Realogy. Earnings Call Q3 2018

Transcription

1 Realogy Earnings Call Q3 2018

2 Management Presenters Ryan Schneider Chief Executive Officer and President Tony Hull Executive Vice President, Chief Financial Officer & Treasurer Alicia Swift Senior Vice President, Investor Relations and Financial Planning & Analysis 2

3 Important Disclosures Forward-Looking Statements This presentation contains forward-looking statements. The Company desires to take advantage of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protections of the safe harbor with respect to all forward-looking statements. Therefore, the Company wishes to caution each participant to consider carefully the specific factors discussed with each forward-looking statement in this presentation and other factors contained in the Company s filings with the Securities and Exchange Commission under the captions Forward-Looking Statements, Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations as such factors in some cases have affected, and in the future (together with other factors) could affect, the ability of the Company to implement its business strategy and may cause actual results to differ materially from those contemplated by the statements expressed herein. The information contained in this presentation is as of November 2, The Company assumes no obligation to update the information or the forward-looking statements contained herein, whether as a result of new information or otherwise. RECIPIENTS ARE STRONGLY ADVISED TO READ THE COMPANY S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Non-GAAP Financial Measures Certain financial measures, as used in this presentation, are supplemental measures of the Company s performance that are not Generally Accepted Accounting Principles ( GAAP ) measures. Refer to slides of this presentation and Tables 1a, 4a, 4b, 5a, 5b, 6, 7 and 8 of the November 2 press release announcing third quarter 2018 financial results for the definitions of these non-gaap financial measures, a reconciliation of these measures to their most comparable GAAP measures, and the Company s explanation of why it believes these non-gaap measures are useful to investors. 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 and forecasted Free Cash Flow 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. 3

4 Realogy's Advantages in Residential Real Estate Market 1. As reported in Realogy s Annual Report on Form 10-K for fiscal year 2017, we estimate that our market share in 2017, based on homesale transaction volume in the U.S., was 15.9%, calculated in the manner set forth under Item 1. Business 2. For the fiscal years ended December 31, 2015, 2016 and

5 Q Overview Maintained revenue and market share amid challenged market conditions Commission split increases continued to moderate Executing on strategic initiatives Announced the launch of Corcoran and Climb franchise brands in 2019 Piloting new commission plans and products Returned $113 million to shareholders through share buybacks and dividends 5

6 Guidance Housing Metric Q Transaction Volume Y/Y (both RFG and NRT) Guidance Flat FY 2018 Financial Metrics Operating EBITDA Operating EBITDA to FCF Conversion Guidance $660 - $670 million Mid-50% range Guidance is as of November 2,

7 Q Results Net Revenue: $1.7 billion Flat compared with Q Operating EBITDA 1 : Net Income and Net Income Per Share: Adjusted Net Income and Adjusted Income Per Share 2 : Free Cash Flow 3 and Capital Return: $242 million $103 million, or $0.84 per share $104 million, or $0.85 per share $194 million Decreased $16 million compared with Q primarily due to the absence of the gain from the PHH Home Loans JV Compared with $95 million, or $0.70 per share in Q Compared with $97 million, or $0.71 per share in Q Returned $336 million in share repurchases and dividends in nine months of See Slide 16 for a reconciliation from Net Income attributable to the Company to Operating EBITDA 2 See Table 1a of our November 2, 2018 press release for a reconciliation from Net Income to Adjusted Net Income 3 See Slide 18 for a reconciliation from Net Income to Free Cash Flow Note: Refer to Table 8 of the Press Release dated November 2, 2018 for the definitions of these non-gaap financial measures and the Company s explanation of why it believes these measures are useful to investors 7

8 Business Operating EBITDA Operating EBITDA ($ in millions) Q Q $ Change % Change RFG $161 $159 $2 1% NRT (before PHHHL JV)* (9) (17)% PHHHL JV Gain 12 (12) (100)% Cartus % TRG (1) (5)% Corporate (21) (23) 2 ** Total Operating EBITDA $242 $258 $(16) (6)% Note: See Slides for a reconciliation of Operating EBITDA to Net Income. Refer to Table 8 of the Press Release dated November 2, 2018 for the definition of Operating EBITDA and the Company s explanation of why it believes this non-gaap measure is useful to investors * NRT results exclude equity earnings related to our former investment in PHH Home Loans LLC ( PHHHL JV Gain ), our former home mortgage joint venture with PHH Corporation ( PHH ). The current mortgage joint venture with Guaranteed Rate is reported in the TRG segment ** Not meaningful 8

9 Appendix

10 Business Unit Revenue Net Revenue ($ in millions) Q Q $ Change % Change RFG $221 $224 $(3) (1)% NRT 1,268 1,267 1 % Cartus (3) (3)% TRG % Intercompany Eliminations (83) (82) (1) * Total Revenue $1,676 $1,674 $2 % * Not meaningful 10

11 Q Key Revenue Drivers Q vs. Q Realogy Franchise Group Amount % Change Closed Homesale Sides 308,917 (3)% Average Homesale Price $305,398 5% Average Broker Commission Rate 2.47% (2 bps) Net Royalty per Side $322 2% NRT Closed Homesale Sides 94,241 (1)% Average Homesale Price $513,403 1% Average Broker Commission Rate 2.44% (1 bps) Cartus Initiations 42,718 8% Referrals 26,226 10% Title Resource Group Purchase Title and Closing Units 43,836 % Refinance Title and Closing Units 4,264 (35)% Average Fee per Closing Unit $2,229 5% 11

12 Existing Home Sale Transaction Volume Source: National Association of Realtors and Realogy data 12

13 Capitalization Table Pricing Maturity As of Sept 30 Cash and Cash Equivalents $226 Revolver L+225 (1) February 2023 $250 Term Loan A L+225 (1) February 2023 $741 Term Loan B L+225 (2) February 2025 $1,072 Senior Notes 4.50% April 2019 $450 Senior Notes 5.25% December 2021 $550 Senior Notes 4.875% June 2023 $500 Net Corporate Debt (excluding securitizations) $3,337 Net Debt Leverage Ratio (3) 4.3x 1) Adjusts up or down based on the previous quarter senior secured leverage ratio as defined by the senior secured credit facilities 2) Includes 75 basis points LIBOR floor 3) Defined as net corporate debt divided by EBITDA as defined by the senior secured credit facilities. See Table 7 of our November 2, 2018 press release for a Net Debt Leverage Ratio calculation 13

14 2019 Industry Forecasts 8.8% volume 5.6% volume 4.8% volume 5.1% volume ~6% average volume increase NAR forecast is as of the October Outlook released on September 27, FNMA, Freddie Mac and MBA forecasts are as of October. NAR, FNMA and MBA forecasts reflect unit and median price increases. Freddie Mac price increases are represented by their respective Home Price Indices. Freddie Mac forecasts total homesale units (new + existing), which the Company adjusts by NAR projected new homesales. 14

15 Seasonal Revenue Trends 15

16 GAAP Reconciliation ($ in millions) For the Three Months Ended September 30, 2018 September 30, 2017 Net income attributable to Realogy Holdings $103 $95 Income tax expense Income before income taxes Depreciation and amortization Interest expense, net Restructuring costs, net 9 2 Former parent legacy cost, net 1 Loss on the early extinguishment of debt 1 Operating EBITDA $242 $258 Note: Refer to Table 8 of the Press Release dated November 2, 2018 for the definitions of certain non-gaap financial measures and the Company s explanation of why it believes those non-gaap measures are useful to investors 16

17 GAAP Reconciliation ($ in millions) For the Three Months Ended September 30, September 30, RFG $161 $159 NRT Cartus TRG Corporate and Other (21) (23) Operating EBITDA Total Company $242 $258 Less: Depreciation and amortization Interest expense, net Income tax expense Restructuring costs, net (a) 9 2 Former parent legacy cost, net (b) 1 Loss on the early extinguishment of debt (b) 1 Net income attributable to Realogy $103 $95 (a) Restructuring charges incurred for the three months ended September 30, 2018 include $1 million at RFG and $8 million at NRT. Restructuring charges incurred for the three months ended September 30, 2017 include $2 million at NRT (b) Former parent legacy items and loss on the early extinguishment of debt are recorded in the Corporate and Other segment. Note: Refer to Table 8 of the Press Release dated November 2, 2018 for the definitions of certain non-gaap financial measures and the Company s explanation of why it believes those non-gaap measures are useful to investors 17

18 GAAP Reconciliation ($ in millions) For the Three Months Ended September 30, 2018 September 30, 2017 Net income attributable to Realogy $103 $95 Income tax expense, net of payments Interest expense, net Cash interest payments (31) (25) Depreciation and amortization Capital expenditures (24) (21) Restructuring costs and former parent legacy items, net of payments 4 (1) Loss on the early extinguishment of debt 1 Working capital adjustments 9 17 Relocation receivables (assets), net of securitization obligations 5 28 Free Cash Flow $194 $250 Note: Refer to Table 8 of the Press Release dated November 2, 2018 for the definitions of certain non-gaap financial measures and the Company s explanation of why it believes those non-gaap measures are useful to investors. 18