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Realogy Holdings Corp. recently reported financial results for the first quarter of 2018, including the following highlights:

  • Revenue was $1.2 billion, an increase of 2 percent compared with the first quarter in 2017, driven by increases in home-sale transaction volume (transaction sides multiplied by average sale price).
  • The company’s combined home-sale transaction volume increased 4 percent compared with the first quarter of 2017, consisting of a 5 percent volume gain at RFG and a 2 percent volume gain at NRT. For reference, the National Association of REALTORS® reported an annual industry volume increase of 2 percent in the first quarter of 2018.
  • Operating EBITDA was $34 million, consistent with guidance for the first quarter of 2018.
  • Net loss was $67 million compared with net loss of $28 million in the first quarter of 2017. Basic loss per share was $0.51 compared with basic loss per share of $0.20 in the first quarter of 2017. The net loss was driven by lower Operating EBITDA and includes a $30 million restructuring charge.
  • Adjusted net loss per share was $0.38 compared with adjusted net loss per share of $0.16 in the first quarter of 2017.
  • Free Cash Flow for the first quarter of 2018 was negative $166 million compared with negative $72 million for the first quarter of 2017. In addition to the change in Operating EBITDA, the results reflected greater seasonal working capital adjustments than last year.
  • In the first quarter of 2018, Realogy returned $111 million of capital to stockholders through share repurchases and dividends.

“I continue to be incredibly excited by Realogy’s strengths,” says Ryan Schneider, CEO and president of Realogy. “We grew both revenue and transaction volume in an intensely competitive market in the first quarter. To improve our business performance, we must enhance our value proposition to agents by leveraging our market leadership, geographic reach, and data and technology scale. While our results trajectory will not change overnight, we are committed to demonstrating a fast pace of change, returning capital to shareholders and improving profitability over time.”

“Operating EBITDA for the quarter was $34 million, about half of Q1 2017, consistent with our guidance,” says Anthony E. Hull, EVP, CFO and treasurer of Realogy. “The year-over-year decline of $27 million was largely due to a $24 million decline at NRT, which was primarily a result of greater agent commission costs and softness in the New York City market.”

In the first quarter of 2018, RFG and NRT’s 190,800 U.S.-based affiliated sales agents helped consumers with 290,087 home-sale transactions. In aggregate, Realogy achieved home-sale transaction volume of approximately $100 billion, an increase of 4 percent compared with the first quarter of 2017. NRT average home-sale price increased 3 percent and home-sale transaction sides decreased 1 percent, while RFG reported an average home-sale price increase of 6 percent and a home-sale transaction sides decrease of 1 percent.

In the title and settlement services sector, TRG was involved in the closing of approximately 37,000 transactions in the first quarter of 2018, reflecting a 1 percent increase in purchase units. Refinance closing volume fell 37 percent compared with the first quarter of 2017.

In the relocation segment, Cartus initiations were up 4 percent and referrals were up 5 percent. Cartus continues to be an important part of the company’s value proposition, generating highly qualified leads for its network of affiliated agents and helping them to build their businesses. Cartus generated referral opportunities to agents that resulted in approximately 76,000 in-network home-sale closings for Realogy and its brands in 2017.

Looking Ahead
or the second quarter of 2018, Realogy expects that combined home-sale transaction volume will increase in the range of 2 percent to 5 percent year-over-year with sides contributing between -2 percent to flat and 4 percent to 5 percent coming from price. Broken down by business unit, we expect 3 percent to 5 percent transaction volume growth at RFG and 1 percent to 3 percent growth at NRT.

Based on what the company knows today and subject to macro uncertainty, Realogy continues to expect the aggregate second quarter 2018 to fourth quarter 2018 Operating EBITDA to be in line with or better than the same period in 2017.

This year, Realogy continues to expect to see conversion from Operating EBITDA to Free Cash Flow at a rate of approximately 60 percent.

Capital Allocation
Since the share repurchase program’s inception in February 2016, the company has repurchased approximately 20.2 million shares through March 31, 2018 at an average price of $28.36 for $574 million. As a result, Realogy had approximately 129 million shares of common stock outstanding as of March 31, 2018.

Balance Sheet
The company ended the quarter with cash and cash equivalents of $182 million. Total long-term corporate debt, including the short-term portion, net of cash and cash equivalents (net corporate debt), totaled $3.4 billion at March 31, 2018.  The company’s net debt leverage ratio was 4.3 times at March 31, 2018.

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