RE/MAX Holdings, Inc. (NYSE: RMAX)

RE/MAX Holdings, Inc. is one of the world’s leading franchisors in the real estate industry. The company franchises real estate brokerages worldwide under the REMAX brand and mortgage brokerages in the United States under the Motto brand. It also provides ancillary products and services to its franchise networks, including marketing services, technology platforms and mortgage loan processing services through the wemlo brand. All of its operations are 100 percent franchised, meaning it does not own or operate brokerage offices. Instead it grants franchisees the right to use its brands, technology and value proposition while franchisees fund and manage their own operations. This structure yields a low fixed cost base and generates revenue primarily from recurring fee based sources, delivering strong margins and cash flow.

The company’s revenue comes from several streams. Recurring franchise fees, which include continuing franchise fees paid monthly by franchisees and annual dues paid by REMAX agents, form the largest portion. Broker fees, representing a percentage of the commissions earned on real estate transactions, also contribute significantly. Additional revenue is generated from franchise sales and renewals, event based income, mortgage loan processing fees, marketing services, digital advertising and the MaaS platform. Approximately 93 percent of total revenue is derived from the United States and Canada, with the remainder coming from international markets. Historically, recurring revenue streams accounted for about 66 percent of revenue excluding the Marketing Funds segment, while broker fees contributed roughly 23 percent.

The company operates through the following segments: Real Estate, Mortgage and Marketing Funds.

• Real Estate comprises real estate brokerage franchising operations under the REMAX brand name and corporate wide shared services expenses.

• Mortgage is comprised of mortgage brokerage franchising operations under the Motto brand and mortgage loan processing software and services under the wemlo brand.

• Marketing Funds represents marketing campaigns designed to build and maintain brand awareness for both franchise brands and the costs of agent marketing technology such as BoldTrail.

RE/MAX Holdings, Inc. holds a leading position in the global real estate franchising market, boasting the highest unaided brand awareness in residential real estate in the United States and Canada according to MMR Strategy Group studies. Its competitive advantages include a vast international footprint covering more than 120 countries and territories, a productive agent network that consistently outperforms industry averages and a suite of technology and marketing tools such as BoldTrail, MaaS and REMAX University that support franchisee growth. The company faces competition from traditional brokerages, non traditional models and other franchisors. In the United States and Canada its primary rivals include the six brands recently acquired by Compass International Holdings from Anywhere Real Estate Inc (Century 21, Coldwell Banker, ERA, Sotheby’s, Corcoran and Better Homes and Gardens), Berkshire Hathaway Home Services, eXp Realty, Keller Williams Realty Inc and Royal LePage in Canada. In the mortgage space, it competes with other mortgage brokerage franchises and wholesale lenders, though it remains the sole national mortgage brokerage franchise brand in the United States.

The company serves a diverse customer base that includes real estate brokerage franchisees, mortgage brokerage franchisees, real estate agents, mortgage loan originators and ultimately home buyers and sellers. Its franchisee network consists of independent entrepreneurs who operate under the REMAX and Motto brands, while its agents and loan originators are independent contractors affiliated with those franchises. The end consumers of the services provided by these agents and originators are individuals seeking to purchase, sell or refinance residential properties.