitytopaydividendsunderourseniorsecured
creditfacilityandanyotherapplicablecontracts,andotherfactorsdeemedrelevantbyourBoardofDirectors.Anydividends
declaredandpaidwillnotbecumulative.
BecauseweareaholdingcompanywithnomaterialassetsotherthanourownershipofcommonunitsofRMCO,wehaveno
independentmeansofgeneratingrevenueorcashflow,andourabilitytopaydividendsisdependentuponthefinancialresults
andcashflowsofRMCOanditssubsidiariesanddistributionswereceivefromRMCO.WeexpecttocauseRMCOtomake
distributionstofundourexpecteddividendpayments,subjecttoapplicablelawandanyrestrictionscontainedinRMCO’sorits
subsidiaries’currentorfuturedebtagreements.
Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us
that you might consider favorable.
Ourcertificateofincorporationandbylawscontainprovisionsthatmaymaketheacquisitionofourcompanymoredifficult
withouttheapprovalofourBoardofDirectors.Theseprovisions:
● establishaclassifiedBoardofDirectorssothatnotallmembersofourBoardofDirectorsareelectedatonetime;
● authorizetheissuanceofundesignatedpreferredstock,thetermsofwhichmaybeestablishedandthesharesofwhich
maybeissuedwithoutstockholderapproval,andwhichmayincludesupervoting,specialapproval,dividendorother
rightsorpreferencessuperiortotherightsoftheholdersofcommonstock;
● providethatourBoardofDirectorsisexpresslyauthorizedtomake,alterorrepealourbylaws;
● delegatethesolepowertoamajorityofourBoardofDirectorstofixthenumberofdirectors;
● providethepowerofourBoardofDirectorstofillanyvacancyonourBoardofDirectors,whethersuchvacancyoccurs
asaresultofanincreaseinthenumberofdirectorsorotherwise;
● eliminatetheabilityofstockholderstocallspecialmeetingsofstockholders;and
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● establishadvancenoticerequirementsfornominationsforelectionstoourBoardofDirectorsorforproposingmatters
thatcanbeacteduponbystockholdersatstockholdermeetings.
OurcertificateofincorporationalsocontainsaprovisionthatprovidesuswithprotectionssimilartoSection203oftheDelaware
GeneralCorporationLaw,andpreventsusfromengaginginabusinesscombinationwithapersonwhoacquiresatleast15%of
ourcommonstockforaperiodofthreeyearsfromthedatesuchpersonacquiredsuchcommonstockunlessboardorstockholder
approvalisobtainedpriortotheacquisition,exceptthatDavidandGailLinigeraredeemedtohavebeenapprovedbyourBoard
ofDirectors,andtherebynotsubjecttotheserestrictions.Theseanti-takeoverprovisionsandotherprovisionsunderDelaware
lawcoulddiscourage,delayorpreventatransactioninvolvingachangeincontrolofourCompany,evenifdoingsowould
benefitourstockholders.Theseprovisionscouldalsodiscourageproxycontestsandmakeitmoredifficultforyouandother
stockholderstoelectdirectorsofyourchoosingandtocauseustotakeothercorporateactionsyoudesire.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
OurcorporateheadquartersislocatedinleasedofficesinDenver,Colorado.Theleaseconsistsofapproximately231,000square
feetandexpiresinApril2028.WealsoleaseanofficebuildinginDenver,Coloradoforourboojoperations.Theleaseconsistsof
approximately20,000squarefeetandexpiresinFebruary2034.
ITEM 3. LEGAL PROCEEDINGS
AsdisclosedinNote15Commitments and Contingencies,fromtimetotimeweareinvolvedinlitigation,claimsandother
proceedingsrelatingtotheconductofourbusiness,andthedisclosuressetforthinNote15relatingtocertainlegalmattersis
incorporatedhereinbyreference.Suchlitigationandotherproceedingsmayinclude,butarenotlimitedto,actionsrelatingto
intellectualproperty,commercialarrangements,franchisingarrangements,brokeragedisputes,vicariousliabilitybasedupon
conductofindividualsorentitiesoutsideofourcontrolincludingfranchiseesandindependentagents,andemploymentlaw
claims.Litigationandotherdisputesareinherentlyunpredictableandsubjecttosubstantialuncertaintiesandunfavorable
resolutionscouldoccur.Oftenthesecasesraisecomplexfactualandlegalissues,whicharesubjecttorisksanduncertaintiesand
whichcouldrequiresignificanttimeandresourcesfrommanagement.Althoughwedonotbelieveanycurrentlypending
litigationwillhaveamaterialadverseeffectonourbusiness,financialconditionoroperations,thereareinherentuncertaintiesin
litigationandotherclaimsandregulatoryproceedingsandsuchpendingmatterscouldresultinunexpectedexpensesand
liabilitiesandmightmateriallyadverselyaffectourbusiness,financialconditionoroperations,includingourreputation.
ITEM 4. MINE SAFETY DISCLOSURES
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
OurClassAcommonstocktradesontheNewYorkStockExchange(“NYSE”)underthesymbol“RMAX”.AsofFebruary20,
2020,wehad65stockholdersofrecordofourClassAcommonstock.Thisnumberdoesnotincludestockholderswhosestockis
heldinnomineeorstreetnamebybrokers.AllsharesofClassBcommonstockareownedbyRIHI,Inc.(“RIHI”),andthereisno
publicmarketfortheseshares.
4
FortheyearsendedDecember31,2019and2018wedeclareda$0.21and$0.20persharedividendforeachquarterduringthose
calendaryears,respectively.WeintendtocontinuetopayacashdividendonsharesofClassAcommonstockonaquarterly
basis.HoweverthetimingandamountofthosedividendswillbesubjecttoapprovalanddeclarationbyourBoardofDirectors
andwilldependonavarietyoffactors,includingthefinancialresultsandcashflowsofRMCO,LLCanditsconsolidated
subsidiaries(“RMCO”),distributionswereceivefromRMCO,cashrequirementsandfinancialcondition,ourabilitytopay
dividendsunderourseniorsecuredcreditfacilityandanyotherapplicablecontracts,andotherfactorsdeemedrelevantbyour
BoardofDirectors.Alldividendsdeclaredandpaidwillnotbecumulative.SeeNote5,Earnings Per Share and Dividends tothe
consolidatedfinancialstatementsincludedelsewhereinthisAnnualReportonForm10-Kforfurtherinformation.
Performance Graph
ThefollowinggraphandtabledepictthetotalreturntostockholdersfromDecember31,2013throughDecember31,2019,
relativetotheperformanceoftheS&P500IndexandS&PHomebuildersSelectIndustryIndex.Thegraphassumesthat$100
wasinvestedattheclosingpriceonDecember31,2014andthatalldividendswerereinvested.
Theperformancegraphisnotintendedtobeindicativeoffutureperformance.Theperformancegraphshallnotbedeemed
“solicitingmaterial”ortobe“filed”withtheSecuritiesandExchangeCommissionforpurposesofSection18oftheSecurities
ExchangeActof1934,asamended(the“ExchangeAct”),orotherwisesubjecttotheliabilitiesunderthatSection,andshallnot
bedeemedtobeincorporatedbyreferenceintoanyoftheCompany’sfilingsundertheSecuritiesActof1933,asamended,orthe
ExchangeAct.
4
TableofContents
44
ITEM 6. SELECTED FINANCIAL DATA
Thefollowingtablessetforthourselectedhistoricalconsolidatedfinancialresultsandotherdataasofthedatesandforthe
periodsindicated.TheselectedconsolidatedstatementsofincomedatafortheyearsendedDecember31,2019,2018and2017,
andtheconsolidatedbalancesheetsdataasofDecember31,2019and2018havebeenderivedfromourauditedconsolidated
financialstatements(“financialstatements”)includedelsewhereinthisAnnualReportonForm10-K.
TheselectedconsolidatedstatementsofincomedatafortheyearsendedDecember31,2016and2015andtheselected
consolidatedbalancesheetsdataasofDecember31,2017,2016and2015havebeenderivedfromourauditedfinancial
statementsnotincludedinthisAnnualReportonForm10-K.
AsofDecember31,2014,RE/MAXHoldings,Inc.(“Holdings”)owned39.9%ofthecommonmembershipunitsinRMCO,LLC
anditsconsolidatedsubsidiaries(“RMCO”),andasofDecember31,2019,Holdingsowns58.7%ofthecommonmembership
unitsinRMCO.Holdings’economicinterestinRMCOincreasedprimarilyduetotheissuanceofsharesofClassAcommon
stockasaresultofRIHI’sredemptionof5.2millioncommonunitsinRMCOduringthefourthquarterof2015.Holdings’only
businessistoactasthesolemanagerofRMCOandinthatcapacity,Holdingsoperatesandcontrolsallofthebusinessandaffairs
ofRMCO.
Ourselectedhistoricalfinancialdatamaynotbeindicativeofourfuturefinancialcondition,futureresultsofoperationsorfuture
cashflows.
Youshouldreadtheinformationsetforthbelowinconjunctionwithourhistoricalfinancialstatementsandthenotestothose
statementsand“Item7.—Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations”included
elsewhereinthisAnnualReportonForm10-K.
TableofContents
45
Year Ended December 31,
2019 2018 2017 2016 2015
(1)
(inthousands,exceptpershareamountsandagentdata)
Totalrevenue:
Continuingfranchisefees $ 99,928 $ 101,104 $ 93,694 $ 81,197 $ 73,750
Annualdues 35,409 35,894 33,767 32,653 31,758
Brokerfees 45,990 46,871 43,801 37,209 32,334
MarketingFundsfees 72,299 — — — —
Franchisesalesandotherrevenue 28,667 28,757 22,452 24,471 25,468
Brokeragerevenue — — — 112 13,558
Totalrevenue 282,293 212,626 193,714 175,642 176,868
Operatingexpenses:
Selling,operatingandadministrative
expenses 118,890 120,179 106,946 88,037 91,561
MarketingFundsexpenses 72,299 — — — —
Depreciationandamortization 22,323 20,678 20,512 16,094 15,124
Loss(gain)onsaleordispositionof
assets,net 342 63 660 178 (3,397)
Gainonreductionintaxreceivable
agreementliability — (6,145) (32,736) — —
Totaloperatingexpenses 213,854 134,775 95,382 104,309 103,288
Operatingincome 68,439 77,851 98,332 71,333 73,580
Otherexpenses,net:
Interestexpense (12,229) (12,051) (9,996) (8,596) (10,413)
Interestincome 1,446 676 352 160 178
Foreigncurrencytransaction(losses)
gains 109 (312) 174 (86) (1,661)
Lossonearlyextinguishmentofdebt — — — (796) (94)
Equityinearningsofinvestees — — — — 1,215
Totalotherexpenses,net (10,674) (11,687) (9,470) (9,318) (10,775)
Incomebeforeprovisionforincometaxes 57,765 66,164 88,862 62,015 62,805
Provisionforincometaxes (10,909) (16,342) (57,542) (15,167) (12,030)
Netincome 46,856 49,822 31,320 46,848 50,775
Less:netincomeattributabletonon-controlling
interests 21,816 22,939 21,221 24,627 34,363
NetincomeattributabletoRE/MAXHoldings,
Inc.
$ 25,040 $ 26,883 $ 10,099 $ 22,221 $ 16,412
Earnings Per Share Data:
Basic
$ 1.41 $ 1.52 $ 0.57 $ 1.26 $ 1.30
Diluted
$ 1.40 $ 1.51 $ 0.57 $ 1.26 $ 1.28
Other Data:
Agentcountatperiodend(unaudited)
130,889 124,280 119,041 111,915 104,826
CashdividendsdeclaredpershareofClassA
commonstock
$ 0.84 $ 0.80 $ 0.72 $ 0.60 $ 2.00
(1) EffectiveJanuary1,2018,theCompanyadoptedASU2014-09,RevenuefromContractswithCustomers(Topic606),the
newrevenuerecognitionstandard,retrospectively.Financialresultsfor2015havenotbeenrecastandarethereforenot
comparable.
TableofContents
46
As of December 31,
2019 2018 2017 2016 2015
(1)
(inthousands)
Cashandcashequivalents $ 83,001 $ 59,974 $ 50,807 $ 57,609 $ 110,212
Restrictedcash
(2)
20,600 — — — —
Franchiseagreements,net 87,670 103,157 119,349 109,140 61,939
Goodwill 159,038 150,684 135,213 126,633 71,871
Totalassets 542,352 428,373 413,934 444,683 383,786
Payablepursuanttotaxreceivableagreements,
includingcurrentportion 37,223 40,787 53,175 98,809 100,035
Debt,includingcurrentportion 225,681 227,787 228,986 230,820 200,357
Totalstockholders'equity 98,376 75,014 45,408 40,615 39,414
(1) EffectiveJanuary1,2018,theCompanyadoptedASU2014-09,RevenuefromContractswithCustomers(Topic606),the
newrevenuerecognitionstandard,retrospectively.Financialresultsfor2015havenotbeenrecastandthereforearenot
comparable.
(2) RestrictedcashisattributabletotheMarketingFunds,whichwereacquiredJanuary1,2019.SeeNote6, Acquisitionstothe
accompanyingconsolidatedfinancialstatementsformoreinformation.
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47
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 (“financial
statements”) and accompanying notes thereto 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”).
Financial and Operational Highlights – Year Ended December 31, 2019
(Compared to the year ended December 31, 2018 unless otherwise noted)
● DeployedtheboojPlatformtothemajorityofagentsinU.S.Company-ownedRegions
● AcquiredFirst,adatascienceandmachinelearningcompany.
● Totalagentcountincreasedby5.3%to130,889agents.
● U.S.andCanadacombinedagentcountincreased0.3%to84,688agents.
● TotalopenMottoMortgageofficesincreasedto111offices.
● Revenueof$282.3million,up32.8%fromtheprioryear.ExcludingtheacquisitionoftheMarketingFunds,revenue
decreased$2.6millionfromtheprioryear.
● NetincomeattributabletoRE/MAXHoldings,Inc.of$25.0million.
● AdjustedEBITDAof$103.5millionandAdjustedEBITDAmarginof36.7%.AdjustedEBITDAmargindecreased
fromtheprioryearbecauseoftheacquisitionoftheMarketingFunds,whichincreasedrevenue,buthadnoimpactto
AdjustedEBITDA.
AsofDecember31,2019,wegrewourtotalagentcount5.3%ascomparedto2018,surpassing130,000agentsforthefirsttime
inourhistory,ledbystronggrowthinourinternationalmarkets.During2019,ourstablebusinessmodeldeliveredresilient
revenueandmarginperformancedespitethesofthousingmarketthatprevailedduringthefirstpartoftheyear.Agentcountinthe
combinedU.S.andCanadamarketswerevirtuallyflatat0.3%growthfromtheprioryear,withimprovementinthefourth
quarter.RejuvenatingagentcountgrowthintheU.S.hasbeenandwillcontinuetobeatoppriority.Someofthemoreimpactful
forcesonourU.S.agentcountgrowthinthefourthquarterof2019included:ourenterprise-widefocusongrowth,ourongoing
technologytransformation,improvinghousingmarketconditionsandperhapsmostnotably,theintroductionofseveralrecruiting
initiativesincludingsomethatincentivizedrecruitmentthroughtemporarywaiversoffeesfornewagents.Mottocontinuedto
expandwith111openfranchisesasofDecember31,2019,whichisanincreaseof42.3%sinceDecember31,2018.Revenue,
excludingtheMarketingFunds,declined1.2%during2019ascomparedtotheprioryearperiod,drivenbyweakhousingmarket
conditionsintheU.S.andpartsofCanadaduringthefirstpartoftheyear,decreasedaverageagentcountintheU.S.andCanada
ownedregionsandattritionofsomeofbooj’slegacycustomers,offsetbytheexpansionofMottoandhealthyinternationalagent
growth.AdjustedEBITDAdecreased$0.8millionprimarilyduetohigherbaddebtexpense,higherpropertytaxexpense,
additionaltrainingexpensesforthelaunchoftheboojtechnologyplatformandlowerorganicrevenue,partiallyoffsetbylower
professionalfeesandseverancecosts.
Wecontinuedtoinvestinourvaluepropositionandbeganintroducingthepowerful,fullyintegratedboojPlatformthathasbeen
custom-builtforRE/MAX’suniqueentrepreneurialcultureinthethirdquarterof2019inourU.S.Company-ownedRegions,
withadditionalfunctionalityaddedinthefourthquarter.Wedeployedanenhancedconsumerfacingappandwww.remax.com
experienceinJanuary2020andplantocontinuetoinnovateandreleaseongoingupdatestothe
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48
Platforminthefuture.Laterin2020,weplantooffertheboojPlatformtoparticipatingU.S.IndependentRegionsandtoCanada.
Ultimately,weplantooffertheboojPlatformthroughoutourglobalnetwork.Wewillcontinuetoinvestinfuturegrowth
opportunities,includingthosethatdiversifyourrevenueliketheexcitingFirstmobileapp,whichweexpecttobeaccretivein
2021buttoadverselyimpactAdjustedEBITDAin2020by$1.5millionto$2.5million.
Financial and Operational Highlights – Year Ended December 31, 2018
(Compared to year ended December 31, 2017 unless otherwise noted)
● Totalagentcountincreasedby4.4%to124,280agents.
● U.S.andCanadacombinedagentcountincreased0.2%to84,449agents.
● TotalopenMottoMortgagefranchisesmorethandoubledto78offices.
● Revenueincreased9.8%to$212.6million.
● NetincomeattributabletoRE/MAXHoldings,Inc.of$26.9million.
● AdjustedEBITDAof$104.3millionandAdjustedEBITDAmarginof49.1%.
During2018,wegreworganicrevenue4.5%primarilyduetoagentcountincreases,Mottoexpansion,risingaveragehome
prices,event-basedrevenuefromourannualconventionintheU.S.andaJuly1,2017annualduesfeeincreaseintheU.S.and
Canada.Our2018revenuegrowthwasalsoimpactedbyhavingwaivedapproximately$2.0millionofcontinuingfranchisefees
andbrokersfeesintheprioryearforhurricane-impactedassociates.Wegrewournetworkagentcount4.4%andourU.S.and
Canadiancombinedagentcountby0.2%,andwesold1,120RE/MAXfranchisesworldwide,including285franchisesintheU.S.
andCanadacombined.
Expensesincreasedprimarilyduetoincreasedinvestmentsintechnology,coststosupportbooj’slegacyoperationsassistingits
externalcustomers,severanceandotherpayrollrelatedexpenses,andoperatingcoststosupportMotto’sgrowth.Theseincreases
werepartiallyoffsetbya$3.7millionlossrecognizedintheprioryearrelatedtosubleasingaportionofourcorporateoffice
buildingandcostsofalitigationsettlement.Interestexpensealsoincreased$2.1millionduetorisinginterestrates.
Wealsofocusedonpursuingpotentialgrowthcatalystsbyacquiringbooj,arealestatetechnologycompany,forapurchaseprice
of$26.3million.Withbooj,weexpecttodelivercoretechnologysolutionsdesignedforandwithRE/MAXaffiliatesin2019.We
believethisnewtechnologywillmakeourhighlyproductiveagentsevenmoreefficientandsuccessfulandhelpRE/MAX
franchiseesrecruitandretainagents.
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49
Selected Operating and Financial Highlights
Forcomparabilitypurposes,thefollowingtablesetsforthouragentcount,Mottoopenoffices,franchisesalesandresultsof
operationsfortheperiodspresentedinourauditedfinancialstatementsincludedelsewhereinthisAnnualReportonForm10-K.
Theperiod-to-periodcomparisonofagentcount,Mottoopenoffices,franchisesalesandfinancialresultsisnotnecessarily
indicativeoffutureperformance.
December 31,
2019 2018  2017 
Totalagentcountgrowth 5.3 % 4.4 % 6.4 %
Agent Count:
U.S. 63,121 63,122 63,162
Canada 21,567 21,327 21,112
U.S.andCanadaTotal 84,688 84,449 84,274
OutsideU.S.andCanada 46,201 39,831 34,767
Network-wideagentcount
130,889 124,280 119,041
Motto open offices
(2)
111 78 31
Year Ended December 31,
2019 2018 2017
RE/MAX franchise sales
(1)
1,030 1,120 1,059
Motto franchise sales
(2)
52 49 60
(1) IncludesfranchisesalesintheU.S.,Canadaandglobalregions.
(2) Excludesvirtualofficesandbranchises.
Year Ended December 31,
2019  2018 2017
Totalrevenue $ 282,293 $ 212,626 $ 193,714
Totalselling,operatingandadministrativeexpenses $ 118,890 $ 120,179 $ 106,946
Operatingincome $ 68,439 $ 77,851 $ 98,332
NetincomeattributabletoRE/MAXHoldings,Inc. $ 25,040 $ 26,883 $ 10,099
AdjustedEBITDA
(1)
$ 103,515 $ 104,316 $ 102,145
AdjustedEBITDAmargin
(1)
36.7 % 49.1 % 52.7 %
(1) See“—Non-GAAPFinancialMeasures”forfurtherdiscussionofAdjustedEBITDAandAdjustedEBITDAmarginanda
reconciliationofthedifferencesbetweenAdjustedEBITDAandnetincome,whichisthemostcomparableU.S.generally
acceptedaccountingprinciples(“U.S.GAAP”)measureforoperatingperformance.AdjustedEBITDAmarginrepresents
AdjustedEBITDAasapercentageoftotalrevenue.AdjustedEBITDAmarginsdecreasedconsiderablyfromtheprioryear
becauseoftheacquisitionoftheMarketingFunds,whichincreasedrevenuesignificantly,buthadnoimpacttoAdjusted
EBITDA.
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50
Results of Operations
Year Ended December 31, 2019 vs. Year Ended December 31, 2018
Revenue
Asummaryofthecomponentsofourrevenueisasfollows(inthousandsexceptpercentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
2019 2018 $ %
Revenue:
Continuingfranchisefees $ 99,928 $ 101,104 $ (1,176) (1.2)%
Annualdues 35,409 35,894 (485) (1.4)%
Brokerfees 45,990 46,871 (881) (1.9)%
MarketingFundsfees 72,299 — 72,299 n/m
Franchisesalesandotherrevenue 28,667 28,757 (90) (0.3)%
Totalrevenue
$ 282,293 $ 212,626 $ 69,667
32.8 %
n/m–notmeaningful
ConsolidatedrevenueincreasedduetoacquisitionsoftheMarketingFundsandhavingafullyearofboojrevenuedueto
acquisitiontiming,whichadded$73.4million,or34.6%,partiallyoffsetbyadecreaseinorganicrevenueof$3.1million,or
1.5%andforeigncurrencymovementsof$0.6million,or0.3%.
Continuing Franchise Fees
RevenuefromcontinuingfranchisefeesdecreasedprimarilyduetoagentcountdecreasesintheU.S.andCompany-owned
RegionsinCanadaduringmostoftheyear,partiallyoffsetbyMottoexpansion.WhileU.S.agentcountwasflatyear-over-year,
itwasdownalargeportionof2019withmostoftheincreasescominginthefourthquarter,drivennotablybytheintroductionof
recruitinginitiatives,someofwhichwaivedcontinuingfranchisefeesforalimitedperiodoftime.Weestimatethatwewillforgo
$2.0millionto$3.0millioninrevenuethroughthethirdquarterof2020fromthesewaivers.
Annual Dues
RevenuefromannualduesdeclinedduetoagentcountdeclinesintheU.S.andCompany-ownedRegionsinCanada.
Broker Fees
RevenuefrombrokerfeesdecreasedprimarilyduetoagentcountdeclinesintheU.S.andCompany-ownedRegionsinCanada
andlowertotaltransactionsperagent,partiallyoffsetbyrisinghomeprices.
Marketing Funds fees
RevenuefromtheMarketingFundsfeesincreasedduetotheacquisitionoftheMarketingFundsonJanuary1,2019.
Franchise Sales and Other Revenue
Franchisesalesandotherrevenuewasrelativelyflataslowerrevenuefrompreferredmarketingarrangements,event-based
revenuefromourRE/MAXannualconventionintheU.S.andcontinuedattritionofbooj’slegacycustomerbasewasmostly
offsetbyboojrevenueinthecurrentyearforperiodswedidnotownboojintheprioryear.Weexpectthecontinuedboojlegacy
customerattritiontolowerotherrevenuebyapproximately$3.0millionin2020.
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51
Operating Expenses
Asummaryofthecomponentsofouroperatingexpensesisasfollows(inthousands,exceptpercentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
2019 2018 $ %
Operatingexpenses:
Selling,operatingandadministrativeexpenses $ 118,890 $ 120,179 $ 1,289 1.1 %
MarketingFundsexpenses 72,299 — (72,299) n/m
Depreciationandamortization 22,323 20,678 (1,645) (8.0)%
Loss(gain)onsaleordispositionofassets,net 342 63 (279) (442.9)
Gainonreductionintaxreceivableagreementliability — (6,145) (6,145) 100.0 %
Totaloperatingexpenses
$ 213,854 $ 134,775 $ (79,079)
(58.7)%
Percentofrevenue
75.8
%
63.4
%
n/m–notmeaningful
Selling, Operating and Administrative Expenses
Selling,operatingandadministrativeexpensesconsisted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conventionsin
theU.S.andotherevents.
Asummaryofthecomponentsofourselling,operatingandadministrativeexpensesisasfollows(inthousands,except
percentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
2019 2018 $ %
Selling,operatingandadministrativeexpenses:
Personnel $ 63,022 $ 62,935 $ (87) (0.1)%
Professionalfees 11,159 15,631 4,472 28.6 %
Leasecosts 8,805 9,104 299 3.3 %
Other 35,904 32,509 (3,395) (10.4)%
Totalselling,operatingandadministrativeexpenses
$ 118,890 $ 120,179 $ 1,289
1.1 %
Percentofrevenue
42.1
%
56.5
%
Totalselling,operatingandadministrativeexpensesdecreasedasfollows:
● Personnelcostsremainedrelativelyflatduetoanincreaseinequity-basedcompensationexpenseof$1.8million(See
Note13Equity-Based Compensation)andotherpersonnelcosts,mostlyoffsetbylowerseverance.
● Professionalfeesdecreasedprimarilyduetocostsincurredin2018relatedtoaninvestigationbyaspecialcommitteeof
ourBoardofDirectors(the“SpecialCommittee”)of$2.5millionandadecreaseof$1.0millionfortechnologycosts
(whichincludestheimpactofchargingcertaincoststotheMarketingFundsin2019.SeeNote2Summary of Significant
Accounting Policies),partiallyoffsetbyaslightincreaseinlegalfeesinthecurrentyear,drivenbytheMoehrl/Sitzer
suits(SeeNote15Commitments and Contingencies).Weexpectlegalfeeswillincreaseapproximately$1.5millionin
2020.
● Otherselling,operatingandadministrativeexpensesincreasedprimarilyduetoafavorablefairvalueadjustmenttoour
contingentconsiderationliabilityin2018thatdidnotrecurin2019(SeeNote11Fair Value Measurements),increases
inbaddebtexpense,increasesinpropertytaxexpense(drivenbyanincreaseinthe
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52
assessedvalueofourcorporateheadquarters)andadditionaltrainingexpensesforthelaunchoftheboojPlatform.
Marketing Funds Expenses
MarketingFundsexpensesincreasedduetotheacquisitionoftheMarketingFundsonJanuary1,2019.Werecognizeanequal
andoffsettingamountofexpensestorevenuesuchthatthereisnoimpacttoouroverallprofitability.
Depreciation and Amortization
Depreciationandamortizationexpenseincreasedprimarilyduetoamortizationexpenserelatedtothedeploymentofvarious
technologyinitiatives.
Gain on Reduction in TRA Liability
ThegainonreductioninTRAliabilityduringtheyearendedDecember31,2018resultedfromchangesintaxlawarisingfrom
theTaxCutsandJobsAct,enactedinDecember2017andfurtherclarifiedin2018.Thesetaxlawchangesresultedinreductions
tothevalueofdeferredtaxassetstheCompanyholdsandrelatedreductioninthevalueoftheTRAliabilities.Thegainof$6.1
millionin2018isaresultofchangesinthetaxationofforeignderivedincome,whichtheCompanyrecognizedafterperforminga
detailedreviewduring2018ofthesecomplexprovisions.SeeNote12,Income Taxes foradditionalinformation.
Other Expenses, Net
Asummaryofthecomponentsofouroperatingexpensesisasfollows(inthousands,exceptpercentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
 2019  2018  $  %
Otherexpenses,net:
Interestexpense $ (12,229) $ (12,051) $ (178) (1.5)%
Interestincome 1,446 676 770 113.9 %
Foreigncurrencytransactiongains(losses) 109 (312) 421 134.9 %
Totalotherexpenses,net
$ (10,674) $ (11,687) $ 1,013
8.7 %
Percentofrevenue
3.8
%
5.5
%
Otherexpenses,netdecreasedduetoanincreaseininterestincomeduetorisinginterestratesandhavinglargercashbalancesto
investin2019comparedto2018,andforeigncurrencygainsthatwereprimarilyaresultoffluctuationsoftheCanadiandollar
againsttheU.S.dollar,partiallyoffsetbyanincreaseininterestexpenseduetoanincreaseininterestratesonourSeniorSecured
CreditFacility.
Provision for Income Taxes
Oureffectiveincometaxratedecreasedto18.9%from24.7%fortheyearsendedDecember31,2019and2018,respectively,
primarilyduetoavaluationallowancerecognizedin2018.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.SeeNote4,Non-controlling Interest
forfurtherdetailsontheallocationofincometaxesbetweenHoldingsandthenon-controllinginterest.
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53
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,whichisthemostcomparableGAAPmeasure
foroperatingperformance.
AdjustedEBITDAwas$103.5millionfortheyearendedDecember31,2019,adecreaseof$0.8millionfromthecomparable
prioryearperiod.AdjustedEBITDAdecreasedprimarilyduetoincreasesinbaddebtexpense,organicrevenuedeclines,property
taxexpenseandtechnologytrainingexpenses,offsetbylowereventandadvertisingexpenses,severance,legalandother
professionalfeesascomparedtotheprioryearperiod.
Year Ended December 31, 2018 vs. Year Ended December 31, 2017
Revenue
AsummaryofthecomponentsofourrevenuefortheyearsendedDecember31,2018and2017isasfollows(inthousands,
exceptpercentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
2018 2017 $  %
Revenue:
Continuingfranchisefees $ 101,104 $ 93,694 $ 7,410 7.9 %
Annualdues 35,894 33,767 2,127 6.3 %
Brokerfees 46,871 43,801 3,070 7.0 %
Franchisesalesandotherrevenue 28,757 22,452 6,305 28.1 %
Totalrevenue
$ 212,626 $ 193,714 $ 18,912
9.8 %
Consolidatedrevenueincreased$18.9million,or9.8%,dueto:
● organicgrowthof$8.8million,or4.5%,primarilyasaresultofagentcountincreases,Mottoexpansion,risingaverage
homeprices,event-basedrevenuefromourannualconventionintheU.S.andcontributionsfromtheJuly1,2017annual
duesfeeincrease,andtheimpactofhavingwaivedapproximately$2.0millionofcontinuingfranchisefeesandbroker
feesforhurricane-impactedassociatesduring2017;
● acquisitionsofNorthernIllinoisandboojadded$10.0million,or5.2%;and
● foreigncurrencymovementsincreasedrevenue$0.2million,or0.1%.
Continuing Franchise Fees
RevenuefromcontinuingfranchisefeesincreasedprimarilyasaresultofcontributionsfromtheacquisitionofRE/MAXof
NorthernIllinois,whichadded$3.1million,Mottoexpansionandagentcountgrowth.Additionally,theCompanywaived
approximately$1.4millionofcontinuingfranchisefeesforhurricane-impactedassociatesduring2017.
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54
Annual Dues
RevenuefromannualduesincreasedprimarilyduetoanincreaseinagentcountintheU.S.andCanadaandtheJuly1,2017fee
increase.RevenuefromannualduesisnotaffectedbyouracquisitionsofIndependentRegionsbecauseagentsintheU.S.and
CanadianIndependentRegionsalreadypayannualduestousinthesameamountsasagentsinCompany-ownedRegions.
Broker Fees
RevenuefrombrokerfeesincreasedprimarilyduetocontributionsfromtheacquisitionofRE/MAXofNorthernIllinois,which
added$1.1million,organicgrowthdrivenprimarilybyrisingaveragehomeprices,andhavingwaivedapproximately$0.6
millionofbrokerfeesforhurricane-impactedassociatesduring2017,partiallyoffsetbydeclinesintotaltransactionsperagent.
Franchise Sales and Other Revenue
Franchisesalesandotherrevenueincreasedprimarilyduetorevenuecontributedfromboojof$5.6millionandevent-based
revenuefromourannualconventionintheU.S.
Operating Expenses
AsummaryofthecomponentsofouroperatingexpensesfortheyearsendedDecember31,2018and2017isasfollows(in
thousands,exceptpercentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
2018 2017 $  %
Operatingexpenses:
Selling,operatingandadministrativeexpenses $ 120,179 $ 106,946 $ (13,233) (12.4)%
Depreciationandamortization 20,678 20,512 (166) (0.8)%
Lossonsaleordispositionofassets,net 63 660 597 90.5 %
Gainonreductionintaxreceivableagreementliability (6,145) (32,736) (26,591) (81.2)%
Totaloperatingexpenses
$ 134,775 $ 95,382 $ (39,393)
(41.3)%
Percentofrevenue
63.4
%
49.2
%
Selling, Operating and Administrative Expenses
Selling,operatingandadministrativeexpensesconsistedofpersonnelcosts,professionalfeeexpenses,rentandrelatedfacility
operationsexpense(includinglossesonsubleases)andotherexpenses.Otherexpensesincludecertainmarketingandproduction
coststhatarenotpaidbyourrelatedpartyadvertisingfunds,includingtravelandentertainmentcosts,andcostsassociatedwith
ourannualconventionsintheU.S.andotherevents.
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55
Asummaryofthecomponentsofourselling,operatingandadministrativeexpensesfortheyearsendedDecember31,2018and
2017isasfollows(inthousands,exceptpercentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
2018 2017 $  %
Selling,operatingandadministrativeexpenses:
Personnel $ 62,935 $ 45,063 $ (17,872) (39.7)%
Professionalfees 15,631 16,927 1,296 7.7 %
Rentandrelatedfacilityoperations 9,104 12,860 3,756 29.2 %
Other 32,509 32,096 (413) (1.3)%
Totalselling,operatingand
administrativeexpenses
$ 120,179 $ 106,946 $ (13,233)
(12.4)%
Percentofrevenue
56.5
%
55.2
%
Totalselling,operatingandadministrativeexpensesincreasedasfollows:
● Personnelcostsincreasedprimarilydueto$5.7millionincosts,includingincrementalstock-basedcompensation
expense,tosupportourincreasedinvestmentsintechnology,$5.1millionincoststosupportbooj’slegacyoperations
assistingitsexternalcustomers,severanceandotherpayrollrelatedexpenses,andoperatingcoststosupportMotto.
● Professionalfeesdecreasedprimarilyduetoadecreaseinacquisition-relatedcostscomparedtotheprioryearandcosts
incurredduringthethirdquarterof2017inconnectionwithlitigationrelatedtoour2013acquisitionofthenetassetsof
Tails(SeeNote15,Commitments and Contingencies)andotherlegalfees,partiallyoffsetbyinvestmentsintechnology.
● Rentandrelatedfacilityoperationsdecreasedprimarilyduetoa$3.7millionlossrecognizedduringthethirdquarterof
2017relatedtosubleasingaportionofourcorporateofficebuilding.
● Otherselling,operatingandadministrativeexpensesincreasedslightlyprimarilyduetoincreasedcoststosupportbooj’s
legacyoperationsassistingitsexternalcustomers,increasedcostsforRE/MAXofNorthernIllinoisandMotto,increases
inexpensesrelatedtohigherattendanceatourannualconventionintheU.S.,andincreasesinbaddebtexpense.These
increaseswerelargelyoffsetbychargesin2017thatdidnotrecur,includinga$2.6millionnetlitigationsettlement
relatedtoour2013acquisitionofthenetassetsofTails(SeeNote15,Commitments and Contingencies)andtherefresh
oftheRE/MAXbrand.Additionally,duringtheyearendedDecember31,2018,weadjustedtheestimatedfairvalueof
thecontingentconsiderationliabilityrelatedtotheacquisitionofFullHouse(SeeNote11,Fair Value Measurements).
Depreciation and Amortization
Depreciationandamortizationexpenseincreasedprimarilyduetoanincreaseinamortizationexpenserelatedtointangibles
acquiredinconnectionwiththeacquisitionsofRE/MAXofNorthernIllinoisandbooj.SeeNote6,Acquisitions foradditional
information.Theseincreaseswerelargelyoffsetbyareductioninamortizationexpenserelatedtocertainacquiredfranchise
agreementsbecomingfullyamortized.
Loss on Sale or Disposition of Assets, Net
Thechangeinlossonsaleordispositionofassets,netwasprimarilyduetothe$0.5millionlossrecognizedduringtheyearended
December31,2017forafinalsettlementofcertainprovisionsoftheassetsaleagreementrelatedtotheDecember31,2015
dispositionofSacagawea,LLCd/b/a/RE/MAXEquityGroup(“RE/MAXEquityGroup”).
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56
Gain on Reduction in TRA Liability
ThegainonreductioninTRAliabilityresultedfromchangesintaxlawarisingfromtheTaxCutsandJobsAct,enactedin
December2017andfurtherclarifiedin2018.Thesetaxlawchangesresultedinreductionstothevalueofdeferredtaxassetsthe
CompanyholdsandrelatedreductioninthevalueoftheTRAliabilities.Thegainof$6.1millionin2018isaresultofchangesin
thetaxationofforeignderivedincome,whichtheCompanyrecognizedafterperformingadetailedreviewduring2018ofthese
complexprovisions.ThegainonreductioninTRAliabilityof$32.7millionin2017isaresultofthereductioninthecorporate
taxratefrom35%to21%.SeeNote12,Income Taxes foradditionalinformation.
Other Expenses, Net
Asummaryofthecomponentsofourotherexpenses,netfortheyearsendedDecember31,2018and2017isasfollows(in
thousands,exceptpercentages):
Year Ended Change
December 31, Favorable/(Unfavorable)
 2018  2017  $  %
Otherexpenses,net:
Interestexpense $ (12,051) $ (9,996) $ (2,055) (20.6)%
Interestincome 676 352 324 92.0 %
Foreigncurrencytransaction(loss)gain (312) 174 (486) n/m
Totalotherexpenses,net
$ (11,687) $ (9,470) $ (2,217)
(23.4)%
Percentofrevenue
5.5
%
4.9
%
n/m–notmeaningful
Otherexpenses,netincreasedprimarilyduetoanincreaseininterestexpenseasaresultofincreasinginterestratesonourSenior
SecuredCreditFacilityandachangeinforeigncurrencytransaction(losses)gainsthatwereprimarilyasaresultoffluctuations
oftheCanadiandollaragainsttheU.S.dollar.
Provision for Income Taxes
Oureffectiveincometaxratedecreasedto24.7%from64.8%fortheyearsendedDecember31,2018and2017,respectively,
primarilyduetotheTaxCutsandJobsActenactedinDecember2017whichresultedinasubstantialdecreaseinourcorporate
taxrate.SeeNote12,Income TaxesforfurtherinformationontheimpactoftheTaxCutsandJobsAct.Oureffectiveincometax
ratedependsonmanyfactors,includingaratebenefitattributabletothefactthattheportionofRMCO,LLC’searnings
attributabletothenon-controllinginterestsarenotsubjecttocorporate-leveltaxesbecauseRMCO,LLC(“RMCO”)isclassified
asapartnershipforU.S.federalincometaxpurposesandthereforeistreatedasa“flow-throughentity.”SeeNote4,Non-
controlling Interest forfurtherdetailsontheallocationofincometaxesbetweenRE/MAXHoldingsandthenon-controlling
interest.
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,whichisthemostcomparableGAAPmeasure
foroperatingperformance.
AdjustedEBITDAwas$104.3millionfortheyearendedDecember31,2018,anincreaseof$2.2millionfromthecomparable
prioryearperiod.AdjustedEBITDAincreasedprimarilyduetocontributionsfromtheacquisitionofRE/MAXofNorthern
Illinois,agentcountgrowth,risingaveragehomepricesandtheimpactofhavingwaivedcontinuingfranchisefeesandbroker
feesforhurricane-impactedassociatesduring2017.Theincreaseswerepartiallyoffsetbyincreasedinvestmentsintechnology
andpersonnel,severanceexpenseandoperatingcoststosupportbooj’slegacyoperationsassistingitsexternalcustomers.
TableofContents
57
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AdjustedEBITDAandtheratiosrelated
thereto.ThesemeasuresarederivedonthebasisofmethodologiesotherthaninaccordancewithU.S.GAAP.
Wedefine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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andsublease,
equity-basedcompensationexpense,acquisitionrelatedexpense,gainonreductionintaxreceivableagreementliability,Special
Committeeinvestigationandremediationexpense,expenseorincomerelatedtochangesintheestimatedfairvaluemeasurement
ofcontingentconsideration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provides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:
● thesemeasuresdonotreflectchangesin,orcashrequirementsfor,ourworkingcapitalneeds;
● thesemeasuresdonotreflectourinterestexpense,orthecashrequirementsnecessarytoserviceinterestorprincipal
paymentsonourdebt;
● thesemeasuresdonotreflectourincometaxexpenseorthecashrequirementstopayourtaxes;
● thesemeasuresdonotreflectthecashrequirementstopaydividendstostockholdersofourClassAcommonstockand
taxandothercashdistributionstoournon-controllingunitholders;
● thesemeasuresdonotreflectthecashrequirementspursuanttotheTaxReceivableAgreements(“TRAs”);
● althoughdepreciationandamortizationarenon-cashcharges,theassetsbeingdepreciatedandamortizedwilloften
requirereplacementinthefuture,andthesemeasuresdonotreflectanycashrequirementsforsuchreplacements;
● althoughequity-basedcompensationisanon-cashcharge,theissuanceofequity-basedawardsmayhaveadilutive
impactonearningspershare;and
● othercompaniesmaycalculatethesemeasuresdifferently,sosimilarlynamedmeasuresmaynotbecomparable.
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58
AreconciliationofAdjustedEBITDAtonetincomeissetforthinthefollowingtable(inthousands):
Year Ended December 31,
2019 2018 2017
Netincome $ 46,856 $ 49,822 $ 31,320
Depreciationandamortization 22,323 20,678 20,512
Interestexpense 12,229 12,051 9,996
Interestincome (1,446) (676) (352)
Provisionforincometaxes 10,909 16,342 57,542
EBITDA 90,871 98,217 119,018
(Gain)lossonsaleordispositionofassetsandsublease,net 342 (139) 4,260
Equity-basedcompensationexpense 10,934 9,176 2,900
Acquisition-relatedexpense
(1)
1,127 1,634 5,889
Gainonreductionintaxreceivableagreementliability
(2)
— (6,145) (32,736)
SpecialCommitteeinvestigationandremediationexpense
(3)
— 2,862 2,634
Fairvalueadjustmentstocontingentconsideration
(4)
241 (1,289) 180
AdjustedEBITDA
$ 103,515 $ 104,316 $ 102,145
(1) Acquisition-relatedexpenseincludeslegal,accounting,advisoryandconsultingfeesincurredinconnectionwiththe
acquisitionandintegrationofacquiredcompanies.
(2) GainonreductionintaxreceivableagreementliabilityisaresultoftheTaxCutsandJobsActenactedinDecember2017
andfurtherclarifiedin2018.SeeNote12,Income Taxesforadditionalinformation.
(3) SpecialCommitteeinvestigationandremediationexpenserelatestocostsincurredinrelationtothepreviouslydisclosed
investigationbythespecialcommitteeofindependentdirectorsofactionsofcertainmembersofourseniormanagementand
theimplementationoftheremediationplan.
(4) Fairvalueadjustmentstocontingentconsiderationincludeamountsrecognizedforchangesintheestimatedfairvalueofthe
contingentconsiderationliability.SeeNote11,Fair Value Measurementstotheaccompanyingconsolidatedfinancial
statementsforadditionalinformation
Liquidity and Capital Resources
Overview of Factors Affecting Our Liquidity
Ourliquiditypositionisaffectedbythegrowthofouragentbaseandconditionsintherealestatemarket.Inthisregard,ourshort-
termliquiditypositionfromtimetotimehasbeen,andwillcontinuetobe,affectedbythenumberoffactorsincludingagentsin
theRE/MAXnetwork,particularlyinCompany-ownedRegions.Ourcashflowsareprimarilyrelatedtothetimingof:
(i) cashreceiptofrevenues;
(ii) paymentofselling,operatingandadministrativeexpenses;
(iii) investmentsintechnologyandMotto;
(iv) cashconsiderationforacquisitionsandacquisition-relatedexpenses;
(v) principalpaymentsandrelatedinterestpaymentsonourSeniorSecuredCreditFacility;
(vi) dividendpaymentstostockholdersofourClassAcommonstock;
(vii)
distributionsandotherpaymentstonon-controllingunitholderspursuanttothetermsofRMCO’slimitedliability
companyoperatingagreement(“theRMCO,LLCAgreement”);
(viii) corporatetaxpaymentspaidbytheCompany;and
(ix) paymentstotheTRApartiespursuanttotheTRAs.
Wehavesatisfiedtheseneedsprimarilythroughourexistingcashbalances,cashgeneratedbyouroperationsandfundsavailable
underourSeniorSecuredCreditFacility.
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59
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”).TheSeniorSecuredCreditFacility
providestoRE/MAX,LLC$235.0millionintermloansanda$10.0millionrevolvingfacility.
TheSeniorSecuredCreditFacilityrestrictstheaggregateacquisitionconsiderationforpermittedacquisitions,inasituationin
whichRE/MAX,LLCwouldnotbeinproformacompliancewitha3.5:1.0totalleverageratio(basedonhowsuchtermis
definedtherein),to$100.0millioninanyfiscalyear.TheSeniorSecuredCreditFacilityalsoprovidesforincrementalfacilities,
subjecttolenderparticipation,aslongasthetotalleverageratio(calculatedasnetdebttoEBITDAasdefinedtherein)remains
below4.00:1.00.
TheSeniorSecuredCreditFacilityrequiresRE/MAX,LLCtorepaytermloansandreducerevolvingcommitmentswith(i)
100.0%ofproceedsofanyincurrenceofadditionaldebtnotpermittedbytheSeniorSecuredCreditFacility,(ii)100.0%of
proceedsofassetsalesand100.0%ofamountsrecoveredunderinsurancepolicies,subjecttocertainexceptionsanda
reinvestmentrightand(iii)50.0%ofexcesscashflowattheendoftheapplicablefiscalyearifRE/MAX,LLC’stotalleverage
ratioasdefinedintheSeniorSecuredCreditFacilityisinexcessof3.25:1.00,withsuchpercentagedecreasingasRE/MAX,
LLC’sleverageratiodecreases.
TheSeniorSecuredCreditFacilityisguaranteedbyRMCOandRE/MAXofWesternCanada(1998),LLC,awhollyowned
subsidiaryofRE/MAX,LLC,andissecuredbyalienonsubstantiallyalloftheassetsofRE/MAX,LLCandeachguarantor.
Borrowingsunderthetermloansandrevolvingloansaccrueinterest,atLondonInterbankOfferedRate(“LIBOR”),provided
LIBORshallbenolessthan0.75%plusanapplicablemarginof2.75%.
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.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.
AsofDecember31,2019,wehad$225.3millionoftermloansoutstanding,netofanunamortizeddiscountandissuancecosts,
$0.4millionoflong-termfinancingassumedwiththeacquisitionofboojandnorevolvingloansoutstandingunderourSenior
SecuredCreditFacility.AsofDecember31,2019,theinterestrateonthetermloanfacilitywas4.55%.Ifanyloanorother
amountsareoutstandingundertherevolvinglineofcredit,theSeniorSecuredCreditFacilityrequirescompliancewithaleverage
ratioandaninterestcoverageratio.Acommitmentfeeof0.5%perannumaccruesontheamountofunutilizedrevolvinglineof
credit.
Asneedsarise,wemayseekadditionalfinancinginthepubliccapitalmarkets.OnOctober15,2019wefiledaregistration
statementonFormS-3(“shelfregistration”)allowingforthesaleofupto$400millioninadditionalfinancing.TheSECdeclared
theshelfregistrationeffectiveonDecember30,2019.
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60
Sources and Uses of Cash
AsofDecember31,2019,and2018,wehad$83.0millionand$60.0million,respectively,incashandcashequivalents,ofwhich
approximately$1.1millionweredenominatedinforeigncurrencies,respectively.
Year Ended December 31,
 2019  2018 2017
Cashprovidedby(usedin):
Operatingactivities $ 78,975 $ 76,064 $ 63,288
Investingactivities (876) (33,675) (37,918)
Financingactivities (34,542) (33,152) (33,235)
Effectofexchangeratechangesoncash 70 (70) 1,063
Netchangeincash,cashequivalentsandrestrictedcash
$ 43,627 $ 9,167 $ (6,802)
Operating Activities
DuringtheyearendedDecember31,2019,AdjustedEBITDAwasrelativelyflat,butcashprovidedbyoperatingactivities
increasedbecauseof:
● adecreaseinTRApaymentsbetweenyearsof$2.7milliondrivenbytheimpactsoftheTaxCut&JobsAct;
● anetpaymentinFebruary2018of$2.6milliontosatisfythetermsofalitigationsettlementthatoccurredin2018that
didnotrecurin2019;partiallyoffsetby
● lowerreceiptsofinitialfranchisesalesascomparedtorevenuerecognized,withanetimpactof$2.1millionand
● timingdifferencesonvariousoperatingassetsandliabilities.
DuringtheyearendedDecember31,2018,cashprovidedbyoperatingactivitiesincreasedbecauseof:
● anincreaseofAdjustedEBITDAof$2.2million,whichincludes$3.3millionofseverancecostsaccruedbutunpaidin
thecurrentyearperiodversustheprioryearperiod;
● adecreaseof$7.1millionintimingofTRApaymentsinthecurrentyearversustheprioryear;and
● timingdifferencesonvariousoperatingassetsandliabilities.
TheincreaseincashprovidedbyoperatingactivitieswaspartiallyoffsetbytheFebruary2018netpaymentof$2.6millionto
satisfythetermsofalitigationsettlementinwhichnocomparabletransactionsoccurredintheprioryearperiod.
Investing Activities
DuringtheyearendedDecember31,2019,cashusedininvestingactivitieswasprimarilytheresultoftheacquisitionofFirstand
investmentsintechnology,especiallytheboojPlatform,mostlyoffsetbyrestrictedcashacquiredinconnectionwiththe
acquisitionoftheMarketingFunds.SeeNote6, Acquisitionstotheaccompanyingconsolidatedfinancialstatementsformore
information.
DuringtheyearendedDecember31,2018,cashusedininvestingactivitiesincreasedprimarilybecauseoftheacquisitionofbooj,
investmentsintrainingmaterialsandcashusedfortechnologyinvestments.
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Financing Activities
DuringtheyearendedDecember31,2019,cashusedinfinancingactivitiesincreasedprimarilydueto:
● anincreaseindistributionspaidtonon-controllingunitholders,and
● anincreaseincashpaidtoClassAcommonstockholdersandnon-controllingunitholdersduetoourBoardofDirectors
declaringadividendof$0.21pershareonalloutstandingsharesofClassAcommonstockinallfourquartersof2019
comparedtoadividendof$0.20pershareonalloutstandingsharesofClassAcommonstockinallfourquartersof
2018.
DuringtheyearendedDecember31,2018,cashusedinfinancingactivitiesdecreasedprimarilydueto:
● adecreaseindistributionspaidtonon-controllingunitholders,offsetby
● anincreaseincashpaidtoClassAcommonstockholdersandnon-controllingunitholdersduetoourBoardofDirectors
declaringadividendof$0.20pershareonalloutstandingsharesofClassAcommonstockinallfourquartersof2018
comparedtoadividendof$0.18pershareonalloutstandingsharesofClassAcommonstockinallfourquartersof
2017,aswellas
● anincreaseincashpaidrelatedtofinancingassumedwiththeacquisitionofbooj.
Capital Allocation Priorities
Liquidity
Ourobjectiveistomaintainastrongliquidityposition.Wehaveexistingcashbalances,cashflowsfromoperatingactivities,
accesstoourrevolvinglineofcreditandincrementalfacilitiesunderourSeniorSecuredCreditFacilityavailabletosupportthe
needsofourbusiness.Shouldadditionalliquidityneedsarise,ourrecentlyfiledshelfregistration,effectiveDecember30,2019,
wouldpermitaccesstopubliccapitalmarkets.
Acquisitions
AspartofourgrowthstrategywemaypursuereacquisitionsofIndependentRegionsintheU.S.andCanadaaswellas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wouldfundanysuchgrowthwithexistingcashbalances,
fundsgeneratedfromoperations,accesstocapitalunderourSeniorSecuredCreditFacilityandaccesstopubliccapitalmarkets
viaourrecentlyfiledshelfregistration.
Capital Expenditures
Thetotalaggregateamountforpurchasesofpropertyandequipmentandcapitalizationofsoftwarewas$13.2million,$7.8
millionand$2.2millionin2018,2017and2016,respectively.Theseamountsprimarilyrelatedtoinvestmentsintechnologyand
trainingmaterials.Inordertoexpandourtechnologicalcapabilities,weplantocontinuetore-investinourbusinessinorderto
improveoperationalefficienciesandenhancethetoolsandservicesprovidedtothefranchisees,agents,andloanoriginatorsin
ournetworks.Totalcapitalexpendituresfor2020areexpectedtobebetween$17millionand$19millionasaresultofcombined
investmentsintechnologyandincludingbetween$7millionand$8millionrelatedtotherefreshandefficiencyenhancementsof
ourcorporateheadquarters.SeeFinancialandOperationalHighlightsaboveforadditionalinformation.
Dividends
OurBoardofDirectorsdeclaredquarterlycashdividendsof$0.21and$0.20pershareonalloutstandingsharesofClassA
commonstockeveryquarterin2019and2018,respectively,asdisclosedinNote5,Earnings Per Share and Dividends.On
February19,2020,ourBoardofDirectorsannouncedaquarterlydividendof$0.22pershareonalloutstandingsharesofClassA
commonstock,whichispayableonMarch18,2020tostockholdersofrecordattheclose
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62
ofbusinessonMarch4,2020.Thedeclarationofadditionalfuturedividends,and,ifdeclared,theamountofanysuchfuture
dividend,willbesubjecttoouractualfutureearningsandcapitalrequirementsandwillbeatthediscretionofourBoardof
Directors;however,wecurrentlyintendtocontinuetopayacashdividendonsharesofClassAcommonstockonaquarterly
basis.
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receivesdistributions
fromRMCOonaquarterlybasisthatareequaltothedividendpaymentsHoldingsmakestothestockholdersofitsClassA
commonstock.Asaresult,absentanyadditionaldistributions,Holdingsmayhaveinsufficientfundstocoveritsestimatedtax
andTRAliabilities.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.
Throughouttheyearuntilcompletionofitstaxreturnwithrespecttosuchyear,RMCOmaypayrequiredorpro-ratatrue-up
distributionstoitsmembers,ifcashisavailableforsuchpurposes,withrespecttoactualtaxableincomefortheprioryear.See
Note4,Non-controlling InterestforfurtherdetailsondistributionsmadebyRMCO.
Payments Pursuant to the Tax Receivable Agreements
AsofDecember31,2019,theCompanyreflectedatotalliabilityof$37.2millionunderthetermsofitsTRAs.Theliability
pursuanttotheTRAswillincreaseuponfutureexchangesbyRIHIofRMCOcommonunits,withtheincreaserepresenting85%
oftheestimatedfuturetaxbenefits,ifany,resultingfromsuchexchanges.Paymentsaremadeonthisliabilityastaxbenefitsare
realizedbyHoldings.
DistributionsandotherpaymentspursuanttotheRMCO,LLCAgreementandTRAswerecomprisedofthefollowing(in
thousands):
Year Ended December 31,
 2019  2018
DistributionsandotherpaymentspursuanttotheRMCO,LLCAgreement:
Requireddistributionsfortaxesandproratadistributionsasaresultofdistributions
toRE/MAXHoldingsinordertosatisfyitsestimatedtaxliabilities $ 4,880 $ 4,511
Dividenddistributions 10,550 10,048
TotaldistributionstoRIHI 15,430 14,559
PaymentspursuanttotheTRAs 3,556 6,305
TotaldistributionstoRIHIandTRApayments
$ 18,986 $ 20,864
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Contractual Obligations
ThefollowingtablesummarizesourcontractualobligationsasofDecember31,2019andtheeffectsuchobligationsareexpected
tohaveonourliquidityandcashflowsinfutureperiods(inthousands):
Payments due by Period
 Total Less than 1 year  1-3 years  3-5 years  After 5 years
SeniorSecuredCreditFacility(includingcurrentportion)
(1)(2)
$ 227,363 $ 2,350 $ 4,700 $ 220,313 $ —
Otherlong-termfinancing(includingcurrentportion)
(3)
362 298 64 — —
Interestpaymentsoncreditfacility
(4)
40,688 10,466 20,550 9,672 —
Interestpaymentsonotherlong-termdebt
(3)
24 23 1 — —
Leaseobligations
(5)
74,944 7,868 16,433 17,005 33,638
Paymentspursuanttotaxreceivableagreements
(6)
37,223 3,583 7,273 6,803 19,564
Vendorcontracts
(7)
49,904 38,403 11,413 88 —
Estimatedundiscountedcontingentconsiderationpayments
(8)
9,052 402 1,750 2,864 4,036
$ 439,560 $ 63,393 $ 62,184 $ 256,745 $ 57,238
(1) WehavereflectedfullpaymentofourSeniorSecuredCreditFacilityinDecember2023atmaturity.
(2) TheSeniorSecuredCreditFacilitymayrequireadditionalprepaymentsthroughoutthetermoftheloanifthetotalleverage
ratioasofthelastdayofsuchfiscalyearisgreaterthan2.75to1.0.Ifthetotalleverageratioasofthelastdayofsuchfiscal
yearisnotgreaterthan2.75to1.0noexcesscashflowprincipalprepaymentisrequired.
(3) Includesfinancingassumedwiththeacquisitionofbooj.
(4) ThevariableinterestrateontheSeniorSecuredCreditFacilityisassumedattheinterestrateineffectasofDecember31,
2019of4.55%.
(5) Weareobligatedundernon-cancelableleasesforofficesandequipment.Futurepaymentsundertheseleasesand
commitments,netofpaymentstobereceivedundersubleaseagreementsof$4.7millionintheaggregate,areincludedinthe
tableabove.
(6) AsdescribedelsewhereinthisAnnualReportonForm10-K,weenteredintoTRAs,thatwillprovideforthepaymentbyus
of85%oftheamountofcashsavings,ifany,inU.S.federal,stateandlocalincometaxorfranchisetaxthatwerealizeasa
resultoftaxdeductionsarisingfromtheincreaseintaxbasisinRMCO’sassets.
(7) Representsoutstandingpurchaseorderswithvendorsinitiatedintheordinarycourseofbusinessforoperatingandcapital
expenditures.
(8) RepresentsestimatedpaymentstotheformerownerofMottoasrequiredperthepurchaseagreement.
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,2019.
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.
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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.
Motto Goodwill and Contingent Consideration
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.
During2019,2018and2017,weperformedthequalitativeimpairmentassessmentsforallreportingunits.ExceptfortheMotto
Franchisingreportingunit,thefairvalueofthereportingunitssignificantlyexceededtheircarryingvaluesatthelatestassessment
date.
TheMottoFranchisingsegment,whichhasacarryingvalueofgoodwillasofDecember31,2019of$11.8million,isanearly-
stagebusinessand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.Failuretoachievetargetedfranchisesales(whicharecurrentlyestimatedatbetween50and80per
yearoverthenext10years)wouldlikelyresultinanimpairmentofthisgoodwillbalance.
WehavenotrecordedanygoodwillimpairmentsduringtheyearsendedDecember31,2019,2018and2017.
Contingentconsiderationconsistsofanearn-outobligationinconnectionwiththeacquisitionofFullHouse,inwhichweare
requiredtopayadditionalpurchaseconsiderationtotaling8%ofgrossreceiptsgeneratedbytheacquiredbusinesseachyear
through2026withnolimitationastothemaximumpayout.Contingentconsiderationisrecordedatfairvalue,whichismeasured
atthepresentvalueoftheconsiderationexpectedtobetransferred.Thefairvalueofcontingentconsiderationisre-measuredat
theendofeachreportingperiodwiththechangeinfairvaluerecognizedinselling,operatingandadministrativeexpensesinthe
ConsolidatedStatementsofIncome.Similartothegoodwilldiscussionabove,estimatesofthefairvalueofcontingent
considerationarealsoimpactedbyMottofranchisesalesoverthenextseveralyearsanddiscountrates.SeeNote11,Fair Value
Measurement foradditionalinformation.Contingentconsiderationobligationswere$5.0millionand$5.1millionatDecember
31,2019and2018.
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.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.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.
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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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.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.
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$37.2millionexistsasofDecember
31,2019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increaseifRIHIredeemsadditionalcommonunitsofRMCO.
General Litigation Matters
Wearesubjecttolitigationclaimsarisingintheordinarycourseofbusiness.Weaccrueforcontingenciesrelatedtolitigation
mattersifitisprobablethataliabilityhasbeenincurredandtheamountofthelosscanbereasonablyestimated.Becausethese
mattersareinherentlyunpredictableandunfavorabledevelopmentsorresolutionscanoccur,assessinglitigationmattersishighly
subjectiveandrequiresjudgmentsaboutfutureevents.Weregularlyreviewlitigationmatterstodeterminewhetherouraccruals
andrelateddisclosuresareadequate.Theamountofultimatelossmaydifferfromtheseestimates.SeeNote15,Commitments and
Contingenciesformoreinformationrelatedtolitigationmatters.
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 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
WehaveoperationsbothwithintheU.S.andgloballyandweareexposedtomarketrisksintheordinarycourseofourbusiness.
Theserisksprimarilyincludeinterestrate,foreignexchangeandinflationrisks,aswellasrisksrelatingtochangesinthegeneral
economicconditionsinthecountrieswhereweconductbusiness.Toreducecertainoftheserisks,wemonitorthefinancial
conditionofourlargefranchisees.Inaddition,ourinvestmentstrategyhasbeentoinvestinfinancialinstrumentsthatarehighly
liquidandmaturewithinthreemonthsfromthedateofpurchase.Wedonotcurrentlyusederivativeinstrumentstomitigatethe
impactofourmarketriskexposuresnordoweusederivativesfortradingorspeculativepurposes.
Interest Rate Risk
WearesubjecttointerestrateriskinconnectionwithborrowingsunderourSeniorSecuredCreditFacilitywhichbearinterestat
variablerates.AtDecember31,2019,$227.4millionintermloanswereoutstandingunderourSeniorSecuredCreditFacility.
Wecurrentlydonotengageinanyinterestratehedgingactivity,butgivenourvariablerateborrowings,
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wemonitorinterestratesandifappropriate,mayengageinhedgingactivityprospectively.TheinterestrateonourSeniorSecured
CreditFacilityiscurrentlybasedonLIBOR,subjecttoafloorof0.75%,plusanapplicablemarginof2.75%.AsofDecember31,
2019,theinterestratewas4.55%%.IfLIBORrises,theneachhypothetical0.25%increasewouldresultinadditionalannual
interestexpenseof$0.6million.Tomitigateaportionofthisrisk,weinvestourcashbalancesinshort-terminvestmentsthatearn
interestatvariablerates.
Currency Risk
Wehaveanetworkofglobalfranchiseesinover110countriesandterritories.FluctuationsinexchangeratesoftheU.S.dollar
againstforeigncurrenciescanresult,andhaveresulted,influctuationsin(a)revenueandoperatingincomeduetoaportionofour
revenuebeingdenominatedinforeigncurrenciesand(b)foreignexchangetransactiongainsandlossesdueprimarilytocashand
accountsreceivablebalancesdenominatedinforeigncurrencies,withtheCanadiandollarrepresentingthemostsignificant
exposure.Wecurrentlydonotengageinanyforeignexchangehedgingactivityofourrevenuesbutmaydosointhefuture;
however,weactivelyconvertcashbalancesintoU.S.dollarstomitigatecurrencyriskoncashpositions.Duringtheyearended
December31,2019,ahypothetical5%strengthening/weakeninginthevalueoftheU.S.dollarcomparedtotheCanadiandollar
wouldhaveresultedinadecrease/increasetooperatingincomeofapproximately$1.0million.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ReportsofIndependentRegisteredPublicAccountingFirm  68
ConsolidatedBalanceSheetsasofDecember31,2019and2018 72
ConsolidatedStatementsofIncomefortheYearsEndedDecember31,2019,2018and2017 73
ConsolidatedStatementsofComprehensiveIncomefortheYearsEndedDecember31,2019,2018and2017 74
ConsolidatedStatementsofStockholders’EquityfortheYearsEndedDecember31,2019,2018and2017 75
ConsolidatedStatementsofCashFlowsfortheYearsEndedDecember31,2019,2018and2017 76
NotestoConsolidatedFinancialStatements 77
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Report of Independent Registered Public Accounting Firm
TotheStockholdersandBoardofDirectors
RE/MAXHoldings,Inc.:
Opinion on the ConsolidatedFinancial Statements
WehaveauditedtheaccompanyingconsolidatedbalancesheetsofRE/MAXHoldings,Inc.andsubsidiaries(theCompany)asof
December31,2019and2018,therelatedconsolidatedstatementsofincome,comprehensiveincome,stockholders’equity,and
cashflowsforeachoftheyearsinthethree-yearperiodendedDecember31,2019,andtherelatednotes(collectively,the
consolidatedfinancialstatements).Inouropinion,theconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,the
financialpositionoftheCompanyasofDecember31,2019and2018,andtheresultsofitsoperationsanditscashflowsforeach
oftheyearsinthethree-yearperiodendedDecember31,2019,inconformitywithU.S.generallyacceptedaccountingprinciples.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates)
(PCAOB),theCompany’sinternalcontroloverfinancialreportingasofDecember31,2019,basedoncriteriaestablishedin
Internal Control – Integrated Framework (2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadway
Commission,andourreportdatedFebruary21,2020expressedanunqualifiedopinionontheeffectivenessoftheCompany’s
internalcontroloverfinancialreporting.
Change in Accounting Principle
AsdiscussedinNote2totheconsolidatedfinancialstatements,theCompanyhaselectedtochangeitsmethodofaccountingfor
leasesasofJanuary1,2019duetotheadoptionofASCTopic842,Leases.
Basis for Opinion
TheseconsolidatedfinancialstatementsaretheresponsibilityoftheCompany’smanagement.Ourresponsibilityistoexpressan
opinionontheseconsolidatedfinancialstatementsbasedonouraudits.Weareapublicaccountingfirmregisteredwiththe
PCAOBandarerequiredtobeindependentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecuritieslawsand
theapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.
WeconductedourauditsinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperformthe
audittoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsarefreeofmaterialmisstatement,
whetherduetoerrororfraud.Ourauditsincludedperformingprocedurestoassesstherisksofmaterialmisstatementofthe
consolidatedfinancialstatements,whetherduetoerrororfraud,andperformingproceduresthatrespondtothoserisks.Such
proceduresincludedexamining,onatestbasis,evidenceregardingtheamountsanddisclosuresintheconsolidatedfinancial
statements.Ourauditsalsoincludedevaluatingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,as
wellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.Webelievethatourauditsprovidea
reasonablebasisforouropinion.
Critical Audit Matter
Thecriticalauditmattercommunicatedbelowisamatterarisingfromthecurrentperiodauditoftheconsolidatedfinancial
statementsthatwascommunicatedorrequiredtobecommunicatedtotheauditcommitteeandthat:(1)relatestoaccountsor
disclosuresthatarematerialtotheconsolidatedfinancialstatementsand(2)involvedourespeciallychallenging,subjective,or
complexjudgment.Thecommunicationofacriticalauditmatterdoesnotalterinanywayouropinionontheconsolidated
financialstatements,takenasawhole,andwearenot,bycommunicatingthecriticalauditmatterbelow,providingaseparate
opiniononthecriticalauditmatterorontheaccountsordisclosurestowhichitrelates.
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69
Assessment of the carrying value of goodwill for the Motto reporting unit
Asdiscussedinnotes2and8totheconsolidatedfinancialstatements,thegoodwillbalanceasofDecember31,2019
was$159.0million,ofwhich$11.8millionrelatedtotheMottoreportingunit.TheMottoreportingunitincludesMotto
Franchising,amortgagebrokeragefranchisor.TheCompanyperformsgoodwillimpairmenttestingonanannualbasis
andwhenevereventsorchangesincircumstancesindicatethatthecarryingvalueofareportingunitmightexceeditsfair
value.
WeidentifiedtheassessmentofthecarryingvalueofgoodwillfortheMottoreportingunitasacriticalauditmatter.
AssessingtheestimatedfairvalueoftheMottoreportingunitrequiredtheapplicationofsubjectiveauditorjudgment.
Specifically,evaluatingcertainassumptions,suchasfranchisesalesforecastsandthediscountrate,usedtodetermine
thefairvalueofthereportingunitrequiredsubjectiveauditorjudgment.
Theprimaryproceduresweperformedtoaddressthiscriticalauditmatterincludedthefollowing.Wetestedcertain
internalcontrolsovertheCompany’sgoodwillimpairmentassessmentprocess,includingcontrolsrelatedtothe
determinationofthefairvalueofthereportingunit,therelatedfranchisesalesforecasts,andtheassumptionsusedto
developthediscountrate.WeevaluatedtheCompany’sforecastedfranchisesalesbycomparingthegrowthassumptions
tohistoricalfranchisesalesoftheCompany.WecomparedtheCompany’shistoricalfranchisesalesforecaststo
historicalactualresultstoassesstheCompany’sabilitytoaccuratelyforecastfranchisesales.Weinvolvedavaluation
professionalwithspecializedskillandknowledge,whoassistedin:
•EvaluatingtheCompany’sselecteddiscountratebasedonhistoricresults,franchisesalesforecasts,discount
ratesusedinpriorvaluationsofthereportingunit,anddiscountratesfrompubliclyavailableventurecapital
studies;and
•AssessingthevaluationmethodologyusedbytheCompanytoestimatethefairvalueoftheMottoreporting
unit.
/s/KPMGLLP
WehaveservedastheCompany’sauditorsince2003.
Denver,Colorado
February21,2020
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70
Report of Independent Registered Public Accounting Firm
TotheStockholdersandBoardofDirectors
RE/MAXHoldings,Inc.:
Opinion on Internal Control Over Financial Reporting
WehaveauditedRE/MAXHoldings,Inc.andsubsidiaries’(theCompany)internalcontroloverfinancialreportingasof
December31,2019,basedoncriteriaestablishedin Internal Control – Integrated Framework (2013)issuedbytheCommitteeof
SponsoringOrganizationsoftheTreadwayCommission.Inouropinion,theCompanymaintained,inallmaterialrespects,
effectiveinternalcontroloverfinancialreportingasofDecember31,2019,basedoncriteriaestablishedinInternal Control –
Integrated Framework (2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates)
(PCAOB),theconsolidatedbalancesheetsoftheCompanyasofDecember31,2019and2018,therelatedconsolidated
statementsofincome,comprehensiveincome,stockholders’equity,andcashflowsforeachoftheyearsinthethree-yearperiod
endedDecember31,2019,andtherelatednotes(collectively,theconsolidatedfinancialstatements),andourreportdated
February21,2020expressedanunqualifiedopiniononthoseconsolidatedfinancialstatements.
Basis for Opinion
TheCompany’smanagementisresponsibleformaintainingeffectiveinternalcontroloverfinancialreportingandforits
assessmentoftheeffectivenessofinternalcontroloverfinancialreporting,includedintheaccompanyingManagement’sReport
onInternalControlsoverFinancialReporting.OurresponsibilityistoexpressanopinionontheCompany’sinternalcontrolover
financialreportingbasedonouraudit.WeareapublicaccountingfirmregisteredwiththePCAOBandarerequiredtobe
independentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecuritieslawsandtheapplicablerulesand
regulationsoftheSecuritiesandExchangeCommissionandthePCAOB.
WeconductedourauditinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperformthe
audittoobtainreasonableassuranceaboutwhethereffectiveinternalcontroloverfinancialreportingwasmaintainedinall
materialrespects.Ourauditofinternalcontroloverfinancialreportingincludedobtaininganunderstandingofinternalcontrol
overfinancialreporting,assessingtheriskthatamaterialweaknessexists,andtestingandevaluatingthedesignandoperating
effectivenessofinternalcontrolbasedontheassessedrisk.Ourauditalsoincludedperformingsuchotherproceduresaswe
considerednecessaryinthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.
Definition and Limitations of Internal Control Over Financial Reporting
Acompany’sinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthe
reliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerally
acceptedaccountingprinciples.Acompany’sinternalcontroloverfinancialreportingincludesthosepoliciesandproceduresthat
(1)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsof
theassetsofthecompany;(2)providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationof
financialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatreceiptsandexpendituresofthe
companyarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsofthecompany;and(3)provide
reasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,use,ordispositionofthecompany’s
assetsthatcouldhaveamaterialeffectonthefinancialstatements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,
projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecome
TableofContents
71
inadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
/s/KPMGLLP
Denver,Colorado
February21,2020
TableofContents
72
RE/MAX HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
As of December 31,
2019 2018
Assets
Currentassets:
Cashandcashequivalents $ 83,001 $ 59,974
Restrictedcash 20,600 —
Accountsandnotesreceivable,currentportion,lessallowancesof$12,538and$7,980,respectively 28,644 21,185
Incometaxesreceivable 896 533
Othercurrentassets 9,638 5,855
Totalcurrentassets
142,779 87,547
Propertyandequipment,netofaccumulateddepreciationof$14,940and$13,280,respectively 5,444 4,390
Operatingleaserightofuseassets 51,129 —
Franchiseagreements,net 87,670 103,157
Otherintangibleassets,net 32,315 22,965
Goodwill 159,038 150,684
Deferredtaxassets,net 52,595 53,852
Incometaxesreceivable,netofcurrentportion 1,690 1,379
Otherassets,netofcurrentportion 9,692 4,399
Total assets
$ 542,352 $ 428,373
Liabilities and stockholders' equity
Currentliabilities:
Accountspayable $ 2,983 $ 1,890
Accruedliabilities 60,163 13,143
Incometaxespayable 6,854 208
Deferredrevenue 25,663 25,489
Currentportionofdebt 2,648 2,622
Currentportionofpayablepursuanttotaxreceivableagreements 3,583 3,567
Operatingleaseliabilities 5,102 —
Totalcurrentliabilities
106,996 46,919
Debt,netofcurrentportion 223,033 225,165
Payablepursuanttotaxreceivableagreements,netofcurrentportion 33,640 37,220
Deferredtaxliabilities,net 293 400
Incometaxespayable,netofcurrentportion — 5,794
Deferredrevenue,netofcurrentportion 18,763 20,224
Operatingleaseliabilities,netofcurrentportion 55,959 —
Otherliabilities,netofcurrentportion 5,292 17,637
Totalliabilities
443,976 353,359
Commitmentsandcontingencies(note15)
Stockholders'equity:
ClassAcommonstock,parvalue$.0001pershare,180,000,000sharesauthorized;17,838,233shares
issuedandoutstandingasofDecember31,2019;17,754,416sharesissuedandoutstandingasof
December31,2018 2 2
ClassBcommonstock,parvalue$.0001pershare,1,000sharesauthorized;1shareissuedandoutstanding
asofDecember31,2019andDecember31,2018 — —
Additionalpaid-incapital 466,945 460,101
Retainedearnings 30,525 20,559
Accumulatedothercomprehensiveincome,netoftax 414 328
Totalstockholders'equityattributabletoRE/MAXHoldings,Inc.
497,886 480,990
Non-controllinginterest (399,510) (405,976)
Totalstockholders'equity
98,376 75,014
Total liabilities and stockholders' equity
$ 542,352 $ 428,373
See accompanying notes to consolidated financial statements
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73
RE/MAX HOLDINGS, INC.
Consolidated Statements of Income
(In thousands, except share and per share amounts)
Year Ended December 31,
2019  2018  2017
Revenue:
Continuingfranchisefees $ 99,928 $ 101,104 $ 93,694
Annualdues 35,409 35,894 33,767
Brokerfees 45,990 46,871 43,801
MarketingFundsfees 72,299 — —
Franchisesalesandotherrevenue 28,667 28,757 22,452
Totalrevenue 282,293 212,626 193,714
Operatingexpenses:
Selling,operatingandadministrativeexpenses 118,890 120,179 106,946
MarketingFundsexpenses 72,299 — —
Depreciationandamortization 22,323 20,678 20,512
Lossonsaleordispositionofassets,net 342 63 660
Gainonreductionintaxreceivableagreementliability(note4) — (6,145) (32,736)
Totaloperatingexpenses 213,854 134,775 95,382
Operatingincome 68,439 77,851 98,332
Otherexpenses,net:
Interestexpense (12,229) (12,051) (9,996)
Interestincome 1,446 676 352
Foreigncurrencytransactiongains(losses) 109 (312) 174
Totalotherexpenses,net (10,674) (11,687) (9,470)
Incomebeforeprovisionforincometaxes 57,765 66,164 88,862
Provisionforincometaxes (10,909) (16,342) (57,542)
Netincome $ 46,856 $ 49,822 $ 31,320
Less:netincomeattributabletonon-controllinginterest(note4) 21,816 22,939 21,221
NetincomeattributabletoRE/MAXHoldings,Inc.
$ 25,040 $ 26,883 $ 10,099
NetincomeattributabletoRE/MAXHoldings,Inc.pershareofClassA
commonstock
Basic
$ 1.41 $ 1.52 $ 0.57
Diluted
$ 1.40 $ 1.51 $ 0.57
WeightedaveragesharesofClassAcommonstockoutstanding
Basic
17,812,065 17,737,649 17,688,533
Diluted
17,867,752 17,767,499 17,731,800
CashdividendsdeclaredpershareofClassAcommonstock $ 0.84 $ 0.80 $ 0.72
See accompanying notes to consolidated financial statements.
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74
RE/MAX HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
(In thousands)
Year Ended December 31,
2019 2018 2017
Netincome $ 46,856 $ 49,822 $ 31,320
Changeincumulativetranslationadjustment 166 (253) 1,037
Othercomprehensiveincome(loss),netoftax 166 (253) 1,037
Comprehensiveincome 47,022 49,569 32,357
Less:comprehensiveincomeattributabletonon-controllinginterest 21,896 22,817 21,752
ComprehensiveincomeattributabletoRE/MAXHoldings,Inc.,netoftax
$ 25,126 $ 26,752 $ 10,605
See accompanying notes to consolidated financial statements.
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RE/MAX HOLDINGS, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands, except unit and share amounts)
Accumulated other
Class A Class B Additional comprehensive Non- Total
common stock common stock paid-in Retained income (loss), controlling stockholders'
 Shares  Amount  Shares  Amount  capital  earnings  net of tax  interest  equity
Balances, January 1, 2017
17,652,548 $ 2 1 $ — $ 448,713 $ 10,676 $ (47) $ (418,729) $ 40,615
Netincome — — — — — 10,099 — 21,221 31,320
Distributionstonon-controllingunitholders — — — — — — — (17,257) (17,257)
Equity-basedcompensationexpenseandrelated
dividendequivalents 58,426 — — — 2,900 (53) — — 2,847
DividendstoClassAcommonstockholders — — — — — (12,740) — — (12,740)
Changeinaccumulatedothercomprehensiveincome — — — — — — 506 531 1,037
Payrolltaxesrelatedtonetsettledrestrictedstockunits (13,983) — — — (816) — — — (816)
Other — — — — 402 — — — 402
Balances, December 31, 2017
17,696,991 $ 2 1 $ — $ 451,199 $ 7,982 $ 459 $ (414,234) $ 45,408
Netincome — — — — — 26,883 — 22,939 49,822
Distributionstonon-controllingunitholders — — — — — — — (14,559) (14,559)
Equity-basedcompensationexpenseandrelated
dividendequivalents 73,462 — — — 9,314 (112) — — 9,202
DividendstoClassAcommonstockholders — — — — — (14,194) — — (14,194)
Changeinaccumulatedothercomprehensiveincome — — — — — — (131) (122) (253)
Payrolltaxesrelatedtonetsettledrestrictedstockunits (16,037) — — — (895) — — — (895)
Other — — — — 483 — — — 483
Balances, December 31, 2018
17,754,416 $ 2 1 $ — $ 460,101 $ 20,559 $ 328 $ (405,976) $ 75,014
Netincome — — — — — 25,040 — 21,816 46,856
Distributionstonon-controllingunitholders — — — — — — — (15,430) (15,430)
Equity-basedcompensationexpenseandrelated
dividendequivalents 106,390 — — — 7,375 (104) — — 7,271
DividendstoClassAcommonstockholders — — — — — (14,970) — — (14,970)
Changeinaccumulatedothercomprehensiveincome — — — — — — 86 80 166
Payrolltaxesrelatedtonetsettledrestrictedstockunits (22,573) — — — (1,110) — — — (1,110)
Other — — — — 579 — — — 579
Balances, December 31, 2019
17,838,233 $ 2 1 $ — $ 466,945 $ 30,525 $ 414 $ (399,510) $ 98,376
See accompanying notes to consolidated financial statements.
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RE/MAX HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2019 2018 2017
Cashflowsfromoperatingactivities:
Netincome $ 46,856 $ 49,822 $ 31,320
Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities:
Depreciationandamortization 22,323 20,678 20,512
Baddebtexpense 4,964 2,257 1,109
Loss(gain)onsaleordispositionofassetsandsublease,net 342 (139) 4,260
Equity-basedcompensationexpense 10,934 9,176 2,900
Deferredincometaxexpense 2,310 9,511 47,931
Fairvalueadjustmentstocontingentconsideration 241 (1,289) 180
Paymentspursuanttotaxreceivableagreements (3,556) (6,305) (13,371)
Non-cashchangeintaxreceivableagreementliability — (6,145) (32,736)
Other,net 910 1,127 1,146
Changesinoperatingassetsandliabilities
Accountsandnotesreceivable,currentportion (5,614) (3,241) (2,825)
Advancesfrom/toaffiliates — 581 (106)
Othercurrentandnoncurrentassets (6,084) 2,170 (2,724)
Othercurrentandnoncurrentliabilities 6,737 (3,466) 1,592
Incometaxesreceivable/payable 178 1,099 (605)
Deferredrevenue,currentandnoncurrent (1,566) 228 4,705
Netcashprovidedbyoperatingactivities
78,975 76,064 63,288
Cashflowsfrominvestingactivities:
Purchasesofproperty,equipmentandcapitalizationofsoftware (13,226) (7,787) (2,198)
Acquisitions,netofcashacquiredof$55,$362and$0,respectively (14,945) (25,888) (35,720)
RestrictedcashacquiredwiththeMarketingFundsacquisition 28,495 — —
Other (1,200) — —
Netcashusedininvestingactivities
(876) (33,675) (37,918)
Cashflowsfromfinancingactivities:
Paymentsondebt (2,622) (3,171) (2,366)
Distributionspaidtonon-controllingunitholders (15,430) (14,559) (17,260)
DividendsanddividendequivalentspaidtoClassAcommonstockholders (15,074) (14,306) (12,793)
Paymentofpayrolltaxesrelatedtonetsettledrestrictedstockunits (1,110) (895) (816)
Paymentofcontingentconsideration (306) (221) —
Netcashusedinfinancingactivities
(34,542) (33,152) (33,235)
Effectofexchangeratechangesoncash
70 (70) 1,063
Netincrease(decrease)incash,cashequivalentsandrestrictedcash
43,627 9,167 (6,802)
Cash,cashequivalentsandrestrictedcash,beginningofyear 59,974 50,807 57,609
Cash,cashequivalentsandrestrictedcash,endofperiod
$ 103,601 $ 59,974 $ 50,807
Supplementaldisclosuresofcashflowinformation:
Cashpaidforinterest $ 11,690 $ 11,525 $ 9,972
Netcashpaidforincometaxes $ 8,429 $ 5,769 $ 10,078
Scheduleofnon-cashinvestingactivities:
Increase(decrease)inaccountspayableandaccruedliabilitiesforpurchasesofproperty,equipmentand
capitalizationofsoftware $ (94) $ 1,080 $ 295
See accompanying notes to consolidated financial statements.
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1. Business and Organization
RE/MAXHoldings,Inc.(“Holdings”)completedaninitialpublicoffering(the“IPO”)ofitssharesofClassAcommonstockon
October7,2013.Holdings’onlybusinessistoactasthesolemanagerofRMCO,LLC(“RMCO”).AsofDecember31,2019,
Holdingsowns58.7%ofthecommonmembershipunitsinRMCO,whileRIHI,Inc.(“RIHI”)ownstheremaining41.3%.
Holdingsanditsconsolidatedsubsidiaries,includingRMCO,arereferredtohereinafterasthe“Company.”
TheCompanyisafranchisorintherealestateindustry,franchisingrealestatebrokeragesgloballyundertheRE/MAXbrand
(“RE/MAX”)andmortgagebrokerageswithintheUnitedStates(“U.S.”)undertheMottoMortgagebrand(“Motto”).RE/MAX,
foundedin1973,hasover130,000agentsoperatinginover8,000officesandapresenceinmorethan110countriesand
territories.Motto,foundedin2016,isthefirstnationallyfranchisedmortgagebrokerageintheU.S.During2018,theCompany
acquiredallmembershipinterestsinbooj,LLC,formerlyknownasActiveWebsite,LLC,(“booj”),arealestatetechnology
company.RE/MAXandMottoare100%franchisedanddonotoperateanyrealestateormortgagebrokerageoffices.
Holdings Capital Structure
Holdingshastwoclassesofcommonstock,ClassAcommonstockandClassBcommonstock:
Class A common stock
HoldersofsharesofClassAcommonstockareentitledtoonevoteforeachshareheldofrecordonallmatterssubmittedtoa
voteofstockholders.Additionally,holdersofsharesofClassAcommonstockareentitledtoreceivedividendswhenandif
declaredbytheCompany’sBoardofDirectors,subjecttoanystatutoryorcontractualrestrictionsonthepaymentofdividends.
HoldersofsharesofClassAcommonstockdonothavepreemptive,subscription,redemptionorconversionrights.
Class B common stock
RIHIisthesoleholderofClassBcommonstockandiscontrolledbyDavidLiniger,theCompany’sChairmanandCo-Founder,
andGailLiniger,theCompany’sViceChairandCo-Founder.OnOctober7,2018,pursuanttothetermsoftheCompany’s
CertificateofIncorporation,RIHIlostitspreviouseffectivecontrolofamajorityofthevotingpowerofHoldingscommonstock.
RIHIownsallHoldings’ClassBcommonstockwhich,priortoOctober7,2018,entitledRIHItoanumberofvotesonmatters
presentedtoHoldingsstockholdersequaltotwotimesthenumberofRMCOcommonunitsthatRIHIheld.EffectiveOctober7,
2018,thevotingpowerofClassBcommonstockwasreducedtoequalthenumberofRMCOcommonunitsheld,andtherefore
RIHIlostthecontrollingvoteofHoldings.AsaresultofthischangeinthevotingrightsoftheClassBcommonstock,RIHIno
longercontrolsamajorityofthevotingpowerofHoldings’commonstock,andHoldingsisnolongerconsidereda“controlled
company”underthecorporategovernancestandardsoftheNewYorkStockExchange(the“NYSE”).
HoldersofsharesofClassBcommonstockdonothavepreemptive,subscription,redemptionorconversionrights.
HoldersofsharesofClassAcommonstockandClassBcommonstockvotetogetherasasingleclassonallmatterspresentedto
theCompany’sstockholdersfortheirvoteorapproval,exceptasotherwiserequiredbyapplicablelaw.
2. Summary of Significant Accounting Policies
Basis of Presentation
Theaccompanyingconsolidatedfinancialstatements(“financialstatements”)andnotestheretoincludedinthisAnnualReporton
Form10-KhavebeenpreparedinaccordancewithU.S.generallyacceptedaccountingprinciples(“U.S.GAAP”).The
accompanyingfinancialstatementsincludetheaccountsofHoldingsanditsconsolidatedsubsidiaries.Allsignificant
intercompanyaccountsandtransactionshavebeeneliminated.Intheopinionofmanagement,theaccompanyingfinancial
statementsreflectallnormalandrecurringadjustmentsnecessarytopresentfairlythe
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Company’sfinancialpositionasofDecember31,2019and2018,theresultsofitsoperationsandcomprehensiveincome,
changesinitsstockholders’equityanditscashflowsfortheyearsendedDecember31,2019,2018and2017.
OnJanuary1,2019theCompanyacquiredalloftheregionalandpan-regionaladvertisingfundentitiespreviouslyownedbyits
founderandChairmanoftheBoardofDirectors,DavidLiniger,foranominalamount.During2018,theCompanycompletedthe
acquisitionofbooj,andduring2017theCompanycompletedtheacquisitionofanindependentregion.Theirresultsof
operations,cashflowsandfinancialpositionsareincludedinthefinancialstatementsfromtheirrespectivedatesofacquisition.
SeeNote6,Acquisitions foradditionalinformation.
Use of Estimates
ThepreparationoftheaccompanyingfinancialstatementsinconformitywithU.S.GAAPrequiresmanagementtomake
estimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesandthedisclosureofcontingentliabilitiesat
thedateofthefinancialstatementsandthereportedamountsofrevenueandexpensesduringthereportingperiod.Actualresults
coulddifferfromthoseestimates.
Reclassifications
CertainitemsintheConsolidatedStatementofCashFlowshavebeenreclassifiedintheyearsendedDecember31,2018and
2017toconformwiththecurrentyearpresentation.
Segment Reporting
TheCompanyoperatesunderthefollowingsegments:
● RE/MAXFranchising–comprisestheoperationsoftheCompany’sownedandindependentglobalfranchising
operationsundertheRE/MAXbrandnameandcorporate-widesharedservicesexpenses.
● MottoFranchising–comprisestheoperationsoftheCompany’smortgagebrokerfranchisingoperationsunderthe
MottoMortgagebrandnameanddoesnotincludeanychargesrelatedtothecorporate-widesharedservicesexpenses.
● MarketingFunds–comprisestheoperationsoftheCompany’smarketingcampaignsdesignedtobuildandmaintain
brandawarenessandthedevelopmentandoperationofagentmarketingtechnology.
● Other–comprisesthelegacyoperationsofbooj(seeNote6,Acquisitions foradditionalinformation),which,dueto
quantitativeinsignificance,donotmeetthecriteriaofareportablesegment.
SeeNote18Segment Informationforadditionalinformationaboutsegmentreporting.
Principles of Consolidation
HoldingsconsolidatesRMCOandrecordsanon-controllinginterestintheaccompanyingConsolidatedBalanceSheetsand
recordsnetincomeattributabletothenon-controllinginterestandcomprehensiveincomeattributabletothenon-controlling
interestintheaccompanyingConsolidatedStatementsofIncomeandConsolidatedStatementsofComprehensiveIncome,
respectively.
Revenue Recognition
TheCompanygeneratesthesubstantialmajorityofitsrevenuefromcontractswithcustomers.TheCompany’sfranchise
agreementsofferthefollowingbenefitstothefranchisee:commonuseandpromotionofRE/MAXandMottotrademarks;
distinctivesalesandpromotionalmaterials;accesstotechnology;marketingtoolsandtraining;standardizedsuppliesandother
materialsusedinRE/MAXandMottooffices;andrecommendedproceduresforoperationofRE/MAXandMottooffices.The
Companyconcludedthatthesebenefitsarehighlyrelatedandallapartofoneperformanceobligationforeachfranchise
agreement,alicenseofsymbolicintellectualpropertythatisbilledthroughavarietyoffeesincludingcontinuingfranchisefees,
annualdues,brokerfees,marketingfundsfeesandfranchisesales,describedbelow.TheCompanyhasotherperformance
obligationsassociatedwithcontractswithcustomersinother
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79
revenuefortraining,marketingandevents,andlegacyboojcustomers.Themethodusedtomeasureprogressisoverthepassage
oftimeformoststreamsofrevenue.ThefollowingisadescriptionofprincipalactivitiesfromwhichtheCompanygeneratesits
revenue.
Continuing Franchise Fees
Continuingfranchisefeesarefixedcontractualfeespaidmonthly(a)byregionalfranchiseownersinIndependentRegionsor
franchiseesinCompany-ownedRegionsbasedonthenumberofRE/MAXagentsintherespectivefranchisedregionorofficeor
(b)byMottofranchiseesbasedonthenumberofofficesopen.MottoofficesreachthefullmonthlybillingoncetheMottooffice
hasbeenopenfor12to14months.Thisrevenueisrecognizedinthemonthforwhichthefeeisbilled.Thisrevenueisausage-
basedroyaltyasitisdependentonthenumberofRE/MAXagentsornumberofMottooffices.
Annual Dues
AnnualduesareafixedmembershipfeepaidannuallybyRE/MAXagentsdirectlytotheCompanytobeapartoftheRE/MAX
networkandusetheRE/MAXbrand.Annualduesareaflatfeeperagent.TheCompanydeferstheannualduesrevenuewhen
billedandrecognizestherevenueratablyoverthe12-monthperiodtowhichitrelates.Annualduesrevenueisausage-based
royaltyasitisdependentonthenumberofRE/MAXagents.
TheactivityintheCompany’sdeferredrevenueforannualduesisincludedin“Deferredrevenue”and“Deferredrevenue,netof
currentportion”ontheConsolidatedBalanceSheets,andconsistsofthefollowinginaggregate(inthousands):

Balance at
beginning of period  New billings  Revenue recognized
(a)

Balance at end
of period
YearendedDecember31,2019
$ 15,877 $ 35,514 $ (35,409) $ 15,982
(a) Revenuerecognizedrelatedtothebeginningbalancewas$14.4millionfortheyearendedDecember31,2019.
(b)
Broker Fees
BrokerfeesareassessedagainstrealestatecommissionspaidbycustomerswhenaRE/MAXagentsellsahome.Generally,the
amountpaidis1%ofthetotalcommissiononthetransaction,althoughinIndependentRegionsinCanadaitisnotcharged.
Additionally,agentsinCompany-ownedRegionsexistingpriorto2004,theyeartheCompanybeganassessingbrokerfees,are
generally“grandfathered”andcontinuetobeexemptfrompayingabrokerfee.AsofDecember31,2019,grandfatheredagents
representedapproximately17%oftotalagentsinU.S.Company-ownedRegions.Revenuefrombrokerfeesisrecognizedasa
sales-basedroyaltyandrecognizedinthemonthwhenahomesaletransactionoccurs.Mottofranchiseesdonotpayanyfees
basedonthenumberordollarvalueofloansbrokered.
Marketing Funds Fees
MarketingFundsfeesarefixedcontractualfeespaidmonthlybyfranchiseesbasedonthenumberofRE/MAXagentsinthe
respectivefranchisedregionorofficeorthenumberofMottooffices.Theserevenuesareobligatedtobeusedformarketing
campaignstobuildbrandawarenessandtosupportagentmarketingtechnology.AmountsreceivedintotheMarketingFundsare
recognizedasrevenueinthemonthforwhichthefeeisbilled.Thisrevenueisausage-basedroyaltyasitisdependentonthe
numberofRE/MAXagentsornumberofMottooffices.
AllassetsoftheMarketingFundsarecontractuallyrestrictedforthebenefitoffranchisees,andtheCompanyrecognizesanequal
andoffsettingliabilityontheCompany’sbalancesheetforallamountsreceived.Additionally,thisresultsinrecordinganequal
andoffsettingamountofexpensesagainstallrevenuessuchthatthereisnoimpacttooverallprofitabilityoftheCompanyfrom
theserevenues.
Franchise Sales
Franchisesalescomprisesrevenuefromthesaleorrenewaloffranchises.Afeeischargeduponafranchisesaleorrenewal.
Thosefeesaredeemedtobeapartofthelicenseofsymbolicintellectualpropertyandarerecognizedas
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revenueoverthecontractualtermofthefranchiseagreement,whichistypically5yearsforRE/MAXand7yearsforMotto
franchiseagreements.TheactivityintheCompany’sfranchisesalesdeferredrevenueaccountsconsistsofthefollowing(in
thousands):

Balance at
beginning of period  New billings  Revenue recognized
(a)

Balance at end
of period
YearendedDecember31,2019
$ 27,560 $ 7,750 $ (9,426) $ 25,884
(a) Revenuerecognizedrelatedtothebeginningbalancewas$8.4millionfortheyearendedDecember31,2019.
Commissions Related to Franchise Sales
Commissionspaidonfranchisesalesarerecognizedasanassetandamortizedoverthecontractlifeofthefranchiseagreement.
TheactivityintheCompany’scapitalizedcontractcostsforcommissions(whichareincludedin“othercurrentassets”and“other
assets,netofcurrentportion”ontheConsolidatedBalanceSheets)consistofthefollowing(inthousands):
Balance at Expense Additions to contract Balance at end
 beginning of period  recognized  cost for new activity  of period
YearendedDecember31,2019
$ 3,748 $ (1,290) $ 1,120 $ 3,578
Other Revenue
Otherrevenueisprimarilyrevenuefrompreferredmarketingarrangementsandevent-basedrevenuefromtrainingandother
programs.Revenuefrompreferredmarketingarrangementsinvolvesbothflatfeespaidinadvanceaswellasrevenuesharing,
bothofwhicharegenerallyrecognizedovertheperiodofthearrangementandarerecordednetastheCompanydoesnotcontrol
thegoodorserviceprovided.Event-basedrevenueisrecognizedwhentheeventoccursanduntilthenamountscollectedare
includedin“Deferredrevenue”.Otherrevenuealsoincludesrevenuefrombooj’slegacyoperationsforitsexternalcustomersas
boojcontinuestoprovidetechnologyproductsandservices,suchaswebsites,mobileapps,reportingandwebsitetools,toits
legacycustomersandtechnologysubscriptionrevenuesuchasfortheFirstapp.
Disaggregated Revenue
Inthefollowingtable,segmentrevenueisdisaggregatedbygeographicalarea(inthousands):
Year Ended December 31,
2019 2018 2017
U.S.
$ 164,867 $ 170,496 $ 160,538
Canada 23,024 23,771 23,189
Global 11,745 10,237 9,431
TotalRE/MAXFranchising
199,636 204,504 193,158
U.S. 64,906 — —
Canada 6,559 — —
Global 834 — —
TotalMarketingFunds
72,299 — —
MottoFranchising
(a)
4,542 2,536 556
Other 5,816 5,586 —
Total
$ 282,293 212,626 193,714
(a) RevenuefromtheMottoFranchisingsegmentisderivedexclusivelywithintheU.S.
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81
Inthefollowingtable,segmentrevenueisdisaggregatedbyCompany-ownedorIndependentRegionsintheU.S.,Canadaand
Global(inthousands):
Year Ended December 31,
2019 2018 2017
Company-ownedRegions
$ 128,972 $ 133,925 $ 125,092
IndependentRegions 44,686 46,289 44,799
GlobalandOther 25,978 24,290 23,267
TotalRE/MAXFranchising
199,636 204,504 193,158
MarketingFunds 72,299 — —
MottoFranchising 4,542 2,536 556
Other 5,816 5,586 —
Total
$ 282,293 $ 212,626 $ 193,714
Transaction Price Allocated to the Remaining Performance Obligations
Thefollowingtableincludesestimatedrevenuebyyear,excludingcertainotherimmaterialitems,expectedtoberecognizedin
thefuturerelatedtoperformanceobligationsthatareunsatisfied(orpartiallyunsatisfied)attheendofthereportingperiod(in
thousands):
2020 2021 2022 2023 2024 Thereafter Total
Annualdues $ 15,982 $ — $ — $ — $ — $ — $ 15,982
Franchisesales 7,141 5,801 4,368 2,881 1,589 4,104 25,884
Total
$ 23,123 $ 5,801 $ 4,368 $ 2,881 $ 1,589 $ 4,104 $ 41,866
Cash, Cash Equivalents and Restricted Cash
AllcashheldbytheMarketingFundsiscontractuallyrestricted.Thefollowingtablereconcilestheamountspresentedforcash,
bothunrestrictedandrestricted,intheConsolidatedBalanceSheetstotheamountspresentedintheConsolidatedStatementsof
CashFlows(inthousands):
As of December 31,
 2019 2018
Cashandcashequivalents
$ 83,001 $ 59,974
Restrictedcash 20,600 —
Totalcash,cashequivalentsandrestrictedcash
$ 103,601 $ 59,974
Services Provided to the Marketing Funds by RE/MAX Franchising
RE/MAXFranchisingchargestheMarketingFundsforvariousservicesitperforms.Theseservicesareprimarilycomprisedof
(a)providingagentmarketingtechnology,includingcustomerrelationshipmanagementtools,thewww.remax.comwebsite,
agentandofficewebsites,andmobileapps,(b)dedicatedemployeesfocusedonmarketingcampaigns,and(c)various
administrativeservicesincludingaccountingandlegal.BecausethesecostsareultimatelypaidbytheMarketingFunds,theydo
notimpactthenetincomeofHoldingsastheMarketingFundshavenoreportednetincome.
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CostschargedfromRE/MAXFranchisingtotheMarketingFundsareasfollows(inthousands):
Year Ended
December 31, 2019
Technologydevelopment-operating $ 6,244
Technologydevelopment-capital 5,095
Marketingstaffandadministrativeservices
(a)
3,763
Total
$ 15,102
(a) CostschargedtotheMarketingFundsfortheyearsendedDecember31,2018and2017,whiletheMarketingFundswerea
relatedparty,were$3.8millionand$3.4million,respectively.
PriortoJanuary1,2019,theMarketingFundswerenotownedbytheCompany(seeNote6Acquisitions).Duringthattime,the
Marketingfundsstillincurredsignificanttechnologycosts,however,theseserviceswereprovidedbyandpaiddirectlytothird
partiesandwerenotprovidedbytheCompany.In2019,RE/MAXFranchising(throughtheboojtechnologyteam)began
providingtheseservicesasnotedabove.
Selling, Operating and Administrative Expenses
Selling,operatingandadministrativeexpensesprimarilyconsistofpersonnelcosts,includingsalaries,benefits,payrolltaxesand
othercompensationexpenses,professionalfees,leasecosts,aswellasexpensesformarketingtocustomers,toexpandthe
Company’sfranchisesandoutsourcedtechnologyservices.
Fair Value of Financial Instruments
Thecarryingamountsoffinancialinstruments,netofanyallowances,includingcashequivalents,accountsandnotesreceivable,
accountspayableandaccruedexpensesapproximatefairvalueduetotheirshort-termnature.
Accounts and Notes Receivable
Accountsreceivablearisingfrommonthlybillingsdonotbearinterest.TheCompanyprovideslimitedfinancingofcertain
franchisesalesthroughtheissuanceofnotesreceivablewiththeassociatedinterestrecordedin“Interestincome”inthe
accompanyingConsolidatedStatementsofIncome.Amountscollectedonnotesreceivableareincludedin“Netcashprovidedby
operatingactivities”intheaccompanyingConsolidatedStatementsofCashFlows.
TheCompanyrecordsallowancesagainstitsaccountsandnotesreceivablebalancesforestimatedprobablelosses.Increasesand
decreasesintheallowancefordoubtfulaccountsareestablishedbaseduponchangesinthecreditqualityofreceivablesandare
includedasacomponentof“Selling,operatingandadministrativeexpenses”intheaccompanyingConsolidatedStatementsof
Income.Theallowancefordoubtfulaccountsandnotesisbasedonhistoricalexperience,generaleconomicconditions,andthe
creditqualityofspecificaccounts.
TheactivityintheCompany’sallowancesagainstaccountsandnotesreceivableconsistsofthefollowing(inthousands):
Balance at
beginning of
period
Additions/charges to
cost and expense for
allowances for doubtful
accounts
(a)
Deductions/write-
offs
Balance at end of
period
YearEndedDecember31,2019 $ 7,980 $ 4,964 $ (406) $ 12,538
YearEndedDecember31,2018  $ 7,223 $ 2,257 $ (1,500) $ 7,980
YearEndedDecember31,2017 $ 6,458 $ 1,109 $ (344) $ 7,223
(a)FortheyearendedDecember31,2019,$1.5millionofexpensewasattributabletotheacquiredMarketingFunds.
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83
Accumulated Other Comprehensive Income (Loss) and Foreign Currency Translation
Accumulatedothercomprehensiveincome(loss)includesallchangesinequityduringaperiodthathaveyettoberecognizedin
income,exceptthoseresultingfromtransactionswithstockholdersandiscomprisedofforeigncurrencytranslationadjustments.
AsofDecember31,2019,theCompany,directlyandthroughitsfranchisees,conductedoperationsinover110countriesand
territories,includingtheU.S.andCanada.ThefunctionalcurrencyfortheCompany’soperationsistheU.S.dollar,exceptforits
CanadiansubsidiarywhichistheCanadianDollar.
AssetsandliabilitiesoftheCanadiansubsidiaryaretranslatedatthespotrateineffectattheapplicablereportingdate,andthe
consolidatedstatementsofincomeandcashflowsaretranslatedattheaverageexchangeratesineffectduringtheapplicable
period.ExchangeratefluctuationsontranslatingconsolidatedforeigncurrencyfinancialstatementsintoU.S.dollarsthatresultin
unrealizedgainsorlossesarereferredtoastranslationadjustments.Cumulativetranslationadjustmentsarerecordedasa
componentof“Accumulatedothercomprehensiveincome,”andperiodicchangesareincludedincomprehensiveincome.When
theCompanysellsapartorallofitsinvestmentinaforeignentityresultinginthecompleteorsubstantiallycompleteliquidation
oftheforeignentityinwhichthesubsidiaryorgroupofassetshadresided,itreleasesanyrelatedcumulativetranslation
adjustmentintonetincome.
ForeigncurrencydenominatedmonetaryassetsandliabilitiesandtransactionsoccurringincurrenciesotherthantheCompany’s
ortheCompany’sconsolidatedforeignsubsidiaries’functionalcurrenciesarerecordedbasedonexchangeratesatthetimesuch
transactionsarise.ChangesinexchangerateswithrespecttoamountsrecordedintheaccompanyingConsolidatedBalanceSheets
relatedtothesenon-functionalcurrencytransactionsresultintransactiongainsandlossesthatarereflectedintheaccompanying
ConsolidatedStatementsofIncomeas“Foreigncurrencytransaction(losses)gains.”
Property and Equipment
Propertyandequipment,includingleaseholdimprovements,areinitiallyrecordedatcost.Depreciationisprovidedforona
straight-linemethodovertheestimatedusefullivesofeachassetclassandcommenceswhenthepropertyisplacedinservice.
Amortizationofleaseholdimprovementsisprovidedforonastraight-linemethodovertheestimatedbenefitperiodoftherelated
assetsortheleaseterm,ifshorter.
Franchise Agreements and Other Intangible Assets
TheCompany’sfranchiseagreementsresultfromfranchiserightsacquiredfromIndependentRegionacquisitionsandareinitially
recordedatfairvalue.TheCompanyamortizesthefranchiseagreementsovertheirestimatedusefullifeonastraight-linebasis.
TheCompanyalsopurchasesanddevelopssoftwareforinternaluse.Softwaredevelopmentcostsandupgradeandenhancement
costsincurredduringtheapplicationdevelopmentstagethatresultinadditionalfunctionalityarecapitalized.Costsincurred
duringthepreliminaryprojectandpost-implementation-operationstagesareexpensedasincurred.Capitalizedsoftwarecostsare
generallyamortizedoveratermoftwotofiveyears.Purchasedsoftwarelicensesareamortizedovertheirestimatedusefullives.
Inaddition,theCompanyownstheprincipaltrademarks,servicemarksandtradenamesthatitusesinconjunctionwithoperating
itsbusiness.TheseintangibleassetsincreasewhentheCompanypaystofiletrademarkapplicationsintheU.S.andcertainother
jurisdictionsglobally.TheCompany’strademarksareamortizedonastraight-linebasisovertheirestimatedusefullives.
TheCompanyreviewsitsfranchiseagreementsandotherintangibleassetssubjecttoamortizationforimpairmentwhenever
eventsorchangesincircumstancesindicatethatthecarryingamountofanassetmaynotberecoverable.Recoverabilityofassets
tobeheldandusedisassessedbyacomparisonofthecarryingamountofanassetgrouptoestimatedundiscountedfuturecash
flowsexpectedtobegeneratedfromsuchasset.Ifnotrecoverable,theexcessofthecarryingamountofanassetoverits
estimateddiscountedcashflowswouldbechargedtooperationsasanimpairmentloss.Foreachoftheyearsended
December31,2019,2018and2017,therewerenomaterialimpairmentsindicatedforsuchassets.
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Goodwill
Goodwillisanassetrepresentingthefutureeconomicbenefitsarisingfromtheotherassetsacquiredinabusinesscombination
thatarenotindividuallyidentifiedandseparatelyrecognized.TheCompanyassessesgoodwillforimpairmentatleastannuallyat
thereportingunitlevelorwheneveraneventoccursthatwouldindicateimpairmentmayhaveoccurred.Reportingunitsare
drivenbythelevelatwhichsegmentmanagementreviewsoperatingresults.TheCompanyperformsitsrequiredimpairment
testingannuallyonOctober1.
TheCompany’simpairmentassessmentbeginswithaqualitativeassessmenttodetermineifitismorelikelythannotthata
reportingunit’sfairvalueislessthanthecarryingamount.Theinitialqualitativeassessmentincludescomparingtheoverall
financialperformanceofthereportingunitsagainsttheplannedresultsaswellasotherfactorswhichmightindicatethatthe
reportingunit’svaluehasdeclinedsincethelastassessmentdate.Ifitisdeterminedinthequalitativeassessmentthatitismore
likelythannotthatthefairvalueofareportingunitislessthanitscarryingvalue,thenthestandardtwo-stepquantitative
impairmenttestisperformed.Theimpairmenttestconsistsofcomparingtheestimatedfairvalueofeachreportingunitwithits
carryingamount,includinggoodwill.Thefairvalueofareportingunitisdeterminedbyforecastingresults,suchasfranchise
salesforMotto,andapplyingandassumeddiscountratetodeterminefairvalueasofthetestdate.Iftheestimatedfairvalueofa
reportingunitexceedsitscarryingvalue,thenitisnotconsideredimpairedandnofurtheranalysisisrequired.Goodwill
impairmentexistswhentheestimatedimpliedfairvalueofareportingunit’sgoodwillislessthanitscarryingvalue.
TheCompanydidnotrecordanygoodwillimpairmentsduringtheyearsendedDecember31,2019,2018and2017.
Income Taxes
TheCompanyaccountsforincometaxesundertheassetandliabilitymethod.Deferredtaxassetsandliabilitiesarerecognized
forthefuturetaxconsequencesattributabletodifferencesbetweenthefinancialstatementcarryingamountsofexistingassetsand
liabilitiesandtheirrespectivetaxbasis.Managementperiodicallyassessestherecoverabilityofitsdeferredtaxassetsbasedupon
expectedfutureearnings,futuredeductibilityoftheassetandchangesinapplicabletaxlawsandotherfactors.Ifmanagement
determinesthatitisnotlikelythatthedeferredtaxassetwillbefullyrecoverableinthefuture,avaluationallowancemaybe
establishedforthedifferencebetweentheassetbalanceandtheamountexpectedtoberecoverableinthefuture.Theallowance
willresultinachargetotheCompany’sConsolidatedStatementsofIncome.
RMCOcomplieswiththerequirementsoftheInternalRevenueCodethatareapplicabletolimitedliabilitycompaniesthathave
electedtobetreatedaspartnerships,whichallowforthecompletepass-throughoftaxableincomeorlossestoRMCO’s
unitholders,whoareindividuallyresponsibleforanyfederaltaxconsequences.TheshareofU.S.incomeallocabletoHoldings
resultsinaprovisionforincometaxesforthefederalandstatetaxesonthatportionofincome.TheshareofU.S.income
allocabletoRIHIdoesnotresultinaprovisionforincometaxesforfederalandstatetaxesgivenHoldingsdoesnotconsolidate
RIHI.RMCOissubjecttocertainglobalwithholdingtaxes,whichareultimatelyallocatedtobothHoldingsandRIHIsincethey
arepaidbyRMCO.
TheCompanyrecognizestheeffectofincometaxpositionsonlyifthosepositionsaremorelikelythannotofbeingsustained.
Recognizedincometaxpositionsaremeasuredatthelargestamountthatisgreaterthan50%likelyofbeingrealized.Changesin
recognitionormeasurementarereflectedintheperiodinwhichthechangeinjudgmentoccurs.
Equity-Based Compensation
TheCompanyrecognizescompensationexpenseassociatedwithequity-basedcompensationasacomponentof“Selling,
operatingandadministrativeexpenses”intheaccompanyingConsolidatedStatementsofIncome.Allequity-basedcompensation
isrequiredtobemeasuredatfairvalueonthegrantdate,isexpensedovertherequisiteservice,generallyoverathree-year
period,andforfeituresareaccountedforastheyoccur.TheCompanyrecognizescompensationexpenseonawardsonastraight-
linebasisovertherequisiteserviceperiodfortheentireaward.RefertoNote13,Equity-Based Compensation foradditional
discussionregardingdetailsoftheCompany’sequity-basedcompensationplans.
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85
Recently Adopted Accounting Pronouncements
InFebruary2018,theFinancialAccountingStandardsBoard(“FASB”)issuedAccountingStandardsUpdate(“ASU”)2018-02,
Income Statement – Reporting Comprehensive Income (Topic 220),whichadjuststheclassificationofstrandedtaxeffects
resultingfromtheTaxCutsandJobsActfromaccumulatedothercomprehensiveincometoretainedearnings.ASU2018-02
becameeffectivefortheCompanyonJanuary1,2019.Thestandardistobeappliedeitherintheperiodofadoptionor
retrospectivelytoeachperiodaffectedbytheTaxCutsandJobsAct.TheCompanycompletedthemajorityofitsaccountingfor
thetaxeffectsoftheTaxCutsandJobsActasofDecember31,2017.TheamendmentsofASU2018-02didnothavea
significantimpactontheCompany’sconsolidatedfinancialstatementsandrelateddisclosures.
InFebruary2016,theFASBissuedASU2016-02,Leases (Topic 842),withseveralsubsequentamendments,whichrequires
lesseestorecognizetheassetsandliabilitiesthatarisefromoperatingandfinanceleasesontheconsolidatedbalancesheets,with
afewexceptions.ASU2016-02becameeffectivefortheCompanyonJanuary1,2019andreplacedtheexistingleaseguidance
inU.S.GAAPwhenitbecameeffective.TheCompanydidnotretrospectivelyrecastpriorperiodspresentedandinsteadadjusted
assetsandliabilitiesonJanuary1,2019.Inaddition,theCompanyelectedthepackageofpracticalexpedientspermittedunder
thetransitionguidance,whichallowedtheCompanytoforgoreassessing(a)whetheracontractcontainsalease,(b)lease
classification,and(c)whethercapitalizedcostsassociatedwithaleaseareinitialdirectcosts.Thepracticalexpedientwasapplied
consistentlytoalltheCompany’sleases,includingthoseforwhichtheCompanyactsasthelessor.Inaddition,theCompany
electedthepracticalexpedientrelatingtothecombinationofleaseandnon-leasecomponentsasasingleleasecomponent.The
Companychosenottoapplythehindsightpracticalexpedient.ThenewleaseguidancehasbeenappliedtoalltheCompany’s
leasesasofJanuary1,2019,whichimpactedhowoperatingleaseassetsandliabilitieswererecordedwithintheConsolidated
BalanceSheet,resultingintherecordingofapproximately$65.8millionofleaseliabilitiesandapproximately$55.6millionof
right-of-use(“ROU”)assetsontheConsolidatedBalanceSheet.DeferredrentandsubleaselossbalancesasofJanuary1,2019of
approximately$9.3millionandapproximately$2.4million,respectively,andintangibleassetsofapproximately$1.5million
weresubsumedintotheROUassetattransition.AdoptionofthenewstandarddidnotmateriallyaffecttheCompany’s
consolidatednetearningsandhadnoimpactoncashflows.SeeNote3,Leases,formoreinformation.
InJanuary2017,theFASBissuedASU2017-04,Intangibles – Goodwill and Other (Topic 350),whichsimplifiesthesubsequent
measurementofgoodwillbyeliminatingsteptwofromthegoodwillimpairmenttest.TheCompanyearlyadoptedASU2017-04
anditwaseffectiveforannualandinterimimpairmenttestsbeginningJanuary1,2019usingaprospectiveapproach.The
adoptionofthisstandardhadnoimpactontheCompany’sfinancialstatementsandrelateddisclosures.
New Accounting Pronouncements Not Yet Adopted
InAugust2018,theFASBissuedASU2018-15,Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which
clarifiesthatimplementationcostsincurredbycustomersincloudcomputingarrangementsaredeferrediftheywouldbe
capitalizedbycustomersinthesoftwarelicensingarrangementsundertheinternal-usesoftwareguidance.ASU2018-15also
clarifiesthatanycapitalizedcostsshouldnotberecordedto“Depreciationandamortization”intheConsolidatedStatementsof
Income.ASU2018-15iseffectivefortheCompanybeginningJanuary1,2020andprovidesforthealternativetoadopttheASU
(a)prospectivelyonlyfornewcostsincurredaftertheadoptiondateor(b)byadjustingexistingcoststocomplywiththis
standard,includingtherequirementtopresenttheamortizationofcostsoutside“Depreciationandamortization”.TheCompany
planstoadoptthisASUprospectivelytoallnewimplementationcostsincurredafteradoption.Giventhisimplementation
approach,theadoptionofthestandardonJanuary1,2020willhavenoimmediateimpact.
InAugust2018,theFASBissuedASU2018-13,Fair Value Measurement (Topic 820),whicheliminatescertaindisclosure
requirementsforfairvaluemeasurementsandrequiresnewormodifieddisclosures.ASU2018-13iseffectivefortheCompany
beginningJanuary1,2020;earlyadoptionispermitted.Certainchangesareappliedretrospectivelytoeachperiodpresentedand
othersaretobeappliedeitherintheperiodofadoptionorprospectively.TheCompanybelievestheamendmentsofASU2018-
13willnothaveasignificantimpactontheCompany’sfinancialstatementsandrelateddisclosures.
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86
3. Leases
TheCompanyleasescorporateoffices,adistributioncenter,billboardsandcertainequipment.Asallfranchiseesare
independentlyownedandoperated,therearenoleasesrecognizedforanyofficesusedbytheCompany’sfranchisees.Theleases
haveremainingleasetermsrangingfromlessthanayearupto14,someofwhichincludeoneormoreoptionstorenew,with
renewaltermsthatcanextendtheleasetermfromoneto20yearsdependingonthelease.Oftheserenewaloptions,theCompany
determinedthatnonearereasonablycertaintobeexercised.AlltheCompany’smaterialleasesareclassifiedasoperatingleases.
TheCompanyhasaleaseforitscorporateheadquartersofficebuilding(the“MasterLease”)thatexpiresin2028.TheCompany
may,atitsoption,extendtheMasterLeasefortworenewalperiodsof10years.UnderthetermsoftheMasterLease,the
Companypaysanannualbaserent,whichescalates3%eachyear,includingthefirstoptionalrenewalperiod.Thesecond
optionalrenewalperiodresetstofairmarketrentalvalue,andtherentescalates3%eachyearuntilexpiration.TheCompanypays
forinsurance,propertytaxesandoperatingexpensesoftheleasedspace.TheMasterLeaseistheCompany’sonlysignificant
lease.
TheCompanyactsasthelessorforfoursubleaseagreementsonitscorporateheadquarters,consistingsolelyofoperatingleases,
eachofwhichincludearenewaloptionforthelesseetoextendthelengthofthelease.Renewaloptionsfortwoofthesublease
agreementsarecontingentuponrenewalofthecorporateheadquarterslease,whichisnotreasonablycertaintobeexercisedin
2028.Assuch,theCompanydeterminedthesesubleaserenewaloptionsarenotreasonablycertaintobeexercised.Renewal
optionsfortheremainingtwosubleaseagreementshavealreadybeenexercisedandwillexpirebeforetheendofthecorporate
headquartersleasein2028.
TheCompanyhasmadeanaccountingpolicyelectionnottorecognizeright-of-useassetsandleaseliabilitiesthatarisefromany
ofitsshort-termleases.Allleaseswithatermof12monthsorlessatcommencement,forwhichtheCompanyisnotreasonably
certaintoexerciseavailablerenewaloptionsthatwouldextendtheleasetermpast12months,willberecognizedonastraight-
linebasisovertheleaseterm.
TheCompanyuseditsSeniorSecuredCreditFacilityinterestratetoextrapolatearateforeachofitsleasestocalculatethe
presentvalueoftheleaseliabilityandright-of-useasset.AsummaryoftheCompany’sleasecostisasfollows(inthousands,
exceptforweighted-averages):
Year Ended
December 31, 2019
Lease Cost
Operatingleasecost
(a)
$ 12,259
Subleaseincome (1,508)
Short-termleasecost
(b)
6,495
Totalleasecost
$ 17,246
Other information
Cashpaidforamountsincludedinthemeasurementofleaseliabilities
Operatingcashoutflowsfromoperatingleases $ 8,507
Weighted-averageremainingleaseterminyears-operatingleases 8.4
Weighted-averagediscountrate-operatingleases 6.3 %
(a) Includesapproximately$3.7millionoftaxes,insuranceandmaintenance.
(b) Includesexpensesassociatedwithshort-termleasesofbillboardadvertisementsandisincludedin“MarketingFunds
expenses”ontheConsolidatedStatementsofIncome.
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87
Maturitiesundernon-cancellableleasesasofDecember31,2019wereasfollows(inthousands):
Rent Payments Sublease Receipts
Total Cash
Outflows
YearendingDecember31:
2020  $ 8,756 $ (888) $ 7,868
2021 9,010 (775) 8,235
2022 9,002 (804) 8,198
2023 9,173 (822) 8,351
2024 9,439 (785) 8,654
Thereafter 34,235 (597) 33,638
Totalleasepayments
$ 79,615 $ (4,671) $ 74,944
Less:imputedinterest 18,554
Presentvalueofleaseliabilities
$ 61,061
Aspreviouslydisclosedinour2018AnnualReportonForm10-Kandunderthepreviousleaseaccounting,maturitiesundernon-
cancellableleasesasofDecember31,2018wereasfollows(inthousands):
Rent Payments Sublease Receipts
Total Cash
Outflows
YearendingDecember31:
2019  $ 9,402 $ (1,087) $ 8,315
2020 9,601 (873) 8,728
2021 9,341 (775) 8,566
2022 9,011 (804) 8,207
2023 9,169 (827) 8,342
Thereafter 43,556 (1,382) 42,174
Totalleasepayments
$ 90,080 $ (5,748) $ 84,332
4. Non-controlling Interest
HoldingsisthesolemanagingmemberofRMCOandoperatesandcontrolsallofthebusinessaffairsofRMCO.Theownership
ofthecommonunitsinRMCOissummarizedasfollows:
As of December 31,
2019 2018
 Shares Ownership % Shares Ownership %
Non-controllinginterestownershipofcommonunitsinRMCO 12,559,600 41.3 % 12,559,600 41.4 %
HoldingsoutstandingClassAcommonstock(equaltoHoldingscommon
unitsinRMCO) 17,838,233 58.7 % 17,754,416 58.6 %
TotalcommonunitsinRMCO
30,397,833 100.0
%
30,314,016 100.0
%
TableofContents
88
Theweightedaverageownershippercentagesfortheapplicablereportingperiodsareusedtocalculatethe“Netincome
attributabletoRE/MAXHoldings,Inc.”Areconciliationof“Incomebeforeprovisionforincometaxes”to“Netincome
attributabletoRE/MAXHoldings,Inc.”and“NetIncomeattributabletonon-controllinginterest”intheaccompanying
ConsolidatedStatementsofIncomefortheperiodsindicatedisdetailedasfollows(inthousands,exceptpercentages):
Year Ended December 31,
2019 2018 2017
RE/MAX
Holdings,
Inc.
Non-
controlling
interest Total
RE/MAX
Holdings,
Inc.
Non-
controlling
interest Total
RE/MAX
Holdings,
Inc.
Non-
controlling
interest Total
Weightedaverageownershippercentage
ofRMCO
(a)
58.6 % 41.4 % 100.0 % 58.6 % 41.4 % 100.0 % 58.5 % 41.5 % 100.0 %
Incomebeforeprovisionforincome
taxes
(a)
$ 33,850 $ 23,915 $ 57,765 $ 41,238 $ 24,926 $ 66,164 $ 65,493 $ 23,369 $ 88,862
Provisionforincometaxes
(b)(c)
(8,810) (2,099) (10,909) (14,355) (1,987) (16,342) (55,394) (2,148) (57,542)
Netincome
$ 25,040 $ 21,816 $ 46,856 $ 26,883 $ 22,939 $ 49,822 $ 10,099 $ 21,221 $ 31,320
(a) TheweightedaverageownershippercentageofRMCOdiffersfromtheallocationofincomebeforeprovisionforincome
taxesbetweenHoldingsandthenon-controllinginterestdueto(i)certainrelativelyinsignificantexpensesand(ii)the
significantgainonreductioninTRAliabilityin2018and2017attributableonlytoHoldings.SeeNote12,Income Taxes for
additionalinformation.
(b) TheprovisionforincometaxesattributabletoHoldingsisprimarilycomprisedofU.S.federalandstateincometaxesonits
proportionateshareofthepass-throughincomefromRMCO.ItalsoincludesHoldings’shareoftaxesdirectlyincurredby
RMCOanditssubsidiaries,relatedprimarilytotaxliabilitiesincertainforeignjurisdictions.In2018and2017,theprovision
forincometaxesattributabletoHoldingsalsoincludesasignificantdecreaseinthevalueofdeferredtaxassets.SeeNote12,
Income Taxes foradditionalinformation.
(c) Theprovisionforincometaxesattributabletothenon-controllinginterestrepresentsitsshareoftaxesrelatedprimarilytotax
liabilitiesincertainforeignjurisdictionsdirectlyincurredbyRMCOoritssubsidiaries.BecauseRMCOisapass-through
entitythereisnoU.S.federalandstateincometaxprovisionrecordedonthenon-controllinginterest.
Distributions and Other Payments to Non-controlling Unitholders
UnderthetermsofRMCO’slimitedliabilitycompanyoperatingagreement,RMCOmakescashdistributionstonon-controlling
unitholdersonapro-ratabasis.Thedistributionspaidorpayabletonon-controllingunitholdersaresummarizedasfollows(in
thousands):
Year Ended
December 31,
 2019  2018
Taxandotherdistributions
$ 4,880 $ 4,511
Dividenddistributions 10,550 10,048
Totaldistributionstonon-controllingunitholders
$ 15,430 $ 14,559
OnFebruary19,2020,theCompanydeclaredadistributiontonon-controllingunitholdersof$2.8million,whichispayableon
March18,2020.
Holdings Ownership of RMCO and Tax Receivable Agreements
HoldingshastwiceacquiredsignificantportionsoftheownershipinRMCO;firstinOctober2013atthetimeofIPOwhen
Holdingsacquireditsinitial11.5millioncommonunitsofRMCOand,second,inNovemberandDecember2015whenit
acquired5.2millionadditionalcommonunits.HoldingsissuedClassAcommonstock,whichitexchangedforthesecommon
unitsofRMCO.RIHIthensoldtheClassAcommonstocktothemarket.
WhenHoldingsacquiredcommonunitsinRMCO,itreceiveda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thestep-upisoftensubstantial.Theseassets
areamortizableunderIRSrulesandresultindeductionsontheCompany’staxreturnformanyyearsandconsequently,Holdings
receivesafuturetaxbenefit.Thesefuturebenefitsarereflectedwithin
TableofContents
89
deferredtaxassetsontheCompany’sconsolidatedbalancesheets.
IfHoldingsacquiresadditionalcommonunitsofRMCOfromRIHI,thepercentageofHoldings’ownershipofRMCOwill
increase,andadditionaldeferredtaxassetswillbecreatedasadditionaltaxbasisstep-upsoccur.
InconnectionwiththeinitialsaleofRMCOcommonunitsinOctober2013,HoldingsenteredintoTaxReceivableAgreements
(“TRAs”)whichrequirethatHoldingsmakeannualpaymentstotheTRAholdersequivalentto85%ofanytaxbenefitsrealized
oneachyear’staxreturnfromtheadditionaltaxdeductionsarisingfromthestep-upintaxbasis.TheTRAholdersasof
December31,2019areRIHIandParallaxesRainCo-Investment,LLC(“Parallaxes”).TRAliabilitieswereestablishedforthe
futurecashobligationsexpectedtobepaidundertheTRAsandarenotdiscounted.AsofDecember31,2019,thisliabilitywas
$37.2millionandwasrecordedwithin“Currentportionofpayablepursuanttotaxreceivableagreements”and“Payablepursuant
totaxreceivableagreement”intheConsolidatedBalanceSheets.Similartothedeferredtaxassets,theTRAliabilitieswould
increaseifHoldingsacquiresadditionalcommonunitsofRMCOfromRIHI.
BothdeferredtaxassetsandTRAliabilityweresubstantiallyreducedbytheTaxCutsandJobsActenactedinDecember2017.
Thereductioninthecorporatetaxratefrom35%to21%resultedincomparablereductionsinboththedeferredtaxassetamounts
andtheTRAliabilities.ThedeferredtaxassetsandTRAliabilitieswerefurtherreducedin2018asaresultoftheforeigntax
provisionscontainedintheTaxCutsandJobsAct.SeeNote12,Income Taxes forfurtherinformationontheimpactoftheTax
CutsandJobsAct.
5. Earnings Per Share and Dividends
Earnings Per Share
Basicearningspershare(“EPS”)measurestheperformanceofanentityoverthereportingperiod.DilutedEPSmeasuresthe
performanceofanentityoverthereportingperiodwhilegivingeffecttoallpotentiallydilutivecommonsharesthatwere
outstandingduringtheperiod.Thetreasurystockmethodisusedtodeterminethedilutiveeffectoftime-basedrestrictedstock
units.Thedilutiveeffectofperformance-basedrestrictedstockunitsismeasuredusingtheguidanceforcontingentlyissuable
shares.
ThefollowingisareconciliationofthenumeratoranddenominatorusedinthebasicanddilutedEPScalculations(inthousands,
exceptsharesandpershareinformation):
Year Ended December 31,
2019 2018 2017
Numerator
NetincomeattributabletoRE/MAXHoldings,Inc.
$ 25,040 $ 26,883 $ 10,099
Denominator for basic net income per share of Class A common stock
WeightedaveragesharesofClassAcommonstockoutstanding
17,812,065 17,737,649 17,688,533
Denominator for diluted net income per share of Class A common stock
WeightedaveragesharesofClassAcommonstockoutstanding 17,812,065 17,737,649 17,688,533
Adddilutiveeffectofthefollowing:
Restrictedstockunits 55,687 29,850 43,267
WeightedaveragesharesofClassAcommonstockoutstanding,diluted
17,867,752 17,767,499 17,731,800
Earnings per share of Class A common stock
NetincomeattributabletoRE/MAXHoldings,Inc.pershareofClassA
commonstock,basic
$ 1.41 $ 1.52 $ 0.57
NetincomeattributabletoRE/MAXHoldings,Inc.pershareofClassA
commonstock,diluted
$ 1.40 $ 1.51 $ 0.57
OutstandingClassBcommonstockdoesnotshareintheearningsofHoldingsandisthereforenotaparticipatingsecurity.
Accordingly,basicanddilutednetincomepershareofClassBcommonstockhasnotbeenpresented.
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Dividends
DividendsdeclaredandpaidduringeachquarterendedpershareonalloutstandingsharesofClassAcommonstockwereas
follows(inthousands,exceptpershareinformation):
Year Ended December 31,
2019 2018 2017
Quarter end declared  Date paid  Per share  Date paid  Per share  Date paid  Per share
March31 March20,2019 $ 0.21 March21,2018 $ 0.20 March22,2017 $ 0.18
June30 May29,2019 0.21 May30,2018 0.20 May31,2017 0.18
September30 August29,2019 0.21 August29,2018 0.20 August30,2017 0.18
December31 November27,2019 0.21 November28,2018 0.20 November29,2017 0.18
$ 0.84 $ 0.80 $ 0.72
OnFebruary19,2020,theCompany’sBoardofDirectorsdeclaredaquarterlydividendof$0.22pershareonalloutstanding
sharesofClassAcommonstock,whichispayableonMarch18,2020tostockholdersofrecordatthecloseofbusinessonMarch
4,2020.
6. Acquisitions
First
OnDecember16,2019,theCompanyacquiredFirstLeads,Inc.(“First”)for$15millionincashgeneratedfromoperations.First
isamobileappthatleveragesdatascience,machinelearningandhumaninteractiontohelprealestateprofessionalsbetter
leveragethevalueoftheirpersonalnetworkandwasacquiredtocomplementtheCompany’stechnologyofferingsandbooj
Platform.
Marketing Funds
OnJanuary1,2019,theCompanyacquiredalloftheregionalandpan-regionaladvertisingfundentitiespreviouslyownedbyits
founderandChairmanoftheBoardofDirectors,DavidLiniger,foranominalamount.Asinthepast,theMarketingFundsare
contractuallyobligatedtousethefundscollectedtosupportbothregionalandpan-regionalmarketingcampaignsdesignedto
buildandmaintainbrandawarenessandtosupporttheCompany’sagentmarketingtechnology.TheCompanydoesnotplanfor
theuseofthefundstochangebecauseofthisacquisitionandconsolidation.TheacquisitionsoftheMarketingFundsarepartof
theCompany’ssuccessionplan,andownershipoftheMarketingFundsbythefranchisorisacommonstructure.Expenses
incurredwiththeacquisitionoftheMarketingFundswerenotmaterial.
ThetotalassetsequalthetotalliabilitiesoftheMarketingFundsandbeginningJanuary1,2019,arereflectedintheconsolidated
financialstatementsoftheCompany.TheCompanyalsobeganrecognizingrevenuefromtheamountscollected,which
substantiallyincreaseditsrevenuesandexpenses.
ThefollowingtablesummarizestheCompany’sallocationofthepurchasepricetothefairvalueofassetsacquiredandliabilities
assumed(inthousands):
Restrictedcash $ 28,495
Othercurrentassets 8,472
Propertyandequipment 788
Otherassets,netofcurrentportion 126
Totalassetsacquired 37,881
Othercurrentliabilities 37,881
Totalliabilitiesassumed 37,881
Totalacquisitionprice
$ -
TheMarketingFundsconstitutesabusinessandwasaccountedforusingthefairvalueacquisitionmethod.Thetotalpurchase
pricewasallocatedtotheassetsacquiredbasedontheirestimatedfairvalues.
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Booj, LLC
OnFebruary26,2018,theCompanyacquiredallmembershipinterestsinboojusing$26.3millionincashgeneratedfrom
operations,plusuptoapproximately$10.0millioninequity-basedcompensationtobeearnedovertime,basedongrantdatefair
value,whichwillbeaccountedforascompensationexpenseinthefuture(seeNote13,Equity-Based Compensationfor
additionalinformation).TheCompanyacquiredboojinordertodelivercoretechnologysolutionsdesignedforandwith
RE/MAXaffiliates.
ThefollowingtablesummarizestheCompany’sallocationofthepurchasepricetothefairvalueofassetsacquiredandliabilities
assumed(inthousands):

Cash $ 362
Othercurrentassets 367
Propertyandequipment 625
Software 7,400
Trademarks 500
Non-competeagreement 1,200
Customerrelationships 800
Otherintangibleassets 1,589
Otherassets,netofcurrentportion 336
Totalassetsacquired,excludinggoodwill 13,179
Currentportionofdebt (606)
Othercurrentliabilities (557)
Debt,netofcurrentportion (805)
Totalliabilitiesassumed (1,968)
Goodwill 15,039
Totalpurchaseprice
$ 26,250
Boojconstitutesabusinessandwasaccountedforusingthefairvalueacquisitionmethod.Thetotalpurchasepricewasallocated
totheassetsacquiredbasedontheirestimatedfairvalues.Thelargestintangibleassetsacquiredwerevaluedusinganincome
approachwhichutilizesLevel3inputsandarebeingamortizedoveraweighted-averageusefullifeusingthestraight-line
method.Theexcessofthetotalpurchasepriceoverthefairvalueoftheidentifiableassetsacquiredwasrecordedasgoodwill.
Thegoodwillisattributabletoexpectedsynergiesandprojectedlong-termrevenuegrowthfortheRE/MAXnetwork.Allofthe
goodwillrecognizedistaxdeductible.
Independent Region Acquisition
OnNovember15,2017,theCompanyacquiredcertainassetsofRE/MAXofNorthernIllinois,Inc.for$35.7millionusingcash
generatedfromoperations.TheCompanyacquiredthefranchiseagreementsissuedbytheCompanypermittingthesaleof
RE/MAXfranchisesinthecorrespondingregionaswellasthefranchiseagreementsbetweentheregionandthefranchisees.The
Companyacquiredtheseassetsinordertoexpanditsownedandoperatedregionalfranchisingoperations.
Unaudited Pro Forma Financial Information
ThefollowingunauditedproformafinancialinformationreflectstheconsolidatedresultsofoperationsoftheCompanyasifthe
acquisitionoftheMarketingFundshadoccurredJanuary1,2018,theacquisitionofboojhadoccurredonJanuary1,2017and
theacquisitionofRE/MAXofNorthernIllinoishadoccurredonJanuary1,2016.Thehistoricalfinancialinformationhasbeen
adjustedtogiveeffecttoeventsthatare(1)directlyattributedtotheacquisitions,(2)factuallysupportableand(3)expectedto
haveacontinuingimpactonthecombinedresults,includingadditionalamortizationexpenseassociatedwiththevaluationofthe
acquiredfranchiseagreements.Thisunauditedproforma
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92
informationshouldnotberelieduponasnecessarilybeingindicativeofthehistoricalresultsthatwouldhavebeenobtainedifthe
acquisitionshadactuallyoccurredonthatdate,noroftheresultsthatmaybeobtainedinthefuture.
Year Ended December 31,
2018 2017
(inthousands,exceptpershareamounts)
Totalrevenue $ 287,394 $ 205,059
NetincomeattributabletoHoldings $ 26,131 $ 7,628
Basicearningspercommonshare $ 1.47 $ 0.43
Dilutedearningspercommonshare $ 1.47 $ 0.43
7. Property and Equipment
Propertyandequipmentconsistofthefollowing(inthousands):
As of December 31,
 Depreciable Life  2019  2018
Leaseholdimprovements

Shorterofestimatedusefullifeor
lifeoflease $ 3,327 $ 3,278
Officefurniture,fixturesandequipment 2-10years 17,057 14,392
Totalpropertyandequipment 20,384 17,670
Lessaccumulateddepreciation (14,940) (13,280)
Totalpropertyandequipment,net
$ 5,444 $ 4,390
Depreciationexpensewas$1.7million,$1.2millionand$0.9millionfortheyearsendedDecember31,2019,2018and2017,
respectively.
8. Intangible Assets and Goodwill
ThefollowingtableprovidesthecomponentsoftheCompany’sintangibleassets(inthousands,exceptweightedaverage
amortizationperiodinyears):
Weighted      
Average As of December 31, 2019 As of December 31, 2018
Amortization Initial Accumulated Net Initial Accumulated Net
Period Cost Amortization Balance Cost Amortization Balance
Franchiseagreements 12.5
$ 180,867 $ (93,197) $ 87,670 $ 180,867 $ (77,710) $ 103,157
Otherintangibleassets:
Software
(a)
4.0 $ 36,680 $ (9,653) $ 27,027 $ 20,579 $ (5,802) $ 14,777
Trademarks 9.3 1,904 (1,037) 867 1,857 (839) 1,018
Non-competeagreements 7.7 3,700 (1,546) 2,154 3,700 (896) 2,804
Trainingmaterials 5.0 2,400 (640) 1,760 2,350 (157) 2,193
Other
(b)
5.0 800 (293) 507 2,389 (216) 2,173
Totalotherintangibleassets 4.6
$ 45,484 $ (13,169) $ 32,315 $ 30,875 $ (7,910) $ 22,965
(a) AsofDecember31,2019,andDecember31,2018,capitalizedsoftwaredevelopmentcostsof$10.5millionand$4.5
million,respectively,wererelatedtotechnologyprojectsnotyetcompleteandreadyfortheirintendeduseandthuswerenot
subjecttoamortization.
(b) Otherconsistsofcustomerrelationshipsandafavorablemarketlease,bothobtainedinconnectionwiththeacquisitionof
booj.Thefavorablemarketleasewassubsumedinto“Operatingleaserightofuseassets”ontheaccompanyingConsolidated
BalanceSheetuponadoptingthenewleasestandardonJanuary1,2019.SeeNote2, Summary of Significant Accounting
Policies foradditionalinformation.
Amortizationexpensewas$20.6million,$19.5millionand$19.6millionfortheyearsendedDecember31,2019,2018and
2017,respectively.
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93
AsofDecember31,2019,theestimatedfutureamortizationexpenseforthenextfiveyearsrelatedtointangibleassetsincludes
theestimatedamortizationexpenseassociatedwiththeCompany’sintangibleassetsassumedwiththeacquisitionofboojandis
asfollows(inthousands):
Year ending December 31:
2020 $ 25,438
2021 25,122
2022 21,946
2023 14,594
2024 12,146
$ 99,246
ThefollowingtablepresentschangestogoodwillfortheperiodfromJanuary1,2018toDecember31,2019(inthousands):

RE/MAX
Franchising 
Motto
Franchising  Total
Balance, January 1, 2018
$ 123,413 $ 11,800 $ 135,213
Goodwillrecognizedrelatedtoacquisitions
(a)
15,039 — 15,039
Adjustmentstoacquisitionaccountingduringthemeasurementperiod 700 — 700
Effectofchangesinforeigncurrencyexchangerates (268) — (268)
Balance, December 31, 2018
138,884 11,800 150,684
Goodwillrecognizedrelatedtoacquisitions
(a)
8,207 — 8,207
Effectofchangesinforeigncurrencyexchangerates
147 — 147
Balance, December 31, 2019 $ 147,238 $ 11,800 $ 159,038
(a) ThepurposeoftheboojandFirstacquisitionsistodelivertechnologysolutionstoRE/MAXfranchiseesandagents.As
such,theCompanyallocatedthegoodwillarisingfromtheseacquisitionstoRE/MAXFranchising.SeeNote6, Acquisitions
foradditionalinformation.
9. Accrued Liabilities
Accruedliabilitiesconsistofthefollowing(inthousands):
As of December 31,
2019 2018
MarketingFunds
(a)
$ 39,672 $ —
Accruedpayrollandrelatedemployeecosts 11,900 6,517
Accruedtaxes 2,451 1,480
Accruedprofessionalfees 2,047 2,010
Other 4,093 3,136
$ 60,163 $ 13,143
(a) ConsistsprimarilyofliabilitiesrecognizedtoreflectthecontractualrestrictionthatallfundscollectedintheMarketing
Fundsmustbespentfordesignatedpurposes.SeeNote2,Summary of Significant Accounting Policies foradditional
information.Aspreviouslynoted,theMarketingFundswereacquiredonJanuary1,2019.
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10. Debt
Debt,netofcurrentportion,consistsofthefollowing(inthousands):
As of December 31,
2019 2018
SeniorSecuredCreditFacility $ 227,363 $ 229,713
Otherlong-termfinancing
(a)
362 635
Lessunamortizeddebtissuancecosts (1,182) (1,481)
Lessunamortizeddebtdiscountcosts (862) (1,080)
Lesscurrentportion
(a)
(2,648) (2,622)
$ 223,033 $ 225,165
(a) Includesfinancingassumedwiththeacquisitionofbooj.AsofDecember31,2019and2018,thecarryingvalueofthis
financingapproximatesthefairvalue.
Maturitiesofdebtareasfollows(inthousands):
Year Ended December 31, 2019 
2020 $ 2,648
2021 2,414
2022 2,350
2023 220,313
$ 227,725
Senior Secured Credit Facility
InJuly2013,theCompanyenteredintoacreditagreementwithseverallendersandadministeredbyabank,referredtohereinas
the“2013SeniorSecuredCreditFacility.”InDecember2016,the2013SeniorSecuredCreditFacilitywasamendedandrestated,
referredtohereinasthe“SeniorSecuredCreditFacility.”TheSeniorSecuredCreditFacilityconsistsofa$235.0millionterm
loanfacilitywhichmaturesonDecember15,2023anda$10.0millionrevolvingloanfacilitywhichmustberepaidonDecember
15,2021.InconnectionwiththeSeniorSecuredCreditFacility,theCompanyincurredcostsof$3.5millionduring2016,of
which$1.4millionwasrecordedin“Debt,netofcurrentportion”intheaccompanyingConsolidatedBalanceSheetsandisbeing
amortizedtointerestexpenseoverthetermoftheSeniorSecuredCreditFacilityandtheremaining$2.1millionwasexpensedas
incurred.
Borrowingsunderthetermloansandrevolvingloansaccrueinterest,attheCompany’soptionon(a)LIBORprovidedLIBOR
shallbenolessthan0.75%plusanapplicablemarginof2.75%and,providedfurther,thatLIBORshallbeadjustedforreserve
requirementsforeurocurrencyliabilities,ifany(the“LIBORrate”)or(b)thegreatestof(i)JPMorganChaseBankN.A.’sprime
rate,(ii)theNYFRBRate(asdefinedintheSeniorSecuredCreditFacility)plus0.50%and(iii)theone-monthEurodollarRate
plus1%,(suchgreatestrate,the“ABR”)plus,ineachcase,theapplicablemargin.TheapplicablemarginforABRloansis
1.75%.AsofDecember31,2019,theCompanyselectedtheLIBORrateresultinginaninterestrateonthetermloanfacilityof
4.55%.
TheSeniorSecuredCreditFacilityrequiresRE/MAX,LLCtorepaytermloansandreducerevolvingcommitmentswith
(i)100.0%ofproceedsofanyincurrenceofadditionaldebtnotpermittedbytheSeniorSecuredCreditFacility,(ii)100.0%of
proceedsofassetsalesand100.0%ofamountsrecoveredunderinsurancepolicies,subjecttocertainexceptionsanda
reinvestmentrightand(iii)50.0%ofexcesscashflowattheendoftheapplicablefiscalyearifRE/MAX,LLC’stotalleverage
ratioasdefinedintheSeniorSecuredCreditFacilityisinexcessof3.25:1.00,withsuchpercentagedecreasingtozeroas
RE/MAX,LLC’sleverageratiodecreasesbelow2.75to1.0.TheCompany’stotalleverageratiowaslessthan2.75to1.0asof
December31,2019,andasaresult,theCompanydoesnotexpecttomakeanexcesscashflowprincipalprepaymentwithinthe
next12-monthperiod.TheCompanymaymakeoptionalprepaymentsonthetermloanfacilityatanytimewithoutpenalty;
however,nosuchoptionalprepaymentsweremadeduringtheyearendedDecember31,2019.
Wheneveramountsaredrawnundertherevolvinglineofcredit,theSeniorSecuredCreditFacilityrequirescompliancewitha
leverageratioandaninterestcoverageratio.Acommitmentfeeof0.5%perannumaccruesontheamountofunutilized
revolvinglineofcredit.AsofDecember31,2019,noamountsweredrawnontherevolvinglineofcredit.
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11. Fair Value Measurements
Fairvalueisanexitprice,representingtheamountthatwouldbereceivedtosellanassetorpaidtotransferaliabilityinan
orderlytransactionbetweenmarketparticipants.Assuch,fairvalueisamarket-basedmeasurementthatisdeterminedbasedon
assumptionsthatmarketparticipantswoulduseinpricinganassetorliability.Asabasisforconsideringassumptions,the
Companyfollowsathree-tierfairvaluehierarchy,whichprioritizestheinputsusedinmeasuringfairvalueasfollows:
● Level1:Quotedpricesforidenticalinstrumentsinactivemarkets.
● Level2:Quotedpricesforsimilarinstrumentsinactivemarkets,quotedpricesforidenticalorsimilarinstrumentsin
marketsthatarenotactive,andmodel-derivedvaluations,inwhichallsignificantinputsareobservableinactive
markets.ThefairvalueoftheCompany’sdebtreflectsaLevel2measurementandwasestimatedbasedonquoted
pricesfortheCompany’sdebtinstrumentsinaninactivemarket.
● Level3:Unobservableinputsinwhichthereislittleornomarketdata,whichrequirethereportingentitytodevelopits
ownassumptions.Level3liabilitiesthataremeasuredatfairvalueonarecurringbasisconsistoftheCompany’s
contingentconsiderationrelatedtotheacquisitionofMotto.
AsummaryoftheCompany’sliabilitiesmeasuredatfairvalueonarecurringbasisisasfollows(inthousands):
As of December 31, 2019 As of December 31, 2018
 Fair Value Level 1   Level 3 Fair Value  Level 1  Level 2  Level 3
Liabilities
Contingentconsideration
$ 5,005 $ — — $ 5,005 $ 5,070 $ — $ — $ 5,070
TheCompanyisrequiredtopayadditionalpurchaseconsiderationtotaling8%ofgrossreceiptscollectedbyMottoeachyear(the
“RevenueShareYear”)throughSeptember30,2026,withnolimitationastothemaximumpayout.Theannualpaymentis
requiredtobemadewithin120daysoftheendofeachRevenueShareYear.EachRevenueShareYearendsSeptember30.The
fairvalueofthecontingentpurchaseconsiderationrepresentstheforecasteddiscountedcashpaymentsthattheCompanyexpects
topay.Increasesordecreasesinthefairvalueofthecontingentpurchaseconsiderationcanresultfromchangesindiscountrates
aswellasthetimingandamountofforecastedrevenues.Theforecastedrevenuegrowthassumptionthatismostsensitiverelated
toassumedfranchisesalescountforwhichtheforecastassumesbetween50and80franchisessoldannually.Thisassumptionis
basedonhistoricalsalesandanassumptionofgrowthovertime.A10%reductioninthenumberoffranchisesaleswould
decreasetheliabilityby$0.3million.A1%changetothediscountrateappliedtotheforecastchangestheliabilityby
approximately$0.2million.TheCompanymeasuresthisliabilityeachreportingperiodandrecognizeschangesinfairvalue,if
any,in“Selling,operatingandadministrativeexpenses”intheaccompanyingConsolidatedStatementsofIncome.
Thetablebelowpresentsareconciliationofthecontingentconsideration(inthousands):
Balance at January 1, 2018 $ 6,580
Fairvalueadjustments
(a)
(1,289)
Cashpayments (221)
Balance at December 31, 2018 5,070
Fairvalueadjustments
(a)
241
Cashpayments (306)
Balance at December 31, 2019
$ 5,005
(a) Fairvalueadjustmentsrelatetorealignmentoffuturefranchisesalesassumptionstomorecloselyreflecthistoricalsales
trendsfrominceptiontodate.
TheCompanyassessescategorizationofassetsandliabilitiesbylevelateachmeasurementdate,andtransfersbetweenlevelsare
recognizedontheactualdateoftheeventorchangeincircumstancesthatcausedthetransfer.Therewerenotransfersbetween
LevelsI,IIandIIIduringtheyearendedDecember31,2019.
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96
ThefollowingtablesummarizesthecarryingvalueandestimatedfairvalueoftheSeniorSecuredCreditFacility(inthousands):
December 31, December 31,
2019 2018

Carrying
Amount
Fair Value
Level 2 
Carrying
Amount
Fair Value
Level 2
SeniorSecuredCreditFacility
$ 225,319 $ 227,363 $ 227,152 $ 221,673
12. Income Taxes
“Incomebeforeprovisionforincometaxes”asshownintheaccompanyingConsolidatedStatementsofIncomeiscomprisedof
thefollowing(inthousands):
Year Ended December 31,
2019 2018  2017
Domestic  $ 44,343 $ 52,798 $ 77,346
Foreign 13,422 13,366 11,516
Total
$ 57,765 $ 66,164 $ 88,862
Componentsofthe“Provisionforincometaxes”intheaccompanyingConsolidatedStatementsofIncomeconsistofthe
following(inthousands):
Year Ended December 31,
2019 2018  2017
Current
Federal $ 2,533 $ 1,393 $ 3,239
Foreign 4,929 4,738 5,203
Stateandlocal 1,137 700 1,169
Totalcurrentexpense 8,599 6,831 9,611
Deferred expense
Federal 2,084 8,795 47,045
Foreign (142) 12 323
Stateandlocal 368 704 563
Totaldeferredexpense 2,310 9,511 47,931
Provision for income taxes
$ 10,909 $ 16,342 $ 57,542
TheprovisionforincometaxesattributabletoHoldingsincludesallU.S.federalandstateincometaxesonHoldings’
proportionateshareofRMCO’snetincome.TheprovisionforincometaxesattributabletoentitiesotherthanHoldingsrepresents
taxesimposeddirectlyonRMCOanditssubsidiaries,primarilyforeigntaxesthatareallocatedtothenon-controllinginterest.
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97
AreconciliationoftheU.S.statutoryincometaxratetotheCompany’seffectivetaxrateisasfollows:
Year Ended December 31,
2019 2018  2017
U.S.statutorytaxrate 21.0 % 21.0 % 35.0 %
Increaseduetostateandlocaltaxes,netoffederalbenefit 3.1 3.1 2.6
Non-creditableforeigntaxes 1.1 1.2 -
Foreignderivedintangibleincomededuction (1.5) (1.3) -
Incomeattributabletonon-controllinginterests (7.2) (7.3) (12.5)
UncertainTaxPositions 1.0 0.8 0.6
Other 1.4 (0.8) (0.8)
Subtotal 18.9 16.7 24.9
ImpactofTRAadjustmentonNCI
(a)
- 0.7 4.5
Effectofpermanentdifference-TRAadjustment
(b)
- (2.2) (13.6)
TaxReformRateChange
(c)
- - 49.0
Valuationallowancerecognizedonbasisstep-ups - 9.5 -
18.9
%
24.7
%
64.8
%
(a) Reflectsadditionalimpactofnon-controllinginterestadjustmentbeingonalargerbaseofincomethatincludesthegainon
reductioninTRAliability.
(b) ReflectstheimpactofgainonTRAliabilityreduction,whichisnottaxable.
(c) ReflectsreductionindeferredtaxassetsandresultingincreaseindeferredtaxexpenseduetoU.S.Federalratedeclining
from35%to21%.
InDecember2017,theTaxCutandJobsAct(the“TCJA”)wasenacted,whichincludedasignificantreductionintheU.S.
corporateincometaxratefrom35%to21%alongwithseveralchangestotaxationofforeignderivedincome.In2017,the
Companyrecordeda$42.8millionchargeto“Provisionforincometaxes”intheaccompanyingConsolidatedStatementsof
Incomeforthereductioninthevalueofitsdeferredtaxassetsrelatedtothistaxratechange(reflectedintheratereconciliation
tableaboveasa49.0%adjustmentin2017).Correspondingly,theTRAliabilitieswerereducedbecauseoftheratechange,
resultinginabenefittooperatingincomeof$32.7million.Theneteffectofthesetwoadjustmentswasareductionto2017net
incomeof$10.1million.Whentheaforementionedadjustmentswererecordedin2017,theCompanywasstillevaluatingseveral
aspectsoftheTCJA,mostnotablyaroundforeignderivedincome.
In2018,theCompanycompleteditsevaluationoftheimpactstoitsforeignderivedincome,particularlythetaxcreditsreceived
forforeigntaxesanddeductionsallowedunderthenewlycreatedforeign-derivedintangibleincomededuction.TheSECstaff
issuedStaffAccountingBulletin118andlaterASU2018-05,whichprovidedallcompaniesthroughDecemberof2018to
finalizeprovisionalestimatesoftheimpactsoftheTCJA.
Startingwithtaxyear2018,theCompanyhasforeigntaxcreditlimitationduetotheU.S.federaltaxratebeinglowerthanmany
foreignjurisdictions,particularlyCanada.Certainofthetaxbasisstep-ups,describedinNote4,Non-controlling interest,are
relatedtointangibleassetsfromtheCompany’sWesternCanadaoperations.Thedeductionsexpectedtobetakenfromthesetax
basisstep-upsarenolongerexpectedtoberealizedbytheCompanyduetonowbeingsubjecttoaforeigntaxcreditlimitation.
Asaresult,theCompanyrecognizeda$6.3millionvaluationallowanceagainsttherelateddeferredtaxassetsandanincreasein
“Provisionforincometaxes”intheaccompanyingConsolidatedStatementsofIncome(reflectedintheratereconciliationtable
aboveasa9.5%adjustmentin2018).Thelossinvalueofthestep-up,alongwithotherlesssignificantchanges,alsoreducedthe
valueoftheTRAliabilities,resultingina$6.1benefittooperatingincome.Thenetimpactoftheseitemswasinsignificanttonet
income.Inaddition,theCompanyisnowlimitedontheamountofforeigntaxcreditthatcanbeclaimedinitsU.S.return.
TheCompanywillcontinuetoevaluatetaxplanningopportunitiesaswellasmonitoranychangesthatmightbecontainedinthe
finalregulationsrelatedtoforeignderivedincome.Suchremainingfinalregulationsareexpectedin2020.
Incometaxes(payable)receivable,netwere($4.3)millionand$0.3millionatDecember31,2019and2018,respectively.
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98
Deferredincometaxesareprovidedfortheeffectsoftemporarydifferencesbetweenthetaxbasisofanassetorliabilityandits
reportedamountintheaccompanyingConsolidatedBalanceSheets.
Thesetemporarydifferencesresultintaxableordeductibleamountsinfutureyears.DetailsoftheCompany’sdeferredtaxassets
andliabilitiesaresummarizedasfollows(inthousands):
As of December 31,
2019 2018
Long-term deferred tax assets
Goodwill,otherintangiblesandotherassets $ 42,800 $ 48,427
Imputedinterestdeductionpursuanttotaxreceivableagreements 2,651 2,719
Operatingleaseliabilities 1,618 1,845
Compensationandbenefits 3,043 2,131
Allowancefordoubtfulaccounts 1,629 944
Mottocontingentliability 783 748
Deferredrevenue 3,706 3,939
Foreigntaxcreditcarryforward 1,862 1,259
Netoperatingloss 2,641 —
Other 950 1,435
Totallong-termdeferredtaxassets 61,683 63,447
Valuationallowance
(a)
(7,184) (7,051)
Totallong-termdeferredtaxassets,netofvaluationallowance 54,499 56,396
Long-term deferred tax liabilities
Propertyandequipmentandotherlonglivedassets (1,494) (2,944)
Other (703) —
Totallong-termdeferredtaxliabilities (2,197) (2,944)
Netlong-termdeferredtaxassets 52,302 53,452
Total deferred tax assets and liabilities
$ 52,302 $ 53,452
(a) IncludesavaluationallowanceondeferredtaxassetsforgoodwillandintangiblesintheCompany’sWesternCanada
operations,aswellasforeigntaxcreditcarryforwards.
AsofDecember31,2019,theCompanygenerated$1.1millioninunutilizedforeigntaxcredits.Thesecreditsmaybecarried
backoneyearandcarriedforwardfor10yearsuntilutilized.ThisamountisincludedinthevaluationallowanceasofDecember
31,2019.
NetdeferredtaxassetsarerecordedrelatedtodifferencesbetweenthefinancialreportingbasisandthetaxbasisofHoldings’
proportionateshareofthenetassetsofRMCO.BasedontheCompany’shistoricaltaxableincomeanditsexpectedfuture
earnings,managementevaluatestheuncertaintyassociatedwithbookingtaxbenefitsanddetermineswhetherthedeferredtax
assetsaremorelikelythannottoberealized,includingevaluationofdeferredtaxliabilitiesandtheexpectationoffuturetaxable
income.Ifnotexpectedtoberealized,avaluationallowanceisrecognizedtooffsetthedeferredtaxasset.
TheCompanyanditssubsidiariesfile,orwillfile,incometaxreturnsintheU.S.federaljurisdictionandvariousstatesand
foreignjurisdictions.Holdingswillfileits2019incometaxreturnsbyOctober15,2020.RMCOisnotsubjecttodomestic
federalincometaxesasitisaflow-throughentity;however,RMCOisstillrequiredtofileanannualU.S.ReturnofPartnership
Income.WithrespecttostateandlocaljurisdictionsandcountriesoutsideoftheU.S.,theCompanyanditssubsidiariesare
typicallysubjecttoexaminationforthreetofouryearsaftertheincometaxreturnshavebeenfiled.Assuch,incometaxreturns
filedsince2015aresubjecttoexamination.
Uncertain Tax Positions
In2019,theCompanycorrectedimmaterialerrorstorecognizeuncertaintaxpositionliabilities,andrelatedtaxexpensefor
certainforeigntaxmatters,alongwithdeferredtaxassetsforamountsofsuchforeigntaxesexpectedtobecreditable
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99
intheU.S.TheCompanyconcludedthattheomissionoftaxexpenseforthesemattersfrompriorperiodfinancialswas
immaterialtoeachoftheaffectedreportingperiodsandthereforeamendmentofpreviouslyfiledreportswasnotrequired.
However,theCompanycorrectedthoseamountsintheprioryearsincludedherein.Theseadjustmentsresultedinanincreasein
“Provisionforincometaxes”of$0.5millionforeachoftheyearsendedDecember31,2018,and2017,respectively.Inaddition,
theCompanyrecognizedanuncertaintaxpositionliabilityof$5.8million(includinginterestandpenalties),anincometax
receivableof$1.4million,adeferredtaxassetof$0.2millionandaresultingreductionin“Totalstockholders’equity”of$4.2
millionasofDecember31,2018intheConsolidatedBalanceSheets.TheCompanyrecognizeda$3.7millionreductionin
“Totalstockholders’equity”intheConsolidatedStatementsofStockholders’EquityasofDecember31,2017inrelationtothis
correction.
WhiletheCompanybelievestheliabilitiesrecognizedforuncertaintaxpositionsareadequatetocoverreasonablyexpectedtax
risks,therecanbenoassurancethatanissueraisedbyataxauthoritywillberesolvedatacostthatdoesnotexceedtheliability
recognized.Interestandpenaltiesareaccruedonuncertaintaxpositionsandincludedinthe“Provisionforincometaxes”inthe
accompanyingConsolidatedStatementsofIncome.
Uncertaintaxpositionliabilitiesrepresenttheaggregatetaxeffectofdifferencesbetweenthetaxreturnpositionsandtheamounts
otherwiserecognizedintheconsolidatedfinancialstatementsandarerecognizedin“Incometaxespayable”intheConsolidated
BalanceSheets.Areconciliationofthebeginningandendingamount,excludinginterestandpenaltiesisasfollows:
As of December 31,
2019 2018
Balance, January 1 $ 4,278 $ 3,703
Increaserelatedtocurrentperiodtaxpositions 532 575
Balance, December 31
(a)
$ 4,810 $ 4,278
(a) Excludesaccruedinterestandpenaltiesof$1.9millionand$1.5millionfortheyearsendedDecember31,2019and2018,
respectively.Theserelatedinterestandpenaltiesarerecognizedin“Incometaxespayable”withintheConsolidatedBalance
Sheets.
TheCompany’suncertaintaxpositionhasareasonablepossibilityofbeingpaidwithinthenext12months.
13. Equity-Based Compensation
TheRE/MAXHoldings,Inc.2013OmnibusIncentivePlan(the“IncentivePlan”)includesrestrictedstockunitswhichmayhave
time-basedorperformance-basedvestingcriteria.TheCompanyrecognizesequity-basedcompensationexpensein“Selling,
operatingandadministrativeexpenses”intheaccompanyingConsolidatedStatementsofIncome.TheCompanyrecognizes
corporateincometaxbenefitsrelatingtothevestingofrestrictedstockunitsin“Provisionforincometaxes”intheaccompanying
ConsolidatedStatementsofIncome.
Employeestock-basedcompensationexpenseundertheCompany’sIncentivePlan,netoftheamountcapitalizedininternally
developedsoftware,isasfollows(inthousands):
Year Ended December 31,
2019  2018  2017
ExpensefromTime-basedawards
(a)
$ 7,554 $ 5,189 $ 2,523
ExpensefromPerformance-basedawards
(a)(b)
(179) 4,126 377
Expensefrombonustobesettledinshares
(c)
3,788 — —
Equity-basedcompensationcapitalized
(a)
(229) (139) —
Equity-basedcompensationexpense 10,934 9,176 2,900
Taxbenefitfromequity-basedcompensation (1,548) (1,297) (637)
Deficit/(excess)taxbenefitfromequity-basedcompensation 55 (145) (324)
Netcompensationcost
$ 9,441 $ 7,734 $ 1,939
(a) Includesexpenserecognizedandcostscapitalizedinconnectionwiththeawardsgrantedtoboojemployeesandformer
ownersatthetimeofacquisition.
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100
(b) Expenserecognizedforperformance-basedawardsisre-assessedeachquarterbasedonexpectationsofachievementagainst
theperformanceconditions.FortheyearendedDecember31,2019,theCompanyreversedexpensethathadbeen
recognizedin2018forawardsgrantedforcertainboojworkdeliverables.Thisreversalwasprimarilyaresultofmodifying
theawardstoextendtheduedateoftheperformanceconditions,primarilythroughDecember31,2019,astheachievement
ofthegoalsatthepreviousdatewasnolongerprobable.Accountingforthesemodificationsresultinginthereversalofthe
cumulativeexpensepreviouslyrecognizedandexpensingthemodifiedawardsoverthenewvestingperiodresultinginanet
$0.3millionrecognizedin2019.Also,fortheyearendedDecember31,2019,certainconditionswerenolongerdeemed
probableofbeingmetforotherperformanceawardstiedtotheachievementofarevenuetargetmeasuredoverathree-year
performanceperiod.Thecumulativeexpensepreviouslyrecognizedwasreversedinthecurrentperiod,resultingina
negativeexpenseof($0.5)millionin2019.
(c) In2019,theCompanyreviseditsannualbonusplansothathalfofthebonusformostemployeeswillbesettledinshares.
Theshareamountstobeissuedwillbedeterminedbasedonthestockpriceatthetimeofvestinginearly2020.These
amountsarerecognizedas“Accruedliabilities”intheaccompanyingConsolidatedBalanceSheetsandarenotincludedin
“Additionalpaid-incapital”untilsharesareissued.
Time-based Restricted Stock Units
Time-basedrestrictedstockunits(“RSUs”)arevaluedusingtheCompany’sclosingstockpriceonthedateofgrant.Grants
awardedtotheCompany’sBoardofDirectorsgenerallyvestoveraone-yearperiod.GrantsawardedtotheCompany’s
employees,otherthanboojemployeesandformerownersinconnectionwiththeacquisition,generallyvestequallyinannual
installmentsoverathree-yearperiod.Grantsawardedtoboojemployeesandformerownersinconnectionwiththeacquisition
vestinthreeinstallmentsoverafour-yearperiod.Compensationexpenseisrecognizedonastraight-linebasisoverthevesting
period.
Thefollowingtablesummarizesequity-basedcompensationactivityrelatedtoRSUs:
 RSUs 
Weighted average
grant date fair
value per share
Balance, January 1, 2019
298,610 $ 51.97
Granted
(a)
257,087 $ 38.43
Sharesvested(includingtaxwithholding)
(b)
(80,008) $ 43.30
Forfeited (20,237) $ 45.41
Balance, December 31, 2019
455,452
$ 46.15
(a) TheweightedaveragegrantdatefairvaluefortheyearsendedDecember31,2018and2017were$53.04and$55.45per
RSUgranted,respectively.
(b) PursuanttothetermsoftheIncentivePlan,RSUswithheldbytheCompanyforthepaymentoftheemployee'stax
withholdingrelatedtoanRSUvestingareaddedbacktothepoolofsharesavailableforfutureawards.
AtDecember31,2019,therewas$12.6millionoftotalunrecognizedRSUexpense.Thiscompensationexpenseisexpectedtobe
recognizedovertheweighted-averageremainingvestingperiodof2.1yearsforRSUs.
Performance-based Restricted Stock Units
Performance-basedrestrictedstockunits(“PSUs”)grantedtoemployees,otherthanboojemployeesandformerownersin
connectionwiththeacquisition,arestock-basedawardsinwhichthenumberofsharesultimatelyreceiveddependsonthe
Company’sachievementofeitheraspecifiedrevenuetargetortheCompany’stotalshareholderreturn(“TSR”)relativetoapeer
companyindexoverathree-yearperformanceperiodorachievementofboth.Iftheminimumthresholdconditionsarenotmet,
noshareswillvest.Thenumberofsharesthatcouldbeissuedrangefrom0%to150%oftheparticipant’stargetaward.PSUsare
valuedonthedateofgrantusingaMonteCarlosimulationfortheTSRelementoftheaward.PSUsthatvestuponachievement
ofaspecifiedrevenuetargetarevaluedusingtheCompany’sclosingstockpriceonthedateofgrant.TheCompany’sexpense
willbeadjustedbasedontheestimatedachievementofrevenueversustarget.EarnedPSUscliff-vestattheendofthethree-year
performanceperiod.Compensationexpenseisrecognizedonastraight-linebasisoverthevestingperiodbasedontheCompany’s
probableperformance,withcumulativeto-dateadjustmentsmadewhenrevenueperformanceexpectationschange.
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PSUsgrantedtoboojemployeesandformerownersinconnectionwiththeacquisitionarestock-basedawardsinwhichthe
numberofsharesultimatelyreceiveddependsontheachievementofcertaintechnologymilestonessetforthintherelated
purchaseagreement.Thenumberofsharesthatcouldbeissuedrangefrom0%to100%oftheparticipant’stargetaward.The
awardswerevaluedusingtheCompany’sclosingstockpriceonthedateofgrant.TheCompany’sexpensewillbeadjustedbased
ontheestimatedachievementofthemilestones.ThemajorityofthesePSUsvestedJuly29,2019andDecember31,2019.The
remainingPSUsvestonFebruary15,2020totheextentthecorrespondingmilestonesareachievedandprovidedtheparticipant
isstillanemployeeoftheCompanyatthetimeofvesting.Compensationexpenseisrecognizedonastraight-linebasisoverthe
vestingperiodbasedontheCompany’sestimatedperformance,subjecttoadjustmentforchangesinexpectationsofthe
achievementofthetechnologymilestones.
Thefollowingtablesummarizesequity-basedcompensationactivityrelatedtoPSUs:
 PSUs 
Weighted average
grant date fair
value per share
Balance, January 1, 2019 179,615 $ 55.75
Granted
(a)(b)
119,410 $ 38.87
Sharesvested (97,436) $ 36.20
Forfeited (61,625) $ 56.24
Balance, December 31, 2019
139,964
$ 45.31
(a) Representsthetotalparticipanttargetaward.
(b) TheweightedaveragegrantdatefairvaluefortheyearsendedDecember31,2018and2017were$55.38and$57.88per
PSUgranted,respectively.
AtDecember31,2019,therewas$2.3millionoftotalunrecognizedPSUexpense.Thiscompensationexpenseisexpectedtobe
recognizedovertheweighted-averageremainingvestingperiodof1.8yearsforPSUs.
Aftergivingeffecttoalloutstandingawards(assumingmaximumachievementofperformancegoalsforperformance-based
awards),therewere2,122,970additionalsharesavailablefortheCompanytograntundertheIncentivePlanasofDecember31,
2019.
14. Leadership Changes and the New Service Model
OnFebruary9,2018,theCompanyannouncedtheretirementoftheCompany’sPresident.TheCompanyenteredintoa
SeparationAgreementwiththePresident,andpursuanttothetermsofthisagreement,theCompanyincurredatotalcostof$1.8
millionwhichwasrecordedto“Selling,operatingandadministrativeexpenses”intheaccompanyingConsolidatedStatementsof
IncomeduringtheyearendedDecember31,2018,whichwillbepaidovera39-monthperiod.
Inaddition,theCompanyannouncedanewservicemodelinearly2019designedtodelivermorevaluetofranchisees,aswellas
supportfranchiseegrowthandprofessionaldevelopment(the“NewServiceModel”).InconnectionwiththeNewServiceModel,
theCompanyincurredatotalofapproximately$2.1millioninexpensesrelatedtoseveranceandoutplacementservicesprovided
tocertainformeremployeesoftheCompany,ofwhich$1.4millioninexpensewasrecognizedduringtheyearendedDecember
31,2018andtheremainderwasrecognizedin2019.Theseexpensesareincludedin“Selling,operatingandadministrative
expenses”intheaccompanyingConsolidatedStatementsofIncome.AlloftheabovecostswereattributabletotheRE/MAX
Franchisingreportablesegment.
15. Commitments and Contingencies
Contingencies
InconnectionwiththesaleoftheassetsandliabilitiesrelatedtotheCompany’spreviouslyownedbrokerages,theCompany
enteredintothreeAssignmentandAssumptionofLeasesAgreements(the“AssignmentAgreements”)pursuanttowhichthe
Companyassigneditsobligationsunderandrights,titleandinterestin21leasestotherespectivepurchasers.Forcertainleases,
theCompanyremainssecondarilyliableforfutureleasepaymentsthroughJuly2021undertherespectiveleaseagreementsand
accordingly,asofDecember31,2019,theCompanyhasoutstandinglease
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guaranteesof$1.1million.Thisamountrepresentsthemaximumpotentialamountoffuturepaymentsundertherespectivelease
guarantees.
Inaddition,theCompanymaintainsaself-insuranceprogramforhealthbenefits.AsofDecember31,2019,and2018,the
Companyrecordedaliabilityof$0.3millionand$0.3million,respectively,relatedtothisprogram.
Litigation
InMarchandAprilof2019,threeputativeclassactioncomplaintswerefiledagainstNationalAssociationofRealtors(“NAR”),
RealogyHoldingsCorp.,HomeServicesofAmerica,Inc,RE/MAXHoldings,andKellerWilliamsRealty,Inc.Thefirstwasfiled
onMarch6,2019,byplaintiffChristopherMoehrlintheNorthernDistrictofIllinois.ThesecondwasfiledonApril15,2019,by
plaintiffSawbillStrategies,Inc.,alsointheNorthernDistrictofIllinois.Thesetwoactionshavenowbeenconsolidated.Athird
actionwasfiledbyplaintiffsJoshuaSitzerandfourotherindividualplaintiffsintheWesternDistrictofMissouri.Thecomplaints
(collectively“Moehrl/Sitzersuits”)makesubstantiallysimilarallegationsandseeksubstantiallysimilarrelief.Theplaintiffs
allegethataNARrulerequiresbrokerstomakeablanket,non-negotiableofferofbuyerbrokercompensationwhenlistinga
property,resultingininflatedcoststosellersinviolationoffederalantitrustlaw.Theyfurtherallegethatcertaindefendantsuse
theiragreementswithfranchiseestorequireadherencetotheNARruleinviolationoffederalantitrustlaw.Amendedcomplaints
addallegationsregardingbuyersteeringandnon-disclosureofbuyer-brokercompensationtothebuyer.Additionally,plaintiffsin
theactionfiledbySitzeretalallegeviolationsoftheMissouriMerchandisingPracticesAct.Byagreement,RE/MAX,LLCwas
substitutedforRE/MAXHoldingsasdefendantintheactions.Amongotherrequestedrelief,plaintiffsseekdamagesagainstthe
defendantsandaninjunctionenjoiningdefendantsfromrequiringsellerstopaythebuyerbroker.TheCompanyintendsto
vigorouslydefendagainstallclaims.
OnOctober7,2013,RE/MAXHoldingsacquiredthenetassets,excludingcash,ofTailsforconsiderationpaidof$20.2million.
Followingearlierlitigationthatwasdismissed,severalshareholdersofTailsfiledacomplaintentitledRobertB.Fisher,CarlaL.
Fisher,BradleyG.RhodesandJamesD.Schwartzv.GailLiniger,DaveLiniger,BruceBenham,RE/MAXHoldings,Inc.and
TailsHoldco,Inc.inDenverDistrictCourt("TailsII").OnFebruary13,2018,thepartiessignedaformalSettlementAgreement
andMutualGeneralReleaseresultingintheCompanyrecordingachargeof$2.6millionin“Selling,operatingand
administrativeexpenses”intheaccompanyingConsolidatedStatementsofIncomeduringtheyearendedDecember31,2017.In
February2018,theCompanyreceived$1.9millionfromitsinsurancecarriersasreimbursementofattorneys’feesandaportion
ofthesettlementandpaid$4.5milliontosatisfythetermsoftheSettlementAgreement.Asaresultofthesettlement,the
litigationwasdismissedwithprejudiceonMarch1,2018.
16. Defined-Contribution Savings Plan
TheCompanysponsorsanemployeeretirementplan(the“401(k)Plan”)thatprovidescertaineligibleemployeesoftheCompany
anopportunitytoaccumulatefundsforretirement.TheCompanyprovidesmatchingcontributionsonadiscretionarybasis.
DuringtheyearsendedDecember31,2019,2018and2017,theCompanyrecognizedexpenseof$2.1million,$1.8millionand
$1.5million,respectively,formatchingcontributionstothe401(k)Plan.
17. Related-Party Transactions
ThemajoritystockholdersofRIHI,specificallytheCompany’scurrentChairmanandCo-FounderandtheCompany’sViceChair
andCo-FounderhavemadeandcontinuetomakeagolfcoursetheyownavailabletotheCompanyforbusinesspurposes.The
CompanyusedthegolfcourseandrelatedfacilitiesforbusinesspurposesatminimalchargeduringtheyearsendedDecember
31,2019,2018and2017.Additionally,theCompanyrecordedexpenseof$0.5millionforthevalueofthebenefitsprovidedto
CompanypersonnelandothersforthecomplimentaryuseofthegolfcourseduringeachyearendedDecember31,2019,2018
and2017,withanoffsettingincreaseinadditionalpaidincapital.
TheCompanyalsoprovidedsupportservicestotheMarketingFundspriortotheiracquisitiononJanuary1,2019.SeeNote2
Summary of Significant Accounting Policies andNote6Acquisitions foradditionalinformation.
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18. Segment Information
TheCompanyoperatesunderthefollowingfouroperatingsegments:RE/MAXFranchising,MottoFranchising,MarketingFunds
andbooj.Duetoquantitativeinsignificance,theboojoperatingsegmentdoesnotmeetthecriteriaofareportablesegmentandis
includedin“Other”.MottoFranchisingdoesnotmeetthequantitativesignificancetest;however,managementhaschosento
reportresultsforthesegmentasitbelievesitwillbeakeydriveroffuturesuccessforHoldings.Managementevaluatesthe
operatingresultsofitssegmentsbaseduponrevenueandadjustedearningsbeforeinterest,theprovisionforincometaxes,
depreciationandamortizationandothernon-cashandnon-recurringcashchargesorotheritems(“AdjustedEBITDA”).The
Company’spresentationofAdjustedEBITDAmaynotbecomparabletosimilarmeasuresusedbyothercompanies.Exceptfor
theadjustmentsidentifiedbelowinarrivingatAdjustedEBITDA,theaccountingpoliciesofthereportablesegmentsarethesame
asthosedescribedinNote2,Summary of Significant Accounting Policies.
Thefollowingtablepresentsrevenuefromexternalcustomersbysegment(inthousands):
Year Ended December 31,
2019 2018* 2017*
Continuingfranchisefees $ 95,853 $ 98,828 $ 93,232
Annualdues 35,409 35,894 33,767
Brokerfees 45,990 46,871 43,801
Franchisesalesandotherrevenue 22,383 22,911 22,357
TotalRE/MAXFranchising 199,635 204,504 193,157
Continuingfranchisefees 4,075 2,276 462
Franchisesalesandotherrevenue 468 260 95
TotalMottoFranchising 4,543 2,536 557
MarketingFundsfees 72,299 — —
Other 5,816 5,586 —
Totalrevenue
$ 282,293 $ 212,626 $ 193,714
*AmountsintheyearsendedDecember31,2018and2017havebeenrecasttoshowMottoseparately.
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ThefollowingtablepresentsareconciliationofAdjustedEBITDAbysegmenttoincomebeforeprovisionforincometaxes(in
thousands):
Year Ended December 31,
2019 2018* 2017*
AdjustedEBITDA:RE/MAXFranchising $ 106,810 $ 108,669 $ 105,184
AdjustedEBITDA:MottoFranchising (2,709) (3,436) (3,039)
AdjustedEBITDA:Other (586) (917) —
AdjustedEBITDA:Consolidated 103,515 104,316 102,145
Gain(loss)onsaleordispositionofassetsandsublease,net
(a)
(342) 139 (4,260)
Equity-basedcompensationexpense (10,934) (9,176) (2,900)
Acquisition-relatedexpense
(b)
(1,127) (1,634) (5,889)
GainonreductioninTRAliability
(c)
— 6,145 32,736
SpecialCommitteeinvestigationandremediationexpense
(d)
— (2,862) (2,634)
Fairvalueadjustmentstocontingentconsideration
(e)
(241) 1,289 (180)
Interestincome 1,446 676 352
Interestexpense (12,229) (12,051) (9,996)
Depreciationandamortization (22,323) (20,678) (20,512)
Incomebeforeprovisionforincometaxes
$ 57,765 $ 66,164 $ 88,862
*AmountsintheyearsendedDecember31,2018and2017havebeenrecasttoshowMottoseparately.
(a) Representsgain(loss)onthesaleordispositionofassetsaswellasthegains(losses)onthesubleaseofaportionofour
corporateheadquartersofficebuilding.
(b) Acquisition-relatedexpenseincludeslegal,accounting,advisoryandconsultingfeesincurredinconnectionwiththe
acquisitionandintegrationofacquiredcompanies.
(c) GainonreductionintaxreceivableagreementliabilityisaresultoftheTaxCutsandJobsActenactedinDecember2017
andfurtherclarifiedin2018.SeeNote12,Income Taxes foradditionalinformation.
(d) SpecialCommitteeinvestigationandremediationexpenserelatestocostsincurredinrelationtothepreviouslydisclosed
investigationbythespecialcommitteeofindependentdirectorsofactionsofcertainmembersofourseniormanagementand
theimplementationoftheremediationplan.
(e) Fairvalueadjustmentstocontingentconsiderationincludeamountsrecognizedforchangesintheestimatedfairvalueofthe
contingentconsiderationliability.SeeNote11,Fair Value Measurementsforadditionalinformation.
ThefollowingtablepresentstotalassetsoftheCompany’ssegments(inthousands):
As of December 31,
2019 2018*
RE/MAXFranchising $ 479,370 $ 406,643
MarketingFunds 41,090 —
MottoFranchising 20,161 21,346
Other 1,731 384
Totalassets
$ 542,352 $ 428,373
*AmountsasofDecember31,2018havebeenrecasttoshowMottoseparately.
Thefollowingtablepresentslong-livedassets,netofaccumulateddepreciationdisaggregatedbygeographicalarea(in
thousands):
As of December 31,
2019 2018
U.S.
$ 5,406 $ 4,342
Global
38 48
Totallong-livedassets
$ 5,444 $ 4,390
TableofContents
105
19. Quarterly Financial Information (unaudited)
Summarizedquarterlyresultswereasfollows(inthousands,exceptsharesandpershareamounts):
Forthe Quarter Ended
 March 31, 2019  June 30, 2019  September 30, 2019  December 31, 2019
Totalrevenue $ 71,178 $ 71,381 $ 71,541 $ 68,193
Totaloperatingexpenses 58,233 49,311 48,097 58,213
Operatingincome 12,945 22,070 23,444 9,980
Totalotherexpenses,net  (2,780) (2,751) (2,727) (2,416)
Incomebeforeprovisionforincome
taxes 10,165 19,319 20,717 7,564
Provisionforincometaxes (1,908) (3,186) (3,453) (2,362)
Netincome 8,257 16,133 17,264 5,202
Less:netincomeattributabletonon-
controllinginterest 3,848 7,563 8,091 2,314
NetincomeattributabletoHoldings
$ 4,409 $ 8,570 $ 9,173 $ 2,888
NetincomeattributabletoHoldingsper
shareofClassAcommonstock
Basic
$ 0.25 $ 0.48 $ 0.51 $ 0.16
Diluted
$ 0.25 $ 0.48 $ 0.51 $ 0.16
WeightedaveragesharesofClassA
commonstockoutstanding
Basic
17,775,381 17,808,321 17,826,332 17,837,386
Diluted
17,817,620 17,833,958 17,840,158 17,978,431
For the Quarter Ended
 March 31, 2018  June 30, 2018  September 30, 2018  December 31, 2018
Totalrevenue $ 52,642 $ 54,277 $ 54,866 $ 50,841
Totaloperatingexpenses 38,925 33,363 33,059 29,428
Operatingincome 13,717 20,914 21,807 21,413
Totalotherexpenses,net (2,688) (3,176) (2,846) (2,977)
Incomebeforeprovisionforincome
taxes 11,029 17,738 18,961 18,436
Provisionforincometaxes (1,997) (3,283) (3,555) (7,507)
Netincome 9,032 14,455 15,406 10,929
Less:netincomeattributabletonon-
controllinginterest 4,089 6,848 7,307 4,695
NetincomeattributabletoHoldings
$ 4,943 $ 7,607 $ 8,099 $ 6,234
NetincomeattributabletoHoldingsper
shareofClassAcommonstock
Basic
$ 0.28 $ 0.43 $ 0.46 $ 0.35
Diluted
$ 0.28 $ 0.43 $ 0.46 $ 0.35
WeightedaveragesharesofClassA
commonstockoutstanding
Basic
17,709,095 17,746,042 17,746,184 17,748,745
Diluted
17,762,133 17,769,641 17,771,212 17,771,180
TableofContents
106
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Notapplicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Wemaintaindisclosurecontrolsandprocedures,asdefinedinRules13a-15(e)and15d-15(e)undertheSecuritiesExchangeAct
of1934(ExchangeAct),thataredesignedtoensurethatinformationrequiredtobedisclosedinourreportsfiledorsubmitted
undertheExchangeActisrecorded,processed,summarizedandreportedwithinthetimeperiodsspecifiedintheSEC’srulesand
forms.Disclosurecontrolsandproceduresinclude,withoutlimitation,controlsandproceduresdesignedtoensurethat
informationrequiredtobedisclosedisaccumulatedandcommunicatedtoourmanagement,includingourPrincipalExecutive
OfficerandPrincipalFinancialOfficer,asappropriate,toallowtimelydecisionsregardingrequireddisclosure.
Ourmanagement,underthesupervisionandwiththeparticipationofourPrincipalExecutiveOfficerandPrincipalFinancial
Officer,evaluatedtheeffectivenessofourdisclosurecontrolsandprocedures(asdefinedinRule13a-15(e)undertheSecurities
ExchangeActof1934)asoftheendoftheperiodcoveredbythisAnnualReportonForm10-K.Basedonthatevaluation,our
PrincipalExecutiveOfficerandPrincipalFinancialOfficerhaveconcludedthatasofDecember31,2019ourdisclosurecontrols
andprocedureswereeffective.
Management’s Report on Internal Control over Financial Reporting
Ourmanagementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreportingasdefinedin
Rule13a-15(f)undertheExchangeAct.Ourinternalcontroloverfinancialreportingisdesignedtoprovidereasonableassurance
regardingthereliabilityoffinancialreportingandthepreparationofconsolidatedfinancialstatementsforexternalpurposesin
accordancewithU.S.generallyacceptedaccountingprinciples.Ourinternalcontroloverfinancialreportingincludesthose
policiesandproceduresthat(1)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthe
transactionsanddispositionsofassetsofthecompany,(2)providereasonableassurancethattransactionsarerecordedas
necessarytopermitpreparationofconsolidatedfinancialstatementsforexternalpurposesinaccordancewithU.S.generally
acceptedaccountingprinciplesandthatreceiptsandexpendituresofthecompanyarebeingmadeonlyinaccordancewith
authorizationsofmanagementanddirectorsofthecompany,and(3)providereasonableassuranceregardingpreventionortimely
detectionofunauthorizedacquisition,useordispositionofassetsthatcouldhaveamaterialeffectontheconsolidatedfinancial
statements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,
projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequate
becauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
OurmanagementassessedtheeffectivenessoftheCompany'sinternalcontroloverfinancialreportingasofDecember31,2019,
usingthecriteriaintheInternal Control-Integrated Framework (2013)issuedbytheCommitteeofSponsoringOrganizationsof
theTreadwayCommission(“COSO”).Basedonthisevaluation,ourmanagementconcludedthattheCompany’sinternalcontrol
overfinancialreportingwaseffectiveasofDecember31,2019.
KPMGLLP,anindependentregisteredpublicaccountingfirm,hasindependentlyassessedtheeffectivenessofourinternal
controloverfinancialreportingasofDecember31,2019anditsreportisincludedherein.
Changes in Internal Controls over Financial Reporting
Therehavebeennochangesinourinternalcontroloverfinancialreportingidentifiedinconnectionwiththeevaluationrequired
byRules13a-15(d)and15d-15(d)oftheExchangeActthatoccurredduringourfourthfiscalquarterendedDecember31,2019
thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.
TableofContents
107
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
WehaveadoptedaCodeofConductandaSupplementalCodeofEthicsfortheChiefExecutiveOfficerandSeniorFinancial
Officers.Bothofthesecodesapplytoourchiefexecutiveofficer,principalfinancialofficer,principalaccountingofficerand
controller,orpersonsperformingsimilarfunctions.Bothofthesecodesareavailableonourwebsiteatwww.remax.com.
TheremaininginformationrequiredbythisItem10willbeincludedinourdefinitiveproxystatementforitsannualmeetingof
stockholders(the“ProxyStatement”)andisincorporatedhereinbyreference.
ITEM 11. EXECUTIVE COMPENSATION
TheinformationrequiredbythisItem11willbeincludedintheProxyStatementandisincorporatedhereinbyreference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
ThefollowingtableprovidesinformationasofDecember31,2019withrespecttosharesofourClassAcommonstockissuable
underourequitycompensationplan:
Equity Compensation Plan Information
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to Weighted-Average Equity Compensation
be Issued Upon Exercise Exercise Price of Plans (Excluding
of Outstanding Options, Outstanding Options, Securities Reflected in
Plan Category Warrants and Rights Warrants and Rights Column (a))
Equitycompensationplans
approvedbysecurityholders
595,416
(1)
$ —
(2)
2,122,970
Equitycompensationplansnot
approvedbysecurityholders
— — —
Total 595,416
(1)
$ —
(2)
2,122,970
(1) Represents595,416sharesissuableuponvestingofunvestedrestrictedstockunits.
(2) Theweightedaverageexercisepricedoesnottakeintoaccountsharesissuableuponvestingordeliveryofrestrictedstock
unitsbecausethesehavenoexerciseprice.
TheremaininginformationrequiredbythisItem12willbeincludedintheProxyStatementandisincorporatedhereinby
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
TheinformationrequiredbythisItem13willbeincludedintheProxyStatementandisincorporatedhereinbyreference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
TheinformationrequiredbythisItem14willbeincludedintheProxyStatementandisincorporatedhereinbyreference.
TableofContents
108
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) ThefollowingdocumentsarefiledaspartofthisAnnualReportonForm10-K:
1. ConsolidatedFinancialStatements
ThefollowingfinancialstatementsareincludedinPartII,Item8ofthisAnnualReportonForm10-K:
● ConsolidatedBalanceSheetsasofDecember31,2019andDecember31,2018
● ConsolidatedStatementsofIncomeforthefiscalyearsendedDecember31,2019,December31,2018and
December31,2017
● ConsolidatedStatementsofComprehensiveIncomeforthefiscalyearsendedDecember31,2019,December31,2018
andDecember31,2017
● ConsolidatedStatementsofStockholders’EquityforthefiscalyearsendedDecember31,2019,December31,2018and
December31,2017
● ConsolidatedStatementsofCashFlowsforthefiscalyearsendedDecember31,2019,December31,2018and
December31,2017
● NotestoConsolidatedFinancialStatements
● ReportofIndependentRegisteredPublicAccountingFirm
2. FinancialStatementSchedules
Separatefinancialstatementscheduleshavebeenomittedbecausesuchinformationisinapplicableorisincludedinthe
financialstatementsornotesdescribedabove.
3. Exhibits
TheexhibitslistedintheIndextoExhibits,whichappearsimmediatelyfollowingthesignaturepageandisincorporated
hereinbyreference,arefiledorincorporatedbyreferenceaspartofthisAnnualReportonForm10-K.
ITEM 16. FORM 10-K SUMMARY
None.
TableofContents
109
INDEX TO EXHIBITS
Exhibit No.
Exhibit Description
Form
File Number
Date of First Filing
Exhibit Number
Filed Herewith
3.1 AmendedandRestated
CertificateofIncorporation
10-Q 001-36101 11/14/2013 3.1
3.2 BylawsofRE/MAXHoldings,
Inc.
8-K 001-36101 2/22/2018 3.2
4.1 FormofRE/MAXHoldings,
Inc.’sClassAcommonstock
certificate.
S-1 333-190699 9/27/2013 4.1
4.2 DescriptionoftheRegistrant’s
SecuritiesRegisteredunder
Section12oftheSecurities
ExchangeActof1934,as
amended.
X
10.1 2013OmnibusIncentivePlan
andrelateddocuments.†
S-8 333-191519 10/1/2013 4.2
10.2 Lease,datedApril16,2010,by
andbetweenHubProperties
TrustandRE/MAX
International,LLC.
S-1 333-190699 8/19/2013 10.5
10.3 RegistrationRightsAgreement,
datedasofOctober1,2013,by
andamongRE/MAXHoldings,
Inc.andRIHI,Inc.
10-Q 001-36101 11/14/2013 10.8
10.4 ManagementServices
Agreement,datedasofOctober
1,2013,byandamongRMCO,
LLC,RE/MAX,LLCand
RE/MAXHoldings,Inc.
10-Q 001-36101 11/14/2013 10.9
10.5 RMCO,LLCFourthAmended
andRestatedLimitedLiability
CompanyAgreement.**
X
10.6 TaxReceivableAgreement,
datedasofOctober7,2013,by
andbetweenRIHI,Inc.and
RE/MAXHoldings,Inc.
10-Q 001-36101 11/14/2013 10.11
10.7 TaxReceivableAgreement,
datedasofOctober7,2013,by
andbetweenWestonPresidioV,
L.P.andRE/MAXHoldings,
Inc.
10-Q 001-36101 11/14/2013 10.12
TableofContents
110
Exhibit No.
Exhibit Description
Form
File Number
Date of First Filing
Exhibit Number
Filed Herewith
10.8 FormofIndemnification
Agreementbyandbetween
RE/MAXHoldings,Inc.and
eachofitsdirectorsand
executiveofficers.†
S-1 333-190699 9/27/2013 10.3
10.9 FormofTime-BasedRestricted
StockUnitAward.†
10-K 333-190699 2/24/2017 10.11
10.10 FormofPerformance-Based
RestrictedStockUnitAward.†
10-K 001-36101 2/22/2019 10.12
10.11 FormofRestrictedStockAward
(DirectorsandSenior
Officers).†
S-1 333-190699 9/27/2013 10.15
10.12 FormofRestrictedStockAward
(General).†
S-1 333-190699 9/27/2013 10.16
10.13 FormofStockOptionAward
(DirectorsandSenior
Officers).†
S-1 333-190699 9/27/2013 10.17
10.14 FormofStockOptionAward
(General).†
S-1 333-190699 9/27/2013 10.18
10.15 Joinder,datedMay29,2015,
amongRE/MAXHoldings,Inc.,
WestonPresidioV.,L.P.and
OberndorfInvestmentsLLC
10-Q 001-36101 8/7/2015 10.3
10.16 Joinder,datedOctober4,2018,
amongRE/MAXHoldings,Inc.,
OberndorfInvestmentsLLCand
ParallaxesCapitalOpportunities
fundILP
10-K 001-36101 2/22/2019 10.18
10.17 Joinder,datedDecember19,
2018,amongRE/MAX
Holdings,Inc.,Parallaxes
CapitalOpportunitiesFundILP
andParallaxesRain
Co-Investment,LLC
10-K 001-36101 2/22/2019 10.19
TableofContents
111
Exhibit No.
Exhibit Description
Form
File Number
Date of First Filing
Exhibit Number
Filed Herewith
10.18 AmendedandRestatedCredit
Agreement,datedasof
December15,2016,among
RMCO,LLC,RE/MAX,LLC,
theseverallendersfromtimeto
timepartiesthereto,and
JPMorganChaseBank,N.A.,as
administrativeagent.*
8-K 001-36101 12/21/2016 10.1
10.19 ConsentandWaiver,dated
November14,2017withrespect
totheAmendedandRestated
CreditAgreement,datedasof
December15,2016among
RE/MAX,LLC;RMCO,LLC;
theseveralbanksandother
financialinstitutionsorentities
fromtimetotimepartythereto;
andJPMorganChaseBank,
N.A.,asadministrativeagent.
8-K 001-36101 11/15/17 10.1
10.20 SecondConsentandWaiver,
datedDecember19,2017with
respecttotheAmendedand
RestatedCreditAgreement,
datedasofDecember15,2016
amongRE/MAX,LLC;RMCO,
LLC;theseveralbanksand
otherfinancialinstitutionsor
entitiesfromtimetotimeparty
thereto;andJPMorganChase
Bank,N.A.,asadministrative
agent.
8-K 001-36101 12/26/17 10.1
10.21 EquityPurchaseAgreement,
datedJanuary1,2019,byand
betweenRADF,LLCandDavid
Liniger.*
10-K 001-36101 2/22/2019 10.23
10.22 AssetPurchaseAgreement,
datedJanuary1,2019,byand
betweenRE/MAXTexasAd
Fund,Inc.
10-K 001-36101 2/22/2019 10.24
10.23 SharePurchaseAgreement,
datedJanuary1,2019,byand
betweenRE/MAXofWestern
Canada(1998),LLCandDavid
Liniger
10-K 001-36101 2/22/2019 10.25
TableofContents
112
Exhibit No.
Exhibit Description
Form
File Number
Date of First Filing
Exhibit Number
Filed Herewith
10.24 SharePurchaseAgreement,
datedJanuary1,2019,byand
betweenMottoFranchising,
LLCandDavidLiniger
10-K 001-36101 2/22/2019 10.26
10.25 SeverancePayBenefitPlan 8-K 001-36101 4/11/2019 10.1
21.1 ListofSubsidiaries X
23.1 ConsentofIndependent
RegisteredPublicAccounting
Firm.
X
24.1 PowerofAttorney(includedon
signaturepage)
X
31.1 CertificationofChiefExecutive
OfficerpursuanttoRule13a-
14(a)oftheSecuritiesExchange
Actof1934,asamended.
X
31.2 CertificationofChiefFinancial
OfficerpursuanttoRule13a-
14(a)oftheSecuritiesExchange
Actof1934,asamended.
X
32.1 CertificationofChiefExecutive
OfficerandChiefFinancial
Officer,pursuantto18U.S.C.
Section1350,asadopted
pursuanttoSection906ofthe
Sarbanes-OxleyActof2002
X
101 Thefollowingmaterialsfrom
theCompany’sAnnualReport
onForm10-Kfortheyearended
December31,2019formattedin
InlineExtensibleBusiness
ReportingLanguage(iXBRL):
(i)theConsolidatedStatements
ofIncome,(ii)theConsolidated
StatementsofComprehensive
Income,(iii)theConsolidated
BalanceSheets,(iv)the
ConsolidatedStatementsof
CashFlows,(v)the
ConsolidatedStatementsof
Stockholders’Equityand
(vi)relatednotes
X
TableofContents
113
Exhibit No.
Exhibit Description
Form
File Number
Date of First Filing
Exhibit Number
Filed Herewith
104 CoverPageInteractiveDataFile
–Thecoverpageinteractive
datafiledoesnotappearinthe
InteractiveDataFilebecauseits
XBRLtagsareembeddedwithin
theInlineXBRLdocument.
X
†Indicatesamanagementcontractorcompensatoryplanorarrangement.
*ExhibitsandscheduleshavebeenomittedpursuanttoItem601(b)(2)ofRegulationS-K.TheRegistrantherebyundertakesto
furnishsupplementalcopiesofanyomittedexhibitsandschedulesuponrequestbytheSEC.
**Exhibitrefiledtocorrectcertainsectionreferences.
SIGNATURES
PursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934,theRegistranthasdulycausedthis
reporttobesignedonitsbehalfbytheundersignedthereuntodulyauthorized.
RE/MAXHoldings,Inc.
(Registrant)

Date:February21,2020 By: /s/AdamM.Contos
Adam M. Contos
Director and Chief Executive Officer
(Principal Executive Officer)
Date:February21,2020 By: /s/KarriR.Callahan
Karri R. Callahan
Chief Financial Officer
(Principal Financial Officer)
Date:February21,2020 By: /s/BrettA.Ritchie
Brett A. Ritchie
Chief Accounting Officer
(Principal Accounting Officer)
POWER OF ATTORNEY
Knowallpersonsbythesepresents,thateachpersonwhosesignatureappearsbelowconstitutesandappointsAdamM.Contos
andKarriR.Callahan,andeachofthem,assuchperson’strueandlawfulattorneys-in-factandagents,withfullpowerof
substitutionandresubstitution,forsuchpersonandinsuchperson’sname,placeandstead,inanyandallcapacities,tosignany
andallamendmentstothisannualreportonForm10-K,andtofilethesame,withallexhibitsthereto,andallotherdocumentsin
connectiontherewith,withtheSecuritiesandExchangeCommission,grantinguntoeachsaidattorneys-in-factandagents,and
eachofthem,fullpowerandauthoritytodoandperformeachandeveryactandthingrequisiteandnecessarytobedonein
connectiontherewith,asfullytoallintentsandpurposesassuchpersonmightorcoulddoinperson,herebyratifyingand
confirmingallthatsaidattorneys-in-factandagents,oranyofthemortheirorsuchperson’ssubstituteorsubstitutes,may
lawfullydoorcausetobedonebyvirtuethereof.
PursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisreporthasbeensignedbelowbythefollowingpersons
onbehalfoftheRegistrantandinthecapacitiesandonthedatesindicated.
Signature Title Date
/s/AdamM.Contos DirectorandChiefExecutiveOfficer February21,2020
Adam M. Contos
(PrincipalExecutiveOfficer)
/s/KarriR.Callahan ChiefFinancialOfficer February21,2020
Karri R. Callahan
(PrincipalFinancialOfficer)
Exhibit4.2
TableofContents
114
/s/BrettA.Ritchie ChiefAccountingOfficer February21,2020
Brett A. Ritchie
(PrincipalAccountingOfficer)
/s/DavidL.Liniger ChairmanandCo-Founder February21,2020
David L. Liniger
/s/GailA.Liniger ViceChairandCo-Founder February21,2020
Gail A. Liniger
/s/KathleenJ.Cunningham Director February21,2020
Kathleen J. Cunningham
/s/RogerJ.Dow Director February21,2020
Roger J. Dow
/s/RonaldE.Harrison Director February21,2020
Ronald E. Harrison
/s/DanielJ.Predovich Director February21,2020
Daniel J. Predovich
/s/ChristineM.Riordan Director February21,2020
Christine M. Riordan
/s/JosephA.DeSplinter Director February21,2020
Joseph A. DeSplinter
/s/TeresaS.VanDeBogart Director February21,2020
Teresa S. Van De Bogart
Exhibit4.2
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED UNDER SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
OurClassAcommonstockisregisteredunderSection12oftheSecuritiesExchangeActof1934,asamended.
Description of Capital Stock
Our authorized capital stock consists of 180,000,000 shares of Class A common stock, par value $0.0001 per share,
1,000 shares of Class B common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value
$0.0001 per share. The following description of our Class A common stock is a summary and is qualified in its entirety by
reference to our certificate of incorporation and bylaws, and by applicable law. Unless our board of directors determines
otherwise, we will issue all shares of our Class A common stock in uncertificated form.
Class A common stock
Holders of shares of our Class A common stock are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders.
Holders of shares of our Class A common stock are entitled to receive dividends when and if declared by our board of
directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of
dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.
Upon our dissolution or liquidation or the sale of all or substantially all of our assets, and after payment in full of all
amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the
holders of shares of our Class A common stock will be entitled to receive pro rata our remaining assets available for
distribution.
Holders of shares of our Class A common stock do not have preemptive, subscription, redemption or conversion rights.
Options and Other Equity Awards
Our certificate of incorporation authorizes us to issue shares of Class A common stock and options, rights, warrants and
appreciation rights relating to Class A common stock for the consideration and on the terms and conditions established by
our board of directors in its sole discretion, whether in connection with acquisitions or otherwise.
Antitakeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws also contain provisions that may delay, defer or discourage another party
from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive
takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire
control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of
any such acquisition in favor of our stockholders. However, they also give our board of directors the power to discourage
acquisitions that some stockholders may favor.
Undesignated Preferred Stock
The authorization of undesignated preferred stock in our certificate of incorporation will make it possible for our board
of directors to issue preferred stock with super voting, special approval, dividend or other rights or
preferences on a discriminatory basis that could impede the success of any attempt to acquire us. These and other provisions
may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our
company.
Classified Board of Directors
Our certificate of incorporation provides that our board of directors will be divided into three classes, with each class
serving three-year staggered terms. These provisions may have the effect of deferring, delaying or discouraging hostile
takeovers, or changes in control or management of our company.
Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
Our certificate of incorporation provides that special meetings of the stockholders may be called only by a resolution
adopted by the affirmative vote of the majority of the directors then in office. Our bylaws prohibit the conduct of any
business at a special meeting other than as specified in the notice for such meeting. In addition, any stockholder who wishes
to bring business before an annual meeting or nominate directors must comply with the requirements set forth in our bylaws.
These provisions may have the effect of deferring, delaying or discouraging hostile takeovers or changes in control or
management of our company.
No Stockholder Action by Written Consent
Pursuant to Section 228 of the Delaware General Corporation Law, or the DGCL, any action required to be taken at any
annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a
consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares
of our stock entitled to vote thereon were present and voted, unless our company's certificate of incorporation provides
otherwise. Our certificate of incorporation provides that any action required or permitted to be taken by our stockholders
may be effected at a duly called annual or special meeting of our stockholders and may not be effected by consent in writing
by such stockholders.
No Cumulative Voting
The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless
our amended and restated certificate of incorporation provides otherwise. Our certificate of incorporation does not provide
for cumulative voting.
Business Combinations with Interested Stockholders
We have elected in our certificate of incorporation not to be subject to Section 203 of the DGCL, an anti-takeover law.
In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a
merger, with a person or group owning 15% or more of the corporation's voting stock for a period of three years following
the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in a prescribed manner. Accordingly, we are
not subject to any anti-takeover effects of Section 203. However, our certificate of incorporation contains provisions that
have the same effect as Section 203, except that they provide that RIHI and any person to whom RIHI sells its common stock
will not be subject to the restrictions set forth in these provisions.
Transfer Agent and Registrar
The transfer agent and registrar for our Class A common stock is Broadridge Financial Solutions, Inc.
Exchange Listing
Our Class A common stock is listed on the NYSE under the symbol "RMAX".
Exhibit 10.5
RMCO, LLC
FOURTHAMENDEDANDRESTATEDLIMITEDLIABILITYCOMPANYAGREEMENT
DatedasofOctober1,2013
THE COMPANY INTERESTS REPRESENTED BY THIS FOURTH AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIESACTOF1933,ASAMENDED,ORUNDERANYOTHERAPPLICABLESECURITIESLAWS.
SUCHCOMPANYINTERESTS MAYNOTBESOLD, ASSIGNED,PLEDGEDOROTHERWISE DISPOSED
OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR
EXEMPTIONTHEREFROM,ANDCOMPLIANCEWITHTHEOTHERSUBSTANTIALRESTRICTIONSON
TRANSFERABILITYSETFORTHHEREIN.
TABLE OF CONTENTS
Page
ARTICLEIDEFINITIONS
3
ARTICLEIIORGANIZATIONALMATTERS
12
2.1 FormationofCompany 12
2.2 FourthAmendedandRestatedLimitedLiabilityCompanyAgreement 12
2.3 Name 12
2.4 Purpose 13
2.5 PrincipalOffice;RegisteredOffice 13
2.6 Term 13
2.7 NoState-LawPartnership 13
ARTICLEIIIUNITS;INITIALCAPITALIZATION;MEMBERS
13
3.1 Members 13
3.2 Units 14
3.3 RecapitalizationandSplit;HoldingsCapitalContribution;HoldingsPurchaseofCommon
Units;Redemptions
14
3.4 AuthorizationandIssuanceofAdditionalUnits 15
3.5 RepurchaseorRedemptionofClassAShares 17
3.6 CertificatesRepresentingUnits;Lost,StolenorDestroyedCertificates;Registrationand
TransferofUnits
17
3.7 NegativeCapitalAccounts 18
3.8 NoWithdrawal 18
3.9 LoansFromMembers 18
ARTICLEIVDISTRIBUTIONS
18
4.1 Distributions 18
4.2 RestrictedDistributions 20
ARTICLEVCAPITALACCOUNTS;ALLOCATIONS;TAXMATTERS
20
5.1 CapitalAccounts 20
5.2 Allocations 21
5.3 RegulatoryAllocations 21
5.4 FinalAllocations 22
5.5 TaxAllocations 22
5.6 IndemnificationandReimbursementforPaymentsonBehalfofaMember 23
ARTICLEVIMANAGEMENT
24
6.1 AuthorityofManager 24
6.2 ActionsoftheManager 24
6.3 Resignation 24
6.4 Removal 25
6.5 Vacancies 25
6.6 TransactionsBetweenCompanyandManager 25
6.7 Expenses 25
6.8 DelegationofAuthority 25
6.9 LimitationofLiabilityofManager 25
6.10 InvestmentCompanyAct 26
ARTICLEVIIRIGHTSANDOBLIGATIONSOFMEMBERS
26
-i-
7.1 LimitationofLiabilityofMembers 26
7.2 LackofAuthority 27
7.3 NoRightofPartition 27
7.4 Indemnification 27
7.5 MembersRighttoAct 28
7.6 InspectionRights 29
ARTICLEVIIIBOOKS,RECORDS,ACCOUNTINGANDREPORTS,AFFIRMATIVECOVENANTS
29
8.1 RecordsandAccounting 29
8.2 FiscalYear 30
8.3 Reports 30
ARTICLEIXTAXMATTERS
30
9.1 PreparationofTaxReturns 30
9.2 TaxElections 30
9.3 TaxControversies 30
ARTICLEXRESTRICTIONSONTRANSFEROFUNITS;PREEMPTIVERIGHTS
31
10.1 TransfersbyMembers 31
10.2 PermittedTransfers 31
10.3 RestrictedUnitsLegend 32
10.4 Transfer 32
10.5 Assignee’sRights 32
10.6 Assignor’sRightsandObligations 33
10.7 OverridingProvisions 33
ARTICLEXIREDEMPTIONANDEXCHANGERIGHTS
34
11.1 RedemptionRightofaMember 34
11.2 ElectionandContributionofHoldings 36
11.3 ExchangeRightofHoldings 37
11.4 ReservationofClassAShares;Listing;CertificateofHoldings 37
11.5 EffectofExerciseofRedemptionorExchangeRight 38
11.6 TaxTreatment 38
ARTICLEXIIADMISSIONOFMEMBERS
38
12.1 SubstitutedMembers 38
12.2 AdditionalMembers 38
ARTICLEXIIIWITHDRAWALANDRESIGNATIONOFMEMBERS
38
13.1 WithdrawalandResignationofMembers 38
ARTICLEXIVDISSOLUTIONANDLIQUIDATION
39
14.1 Dissolution 39
14.2 LiquidationandTermination 39
14.3 Deferment;DistributioninKind 40
14.4 CancellationofCertificate 40
14.5 ReasonableTimeforWindingUp 40
14.6 ReturnofCapital 40
ARTICLEXVVALUATION
41
15.1 Determination 41
15.2 DisputeResolution 41
ARTICLEXVIGENERALPROVISIONS
41
-ii-
16.1 PowerofAttorney 41
16.2 Confidentiality 42
16.3 Amendments 42
16.4 TitletoCompanyAssets 43
16.5 AddressesandNotices 43
16.6 BindingEffect 43
16.7 Creditors 43
16.8 Waiver 44
16.9 Counterparts 44
16.10 ApplicableLaw 44
16.11 Severability 44
16.12 FurtherAction 44
16.13 DeliverybyElectronicTransmission 44
16.14 RightofOffset 44
16.15 Effectiveness;FourthLLCAgreement 45
16.16 EntireAgreement 45
16.17 Remedies 45
16.18 DescriptiveHeadings;Interpretation 45
-iii-
RMCO, LLC
FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
This FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
“Agreement”),datedasofOctober1,2013,isenteredintobyandamongRMCO,LLC,aDelawarelimitedliability
company(the“Company”),anditsMembers(asdefinedherein).
WHEREAS, RE/MAX International Holdings, Inc. (“RIHI”), as sole Member, entered into that certain
LimitedLiabilityCompanyAgreementoftheCompany,datedasofApril15,2010;
WHEREAS, RIHI and Weston Presidio V, L.P. (collectively, the “Original Members”) entered into that
certainAmendedandRestatedLimitedLiabilityCompanyAgreementoftheCompany,datedasofApril16,2010;
WHEREAS,theOriginalMembersenteredintothatcertainSecondAmendedandRestatedLimitedLiability
CompanyAgreementoftheCompany,datedasofNovember15,2012;
WHEREAS,theOriginalMembersenteredintothatcertainThirdAmendedandRestatedLimitedLiability
CompanyAgreementoftheCompany,datedasofFebruary1,2013(the“ThirdLLCAgreement”);
WHEREAS, theCompany and theOriginal Members desire to haveRE/MAX Holdings, Inc., a Delaware
corporation(“Holdings”),effectaninitialpublicoffering(the“IPO”)ofsharesofitsClassACommonStock,par
value$0.0001 (the“ClassACommonStock”), and in connectiontherewith, to amend andrestate theThird LLC
Agreementtoreflect(i)arecapitalizationoftheCompany(the“Recapitalization”),(ii)theadditionofHoldingsasa
MemberintheCompanyanditsdesignationassoleManager(asdefinedherein)oftheCompany,and(iii)therights
andobligationsoftheMemberswhichareenumeratedandagreeduponinthetermsofthisAgreementeffectiveasof
theEffectiveTime(asdefinedherein),pursuanttowhichtheThirdLLCAgreementandtheLetterAgreement(as
definedherein)shallbesupersededentirelybythisAgreement;
WHEREAS,inconnectionwiththeRecapitalization,(i)WP’spriorClassAPreferredUnits(asdefinedinthe
ThirdLLC Agreement) willbe converted into PreferredUnits (as defined herein)and Common Units(as defined
herein)and(ii)RIHI’spriorClassBCommonUnits(asdefinedintheThirdLLCAgreement)willbeconvertedinto
CommonUnits;
WHEREAS, exclusive of the Over-Allotment Option (as defined below), Holdings will sell shares of its
ClassACommonStocktopublicinvestorsintheIPOandwilluseapproximately$27.3millionofthenetproceeds
receivedfromtheIPO(the“NetIPOProceeds”)topurchasetheHBN/TailsAssets(asdefinedherein);
2
WHEREAS, following the Recapitalization, the IPO, and Holdings’ purchase of the HBN/Tails Assets,
Holdings will subsequently contribute the HBN/Tails Assets (the “HBN/Tails Contribution”) to the Company in
exchangeforCommonUnitsworthapproximately$27.3millionpursuanttothatcertainContributionAgreement(as
definedherein);
WHEREAS,followingtheHBN/TailsContribution,HoldingswillusetheNetIPOProceedsremainingafter
itspurchaseoftheHBN/TailsAssets(the“RemainingNetIPOProceeds”)topurchasenewlyissuedCommonUnits
fromtheCompanypursuanttothatcertainCommonUnitPurchaseAgreement(asdefinedherein);
WHEREAS, following the Company’s receipt of the Remaining Net IPO Proceeds from Holdings in
exchange for theCompany’s delivery of newlyissued CommonUnits to Holdings,the Company willpay to WP
$49,850,000oftheRemainingNetIPOProceedsinordertocompletelyredeemthePreferredUnitsheldbyWP(the
“WPPreferredUnitRedemption”)andtosatisfytheliquidationpreferenceassociatedwiththePreferredUnits;
WHEREAS,followingtheWPPreferredUnitRedemption,theCompanywillpay$$76,931,250.00toWP
from the rest of the Remaining Net IPO Proceeds in order to redeem all Common Units held by WP (the “WP
CommonUnitRedemption”)andwillthereafterpay$$40,063,743.50toRIHIinordertoredeemCommonUnits
heldbyRIHI(the“RIHIInitialCommonUnitRedemption”);
WHEREAS,asaresultoftheRecapitalizationandtherelatedtransactionsdescribedabove,WPwillbefully
redeemedandwillnolongerbeaMember;
WHEREAS,HoldingsmayissueadditionalClassACommonStockinconnectionwiththeIPOasaresultof
the exercise by the underwriters of their over-allotment option (the “Over‑Allotment Option”) and, if the Over-
Allotment Option is in fact exercised in whole or in part, any additional net proceeds (the “Net Over-Allotment
Proceeds”)alsoshallbeusedbyHoldingstopurchasenewlyissuedCommonUnitspursuanttotheCommonUnit
PurchaseAgreement;
WHEREAS, following the Company’s receipt of any Net Over-Allotment Proceeds from Holdings in
exchangefortheCompany’s deliveryofnewlyissuedCommonUnitstoHoldings,theCompany will,inturn,use
suchNetOver-AllotmentProceeds toredeem additionalCommonUnits heldbyRIHI(the“RIHIOver-Allotment
OptionCommonUnitRedemption”);
NOW,THEREFORE,inconsiderationofthemutualcovenantscontainedhereinandothergoodandvaluable
consideration,thereceiptandsufficiencyofwhichareherebyacknowledged,theMembers,intendingtobelegally
bound,herebyagreeasfollows:
ARTICLE I
DEFINITIONS
The following definitions shall be applied to the terms used in this Agreement for all purposes, unless
otherwiseclearlyindicatedtothecontrary.
3
“AdditionalMember”hasthemeaningsetforthinSection12.2.
“AdjustedCapitalAccountDeficit”meanswithrespecttoanyCapitalAccountasoftheendofanyTaxable
Year,the amountbywhich the balanceinsuch Capital Accountisless thanzero.For this purpose,suchPerson’s
CapitalAccountbalanceshallbe:
(i)reducedforanyitemsdescribedinTreasuryRegulationSection1.704-1(b)(2)(ii)(d)(4),(5),and(6),
and
(ii)increasedforanyamountsuchPersonisobligatedtocontributeoristreatedasbeingobligatedto
contribute to the Company pursuant to Treasury Regulation Section 1.704- 1(b)(2)(ii)(c) (relating to partner
liabilitiestoapartnership)or1.704-2(g)(1)and1.704-2(i)(relatingtominimumgain).
“AdmissionDate”hasthemeaningsetforthinSection10.6.
“Affiliate”(and,withacorrelativemeaning,“Affiliated”)means,withrespecttoaspecifiedPerson,aPerson
that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common
control with, the Person specified. As used in this definition, “control” (including with correlative meanings,
“controlled by”and“under common control with”)means possession, directly orindirectly, ofpower todirect or
causethedirectionofmanagementorpolicies(whetherthroughownershipofvotingsecuritiesorbycontractorother
agreement).
“Agreement”hasthemeaningsetforthinthePreamble.
“Appraiser”hasthemeaningsetforthinSection15.2.
“Assignee” meansa Person to whom a Company Interest has been transferred butwho hasnot become a
MemberpursuanttoArticleXII.
“AssumedTaxLiability” means, withrespect toa Member,an amount equalto theDistribution TaxRate
multipliedbytheaggregateamountofallitemsofincome,gain,deduction,lossandcreditallocated toaMember
pursuanttoSection5.5;providedsuchAssumedTaxLiabilityshallbecomputed,inthecaseofHoldings,without
regardtoanyreductionintaxableincomeattributabletoany“BasisAdjustments”(assuchtermisdefinedintheTax
ReceivableAgreements).
“Base Rate” means, on any date, a variable rate per annum equal to the rate of interest most recently
publishedbyTheWallStreetJournalasthe“primerate”atlargeU.S.moneycenterbanks.
“BookValue”means,withrespecttoanyCompanyproperty,theCompany’sadjustedbasisforU.S.federal
income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treasury
RegulationSection1.704-1(b)(2)(iv)(d)-(g).
“Brokerage”meansRE/MAXBrokerage,LLC,aDelawarelimitedliabilitycompanyandaSubsidiaryofthe
Company.
4
“BusinessDay”meansanydayotherthanaSaturdayoraSundayoradayonwhichbankslocatedinDenver,
Coloradogenerallyareauthorizedorrequiredbylawtoclose.
“CapitalAccount”meansthecapitalaccountmaintainedforaMemberpursuanttoSection5.1.
“CapitalContribution”meansanycash,cashequivalents,promissoryobligationsortheFairMarketValueof
otherpropertywhichaMembercontributedtotheCompany.
“CashSettlement”meansimmediately availablefundsinU.S.dollarsinanamountequaltotheRedeemed
UnitsEquivalent.
“Certificate”meanstheCompany’sCertificateofFormationasfiledwiththeSecretaryofStateofDelaware.
“ChangeofControlTransaction”meansasaleofallorsubstantiallyalloftheCompany’sassetsdetermined
on a consolidated basis or a sale of (a) a majority of the Company’s outstanding Units or (b) a majority of the
outstandingvotingsecuritiesofanySubsidiaryoftheCompany;ineithercase,whetherbymerger,recapitalization,
consolidation,reorganization,combinationorotherwise),provided,however,thatneither(x)atransactionsolelyfor
thepurposeofchangingthejurisdictionofdomicileoftheCompany,nor(y)atransactionsolelyforthepurposeof
changingtheformofentityoftheCompany,shallconstituteaChangeofControlTransaction.
“ClassAPreferredUnit”hasthemeaningsetforthinArticle1oftheThirdLLCAgreement.
“ClassACommonStock”hasthemeaningsetforthintheRecitals.
“ClassACommonUnit”hasthemeaningsetforthinArticle1oftheThirdLLCAgreement.
“ClassBCommonStock”meansClassBCommonStock,parvalue$0.0001pershare,ofHoldings.
“Code”meanstheUnitedStatesInternalRevenueCodeof1986,asamended.
“CommonUnit”meansaUnit representingafractionalpartoftheCompanyInterestsoftheMembers and
havingtherightsandobligationsspecifiedwithrespecttotheCommonUnitsinthisAgreement.
“CommonUnitholder”meansaholderofCommonUnits.
“CommonUnitPurchase”hasthemeaningsetforthinSection3.3(c).
“Common Unit Purchase Agreement” means that certain Common Unit Purchase Agreement between
HoldingsandtheCompanyanddatedasofthedatehereof.
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“CommonUnitRedemptionPrice”meansthearithmeticaverageofthevolumeweightedaveragepricesfora
share of Class A Common Stock on the principal U.S. securities exchange or automated or electronic quotation
systemonwhichClassACommonStocktrades,asreportedbyBloomberg,L.P.,oritssuccessor,foreachofthefive
(5) consecutive full Trading Days ending on and including the last full Trading Day immediately prior to the
RedemptionDate,subjecttoappropriateandequitableadjustmentforanystocksplits,reversesplits,stockdividends
or similar events affecting the Class A Common Stock. If the Class A Common Stock no longer trades on a
securitiesexchangeorautomatedorelectronicquotationsystem,thenamajorityoftheIndependentDirectorsshall
determinetheCommonUnitRedemptionPriceingoodfaith.
“Company”hasthemeaningsetforthinthePreamble.
“CompanyInterest”meanstheinterestofaMemberinProfits,LossesandDistributions.
“ContributionAgreement”meansthatcertainContributionAgreementbetweenHoldingsandtheCompany
anddatedasofthedatehereof.
“ContributionNotice”hasthemeaningsetforthinSection11.1(b).
“Credit Agreement” means that certain Credit Agreement, dated as of July 31, 2013, by and among the
Company,RE/MAXLLC,theseverallendersfromtimetotimepartiesthereto,andJPMorganChaseBank,N.A.,as
administrative agent for the lenders, including all exhibits, schedules and attachments thereto, as such Credit
Agreement is in effect as of July 31, 2013, as the same may be amended, refinanced, restated, supplemented or
otherwisemodifiedfromtimetotime.
“DelawareAct”meanstheDelawareLimitedLiabilityCompanyAct,6Del.L.§18-101,etseq.,asitmaybe
amendedfromtimetotime,andanysuccessortotheDelawareAct.
“Distributable Cash” shall mean, as of any relevant date on which a determination is being made by the
ManagerregardingapotentialdistributionpursuanttoSection4.1(a),theamountofcashthatcouldbedistributedby
the Company pursuantto theCredit Agreement (andwithout otherwise violatingany applicable provisions of the
CreditAgreement).
“Distribution”(and,withacorrelativemeaning,“Distribute”)meanseachdistributionmadebytheCompany
to a Member with respect to such Member’s Units, whether in cash, property or securities of the Company and
whether by liquidating distribution or otherwise; provided,  however, that none of the following shall be a
Distribution:(i)anyrecapitalizationthatdoesnotresultinthedistributionofcashorpropertytoMembersorany
exchange ofsecurities of the Company, and any subdivision (by Unit split or otherwise) or any combination (by
reverse Unit split or otherwise) of any outstanding Units, (ii) any payments made by the Company to Holdings
pursuant to the Management Services Agreement (which shall be treated as payments made by the Company to
HoldingsunderSection707(a)oftheCode),or(iii)anyotherpaymentmadebytheCompanytoaMemberthatis
notproperlytreatedasa“distribution”forpurposesofSections731,732,or733orotherapplicableprovisionsofthe
Code.
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“DistributionTaxRate”shallmeanarateequaltothehighesteffectivemarginalcombinedfederal,stateand
localincometaxrateforaFiscalYearprescribedforaColoradoresident,asdeterminedinthereasonablediscretion
oftheManager.
“EffectiveTime”hasthemeaningsetforthinSection16.15.
“EquityCompensationNotice”hasthemeaningsetforthinSection3.4(c)(i).
“Equity Securities” means (i) Units or other equity interests in the Company or any Subsidiary of the
Company(includingotherclassesorgroupsthereofhavingsuchrelativerights,powersanddutiesasmayfromtime
totimebeestablishedbytheManagerpursuanttotheprovisionsofthisAgreement,includingrights,powersand/or
dutiesseniortoexistingclassesandgroupsofUnitsandotherequityinterestsintheCompanyoranySubsidiaryof
theCompany),(ii)obligations,evidencesofindebtednessorothersecuritiesorinterestsconvertibleorexchangeable
intoUnitsorotherequityinterestsintheCompanyoranySubsidiaryoftheCompany,and(iii)warrants,optionsor
otherrightstopurchaseorotherwiseacquireUnitsorotherequityinterestsintheCompanyoranySubsidiaryofthe
Company.
“EventofWithdrawal”meanstheexpulsion,bankruptcyordissolutionofaMemberortheoccurrenceofany
othereventthatterminatesthecontinuedmembershipofaMemberintheCompany.“EventofWithdrawal”shallnot
includeaneventthat(i)terminatestheexistenceofaMemberforincometaxpurposes(including,withoutlimitation,
(a)achangeinentityclassificationofaMemberunderTreasuryRegulationsSection301.7701-3,(b)terminationof
apartnershippursuanttoCodeSection708(b)(1)(B),(c)asaleofassetsby,orliquidationof,aMemberpursuantto
anelectionunderCodeSection338,or(d)merger,severance,orallocationwithinatrustoramongsub-trustsofa
trustthatisaMember)butthat(ii)doesnotterminatetheexistenceofsuchMemberunderapplicablestatelaw(or,
inthe case of atrust that isa Member, doesnot terminatethe trusteeshipof thefiduciaries undersuch trustwith
respecttoalltheCompanyInterestsofsuchtrustthatisaMember).
“Fair Market Value” means, with respect to any asset, its fair market value determined according to
ArticleXV.
“FiscalPeriod”meansanyinterimaccountingperiodwithinaTaxableYearestablishedbytheManagerand
whichispermittedorrequiredbySection706oftheCode.
“FiscalYear”meanstheCompany’sannualaccountingperiodestablishedpursuanttoSection8.2.
“GovernmentalEntity”meanstheUnitedStatesofAmericaoranyothernation,anystateorotherpolitical
subdivisionthereof,oranyentityexercisingexecutive,legislative,judicial,regulatoryoradministrativefunctionsof
government.
“HBN/TailsAssets”meanstheassetspurchasedbyHoldingsfromHBN,Inc.andTails,Inc.
“HBN/TailsContribution”hasthemeaningsetforthintheRecitals.
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“Holdings”hasthemeaningsetforthintheRecitals.
“HoldingsBoard”meanstheBoardofDirectorsofHoldings.
“IndemnifiedPerson”hasthemeaningsetforthinSection7.4(a).
“IndependentDirectors”meanstheindependentmembersoftheHoldingsBoard.
“InvestmentCompanyAct”meanstheInvestmentCompanyActof1940,asamendedfromtimetotime.
“IPO”hasthemeaningsetforthintheRecitals.
“IPOClosingDate”meanstheclosingdateoftheIPO,whichfortheavoidanceofdoubtmeansthedateon
which all IPO proceeds required to be delivered pursuant to the Underwriting Agreement have been delivered to
HoldingsinrespectofitssaleofClassACommonStockexcludinganyproceedsfromtheOver-AllotmentOption
whichareexpectedtobedeliveredatasubsequentdateeffectingexerciseofsuchoption.
“Law”means all laws, statutes, ordinances, rules and regulations oftheUnitedStates,anyforeigncountry
and each state, commonwealth, city, county, municipality, regulatory body, agency or other political subdivision
thereof.
“LetterAgreement”means that certain letter agreement, dated as ofApril16,2010, among David Liniger,
GailLiniger,RIHIandWPwithrespectto,amongstotherthings,certainestateplanningarrangementsarisingafter
thedeathordisabilityofDavidLiniger.
“Losses”meansitemsofCompanylossdeterminedaccordingtoSection5.1(b).
“Manager”hasthemeaningsetforthinSection6.1.
“Management Services Agreement” means that certain Management Services Agreement between the
CompanyandHoldingsanddatedasofthedatehereof.
“Member”means(i)eachofthemembersnamedonScheduleIattachedheretoand(ii)anyPersonadmitted
totheCompanyasaSubstitutedMemberorAdditionalMemberinaccordancewithArticleXII,butonlysolongas
suchPersonisshownontheCompany’sbooksandrecordsastheownerofoneormoreUnits.
“Minimum Gain” means “partnership minimum gain” determined pursuant to Treasury Regulation
Section1.704-2(d).
“NetIPOProceeds”hasthemeaningsetforthintheRecitals.
“NetLoss”means,withrespecttoaFiscalYear,theexcessifany,ofLossesforsuchFiscalYearoverProfits
forsuchFiscalYear(excludingProfitsandLossesspeciallyallocatedpursuanttoSection5.3andSection5.4).
“NetOver-AllotmentProceeds”hasthemeaningsetforthintheRecitals.
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“Net Profit” means, with respect to a Fiscal Year, the excess if any, of Profits for such Fiscal Year over
Losses for such Fiscal Year (excluding Profits and Losses specially allocated pursuant to Section 5.3and
Section5.4).
“Officer”hasthemeaningsetforthinSection6.1(b).
“Omnibus Incentive Plan” means the RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan, as the same
maybeamended,supplementedorotherwisemodifiedfromtimetotime.
“Options”means options,issued under the Omnibus IncentivePlan, to acquire ClassA Common Stock or
otherequityequivalentsofHoldings.
“OriginalMembers”hasthemeaningsetforthintheRecitals.
“OtherAgreements”hasthemeaningsetforthinSection10.4.
“Over-AllotmentOption”hasthemeaningsetforthintheRecitals.
“Percentage Interest” means, with respect to a Member at a particular time, such Member’s percentage
interestintheCompanydeterminedbydividingsuchMember’sUnitsbythetotalUnitsofallMembersatsuchtime.
“PermittedTransfer”hasthemeaningsetforthinSection10.2.
“Person”meansanindividualoranycorporation,partnership,limitedliabilitycompany,trust,unincorporated
organization,association,jointventureoranyotherorganizationorentity,whetherornotalegalentity.
“PreferredUnit”meansaUnitrepresentingafractionalpartoftheCompanyInterests oftheMembersand
havingtherightsandobligationsspecifiedwithrespecttoPreferredUnitsinthisAgreement.
“PreferredUnitRedemptionAmount”hasthemeaningsetforthinSection3.3(a).
“PreferredUnitholder”meansaholderofPreferredUnits.
“Profits”meansitemsofCompanyincomeandgaindeterminedaccordingtoSection5.1(b).
“Pro rata,”“pro rata portion,”“accordingtotheirinterests,”“ratably,”“proportionately,”“proportional,”“in
proportionto,”“basedonthe numberof Unitsheld,”“baseduponthepercentageof Unitsheld,”“based uponthe
numberofUnitsoutstanding,”andothertermswithsimilarmeanings,whenusedinthecontextofanumberofUnits
oftheCompanyrelativetootherUnits,means(i)asbetweenthePreferredUnitsandtheCommonUnits,pro rata
baseduponthenumberofsuch Units held bytheMembersholdingsuchUnits, and(ii)asamongstanindividual
classofUnits,proratabaseduponthenumberofsuchUnitswithinsuchclassofUnits.
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“Recapitalization”hasthemeaningsetforthintheRecitals.
“RedeemedUnits”hasthemeaningsetforthinSection11.1(a).
“Redeemed UnitsEquivalent” means the product of (i) the Share Settlement, times (ii) the Common Unit
RedemptionPrice.
“RedeemingMember”hasthemeaningsetforthinSection11.1(a).
“Redemption”hasthemeaningsetforthinSection11.1(a).
“RedemptionDate”hasthemeaningsetforthinSection11.1(a).
“RedemptionNotice”hasthemeaningsetforthinSection11.1(a).
“RedemptionRight”hasthemeaningsetforthinSection11.1(a).
“RE/MAX LLC” means RE/MAX, LLC, a Delaware limited liability company and a Subsidiary of the
Company.
“Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of the date
hereof,byandbetweenHoldingsandRIHI.
“RemainingNetIPOProceeds”hasthemeaningsetforthintheRecitals.
“RetractionNotice”hasthemeaningsetforthinSection11.1(b).
“RIHI”meansRIHI,Inc.,aDelawarecorporation.
“RIHIOver-AllotmentOptionCommonUnitRedemption”hasthemeaningsetforthintheRecitals.
“RIHIInitialCommonUnitRedemption”hasthemeaningsetforthintheRecitals.
“ScheduleofMembers”hasthemeaningsetforthinSection3.1(b).
“Securities Act” means the Securities Act of 1933, as amended, and applicable rules and regulations
thereunder,andanysuccessortosuchstatute,rulesorregulations.Anyreferencehereintoaspecificsection,ruleor
regulationoftheSecuritiesActshallbedeemedtoincludeanycorrespondingprovisionsoffuturelaw.
“Securities and Exchange Commission” means the United States Securities and Exchange Commission,
includinganygovernmentalbodyoragencysucceedingtothefunctionsthereof.
“ShareSettlement”meansanumberofsharesofClassACommonStockequaltothenumberofRedeemed
Units.
“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership,
associationorbusinessentityofwhich(i)ifacorporation,amajorityof
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thetotalvotingpowerofsharesofstockentitled(withoutregardtotheoccurrenceofanycontingency)tovoteinthe
electionofdirectors,managersortrusteesthereofisatthetimeownedorcontrolled, directlyorindirectly, bythat
PersonoroneormoreoftheotherSubsidiariesofthatPersonoracombinationthereof,or(ii)ifalimitedliability
company, partnership, association or other business entity (other than a corporation), a majority of the voting
intereststhereofareatthetimeownedorcontrolled,directlyorindirectly,byanyPersonoroneormoreSubsidiaries
of that Person or a combination thereof; provided,  however,that, notwithstanding the foregoing, each of Equity
Group Insurance, LLC and Equity Home Mortgage, LLC shall be considered a Subsidiary of the Company and
Brokerage.Forpurposeshereof,referencestoa“Subsidiary”oftheCompanyshallbegiveneffectonlyatsuchtimes
thatthe Company hasoneor moreSubsidiaries,and,unless otherwise indicated, the term“Subsidiary”refersto a
SubsidiaryoftheCompany.
“Substituted Member” means a Person that is admitted as a Member to the Company pursuant to
Section12.1.
“TaxMattersPartner”hasthemeaninggiventosuchterminSection6231oftheCode.
“TaxReceivableAgreements”meansthosecertainTaxReceivableAgreements,datedasthedatehereof,by
andbetweenHoldings,ontheonehand,andRIHIorWP,asthecasemaybe,ontheotherhand.
“TaxableYear”means the Company’s accounting period for U.S.federal incometax purposes determined
pursuanttoSection9.2.
“ThirdLLCAgreement”hasthemeaningsetforthintheRecitals.
“TradingDay”meansadayonwhichtheNewYorkStockExchangeorsuchotherprincipalUnitedStates
securitiesexchangeonwhichtheClassACommonStockislistedoradmittedtotradingisopenforthetransaction
ofbusiness(unlesssuchtradingshallhavebeensuspendedfortheentireday).
“Transfer” (and, with acorrelative meaning, “Transferring”) meansany sale,transfer, assignment,pledge,
encumbrance or other disposition of (whether directly or indirectly, whether with or without consideration and
whethervoluntarilyorinvoluntarilyorbyoperationoflaw)(i)anyinterest(legalorbeneficial)inanyUnitor(ii)any
equityorotherinterest(legalorbeneficial)inanyMember.
“Treasury Regulations” means the income tax regulations promulgated under the Code and any
correspondingprovisionsofsucceedingregulations.
“UnderwritingAgreement”meanstheUnderwritingAgreement,datedasofOctober1,2013,byandamong
Holdings,theCompany,MorganStanley&Co.LLC,MerrillLynch,Pierce,Fenner&SmithIncorporatedandJ.P.
MorganSecuritiesLLC.
“Unit” means a Company Interest of a Member or a permitted Assignee in the Company representing a
fractionalpartoftheCompanyInterestsofallMembersandAssignees,whetheraPreferredUnitoraCommonUnit;
provided,however,thatanyclassorgroupofUnitsissued
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shallhavetherelativerights,powersanddutiessetforthinthisAgreement,andtheCompanyInterestrepresentedby
suchclassorgroupofUnitsshallbedeterminedinaccordancewithsuchrelativerights,powersandduties.
“Unitholder”meansaCommonUnitholderoraPreferredUnitholder.
“Unvested Holdings Shares” means shares of Class A Common Stock issued pursuant to the Omnibus
IncentivePlanthatarenotVestedHoldingsShares.
“VestedHoldingsShares”hasthemeaningsetforthinSection3.4(c)(ii).
“WP”meansWestonPresidioV,L.P.,anditsAffiliates.
“WPCommonUnitRedemption”hasthemeaningsetforthintheRecitals.
“WPPreferredUnitRedemption”hasthemeaningsetforthintheRecitals.
ARTICLE II
ORGANIZATIONALMATTERS
2.1Formation of Company.TheCompanywasformedonApril7,2010pursuanttotheprovisionsof
theDelawareAct.
2.2Fourth Amended and Restated Limited Liability Company Agreement.TheMembershereby
executethisAgreementforthepurposeofestablishingtheaffairsoftheCompanyandtheconductofitsbusinessin
accordancewiththeprovisionsoftheDelawareAct.TheMembersherebyagreethatduringthetermoftheCompany
setforthinSection2.6therightsandobligationsoftheMemberswithrespecttotheCompanywillbedeterminedin
accordancewiththetermsandconditionsofthisAgreementandtheDelawareAct.Onanymatteruponwhichthis
Agreement is silent, the Delaware Act shall control. No provision of this Agreement shall be in violation of the
DelawareActandtotheextentanyprovisionofthisAgreementisinviolationoftheDelawareAct,suchprovision
shallbevoidandofnoeffecttotheextentofsuchviolationwithoutaffectingthevalidityoftheotherprovisionsof
thisAgreement;provided,however,thatwheretheDelawareActprovidesthataprovisionoftheDelawareActshall
apply“unlessotherwiseprovidedinalimitedliabilitycompanyagreement”orwordsofsimilareffect,theprovisions
ofthisAgreementshallineachinstancecontrol;providedfurther,thatnotwithstandingtheforegoing,Section18-210
oftheDelawareActshallnotapplyorbeincorporatedintothisAgreement.
2.3Name.ThenameoftheCompanyshallbe“RMCO,LLC.”TheManagerinitssolediscretionmay
changethenameoftheCompanyatanytimeandfromtimetotime.Notificationofanysuchchangeshallbegiven
toalloftheMembers.TheCompany’sbusinessmaybeconductedunderitsnameand/oranyothernameornames
deemedadvisablebytheManager.
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2.4Purpose.TheprimarybusinessandpurposeoftheCompanyshallbetoengageinsuchactivitiesas
arepermittedundertheDelawareActanddeterminedfromtimetotimebytheManagerinaccordancewiththeterms
andconditionsofthisAgreement.
2.5Principal Office; Registered Office. The principal office of the Company shall be at 5075 S.
SyracuseStreet,Denver,Colorado80237,orsuchotherplaceastheManagermayfromtimetotimedesignate.The
address of the registered office of the Company in the State of Delaware shall be c/o The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware, and the registered agent for service of process on the
CompanyintheStateofDelawareatsuchregisteredofficeshallbeTheCorporationTrustCompany.
2.6Term.ThetermoftheCompanycommenceduponthefilingoftheCertificateinaccordancewiththe
Delaware Act and shall continue in existence until termination and dissolution thereof in accordance with the
provisionsofArticleXIV.
2.7No State-Law Partnership.TheMembersintendthattheCompanynotbeapartnership(including,
withoutlimitation,alimitedpartnership)orjointventure,andthatnoMemberbeapartnerorjointventurerofany
other Member by virtue of this Agreement, for any purposes other than as set forth in the last sentence of this
Section 2.7, and neither this Agreement nor any other document entered into by the Company or any Member
relatingtothesubjectmatterhereofshallbeconstruedtosuggestotherwise.TheMembersintendthattheCompany
shallbetreatedasapartnershipforU.S.federaland,ifapplicable,stateorlocalincometaxpurposes,andthateach
MemberandtheCompanyshallfilealltaxreturnsandshallotherwisetakealltaxandfinancialreportingpositionsin
amannerconsistentwithsuchtreatment.
ARTICLE III
UNITS;INITIALCAPITALIZATION;MEMBERS
3.1Members.
(a)EachoftheOriginalMemberspreviouslywasadmittedasaMembertotheCompanypursuant
tothe Third LLCAgreement. At the Effective Time and concurrently withthe Common Unit Purchase, Holdings
shallbeadmittedtotheCompanyasaMember.
(b) The Company shall maintain a schedule setting forth: (i) the name andaddress of each
Member;(ii)theaggregatenumberofoutstandingUnitsandthenumberandclassofUnitsheldbyeachMember;
(iii)theaggregateamountofcashCapitalContributionsthathavebeenmadebytheMemberswithrespecttotheir
Units;and(iv)theFairMarketValueofanypropertyotherthancashcontributed bytheMemberswithrespectto
their Units (including,if applicable, adescription andthe amountof any liabilityassumed by theCompany orto
which contributed property is subject) (such schedule, the “Schedule of Members”). The applicable Schedule of
MembersineffectasoftheEffectiveTimeissetforthas“ScheduleI”tothisAgreement.TheScheduleofMembers
shallbethedefinitiverecordofownershipofeachUnitoftheCompanyandallrelevantinformationwithrespectto
eachMember.TheCompanyshallbeentitledtorecognizetheexclusiverightofaPersonregisteredonitsrecordsas
the
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ownerof Units for all purposesand shall not bebound to recognize anyequitable orother claim to or interestin
UnitsonthepartofanyotherPerson,whetherornotitshallhaveexpressorothernoticethereof,exceptasotherwise
providedbytheDelawareAct.
(c)NoMembershallberequiredor,exceptasapprovedbytheManagerpursuanttoSection6.1
and in accordance with the other provisions of this Agreement, permitted to loan any money or property to the
CompanyorborrowanymoneyorpropertyfromtheCompany.
3.2Units. Interests in the Company shall be represented by Units, or such other securities of the
Company,ineachcaseastheManagermayestablishinitsdiscretioninaccordancewiththetermsandsubjecttothe
restrictionshereof.ImmediatelyaftertheEffectiveTime,andpriortotheWPPreferredUnitRedemption,theUnits
willbecomprisedoftwoclasses:(i)“PreferredUnits”(with2,429,930PreferredUnitsbeingauthorizedforissuance
bytheCompany);and(ii)“CommonUnits”(with180,000,000CommonUnitsbeingauthorizedforissuancebythe
Company).
3.3Recapitalization and Split; Holdings Capital Contribution; Holdings Purchase of Common
Units; Redemptions.
(a)RecapitalizationandSplit.In connectionwiththeRecapitalization,immediatelyuponthe
EffectiveTime,theaggregatenumberof150,000ClassAPreferredUnits(asdefinedintheThirdLLCAgreement)
that were issued and outstanding and held by WP prior to the execution and effectiveness of this Agreement are
herebyconvertedinto2,429,930PreferredUnitsand3,750,000CommonUnits.ThePreferredUnitsreceivedbyWP
haveanaggregateliquidationpreferenceof$49,850,000andreflectthepreferredCompanyInterestpreviouslyheld
by WP and reflected in Sections 4.1(a)(i), (ii), and (iii) and other applicable provisions of the Third LLC
Agreement. At the same time, and also in connection with the Recapitalization, immediately upon the Effective
Time,theaggregatenumberof847,500ClassBCommonUnits(asdefinedintheThirdLLCAgreement)thatwere
issuedandoutstanding andheldbyRIHIpriortothe executionand effectivenessofthisAgreement areconverted
herebyinto21,187,500CommonUnits.ThenumberofCommonUnitsreceivedbyeachofWPandRIHIreflecta
25:1(twenty-fivetoone)splitoftheresidualcommonCompanyInterestpreviouslyheldbyeachofWPandRIHI
and reflected in Section 4.1(a)(iv) and other applicable provisions of the Third LLC Agreement. Following the
Recapitalizationandinconnectiontherewith,immediatelyupontheEffectiveTime,theCompanywillbedeemedto
have distributed one share of Class B Common Stock to RIHI. Such Class B Common Stock will be issued by
HoldingstotheCompanyinexchangeforboththeCommonUnitstobepurchasedbyHoldingsinconnectionwith
theCommonUnitPurchaseandHoldings’rightsasManagertransferredtoitbytheCompanyasprovidedforinthis
Agreement.
(b)Holdings Contribution. Following the Recapitalization and Holdings’ purchase of the
HBN/Tails Assets, immediately upon the Effective Time, Holdings will contribute the HBN/Tails Assets to the
Company in exchange for 1,330,977 Common Units pursuant to the Contribution Agreement. The HBN/Tails
ContributionandsubsequentreceiptofCommonUnitsbyHoldingsshallbereflectedonScheduleI.
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(c)HoldingsCommonUnitPurchase.FollowingtheHBN/TailsContribution,immediatelyafter
the Effective Time, Holdings will contribute the Remaining Net IPO Proceeds to the Company in exchange for
8,669,023CommonUnitspursuanttotheCommonUnitPurchaseAgreement(the“CommonUnitPurchase”).The
CommonUnitPurchaseshallbereflectedonScheduleI.
(d)WPPreferredUnitRedemption.FollowingtheCommonUnitPurchase,immediatelyafterthe
Effective Time, thePreferred Unitsthat wereissued toWP pursuantto Section3.3(a)of this Agreementshall be
redeemed by the Company with a portion of the Remaining Net IPO Proceeds received from Holdings for the
aggregate amount of$49,850,000 (the “PreferredUnit Redemption Amount”). Allof the issued and outstanding
Preferred Units automatically shall terminate and cease to be outstanding on payment of the Preferred Unit
RedemptionAmounttowhicheachPreferredUnitisentitledunderSection3.3(a)andtheCompanyshallceaseto
haveauthorizedPreferredUnits.TheWPPreferredUnitRedemptionshallbereflectedonScheduleI.
(e)CommonUnit Redemptions. FollowingtheWP PreferredUnit Redemption,immediately
after the Effective Time,the Company willuse the restof the Remaining NetIPO Proceeds toredeem 3,750,000
Common Units held by WP and thereafter the Company will use the Remaining Net IPO Proceeds to redeem
1,952,900 Common Units held by RIHI. The WP Common Unit Redemption andthe RIHI Initial Common Unit
RedemptionshallbereflectedonScheduleI.
(f)Over-Allotment Option Common Unit Redemptions. If the Over-Allotment Option is
exercisedinwholeorinpart,immediatelyupontheclosingoftheOver-AllotmentOption,theNetOver-Allotment
ProceedsfromsuchexerciseshallbepaidbyHoldingstotheCompanyinordertopurchasenewlyissuedCommon
UnitspursuanttotheCommonUnitPurchaseAgreement.FollowingtheCompany’sreceiptofanysuchNetOver-
Allotment Proceeds from Holdings in exchange for the Company’s delivery of newly issued Common Units to
Holdings,theCompanyshall,inturn,paysuchNetOver-AllotmentProceedstoRIHItoredeemadditionalCommon
UnitsheldbyRIHI.AnyadditionalClassACommonStocksoldasaresultoftheexerciseoftheOver‑Allotment
OptionshallbesoldatthesamepriceastheClassACommonStocksoldinconnectionwiththeIPOandtheprice
perCommonUnitpaidtoredeemadditionalCommonUnitsheldbyRIHIshallbethesamepricedpaidwithrespect
totheWPCommonUnitRedemptionandtheRIHIInitialCommonUnitRedemption.TheRIHIOver-Allotment
OptionCommonUnitRedemption,totheextentitoccurs,shallbereflectedonScheduleI,whichshallbeamended
asnecessaryorappropriatefollowingtheIPOClosingDate.
3.4Authorization and Issuance of Additional Units.
(a) TheCompany shallundertake all actions,including, withoutlimitation, areclassification,
distribution, division or recapitalization, withrespect to the Common Units, to maintainat all times a one-to-one
ratiobetweenthenumberofCommon UnitsownedbyHoldingsandthenumberofoutstandingsharesofClassA
CommonStock,disregarding,forpurposesofmaintainingtheone-to-oneratio,UnvestedHoldingsShares,treasury
stock,preferredstockorothersecuritiesofHoldingsthatarenotconvertibleintoorexercisableor
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exchangeableforClassACommonStock.IntheeventHoldingsissues,transfersfromtreasurystockorrepurchases
ClassACommonStockinatransactionnotcontemplatedinthisAgreement,theManagershallhavetheauthorityto
takeallactionssuchthat,aftergivingeffecttoallsuchissuances,transfersorrepurchases,thenumberofoutstanding
CommonUnitsownedbyHoldingswillequalonaone-for-onebasisthenumberofoutstandingsharesofClassA
CommonStock.IntheeventHoldingsissues,transfersfromtreasurystockorrepurchasesHoldingspreferredstock
ina transaction not contemplated inthisAgreement, theManagershallhavetheauthority totakeallactionssuch
that,aftergivingeffecttoallsuchissuances,transfersorrepurchases,Holdingsholdsmirrorequityinterestsinthe
Companywhich(inthegoodfaithdeterminationbytheManager)areintheaggregatesubstantiallyequivalenttothe
outstanding Holdings preferred stock. The Company shallnot undertake anysubdivision (by any Unitsplit, Unit
distribution,reclassification,recapitalizationorsimilarevent)orcombination(byreverseUnitsplit,reclassification,
recapitalizationorsimilarevent)oftheUnitsthatisnotaccompaniedbyanidenticalsubdivisionorcombinationof
ClassACommonStocktomaintainatalltimesaone-to-oneratiobetweenthenumberofCommonUnitsownedby
Holdings and the number of outstanding shares of Class A Common Stock, unless such action is necessary to
maintainatalltimesaone-to-oneratiobetweenthenumberofCommonUnitsownedbyHoldingsandthenumberof
outstandingsharesofClassACommonStockascontemplatedbythefirstsentenceofthisSection3.3(f).
(b)TheCompanyshallonlybepermittedtoissueadditionalUnitsorotherEquitySecuritiesin
theCompanytothePersonsandonthetermsandconditionsprovidedforinSection3.2andthisSection3.4.Subject
to the foregoing, the Manager may cause the Company to issue additional Common Units authorized under this
Agreement at such times andupon such terms asthe Manager shall determine andthe Manager shall amend this
Agreementasnecessaryinconnection withtheissuance ofadditional Common Units and admission of additional
MembersunderthisSection3.4.
(c)EquityCompensationIssuedbyHoldings.
(i)InconnectionwiththeexerciseofOptions,Holdingsshallhavetherighttoacquire
additional Common Units from the Company. Holdings shall exercise its rights under this Section 3.4(c)(i)by
givingwrittennotice(the“EquityCompensationNotice”)totheCompanyandallMembersfollowingexerciseofthe
Options.TheEquityCompensationNoticeshallspecifythenetnumberofsharesofClassACommonStockissued
byHoldingspursuanttoexerciseoftheOptions.TheCompanyshallissuetheCommonUnitstowhichHoldingsis
entitledunderthisSection3.4(c)(i)withinthree(3)BusinessDaysafterdeliveryoftheEquityCompensationNotice
(tobeeffectiveimmediatelypriortothecloseofbusinessonsuchdate).ThenumberofadditionalCommonUnits
thatHoldings shallbeentitled toreceiveunder thisSection3.4(c)(i)shallbeequaltothenet numberofsharesof
ClassACommon Stock issued by Holdings pursuantto the exercise ofthe Options. The net number ofshares of
ClassACommonStockissuedbyHoldingspursuanttoexerciseoftheOptionsshallbeequalto(i)thenumberof
sharesofClassACommonStockwithrespecttowhichtheOptionswereexercised,less(ii)anysharesofClassA
CommonStocktransferredtoorwithheldbyHoldingsinsatisfactionoftheexercisepriceortaxespayableasaresult
oftheexerciseoftheOptions.InconsiderationoftheCommonUnitsissuedbytheCompanytoHoldingsunderthis
Section3.4(c)(i),HoldingsshallcontributetotheCompanythecashconsideration,ifany,receivedbyHoldingsin
exchangefor
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thenetsharesofClassACommonStockissuedpursuanttoexerciseoftheOptions.Holdingsshallcontributeany
cashconsiderationtowhichtheCompanyisentitledunderthisSection3.4(c)(i)onthesamedate(andtobeeffective
asofthesametime)thattheCompanyissuestheCommonUnitstoHoldings.
(ii) In connection with the grant of Class A Common Stock pursuant to the Omnibus
IncentivePlan(including,withoutlimitation,theissuanceofrestrictedandnon-restrictedClassACommonStock,
the payment of bonuses in Class A Common Stock, the issuance of Class A Common Stock in settlement of
restricted stock units, stock appreciation rights or otherwise), other than through the exercise of Options as
contemplated in Section3.4(c)(i), Holdings shall deliver an Equity Compensation Notice tothe Company and all
MembersfollowingthedateonwhichsharesofsuchClassACommonStockarevestedforU.S.federalincometax
purposes(“VestedHoldingsShares”).TheEquityCompensationNoticeshallspecifythenumberofVestedHoldings
Shares, which shall be net of any shares of Class A Common Stock transferred to or withheld by Holdings in
satisfactionoftaxespayableasaresultofthevestingorissuanceofsuchshares.Withinthree(3)BusinessDaysafter
deliveryoftheEquityCompensationNotice(tobeeffectiveimmediatelypriortothecloseofbusinessonsuchdate)
(i)the Company shall(x)issuetoHoldingsanumberofCommon Units equal tothenumber of Vested Holdings
Shares, and (y) make aspecial distribution to Holdings (to theextent such distribution is not restrictedunder the
CreditAgreement)inrespectofsuchCommonUnitsinanamountequaltoanydividends ordividendequivalents
paidorpayablebyHoldingsinrespectofsuchVestedHoldingsShares(providedthat(i)therelateddividendrecord
dateprecededthedatesuchVestedHoldingsSharesbecameVestedHoldingsSharesand(ii)Holdingshasnotbeen,
andwillnotbe,reimbursedforsuchdividendordividendequivalentpaymentspursuanttotheManagementServices
Agreement or otherwise), and (ii) Holdings shall contribute to the Company any cash consideration received by
HoldingsinrespectofsuchVestedHoldingsShares.
3.5Repurchase or Redemption of Class A Shares. If, atanytime, anysharesofClassA Common
Stock are repurchased or redeemed (whether by exercise of a put or call, automatically or by means of another
arrangement)byHoldingsforcash,thentheManagershallcausetheCompany,immediatelypriortosuchrepurchase
orredemptionofClassACommonStock,toredeemacorrespondingnumberofCommonUnitsheldbyHoldings,at
anaggregateredemptionpriceequaltotheaggregatepurchaseorredemptionpriceofthesharesofClassACommon
StockbeingrepurchasedorredeemedbyHolding(plusanyexpensesrelatedthereto)anduponsuchothertermsas
arethesameforthesharesofClassACommonStockbeingrepurchasedorredeemedbyHoldings.
3.6Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and
Transfer of Units.
(a)UnitsshallnotbecertificatedunlessotherwisedeterminedbytheManager.IftheManager
determinesthatoneormoreUnitsshallbecertificated,eachsuchcertificateshallbesignedbyorinthenameofthe
Company,bytheChiefExecutiveOfficerandanyotherofficerdesignatedbytheManager,representingthenumber
ofUnitsheldbysuchholder.Suchcertificateshallbeinsuchform(andshallcontainsuchlegends)astheManager
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maydetermine.AnyorallofsuchsignaturesonanycertificaterepresentingoneormoreUnitsmaybeafacsimile,
engravedorprinted,totheextentpermittedbyapplicableLaw.
(b)IfUnitsarecertificated,theManagermaydirectthatanewcertificaterepresentingoneor
moreUnitsbeissuedinplaceofanycertificatetheretoforeissuedbytheCompanyallegedtohavebeenlost,stolen
ordestroyed,upondeliverytotheManagerofanaffidavitoftheownerorownersofsuchcertificate,settingforth
suchallegation. TheManagermayrequiretheowner of such lost, stolen ordestroyed certificate, or suchowner’s
legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made
againstitonaccountoftheallegedloss,theftordestructionofanysuchcertificateortheissuanceofanysuchnew
certificate.
(c)UponsurrendertotheCompanyorthetransferagentoftheCompany,ifany,ofacertificate
foroneormoreUnits,dulyendorsedoraccompaniedbyappropriateevidenceofsuccession,assignmentorauthority
totransfer,incompliancewiththeprovisionshereof,theCompanyshallissueanewcertificaterepresentingoneor
moreUnitstothePersonentitledthereto,canceltheoldcertificateandrecordthetransactionuponitsbooks.Subject
totheprovisionsofthisAgreement,theManagermayprescribesuchadditionalrulesandregulationsasitmaydeem
appropriaterelatingtotheissue,TransferandregistrationofUnits.
3.7Negative Capital Accounts. No Member shall be required to pay to any other Member or the
Company any deficit or negative balance which may exist from time to time in such Member’s Capital Account
(includinguponandafterdissolutionoftheCompany).
3.8No Withdrawal. No Person shall be entitled to withdraw any part of such Person’s Capital
Contribution or Capital Account or to receive any Distribution from the Company, except as expressly provided
herein.
3.9Loans From Members. Loans by Members to the Company shall not be considered Capital
Contributions.SubjecttotheprovisionsofSection3.1(c), theamount of anysuchadvances shall beadebt ofthe
Company to such Member and shall be payable or collectible in accordance with the terms and conditions upon
whichsuchadvancesaremade.
ARTICLE IV
DISTRIBUTIONS
4.1Distributions.
(a)Distributable Cash; Other Distributions. To the extentpermitted byapplicable Lawand
hereunder,DistributionstoMembers maybedeclared by theManagerout of Distributable Cashorother funds or
property legally available therefor in such amounts and on such terms (including the payment dates of such
Distributions) as the Manager shall determine using such record date as the Manager may designate; such
Distributionsshallbemadeto theMembersasofthecloseofbusiness onsuchrecorddateonapro rata basisin
accordance with each Member’s Percentage Interest as of the close of business on such record date; provided,
however,thattheManagershallhavetheobligationtomakeDistributionsassetforthinSections4.1(b)and 14.2;
andprovidedfurtherthat,notwithstandinganyotherprovisionhereintothe
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contrary,noDistributionsshallbemadetoanyMembertotheextentsuchDistributionwouldrendertheCompany
insolvent. For purposes of the foregoing sentence, insolvency means the inability of the Company to meet its
payment obligations when due. Promptly following the designation of a record date and the declaration of a
Distributionpursuant tothis Section4.1(a),theManager shall give noticetoeachMember of therecorddate,the
amountandthetermsoftheDistributionandthepaymentdatethereof.Infurtheranceoftheforegoing,itisintended
thattheManagershall,totheextentpermittedbyapplicableLawandhereunder,havetherightinitssolediscretion
tomakeDistributionstotheMemberspursuanttothisSection4.1(a)insuchamountsasshallenableHoldingstopay
dividends or to meet its obligations, including its obligations pursuant to the Tax Receivable Agreements (to the
extent such obligations arenot otherwise ableto besatisfied as aresult of Tax Distributionsrequired tobe made
pursuanttoSection4.1(b)).
(b)TaxDistributions.
(i)Onorabouteachdate(a“TaxDistributionDate”)thatisfive(5)BusinessDaysprior
to (i) each date on which estimated U.S. federal income tax payments are required to be made by calendar year
individualtaxpayers (or,ifearlier, thedateonwhichestimated U.S.federalincome taxpayments arerequiredfor
Holdings) and (ii) each due date for the U.S. federal income tax return of an individual calendar year taxpayer
(without regard to extensions) (or, if earlier, the due date for the U.S. federal income tax return of Holdings, as
determinedwithoutregardtoextensions),theCompanyshallberequiredtomakeaDistributiontoeachMemberof
cash in an amount equal to such Member’s Assumed Tax Liability, if any, for such taxable period (the “Tax
Distributions”).Thecalculation ofAssumed TaxLiabilityshall takeinto accountthe carryforwardofpriorlosses
andthecharacteroftaxitemsallocatedtoaMember(e.g.,capitalorordinary)andshalltreateachDistributionmade
pursuanttothisSection4.1(b)asapaymentoftaxesorestimatedtaxes.
(ii)TotheextentaMemberotherwisewouldbeentitledtoreceivelessthanitsPercentage
Interest of the aggregate Tax Distributions to be paid pursuant to this Section 4.1(b)on any given date, the Tax
DistributionstosuchMembershallbeincreasedtoensurethatallDistributionsmadepursuanttothisSection4.1(b)
are made pro ratain accordance with Percentage Interests. If, on a Tax Distribution Date,there are insufficient
funds on handto distribute to the Members the fullamount of the TaxDistributions towhich such Members are
otherwise entitled, Distributions pursuant to this Section 4.1(b)shall be made to the Members to the extent of
availablefundsinaccordancewiththeirPercentageInterestsandtheCompanyshallmakefutureTaxDistributions
assoon as funds become availablesufficient topay the remainingportion ofthe Tax Distributions towhich such
Membersareotherwiseentitled.
(iii)Intheeventofanyauditby,orsimilareventwith,ataxingauthoritythataffectsthe
calculation of any Member’s Assumed Tax Liability for any taxable year, or in the event the Company files an
amended return,each Member’sAssumed TaxLiability withrespect tosuch yearshall be recalculated bygiving
effect to such event (for the avoidance of doubt, taking into account interest or penalties). Any shortfall in the
amountofTaxDistributionstheMembersandformerMembersreceivedfortherelevanttaxableyearsbasedonsuch
recalculatedAssumedTaxLiabilitypromptlyshallbedistributedtosuchMembersandthesuccessorsofsuchformer
Members,except,fortheavoidanceofdoubt,totheextent
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DistributionsweremadetosuchMembersandformerMemberspursuanttoSection4.1(a)andthisSection4.1(b)in
therelevanttaxableyearssufficienttocoversuchshortfall.
(iv)Notwithstandingtheforegoing,DistributionspursuanttothisSection4.1(b),ifany,
shallbemadetoaMemberonlytotheextentallpreviousDistributionstosuchMemberpursuanttoSection4.1(a)
duringthe FiscalYearareless thantheDistributions such Member otherwise wouldhavebeen entitled toreceive
duringsuchFiscalYearpursuanttothisSection4.1(b).
4.2Restricted Distributions. Notwithstanding any provision to the contrary contained in this
Agreement, the Company shallnot make any Distributionto any Memberon account ofany Company Interest if
suchDistributionwouldviolateanyapplicableLaworthetermsoftheCreditAgreement.
ARTICLE V
CAPITALACCOUNTS;ALLOCATIONS;TAXMATTERS
5.1Capital Accounts.
(a)TheCompanyshallmaintainaseparateCapitalAccountforeachMemberaccordingtothe
rulesofTreasuryRegulationSection1.704-1(b)(2)(iv).Forthispurpose,theCompanymay(inthediscretionofthe
Manager),upontheoccurrenceoftheeventsspecifiedinTreasuryRegulationSection1.704-1(b)(2)(iv)(f),increase
ordecreasetheCapitalAccountsinaccordancewiththerulesofsuchTreasuryRegulationandTreasuryRegulation
Section1.704-1(b)(2)(iv)(g)toreflectarevaluationofCompanyproperty.
(b) For purposes of computing the amount of any item of Company income, gain, loss or
deductiontobeallocatedpursuanttothisArticleVandtobereflectedintheCapitalAccountsoftheMembers,the
determination,recognitionandclassificationofanysuchitemshallbethesameasitsdetermination,recognitionand
classification for U.S. federal income tax purposes (including any method of depreciation, cost recovery or
amortizationusedforthispurpose);provided,however,that:
(i)Thecomputationofallitemsofincome,gain,lossanddeductionshallincludethose
itemsdescribedinCodeSection705(a)(l)(B)orCodeSection705(a)(2)(B)andTreasuryRegulationSection1.704-
1(b)(2)(iv)(i),withoutregardtothefactthatsuchitemsarenotincludableingrossincomeorarenotdeductiblefor
U.S.federalincometaxpurposes.
(ii) If the Book Value of any Company property is adjusted pursuant to Treasury
RegulationSection 1.704-1(b)(2)(iv)(f), theamountofsuch adjustment shallbetaken into account asgainor loss
fromthedispositionofsuchproperty.
(iii) Itemsof income, gain, lossordeduction attributable tothe disposition of Company
propertyhavingaBookValuethatdiffersfromitsadjustedbasisfortaxpurposesshallbecomputedbyreferenceto
theBookValueofsuchproperty.
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(iv)Itemsofdepreciation,amortizationandothercostrecoverydeductionswithrespectto
CompanypropertyhavingaBookValuethatdiffersfromitsadjustedbasisfortaxpurposesshallbecomputedby
referencetotheproperty’sBookValueinaccordancewithTreasuryRegulationSection1.704-1(b)(2)(iv)(g).
(v)TotheextentanadjustmenttotheadjustedtaxbasisofanyCompanyassetpursuantto
CodeSections732(d),734(b)or743(b)isrequired,pursuanttoTreasuryRegulationSection1.704-1(b)(2)(iv)(m),to
betakenintoaccountindeterminingCapitalAccounts,theamountofsuchadjustmenttotheCapitalAccountsshall
betreatedasanitemofgain(iftheadjustmentincreasesthebasisoftheasset)orloss(iftheadjustmentdecreases
suchbasis).
5.2Allocations.ExceptasotherwiseprovidedinSection5.3andSection5.4,NetProfitsandNetLosses
for any Fiscal Year or Fiscal Period shall be allocated among the Capital Accounts of the Members pro ratain
accordancewiththeirrespectivePercentageInterests.
5.3Regulatory Allocations.
(a) Losses attributable to partner nonrecourse debt (as defined in Treasury Regulation
Section1.704-2(b)(4))shallbeallocatedinthemannerrequiredbyTreasuryRegulationSection1.704-2(i).Ifthere
is a net decrease during a Taxable Year in partner nonrecourse debt minimum gain (as defined in Treasury
RegulationSection1.704-2(i)(3)),ProfitsforsuchTaxableYear(and,ifnecessary,forsubsequentTaxableYears)
shall be allocated to the Members in the amounts and of such character as determined according to Treasury
RegulationSection1.704-2(i)(4).
(b)Nonrecoursedeductions(asdeterminedaccordingtoTreasuryRegulationSection1.704-2(b)
(1)) for any Taxable Year shall be allocated pro rataamong the Members in accordance with their Percentage
Interests.ExceptasotherwiseprovidedinSection4.3(a),ifthereisanetdecreaseintheMinimumGainduringany
Taxable Year, each Member shall be allocated Profits for such Taxable Year (and, if necessary, for subsequent
TaxableYears)intheamountsandofsuchcharacterasdeterminedaccordingtoTreasuryRegulationSection1.704-
2(f).ThisSection5.3(b)isintendedtobeaminimumgainchargebackprovisionthatcomplieswiththerequirements
ofTreasuryRegulationSection1.704-2(f),andshallbeinterpretedinamannerconsistenttherewith.
(c)IfanyMemberthatunexpectedlyreceivesanadjustment,allocationorDistributiondescribed
inTreasuryRegulationSection1.704-1(b)(2)(ii)(d)(4),(5)and(6)hasanAdjustedCapitalAccountDeficitasofthe
endofanyTaxableYear,computedaftertheapplicationofSections5.3(a)and 5.3(b)butbeforetheapplicationof
any other provision of this Article V, then Profits for such Taxable Year shall be allocated to such Member in
proportionto,and to theextentof,such Adjusted Capital Account Deficit. ThisSection5.3(c)isintended to bea
qualified income offset provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpretedinamannerconsistenttherewith.
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(d)Profits andLossesdescribedin Section5.1(b)(v)shallbeallocatedinamannerconsistent
with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Treasury
RegulationSection1.704-1(b)(2)(iv)(j),(k)and(m).
(e) The allocations set forth in Section 5.3(a)through and including Section 5.3(d)(the
“RegulatoryAllocations”)areintendedtocomplywithcertainrequirements ofSections 1.704-1(b)and1.704-2of
theTreasuryRegulations.TheRegulatoryAllocationsmaynotbeconsistentwiththemannerinwhichtheMembers
intend to allocate Profit and Loss ofthe Company or make Distributions. Accordingly, notwithstandingthe other
provisionsofthisArticleV, but subject tothe RegulatoryAllocations, income, gain,deduction, and lossshall be
reallocated among theMembers so asto eliminatethe effect ofthe Regulatory Allocations andthereby cause the
respectiveCapitalAccountsoftheMemberstobeintheamounts(orasclosetheretoaspossible)theywouldhave
been if Profit and Loss (and such other items of income, gain, deduction and loss) had been allocated without
reference to the Regulatory Allocations. In general, the Members anticipate that this will be accomplished by
specially allocating other Profit and Loss (and such other items of income, gain, deduction and loss) among the
MemberssothatthenetamountoftheRegulatoryAllocationsandsuchspecialallocationstoeachsuchMemberis
zero.Inaddition,ifinanyFiscalYearorFiscalPeriodthereisadecreaseinpartnershipminimumgain,orinpartner
nonrecourse debt minimum gain, and application of the minimum gain chargeback requirements set forth in
Section 5.3(a)or Section 5.3(b)would cause a distortion in the economic arrangement among the Members, the
Membersmay,iftheydonotexpectthattheCompanywillhavesufficientotherincometocorrectsuchdistortion,
requesttheInternalRevenueServicetowaiveeitherorbothofsuchminimumgainchargebackrequirements.Ifsuch
request is granted, this Agreement shall be applied in such instance as if it did not contain such minimum gain
chargebackrequirement.
5.4Final Allocations.NotwithstandinganycontraryprovisioninthisAgreementexceptSection5.3,the
ManagershallmakeappropriateadjustmentstoallocationsofProfitsandLossesto(or,ifnecessary,allocateitemsof
grossincome, gain, lossordeduction of theCompanyamong) the Membersupontheliquidation of theCompany
(withinthemeaningofSection1.7041(b)(2)(ii)(g)oftheTreasuryRegulations),thetransferofsubstantiallyallthe
Units(whetherbysaleorexchangeormerger)orsaleofallorsubstantiallyalltheassetsoftheCompany,suchthat,
to the maximum extent possible, the Capital Accounts of the Members are proportionate to their Percentage
Interests. Ineach case,suchadjustments orallocationsshalloccur, tothemaximum extent possible,intheFiscal
Yearoftheeventrequiringsuchadjustmentsorallocations.
5.5Tax Allocations.
(a) The income, gains, losses, deductions and credits of the Company will be allocated, for
federal,stateandlocalincometaxpurposes,amongtheMembersinaccordancewiththeallocationofsuchincome,
gains,losses,deductionsandcreditsamongtheMembersforcomputingtheirCapitalAccounts;providedthatifany
such allocation is not permitted by the Code or other applicable law, the Company’s subsequent income, gains,
losses, deductions and credits will be allocated among the Members so as to reflect as nearly as possible the
allocationsetforthhereinincomputingtheirCapitalAccounts.
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(b) Items ofCompany taxable income, gain,loss anddeduction withrespect to anyproperty
contributed to the capital of the Company shall be allocated among the Members in accordance with Code
Section704(c)soastotakeaccountofanyvariationbetweentheadjustedbasisofsuchpropertytotheCompanyfor
federalincometaxpurposesanditsBookValueusingthetraditionalmethod,asdescribedinTreasuryRegulations
Section1.704-3(b).
(c)IftheBookValueofanyCompanyassetisadjustedpursuanttoSection5.1(b),subsequent
allocationsofitemsoftaxableincome,gain,lossanddeductionwithrespecttosuchassetshalltakeaccountofany
variationbetweentheadjustedbasisofsuchassetforfederalincometaxpurposesanditsBookValueinthesame
manner as under Code Section 704(c) using the traditional method, as described in Treasury Regulations
Section1.704-3(b).
(d)Allocationsoftaxcredits,taxcreditrecapture,andanyitemsrelatedtheretoshallbeallocated
tothe Members pro rataasdetermined bytheManager taking into account the principles ofTreasuryRegulation
Section1.704-1(b)(4)(ii).
(e) For purposes of determining a Member’s pro rata share of the Company’s “excess
nonrecourseliabilities”withinthemeaningofTreasuryRegulationSection1.752-3(a)(3),eachMember’sinterestin
incomeandgainshallbeinproportiontotheUnitsheldbysuchMember.
(f)AllocationspursuanttothisSection5.5aresolelyforpurposesoffederal,stateandlocaltaxes
andshallnotaffect,orinanywaybetakenintoaccountincomputing,anyMember’sCapitalAccountorshareof
Profits,Losses,DistributionsorotherCompanyitemspursuanttoanyprovisionofthisAgreement.
5.6Indemnification and Reimbursement for Payments on Behalf of a Member.IftheCompanyis
obligatedtopayanyamounttoaGovernmentalEntity(orotherwisemakesapaymenttoaGovernmentalEntity)that
is specifically attributable to a Member or a Member’s status as such (including federal withholding taxes, state
personal property taxes, and state unincorporated business taxes, but excluding payments such as professional
associationfeesandthelikemadevoluntarilybytheCompanyonbehalfofanyMemberbaseduponsuchMember’s
statusasanemployeeoftheCompany),thensuchPersonshallindemnifytheCompanyinfullfortheentireamount
paid(includinginterest,penaltiesandrelatedexpenses).TheManagermayoffsetDistributionstowhichaPersonis
otherwise entitled under this Agreement against such Person’s obligation to indemnify the Company under this
Section5.6.AMember’sobligationtomakecontributionstotheCompanyunderthisSection5.6shallsurvivethe
termination, dissolution, liquidation and winding up of the Company, and for purposes of this Section 5.6, the
Companyshallbetreatedascontinuinginexistence.TheCompanymaypursueandenforceallrightsandremediesit
may have against eachMember under thisSection5.6, including instituting alawsuit to collectsuch contribution
withinterestcalculatedatarateequaltotheBaseRateplusthreepercentagepointsperannum(butnotinexcessof
thehighestrateperannumpermittedbylaw).
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ARTICLE VI
MANAGEMENT
6.1Authority of Manager.
(a)ExceptforsituationsinwhichtheapprovalofanyMember(s)isspecificallyrequiredbythis
Agreement,(i)allmanagementpowersoverthebusinessandaffairsoftheCompanyshallbeexclusivelyvestedin
one manager (the “Manager”) that shall be Holdings and (ii) the Manager shall conduct, direct and exercise full
controloverallactivitiesoftheCompany.TheManagershallbethe“manager”oftheCompanyforthepurposesof
the Delaware Act. Except as otherwise expressly provided for herein and subject to the other provisions of this
Agreement,theMembersherebyconsenttotheexercisebytheManagerofallsuchpowersandrightsconferredon
theMembersbytheDelawareActwithrespecttothemanagementandcontroloftheCompany.Holdingsmaynot
be removed as a Manager except as provided in Section6.4. Any Manager that is properly removed pursuant to
Section 6.4shall be replaced in the manner provided in Section 6.5. The Original Members terminate as of the
EffectiveTimethe“Board”previouslyestablishedinordertoconductthebusinessoftheCompanypursuanttothe
ThirdLLCAgreement(assuchtermwaspreviouslydefinedintheThirdLLCAgreement).
(b)Theday-to-daybusinessandoperationsoftheCompanyshallbeoverseenandimplemented
byofficersoftheCompany(each,an“Officer”andcollectively,the“Officers”),subjecttothelimitationsimposed
bytheManager.AnOfficermay,butneednot,beaMember.EachOfficershallbeappointedbytheManagerand
shallholdofficeuntilhisorhersuccessorshallbedulydesignatedandshallqualifyoruntilhisorherdeathoruntil
heshallresignorshallhavebeenremovedinthemannerhereinafterprovided.AnyonePersonmayholdmorethan
oneoffice.SubjecttotheotherprovisionsinthisAgreement(includinginSection6.8below),thesalariesorother
compensation,ifany,oftheOfficersoftheCompanyshallbefixedfromtimetotimebytheManager.Theauthority
andresponsibilityoftheOfficersshallinclude,butnotbelimitedto,suchdutiesastheManagermay,fromtimeto
time,delegatetothemandthecarryingoutoftheCompany’sbusinessandaffairsonaday-todaybasis.Theexisting
OfficersoftheCompanyasoftheEffectiveTimeshallremainintheirrespectivepositionsandshallbedeemedto
havebeenappointedbytheManager.
(c) The Manager shall have the power and authority to effectuate the sale, lease, transfer,
exchangeorotherdispositionofany,allorsubstantiallyalloftheassetsoftheCompany(includingtheexerciseor
grantofanyconversion, option,privilegeorsubscription rightor anyotherrightavailableinconnection withany
assetsat any time held by theCompany)orthemerger,consolidation,reorganizationor othercombination of the
Companywithorintoanotherentity.
6.2Actions of the Manager.TheManagermayactthroughanyPersonorPersonstowhomauthority
anddutieshavebeendelegatedpursuanttoSection6.8.
6.3Resignation.TheManagermayresignatanytimebygivingwrittennoticetotheMembers.Unless
otherwisespecifiedinthenotice,theresignationshalltakeeffectuponreceipt
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thereofbytheMembers,andtheacceptanceoftheresignationshallnotbenecessarytomakeiteffective.
6.4Removal.TheManagermayonlyberemovedbyHoldings.
6.5Vacancies. Vacancies in the position of Manager occurring for any reason shall be filled by
Holdings.
6.6Transactions Between Company and Manager.TheManagermaycausetheCompanytocontract
and deal with the Manager, or any Affiliate of the Manager, providedsuch contracts and dealings are on terms
comparable to and competitive with those available to the Company from others dealing at arm’s length or are
approvedbytheMembers.TheMembersherebyapprovetheManagementServicesAgreement,theCommonUnit
PurchaseAgreementandtheContributionAgreement.
6.7Expenses.TheCompanywillreimburseHoldingsforthefeesoftheHoldingsBoard.TheMembers
herebyapprovetheManagementServicesAgreement.
6.8Delegation of Authority.TheManager(a)may,fromtimetotime,delegatetooneormorePersons
such authority and duties as the Manager may deem advisable, and (b) may assign titles (including, without
limitation, chief executive officer, president, principal, vice president, secretary, assistant secretary, treasurer, or
assistanttreasurer)anddelegatecertainauthorityanddutiestosuchPersonsasthesamemaybeamended,restatedor
otherwisemodifiedfromtimetotime.Anynumberoftitlesmaybeheldbythesameindividual.Thesalariesorother
compensation,ifany,ofsuchagentsoftheCompanyshallbefixedfromtimetotimebytheManager,subjecttothe
otherprovisionsinthisAgreement.
6.9Limitation of Liability of Manager.
(a)ExceptasotherwiseprovidedhereinorinanagreemententeredintobysuchPersonandthe
Company,neithertheManagernoranyoftheManager’sAffiliatesshallbeliabletotheCompanyortoanyMember
that is not the Manager for any act or omission performed or omitted by the Manager in its capacity as the sole
managing member of the Company pursuant to authority granted to the Manager by this Agreement; provided,
however,that,exceptasotherwiseprovidedherein,suchlimitationofliabilityshallnotapplytotheextenttheactor
omissionwasattributabletotheManager’sgrossnegligence,willfulmisconductorknowingviolationoflaworfor
any present or future breaches of any representations, warranties or covenants by the Manager or its Affiliates
containedhereinorintheotheragreementswiththeCompany.TheManagermayexerciseanyofthepowersgranted
toitbythisAgreementandperformanyofthedutiesimposeduponithereundereitherdirectlyorbyorthroughits
agents,andshallnotberesponsibleforanymisconductornegligenceonthepartofanysuchagent(solongassuch
agentwasselectedingoodfaithandwithreasonablecare).TheManagershallbeentitledtorelyupontheadviceof
legal counsel, independent public accountants and other experts, including financial advisors, and any act of or
failuretoactbytheManageringoodfaithrelianceonsuchadviceshallinnoeventsubjecttheManagertoliability
totheCompanyoranyMemberthatisnottheManager.
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(b) Whenever this Agreement or any other agreement contemplated herein provides that the
Managershallactinamannerwhichis,orprovidetermswhichare,“fairandreasonable”totheCompanyorany
Member that is not the Manager, the Manager shall determine such appropriate action or provide such terms
considering, in each case, the relative interests of each party to such agreement, transaction or situation and the
benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable
UnitedStatesgenerallyacceptedaccountingpracticesorprinciples.
(c) WheneverinthisAgreement oranyother agreement contemplatedherein, theManager is
permittedorrequiredtotakeanyactionortomakeadecisioninits“solediscretion”or“discretion,”with“complete
discretion”orunderagrantofsimilarauthorityorlatitude,theManagershallbeentitledtoconsidersuchinterests
andfactorsasitdesires,includingitsowninterests,andshall,tothefullestextentpermittedbyapplicablelaw,have
nodutyorobligationtogiveanyconsiderationtoanyinterestoforfactorsaffectingtheCompanyorotherMembers.
(d)WheneverinthisAgreementtheManagerispermittedorrequiredtotakeanyactionorto
make a decision in its “good faith” or under another express standard, the Manager shall act under such express
standard and, to the extent permitted by applicable law, shall not be subject to any other or different standards
imposedby this Agreementoranyother agreement contemplatedherein,and,notwithstanding anything contained
hereintothecontrary,solongastheManageractsingoodfaith,theresolution,actionortermssomade,takenor
providedbytheManagershallnotconstituteabreachofthisAgreementoranyotheragreementcontemplatedherein
orimposeliabilityupontheManageroranyoftheManager’sAffiliates.
6.10Investment Company Act. TheManagershalluseitsbesteffortstoensurethattheCompanyshall
notbesubjecttoregistrationasaninvestmentcompanypursuanttotheInvestmentCompanyAct.
ARTICLE VII
RIGHTSANDOBLIGATIONSOFMEMBERS
7.1Limitation of Liability of Members.
(a) Except as provided in thisAgreement orin theDelaware Act, thedebts, obligations and
liabilitiesof theCompany, whether arisingincontract, tortor otherwise,shallbe solelythe debts,obligationsand
liabilitiesoftheCompanyandnoMember(includingwithoutlimitation,theManager)shallbeobligatedpersonally
for any such debts, obligation or liability solely by reason of being a Member or acting as the Manager of the
Company. Except as otherwise provided in this Agreement, a Member’s liability (in its capacity as such) for
CompanyliabilitiesandLossesshallbelimitedtotheCompany’sassets.Notwithstandinganythingcontainedherein
tothecontrary,thefailureoftheCompanytoobserveanyformalitiesorrequirementsrelatingtotheexerciseofits
powersormanagementofitsbusinessandaffairsunderthisAgreementortheDelawareActshallnotbegroundsfor
imposingpersonalliabilityontheMembersforliabilitiesoftheCompany.
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(b)InaccordancewiththeDelawareActandthelawsoftheStateofDelaware,aMembermay,
undercertaincircumstances,berequiredtoreturnamountspreviouslydistributedtosuchMember.Itistheintentof
theMembersthatnoDistributiontoanyMemberpursuanttoArticleIVshallbedeemedareturnofmoneyorother
propertypaidordistributedinviolationoftheDelawareAct.ThepaymentofanysuchmoneyorDistributionofany
suchpropertytoaMembershallbedeemedtobeacompromisewithinthemeaningofSection18‑502(b)oftheAct,
and,tothefullestextentpermittedbylaw,anyMemberreceivinganysuchmoneyorpropertyshallnotberequired
to return any such moneyor property to theCompany orany other Person. However, ifany court of competent
jurisdictionholdsthat,notwithstandingtheprovisionsofthisAgreement,anyMemberisobligatedtomakeanysuch
payment,suchobligationshallbetheobligationofsuchMemberandnotofanyotherMember.
7.2Lack of Authority.NoMember,otherthantheManager,initscapacityassuch,hastheauthorityor
powertoactfororonbehalfoftheCompany,todoanyactthatwouldbebindingontheCompanyortomakeany
expenditureonbehalfoftheCompany.TheMembersherebyconsenttotheexercisebytheManagerofthepowers
conferredonthembylawandthisAgreement.
7.3No Right of Partition.NoMember,otherthantheManager,shallhavetherighttoseekorobtain
partition by court decree or operation of law of any Company property, or the right to own or use particular or
individualassetsoftheCompany.
7.4Indemnification.
(a) Subject to Section 5.6, the Company hereby agrees to indemnify and hold harmless any
Person(eachan“IndemnifiedPerson”)tothefullestextentpermittedundertheDelawareAct,asthesamenowexists
or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or
replacement only to the extent that suchamendment, substitution orreplacement permits theCompany to provide
broader indemnificationrights thanthe Company is providing immediately prior to such amendment),against all
expenses, liabilities and losses (including attorneys’ fees, judgments, fines, excise taxes or penalties) reasonably
incurred or suffered by such Person (or one or more of such Person’s Affiliates) by reason of the fact that such
PersonisorwasaMemberorisorwasservingastheManager,Officer,principal,employeeorotheragentofthe
Company or is or was serving at the request of the Company as a manager, officer, director, principal, member,
employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other
enterprise; provided, however, that no Indemnified Person shall be indemnified for any expenses, liabilities and
losses suffered that are attributable to such Indemnified Person’s or its Affiliates’ gross negligence, willful
misconductorknowingviolationoflaworforanypresentorfuturebreachesofanyrepresentations,warrantiesor
covenants by such Indemnified Person or its Affiliates contained herein or in the other agreements with the
Company.Expenses,includingattorneys’fees,incurredbyanysuchIndemnifiedPersonindefendingaproceeding
shallbepaidbytheCompanyinadvanceofthefinaldispositionofsuchproceeding,includinganyappealtherefrom,
uponreceiptofanundertakingbyoronbehalfofsuchIndemnifiedPersontorepaysuchamountifitshallultimately
bedeterminedthatsuchIndemnifiedPersonisnotentitledtobeindemnifiedbytheCompany.
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(b)TherighttoindemnificationandtheadvancementofexpensesconferredinthisSection7.4
shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute,
agreement,by-law,actionbytheManagerorotherwise.
(c) The Company shall maintain directors’ and officers’ liability insurance, or substantially
equivalent insurance, at its expense, to protect any Indemnified Person (and the investment funds, if any, they
represent)againstanyexpense,liabilityorlossdescribedinSection7.4(a)whetherornottheCompanywouldhave
thepowertoindemnifysuchIndemnifiedPersonagainstsuchexpense,liabilityorlossundertheprovisionsofthis
Section7.4.TheCompanyshalluseitscommerciallyreasonableeffortstopurchaseandmaintainproperty,casualty
and liability insurance in types and at levels customary for companies of similar size engaged insimilar lines of
business,asdeterminedingoodfaithbytheManager,andtheCompanyshalluseitscommerciallyreasonableefforts
topurchasedirectors’andofficers’liabilityinsurance(includingemploymentpracticescoverage)withacarrierand
inanamountdeterminednecessaryordesirableasdeterminedingoodfaithbytheManager.
(d)Notwithstandinganythingcontainedhereintothecontrary(includinginthisSection7.4),any
indemnity by the Companyrelating tothe matterscovered inthis Section7.4shall be provided outof and to the
extentofCompanyassetsonlyandnoMember(unlesssuchMemberotherwise agrees in writing or is found in a
finaldecisionbyacourtofcompetentjurisdictiontohavepersonalliabilityonaccountthereof)shallhavepersonal
liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such
indemnityoftheCompany.
(e)IfthisSection7.4oranyportionhereofshallbeinvalidatedonanygroundbyanycourtof
competentjurisdiction,thentheCompanyshallneverthelessindemnifyandholdharmlesseachIndemnifiedPerson
pursuanttothisSection7.4tothefullestextentpermittedbyanyapplicableportionofthisSection7.4thatshallnot
havebeeninvalidatedandtothefullestextentpermittedbyapplicablelaw.
7.5Members Right to Act.FormattersthatrequiretheapprovaloftheMembers,theMembersshallact
throughmeetingsandwrittenconsentsasdescribedinparagraphs(a)and(b)below:
(a)ExceptasotherwiseexpresslyprovidedbythisAgreement,actsbytheMembersholdinga
majorityof theUnits, voting togetherasasingleclass, shallbethe actsof theMembers.Any Memberentitledto
voteatameetingofMembersortoexpressconsentordissenttoCompanyactioninwritingwithoutameetingmay
authorizeanotherpersonorpersonstoactforitbyproxy.Anelectronicmail,telegram,telex,cablegramorsimilar
transmissionbytheMember,oraphotographic,photostatic,facsimileorsimilarreproductionofawritingexecuted
bytheMembershall(ifstatedthereon)betreatedasaproxyexecutedinwritingforpurposesofthisSection7.5(a).
Noproxy shall be voted or acted uponafterelevenmonthsfromthedate thereof, unless the proxy provides for a
longerperiod.Aproxyshallberevocableunlesstheproxyformconspicuouslystatesthattheproxyisirrevocable
andthattheproxyiscoupledwithaninterest.ShouldaproxydesignatetwoormorePersonstoactasproxies,unless
thatinstrumentshallprovidetothecontrary,amajorityofsuchPersonspresentatanymeetingatwhichtheirpowers
thereunderaretobeexercisedshallhaveandmayexerciseallthepowersof
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votingorgivingconsentstherebyconferred,or,ifonlyonebepresent,thensuchpowersmaybeexercisedbythat
one; or, ifan even number attend and a majority do not agree on anyparticular issue, the Company shall notbe
requiredtorecognizesuchproxywithrespecttosuchissueifsuchproxydoesnotspecifyhowthevotesthatarethe
subjectofsuchproxyaretobevotedwithrespecttosuchissue.
(b)TheactionsbytheMemberspermittedhereundermaybetakenatameetingcalledbythe
ManagerorbytheMembersholdingamajorityoftheUnitsentitledtovoteonsuchmatteronatleast48hours’prior
writtennoticetotheotherMembersentitledtovote,whichnoticeshallstatethepurposeorpurposesforwhichsuch
meetingisbeingcalled.TheactionstakenbytheMembersentitledtovoteorconsentatanymeeting(asopposedto
bywrittenconsent),howevercalledandnoticed,shallbeasvalidasthoughtakenatameetingdulyheldafterregular
callandnoticeif(butnotuntil),eitherbefore,atorafterthemeeting,theMembersentitledtovoteorconsentasto
whom it was improperly held signs a written waiver of notice or aconsent tothe holdingof such meeting or an
approvaloftheminutesthereof.TheactionsbytheMembersentitledtovoteorconsentmaybetakenbyvoteofthe
Members entitled to vote or consent at a meeting or by written consent, so long as such consent is signed by
MembershavingnotlessthantheminimumnumberofUnitsthatwouldbenecessarytoauthorizeortakesuchaction
atameetingatwhichallMembersentitledtovotethereonwerepresentandvoted.Promptnoticeoftheactionso
taken,whichshallstatethepurposeorpurposesforwhichsuchconsentisrequiredandmaybedeliveredviaemail,
withoutameetingshallbegiventothoseMembersentitledtovoteorconsentwhohavenotconsentedinwriting;
provided,however,thatthefailuretogiveanysuchnoticeshallnotaffectthevalidityoftheactiontakenbysuch
writtenconsent..AnyactiontakenpursuanttosuchwrittenconsentoftheMembersshallhavethesameforceand
effectasiftakenbytheMembersatameetingthereof.
7.6Inspection Rights. The Company shall permit each Member and each of its designated
representativesto (i)visitand inspect anyofthe propertiesoftheCompany and itsSubsidiaries,all atreasonable
times and upon reasonable notice, (ii) examine the corporate and financial records of the Company or any of its
Subsidiariesandmakecopiesthereoforextractstherefrom,(iii)consultwiththemanagers,officers,employeesand
independentaccountantsoftheCompanyoranyofitsSubsidiariesconcerningtheaffairs,financesandaccountsof
theCompanyoranyofitsSubsidiaries.ThepresentationofanexecutedcopyofthisAgreementbyanyMemberto
theCompany’sindependentaccountantsshallconstitutetheCompany’spermissiontoitsindependentaccountantsto
participateindiscussionswithsuchPersonsandtheirrespectivedesignatedrepresentatives.
ARTICLE VIII
BOOKS,RECORDS,ACCOUNTINGANDREPORTS,AFFIRMATIVECOVENANTS
8.1Records and Accounting.The Company shall keep,or cause to bekept, appropriate booksand
records with respect to the Company’s business, including all books and records necessary to provide any
information,listsandcopiesofdocumentsrequiredtobeprovidedpursuanttoSection8.3orpursuanttoapplicable
laws.Allmattersconcerning(a)thedeterminationoftherelativeamountofallocationsandDistributionsamongthe
MemberspursuanttoArticlesIIIandIVand(b)accountingproceduresanddeterminations,andother
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determinationsnotspecificallyandexpresslyprovidedforbythetermsofthisAgreement,shallbedeterminedbythe
Manager,whosedeterminationshallbefinalandconclusiveastoalloftheMembersabsentmanifestclericalerror.
8.2Fiscal Year.TheFiscalYearoftheCompanyshallendonDecember31ofeachyearorsuchother
dateasmaybeestablishedbytheManager.
8.3Reports.TheCompanyshalldeliverorcausetobedelivered,within90daysaftertheendofeach
Fiscal Year, to each Person who was a Member at any time during such Fiscal Year, all information reasonably
necessaryforthepreparationofsuchPerson’sUnitedStatesfederalandapplicablestateincometaxreturns.
ARTICLE IX
TAXMATTERS
9.1Preparation of Tax Returns.TheCompanyshallarrangeforthepreparationandtimelyfilingofall
taxreturnsrequiredtobefiledbytheCompany.OnorbeforeMarch15,June15,September15,andDecember15of
eachFiscalYear,theCompanyshallsendtoeachPersonwhowasaMemberatanytimeduringthepriorquarter,an
estimateofsuchMember’sstatetaxapportionmentinformationandallocationstotheMembersoftaxableincome,
gains,lossesdeductionsandcreditsforthepriorquarter,whichestimateshallhavebeenreviewedbytheCompany’s
outsidetaxaccountants.Inaddition,nolaterthanthelaterof(i)March15followingtheendofthepriorFiscalYear,
and (ii) five (5) Business Days after the issuance of the final audit report for a Fiscal Year by the Company’s
auditors,theCompanyshallsendtoeachPersonwhowasaMemberatanytimeduringsuchFiscalYear,astatement
showingsuchMember’sfinalstatetaxapportionmentinformationandallocationstotheMembersoftaxableincome,
gains, losses deductions andcredits forsuch FiscalYear anda completedIRS ScheduleK-1. EachMember shall
notifytheotherMembers uponreceiptofanynotice oftax examination ofthe Companybyfederal, stateor local
authorities.InitscapacityasTaxMattersPartner,Holdingsshallhavetheauthoritytopreparethetaxreturnsofthe
Company using such permissible methods and elections as it determines in its reasonable discretion, including
withoutlimitationtheuseofanypermissiblemethodunderSection706oftheCodeforpurposesofdeterminingthe
varyingCompanyInterestsofitsMembers.
9.2Tax Elections.TheTaxableYearshallbetheFiscalYearsetforthinSection8.2.TheCompany
shallmakeanelectionpursuanttoSection754oftheCode,shallnotthereafterrevokesuchelectionandshallmakea
new election pursuant toSection 754to theextent necessaryfollowing any “termination” of the Company under
Section 708 of the Code. Each Member will upon request supply any information reasonably necessary to give
propereffecttoanysuchelections.
9.3Tax Controversies.HoldingsisherebydesignatedtheTaxMattersPartnerandisauthorizedand
required to represent the Company (at the Company’s expense) in connection with all examinations of the
Company’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend
Company funds for professional services reasonably incurred in connection therewith. Each Member agrees to
cooperatewiththe
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CompanyandtodoorrefrainfromdoinganyorallthingsreasonablyrequestedbytheCompanywithrespecttothe
conductofsuchproceedings.TheTaxMattersPartnersshallkeepallMembersfullyinformedoftheprogressofany
examinations,auditsorotherproceedings,andallMembersshallhavetherighttoparticipateattheirexpenseinany
suchexaminations, audits or otherproceedings.Notwithstandingthe foregoing, the Tax MattersPartnersshallnot
settleorotherwisecompromiseanyissueinanysuchexamination,auditorotherproceedingwithoutfirstobtaining
approvaloftheManager.Nothinghereinshalldiminish,limitorrestricttherightsofanyMemberunderSubchapter
C,Chapter63,SubtitleFoftheCode(CodeSections6221et seq.).
ARTICLE X
RESTRICTIONSONTRANSFEROFUNITS;PREEMPTIVERIGHTS
10.1Transfers by Members.NoholderofUnitsmayTransferanyinterestinanyUnits,exceptTransfers
(a)pursuanttoandinaccordancewithSection10.2or(b)approvedinwritingbytheManager.Notwithstandingthe
foregoing,“Transfer”shallnotincludeaneventthatterminatestheexistenceofaMemberforincometaxpurposes
(including, without limitation, a change in entity classification of a Member under Treasury Regulations
Section 301.7701-3, termination of a partnership pursuant to Code Section 708(b)(1)(B), a sale of assets by, or
liquidationof,aMemberpursuanttoanelectionunderCodeSection338,ormerger,severance,orallocationwithin
atrustoramongsub-trustsofatrustthatisaMember),butthatdoesnotterminatetheexistenceofsuchMember
under applicable state law (or, in the case of a trust that is a Member, does not terminate the trusteeship of the
fiduciariesundersuchtrustwithrespecttoalltheCompanyInterestsofsuchtrustthatisaMember).
10.2Permitted Transfers. Therestrictions contained in Section10.1shall not apply to any Transfer
(each,a“PermittedTransfer”)pursuant to(i) a Change of Control Transaction,(ii) aTransfer by any Member to
such Member’s spouse, any lineal ascendants or descendents ortrusts orother entities in which such Member or
Member’sspouse,linealascendantsordescendentshold(andcontinuetoholdwhilesuchtrustsorotherentitieshold
Units)50%ormoreofsuchentity’sbeneficialinterests,(iii)pursuanttothelawsofdescentanddistributionand(iv)
ifsuchTransferismadebyanOriginal Member,aTransfer toa partner,shareholderor memberofsuchOriginal
Member;provided,however,that(A)therestrictions containedinthisAgreementwillcontinueto applyto Units
afteranyPermittedTransferofsuchUnitspursuanttotheforegoingclauses(ii),(iii)and(iv),and(B)thetransferees
oftheUnitssoTransferredshallagreeinwritingtobeboundbytheprovisionsofthisAgreementand,thetransferor
willdeliver awritten notice totheCompany andtheMembers, whichnoticewill disclose inreasonable detail the
identityoftheproposedtransferee.InthecaseofaPermittedTransferbyRIHItoatransfereeinaccordancewith
this Section 10.2, RIHI shall be required to also transfer the fraction of its remaining Class B Common Stock
ownershipcorrespondingtotheproportionofRIHI’sUnitsthatweretransferredinthetransactiontosuchtransferee,
itbeingunderstoodthatintheeventsuchtransferistoanytransfereeotherthanDavidL.Liniger,thevotingrightsof
theClassBCommon Stocktransferred tosuchtransfereeshallbereducedtoonevoteforeachUnitheldbysuch
transferee.
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10.3Restricted Units Legend.TheUnitshavenotbeenregisteredundertheSecuritiesActand,therefore,
in addition to the other restrictions on Transfer contained in this Agreement, cannot be sold unless subsequently
registeredundertheSecuritiesActoranexemptionfromsuchregistrationisthenavailable.TotheextentsuchUnits
have been certificated, each certificate evidencing Units and each certificate issued in exchange for or upon the
Transfer of any Units (if such securities remain Units as defined herein after such Transfer) shall be stamped or
otherwiseimprintedwithalegendinsubstantiallythefollowingform:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON OCTOBER 1, 2013, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER SPECIFIED IN THE FOURTH AMENDED
ANDRESTATEDLIMITEDLIABILITYCOMPANYAGREEMENTOFRMCO,LLC,ASMAY
BEAMENDEDANDMODIFIEDFROMTIMETOTIME, ANDRMCO, LLCRESERVESTHE
RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED WITH RESPECT TO ANY TRANSFER. A COPY OF SUCH
CONDITIONS SHALL BE FURNISHED BY RMCO, LLC TO THE HOLDER HEREOF UPON
WRITTENREQUESTANDWITHOUTCHARGE.”
TheCompanyshallimprintsuchlegendoncertificates(ifany)evidencingUnits.Thelegendsetforthaboveshallbe
removedfromthecertificates(ifany)evidencinganyunitswhichceasetobeUnitsinaccordancewiththedefinition
thereof.
10.4Transfer.PriortoTransferringanyUnits(otherthanpursuanttoaChangeofControlTransaction),
theTransferringHolderofUnitsshallcausetheprospectiveTransfereetobeboundbythisAgreementandanyother
agreements executed by the holdersof Units and relating to such Unitsin the aggregate (collectively, the“Other
Agreements”), and shall cause the prospective Transferee to execute and deliver to the Company and the other
holdersofUnitscounterparts ofthisAgreement andanyapplicable OtherAgreements.AnyTransfer orattempted
TransferofanyUnitsinviolationofanyprovisionofthisAgreement(includinganyprohibitedindirectTransfers)
(a)shallbevoid,and(b)theCompanyshallnotrecordsuchTransferonitsbooksortreatanypurportedTransferee
ofsuchUnitsastheownerofsuchsecuritiesforanypurpose.
10.5Assignee’s Rights.
(a)TheTransferofaCompanyInterestinaccordancewiththisAgreementshallbeeffectiveasof
thedateofitsassignment(assumingcompliancewithalloftheconditionstosuchTransfersetforthherein),andsuch
TransfershallbeshownonthebooksandrecordsoftheCompany.Profits,LossesandotherCompanyitemsshallbe
allocatedbetweenthetransferorandtheAssigneeaccordingtoCodeSection706,usinganypermissiblemethodas
determinedin
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thereasonablediscretionoftheManager.DistributionsmadebeforetheeffectivedateofsuchTransfershallbepaid
tothetransferor,andDistributionsmadeaftersuchdateshallbepaidtotheAssignee.
(b)UnlessanduntilanAssigneebecomesaMemberpursuanttoArticleXII,theAssigneeshall
not be entitled to any of the rights granted to aMember hereunder or underapplicable law, other than the rights
granted specifically to Assignees pursuant to this Agreement; provided,  however, that, without relieving the
transferringMemberfromanysuchlimitationsorobligationsasmorefullydescribedinSection10.6,suchAssignee
shallbeboundbyanylimitationsandobligationsofaMembercontainedhereinthataMemberwouldbeboundon
accountoftheAssignee’sCompanyInterest(includingtheobligationtomakeCapitalContributionsonaccountof
suchCompanyInterest).
10.6Assignor’s Rights and Obligations.AnyMemberwhoshallTransferanyCompanyInterestina
mannerinaccordancewiththisAgreementshallceasetobeaMemberwithrespecttosuchUnitsorotherinterest
and shall no longer have any rights or privileges, or, except as set forth inthis Section 10.6,duties, liabilities or
obligations, of a Member with respect to such Units or other interest (it being understood, however, that the
applicableprovisionsofSections6.9and7.4shallcontinuetoinuretosuchPerson’sbenefit),exceptthatunlessand
untiltheAssignee(ifnotalreadyaMember)isadmittedasaSubstitutedMemberinaccordancewiththeprovisions
of Article XII(the “ Admission Date”), (i) such assigning Member shall retain all of the duties, liabilities and
obligationsofaMemberwithrespecttosuchUnitsorotherinterest,and(ii)theManagermay,initssolediscretion,
reinstatealloranyportionoftherightsandprivilegesofsuchMemberwithrespecttosuchUnitsorotherinterestfor
anyperiodoftimepriortotheAdmissionDate.NothingcontainedhereinshallrelieveanyMemberwhoTransfers
anyUnitsorotherinterestintheCompanyfromanyliabilityofsuchMembertotheCompanywithrespecttosuch
Company Interest that may exist on the Admission Date or that is otherwise specified in the Delaware Act and
incorporated into this Agreementor for anyliability tothe Company orany other Person forany materially false
statementmadebysuchMember(initscapacityassuch)orforanypresentorfuturebreachesofanyrepresentations,
warrantiesorcovenantsbysuchMember(initscapacityassuch)containedhereinorintheotheragreementswith
theCompany.
10.7Overriding Provisions
(a)AnyTransferinviolationofthisArticleXshallbenullandvoidab initio,andtheprovisions
ofSections10.5and10.6shallnotapplytoanysuchTransfers.Fortheavoidanceofdoubt,anyPersontowhoma
TransferismadeorattemptedinviolationofthisArticleXshallnotbecomeaMember,shallnotbeentitledtovote
onanymatterscomingbeforetheMembersandshallnothaveanyotherrightsinorwithrespecttoanyrightsofa
Memberof theCompany.Theapprovalof any Transfer inanyone ormoreinstancesshall not limitorwaive the
requirementforsuchapprovalinanyotherorfutureinstance.TheManagershallpromptlyamendtheScheduleof
MemberstoreflectanyPermittedTransferpursuanttothisArticleX.
(b)Notwithstandinganythingcontainedhereintothecontrary(including,fortheavoidanceof
doubt,theprovisionsofSection10.1and ArticleXIand ArticleXII),innoeventshallanyMemberTransferany
UnitstotheextentsuchTransferwould:
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(i)resultintheviolationoftheSecuritiesAct,oranyotherapplicablefederal,stateor
foreignlaws;
(ii)causeanassignmentundertheInvestmentCompanyAct;
(iii)beaviolationoforadefault(oraneventthat,withnoticeorthelapseoftimeorboth,
wouldconstituteadefault)under, orresultinanaccelerationofanyindebtednessunder,anynote,mortgage,loan
agreementorsimilarinstrumentordocumenttowhichtheCompanyortheManagerisaparty;
(iv)causetheCompanytoloseitsstatusasapartnershipforfederalincometaxpurposes
and, without limiting the generality of the foregoing, such Transfer was effected on or through an “established
securitiesmarket”ora“secondarymarketorthesubstantialequivalent thereof,”assuchtermsareusedinSection
1.7704-1oftheTreasuryRegulations;
(v)beaTransfertoaPersonwhoisnotlegallycompetentorwhohasnotachievedhisor
hermajorityunderapplicableLaw(excludingtrustsforthebenefitofminors);
(vi)causetheCompanytobetreatedasa“publiclytradedpartnership”ortobetaxedasa
corporationpursuanttoSection7704oftheCodeorsuccessorprovisionoftheCode;or
(vii) result in the Company having more than one hundred (100) partners, within the
meaningofTreasuryRegulationsSection1.7704-1(h)(1)(determinedpursuanttotherulesofTreasuryRegulations
Section1.7704-1(h)(3)).
ARTICLE XI
REDEMPTIONANDEXCHANGERIGHTS
11.1Redemption Right of a Member.
(a) Each Member(other thanHoldings) shallbe entitled to causethe Companyto redeem(a
“Redemption”) its Common Units (the “Redemption Right”) at any time following the expiration of the lock-up
periodunderthelock-upagreement,datedasofJuly12,2013,executedbyRIHI.AMemberdesiringtoexerciseits
RedemptionRight(the“RedeemingMember”)shallexercisesuchrightbygivingwrittennotice(the“Redemption
Notice”)tothe Company with acopy to Holdings. TheRedemption Notice shallspecify thenumber of Common
Units(the“RedeemedUnits”)thattheRedeemingMemberintendstohavetheCompanyredeemandadate,notless
than seven (7) Business Daysnor more than ten(10) Business Days after deliveryof the Redemption Notice, on
which exercise of the Redemption Right shall be completed (the “Redemption Date”). Unless the Redeeming
Member timely has delivered a Retraction Notice as provided in Section 11.1(b)or has revoked or delayed a
RedemptionasprovidedinSection11.1(c),ontheRedemptionDate(tobeeffectiveimmediatelypriortothe
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closeofbusiness on the Redemption Date)(i) the Redeeming Membershall transferand surrender theRedeemed
Units to the Company, free and clear of all liens and encumbrances, and (ii) the Company shall (x) cancel the
Redeemed Units, (y) transfer to the Redeeming Member the consideration to which the Redeeming Member is
entitledunderSection11.1(b),and(z),iftheUnitsarecertificated,issuetotheRedeemingMemberacertificatefora
numberofCommonUnitsequaltothedifference(ifany)betweenthenumberofCommonUnitsevidencedbythe
certificatesurrendered bythe RedeemingMemberpursuant toclause (i)ofthisSection11.1(a)andtheRedeemed
Units.
(b) In exercising its Redemption Right,a Redeeming Member shallbeentitled to receive the
ShareSettlementortheCashSettlement;providedthatHoldingsshallhavetheoptionasprovidedin Section11.2
andsubjecttoSection11.1(d)toselectwhethertheredemptionpaymentismadebymeansofaShareSettlementora
CashSettlement.Withinthree(3)BusinessDaysofdeliveryoftheRedemptionNotice,Holdingsshallgivewritten
notice (the “Contribution Notice”) to the Company (with a copy to the Redeeming Member) of its intended
settlement method; providedthat if Holdings does not timely deliver a Contribution Notice, Holdings shall be
deemedtohaveelectedtheShareSettlementmethod.IfHoldingselectstheCashSettlementmethod,theRedeeming
MembermayretractitsRedemptionNoticebygivingwrittennotice(the“RetractionNotice”)totheCompany(with
acopytoHoldings)withintwo(2)BusinessDaysofdeliveryoftheContributionNotice.Thetimelydeliveryofa
RetractionNoticeshallterminatealloftheRedeemingMember’s,Company’sandHoldings’rightsandobligations
underthisSection11.1arisingfromtheRedemptionNotice.
(c) In the event Holdings elects a Share Settlement in connection with a Redemption, a
RedeemingMembershallbeentitledtorevokeitsRedemptionNoticeordelaytheconsummationofaRedemptionif
any of the following conditions exists: (i) any registration statement pursuant to which the resale of the Class A
CommonStocktoberegisteredforsuchRedeemingMemberatorimmediatelyfollowingtheconsummationofthe
Redemption shall have ceased to be effective pursuant to any action or inaction by the Securities and Exchange
Commissionornosuchresaleregistrationstatementhasyetbecomeeffective;(ii)Holdingsshallhavefailedtocause
any related prospectus to be supplemented by any required prospectus supplement necessary to effect such
Redemption;(iii)Holdingsshall have exercised itsrighttodefer, delay or suspendthefiling or effectiveness of a
registrationstatementandsuchdeferral,delayorsuspensionshallaffecttheabilityofsuchRedeemingMemberto
haveitsClassACommonStockregisteredatorimmediatelyfollowingtheconsummationoftheRedemption;(iv)
Holdings shall have disclosed to such Redeeming Member any material non-public information concerning
Holdings,thereceiptofwhichresultsinsuchRedeemingMemberbeingprohibitedorrestrictedfromsellingClassA
CommonStockatorimmediatelyfollowingtheRedemptionwithoutdisclosureofsuchinformation(andHoldings
doesnotpermitdisclosure);(v)anystoporderrelatingtotheregistrationstatementpursuanttowhichtheClassA
CommonStockwastoberegisteredbysuchRedeemingMemberatorimmediatelyfollowingtheRedemptionshall
havebeenissuedbytheSecuritiesandExchangeCommission;(vi)thereshallhaveoccurredamaterialdisruptionin
thesecuritiesmarketsgenerallyorinthemarketormarketsinwhichtheClassACommonStockisthentraded;(vii)
thereshallbeineffect aninjunction, arestrainingorder oradecreeofanynatureofanygovernmentalentity that
restrainsorprohibitstheRedemption;or(viii)Holdingsshallhavefailedtocomplyinallmaterialrespectswithits
obligationsundertheRegistrationRightsAgreement,andsuchfailureshallhave
35
affectedtheabilityofsuchRedeemingMembertoconsummatetheresaleofClassACommonStocktobereceived
upon such redemption pursuant to an effective registration statement; provided further, that in no event shall the
RedeemingMemberseekingtoRevokeitsRedemptionNoticeordelaytheconsummationofsuchRedemptionand
relying on any of the matters contemplated in clauses (i) through (viii) above have controlled or intentionally
influencedanyfacts,circumstances,orPersonsinconnectiontherewith(exceptinthegoodfaithperformanceofhis
orherdutiesasanofficerordirectorofHoldings)inordertoprovidesuchRedeemingMemberwithabasisforsuch
delayor revocation. If a Redeeming Member delays theconsummation ofaRedemption pursuant tothisSection
11.1(c),theRedemptionDateshalloccuronthefifthBusinessDayfollowingthedateonwhichtheconditionsgiving
risetosuchdelayceasetoexist.
(d)ThenumberofsharesofClassACommonStockandtheRedeemedUnitsEquivalentthata
Redeeming Member is entitled to receive under Section 11.1(b)(whether through a Share Settlement or Cash
Settlement) shall not be adjusted on account of any Distributions previously made with respect to the Redeemed
UnitsordividendspreviouslypaidwithrespecttoClassACommonStock;provided,however,thatifaRedeeming
MembercausestheCompanytoredeemRedeemedUnitsandtheRedemptionDateoccurssubsequenttotherecord
date for any Distribution with respect to the Redeemed Units but prior to payment of such Distribution, the
RedeemingMembershallbeentitledtoreceivesuchDistributionwithrespecttotheRedeemedUnitsonthedatethat
it is made notwithstanding that the Redeeming Member transferred and surrendered the Redeemed Units to the
Companypriortosuchdate.
(e)Intheeventofareclassificationorothersimilartransactionasaresultofwhichthesharesof
ClassACommon Stock are converted intoanother security,then in exercising itRedemption Righta Redeeming
MembershallbeentitledtoreceivetheamountofsuchsecuritythattheRedeemingMemberwouldhavereceivedif
suchRedemptionRighthadbeenexercisedandtheRedemptionDatehadoccurredimmediatelypriortotherecord
dateofsuchreclassificationorothersimilartransaction.
11.2Election and Contribution of Holdings.InconnectionwiththeexerciseofaRedeemingMember’s
Redemption Rights under Section 11.1(a), Holdings shall contribute to the Company the consideration the
RedeemingMemberisentitledtoreceiveunderSection11.1(b).Holdings,atitsoption,shalldeterminewhetherto
contribute,pursuanttoSection11.1(b),theShareSettlementortheCashSettlement.UnlesstheRedeemingMember
hastimelydeliveredaRetractionNoticeasprovidedinSection11.1(b),orhasrevokedordelayedaRedemptionas
providedinSection11.1(c),ontheRedemptionDate(tobeeffectiveimmediatelypriortothecloseofbusinesson
the Redemption Date) (i)Holdings shall makeits CapitalContribution tothe Company (inthe formof theShare
SettlementortheCashSettlement)requiredunderthisSection11.2,and(ii)theCompanyshallissuetoHoldingsa
number of Common Units equal to the number of Redeemed Units surrendered by the Redeeming
Member.NotwithstandinganyotherprovisionsofthisAgreementtothecontrary,intheeventthatHoldingselectsa
Cash Settlement, Holdings shall only be obligated to pay in respect of such Cash Settlement to the Redeeming
Member the net proceeds (after deduction of any underwriters’ discounts or commissions and brokers’ fees or
commissions)fromthesalebyHoldingsofanumberofsharesofClassACommonStockequaltothenumberof
Redeemed Units to be redeemed with such Cash Settlement. The timely delivery of a Retraction Notice shall
terminatealloftheCompany’s
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andHoldings’rightsandobligationsunderthisSection11.2arisingfromtheRedemptionNotice.
11.3Exchange Right of Holdings.
(a) Notwithstandinganythingtothecontrary inthis ArticleXI,Holdings may,initssole and
absolutediscretion,electtoeffectontheRedemptionDatetheexchangeofRedeemedUnitsfortheShareSettlement
orCashSettlement,asthecasemaybe,throughadirectexchangeofsuchRedeemedUnitsandsuchconsideration
betweentheRedeemingMemberandHoldings(a“DirectExchange”).UponsuchDirectExchangepursuanttothis
Section11.3,HoldingsshallacquiretheRedeemedUnitsandshallbetreatedforallpurposesofthisAgreementas
theownerofsuchUnits.
(b)Holdingsmay,atanytimepriortoaRedemptionDate,deliverwrittennotice(an“Exchange
Election Notice”) to the Company and the Redeeming Member setting forth its election to exercise its right to
consummate a Direct Exchange; providedthat such election does not prejudice the ability of the parties to
consummate a Redemption or Direct Exchange on the Redemption Date. An Exchange Election Notice may be
revokedbyHoldingsatanytime;providedthatanysuchrevocationdoesnotprejudicetheabilityofthepartiesto
consummateaRedemptionorDirectExchangeontheRedemptionDate.TherighttoconsummateaDirectExchange
inalleventsshallbeexercisableforalltheRedeemedUnitsthatwouldhaveotherwisebeensubjecttoaRedemption.
ExceptasotherwiseprovidedbythisSection11.3,aDirectExchange shallbeconsummated pursuanttothesame
timeframeandinthesamemannerastherelevantRedemptionwouldhavebeenconsummatedifHoldingshadnot
deliveredanExchangeElectionNotice.
11.4Reservation of Class A Shares; Listing; Certificate of Holdings. At all times Holdings shall
reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of
issuance upon a Redemption or Direct Exchange, such number of shares of Class A Common Stock as shall be
issuable upon any such Redemption or Direct Exchange pursuant to Share Settlements; providedthat nothing
contained herein shall be construed to preclude Holdings from satisfying its obligations in respect of any such
RedemptionorDirectExchangebydeliveryofpurchasedClassACommonStock(whichmayormaynotbeheldin
the treasury of Holdings) or the delivery of cash pursuant to a Cash Settlement. Holdings shall deliver Class A
CommonStockthathasbeenregisteredundertheSecuritiesActwithrespecttoanyRedemptionorDirectExchange
totheextentaregistrationstatementiseffectiveandavailableforsuchshares.Holdingsshalluseitscommercially
reasonableeffortstolisttheClassACommonStockrequiredtobedelivereduponanysuchRedemptionorDirect
ExchangepriortosuchdeliveryuponeachnationalsecuritiesexchangeuponwhichtheoutstandingsharesofClass
ACommonStockarelistedatthetimeofsuchRedemptionorDirectExchange(itbeingunderstoodthatanysuch
sharesmaybesubjecttotransferrestrictionsunderapplicablesecuritieslaws).HoldingscovenantsthatallClassA
CommonStockissueduponaRedemptionorDirectExchangewill,uponissuance,bevalidlyissued,fullypaidand
non-assessable. The provisions ofthis ArticleXIshall beinterpreted and applied in amanner consistent with the
correspondingprovisionsofHoldings’certificateofincorporation.
37
11.5Effect of Exercise of Redemption or Exchange Right. This Agreement shall continue
notwithstandingtheconsummationofaRedemptionorDirectExchangeandallgovernanceorotherrightssetforth
hereinshallbeexercisedbytheremainingMembersandtheRedeemingMember(totheextentofsuchRedeeming
Member’s remaining interest inthe Company). NoRedemption orDirect Exchangeshall relievesuch Redeeming
MemberofanypriorbreachofthisAgreement.
11.6Tax Treatment.Unlessotherwiserequiredbyapplicablelaw,thepartiesheretoacknowledgeand
agreeaRedemptionoraDirectExchange,asthecasemaybe,shallbetreatedasadirectexchangebetweenHoldings
andtheRedeemingMemberforU.S.federalandapplicablestateandlocalincometaxpurposes.
ARTICLE XII
ADMISSIONOFMEMBERS
12.1Substituted Members. Subject to the provisions of Article Xhereof, in connection with the
PermittedTransferofaCompanyInteresthereunder,thetransfereeshallbecomeasubstitutedMember(“Substituted
Member”)ontheeffectivedateofsuchTransfer,whicheffectivedateshallnotbeearlierthanthedateofcompliance
withtheconditionstosuchTransfer,andsuchadmissionshallbeshownonthebooksandrecordsoftheCompany.
12.2Additional Members.SubjecttotheprovisionsofArticleXhereof,aPersonmaybeadmittedtothe
CompanyasanadditionalMember(“AdditionalMember”)onlyuponfurnishingtotheManager(a)counterpartsof
this Agreement and any applicable Other Agreements and (b) such other documents or instruments as may be
reasonably necessaryor appropriate to effectsuch Person’sadmission asa Member (including entering into such
documentsastheManagermaydeemappropriateinitssolediscretion).Suchadmissionshallbecomeeffectiveon
thedateonwhichtheManagerdeterminesinitssolediscretion thatsuchconditionshavebeensatisfiedandwhen
anysuchadmissionisshownonthebooksandrecordsoftheCompany.
ARTICLE XIII
WITHDRAWALANDRESIGNATIONOFMEMBERS
13.1Withdrawal and Resignation of Members.NoMembershallhavethepowerorrighttowithdraw
or otherwise resign as a Member from the Company prior to the dissolution and winding up of the Company
pursuanttothisArticleXIII.Any Member, however, that attemptsto withdraw or otherwise resignas a Member
fromtheCompanywithoutthepriorwrittenconsentoftheManageruponorfollowingthedissolutionandwinding
upoftheCompanypursuanttothisArticleXIII,butpriortosuchMemberreceivingthefullamountofDistributions
fromtheCompanytowhichsuchMemberisentitledpursuanttothisArticleXIII,shallbeliabletotheCompanyfor
alldamages(includingalllostprofitsandspecial,indirectandconsequentialdamages)directlyorindirectlycaused
by the withdrawal or resignation of such Member. Upon a Transfer of all of a Member’s Units in a Transfer
permittedbythisAgreement,subjecttotheprovisionsofSection10.6,suchMembershallceasetobeaMember.
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ARTICLE XIV
DISSOLUTIONANDLIQUIDATION
14.1Dissolution. The Company shall not be dissolved by the admission of Additional Members or
SubstitutedMembersortheattemptedwithdrawalorresignationofaMember.TheCompanyshalldissolve,andits
affairsshallbewoundup,upon:
(a) the unanimous decision of the Members that then hold Common Units to dissolve the
Company;
(b)aChangeofControlTransaction;or
(c) the entry of a decree of judicial dissolution of the Company under Section 35-5 of the
DelawareActor anadministrativedissolutionunderSection18-802oftheDelaware Act.Except asotherwiseset
forthinthisArticleXIV,theCompanyisintendedtohaveperpetual existence.AnEventofWithdrawal shallnot
causeadissolutionoftheCompanyandtheCompanyshallcontinueinexistencesubjecttothetermsandconditions
ofthisAgreement.
14.2Liquidation and Termination.OndissolutionoftheCompany,theManagershallactasliquidator
ormayappointoneormorePersonsasliquidator.Theliquidatorsshallproceeddiligentlytowinduptheaffairsof
theCompanyandmakefinaldistributionsasprovidedhereinandintheDelawareAct.Thecostsofliquidationshall
be borne as a Company expense. Until final distribution, the liquidators shall continue to operate the Company
propertieswithallofthepowerandauthorityoftheManager.Thestepstobeaccomplishedbytheliquidatorsareas
follows:
(a)aspromptlyaspossibleafterdissolutionandagainafterfinalliquidation,theliquidatorsshall
causeaproperaccountingtobemadebyarecognizedfirmofcertifiedpublicaccountantsoftheCompany’sassets,
liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final
liquidationiscompleted,asapplicable;
(b) theliquidators shall cause the noticedescribed in theDelaware Actto be mailedto each
knowncreditorofandclaimantagainsttheCompanyinthemannerdescribedthereunder;
(c) the liquidators shall pay, satisfy or discharge from Company funds, or otherwise make
adequateprovisionforpaymentanddischargethereof(including,withoutlimitation,theestablishmentofacashfund
for contingent liabilitiesin suchamount andfor such termas theliquidators mayreasonably determine):first, all
expensesincurredinliquidation;andsecond,allofthedebts,liabilitiesandobligationsoftheCompany;and
(d)allremainingassetsoftheCompanyshallbedistributedtotheMembersinaccordancewith
ArticleIVbytheendoftheTaxableYearduringwhichtheliquidationoftheCompanyoccurs(or,iflater,by90
daysafterthedateoftheliquidation).
39
Thedistributionofcashand/orpropertytotheMembersinaccordancewiththeprovisionsofthisSection14.2and
Section 14.3below constitutes a complete return to the Members of their Capital Contributions, a complete
distribution to the Members of their interest in the Company and all the Company’s property and constitutes a
compromise to which all Membershave consented within the meaning of theDelaware Act. To theextent thata
MemberreturnsfundstotheCompany,ithasnoclaimagainstanyotherMemberforthosefunds.
14.3Deferment; Distribution in Kind.NotwithstandingtheprovisionsofSection14.2,butsubjecttothe
orderofprioritiessetforththerein,ifupondissolutionoftheCompanytheliquidatorsdeterminethatanimmediate
saleofpartoralloftheCompany’sassetswouldbeimpracticalorwouldcauseundueloss(orwouldotherwisenot
bebeneficial)totheMembers,theliquidatorsmay,intheirsolediscretion,deferforareasonabletimetheliquidation
ofanyassetsexceptthosenecessarytosatisfyCompanyliabilities(otherthanloanstotheCompanybyMembers)
andreserves.SubjecttotheorderofprioritiessetforthinSection14.2,theliquidatorsmay,intheirsolediscretion,
distributetotheMembers,inlieuofcash,either(a)alloranyportionofsuchremainingCompanyassetsin-kindin
accordancewiththeprovisionsofSection14.2(d),(b)astenantsincommonandinaccordancewiththeprovisionsof
Section 14.2(d), undivided interests in all or any portion of such Company assets or (c) a combination of the
foregoing. Any such Distributions in kind shall be subject to (a) such conditions relating to the disposition and
managementofsuchassetsastheliquidatorsdeemreasonableandequitableand(b)thetermsandconditionsofany
agreementsgoverningsuchassets(ortheoperationthereofortheholdersthereof)atsuchtime.AnyCompanyassets
distributedinkindwillfirstbewrittenupordowntotheirFairMarketValue,thuscreatingProfitorLoss(ifany),
whichshallbeallocatedinaccordancewithArticleV.TheliquidatorsshalldeterminetheFairMarketValueofany
propertydistributedinaccordancewiththevaluationproceduressetforthinArticleXV.
14.4Cancellation of Certificate. On completion of the distribution of Company assets as provided
herein,theCompanyisterminated(andtheCompanyshallnotbeterminatedpriortosuchtime),andtheManager
(orsuchotherPersonorPersonsastheDelawareActmayrequireorpermit)shallfileacertificateofcancellation
withtheSecretaryofStateofDelaware,cancelanyotherfilingsmadepursuanttothisAgreementthatareorshould
be canceled and take such other actions as may be necessary to terminate the Company. The Company shall be
deemedtocontinueinexistenceforallpurposesofthisAgreementuntilitisterminatedpursuanttothisSection14.4.
14.5Reasonable Time for Winding Up.Areasonabletimeshallbeallowedfortheorderlywindingupof
thebusinessandaffairsoftheCompanyandtheliquidationofitsassetspursuanttoSections14.2and14.3inorder
tominimizeanylossesotherwiseattendantuponsuchwindingup.
14.6Return of Capital. The liquidators shall not be personally liable for the return of Capital
ContributionsoranyportionthereoftotheMembers(itbeingunderstoodthatanysuchreturnshallbemadesolely
fromCompanyassets).
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ARTICLE XV
VALUATION
15.1Determination.“FairMarketValue”ofaspecificCompanyassetwillmeantheamountwhichthe
Company would receivein an all-cashsale ofsuch asset inan arms-lengthtransaction with awilling unaffiliated
thirdparty,withneitherpartyhavinganycompulsiontobuyorsell,consummatedonthedayimmediatelypreceding
thedateonwhichtheeventoccurredwhichnecessitatedthedeterminationoftheFairMarketValue(andaftergiving
effecttoanytransfertaxespayableinconnectionwithsuchsale),assuchamountisdeterminedbytheManager(or,
ifpursuanttoSection14.2,theliquidators)initsgoodfaithjudgmentusingallfactors,informationanddataitdeems
tobepertinent.
15.2Dispute Resolution.IfanyMemberorMembersdisputetheaccuracyofanydeterminationofFair
Market Value in accordance with Section 15.1,and theManager andsuch Member(s) are unable to agree on the
determinationoftheFairMarketValueofanyassetoftheCompany,theManagerandsuchMember(s)shalleach
selectanationallyrecognizedinvestmentbankingfirmexperiencedinvaluingsecuritiesofclosely-heldcompanies
suchastheCompanyintheCompany’sindustry(the“Appraisers”),whoshalleachdeterminetheFairMarketValue
oftheassetortheCompany(asapplicable)inaccordancewiththeprovisionsofSection15.1.TheAppraisersshall
beinstructedtogivewrittennoticeoftheirdeterminationoftheFairMarketValueoftheassetortheCompany(as
applicable)within30daysoftheirappointmentasAppraisers.IfFairMarketValueasdeterminedbyanAppraiseris
higher than Fair MarketValue as determinedby the otherAppraiser by10% or more,and the Manager andsuch
Member(s)donototherwiseagreeonaFairMarketValue,theoriginalAppraisersshalldesignateathirdAppraiser
meeting the same criteria used to select the original two. If Fair Market Value as determined by an Appraiser is
within10%oftheFairMarketValueasdeterminedbytheotherAppraiser(butnotidentical),andtheManagerand
suchMember(s)donototherwiseagreeonaFairMarketValue,theManagershallselecttheFairMarketValueof
oneoftheAppraisers.ThefeesandexpensesoftheAppraisershallbebornebytheCompany.
ARTICLE XVI
GENERALPROVISIONS
16.1Power of Attorney.
(a) Each Member who is an individual hereby constitutes and appoints the Manager (or the
liquidator,ifapplicable)withfullpowerofsubstitution,ashistrueandlawfulagentandattorney-in-fact,withfull
powerandauthorityinhisoritsname,placeandstead,to:
(i) execute, swearto, acknowledge, deliver, file and record in theappropriate public
offices (A)this Agreement, all certificates andother instruments and all amendments thereof which the Manager
deemsappropriateornecessarytoform,qualify,orcontinuethequalificationof,theCompanyasalimitedliability
companyintheStateofDelawareandinallotherjurisdictionsinwhichtheCompanymayconductbusinessorown
property;(B)allinstrumentswhichtheManagerdeemsappropriateornecessarytoreflectany
41
amendment,change,modificationorrestatementofthisAgreementinaccordancewithitsterms;(C)allconveyances
andotherinstrumentsordocumentswhichtheManagerdeemsappropriateornecessarytoreflectthedissolutionand
liquidationoftheCompanypursuanttothetermsofthisAgreement,includingacertificateofcancellation;and(D)
allinstrumentsrelatingtotheadmission,withdrawalorsubstitutionofanyMemberpursuanttoArticleXIIorXIII;
and
(ii) sign, execute, swear to and acknowledge all ballots, consents, approvals, waivers,
certificatesandotherinstrumentsappropriateornecessary,inthereasonablejudgmentoftheManager,toevidence,
confirm or ratify anyvote, consent,approval, agreement orother actionwhich ismade orgiven bythe Members
hereunder or isconsistent withthe terms ofthis Agreement and/or appropriate or necessary (andnot inconsistent
with the terms of this Agreement), in the reasonable judgment of the Manager, to effectuate the terms of this
Agreement.
(b)Theforegoingpowerofattorneyisirrevocableandcoupledwithaninterest,andshallsurvive
the death, disability, incapacity, dissolution, bankruptcy, insolvency or termination of any Member who is an
individualandthetransfer ofalloranyportionofhisorits CompanyInterestandshallextendtosuchMember’s
heirs,successors,assignsandpersonalrepresentatives.
16.2Confidentiality.TheManagerandeachoftheMembersagreetoholdtheCompany’sConfidential
InformationinconfidenceandmaynotusesuchinformationexceptinfurtheranceofthebusinessoftheCompanyor
asotherwise authorizedseparately in writing by the Manager. “ConfidentialInformation”asused hereinincludes,
butisnotlimitedto,ideas,financialproductstructuring,businessstrategies,innovationsandmaterials,allaspectsof
the Company’s business plan, proposed operation and products, corporate structure, financial and organizational
information, analyses, proposed partners, software code and system and product designs, employees and their
identities,equityownership,themethodsandmeansbywhichtheCompanyplanstoconductitsbusiness,alltrade
secrets,trademarks,tradenamesandallintellectualpropertyassociatedwiththeCompany’sbusiness.Withrespectto
the Manager and each Member, Confidential Information does not include information or material that: (a) is
rightfullyinthepossessionoftheManageroreachMemberatthetimeofdisclosurebytheCompany;(b)beforeor
afterithasbeendisclosedtotheManageroreachMemberbytheCompany,becomespartofpublicknowledge,not
asaresultofanyactionorinactionoftheManagerorsuchMember,respectively,inviolationofthisAgreement;(c)
is approved for release by written authorization of the CEO of the Company or Holdings; (d) is disclosed to the
Manager or such Member ortheir representatives by athird partynot, to the knowledge ofthe Manager or such
Member,respectively, in violation of any obligation of confidentiality owed to the Company with respect to such
information; or (e) is or becomes independently developed by the Manager or such Member or their respective
representativeswithoutuseorreferencetotheConfidentialInformation.
16.3Amendments.ThisAgreementmaybeamendedormodifiedupontheconsentofMembersholdinga
majorityoftheCommonUnits.Notwithstandingtheforegoing,noamendmentormodificationtoanyoftheterms
and conditions of this Agreement which terms and conditions expressly require the approval or action of certain
Personsmaybemadewithout
42
obtainingtheconsentoftherequisitenumberorspecifiedpercentageofsuchPersonswhoareentitledtoapproveor
takeactiononsuchmatter.
16.4Title to Company Assets. Company assetsshall bedeemed to beowned by theCompany as an
entity,andnoMember,individuallyorcollectively,shallhaveanyownershipinterestinsuchCompanyassetsorany
portionthereof.TheCompanyshallholdtitletoallofitspropertyinthenameoftheCompanyandnotinthename
of any Member. AllCompany assetsshall be recorded asthe propertyof the Company onits booksand records,
irrespectiveofthenameinwhichlegaltitletosuchCompanyassetsisheld.TheCompany’screditandassetsshall
beusedsolelyforthebenefitoftheCompany,andnoassetoftheCompanyshallbetransferredorencumberedfor,
orinpaymentof,anyindividualobligationofanyMember.
16.5Addresses and Notices.AnynoticeprovidedforinthisAgreementwillbeinwritingandwillbe
either personally delivered, or received by certified mail, return receipt requested, or sent by reputable overnight
courierservice(chargesprepaid)totheCompanyattheaddresssetforthbelowandtoanyotherrecipientandtoany
MemberatsuchaddressasindicatedbytheCompany’srecords,oratsuchaddressortotheattentionofsuchother
personasthe recipient partyhasspecified by prior written notice to the sending party. Notices will be deemed to
havebeengivenhereunderwhendeliveredpersonallyorsentbytelecopier(providedconfirmationoftransmissionis
received), three days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier
service.TheCompany’saddressis:
TotheCompany:
RMCO,LLC
c/oRE/MAXInternationalHoldings,Inc.
5075S.SyracuseStreet
Denver,Colorado80237
Attn:DavidMetzger,ChiefFinancialOfficerandGeoffreyLewis,GeneralCounsel
Facsimile:(303)796-3599
withacopy(whichcopyshallnotconstitutenotice)to:
Morrison&FoersterLLP
425MarketStreet
SanFrancisco,California94105
Attn:GavinB.Grover
Facsimile:(415)268-7113
16.6Binding Effect.ThisAgreementshallbebindinguponandinuretothebenefitofthepartieshereto
andtheirheirs,executors,administrators,successors,legalrepresentativesandpermittedassigns.
16.7Creditors.NoneoftheprovisionsofthisAgreementshallbeforthebenefitoforenforceablebyany
creditorsoftheCompanyoranyofitsAffiliates, andnocreditorwhomakesaloantotheCompanyoranyofits
Affiliatesmayhaveoracquire(except pursuanttothetermsofaseparateagreement executedbytheCompanyin
favorofsuchcreditor)atanytimeasa
43
resultofmakingtheloananydirectorindirectinterestinCompanyProfits,Losses,Distributions,capitalorproperty
otherthanasasecuredcreditor.
16.8Waiver. No failure by any party to insist upon the strict performance of any covenant, duty,
agreementorconditionofthisAgreementortoexerciseanyrightorremedyconsequentuponabreachthereofshall
constituteawaiverofanysuchbreachoranyothercovenant,duty,agreementorcondition.
16.9Counterparts.ThisAgreementmaybeexecutedinseparatecounterparts,eachofwhichwillbean
originalandallofwhichtogethershallconstituteoneandthesameagreementbindingonallthepartieshereto.
16.10Applicable Law.ThisAgreementshallbegovernedby,andconstruedinaccordancewith,thelaws
oftheStateofDelaware,withoutgivingeffecttoanychoiceoflaworconflictoflawrulesorprovisions(whetherof
theStateofDelawareoranyotherjurisdiction)thatwouldcausetheapplicationofthelawsofanyjurisdictionother
thantheState ofDelaware. Anydisputerelatinghereto shallbeheardinthestateorfederalcourtsoftheStateof
Delaware,andthepartiesagreetojurisdictionandvenuetherein.
16.11Severability. Whenever possible, each provision of this Agreement will be interpreted in such
mannerastobeeffectiveandvalidunderapplicablelaw,butifanyprovisionofthisAgreementisheldtobeinvalid,
illegalorunenforceableinanyrespectunderanyapplicablelaworruleinanyjurisdiction,suchinvalidity,illegality
orunenforceabilitywillnotaffectanyotherprovisionortheeffectivenessorvalidityofanyprovisioninanyother
jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid,
illegalorunenforceableprovisionhadneverbeencontainedherein.
16.12Further Action.Thepartiesshallexecuteanddeliveralldocuments,provideallinformationandtake
orrefrainfromtakingsuchactionsasmaybenecessaryorappropriatetoachievethepurposesofthisAgreement.
16.13Delivery by Electronic Transmission. This Agreement and any signed agreement or instrument
enteredintoinconnectionwiththisAgreementorcontemplatedhereby,andanyamendmentsheretoorthereto,tothe
extentsignedanddeliveredbymeansofanelectronictransmission,includingbyafacsimilemachineorviaemail,
shallbetreatedinallmannerandrespectsasanoriginalagreementorinstrumentandshallbeconsideredtohavethe
samebindinglegaleffectasifitweretheoriginalsignedversionthereofdeliveredinperson.Attherequestofany
partyheretoortoanysuchagreementorinstrument,eachotherpartyheretoortheretoshallre-executeoriginalforms
thereofanddeliverthemtoallotherparties.Nopartyheretoortoanysuchagreementorinstrumentshallraisethe
useofelectronictransmissionbyafacsimilemachineorviaemailtodeliverasignatureorthefactthatanysignature
oragreementorinstrumentwastransmittedorcommunicatedthrough suchelectronic transmissionasadefenseto
theformationofacontractandeachsuchpartyforeverwaivesanysuchdefense.
16.14Right of Offset.WhenevertheCompanyistopayanysum(otherthanpursuanttoArticleIV)toany
Member,anyamountsthatsuchMemberowestotheCompanywhicharenotthesubjectofagoodfaithdisputemay
bedeductedfromthatsumbeforepayment.
44
16.15Effectiveness; Fourth LLC Agreement.ThisAgreementshallbeeffectiveimmediatelypriortothe
time at which the IPO closes on the IPO Closing Date (the “Effective Time”). The Third LLC Agreement shall
governtherightsandobligationsofthepartiestotheFourthLLCAgreementandtheUnitholdersforthetimeprior
totheEffectiveTime.
16.16Entire Agreement. This Agreement, those documents expressly referred to herein (including the
Registration Rights Agreement and Tax Receivable Agreements), any indemnity agreements entered into in
connection with the Third LLC Agreement with any member of the board of managers at that time and other
documents of even date herewith embody the complete agreement and understanding among the parties and
supersedeandpreemptanypriorunderstandings,agreementsorrepresentationsbyoramongtheparties,writtenor
oral,whichmayhaverelatedtothesubjectmatterhereofinanyway.Fortheavoidanceofdoubt,theThirdLLC
AgreementandtheLetterAgreementaresupersededbythisAgreementasoftheEffectiveTimeandshallbeofno
furtherforceandeffectthereafter.
16.17Remedies.EachMembershallhaveallrightsandremediessetforthinthisAgreementandallrights
andremedieswhichsuchPersonhasbeengrantedatanytimeunderanyotheragreementorcontractandallofthe
rightswhichsuchPersonhasunderanylaw.AnyPersonhavinganyrightsunderanyprovisionofthisAgreementor
any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a
bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to
exerciseallotherrightsgrantedbylaw.
16.18Descriptive Headings; Interpretation.ThedescriptiveheadingsofthisAgreementareinsertedfor
convenienceonlyanddonotconstituteasubstantivepartofthisAgreement.Wheneverrequiredbythecontext,any
pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the
singularformofnouns,pronounsandverbsshallincludethepluralandviceversa.Theuseoftheword“including”
inthisAgreementshallbebywayofexampleratherthanbylimitation.Referencetoanyagreement,documentor
instrumentmeanssuchagreement,documentorinstrumentasamendedorotherwisemodifiedfromtimetotimein
accordance with the terms thereof, and if applicable hereof. Without limiting the generality of the immediately
precedingsentence,noamendmentorothermodificationtoanyagreement,documentorinstrumentthatrequiresthe
consentofanyPersonpursuanttothetermsofthisAgreementoranyotheragreementwillbegiveneffecthereunder
unlesssuchPersonhasconsentedinwritingtosuchamendmentormodification.Whereverrequiredbythecontext,
referencestoaFiscalYearshallrefertoaportionthereof.Theuseofthewords“or,”“either”and“any”shallnotbe
exclusive.ThepartiesheretohaveparticipatedjointlyinthenegotiationanddraftingofthisAgreement.Intheevent
anambiguityorquestionofintentorinterpretationarises,thisAgreementshallbeconstruedasifdraftedjointlyby
thepartieshereto,andnopresumptionorburdenofproofshallarisefavoringordisfavoringanypartybyvirtueof
theauthorshipofanyoftheprovisionsofthisAgreement.WhereveraconflictexistsbetweenthisAgreementand
anyotheragreement,thisAgreementshallcontrolbutsolelytotheextentofsuchconflict.
45
IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this
Agreementasofthedatefirstwrittenabove.
COMPANY:
RMCO,LLC
By: /s/GeoffreyD.Lewis
Name:GeoffreyD.Lewis
Title:ExecutiveVicePresidentandChiefLegaland
ComplianceOfficer
[SignaturePagetoLLCAgreement]
MEMBERS:
WESTONPRESIDIOV,L.P.
By:WestonPresidioManagementV,LLC
By: /s/ThereseMrozek
Name:ThereseMrozek
Title:ChiefOperatingOfficer
[SignaturePagetoLLCAgreement]
RIHI,INC.
By: /s/GeoffreyD.Lewis
Name:GeoffreyD.Lewis
Title:Secretary
RE/MAXHOLDINGS,INC.
By: /s/GeoffreyD.Lewis
Name:GeoffreyD.Lewis
Title:ExecutiveVicePresidentandChiefLegaland
ComplianceOfficer
[SignaturePagetoLLCAgreement]
SCHEDULEI*
ScheduleofMembers
Member  CommonUnits  PercentageInterest
RIHI,Inc. 19,234,600** 65.55%
RE/MAXHoldings,Inc. 10,107,971*** 34.45%
Total 29,342,571 100.00%
*ThisScheduleofMembersreflectstheRecapitalizationandtheWPPreferredUnitRedemptionandWPCommon
UnitRedemptionandshallbeupdatedfromtimetotimetoreflectanyadjustmentwithrespecttoanysubdivision(by
Unitsplitorotherwise)oranycombination(byreverseUnitsplitorotherwise)ofanyoutstandingCommonUnits,or
toreflectanyadditionalissuancesofCommonUnitspursuanttothisAgreement.
**ReflectstheRecapitalizationandtheRIHIInitialCommonUnitRedemptionandRIHIOver-AllotmentOption
CommonUnitRedemption(ifapplicable)
***ReflectstheHBN/TailsContributionandthecontributionoftheRemainingNetIPOProceedsandNetOver-
AllotmentProceeds(ifany)
Exhibit 21.1
Exhibit 21.1
Legal Name
 Jurisdiction
BMFC,LLC

Delaware
Booj,LLC
Delaware
FirstLeads,LLC
Delaware
MaximizedPromotions,Inc.
BritishColumbia,Canada
MottoFranchising,LLC
Delaware
MottoMarketingFund,LLC
Delaware
RE/MAX,LLC

Delaware
RE/MAXAncillaryServices,LLC

Delaware
RE/MAXBrokerage,LLC
Delaware
RE/MAXCaribbeanIslands,LLC
Delaware
RE/MAXForeignHoldings,LLC

Delaware
RE/MAXMarketingFund,LLC
Delaware
RE/MAXofWesternCanada(1998),LLC

Delaware
RMCO,LLC

Delaware
Sacagawea,LLC
Delaware
Seventy3,LLC
Delaware
StatewideRES,Inc.
Texas
STCNorthwest,LLC
Delaware
SyracuseDevelopmentCompany,LLC
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
TheBoardofDirectors
RE/MAXHoldings,Inc.:
Weconsenttotheincorporationbyreferenceintheregistrationstatements(No.333‑191519)onFormS-8and(No.333-
207629andNo.3330234187)onFormS-3ofRE/MAXHoldings,Inc.ofourreportsdatedFebruary21,2020,withrespectto
theconsolidatedbalancesheetsofRE/MAXHoldings,Inc.andsubsidiariesasofDecember31,2019and2018,therelated
consolidatedstatementsofincome,comprehensiveincome,stockholders’equity,andcashflowsforeachoftheyearsinthe
three-yearperiodendedDecember31,2019,andtherelatednotes,andtheeffectivenessofinternalcontroloverfinancial
reportingasofDecember31,2019,whichreportsappearintheDecember31,2019annualreportonForm10‑KofRE/MAX
Holdings,Inc.
Ourreportreferstoachangeinthemethodofaccountingforleases.
/s/KPMGLLP
Denver,Colorado
February21,2020
Exhibit 31.1
Certification
I,AdamM.Contoscertifythat:
1. IhavereviewedthisannualreportonForm10-KofRE/MAXHoldings,Inc.;
2. Basedonmyknowledge,thisannualreportdoesnotcontainanyuntruestatementofamaterialfactoromitto
stateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuch
statementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisannualreport;
3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisannual
report,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsofthe
registrantasof,andfor,theperiodspresentedinthisannualreport;
4. Theregistrant'sothercertifyingofficersandIareresponsibleforestablishingandmaintainingdisclosure
controlsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))andinternalcontrolover
financialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))fortheregistrantandwehave:
a. Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobe
designedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingits
consolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringthe
periodinwhichthisannualreportisbeingprepared;
b. Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancial
reportingtobedesignedunderoursupervision,toprovidereasonableassuranceregardingthereliabilityof
financialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewith
generallyacceptedaccountingprinciples;
c. Evaluatedtheeffectivenessoftheregistrant'sdisclosurecontrolsandproceduresandpresentedinthis
annualreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandproceduresasofthe
endoftheperiodcoveredbythisannualreportbasedonsuchevaluation;and
d. Disclosedinthisannualreportanychangeintheregistrant'sinternalcontroloverfinancialreportingthat
occurredduringtheregistrant'smostrecentfiscalquarter(theregistrant'sfourthfiscalquarterinthecase
ofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theregistrant's
internalcontroloverfinancialreporting;and
5. Theregistrant'sothercertifyingofficersandIhavedisclosed,basedonourmostrecentevaluationofinternal
controloverfinancialreporting,totheregistrant'sauditorsandtheauditcommitteeoftheregistrant'sboardof
directors(orpersonsperformingtheequivalentfunction):
a. Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontrolover
financialreportingwhicharereasonablylikelytoadverselyaffecttheregistrant'sabilitytorecord,process,
summarizeandreportfinancialinformation;and
b. Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificant
roleintheregistrant'sinternalcontroloverfinancialreporting.
Date:February21,2020 /s/AdamM.Contos
AdamM.Contos
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
Certification
I,KarriR.Callahancertifythat:
1. IhavereviewedthisannualreportonForm10-KofRE/MAXHoldings,Inc.;
2. Basedonmyknowledge,thisannualreportdoesnotcontainanyuntruestatementofamaterialfactoromitto
stateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuch
statementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisannualreport;
3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisannual
report,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsofthe
registrantasof,andfor,theperiodspresentedinthisannualreport;
4. Theregistrant'sothercertifyingofficersandIareresponsibleforestablishingandmaintainingdisclosure
controlsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))andinternalcontrolover
financialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))fortheregistrantandwehave:
a. Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobe
designedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingits
consolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringthe
periodinwhichthisannualreportisbeingprepared;
b. Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancial
reportingtobedesignedunderoursupervision,toprovidereasonableassuranceregardingthereliabilityof
financialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewith
generallyacceptedaccountingprinciples;
c. Evaluatedtheeffectivenessoftheregistrant'sdisclosurecontrolsandproceduresandpresentedinthis
annualreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandproceduresasofthe
endoftheperiodcoveredbythisannualreportbasedonsuchevaluation;and
d. Disclosedinthisannualreportanychangeintheregistrant'sinternalcontroloverfinancialreportingthat
occurredduringtheregistrant'smostrecentfiscalquarter(theregistrant'sfourthfiscalquarterinthecase
ofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theregistrant's
internalcontroloverfinancialreporting;and
5. Theregistrant'sothercertifyingofficersandIhavedisclosed,basedonourmostrecentevaluationofinternal
controloverfinancialreporting,totheregistrant'sauditorsandtheauditcommitteeoftheregistrant'sboardof
directors(orpersonsperformingtheequivalentfunction):
a. Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontrolover
financialreportingwhicharereasonablylikelytoadverselyaffecttheregistrant'sabilitytorecord,process,
summarizeandreportfinancialinformation;and
b. Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificant
roleintheregistrant'sinternalcontroloverfinancialreporting.
Date:February21,2020 /s/KarriR.Callahan
KarriR.Callahan
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuanttosection906oftheSarbanes-OxleyActof2002(subsections(a)and(b)ofsection1350,chapter63oftitle18,United
StatesCode),eachoftheundersignedofficersofRE/MAXHoldings,Inc.,aDelawarecorporation(the"Company"),doeshereby
certify,tosuchofficer'sknowledge,that:
TheAnnualReportonForm10-KfortheyearendedDecember31,2019(the"Form10-K")oftheCompanyfullycomplieswith
therequirementsofsection13(a)or15(d)oftheSecuritiesExchangeActof1934andinformationcontainedintheForm10-K
fairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsoftheCompanyasofDecember31,2019
andDecember31,2018,andfortheyearsendedDecember31,2019,2018and2017.
Date:February21,2020 /s/AdamM.Contos
AdamM.Contos
Chief Executive Officer
(Principal Executive Officer)
Date:February21,2020 /s/KarriR.Callahan
KarriR.Callahan
Chief Financial Officer
(Principal Financial Officer)
Theforegoingcertificationisbeingfurnishedsolelypursuanttosection906oftheSarbanes-OxleyActof2002(subsections(a)
and(b)ofsection1350,chapter63oftitle18,UnitedStatesCode)andisnotbeingfiledaspartoftheForm10-Korasaseparate
disclosuredocument.