Realogy Reports Fourth Quarter And Full Year 2019 Financial Results

MADISON, N.J. , Feb. 25, 2020 /PRNewswire/ -- Realogy Holdings Corp. (NYSE: RLGY), the largest full-service residential real estate services company in the United States , today reported financial results for the fourth quarter and full year ended December 31, 2019.

"In 2019 we accelerated our efforts to support and grow Realogy's affiliated agents and franchisees, delivering new products and partnerships to enhance our value proposition, generate high-quality leads, and enhance the consumer experience," said Ryan Schneider , Realogy's chief executive officer and president. "Our industry leading foundation substantial size and scale, strong brands, deep technology and data access, and solid financial engine combined with our 2019 accomplishments, a more rational competitive environment late in the year, and improving housing market, continue to drive my excitement for Realogy in the year ahead."

"The fourth quarter marked a strong close to Realogy's year, driven by solid performance, both financially and operationally, across the business," said Charlotte Simonelli , Realogy's executive vice president, chief financial officer and treasurer. "In 2019, we demonstrated a willingness to change our business mix to optimize our capital deployment and simplify our company, and we will remain thoughtful and deliberate in our approach as we work to build a stronger overall financial profile for Realogy."

On November 7, 2019 , the Company announced an agreement to sell its global employee relocation business, which we refer to as "Cartus Relocation Services" and, accordingly, this business is now reported as discontinued operations. The sale does not include "Realogy Leads Group" the Company's affinity and broker-to-broker businesses as well as its broker network. We have noted in this release those non-GAAP metrics that include discontinued operations. The transaction is expected to close in the next couple of months, subject to the satisfaction or waiver of closing conditions. 

Fourth Quarter 2019 Highlights

  • Generated Revenue of $1.3 billion , an increase of 4% year over year.
  • Delivered 6% transaction volume growth with solidly positive growth across both our owned and franchise businesses.
  • Reported a Net loss of $45 million , driven by the fair value adjustment on the assets being sold as well as tax expense associated with the tax gain on the relocation sale.
  • Generated Operating EBITDA including discontinued operations of $126 million , an increase of 19% year- over-year (See Table 4a).
  • Achieved approximately $30 million of realized cost savings.
  • Delivered Operating EBITDA margin improvement at Realogy.
  • Generated Free Cash Flow including discontinued operations of $77 million (See Table 6).

Full Year 2019 Highlights

  • Generated Revenue of $5.6 billion , a decrease of 3% year over year.
  • Reported a Net loss of $188 million due predominately to the impairment charge taken in third quarter of 2019, the tax expense associated with the tax gain on the relocation sale, and higher interest expense.
  • Generated Operating EBITDA including discontinued operations of $590 million (See Table 4b ).
  • Generated Free Cash Flow including discontinued operations of $226 million (See Table 6).
  • Reduced net debt by $78 million from December 31, 2018 (See Table 7b ).
  • Grew the Realogy Brokerage Group (formerly NRT) agent base by approximately 4% year-over-year to 52,200.
  • Commission split pressure continued to moderate versus 2018 and 2017.
  • Substantially enhanced our value proposition with new marketing, tech and data, and consumer products as well as new lead generation programs and partnerships.

Q4 and Full Year 2019 Financial Highlights

The following tables sets forth Realogy's financial highlights for the periods presented (in millions, except per share data) (unaudited):


Three Months Ended December 31,


2019


2018


 Change


% Change

Revenue

$

1,330



$

1,285



$

45



4

%

Operating EBITDA 1

119



103



16



16


Operating EBITDA including discontinued operations 1

126



106



20



19


Net loss attributable to Realogy

(45)



(22)



(23)



105


Adjusted net income 2

23



7



16



229


Loss per share

(0.39)



(0.19)



(0.20)



105


Adjusted earnings per share 2

0.20



0.06



0.14



233


Free Cash Flow 3

29



28



1



4


Free Cash Flow including discontinued operations 3

77



105



(28)



(27)


Net cash provided by operating activities

$

141



$

170



$

(29)



(17)

%









Select Key Drivers








Realogy Franchise Group 4 5








Closed homesale sides

257,524



257,672





%

Average homesale price

$

322,713



$

301,345





7

%

Realogy Brokerage Group 5








Closed homesale sides

77,560



75,723





2

%

Average homesale price

$

523,024



$

515,452





1

%

Realogy Title Group








Purchase title and closing units

34,345



35,462





(3)

%

Refinance title and closing units

9,294



4,039





130

%






Year Ended


2019


2018


Change


% Change

Revenue

$

5,598



$

5,782



$

(184)



(3)

%

Operating EBITDA 1

562



623



(61)



(10)


Operating EBITDA including discontinued operations 1

590



658



(68)



(10)


Net (loss) income attributable to Realogy

(188)



137



(325)



(237)


Adjusted net income 2

117



186



(69)



(37)


(Loss) earnings per share

(1.65)



1.10



(2.75)



(250)


Adjusted earnings per share 2

1.02



1.50



(0.48)



(32)


Free Cash Flow 3

208



306



(98)



(32)


Free Cash Flow including discontinued operations 3

226



325



(99)



(30)


Net cash provided by operating activities

$

371



$

394



$

(23)



(6)

%









Select Key Drivers








Realogy Franchise Group 4 5








Closed homesale sides

1,061,500



1,103,857





(4)

%

Average homesale price

$

314,769



$

303,750





4

%

Realogy Brokerage Group 5








Closed homesale sides

325,652



336,806





(3)

%

Average homesale price

$

522,282



$

523,426





%

Realogy Title Group








Purchase title and closing units

146,210



157,228





(7)

%

Refinance title and closing units

26,589



18,495





44

%

_______________

Footnotes:

1  See Table 4a. Operating EBITDA is defined as net income (loss) before depreciation and amortization, interest expense, net, income taxes, and other items that are not core to the operating activities of the Company such as restructuring charges, former parent legacy items, gains or losses on the early extinguishment of debt, impairments, gains or losses on discontinued operations and gains or losses on the sale of investments or other assets. Operating EBITDA including discontinued operations is defined as Operating EBITDA, as defined above plus the Operating EBITDA contribution from discontinued operations on the same basis.

2   See Table 1a. Adjusted Net Income (loss) is defined as net income (loss) before mark-to-market interest rate swap adjustments, former parent legacy items, restructuring charges, (gain) loss on the early extinguishment of debt, impairments, the tax effect of the foregoing adjustments and net income (loss) from discontinued operations.

See Table 6.  Free Cash Flow is defined as net income (loss) attributable to Realogy before income tax expense (benefit), net of payments, net interest expense, cash interest payments, depreciation and amortization, capital expenditures, restructuring costs and former parent legacy costs (benefits), net of payments, impairments, (gain) loss on the early extinguishment of debt and working capital adjustments. Free Cash Flow including discontinued operations is defined as Free Cash Flow, as defined above plus the Free Cash Flow contribution from discontinued operations on the same basis.

Includes all franchisees except for Realogy Brokerage Group.

The Company's combined homesale transaction volume growth (transaction sides multiplied by average sale price) increased 6% compared with the fourth quarter of 2018 and decreased 1% compared with the year ended 2018.

Balance Sheet and Capital Allocation

The Company ended the year with cash and cash equivalents of $235 million .  Total corporate debt, including the short-term portion, net of cash and cash equivalents (net corporate debt), totaled $3.3 billion at December 31, 2019.  The Company's Net Debt Leverage Ratio was 5.2 times at December 31, 2019. The Net Debt Leverage Ratio is net corporate debt divided by EBITDA, as defined by the Senior Secured Credit Facility, for the four-quarter period ended December 31, 2019. Earnings from Cartus Relocation Services have been excluded from EBITDA, as defined by the Senior Secured Credit Facility, ahead of the receipt of sale proceeds.  Including earnings from the relocation business of $28 million , the Company's Net Debt Leverage Ratio would have been 5.0x.

In November 2019 , the Company announced the sale of Cartus Relocation Services for an initial cash payment of $375 million , subject to closing adjustments, plus a $25 million deferred cash payment. The Company intends to use a substantial portion of the net sale proceeds to pay down debt.

The Company expects to prioritize investing in its business and reducing leverage over other potential uses of cash.

A consolidated balance sheet is included as Table 2 of this press release.

Investor Conference Call

Today, February 25, at 8:30 a.m. (ET) , Realogy will hold a conference call via webcast to review its full year 2019 results. The webcast will be hosted by Ryan Schneider , chief executive officer and president, and Charlotte Simonelli , chief financial officer, and will conclude with an investor Q&A period with management.

Investors may access the conference call live via webcast at ir.realogy.com or by dialing (888) 895-3527 (toll free); international participants should dial (706) 679-2250. Please dial in at least 5 to 10 minutes prior to start time. A webcast replay also will be available on the website.

About Realogy Holdings Corp.

Realogy Holdings Corp. (NYSE: RLGY) is the leading and most integrated provider of U.S. residential real estate services, encompassing franchise, brokerage, and title and settlement businesses as well as a mortgage joint venture.  Realogy's diverse brand portfolio includes some of the most recognized names in real estate: Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, Corcoran®, ERA®, and Sotheby's International Realty®. Using innovative technology, data and marketing products, best-in-class learning and support services, and high-quality lead generation programs, Realogy fuels the productivity of independent sales agents, helping them build stronger businesses and best serve today's consumers. Realogy's affiliated brokerages operate around the world with approximately 189,900 independent sales agents in the United States and more than 112,500 independent sales agents in 113 other countries and territories. Recognized for nine consecutive years as one of the World's Most Ethical Companies, Realogy has also been designated a Great Place to Work and one of Forbes' Best Employers for Diversity. Realogy is headquartered in Madison, New Jersey .

Forward-Looking Statements

Certain statements in this press release constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Realogy Holdings Corp. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "potential" and "plans" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.

Various factors that could cause actual future results and other future events to differ materially from those in the forward-looking statements, include, but are not limited to: adverse developments or the absence of sustained improvement in general business, economic or political conditions or the U.S. residential real estate markets, either regionally or nationally, including but not limited to a decline or a lack of improvement in the number of homesales, insufficient or excessive home inventory levels by market and price point, stagnant or declining home prices or a reduction in the affordability of housing, increasing mortgage rates and/or constraints on the availability of mortgage financing, a lack of improvement or deceleration in the building of new housing and/or irregular timing or volume of new development closings, the potential negative impact of certain provisions of the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act") on home values over time in states with high property, sales and state and local income taxes or on homeownership rates, and/or the impact of recessions, slow economic growth, or a deterioration in other economic factors that particularly impact the residential real estate market and the business segments in which we operate whether broadly or by geography and price segments; the impact of increased competition in the industry for clients, for the affiliation of independent sales agents and for the affiliation of franchisees on our results of operations and market share; the impact of disruption in the residential real estate brokerage industry, and on our results of operations and financial condition, as a result of listing aggregator concentration and market power; our ability to develop products, technology and programs (including our company-directed affinity programs) that supports our business strategy; continuing pressure on the share of gross commission income paid by our company owned brokerages and affiliated franchisees to affiliated independent sales agents and sales agent teams; our geographic and high-end market concentration; our inability to enter into franchise agreements with new franchisees or renew existing franchise agreements without reducing contractual royalty rates or increasing the amount and prevalence of sales incentives; the lack of revenue growth or declining profitability of our franchisees and company owned brokerage operations or declines in other revenue streams, such as third-party listing fees; the potential impact of negative industry or business trends (including further declines in our market capitalization) on our valuation of goodwill and intangibles; the extent of the negative impact of the discontinuation of the USAA affinity program on our revenues and profits derived from affinity program referrals (including revenue to Realogy Leads, Realogy Brokerage, Realogy Franchise and Realogy Title Groups); the loss of our next largest affinity client; risks related to the planned sale of Cartus Relocation Services, including with respect to expected timing, anticipated benefits and the financial impact to our business; an increase in the experienced claims losses of our title underwriter; our failure or alleged failure to comply with laws, regulations and regulatory interpretations and any changes or stricter interpretations of any of the foregoing (whether through private litigation or governmental action), including but not limited to (i) state or federal employment laws or regulations that would require reclassification of independent contractor sales agents to employee status, (ii) privacy or data security laws and regulations, (iii) the Real Estate Settlement Procedures Act (RESPA) or other federal or state consumer protection or similar laws and (iv) antitrust laws and regulations; risks related to the impact on our operations and financial results that may be caused by any future meaningful changes in industry operations or structure as a result of governmental pressures, the actions of certain competitors, the introduction or growth of certain competitive models, changes to the rules of the multiple listing services, or otherwise; risks relating to our ability to return capital to stockholders including, among other risks, the impact of restrictions contained in our debt agreements, in particular the indenture governing our 9.375% Senior Notes due 2027; risks associated with our substantial indebtedness and interest obligations and restrictions contained in our debt agreements, including risks relating to having to dedicate a significant portion of our cash flows from operations to service our debt and risks relating to our ability to refinance or repay our indebtedness or incur additional indebtedness; and risks and growing costs related to both cybersecurity threats to our data and customer, franchisee, employee and independent sales agent data, as well as those related to our compliance with the growing number of laws, regulations and other requirements related to the protection of personal information.

Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings "Forward-Looking Statements" and "Risk Factors" in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2019, and our other filings made from time to time, in connection with considering any forward-looking statements that may be made by us and our businesses generally. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events except as required by law.

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, important information regarding such measures is contained in the Tables attached to this release. See Tables 1a, 7a and 8 for definitions of these non-GAAP financial measures and Tables 1a, 4a, 4b , 5a, 5b , 6, 7a and 7b for reconciliations of the historical non-GAAP financial measures to their most comparable GAAP terms.

Investor Contacts:

Media Contacts:

Alicia Swift

Trey Sarten

(973) 407-4669

(973) 407-2162

alicia.swift@realogy.com

trey.sarten@realogy.com



Danielle Kloeblen

Elliott Frieder

(973) 407-2148

(973) 407-5236

danielle.kloeblen@realogy.com

elliott.frieder@realogy.com

 

 

Table 1

REALOGY HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)



Three Months Ended
December 31,


Year Ended
December 31,


2019


2018


2019


2018

Revenues








Gross commission income

$

1,020



$

997



$

...