Realogy Reports Financial Results For First Quarter 2019
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Realogy Reports Financial Results For First Quarter 2019

MADISON, N.J., May 2, 2019 // 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, 2019, including the following highlights:

  • Revenue was $1.1 billion, a decrease of 9% compared to the first quarter in 2018 largely due to lower transaction volume at NRT.
  • The Company's combined homesale transaction volume (transaction sides multiplied by average sale price) decreased 9% compared with the first quarter of 2018. For reference, the National Association of Realtors reported that homesale transaction volume decreased 4% in the first quarter of 2019 compared to 2018. The differences were primarily driven by geographic concentration and an increase in the competitive environment especially in a few specific geographies.
  • Operating EBITDA was negative $4 million, a decrease of $38 million compared with the first quarter of 2018 with lower transaction volume partially offset by expense management. (See Table 4)1
  • Net loss was $99 million compared to net loss of $67 million for the first quarter of 2018. Basic loss per share was $0.87 compared with basic loss per share of $0.51 in the first quarter of 2018.
  • Adjusted net loss per share was $0.67 compared with adjusted net loss per share of $0.38 in the first quarter of 2018. (See Table 1a)2
  • In the first quarter of 2019, Realogy generated free cash flow of negative $172 million (See Table 6)3. The company reported net cash used in operating activities of $103 million in the first quarter of 2019 compared with $130 million in the first quarter of 2018.
  • "In the first quarter of 2019, Realogy moved aggressively to deliver new marketing, technology and data products for our affiliated agents, roll out new pricing models and realize new efficiencies across the business," said Ryan Schneider, Realogy's chief executive officer and president. "Despite continued market headwinds and an increasingly competitive environment, we remain intensely focused on executing our strategy and improving our value proposition to drive greater success for our affiliated agents, our franchisees and ultimately, our shareholders."

"We realized meaningful cost savings and operational realignment across the company during the first quarter," said Charlotte Simonelli, Realogy's executive vice president, chief financial officer and treasurer. "We remain on track to achieve $70 million in cost savings in the full year 2019 and are actively pursuing additional opportunities across the business."

In the first quarter of 2019, Realogy's 190,800 U.S.-based affiliated independent sales agents helped consumers with approximately 263,000 homesale transaction sides. In aggregate, Realogy achieved homesale transaction volume of approximately $91 billion in the first quarter of 2019 with $60 billion at RFG and $31 billion at NRT. RFG homesale transaction sides decreased 10% and average homesale price increased 2%. NRT reported a homesale transaction sides decrease of 9% and an average homesale price decrease of 2%.

In the title and settlement services segment, TRG closed 32,000 transactions in the first quarter of 2019, which was a 14% decline driven by the lower housing market and refinance volume. Our mortgage joint venture achieved profitability in Q1 2019.

In the relocation services segment, Cartus initiations were up 1% and referrals were down 4%. Cartus generates highly qualified leads for its network of affiliated agents and helps them to build their businesses. Cartus generated referral opportunities for agents that resulted in approximately 80,000 in-network homesale closings for Realogy and its brands in 2018.

Balance Sheet and Capital Allocation

The Company ended the quarter with cash and cash equivalents of $243 million. Total corporate debt, including the short-term portion, net of cash and cash equivalents (net corporate debt), totaled $3.6 billion at March 31, 2019. The Company's net debt leverage ratio4 was 5.2 times at March 31, 2019. At year end, the Company's net operating loss carryforwards were $855 million, which it expects will allow it to continue to pay minimal cash taxes through 2020.

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 to below 4.00 to 1.00, although the Company currently anticipates continuing its quarterly cash dividend.

Investor Conference Call

Today, May 2, at 8:30 a.m. (ET), Realogy will hold a conference call via webcast to review its Q1 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 190,800 independent sales agents in the United States and approximately 111,100 independent sales agents in 112 other countries and territories. Realogy is headquartered in Madison, New Jersey.

Footnotes:

  1. 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. 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, the tax effect of the foregoing adjustments and adjustments to the reserve for uncertain tax positions.
  3. 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, loss on the early extinguishment of debt, working capital adjustments and relocation receivables (assets), net of change in securitization obligations.
  4. Net corporate debt divided by EBITDA, as defined by the Senior Secured Credit Facility, for the four-quarter period ended March 31, 2019.

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" 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 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; increased competition in the industry and for the affiliation of independent sales agents; 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; 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) 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 quarter ended March 31, 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, 4, 5a, 5b, 6, 7a and 7b for reconciliations of the historical non-GAAP financial measures to their most comparable GAAP terms.

Contacts:

Alicia Swift
Investor Relations
(973) 407-4669
alicia.swift@realogy.com

Trey Sarten
Investor Relations
trey.sarten@realogy.com
(973) 407-2162

Danielle Kloeblen
Media Relations
(973) 407-2148
danielle.kloeblen@realogy.com

Elliott Frieder
Media Relations
elliott.frieder@realogy.com
(973) 407-5236

Table 1

 

REALOGY HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

   
 

Three Months Ended
March 31,

 

2019

 

2018

Revenues

     

Gross commission income

$

799

   

$

902

 

Service revenue

188

   

197

 

Franchise fees

70

   

79

 

Other

57

   

51

 

Net revenues

1,114

   

1,229

 

Expenses

     

Commission and other agent-related costs

575

   

645

 

Operating

380

   

392

 

Marketing

69

   

67

 

General and administrative

95

   

89

 

Restructuring costs, net

12

   

30

 

Lease asset impairment

1

   

 

Depreciation and amortization

49

   

48

 

Interest expense, net

63

   

33

 

Loss on the early extinguishment of debt

5

   

7

 

Total expenses

1,249

   

1,311

 

Loss before income taxes, equity in (earnings) losses and noncontrolling interests

(135)

   

(82)

 

Income tax benefit

(35)

   

(19)

 

Equity in (earnings) losses of unconsolidated entities

(1)

   

4

 

Net loss

(99)

   

(67)

 

Less: Net income attributable to noncontrolling interests

   

 

Net loss attributable to Realogy Holdings

$

(99)

   

$

(67)

 
       

Loss per share attributable to Realogy Holdings:

     

Basic loss per share

$

(0.87)

   

$

(0.51)

 

Diluted loss per share

$

(0.87)

   

$

(0.51)

 

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

Basic

114.0

   

130.3

 

Diluted

114.0

   

130.3

 

Table 1a

 

REALOGY HOLDINGS CORP.

NON-GAAP RECONCILIATION

ADJUSTED NET LOSS AND ADJUSTED LOSS PER SHARE

(In millions, except per share data)

 

We present Adjusted net loss and Adjusted loss 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 loss is defined by us as net loss 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) lease asset 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 loss per share is Adjusted net loss divided by the weighted average common and common equivalent shares outstanding.

 

Set forth in the table below is a reconciliation of Net loss to Adjusted net loss for the three-month periods ended March 31, 2019 and 2018:

   
 

Three Months Ended March 31,

 

2019

 

2018

Net loss attributable to Realogy Holdings

$

(99)

   

$

(67)

 

Addback:

     

Mark-to-market interest rate swap losses (gains)

14

   

(12)

 

Restructuring costs, net

12

   

30

 

Lease asset impairment

1

   

 

Loss on the early extinguishment of debt

5

   

7

 

Adjustments for tax effect (a)

(9)

   

(7)

 

Adjusted net loss attributable to Realogy Holdings

$

(76)

   

$

(49)

 
       

Loss per share

     

Basic loss per share:

$

(0.87)

   

$

(0.51)

 

Diluted loss per share:

$

(0.87)

   

$

(0.51)

 
       

Adjusted loss per share

     

Adjusted basic loss per share:

$

(0.67)

   

$

(0.38)

 

Adjusted diluted loss per share:

$

(0.67)

   

$

(0.38)

 
       

Weighted average common and common equivalent shares outstanding:

Basic:

114.0

   

130.3

 

Diluted:

114.0

   

130.3

 
   
   

(a)

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

Table 2

 

REALOGY HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

       
 

March 31,
2019

 

December 31,
2018

ASSETS

     

Current assets:

     

Cash and cash equivalents

$

243

   

$

225

 

Restricted cash

3

   

13

 

Trade receivables (net of allowance for doubtful accounts of $11 and $9)

155

   

146

 

Relocation receivables

223

   

231

 

Other current assets

147

   

153

 

Total current assets

771

   

768

 

Property and equipment, net

302

   

304

 

Operating lease assets, net

544

   

 

Goodwill

3,712

   

3,712

 

Trademarks

749

   

749

 

Franchise agreements, net

1,210

   

1,227

 

Other intangibles, net

246

   

254

 

Other non-current assets

277

   

276

 

Total assets

$

7,811

   

$

7,290

 
       

LIABILITIES AND EQUITY

     

Current liabilities:

     

Accounts payable

$

154

   

$

147

 

Securitization obligations

187

   

231

 

Current portion of long-term debt

440

   

748

 

Current portion of operating lease liabilities

130

   

 

Accrued expenses and other current liabilities

346

   

401

 

Total current liabilities

1,257

   

1,527

 

Long-term debt

3,335

   

2,800

 

Long-term operating lease liabilities

473

   

 

Deferred income taxes

352

   

389

 

Other non-current liabilities

205

   

259

 

Total liabilities

5,622

   

4,975

 

Commitments and contingencies

     

Equity:

     

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

   

 

Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 114,205,678 shares issued and outstanding at March 31, 2019 and 114,620,499 shares issued and outstanding at December 31, 2018

1

   

1

 

Additional paid-in capital

4,841

   

4,869

 

Accumulated deficit

(2,606)

   

(2,507)

 

Accumulated other comprehensive loss

(50)

   

(52)

 

Total stockholders' equity

2,186

   

2,311

 

Noncontrolling interests

3

   

4

 

Total equity

2,189

   

2,315

 

Total liabilities and equity

$

7,811

   

$

7,290

 

Table 3a

 

REALOGY HOLDINGS CORP.

2019 vs. 2018 KEY DRIVERS

     
   

Three Months Ended March 31,

   

2019

 

2018

 

% Change

RFG (a)

           

Closed homesale sides

 

202,662

   

223,990

   

(10)

%

Average homesale price

 

$

298,361

   

$

292,580

   

2

%

Average homesale broker commission rate

 

2.48

%

 

2.50

%

 

(2)

bps

Net royalty per side

 

$

303

   

$

310

   

(2)

%

NRT

           

Closed homesale sides

 

60,442

   

66,097

   

(9)

%

Average homesale price

 

$

511,922

   

$

525,020

   

(2)

%

Average homesale broker commission rate

 

2.41

%

 

2.45

%

 

(4)

bps

Gross commission income per side

 

$

13,212

   

$

13,666

   

(3)

%

Cartus

           

Initiations

 

38,484

   

37,953

   

1

%

Referrals

 

14,879

   

15,526

   

(4)

%

TRG

           

Purchase title and closing units

 

28,044

   

31,741

   

(12)

%

Refinance title and closing units

 

4,011

   

5,410

   

(26)

%

Average fee per closing unit

 

$

2,267

   

$

2,161

   

5

%

   
   
   

(a) 

Includes all franchisees except for NRT.

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.

For the wide spreadsheet Tables 4 please go to: https://www.prnewswire.com/news-releases/realogy-reports-financial-results-for-first-quarter-2019-300842311.html

Table 5a

 

REALOGY HOLDINGS CORP.

SELECTED 2019 FINANCIAL DATA

(In millions) 

   
 

Three Months Ended

 

March 31,

 

2019

Net revenues (a)

 

Real Estate Franchise Services

$

163

 

Company Owned Real Estate Brokerage Services

816

 

Relocation Services

76

 

Title and Settlement Services

114

 

Corporate and Other

(55)

 

Total Company

$

1,114

 
   

Operating EBITDA

 

Real Estate Franchise Services

$

90

 

Company Owned Real Estate Brokerage Services

(62)

 

Relocation Services

2

 

Title and Settlement Services

(9)

 

Corporate and Other

(25)

 

Total Company

$

(4)

 
   

Non-GAAP Reconciliation - Operating EBITDA

 

Total Company Operating EBITDA

$

(4)

 
   

Less: Depreciation and amortization

49

 

Interest expense, net

63

 

Income tax benefit

(35)

 

Restructuring costs, net (b)

12

 

Lease asset impairment

1

 

Loss on the early extinguishment of debt (c)

5

 

Net loss attributable to Realogy Holdings

$

(99)

 
   
   
   

(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 for the three months ended March 31, 2019.  Such amounts are eliminated through the Corporate and Other line.

   
 

Revenues for the Relocation Services segment include $7 million intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment during the three months ended  March 31, 2019.  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,

 

2019

Real Estate Franchise Services

$

 

Company Owned Real Estate Brokerage Services

4

 

Relocation Services

3

 

Title and Settlement Services

1

 

Corporate and Other

4

 

Total Company

$

12

 
   
   

(c) 

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

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.

   

Table 6

 

REALOGY HOLDINGS CORP.

NON-GAAP RECONCILIATION - FREE CASH FLOW

THREE MONTHS ENDED MARCH 31, 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

 

2019

 

2018

Net loss attributable to Realogy Holdings

$

(99)

   

$

(67)

 

Income tax benefit, net of payments

(36)

   

(23)

 

Interest expense, net

63

   

33

 

Cash interest payments

(40)

   

(21)

 

Depreciation and amortization

49

   

48

 

Capital expenditures

(24)

   

(25)

 

Restructuring costs and former parent legacy items, net of payments

   

19

 

Lease asset impairment

1

   

 

Loss on the early extinguishment of debt

5

   

7

 

Working capital adjustments

(54)

   

(99)

 

Relocation receivables (assets), net of securitization obligations

(37)

   

(38)

 

Free Cash Flow

$

(172)

   

$

(166)

 
 
 

A reconciliation of net cash used in operating activities to Free Cash Flow is set forth in the following table:

 
 
 

Three Months Ended

 

2019

 

2018

Net cash used in operating activities

$

(103)

   

$

(130)

 

Property and equipment additions

(24)

   

(25)

 

Net change in securitization

(45)

   

(11)

 

Effect of exchange rates on cash and cash equivalents

   

 

Free Cash Flow

$

(172)

   

$

(166)

 
       

Net cash used in investing activities

$

(23)

   

$

(9)

 

Net cash provided by financing activities

$

134

   

$

93

 

For the wide spreadsheet Tables 7a please go to: https://www.prnewswire.com/news-releases/realogy-reports-financial-results-for-first-quarter-2019-300842311.html

 

Table 7b

 

NET DEBT LEVERAGE RATIO

THREE MONTHS ENDED MARCH 31, 2019

(In millions)

 

Net corporate debt (excluding securitizations) divided by EBITDA calculated on a Pro Forma Basis, as those terms are defined in the senior secured credit facilities, for the four-quarter period ended March 31, 2019 (referred to as net debt leverage ratio) is set forth in the following table:

 
   

As of March 31,
2019

 

Revolver

 

$

410

 

Term Loan A

 

731

 

Term Loan B

 

1,067

 

5.25% Senior Notes

 

550

 

4.875% Senior Notes

 

500

 

9.375% Senior Notes

 

550

 

Finance lease obligations

 

32

 

Corporate Debt (excluding securitizations)

 

3,840

 

Less: Cash and cash equivalents

 

243

 

Net Corporate Debt (excluding securitizations)

 

$

3,597

 
     

EBITDA as defined by the Senior Secured Credit Agreement (a)

 

$

690

 
     

Net Debt Leverage Ratio

 

5.2

x

   
   
   

(a)

See Table 7a for a reconciliation of Net income (loss) attributable to Realogy Group to EBITDA as defined by the Senior Secured Credit Agreement.

Table 8

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 loss on the early extinguishment of debt, the tax effect of the foregoing adjustments and adjustments to the reserve for uncertain tax positions.  The gross amounts for these items as well as the adjustment for income taxes are presented.  Adjusted earnings (loss) per share is Adjusted net income (loss) divided by the weighted average common and common equivalent shares outstanding.  We present Adjusted net income (loss) and Adjusted earnings (loss) 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.

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, 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.  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, losses on the early extinguishment of debt, former parent legacy items, asset 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, lease asset impairments, 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.

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