MADISON, NJ - (Marketwired - Jul 24, 2013) - Realogy Holdings Corp. (NYSE: RLGY), a global leader in residential real estate franchising and provider of real estate brokerage, relocation, and title and settlement services, today reported financial results for the second quarter ended June 30, 2013, including the following:
"The material improvement in our second quarter financial results is largely attributable to the strength of our business model, the strong performance of management, a dramatically improved balance sheet with a corresponding material reduction in interest expense, and a housing market recovery that is showing resiliency," said Richard A. Smith, Realogy's chairman, chief executive officer and president.
The Company's combined transaction volume increased 21% during the second quarter of 2013 compared to the same period last year. The Realogy Franchise Group (RFG), our franchise segment, and NRT, the operator of our company-owned brokerage offices, reported closed homesale transaction side gains of 10% and 12%, respectively. Average homesale price improved 10% at RFG and 7% at NRT compared with the second quarter of 2012. NRT's average home price is generally twice the national average.
In our relocation business, while second quarter revenue was essentially flat, Cartus experienced a 19% increase in broker referrals and a 5% year-over-year increase in initiations compared with 2012. In our title and settlement services segment, Title Resource Group (TRG) experienced a 14% increase in purchase title and closing units compared to the second quarter of 2012 and a 30% increase in refinance title and closing units.
"Recently, there has been renewed focus on rising mortgage rates and what impact they will have on the housing market," continued Smith. "While rising rates have had an effect on refinancing volume, thus far we have seen no near-term impact on existing home sales. We view rising rates as a reflection of a healthier economy, and while mortgage rates may put near-term pressure on certain homebuyers, this needs to be viewed in the broader context of overall affordability, which remains at historically high levels. We believe the recovery is, and will continue to be, a long-term process."
"Looking ahead, we expect continued growth in transaction volume, with 17% to 19% increases in the third quarter compared to the third quarter of 2012," said Anthony E. Hull, Realogy's executive vice president, chief financial officer and treasurer. "On a combined basis, RFG and NRT transaction sides are anticipated to increase 9% to 10% and average sale price is expected to increase 8% to 9% year-over-year in the third quarter. This business growth trend will drive continued strength in our revenue and EBITDA results for the third quarter."
1See Table 7 for a reconciliation of Net Income/(Loss) to Adjusted EBITDA for the three months ended June 30, 2013 and 2012 and Table 9 for a definition of Adjusted EBITDA.
The Company ended the quarter with a cash balance of $187 million, and $140 million of outstanding borrowings on its revolving credit facility under its senior secured credit agreement.
"We expect that our revolver will be fully repaid by the end of the third quarter, and we currently expect to end the quarter and the year with a significant cash balance," said Hull. "The availability of funds from operating cash flow and our revolver will give us flexibility to continue to materially reduce our borrowings over time. Having already reduced our indebtedness by $3.2 billion over the past year, our goal over the next several years is to reduce our overall leverage (Net Debt to Adjusted EBITDA) to three times or less."
A consolidated balance sheet is included as Table 2 of this press release.
Today, July 24 at 8:30 a.m. (EDT), Realogy will hold a conference call via webcast to review its second quarter results. The call will be hosted by Richard A. Smith, chairman, chief executive officer and president, and Anthony E. Hull, executive vice president, chief financial officer and treasurer, and will conclude with an investor Q&A period with management.
Investors may access the conference call live via webcast at www.realogy.com under "Investors" or by dialing (888) 895-2010 (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 from July 24 through August 7.
In addition, Realogy expects to file its quarterly report Form 10-Q with the Securities and Exchange Commission on August 2, 2013.
Realogy Holdings Corp. (NYSE: RLGY) is a global leader in real estate franchising with company-owned real estate brokerage operations doing business under its franchise systems as well as relocation and title services. Realogy's brands and business units include Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, The Corcoran Group®, ERA®, Sotheby's International Realty®, NRT LLC, Cartus and Title Resource Group. Collectively, Realogy's franchise system members operate approximately 13,500 offices with 241,700 independent sales associates doing business in 103 countries around the world. Realogy is headquartered in Madison, N.J.
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" 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 estimated by management include, but are not limited to: adverse developments or the absence of sustained improvement in general business, economic and political conditions; adverse developments or the absence of improvement in the residential real estate markets including but not limited to the lack of sustained improvement in the number of home sales and/or stagnant or declining home prices, low levels of consumer confidence, the impact of slow economic growth or future recessions and related high levels of unemployment in the U.S. and abroad, continued low inventory levels, renewed high levels of foreclosures, seasonal fluctuations in the residential real estate brokerage business, and increasing mortgage rates and down payment requirements and/or constraints on the availability of mortgage financing; the Company's geographic and high-end market concentration, particularly with respect to its Company-owned brokerage operations; the Company's failure to enter into or renew franchise agreements or maintain its brands; risks relating to our substantial amount of outstanding debt and interest obligations; variable rate indebtedness which subjects the Company to interest rate risk; the Company's inability to access capital; any outbreak or escalation of hostilities on a national, regional or international basis; government regulation as well as legislative, tax or regulatory changes that would adversely impact the residential real estate market, including but not limited to potential reform of the financing of the U.S. housing and mortgage markets and/or the Internal Revenue Code; the Company's inability to realize benefits from future acquisitions; the Company's inability to sustain improvements in its operating efficiency; and the final resolution or outcomes with respect to Cendant's (our former parent) remaining contingent liabilities.
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 Reports on Form 10-K for the year ended December 31, 2012, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and in 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. Except for our ongoing obligations to disclose material information under the federal securities laws, 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 unless we are required to do so by law.
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.
A reconciliation of net income (loss) attributable to Realogy to EBITDA and Adjusted EBITDA for the twelve months ended June 30, 2013 is set forth in the following table:
Set forth in the table below is a reconciliation of net income (loss) attributable to Realogy to EBITDA and Adjusted EBITDA for the three month periods ended June 30, 2013 and 2012:
A reconciliation of net income attributable to Realogy Holdings to free cash flow for the three months ended June 30, 2013 is set forth in the following table:
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) and income taxes. Adjusted EBITDA calculated for a twelve-month period is presented to demonstrate our compliance with the senior secured leverage ratio covenant in the senior secured credit facility. Adjusted EBITDA calculated for a twelve-month period corresponds to the definition of "EBITDA," calculated on a "pro forma basis," used in the senior secured credit facility to calculate the senior secured leverage ratio. Adjusted EBITDA includes adjustments to EBITDA for restructuring costs, former parent legacy cost (benefit) items, net, IPO related costs for the Convertible Notes, loss on the early extinguishment of debt, non-cash charges, non-recurring fair value adjustments for purchase accounting, Apollo management fees, fees for the secondary offering 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 twelve-month period. Adjusted EBITDA calculated for a three-month period adjusts for the same items as for a twelve-month period, except that the pro forma effect of cost savings, business optimizations and acquisitions and new franchisees are calculated as of the beginning of the three-month period instead of the twelve-month period.
We present EBITDA and Adjusted EBITDA because we believe EBITDA and Adjusted EBITDA are useful as supplemental measures in evaluating the performance of our operating businesses and provide greater transparency into our results of operations. Our management, including our chief operating decision maker, uses EBITDA as a factor in evaluating the performance of our business. EBITDA and Adjusted 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 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, which may vary for different companies for reasons unrelated to operating performance. We further believe that EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an EBITDA measure when reporting their results.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider EBITDA or Adjusted EBITDA either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:
In addition to the limitations described above, Adjusted EBITDA includes pro forma cost savings, the pro forma effect of business optimization initiatives and the pro forma full period effect of acquisitions and new franchisees. These adjustments may not reflect the actual cost savings or pro forma effect recognized in future periods.
Free Cash Flow is defined as net loss attributable to Realogy before income tax expense, net of payments, interest expense, net, depreciation and amortization, capital expenditures, restructuring costs and former parent legacy costs (benefit), net of payments,, cash payment related to Apollo management fee termination, loss on the early extinguishment of debt, working capital adjustments and relocation receivables and properties, net of change in securitization obligations. Cash Earnings Per Share is defined as Free Cash Flow divided by the weighted average basic shares outstanding. We use Free Cash Flow and Cash Earnings Per Share in our internal evaluation of operating effectiveness and decisions regarding the allocation of resources. Free Cash Flow and Cash Earnings Per Share are 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. Free Cash Flow and Cash Earnings Per Share may differ from similarly titled measures presented by other companies.
Alicia Swift
(973) 407-4669
alicia.swift@realogy.com
Jennifer Pepper
(973) 407-7487
jennifer.pepper@realogy.com
Mark Panus
(973) 407-7215
mark.panus@realogy.com
Realogy's company-owned real estate brokerage, is the largest residential brokerage company in the United States, operates under several of Realogy's brands and also provides related residential real estate services.