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Realogy Reports Financial Results for First Quarter 2013

By: Anywhere Brands |  3 Shares     180 Reads

Transaction Volume Growth of 14% Drives Revenue Increase Year Over Year; Strong Housing Demand Supports Average Homesale Price Growth

MADISON, NJ - (Marketwired - May 1, 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 first quarter ended March 31, 2013, including the following:

• Realogy's net revenue for first quarter 2013 was $957 million, a 9% increase compared to the same period in 2012. 
• The Company's Adjusted EBITDA¹ was $71 million in the first quarter, which was an increase of 34% year-over-year. The increase was primarily due to a 14% year-over-year increase in sales volume (homesale transaction sides times average sale price) at the franchised and company-owned real estate services segments combined. 
• Net loss attributable to the Company in the first quarter was $75 million, which was after $89 million of interest expense, $42 million of depreciation and amortization and $3 million of debt extinguishment charges.

The Company's combined transaction volume was up 14% for the first quarter of 2013. RFG, our franchise segment, and NRT, the operator of our company-owned brokerage offices, reported closed homesale side increases of 6% and 5%, respectively. Average homesale price increased 9% at RFG and NRT's average homesale price, which is generally twice the national average, increased 6% compared with the first quarter of 2012.

"Our transaction volume, which was at the top end of the range of the guidance we provided in February, and our first quarter performance continue to support our firm belief in the strength of the housing recovery," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "The first quarter results were particularly encouraging given the seasonally lower transaction volume typically seen in the first quarter of any year."

In our relocation business, Cartus experienced a 10% increase in broker referrals and a 4% year-over-year decrease in initiations compared with 2012. In our title and settlement services segment, Title Resource Group (TRG) experienced a 5% increase in purchase title and closing units compared to the first quarter of 2012 and an 11% increase in refinance title and closing units. 

"We expect continued growth in transaction volume, with 14% to 17% increases in the second quarter," said Tony Hull, Realogy's executive vice president, chief financial officer and treasurer. "On a combined basis, RFG and NRT transaction sides are anticipated to increase 7% to 9% and average sale price is expected to increase 7% to 8% year-over-year in the second quarter."

¹ See Tables 6c and 8 for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA for the three months ended March 31, 2013 and 2012.

Business Highlights

• RFG generated new franchise sales totaling $68 million in gross commission income, which was an increase of 42% from first quarter 2012. 
• Earlier today, NRT was ranked as the No. 1 residential real estate brokerage firm in the nation by REAL Trends for the 16th consecutive year, ranking highest by sales volume and closed transaction sides. NRT's 2012 sales volume of $128.7 billion (pro forma for acquisitions) is three times higher than the next largest brokerage.
• In late March and early April, NRT completed three accretive tuck-in acquisitions in Florida. These acquisitions enabled NRT to expand its footprint into two new markets.
• During the first quarter of 2013, Cartus signed 32 new corporate clients and expanded the scope of services provided for over 80 existing clients, the impact of which is expected to benefit future quarters.
• TRG's title and settlement capture rates on NRT homesales improved to 41% in the first quarter, up from 39% in the first quarter of 2012. TRG's underwriter reported a 22% increase in first quarter net premiums year over year, and its underwriting claims experience for the quarter was less than 1%, which continues to substantially outperform the industry average loss ratio. 

Balance Sheet Information as of March 31, 2013

The Company ended the quarter with a cash balance of $366 million, and $135 million of outstanding borrowings on its revolving credit facility under its senior secured credit agreement.

"Since the end of the first quarter, we have redeemed approximately $330 million of senior subordinated notes and senior notes funded mostly from our remaining IPO proceeds," said Hull. "We also will redeem all $492 million of our 11.50% Senior Notes in May 2013 using the net proceeds from our recently completed $500 million offering of 3.375% senior unsecured notes due 2016 and short-term borrowings under our revolver. After giving effect to this transaction as well as the refinancing of our senior secured credit facility in March 2013, we expect cash interest expense for 2013 to be approximately $300 million -- down from the previous guidance of $315 million to $320 million."

A consolidated balance sheet is included as Table 2 of this press release.

As of March 31, 2013, the senior secured leverage ratio (SSLR) under the Realogy Group LLC senior secured credit agreement was 3.38 to 1, well below the 4.75 to 1 maximum ratio required to be in compliance under the agreement. (See Tables 6a, 6b, and 6c for a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure, net loss attributable to the Company.)

Investor Conference Call

Today, May 1 at 5:00 p.m. (EDT), Realogy will hold a conference call via webcast to review its first 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 May 1 through May 15.

About Realogy Holdings Corp.

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 13,600 offices with 239,000 independent sales associates doing business in 102 countries around the world. Realogy is headquartered in Madison, N.J.

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 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 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.

Table 1

Table 2

Table 3

Table 4

Table 5a

Table 5b

Table 6a

A reconciliation of net loss attributable to Realogy to EBITDA and Adjusted EBITDA for the twelve months ended March 31, 2013 is set forth in the following table:

Table 6b

A reconciliation of net loss attributable to Realogy to EBITDA and Adjusted EBITDA for the year ended December 31, 2012 is set forth in the following table:

Table 6c

Set forth in the table below is a reconciliation of net loss attributable to Realogy Holdings Corp. to Adjusted EBITDA for the three-month periods ended March 31, 2013 and 2012:

Table 7

A reconciliation of net loss attributable to Realogy to free cash flow for the three months ended March 31, 2013 is set forth in the following table:

Table 8

Non-GAAP Definitions

EBITDA is defined by us as net income (loss) before depreciation and amortization, interest expense, net (other than relocation services interest for relocation receivables 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 merger costs, restructuring costs, former parent legacy cost (benefit) items, net, gain (loss) on the early extinguishment of debt, pro forma cost savings, 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. 

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:

• these measures do not reflect changes in, or cash requirement for, our working capital needs;
• these measures do 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;
• these measures do not reflect our income tax expense or the cash requirements to pay our taxes;
• these measures do 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 these measures do not reflect any cash requirements for such replacements; and
• other companies may calculate these measures differently so they may not be comparable. 
  
  

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 year 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, IPO related costs, cash payment related to Convertible Notes, 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.

Contacts:

Investors

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

Jennifer Pepper
(973) 407-7487
jennifer.pepper@realogy.com

Media

Mark Panus
(973) 407-7215
mark.panus@realogy.com

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