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Realogy Holdings Corp. recently reported financial results for the second quarter ended June 30, 2018, including the following highlights:

  • Revenue was $1.82 billion, an increase of 2 percent compared with the second 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 3 percent compared with the second quarter of 2017, due to a 4 percent volume gain at Realogy Franchise Group (RFG) and a 1 percent volume gain at NRT. For reference, the National Association of REALTORS® reported a home-sale transaction volume increase of 1 percent in the second quarter of 2018.
  • Operating EBITDA was $276 million, an increase of $7 million compared with the second quarter of 2017.
  • Net income was $123 million compared with net income of $109 million in the second quarter of 2017. Basic earnings per share was $0.97 compared with basic earnings per share of $0.79 in the second quarter of 2017.
  • Adjusted net income per share was $1.00 compared with adjusted net income per share of $0.78 in the second quarter of 2017.
  • Free Cash Flow for the second quarter of 2018 was $192 million compared with $229 million for the second quarter of 2017.
  • In the first half of 2018, Realogy returned $223 million of capital to stockholders through share repurchases and dividends.

“We are excited that some of our early 2018 efforts are starting to drive results,” says Ryan Schneider, CEO and president of Realogy. “We outperformed the market on transaction volume, we began to see the expense benefits from our expanded focus on operating efficiency and our Operating EBITDA exceeded Q2 2017. We are moving quickly to make strategic changes to improve profitability over time, anchored in growing our base of independent sales agents at both NRT and RFG and providing agents compelling service, data and technology products to allow them to increase their productivity.”

“We expect to repurchase an additional $200 million of shares in the back half of 2018, which we believe continues to be our best use of capital given our current stock price,” says Anthony E. Hull, executive vice president, CFO and treasurer of Realogy.

In the second quarter of 2018, RFG and NRT’s 192,000 U.S.-based affiliated independent sales agents helped consumers with approximately 414,000 home-sale transaction sides. In aggregate, Realogy achieved home-sale transaction volume of approximately $152 billion, an increase of 3 percent compared with the second quarter of 2017. RFG average home-sale price increased 7 percent and home-sale transaction sides decreased 3 percent. NRT reported an average home-sale price increase of 2 percent and home-sale transaction sides remained flat.

In the title and settlement services sector, TRG was involved in the closing of approximately 51,000 transactions in the second quarter of 2018, reflecting a 2 percent decrease in purchase units. Refinance closing units were lower by 24 percent compared with the second quarter of 2017, consistent with industry trends.

In the relocation segment, Cartus initiations and referrals were both 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

For the third quarter of 2018, Realogy expects that combined home-sale transaction volume will increase in the range of 3 percent to 6 percent year-over-year with sides contributing between -1 to +1 percent and 4 percent to 5 percent coming from price. Broken down by business unit, we expect 4 percent to 6 percent transaction volume growth at RFG and 3 percent to 5 percent growth at NRT.

Based on what we know 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 24.3 million shares through June 30, 2018 at an average price of $27.80 for $674 million. As a result, Realogy had approximately 125 million shares of common stock outstanding as of June 30, 2018.

Balance Sheet

The company ended the quarter with cash and cash equivalents of $230 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 June 30, 2018. The company’s net debt leverage ratio was 4.3 times at June 30, 2018.

For more information, please visit www.realogy.com.

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