Investor Presentation May 2016
Safe Harbor Statement Non-GAAP Financial Measures The financial measures Operating EBITDA, Adjusted (Covenant) EBITDA, and Free Cash Flow, 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 19 and 20 of this presentation and Tables 5a, 5b, 6a, 6b, 7, and 8 of the Company s May 5, 2016 press release announcing first quarter 2016 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. Market and Industry Data and Forecasts This presentation includes data, forecasts and information obtained from independent trade associations, industry publications and surveys and other information available to us. While we believe that the industry data presented herein is derived from the most widely recognized sources for reporting U.S. residential housing market statistical data, we do not endorse or suggest reliance on this data alone. Forecasts regarding rates of home ownership, median sales price, volume of homesales, and other metrics included in this presentation to describe the housing industry are inherently uncertain or speculative in nature and actual results for any period could materially differ. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but such information may not be accurate or complete. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position are based on market data currently available to us. For further information regarding the Company s use of industry data, forecasts and information, see our Quarterly Report filed on Form 10-Q for the quarter ended March 31, 2016, and our Annual Report on Form 10-K for the year ended December 31, 2015, and our other filings made from time to time. 1
Fee for Service Business Real Estate Franchise Services (RFG) World s Largest Real Estate Franchisor Owned Brokerage Network (NRT) Largest U.S. Residential Real Estate Brokerage 24% 58% 12% 6% Relocation Services Title Settlement & Services Leading Global Relocation Company Significant Provider of Title & Settlement Services 2
Key Investment Highlights Strong Market Position World s largest residential real estate franchisor Largest residential real estate broker in the U.S. Market share has remained steady at average of 16.4% from 2013-2015 Growth Opportunities Roll up acquisition strategy is low risk and highly accretive 13 NRT and 3 TRG acquisitions in 2015 In 2015, established major presence in SunBelt states through acquisitions of CB United and Independence Title ZipRealty Zap platform enhances RFG value proposition Free Cash Flow Generation Generated $437 million of free cash flow in 2015 Significant Adj. EBITDA to free cash flow conversion Board approved $275 million share repurchase authorization Cash interest expense expected to be $170-$175 million in 2016 compared with $230 million in 2015 Free cash flow will be applied to debt reduction, growth opportunities and return of capital 3
1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2,334 2,272 1,990 2,476 2,419 3,064 2,973 2,697 2,829 3,134 3,650 3,474 3,436 3,986 3,827 3,513 3,290 3,184 3,146 3,431 3,737 3,884 3,849 4,167 4,374 4,110 4,340 4,190 4,260 4,965 4,660 5,179 5,173 5,335 5,030 4,940 5,250 5,634 6,176 6,778 6,477 5,375 Projected 7,080 Historical Perspective U.S. Existing Home Sales Units and Median Home Price US home sale units (000) 8,000 7,000 CAGR 1973 2015 Units 2% Median price 5% Median home price ($000) 250 6,000 200 5,000 150 4,000 3,000 100 2,000 50 1,000 0 0 US Home sale units Recession Recovery Median home price Source: National Association of Realtors 4
Economics of a Residential Real Estate Transaction $250,000 Home Co-brokered Sale 2.5% to Cooperating Sales Associate (e.g. buyer's agent) 2.5% to Realogy Broker 1 (e.g. seller's agent) $6,250 Gross Commission Income ( GCI ) Cartus received / delivered 88k referrals between NRT and RFG in 2015 6% 2 Royalty to Realogy (as franchisor) $375 94% to Broker (Realogy/NRT or franchisee) $5,875 TRG closed 59k transactions related to NRT in 2015 RFG earned royalties from 1.4mm transactions in 2015 68% to Agent $3,995 Note: Percentages are for illustrative purposes; actual results may vary. 1 Broker includes NRT-owned brokerage operations as well as third party franchisees. 2 Gross royalty rate before volume rebates paid to franchisees, excluding NRT, which is not eligible to receive rebates. 32% to Broker (Realogy/NRT or franchisee) $1,880 NRT closed 337k transactions in 2015 5
Significant Market Penetration 2015 U.S. New and Existing Homesales: 2015 Existing U.S. Homesales: 2015 Broker-Assisted Existing 5.8 million 1 5.3 million 2 Transaction Volume: $1.2 Trillion 3 New Homesales 9% Existing Homesales 91% Non-Broker- Assisted 5 13% Broker- Assisted 87% Other 73% 27% Non-Broker-Assisted Homesales 5 21% 257 Worldwide # of Agents (In 000s) 6 Domestic residential real estate is a $1.6 trillion industry 4 13% 139 103 42 1 Per National Association of Realtors (NAR). 2 Per NAR. Based on existing homesales in 2015. 3 Based on homesale transactions involving a real estate brokerage firm, per NAR. Represents NAR average price multiplied by broker-assisted existing homesale transactions. Market penetration measures the value of homes where Realogy participated on either the buy or sell side. 4 According to NAR, the U.S. existing residential real estate industry is an approximately $1.4 trillion industry based on 2015 transaction volume (average homesale price times the number of existing homesale transactions) and new homesale transaction volume is a $0.2 trillion industry based on 2015 transaction volume (average homesale price times the number of new homesales). 5 Non-Broker-Assisted Homesales includes For Sale by Owner. Percentage represents Non-Broker-Assisted Homesales as a percentage of total existing U.S. homesales. 2015 estimates of Non-Broker-Assisted Homesales per NAR. 6 Realogy data as of December 31, 2015. RE/MAX data from 10-Q filing, September 30, 2015. Keller Williams, as stated in April 26, 2016 press-release. Prudential/BHHS/Real Living, according to Berkshire Hathaway Jan 26, 2016 press release. 6 2001 2015 6 Realogy Keller Williams RE/MAX Prudential / BHHS / Real Living
Total Realogy U.S. Footprint 7
RFG: World s Largest Real Estate Franchisor National footprint with approximately 6,000 offices and 181,500 independent sales associates in the U.S. 1 Approximately 96% of revenue from U.S. 2 International master franchises in 110 countries with approximately 7,600 offices and 75,300 independent sales associates 1 Deploying ZAP Platform to 70% of affiliated brokers by FYE 2017 Multiple high quality, well-recognized brands Recurring, high-margin revenue streams (66% EBITDA Margin in 2015) High franchisee retention rates (99% through 2015 3,4 ) Long-term agreements (typically 10 years in U.S.) Diversification (no franchisee represents >1% of revenue2,4 ) 1 As of 12/31/2015 (includes NRT). 2 LTM ended 12/31/2015. 3 Based on gross commission income for 2015. 4 Excluding NRT. Benefits from scale, infrastructure, and technology Homesale Sides Key Revenue Drivers Transaction Volume X X Average Homesale Price Average Broker Commission Rate X Net Effective Royalty Rate = RFG Net Domestic Franchise Royalty Revenue 8
Why Brokers Affiliate With Our Brands TOOLS FIELD TECHNOLOGY MARKETING BRAND NAME RECOGNITION CONSULTING GROWTH OPPORTUNITIES 9
ZipRealty Operating Strategy Objective: Complement existing presence in attractive markets with ~1,800 connected, highperforming sales associates and expand into existing NRT regions Outcome: Enhanced penetration of existing Realogy markets with: Added value proposition for recruiting High-margin company-generated units Strong office and shared services synergies Additional revenue opportunities across other business segments Objective: Provide our franchisees and their affiliated agents with a world-class digital platform (Zap) to enhance their business Outcome: An enhanced brand value proposition that will: Improve agent productivity Help franchisees recruit and retain agents Improve NERR on new franchise sales Additional revenue opportunities from franchisees and agents on the platform 10 10
NRT: Largest U.S. Residential Brokerage World s largest residential real estate brokerage company 790 offices with $165 billion in sales volume in 2015 Average price of $490k in 2015 compared to $266k national average 1 Leading broker in top markets Greater than 90% retention rate for the 1 st & 2 nd quartile sales associates2 Transaction Volume Homesale Sides Key Revenue Drivers X X Average Homesale Price Average Broker Commission Rate = NRT Sides Related Gross Commission Income (GCI) 6% Royalty Paid to RFG 11 1 Per NAR. 3 As of 3/31/2016
Where Our Business Originates: Sales Associate Sphere of Influence Remains the No. 1 Source of Business Where BUYERS find their Sales Associate Where SELLERS find their Sales Associate Relo or Walk-ins 7% Offline Ads 1% Yard Signs 6% Open House or Prospecting 9% Other 10% Agent Sphere of Influence 46% Offline Ads 4% Yard Signs 3% Relo or Walk-ins 5% Open House or Prospecting 8% Other 10% Agent Sphere of Influence 42% Internet 4% Internet 9% Past Client 12% Past Client 24% Source: National Association of Realtors 2014 Profile of Home Buyers and Sellers 12
Cartus: Leading Global Relocation Services Company Integral to the Realogy business model Top 25 clients have an average tenure of 20 years 1 Broad and growing international reach (Approx. 150 countries) and product portfolio Customer base includes 58% of Fortune 50 companies 1 1 As of 12/31/2015. 13
TRG: Provider of Title and Settlement Services 14
2011-2015 Financial Progress $ in millions Year Ended Dec 31 st 2012 2013 2014 2015 2012-2015 CAGR Revenue $4,672 $5,289 $5,328 $5,706 7% Adjusted (Covenant) EBITDA 1 $674 $796 $779 $845 8% Cash Interest (excluding securitizations) $562 $305 $243 $238 (25%) Free Cash Flow 1 $(223) $421 $367 $437 NM Net Corporate Debt 2 (excluding securitizations) Net Corporate Debt/Adjusted EBITDA $3,990 $3,669 $3,597 $3,337 (6%) 5.9x 4.6x 4.6x 3.9x NM 1 2 Please see Slides 19 and 20 for a reconciliation of these non-gaap measures to their most comparable GAAP measures, refer to Table 8 of the Company s press release dated May 5, 2016 for its explanation of why it believes these non-gaap measures are useful to investors. Net Corporate Debt represents total long-term corporate debt, including short term portion, net of cash and cash equivalents. 15
Appendix 16
% Change 2016 Existing Homesale Volume Forecasts 2016 Industry Forecasts 8% 7% 6% 5% 4% 3% 2% 1% 7% volume 4.5% 4.8% 2.4% 2.1% 7% volume 7% volume 7% volume 7% volume 3.5% 3.5% 2.0% 5.0% 4.2% 2.4% Median Price Sides 7% average volume 0% All forecasts are as of April, except NAR, which is as of March. NAR, FNMA, and MBA forecasts reflect unit and median price increases. Goldman Sachs and 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. 17
Refinanced High Cost Debt (Dollars in millions) Rate Expiration Date Amount outstanding 3/31/2016 Cash and Cash Equivalents $283 Revolver L+225 October 2020 - Term Loan A L+225 October 2020 430 Term Loan B L+300 March 2020 1,863 Senior Notes 3.375% May 2016* 500 Senior Notes 4.500% April 2019 450 Senior Notes 5.250% Dec 2021 550 Total Net Debt* $3,510 Total Debt to Adjusted (Covenant) EBITDA 4.1x * The $500 million of 3.375% notes were repaid in May 2016 at maturity. Notes: Does not include securitization debt or related assets. Cash and cash equivalents includes statutory cash required for the title business. Term Loan amount outstanding is net of $16 million discount. 18
EBITDA and Adjusted EBITDA Reconciliation Twelve Months Ended Dollars in millions 12/31/2015 12/31/2014 12/31/2013 12/31/2012 Net income (loss) attributable to the Company $184 $143 $438 $(543) Income tax expense (benefit) 110 87 (242) 39 Income (loss) before income taxes $294 $230 $196 $(504) Interest expense, net 231 267 281 528 Depreciation and amortization 201 190 176 173 EBITDA $726 $687 $653 $ 197 EBITDA adjustments: Restructuring costs 10 (1) 4 12 Former parent legacy costs (benefit), net (15) (10) (4) (8) Loss on the early extinguishment of debt 48 47 68 24 IPO related costs and Apollo management fees - - - 400 Operating EBITDA $769 $723 $721 $625 Bank covenant adjustments: Proforma effect of business optimization initiatives 14 14 16 31 Non-cash charges 46 30 39 (3) Proforma effect of acquisitions and new franchisees 12 8 11 5 Incremental securitization interest costs 4 4 5 6 Pro forma cost savings for restructuring activities - - 1 7 Non-recurring fair value adjustments for purchase accounting - - 1 3 Secondary offering costs - - 2 - Adjusted (Covenant) EBITDA $845 $779 $796 $674 19
Free Cash Flow Reconciliation Twelve Months Ended Dollars in millions 12/31/2015 12/31/2014 12/31/2013 12/31/2012 Net income (loss) attributable to the Company Holdings $184 $143 $438 $(543) Income tax expense (benefit), net of payments 93 77 (258) 32 Interest expense, net (including securitization interest) 231 267 281 528 Cash interest payments (244) (249) (312) (571) Depreciation and amortization 201 190 176 173 Capital expenditures (84) (71) (62) (54) Restructuring costs and legacy, net of payments (14) (15) (11) (14) IPO related costs, net 256 Cash payment related to final Apollo management fee termination (15) Loss on the early extinguishment of debt 48 47 68 24 Working capital adjustments 26 (10) 70 (42) Relocation assets, net of securitization (4) (12) 46 (12) Free Cash Flow $437 $367 $421 $(223) 20