Franchise and brokerage services giant Realogy (RLGY) reported financial results this week for the quarter ended June 30, 2014, including the following highlights:
“With our recently announced agreement to acquire ZipRealty, we seized upon an exceptional opportunity to further drive growth in our brokerage operations and undertake a significant technology upgrade across our franchise systems,” said Richard A. Smith, Realogy’s chairman, chief executive officer and president. “For the second quarter, we are pleased to report that we outperformed the high end of our previously announced guidance range by achieving homesale transaction volume gains of 3% for the quarter on a combined basis between our company-owned brokerages and franchise business segments. While price was the principal reason for the overall volume increase, better-than-expected sides comparisons also drove the better-than-expected performance.”
“Homesale transaction volume increased at the Realogy Franchise Group (RFG) and our company-owned brokerage operations (NRT) in the second quarter, though it was not sufficient to offset approximately $11 million of lower EBITDA that resulted from reduced mortgage refinancing activity relative to the same period in 2013,” said Anthony Hull, Realogy’s executive vice president and chief financial officer.
For the second quarter of 2014, combined full-year homesale transaction volume (transaction sides times average sale price) increased by 3%, as compared to second quarter of 2013. RFG and NRT reported that average homesale price improved 7% year-over-year while homesale transactions declined 3% and 5%, respectively.
At Cartus, the Company’s relocation services segment, initiations for second quarter 2014 remained flat and referrals increased 4% compared to second quarter 2013. At TRG, the Company’s title and settlement services segment, purchase unit volume decreased 3% year over year, which was consistent with NRT homesale transaction declines. Average fee per transaction improved 35% due to a shift in the mix of business to home purchase transactions from refinancing transactions. TRG’s refinance title and closing units decreased 72% in second quarter 2014 compared to 2013, which was expected given lower refinancing trends across the industry.
“Looking ahead, third quarter comparisons are difficult given exceptional homesale transaction volume growth of 29% in the third quarter of 2013 for RFG and NRT combined,” added Hull. “For the third quarter of 2014, based on our closed sales activity in July, along with contracts opened in June and July, we expect homesale sides to be down -4% to -6% year-over-year, and average sale price to increase +4% to +6% on a combined basis. As a result, we expect to see homesale transaction volume in the range of -2% to +2% year-over-year this quarter for RFG and NRT combined.”
The Company ended the quarter with a cash and cash equivalents balance of $209 million and no outstanding borrowings under its revolving credit facility under its senior secured credit agreement. Total long-term corporate debt, including the short term portion, net of cash and cash equivalents totaled $3.7 billion at June 30, 2014.
Reported interest expense for the quarter included the impact of mark-to-market adjustments for our interest rate swaps which were losses of $14 million in 2014 compared to gains of $8 million in the same period of 2013. For the six months ended June 30, 2014, corporate cash interest was $52 million lower than the same period in the prior year as a result of refinancing activity. The Company expects full-year corporate cash interest to be approximately $230 million.
For more analysis of Realogy’s second quarter results, click here.
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