What acquisition resulted in Remax having Level 3 liabilities measured at fair value on a recurring basis?

According to Remax's 2025 Franchise Disclosure Document, the acquisition of Motto resulted in the company having Level 3 liabilities that are measured at fair value on a recurring basis. These Level 3 liabilities consist of contingent consideration related to the Motto acquisition. Fair value measurements are based on a three-tier hierarchy, with Level 3 measurements relying on unobservable inputs where there is little or no market data, requiring Remax to develop its own assumptions.

This means that Remax's financial statements include liabilities whose valuation depends on internal estimates and assumptions due to the absence of reliable market data. These liabilities specifically relate to payments contingent on Motto's future performance. The contingent consideration is based on 8% of gross receipts collected by Motto each year through September 30, 2026. The annual payment is required to be made within 120 days of the end of each Revenue Share Year.

For a prospective Remax franchisee, this information provides insight into the financial complexities of Remax's corporate structure and acquisition strategy. The valuation of these liabilities can impact Remax's financial performance and, potentially, its ability to invest in franchisee support or growth initiatives. It also highlights the importance of Motto's performance to Remax's overall financial health, as these contingent liabilities are tied to Motto's gross receipts.

Remax is required to pay additional purchase consideration totaling 8% of gross receipts collected by Motto each 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. The fair value of the contingent purchase consideration represents the forecasted discounted cash payments that the Company expects to pay. As of December 31, 2024, Remax does not anticipate making any further cash payments for contingent consideration associated with the acquisition of Gadberry Group.