Document
false00013989870001355001 0001398987 2019-08-08 2019-08-08 0001398987 rlgy:RealogyGroupLLCMember 2019-08-08 2019-08-08


______________________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________________ 
FORM 8-K
_______________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 8, 2019
_______________________________ 
Realogy Holdings Corp.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
 
001-35674
 
20-8050955
 
 
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
_______________________________ 
Realogy Group LLC
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
 
333-148153
 
20-4381990
 
 
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
_______________________________ 
175 Park Avenue
Madison, NJ 07940
(Address of principal executive offices) (Zip Code)
(973) 407-2000
(Registrant’s telephone number, including area code)
None
(Former name or former address if changed since last report)
_______________________________ 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Realogy Holdings Corp.
Common Stock, par value $0.01 per share
 
RLGY
 
New York Stock Exchange
Realogy Group LLC
None
 
None
 
None
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.    
______________________________________________________________________________________________________






Item 2.02.
Results of Operations and Financial Condition.
On August 8, 2019, the Registrants announced their financial results for the second quarter of 2019. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01.
Financial Statements and Exhibits.
 
(d)
Exhibits
 
Exhibit No.
 
Description
 
99.1
 
Press Release dated August 8, 2019.
 
101.INS
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
REALOGY HOLDINGS CORP.
 
 
 
By:
 
/s/ Charlotte C. Simonelli
Charlotte C. Simonelli, Executive Vice President, Chief Financial Officer and Treasurer
Date: August 8, 2019


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
REALOGY GROUP LLC
 
 
 
By:
 
/s/ Charlotte C. Simonelli
Charlotte C. Simonelli, Executive Vice President, Chief Financial Officer and Treasurer
Date: August 8, 2019







EXHIBIT INDEX
Exhibit No.
 
Description
99.1
 
101.INS
 
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Exhibit
Exhibit 99.1



http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13049568&doc=8
REALOGY REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS


MADISON, N.J. (August 8, 2019) - Realogy Holdings Corp. (NYSE: RLGY), the largest full-service residential real estate services company in the United States, today reported financial results for the second quarter ended June 30, 2019.
“In the second quarter of 2019, we delivered substantial profitability and progress on our strategy," said Ryan Schneider, Realogy's chief executive officer and president. "In the quarter, we continued to enhance our value proposition with new products, new partnerships and new technology and data offerings, all designed to drive future top and bottom-line growth for Realogy."
"The solid financial performance we delivered in the second quarter was driven by improving homesale transaction volume, moderating agent commission splits and strong cost management," said Charlotte Simonelli, Realogy's executive vice president, chief financial officer and treasurer. "We continue to believe we will see sequential improvement with a return to positive transaction volume growth in the third and fourth quarters and are committed to using our strong free cash flow to reduce our debt and to invest in our business."
Second Quarter 2019 Highlights
Generated Operating EBITDA of $245 million (See Table 4a).
Delivered net income of $69 million and Adjusted net income of $95 million (See Table 1a).
Tracking to achieve $70 million of realized cost savings with 60% of actions already completed toward this target. Through Q2 2019, $22 million of the $70 million in cost savings identified for 2019 have been realized through the income statement.
Reduced net corporate debt by $113 million from March 31, 2019 (See Table 7b).
Increased agent engagement with Social Ad Engine, the marketing product we launched with Facebook/Instagram in the first quarter of 2019. Thousands of marketing campaigns have already delivered over 85,000 leads for our agents.
Expanded Listing Concierge to about 60% of the NRT footprint with agents continuing to achieve higher commission rates from home sellers compared to agents who do not use the product.
Continued moderation in commission split pressure, up only 21 basis points year-over-year.
Grew the NRT agent base approximately 2% to 51,000 in the second quarter of 2019.











Exhibit 99.1


Second Quarter 2019 Financial Highlights
The following table sets forth Realogy’s financial highlights for the periods presented (in thousands, unaudited):
 
Three Months Ended June 30,
 
 
 
2019
 
2018
 
 Change
 
% Change
Revenue
$
1,735

 
$
1,820

 
$
(85
)
 
(5
)%
Operating EBITDA 1
$
245

 
$
276

 
$
(31
)
 
(11
%)
Net Income
$
69

 
$
123

 
$
(54
)
 
(44
)%
Adjusted Net Income 2
$
95

 
$
127

 
$
(32
)
 
(25
)%
Earnings Per Share
$
0.60

 
$
0.97

 
$
(0.37
)
 
(38
)%
Adjusted Earnings per Share 2
$
0.83

 
$
1.00

 
$
(0.17
)
 
(17
)%
Free Cash Flow 3
$
147

 
$
192

 
$
(45
)
 
(23
)%
Net Cash provided by operating activities
$
159

 
$
139

 
$
20

 
14
 %
 
 
 
 
 
 
 
 
Select Key Drivers
 
 
 
 
 
 
 
RFG 4 5 
 
 
 
 
 
 
 
Closed homesale sides
301,377

 
313,278

 
 
 
(4
%)
Average homesale price
$
318,799

 
$
312,087

 
 
 
2
%
NRT 5
 
 
 
 
 
 
 
Closed homesale sides
95,251

 
100,745

 
 
 
(5
%)
Average homesale price
$
540,725

 
$
537,748

 
 
 
1
%
Cartus
 
 
 
 
 
 
 
Initiations
50,586

 
53,230

 
 
 
(5
%)
Referrals
24,141

 
25,562

 
 
 
(6
%)
TRG
 
 
 
 
 
 
 
Purchase title and closing units
42,202

 
46,189

 
 
 
(9
%)
Refinance title and closing units
5,270

 
4,782

 
 
 
10
%
_______________
Footnotes:
1 See Table 4a. Operating EBITDA is defined 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, losses on the early extinguishment of debt, asset impairments, gains or losses on discontinued operations and gains or losses on the sale of investments or other assets.
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, the loss on the early extinguishment of debt, impairments and the tax effect of the foregoing adjustments.
3 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, loss on the early extinguishment of debt, working capital adjustments and relocation receivables (assets), net of change in securitization obligations.
4 Includes all franchisees except for NRT.
5 The Company's combined homesale transaction volume (transaction sides multiplied by average sale price) decreased 3% compared with the second quarter of 2018. The decline was primarily driven by the intense competitive environment as well as our geographic concentration. For reference, the National Association of Realtors reported that homesale transaction volume was flat in the second quarter of 2019 compared to 2018.
Looking Ahead
Based on what the Company knows today and subject to macro uncertainty, we forecast positive transaction volume growth in the third quarter with sequential improvement in the fourth quarter and expect Operating EBITDA in the range of $590 to $610 million for full year 2019.






Exhibit 99.1


Balance Sheet and Capital Allocation
The Company ended the quarter with cash and cash equivalents of $270 million. Total corporate debt, including the short-term portion, net of cash and cash equivalents (net corporate debt), totaled $3.5 billion at June 30, 2019. The Company's Net Debt Leverage Ratio was 5.3 times at June 30, 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 June 30, 2019.
A consolidated balance sheet is included as Table 2 of this press release.
The Company expects to prioritize investing in its business and reducing leverage over other potential uses of cash until it is able to reduce its Consolidated Leverage Ratio (as defined under the indenture governing the Company's 9.375% Senior Notes) to below 4.00 to 1.00 (see footnote b to Table 7b).
Investor Conference Call
Today, August 8, at 8:30 a.m. (ET), Realogy will hold a conference call via webcast to review its Q2 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 residential real estate services in the U.S. that is focused on empowering independent sales agents to best serve today’s consumers. Realogy delivers its services through its well-known industry brands including Better Homes and Gardens® Real Estate, CENTURY 21®, Climb Real Estate®, Coldwell Banker®, Coldwell Banker Commercial®, Corcoran®, ERA®, Sotheby's International Realty® as well as NRT, Cartus®, Title Resource Group and ZapLabs®, an in-house innovation and technology development lab. Realogy’s fully integrated business model includes brokerage, franchising, relocation, mortgage, and title and settlement services. Realogy provides independent sales agents access to leading technology, best-in-class marketing and learning programs, and support services to help them become more productive and build stronger businesses. Realogy’s affiliated brokerages operate around the world with approximately 188,600 independent sales agents in the United States and approximately 111,200 independent sales agents in 113 other countries and territories. 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, 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, insufficient or excessive home inventory levels by market and price point, 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



Exhibit 99.1


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 and for the affiliation of independent sales agents on our results of operations and market share; our ability to successfully develop or procure technology 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 at current contractual royalty rates without 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; negative industry or business trends (including further declines in our market capitalization) may have an impact on our valuation of goodwill and intangibles; the loss of a significant affinity client or multiple significant relocation clients or changes in corporate relocation practices resulting in fewer employee relocations, reduced relocation benefits and/or increasing competition in corporate relocation; 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 relating to our ability to return capital to stockholders including, among other risks, the 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 Quarterly Report on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019 and our Annual Report on Form 10-K for the year ended December 31, 2018, 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.
Because of the forward-looking nature of the Company's forecasted non-GAAP financial measures, specific quantifications of the amounts that would be required to reconcile forecasted Operating EBITDA to forecasted net income are not readily determinable. The Company believes that there is a degree of volatility with respect to certain of the Company's GAAP measures which preclude the Company from providing accurate forecasted GAAP to non-GAAP reconciliations. Based on the above, the Company believes that providing estimates of the amounts that would be required to reconcile the range of the non-GAAP measures to forecasted GAAP measures would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.




Exhibit 99.1


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




Realogy Reports Financial Results for Second Quarter 2019                        6


Table 1

REALOGY HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
Gross commission income
$
1,310

 
$
1,388

 
$
2,109

 
$
2,290

Service revenue
253

 
263

 
441

 
460

Franchise fees
112

 
114

 
182

 
193

Other
60

 
55

 
117

 
106

Net revenues
1,735

 
1,820

 
2,849

 
3,049

Expenses
 
 
 
 
 
 
 
Commission and other agent-related costs
955

 
1,009

 
1,530

 
1,654

Operating
390

 
392

 
770

 
784

Marketing
69

 
69

 
138

 
136

General and administrative
82

 
75

 
177

 
164

Restructuring costs, net
9

 
6

 
21

 
36

Impairment
2

 

 
3

 

Depreciation and amortization
50

 
49

 
99

 
97

Interest expense, net
81

 
46

 
144

 
79

Loss on the early extinguishment of debt

 

 
5

 
7

Total expenses
1,638

 
1,646

 
2,887

 
2,957

Income (loss) before income taxes, equity in (earnings) losses and noncontrolling interests
97

 
174

 
(38
)
 
92

Income tax expense (benefit)
34

 
52

 
(1
)
 
33

Equity in (earnings) losses of unconsolidated entities
(7
)
 
(2
)
 
(8
)
 
2

Net income (loss)
70

 
124

 
(29
)
 
57

Less: Net income attributable to noncontrolling interests
(1
)
 
(1
)
 
(1
)
 
(1
)
Net income (loss) attributable to Realogy Holdings
$
69

 
$
123

 
$
(30
)
 
$
56

 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to Realogy Holdings:
 
 
 
 
 
 
 
Basic earnings (loss) per share
$
0.60

 
$
0.97

 
$
(0.26
)
 
$
0.44

Diluted earnings (loss) per share
$
0.60

 
$
0.96

 
$
(0.26
)
 
$
0.43

Weighted average common and common equivalent shares of Realogy Holdings outstanding:
 
 
 
 
Basic
114.3

 
126.5

 
114.1

 
128.4

Diluted
114.9

 
127.6

 
114.1

 
129.7


 




Realogy Reports Financial Results for Second Quarter 2019                        7


Table 1a
REALOGY HOLDINGS CORP.
NON-GAAP RECONCILIATION
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
(In millions, except per share data)
We present Adjusted net income and Adjusted earnings per share because we believe these measures are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our operating results.
Adjusted net income is defined by us as net income before: (a) mark-to-market interest rate swap adjustments, whose fair value is subject to movements in LIBOR and the forward yield curve and therefore are subject to significant fluctuations; (b) former parent legacy items, which pertain to liabilities of the former parent for matters prior to mid-2006 and are non-operational in nature; (c) restructuring charges as a result of initiatives currently in progress; (d) the loss on the early extinguishment of debt that results from refinancing and deleveraging debt initiatives; (e) impairments and (f) the tax effect of the foregoing adjustments. The gross amounts for these items as well as the adjustment for income taxes are shown in the table below.
Adjusted income per share is Adjusted net income divided by the weighted average common and common equivalent shares outstanding.
Set forth in the table below is a reconciliation of Net income (loss) to Adjusted net income for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income (loss) attributable to Realogy Holdings
$
69


$
123

 
$
(30
)
 
$
56

Addback:
 
 
 
 
 
 
 
Mark-to-market interest rate swap losses (gains)
24

 

 
38

 
(12
)
Restructuring costs, net
9

 
6

 
21

 
36

Impairment
2

 

 
3

 

Loss on the early extinguishment of debt

 

 
5

 
7

Adjustments for tax effect (a)
(9
)
 
(2
)
 
(18
)
 
(8
)
Adjusted net income attributable to Realogy Holdings
$
95


$
127

 
$
19

 
$
79

 
 
 
 
 
 
 
 
Earning per share
 
 
 
 
 
 
 
Basic earnings (loss) per share:
$
0.60


$
0.97

 
$
(0.26
)
 
$
0.44

Diluted earnings (loss) per share:
$
0.60

 
$
0.96

 
$
(0.26
)
 
$
0.43

 
 
 
 
 
 
 
 
Adjusted earnings per share
 
 
 
 
 
 
 
Adjusted basic earnings per share:
$
0.83


$
1.00

 
$
0.17

 
$
0.62

Adjusted diluted earnings per share:
$
0.83

 
$
1.00

 
$
0.17

 
$
0.61

 
 
 
 
 
 
 
 
Weighted average common and common equivalent shares outstanding:
 
 
 
 
Basic:
114.3

 
126.5

 
114.1

 
128.4

Diluted:
114.9

 
127.6

 
114.1

 
129.7

_______________
(a)
Reflects tax effect of adjustments at the Company's blended state and federal statutory rate.




Realogy Reports Financial Results for Second Quarter 2019                        8


Table 2
REALOGY HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
 
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
270

 
$
225

Restricted cash
8

 
13

Trade receivables (net of allowance for doubtful accounts of $12 and $9)
185

 
146

Relocation receivables
290

 
231

Other current assets
157

 
153

Total current assets
910

 
768

Property and equipment, net
311

 
304

Operating lease assets, net
536

 

Goodwill
3,712

 
3,712

Trademarks
749

 
749

Franchise agreements, net
1,193

 
1,227

Other intangibles, net
240

 
254

Other non-current assets
303

 
276

Total assets
$
7,954

 
$
7,290

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
198

 
$
147

Securitization obligations
204

 
231

Current portion of long-term debt
364

 
748

Current portion of operating lease liabilities
131

 

Accrued expenses and other current liabilities
383

 
401

Total current liabilities
1,280

 
1,527

Long-term debt
3,325

 
2,800

Long-term operating lease liabilities
465

 

Deferred income taxes
385

 
389

Other non-current liabilities
246

 
259

Total liabilities
5,701

 
4,975

Commitments and contingencies
 
 
 
Equity:
 
 
 
Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at June 30, 2019 and December 31, 2018

 

Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 114,303,786 shares issued and outstanding at June 30, 2019 and 114,620,499 shares issued and outstanding at December 31, 2018
1

 
1

Additional paid-in capital
4,837

 
4,869

Accumulated deficit
(2,537
)
 
(2,507
)
Accumulated other comprehensive loss
(51
)
 
(52
)
Total stockholders' equity
2,250

 
2,311

Noncontrolling interests
3

 
4

Total equity
2,253

 
2,315

Total liabilities and equity
$
7,954

 
$
7,290





Realogy Reports Financial Results for Second Quarter 2019                        9


Table 3a

REALOGY HOLDINGS CORP.
2019 vs. 2018 KEY DRIVERS
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
RFG (a)
 
 
 
 
 
 
 
 
 
 
 
 
Closed homesale sides
 
301,377


313,278

 
(4
%)
 
504,039

 
537,268

 
(6
%)
Average homesale price
 
$
318,799


$
312,087

 
2
%
 
$
310,581

 
$
303,955

 
2
%
Average homesale broker commission rate
 
2.47
%
 
2.48
%
 
(1
) bps
 
2.47
%
 
2.49
%
 
(2
) bps
Net royalty per side (b)
 
$
331

 
$
336

 
(1
%)
 
$
320

 
$
325

 
(2
%)
NRT
 
 
 
 
 
 
 
 
 
 
 
 
Closed homesale sides
 
95,251


100,745

 
(5
%)
 
155,693

 
166,842

 
(7
%)
Average homesale price
 
$
540,725


$
537,748

 
1
%
 
$
529,543

 
$
532,706

 
(1
%)
Average homesale broker commission rate
 
2.41
%
 
2.43
%
 
(2
) bps
 
2.41
%
 
2.44
%
 
(3
) bps
Gross commission income per side
 
$
13,758

 
$
13,804

 
%
 
$
13,546

 
$
13,750

 
(1
%)
Cartus
 
 
 
 
 
 
 
 
 
 
 
 
Initiations
 
50,586


53,230

 
(5
%)
 
89,070

 
91,183

 
(2
%)
Referrals
 
24,141


25,562

 
(6
%)
 
39,020

 
41,088

 
(5
%)
TRG
 
 
 
 
 
 
 
 
 
 
 
 
Purchase title and closing units
 
42,202


46,189

 
(9
%)
 
70,246

 
77,930

 
(10
%)
Refinance title and closing units
 
5,270


4,782

 
10
%
 
9,281

 
10,192

 
(9
%)
Average fee per closing unit
 
$
2,356

 
$
2,282

 
3
%
 
$
2,320

 
$
2,231

 
4
%
_______________
(a)
Includes all franchisees except for NRT.
(b)
The year-over-year decline of $5 in net royalty per side for the three-month period ended June 30, was primarily driven by three factors: (i) strategic growth initiatives, including the launch of a "capped fee model" in January 2019 for our Better Homes and Gardens® Real Estate franchise business, (ii) our increased utilization of incentives to attract new franchisees, grow franchisees or extend existing franchise agreements; and (iii) an increase in the concentration of homesale transaction volume in our top 250 franchisees.




Realogy Reports Financial Results for Second Quarter 2019                        10


Table 3b

REALOGY HOLDINGS CORP.
2018 KEY DRIVERS
 
 
Quarter Ended
 
Year Ended
 
 
March 31,
2018
 
June 30,
2018
 
September 30,
2018
 
December 31,
2018
 
December 31,
2018
RFG (a)
 
 
 
 
 
 
 
 
 
 
Closed homesale sides
 
223,990

 
313,278

 
308,917

 
257,672

 
1,103,857

Average homesale price
 
$
292,580

 
$
312,087

 
$
305,398

 
$
301,345

 
$
303,750

Average homesale broker commission rate
 
2.50
%
 
2.48
%
 
2.47
%
 
2.47
%
 
2.48
%
Net royalty per side
 
$
310

 
$
336

 
$
322

 
$
317

 
$
323

NRT
 
 
 
 
 
 
 
 
 
 
Closed homesale sides
 
66,097

 
100,745

 
94,241

 
75,723

 
336,806

Average homesale price
 
$
525,020

 
$
537,748

 
$
513,403

 
$
515,452

 
$
523,426

Average homesale broker commission rate
 
2.45
%
 
2.43
%
 
2.44
%
 
2.42
%
 
2.43
%
Gross commission income per side
 
$
13,666

 
$
13,804

 
$
13,227

 
$
13,162

 
$
13,458

Cartus
 
 
 
 
 
 
 
 
 
 
Initiations
 
37,953

 
53,230

 
42,718

 
37,541

 
171,442

Referrals
 
15,526

 
25,562

 
24,769

 
18,641

 
84,498

TRG
 
 
 
 
 
 
 
 
 
 
Purchase title and closing units
 
31,741

 
46,189

 
43,836

 
35,462

 
157,228

Refinance title and closing units
 
5,410

 
4,782

 
4,264

 
4,039

 
18,495

Average fee per closing unit
 
$
2,161

 
$
2,282

 
$
2,229

 
$
2,227

 
$
2,230

_______________
(a)
Includes all franchisees except for NRT.



Realogy Reports Financial Results for Second Quarter 2019                        11


Table 4a
REALOGY HOLDINGS CORP.
NON-GAAP RECONCILIATION - OPERATING EBITDA
THREE MONTHS ENDED JUNE 30, 2019 AND 2018
(In millions)
Set forth in the tables below is a reconciliation of Net income to Operating EBITDA for the three-month periods ended June 30, 2019 and 2018:
 
Three Months Ended
 
June 30, 2019
 
June 30, 2018
Net income attributable to Realogy Holdings
$
69

 
$
123

Income tax expense
34

 
52

Income before income taxes
103

 
175

Add: Depreciation and amortization
50

 
49

Interest expense, net
81

 
46

Restructuring costs, net (a)
9

 
6

Impairment
2

 

Operating EBITDA
$
245

 
$
276

The following table reflects Revenue, Operating EBITDA and Operating EBITDA margin by reportable segments:
 
Revenues (b)
 
$ Change
 
%
Change
 
Operating EBITDA
 
$ Change
 
% Change
 
Operating EBITDA Margin
 
Change
 
2019
 
2018
 
 
 
2019
 
2018
 
 
 
2019
 
2018
 
RFG
$
234

 
$
237

 
$
(3
)
 
(1
)%
 
$
163

 
$
173

 
$
(10
)
 
(6
)%
 
70
%
 
73
%
 
(3
)
NRT
1,331

 
1,408

 
(77
)
 
(5
)
 
47

 
61

 
(14
)
 
(23
)
 
4

 
4

 

Cartus
97

 
105

 
(8
)
 
(8
)
 
27

 
34

 
(7
)
 
(21)
 
28

 
32

 
(4
)
TRG
160

 
162

 
(2
)
 
(1
)
 
32

 
31

 
1

 
3
 
20

 
19

 
1

Corporate and Other
(87
)
 
(92
)
 
5

 
*
 
(24
)
 
(23
)
 
(1
)
 
*
 
 
 
 
 
 
Total Company
$
1,735


$
1,820

 
$
(85
)
 
(5
)%
 
$
245

 
$
276

 
$
(31
)
 
(11
%)
 
14
%
 
15
%
 
(1
)
The following table reflects RFG and NRT results before the intercompany royalties and marketing fees, as well as on a combined basis to show the Operating EBITDA contribution of these business units to the overall Operating EBITDA of the Company:
 
Revenues
 
$
Change
 
%
Change
 
Operating EBITDA
 
$
Change
 
%
Change
 
Operating EBITDA Margin
 
Change
 
2019
 
2018
 
 
 
2019
 
2018
 
 
 
2019
 
2018
 
RFG (c)
$
147

 
$
145

 
2

 
1
 %
 
$
76

 
$
81

 
(5
)
 
(6
)%
 
52
%
 
56
%
 
(4
)
NRT (c)
1,331

 
1,408

 
(77
)
 
(5
)
 
134

 
153

 
(19
)
 
(12
)
 
10

 
11

 
(1
)
RFG and NRT Combined
$
1,478

 
$
1,553

 
(75
)
 
(5
)%
 
$
210

 
$
234

 
(24
)
 
(10
)%
 
14
%
 
15
%
 
(1
)
_______________
 
 
*
not meaningful.
(a)
Restructuring charges incurred for the three months ended June 30, 2019 include $6 million at NRT, $1 million at Cartus, $1 million at TRG and $1 million at Corporate and Other. Restructuring charges incurred for the three months ended June 30, 2018 include $4 million at NRT, $1 million at Cartus and $1 million at TRG.
(b)
Includes the elimination of transactions between segments, which consists of intercompany royalties and marketing fees paid by NRT of $87 million and $92 million during the three months ended June 30, 2019 and 2018, respectively.
(c)
The RFG and NRT segment numbers noted above do not reflect the impact of intercompany royalties and marketing fees paid by NRT to RFG of $87 million and $92 million during the three months ended June 30, 2019 and 2018, respectively.




Realogy Reports Financial Results for Second Quarter 2019                        12


Table 4b
REALOGY HOLDINGS CORP.
NON-GAAP RECONCILIATION - OPERATING EBITDA
SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(In millions)
Set forth in the tables below is a reconciliation of Net (loss) income to Operating EBITDA for the six-month periods ended June 30, 2019 and 2018:
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
Net (loss) income attributable to Realogy Holdings
$
(30
)
 
$
56

Income tax (benefit) expense
(1
)
 
33

Income before income taxes
(31
)
 
89

Add: Depreciation and amortization (a)
99

 
99

Interest expense, net
144

 
79

Restructuring costs, net (b)
21

 
36

Impairment
3

 

Loss on the early extinguishment of debt (c)
5

 
7

Operating EBITDA
$
241

 
$
310

The following table reflects Revenue, Operating EBITDA and Operating EBITDA margin by reportable segments:
 
Revenues (d)
 
$ Change
 
%
Change
 
Operating EBITDA
 
$ Change
 
% Change
 
Operating EBITDA Margin
 
Change
 
2019
 
2018
 
 
 
2019
 
2018
 
 
 
2019
 
2018
 
RFG
$
397

 
$
413

 
$
(16
)
 
(4
)%
 
$
253

 
$
278

 
$
(25
)
 
(9
)%
 
64
 %
 
67
%
 
(3
)
NRT
2,147

 
2,325

 
(178
)
 
(8
)
 
(15
)
 
16

 
(31
)
 
(194
)
 
(1
)
 
1

 
(2
)
Cartus
173

 
184

 
(11
)
 
(6
)
 
29

 
33

 
(4
)
 
(12)
 
17

 
18

 
(1
)
TRG
274

 
282

 
(8
)
 
(3
)
 
23

 
25

 
(2
)
 
(8)
 
8

 
9

 
(1
)
Corporate and Other
(142
)
 
(155
)
 
13

 
*
 
(49
)
 
(42
)
 
(7
)
 
*
 
 
 
 
 
 
Total Company
$
2,849

 
$
3,049

 
$
(200
)
 
(7
)%
 
$
241

 
$
310

 
$
(69
)
 
(22
%)
 
8
 %
 
10
%
 
(2
)
The following table reflects RFG and NRT results before the intercompany royalties and marketing fees, as well as on a combined basis to show the Operating EBITDA contribution of these business units to the overall Operating EBITDA of the Company:
 
Revenues
 
$
Change
 
%
Change
 
Operating EBITDA
 
$
Change
 
%
Change
 
Operating EBITDA Margin
 
Change
 
2019
 
2018
 
 
 
2019
 
2018
 
 
 
2019
 
2018
 
RFG (e)
$
255

 
$
258

 
(3
)
 
(1
)%
 
$
111

 
$
123

 
(12
)
 
(10
)%
 
44
%
 
48
%
 
(4
)
NRT (e)
2,147

 
2,325

 
(178
)
 
(8
)
 
127

 
171

 
(44
)
 
(26
)
 
6

 
7

 
(1
)
RFG and NRT Combined
$
2,402

 
$
2,583

 
(181
)
 
(7
)%
 
$
238

 
$
294

 
(56
)
 
(19
)%
 
10
%
 
11
%
 
(1
)
_______________
 
 
*
not meaningful.
(a)
Depreciation and amortization for the six months ended June 30, 2018 includes $2 million of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in (earnings) losses of unconsolidated entities" line on the Condensed Consolidated Statement of Operations.
(b)
Restructuring charges incurred for the six months ended June 30, 2019 include $10 million at NRT, $4 million at Cartus, $2 million at TRG and $5 million at Corporate and Other. Restructuring charges incurred for the six months ended June 30, 2018 include $2 million at RFG, $21 million at NRT, $9 million at Cartus, $2 million at TRG and $2 million at Corporate and Other.
(c)
Loss on the early extinguishment of debt is recorded in the Corporate and Other segment.
(d)
Includes the elimination of transactions between segments, which consists of intercompany royalties and marketing fees paid by NRT of $142 million and $155 million during the six months ended June 30, 2019 and 2018, respectively.
(e)
The RFG and NRT segment numbers noted above do not reflect the impact of intercompany royalties and marketing fees paid by NRT to RFG of $142 million and $155 million during the three months ended June 30, 2019 and 2018, respectively.



Realogy Reports Financial Results for Second Quarter 2019                        13


Table 5a
REALOGY HOLDINGS CORP.
SELECTED 2019 FINANCIAL DATA
(In millions)
 
Three Months Ended
 
March 31,
 
June 30,
 
2019
 
2019
Net revenues (a)
 
 
 
Real Estate Franchise Services
$
163

 
$
234

Company Owned Real Estate Brokerage Services
816

 
1,331

Relocation Services
76

 
97

Title and Settlement Services
114

 
160

Corporate and Other
(55
)
 
(87
)
Total Company
$
1,114

 
$
1,735

 
 
 
 
Operating EBITDA
 
 
 
Real Estate Franchise Services
$
90

 
$
163

Company Owned Real Estate Brokerage Services
(62
)
 
47

Relocation Services
2

 
27

Title and Settlement Services
(9
)
 
32

Corporate and Other
(25
)
 
(24
)
Total Company
$
(4
)
 
$
245

 
 
 
 
Non-GAAP Reconciliation - Operating EBITDA
 
 
 
Total Company Operating EBITDA
$
(4
)
 
$
245

 
 
 
 
Less: Depreciation and amortization
49

 
50

Interest expense, net
63

 
81

Income tax (benefit) expense
(35
)
 
34

Restructuring costs, net (b)
12

 
9

Impairment
1

 
2

Loss on the early extinguishment of debt (c)
5

 

Net income (loss) attributable to Realogy Holdings
$
(99
)
 
$
69

_______________
(a)
Transactions between segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $55 million and $87 million for the three months ended March 31, 2019 and June 30, 2019, respectively. Such amounts are eliminated through the Corporate and Other line.
Revenues for the Relocation Services segment include $7 million and $11 million intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2019 and June 30, 2019, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.
(b)Includes restructuring charges broken down by business unit as follows:
 
Three Months Ended
 
March 31,
 
June 30,
 
2019
 
2019
Real Estate Franchise Services
$

 
$

Company Owned Real Estate Brokerage Services
4

 
6

Relocation Services
3

 
1

Title and Settlement Services
1

 
1

Corporate and Other
4

 
1

Total Company
$
12

 
$
9

(c)
Loss on the early extinguishment of debt is recorded in the Corporate and Other segment.




Realogy Reports Financial Results for Second Quarter 2019                        14


Table 5b
REALOGY HOLDINGS CORP.
SELECTED 2018 FINANCIAL DATA
(In millions)
 
Three Months Ended
 
Year Ended
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
December 31,
 
2018
 
2018
 
2018
 
2018
 
2018
Net revenues (a)
 
 
 
 
 
 
 
 
 
Real Estate Franchise Services
$
176

 
$
237

 
$
221

 
$
186

 
$
820

Company Owned Real Estate Brokerage Services
917

 
1,408

 
1,268

 
1,014

 
4,607

Relocation Services
79

 
105

 
108

 
86

 
378

Title and Settlement Services
120

 
162

 
162

 
136

 
580

Corporate and Other
(63
)
 
(92
)
 
(83
)
 
(68
)
 
(306
)
Total Company
$
1,229

 
$
1,820

 
$
1,676

 
$
1,354

 
$
6,079

 
 
 
 
 
 
 
 
 
 
Operating EBITDA
 
 
 
 
 
 
 
 
 
Real Estate Franchise Services
$
105

 
$
173

 
$
161

 
$
125

 
$
564

Company Owned Real Estate Brokerage Services
(45
)
 
61

 
43

 
(15
)
 
44

Relocation Services
(1
)
 
34

 
39

 
14

 
86

Title and Settlement Services
(6
)
 
31

 
20

 
4

 
49

Corporate and Other
(19
)
 
(23
)
 
(21
)
 
(22
)
 
(85
)
Total Company
$
34

 
$
276

 
$
242

 
$
106

 
$
658

 
 
 
 
 
 
 
 
 
 
Non-GAAP Reconciliation - Operating EBITDA
 
 
 
 
 
 
 
 
 
Total Company Operating EBITDA
$
34

 
$
276

 
$
242

 
$
106

 
$
658

 
 
 
 
 
 
 
 
 
 
Less: Depreciation and amortization (b)
50

 
49

 
49

 
49

 
197

Interest expense, net
33

 
46

 
41

 
70

 
190

Income tax (benefit) expense
(19
)
 
52

 
40

 
(8
)
 
65

Restructuring costs, net (c)
30

 
6

 
9

 
13

 
58

Former parent legacy cost, net (d)

 

 

 
4

 
4

Loss on the early extinguishment of debt (d)
7

 

 

 

 
7

Net income (loss) attributable to Realogy Holdings
$
(67
)
 
$
123

 
$
103

 
$
(22
)
 
$
137

_______________
(a)
Transactions between segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $63 million, $92 million, $83 million and $68 million for the three months ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively. Such amounts are eliminated through the Corporate and Other line.
Revenues for the Relocation Services segment include $8 million, $12 million, $10 million and $9 million of intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.
(b)
Depreciation and amortization for the three months ended March 31, 2018 includes $2 million of amortization expense related to our mortgage origination joint venture Guaranteed Rate Affinity's purchase accounting included in the "Equity in losses (earnings) of unconsolidated entities" line on the Condensed Consolidated Statement of Operations.
(c)
Includes restructuring charges broken down by business unit as follows:
 
Three Months Ended
 
Year Ended
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
December 31,
 
2018
 
2018
 
2018
 
2018
 
2018
Real Estate Franchise Services
$
2

 
$

 
$
1

 
$

 
$
3

Company Owned Real Estate Brokerage Services
17

 
4

 
8

 
8

 
37

Relocation Services
8

 
1

 

 
2

 
11

Title and Settlement Services
1

 
1

 

 
2

 
4

Corporate and Other
2

 

 

 
1

 
3

Total Company
$
30

 
$
6

 
$
9

 
$
13

 
$
58

(d)
Former parent legacy items and loss on the early extinguishment of debt are recorded in the Corporate and Other segment.



Realogy Reports Financial Results for Second Quarter 2019                        15


Table 6
REALOGY HOLDINGS CORP.
NON-GAAP RECONCILIATION - FREE CASH FLOW
THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(In millions)
A reconciliation of net loss attributable to Realogy Holdings to Free Cash Flow is set forth in the following table:
 
Three Months Ended
 
Six Months Ended
 
2019
 
2018
 
2019
 
2018
Net income (loss) attributable to Realogy Holdings
$
69

 
$
123

 
$
(30
)
 
$
56

Income tax expense (benefit), net of payments
29

 
48

 
(7
)
 
25

Interest expense, net
81

 
46

 
144

 
79

Cash interest payments
(59
)
 
(66
)
 
(99
)
 
(87
)
Depreciation and amortization
50

 
49

 
99

 
97

Capital expenditures
(30
)
 
(24
)
 
(54
)
 
(49
)
Restructuring costs and former parent legacy items, net of payments
(2
)
 
(3
)
 
(2
)
 
16

Impairment
2

 

 
3

 

Loss on the early extinguishment of debt

 

 
5

 
7

Working capital adjustments
56

 
28

 
2

 
(71
)
Relocation receivables (assets), net of securitization obligations
(49
)
 
(9
)
 
(86
)
 
(47
)
Free Cash Flow
$
147

 
$
192

 
$
(25
)
 
$
26

A reconciliation of net cash used in operating activities to Free Cash Flow is set forth in the following table:
 
Three Months Ended
 
Six Months Ended
 
2019
 
2018
 
2019
 
2018
Net cash provided by operating activities
$
159

 
$
139

 
$
56

 
$
9

Property and equipment additions
(30
)
 
(24
)
 
(54
)
 
(49
)
Net change in securitization
18

 
78

 
(27
)
 
67

Effect of exchange rates on cash and cash equivalents

 
(1
)
 

 
(1
)
Free Cash Flow
$
147

 
$
192

 
$
(25
)
 
$
26

 
 
 
 
 
 
 
 
Net cash used in investing activities
$
(39
)
 
$
(36
)
 
$
(62
)
 
$
(45
)
Net cash (used in) provided by financing activities
$
(88
)
 
$
(51
)
 
$
46

 
$
42





Realogy Reports Financial Results for Second Quarter 2019                        16


Table 7a

NON-GAAP RECONCILIATION - SENIOR SECURED LEVERAGE RATIO
FOR THE THREE MONTHS ENDED JUNE 30, 2019
(In millions)
The senior secured leverage ratio is tested quarterly and may not exceed 4.75 to 1.00 pursuant to the terms of the senior secured credit facilities*. The senior secured leverage ratio is measured by dividing Realogy Group LLC's total senior secured net debt by the trailing four quarters EBITDA calculated on a Pro Forma Basis, as those terms are defined in the senior secured credit facilities. Total senior secured net debt does not include unsecured indebtedness, including the Unsecured Notes*, or the securitization obligations. EBITDA calculated on a Pro Forma Basis, as defined in the senior secured credit facilities, includes adjustments to Operating EBITDA for non-cash charges and incremental securitization interest costs, as well as pro forma cost savings for restructuring initiatives, the pro forma effect of business optimization initiatives and the pro forma effect of acquisitions and new franchisees, in each case calculated as of the beginning of the trailing four-quarter period. The Company was in compliance with the senior secured leverage ratio covenant at June 30, 2019 with a ratio of 3.04 to 1.00.
A reconciliation of net income (loss) attributable to Realogy Group to Operating EBITDA and EBITDA as defined by the senior secured credit facilities for the four-quarter period ended June 30, 2019 is set forth in the following table:
 
 
 
Less
 
Equals
 
Plus
 
Equals
 
Year Ended
 
Six Months Ended
 
Six Months
Ended
 
Six Months Ended
 
Twelve Months
Ended
 
December 31,
2018
 
June 30,
2018
 
December 31,
2018
 
June 30,
2019
 
June 30,
2019
Net income (loss) attributable to Realogy Group (a)
$
137

 
$
56

 
$
81

 
$
(30
)
 
$
51

Income tax expense (benefit)
65

 
33

 
32

 
(1
)
 
31

Income (loss) before income taxes
202

 
89

 
113

 
(31
)
 
82

Depreciation and amortization (b)
197

 
99

 
98

 
99

 
197

Interest expense, net
190

 
79

 
111

 
144

 
255

Restructuring costs, net
58

 
36