Realogy Reports First Quarter 2021 Financial Results

MADISON, N.J., April 29, 2021 /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 first quarter ended March 31, 2021.

"Realogy delivered a very powerful first quarter. We generated a record $162 million in Operating EBITDA, grew closed transaction volume by 44% year over year, continued to expand market share, and improved our balance sheet to its best position ever," said Ryan Schneider, Realogy's chief executive officer and president. "Our strategic actions are enabling Realogy affiliated agents and franchise owners to better capitalize on the dynamic housing market as we continue to move fast, innovate, and invest for future growth."

"We are off to a phenomenal start to 2021, delivering the strongest first quarter top and bottom line results in Realogy's history," said Charlotte Simonelli, Realogy's executive vice president, chief financial officer, and treasurer. "We delivered strong operational and financial execution, and we continued to drive cost efficiencies and reduced net leverage as we demonstrate continued success." 

First Quarter 2021 Highlights

• Generated revenue of $1.5 billion, an increase of 32% or $379 million year-over-year.
• Reported Net income of $33 million and basic earnings per share of $0.28, an increase of $495 million vs. prior year or $4.31 per share.
• Generated Operating EBITDA of $162 million, an increase of $130 million year-over-year (See Table 5).
• Title and mortgage continued to contribute meaningfully to our business results, generating approximately $61 million in first quarter Operating EBITDA (See Table 5).
• Combined closed transaction volume increased 44% year-over-year in the first quarter driving market share gains for the third consecutive quarter. Transaction volume growth was significantly above the National Association of Realtors' reported 28% year-over-year market volume growth.
• Strengthened the balance sheet with the lowest ever Net Debt Leverage Ratio of 3.1x and Senior Secured Leverage Ratio of 0.64x (See Tables 8a and 8b).
• Strong cost management with $80 million in permanent cost savings expected in 2021.
• Reported Free Cash Flow of negative $67 million, an improvement of $88 million from the corresponding quarter last year, with the first quarter being a seasonal use quarter for the business (See Table 7).
• Grew Brokerage agents 3% year-over-year and continued to maintain strong retention levels.

First Quarter 2021 Financial Highlights

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

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Balance Sheet and Capital Allocation

The Company ended the quarter with cash and cash equivalents of $404 million*. Total corporate debt, including the short-term portion, net of cash and cash equivalents (net corporate debt), totaled $2.9 billion at March 31, 2021.  The Company's Net Debt Leverage Ratio was 3.1x at March 31, 2021 (see Table 8b).

On April 28, 2021, the Company used cash on hand to pay down $150 million of the Term Loan B Facility.

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

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Investor Conference Call

Today, April 29, at 8:30 a.m. (ET), Realogy will hold a conference call via webcast to review its Q1 2021 results and provide a business update. 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 (833) 646-0499 (toll free); international participants should dial (918) 922-3007. 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 (NYSE: RLGY) is moving the real estate industry to what's next. As the leading and most integrated provider of U.S. residential real estate services encompassing franchise, brokerage, relocation, and title and settlement businesses as well as a mortgage joint venture, Realogy supported approximately 1.4 million home transactions in 2020. The company'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, high-quality lead generation programs, and best-in-class learning and support services, Realogy fuels the productivity of its approximately 191,700 independent sales agents in the U.S. and more than 135,000 independent sales agents in 117 other countries and territories, helping them build stronger businesses and best serve today's consumers. Recognized for ten consecutive years as one of the World's Most Ethical Companies, Realogy has also been designated a Great Place to Work three years in a row and is one of LinkedIn's 2021 Top Companies in the U.S.

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.

The following include some, but not all, of the factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements: adverse developments or the absence of sustained improvement in the U.S. residential real estate markets, either regionally or nationally, which could include, but are not limited to: continued negative pressure on the share of commission income realized by real estate brokerages as a result of shifts in favor of affiliated independent sales agents or due to other market factors, meaningful decreases in the average broker commission rate, continued or accelerated declines in inventory, increases in mortgage rates, and other factors that impact homesale transaction volume, including a reduction in housing affordability, a decline or lack of improvement in the number of homesales, stagnant or declining home prices, and changes in consumer preferences, including weakening in the consumer trends that have benefited us since the second half of 2020; adverse developments or the absence of sustained improvement in macroeconomic conditions (such as business, economic or political conditions) on a global, domestic or local basis, which could include, but are not limited to intensifying or continued economic contraction in the U.S. economy, including the impact of recessions, slow economic growth, or a deterioration in other economic factors (including potential consumer, business or governmental defaults or delinquencies due to the COVID-19 crisis or otherwise) and fiscal and monetary policies of the federal government and its agencies, particularly those that may result in unfavorable changes to the interest rate environment; adverse impacts from the COVID-19 crisis, including amplification of risks to our business and worsening economic consequences of the crisis or the reinstatement of significant limitations on normal business operations; our ability to execute our business strategy and achieve growth, including our efforts to: recruit and retain productive independent sales agents, attract and retain franchisees or renew existing franchise agreements without reducing contractual royalty rates or increasing the amount and prevalence of sales incentives, alleviate or control the erosion of our share of the commission income generated by homesale transactions or compete for real estate services business, compete against non-traditional competitors, including but not limited to, iBuying business models and virtual brokerages, in particular those competitors with access to significant third-party capital that may prioritize market share over profitability, develop or procure products, services and technology that supports our strategic initiatives, realize the expected benefits from our mortgage origination joint venture or from other existing or future strategic partnerships, achieve or maintain a beneficial cost structure or savings and other benefits from our cost-saving initiatives, generate a meaningful number of high-quality leads for independent sales agents and franchisees, complete or integrate acquisitions and joint ventures into our existing operations, or to complete or effectively manage divestitures or other corporate transactions; our geographic and high-end market concentration; the operating results of affiliated franchisees; continued consolidation among our top 250 franchisees; difficulties in the business or changes in the licensing strategy of the owners of the two brands we do not own; the loss of our largest real estate benefit program client or multiple significant relocation clients; continued reductions in corporate relocations or relocation benefits; the failure of third-party vendors or partners to perform as expected or our failure to adequately monitor such third-parties; interruptions in information technology used to operate our business and maintain our competitiveness; increases in mortgage rates, tightened mortgage underwriting standards or reductions in refinancing activity; actions taken by listing aggregators to monetize their concentration and market power; industry structure changes (as a result of new laws, regulations or administrative policies, the rules of multiple listing services, or otherwise) that disrupt the functioning of the residential real estate market; adverse effects on our operations or liquidity due to our indebtedness, including with respect to: interest obligations and the negative covenant restrictions contained in our debt agreements, our ability to fund our operations, invest in our business or pursue growth opportunities, react to changes in the economy or our industry, or incur additional borrowings under our existing facilities, an event of default under our debt agreements, or our ability to refinance or repay our indebtedness or incur additional indebtedness; 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: (1) state or federal employment laws or regulations that would require reclassification of independent contractor sales agents to employee status, (2) privacy or data security laws and regulations, (3) the Real Estate Settlement Procedures Act ("RESPA") or other federal or state consumer protection or similar laws, and (4) antitrust laws and regulations; cybersecurity incidents; impairment of our goodwill and other long-lived assets; and severe weather events or natural disasters, including increasing severity or frequency of such events due to climate change or otherwise, or other catastrophic events, including public health crises, such as pandemics and epidemics. 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, 2020, 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, 8a and 9 for definitions of these non-GAAP financial measures and Tables 1a, 5, 6a, 6b, 7, 8a and 8b for reconciliations of the historical non-GAAP financial measures to their most comparable GAAP terms.

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Table 9

Non-GAAP Definitions

Adjusted net income (loss) is defined by us as net income (loss) before mark-to-market interest rate swap adjustments, former parent legacy items, restructuring charges, the (gain) loss on the early extinguishment of debt, impairments, the tax effect of the foregoing adjustments.  The gross amounts for these items as well as the adjustment for income taxes are presented.

Operating EBITDA is defined by us as net income (loss) before depreciation and amortization, interest expense, net (other than relocation services interest for securitization assets and securitization obligations), 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 is our primary non-GAAP measure.

We present Operating EBITDA because we believe it is useful as a supplemental measure in evaluating the performance of our operating businesses and provides greater transparency into our results of operations.  Our management, including our chief operating decision maker, uses Operating EBITDA as a factor in evaluating the performance of our business.  Operating EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations data prepared in accordance with GAAP.

We believe Operating EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation, the age and book depreciation of facilities (affecting relative depreciation expense) and the amortization of intangibles, as well as other items that are not core to the operating activities of the Company such as restructuring charges, gains or losses on the early extinguishment of debt, former parent legacy items, impairments, gains or losses on discontinued operations and gains or losses on the sale of investments or other assets, which may vary for different companies for reasons unrelated to operating performance.  We further believe that Operating EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an Operating EBITDA measure when reporting their results.

Operating EBITDA has limitations as an analytical tool, and you should not consider Operating EBITDA either in isolation or as a substitute for analyzing our results as reported under GAAP.  Some of these limitations are:

• this measure does not reflect changes in, or cash required for, our working capital needs;
• this measure does not reflect our interest expense (except for interest related to our securitization obligations), or the cash requirements necessary to service interest or principal payments on our debt;
• this measure does not reflect our income tax expense or the cash requirements to pay our taxes;
• this measure does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and this measure does not reflect any cash requirements for such replacements; and
• other companies may calculate this measure differently so they may not be comparable.

Free Cash Flow is defined as net income (loss) attributable to Realogy before income tax expense (benefit), net of payments, interest expense, net, 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, working capital adjustments and relocation receivables (assets), net of change in securitization obligations.  We use Free Cash Flow in our internal evaluation of operating effectiveness and decisions regarding the allocation of resources, as well as measuring the Company's ability to generate cash.  Since Free Cash Flow can be viewed as both a performance measure and a cash flow measure, the Company has provided a reconciliation to both net income attributable to Realogy Holdings and net cash provided by operating activities.  Free Cash Flow is not defined by GAAP and should not be considered in isolation or as an alternative to net income (loss), net cash provided by (used in) operating, investing and financing activities or other financial data prepared in accordance with GAAP or as an indicator of the Company's operating performance or liquidity.  Free Cash Flow may differ from similarly titled measures presented by other companies.

SOURCE Realogy Holdings Corp.

Related Links

www.realogy.com