MADISON, N.J., Oct. 29, 2020 /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 third
quarter ended September 30, 2020.
"I am incredibly proud of Realogy's third quarter. We generated
$309 million of Operating EBITDA,
grew closed transaction volume 28%, gained market share, and
materially reduced our debt," said Ryan
Schneider, Realogy's chief executive officer and president.
"Our strategic progress, agent and brand power, and technology
initiatives, amplified by the very strong housing market, drove
Realogy's results. And with very strong preliminary October
volumes, we are excited as we look ahead."
"In the third quarter, Realogy continued to execute from a
position of strength, delivering exceptional top-line and
bottom-line growth," said Charlotte
Simonelli, Realogy's executive vice president, chief
financial officer and treasurer. "We improved operating margins,
captured greater share of transaction economics with our mortgage
joint venture and title operations, stayed laser focused on cost
management and simplification, and strengthened our balance sheet.
Overall, Realogy's financial profile is much stronger today, and I
am optimistic for our future."
Third Quarter 2020 Highlights
- Generated revenue of $1.9
billion, an increase of 20% or $307
million year-over-year.
- Reported Net income of $145
million from continuing operations and Net income of
$98 million including discontinued
operations.
- Generated Operating EBITDA from continuing operations of
$309 million, an increase of
$103 million year-over-year, driven
by higher transaction volume and strong performance at the GRA
mortgage JV (See Table 5a).
- Title and mortgage continued to contribute meaningfully to our
business results, generating approximately $95 million in third quarter Operating
EBITDA.
- Combined closed transaction volume increased 28%
year-over-year in the third quarter with improving transaction
volume through the quarter. Unit growth contributed 12% to this
volume improvement across both Brokerage and Franchise
businesses.
- Generated Free Cash Flow from continuing operations of
$344 million vs. $116 million for the corresponding quarter last
year and $395 million including
discontinued operations vs. $174
million for the corresponding quarter last year (See Table
7).
- Strengthened the balance sheet reducing net debt by $276
million vs. third quarter 2019 with the Net Debt Leverage
Ratio declining to 4.2x (See Table 8b).
- Grew Brokerage agents 2% year-over-year with continued
improving retention.
Third Quarter 2020 Financial Highlights
The following table sets forth Realogy's financial highlights
for the periods presented (in millions, except per share data)
(unaudited):
|
Three Months Ended
September 30,
|
|
2020
|
|
2019
|
|
Change
|
|
%
Change
|
Revenue
|
$
|
1,857
|
|
|
$
|
1,550
|
|
|
$
|
307
|
|
|
20
|
%
|
Operating EBITDA
1
|
309
|
|
|
206
|
|
|
103
|
|
|
50
|
|
Operating EBITDA
including discontinued operations 1
|
313
|
|
|
223
|
|
|
90
|
|
|
40
|
|
Net income (loss)
attributable to Realogy
|
98
|
|
|
(113)
|
|
|
211
|
|
|
187
|
|
Adjusted net income
2
|
159
|
|
|
64
|
|
|
95
|
|
|
148
|
|
Basic earnings (loss)
per share
|
0.85
|
|
|
(0.99)
|
|
|
1.84
|
|
|
186
|
|
Adjusted earnings per
share 2
|
1.38
|
|
|
0.56
|
|
|
0.82
|
|
|
146
|
|
Free Cash Flow
3
|
344
|
|
|
116
|
|
|
228
|
|
|
197
|
|
Free Cash Flow
including discontinued operations 3
|
395
|
|
|
174
|
|
|
221
|
|
|
127
|
|
Net cash provided by
operating activities
|
$
|
385
|
|
|
$
|
174
|
|
|
$
|
211
|
|
|
121
|
%
|
|
|
|
|
|
|
|
|
Select Key
Drivers
|
|
|
|
|
|
|
|
Realogy Franchise
Group 4 5
|
|
|
|
|
|
|
|
Closed homesale
sides
|
336,737
|
|
|
299,937
|
|
|
|
|
12
|
%
|
Average homesale
price
|
$
|
367,095
|
|
|
$
|
314,984
|
|
|
|
|
17
|
%
|
Realogy Brokerage
Group 5
|
|
|
|
|
|
|
|
Closed homesale
sides
|
101,890
|
|
|
92,399
|
|
|
|
|
10
|
%
|
Average homesale
price
|
$
|
563,513
|
|
|
$
|
509,425
|
|
|
|
|
11
|
%
|
Realogy Title
Group
|
|
|
|
|
|
|
|
Purchase title and
closing units
|
45,788
|
|
|
41,619
|
|
|
|
|
10
|
%
|
Refinance title and
closing units
|
18,387
|
|
|
8,014
|
|
|
|
|
129
|
%
|
|
|
|
|
Footnotes:
|
* not
meaningful
|
1
See Tables 5a and 5b. Operating EBITDA is defined as net
income (loss) before depreciation and amortization, interest
expense, net, income taxes, and other items that are not core to
the operating activities of the Company such as restructuring
charges, former parent legacy items, gains or losses on the early
extinguishment of debt, impairments, gains or losses on
discontinued operations and gains or losses on the sale of
investments or other assets. Operating EBITDA including
discontinued operations is defined as Operating EBITDA, as defined
above plus the Operating EBITDA contribution from discontinued
operations on the same basis.
|
2
See Table 1a. Adjusted Net income (loss) is defined as net income
(loss) before mark-to-market interest rate swap adjustments, former
parent legacy items, restructuring charges, (gain) loss on the
early extinguishment of debt, impairments, the tax effect of the
foregoing adjustments and net income (loss) from discontinued
operations. Adjusted earnings (loss) per share is Adjusted net
income (loss) divided by the weighted average common and common
equivalent shares outstanding.
|
3
See Table 7. 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,
impairments, (gain) loss on the early extinguishment of debt and
working capital adjustments. Free Cash Flow including discontinued
operations is defined as Free Cash Flow, as defined above plus the
Free Cash Flow contribution from discontinued operations on the
same basis.
|
4
Includes all franchisees except for Realogy Brokerage
Group.
|
5
The Company's combined homesale transaction volume growth
(transaction sides multiplied by average sale price) increased 28%
compared with the third quarter of 2019.
|
Cartus Relocation Services remained in discontinued operations
for the third quarter of 2020 in accordance with GAAP.
Balance Sheet and Capital Allocation
The Company ended the third quarter 2020 with cash and cash
equivalents of $379 million*.
Total corporate debt, including the short-term portion, net of cash
and cash equivalents (net corporate debt), totaled $3.0 billion at September 30, 2020.
The Company's Net Debt Leverage Ratio was 4.2x at
September 30, 2020 (see Table 8b).
On October 27, 2020, the Company repaid the remaining
$140 million balance on its revolving
credit facility.
The Company expects to continue to prioritize investing in its
business and reducing leverage over other potential uses of
cash.
A consolidated balance sheet is included as Table 2 of this
press release.
______________
|
* excludes restricted
cash
|
Investor Conference Call
Today, October 29, at 8:30 a.m.
(ET), Realogy will hold a conference call via webcast to
review its Q3 2020 results and provide a business update. 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 (833) 646-0499 (toll free);
international participants should dial (918) 922-3007. 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 U.S. residential real estate services,
encompassing franchise, brokerage, relocation, and title and
settlement businesses as well as a mortgage joint venture.
Realogy's diverse brand portfolio includes some of the most
recognized names in real estate: Better Homes and Gardens® Real
Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®,
Corcoran®, ERA®, and Sotheby's International Realty®. Using
innovative technology, data and marketing products, best-in-class
learning and support services, and high-quality lead generation
programs, Realogy fuels the productivity of independent sales
agents, helping them build stronger businesses and best serve
today's consumers. Realogy's affiliated brokerages operate around
the world with approximately 189,000 independent sales agents in
the United States and more than
129,000 independent sales agents in 114 other countries and
territories. Recognized for nine consecutive years as one of the
World's Most Ethical Companies, Realogy has also been designated a
Great Place to Work three years in a row and one of Forbes' Best
Employers for Diversity. Realogy is headquartered in Madison, New Jersey.
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", "potential" 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.
The following include some, but not all, of the factors that
could affect our future results and cause actual results to differ
materially from those expressed in the forward-looking statements.
Additionally, many of these risks and uncertainties are currently
amplified by and will continue to be amplified by, or in the future
may be amplified by, the coronavirus disease (COVID-19) pandemic:
the extent, duration and severity of the spread of the COVID-19
pandemic and economic consequences stemming from the COVID-19
crisis (including continued economic contraction and/or the failure
of any recovery to be sustained) as well as related risks and the
impact of any of the foregoing on our business, results of
operations and liquidity; 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 in
consumer confidence or spending, weak capital, credit and financial
markets and/or the instability of financial institutions,
intensifying or continued economic contraction in the U.S. economy,
including the impact of recessions, slow economic growth, or a
deterioration in other economic factors (including potential
consumer, business or governmental defaults or delinquencies due to
the COVID-19 crisis or otherwise), continued low or accelerated
declines in home inventory levels, continuing high levels of
unemployment and/or declining wages or stagnant wage growth in the
U.S., the economic impact of the termination and/or substantial
curtailment of, or failure to extend, one or more federal and/or
state programs meant to assist businesses and individuals navigate
COVID-19 related financial challenges, an increase in potential
homebuyers with low credit ratings, inability to afford down
payments, or other mortgage challenges due to disrupted earnings,
including constraints on the availability of mortgage financing, an
increase in foreclosure activity, a reduction in the affordability
of housing, including in connection with rising home prices, a
decline or lack of improvement in the number of homesales, stagnant
or declining home prices, higher mortgage rates due to increases in
long-term interest rates, a lack of improvement or deceleration in
the building of new housing, 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 geopolitical and economic instability (including uncertainty
around the 2020 U.S. election); risks associated with our
substantial indebtedness, interest obligations and the restrictions
contained in our debt agreements as well as risks relating to our
having to dedicate a significant portion of our cash flows from
operations to service our debt and our ability to refinance or
repay our indebtedness or incur additional indebtedness; the impact
of increased competition in the industry for clients, for the
affiliation of independent sales agents and for the affiliation of
franchisees on our results of operations and market share; the
impact of disruption in the residential real estate brokerage
industry, and on our results of operations and financial condition,
as a result of actions taken by listing aggregators to monetize
their concentration and market power, including, among other
things, expanding into the brokerage business, diluting the
relationship between agents and brokers (and between agents and the
consumer), and consolidating and leveraging data; 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 inability to
develop products, technology and programs (including our
company-directed affinity programs) that support our business
strategy; our geographic and high-end market concentration; our
inability to enter into franchise agreements with new franchisees
or renew existing franchise agreements without reducing contractual
royalty rates or 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; increases in uncollectible
accounts receivable and note reserves as a result of the adverse
financial effects of the COVID-19 crisis on our franchisees and
relocation clients; the potential impact of negative industry or
business trends (including further declines in our market
capitalization) on our valuation of goodwill and intangibles; the
loss of our largest affinity client or multiple significant
relocation clients; changes in corporate relocation practices
(including in connection with the COVID-19 crisis) 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)
the Real Estate Settlement Procedures Act (RESPA) or other federal
or state consumer protection or similar laws and (iv) antitrust
laws and regulations; risks related to the impact on our operations
and financial results that may be caused by any future meaningful
changes in industry operations or structure as a result of
governmental pressures (including pressures for lower brokerage
commission rates), the actions of certain competitors, the
introduction or growth of certain competitive models, changes to
the rules of the multiple listing services, or otherwise; 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 quarters ended March 31, 2020 and June
30, 2020 and our Annual Report on Form 10-K for the year
ended December 31, 2019, 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, 8a and 9 for definitions of these non-GAAP
financial measures and Tables 1a, 5a, 5b, 6a, 6b, 7, 8a
and 8b for reconciliations of the
historical non-GAAP financial measures to their most comparable
GAAP terms.
Investor
Contacts:
|
Media
Contacts:
|
Alicia
Swift
|
Trey
Sarten
|
(973)
407-4669
|
(973)
407-2162
|
alicia.swift@realogy.com
|
trey.sarten@realogy.com
|
|
|
Danielle
Kloeblen
|
Gabriella
Chiera
|
(973)
407-2148
|
(973)
407-5236
|
danielle.kloeblen@realogy.com
|
Gabriella.Chiera@realogy.com
|
Table
1
|
|
REALOGY HOLDINGS
CORP.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In millions,
except per share data)
|
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
|
|
|
|
|
|
|
Gross commission
income
|
$
|
1,458
|
|
|
$
|
1,201
|
|
|
$
|
3,227
|
|
|
$
|
3,310
|
|
Service
revenue
|
230
|
|
|
191
|
|
|
553
|
|
|
503
|
|
Franchise
fees
|
133
|
|
|
108
|
|
|
289
|
|
|
290
|
|
Other
|
36
|
|
|
50
|
|
|
111
|
|
|
165
|
|
Net
revenues
|
1,857
|
|
|
1,550
|
|
|
4,180
|
|
|
4,268
|
|
Expenses
|
|
|
|
|
|
|
|
Commission and other
agent-related costs
|
1,105
|
|
|
875
|
|
|
2,420
|
|
|
2,405
|
|
Operating
|
342
|
|
|
343
|
|
|
953
|
|
|
1,016
|
|
Marketing
|
56
|
|
|
63
|
|
|
155
|
|
|
200
|
|
General and
administrative
|
97
|
|
|
69
|
|
|
230
|
|
|
217
|
|
Former parent legacy
cost, net
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Restructuring costs,
net
|
13
|
|
|
11
|
|
|
38
|
|
|
29
|
|
Impairments
|
6
|
|
|
240
|
|
|
460
|
|
|
243
|
|
Depreciation and
amortization
|
43
|
|
|
42
|
|
|
134
|
|
|
126
|
|
Interest expense,
net
|
48
|
|
|
66
|
|
|
208
|
|
|
209
|
|
(Gain) loss on the
early extinguishment of debt
|
—
|
|
|
(10)
|
|
|
8
|
|
|
(5)
|
|
Total
expenses
|
1,711
|
|
|
1,700
|
|
|
4,607
|
|
|
4,441
|
|
Income (loss) from
continuing operations before income taxes, equity in earnings and
noncontrolling interests
|
146
|
|
|
(150)
|
|
|
(427)
|
|
|
(173)
|
|
Income tax expense
(benefit) from continuing operations
|
54
|
|
|
(23)
|
|
|
(67)
|
|
|
(22)
|
|
Equity in earnings of
unconsolidated entities
|
(53)
|
|
|
(7)
|
|
|
(98)
|
|
|
(15)
|
|
Net income (loss)
from continuing operations
|
145
|
|
|
(120)
|
|
|
(262)
|
|
|
(136)
|
|
|
|
|
|
|
|
|
|
(Loss) income from
discontinued operations, net of tax
|
(3)
|
|
|
8
|
|
|
(17)
|
|
|
(5)
|
|
Estimated loss on the
sale of discontinued operations, net of tax
|
(43)
|
|
|
—
|
|
|
(97)
|
|
|
—
|
|
Net (loss) income
from discontinued operations
|
(46)
|
|
|
8
|
|
|
(114)
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
99
|
|
|
(112)
|
|
|
(376)
|
|
|
(141)
|
|
Less: Net income
attributable to noncontrolling interests
|
(1)
|
|
|
(1)
|
|
|
(2)
|
|
|
(2)
|
|
Net income (loss)
attributable to Realogy Holdings
|
$
|
98
|
|
|
$
|
(113)
|
|
|
$
|
(378)
|
|
|
$
|
(143)
|
|
|
|
|
|
|
|
|
|
Basic earnings
(loss) per share attributable to Realogy Holdings
shareholders:
|
|
|
|
|
Basic earnings (loss)
per share from continuing operations
|
$
|
1.25
|
|
|
$
|
(1.06)
|
|
|
$
|
(2.29)
|
|
|
$
|
(1.21)
|
|
Basic (loss) earnings
per share from discontinued operations
|
(0.40)
|
|
|
0.07
|
|
|
(0.99)
|
|
|
(0.04)
|
|
Basic earnings (loss)
per share
|
$
|
0.85
|
|
|
$
|
(0.99)
|
|
|
$
|
(3.28)
|
|
|
$
|
(1.25)
|
|
Diluted earnings
(loss) per share attributable to Realogy Holdings
shareholders:
|
|
|
|
|
Diluted earnings
(loss) per share from continuing operations
|
$
|
1.23
|
|
|
$
|
(1.06)
|
|
|
$
|
(2.29)
|
|
|
$
|
(1.21)
|
|
Diluted (loss)
earnings per share from discontinued operations
|
(0.39)
|
|
|
0.07
|
|
|
(0.99)
|
|
|
(0.04)
|
|
Diluted earnings
(loss) per share
|
$
|
0.84
|
|
|
$
|
(0.99)
|
|
|
$
|
(3.28)
|
|
|
$
|
(1.25)
|
|
Weighted average
common and common equivalent shares of Realogy Holdings
outstanding:
|
Basic
|
115.4
|
|
|
114.3
|
|
|
115.2
|
|
|
114.2
|
|
Diluted
|
116.7
|
|
|
114.3
|
|
|
115.2
|
|
|
114.2
|
|
Table
1a
|
|
REALOGY HOLDINGS
CORP.
|
NON-GAAP
RECONCILIATION
|
ADJUSTED NET
INCOME AND ADJUSTED EARNINGS PER SHARE
|
(In millions,
except per share data)
|
|
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.
|
|
Adjusted net income
(loss) is defined by us as net income (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 (gain) loss on the early
extinguishment of debt that results from refinancing and
deleveraging debt initiatives; (e) impairments; (f) the tax effect
of the foregoing adjustments and (g) net (income) loss from
discontinued operations. The gross amounts for these items as
well as the adjustment for income taxes are shown in the table
below.
|
|
Adjusted earnings
(loss) per share is Adjusted net income (loss) divided by the
weighted average common and common equivalent shares
outstanding.
|
|
Set forth in the
table below is a reconciliation of Net income (loss) to
Adjusted net income for the three and nine months ended
September 30, 2020 and 2019:
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income (loss)
attributable to Realogy Holdings
|
$
|
98
|
|
|
$
|
(113)
|
|
|
$
|
(378)
|
|
|
$
|
(143)
|
|
Addback:
|
|
|
|
|
|
|
|
Mark-to-market
interest rate swap losses
|
—
|
|
|
12
|
|
|
59
|
|
|
50
|
|
Former parent legacy
cost, net
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Restructuring costs,
net
|
13
|
|
|
11
|
|
|
38
|
|
|
29
|
|
Impairments
(a)
|
6
|
|
|
240
|
|
|
460
|
|
|
243
|
|
(Gain) loss on the
early extinguishment of debt
|
—
|
|
|
(10)
|
|
|
8
|
|
|
(5)
|
|
Adjustments for tax
effect (b)
|
(5)
|
|
|
(69)
|
|
|
(153)
|
|
|
(86)
|
|
Net loss (income) from
discontinued operations
|
46
|
|
|
(8)
|
|
|
114
|
|
|
5
|
|
Adjusted net
income attributable to Realogy Holdings
|
$
|
159
|
|
|
$
|
64
|
|
|
$
|
149
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per share attributable to Realogy Holdings:
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share:
|
$
|
0.85
|
|
|
$
|
(0.99)
|
|
|
$
|
(3.28)
|
|
|
$
|
(1.25)
|
|
Diluted earnings
(loss) per share:
|
$
|
0.84
|
|
|
$
|
(0.99)
|
|
|
$
|
(3.28)
|
|
|
$
|
(1.25)
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
per share attributable to Realogy Holdings:
|
|
|
|
|
|
|
Adjusted basic
earnings per share:
|
$
|
1.38
|
|
|
$
|
0.56
|
|
|
$
|
1.29
|
|
|
$
|
0.82
|
|
Adjusted diluted
earnings per share:
|
$
|
1.36
|
|
|
$
|
0.56
|
|
|
$
|
1.29
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
Weighted average
common and common equivalent shares outstanding:
|
|
|
Basic:
|
115.4
|
|
|
114.3
|
|
|
115.2
|
|
|
114.2
|
|
Diluted:
|
116.7
|
|
|
114.3
|
|
|
115.2
|
|
|
114.2
|
|
|
|
|
|
|
(a)
|
Impairments for the
three and nine months ended September 30, 2019 primarily
include a goodwill impairment charge of $237 million, which reduced
the net carrying value of Realogy Brokerage Group by $180 million
after accounting for the related income tax benefit of $57
million.
|
|
Impairments for the
nine months ended September 30, 2020 primarily include a
goodwill impairment charge of $413 million, which reduced the
net carrying value of Realogy Brokerage Group by $314 million
after accounting for the related income tax benefit of
$99 million, and an impairment charge of $30 million
which reduced the carrying value of trademarks at Realogy Franchise
Group.
|
(b)
|
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)
|
|
|
September
30,
2020
|
|
December
31,
2019
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash, cash equivalents
and restricted cash
|
$
|
380
|
|
|
$
|
235
|
|
Trade receivables (net
of allowance for doubtful accounts of $13 and $11)
|
109
|
|
|
79
|
|
Other current
assets
|
149
|
|
|
147
|
|
Current assets - held
for sale
|
583
|
|
|
750
|
|
Total current
assets
|
1,221
|
|
|
1,211
|
|
Property and
equipment, net
|
288
|
|
|
308
|
|
Operating lease
assets, net
|
477
|
|
|
515
|
|
Goodwill
|
2,887
|
|
|
3,300
|
|
Trademarks
|
643
|
|
|
673
|
|
Franchise agreements,
net
|
1,109
|
|
|
1,160
|
|
Other intangibles,
net
|
69
|
|
|
72
|
|
Other non-current
assets
|
354
|
|
|
304
|
|
Total
assets
|
$
|
7,048
|
|
|
$
|
7,543
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
87
|
|
|
$
|
84
|
|
Current portion of
long-term debt
|
198
|
|
|
234
|
|
Current portion of
operating lease liabilities
|
125
|
|
|
122
|
|
Accrued expenses and
other current liabilities
|
439
|
|
|
350
|
|
Current liabilities -
held for sale
|
297
|
|
|
356
|
|
Total current
liabilities
|
1,146
|
|
|
1,146
|
|
Long-term
debt
|
3,159
|
|
|
3,211
|
|
Long-term operating
lease liabilities
|
441
|
|
|
467
|
|
Deferred income
taxes
|
279
|
|
|
390
|
|
Other non-current
liabilities
|
290
|
|
|
233
|
|
Total
liabilities
|
5,315
|
|
|
5,447
|
|
Commitments and
contingencies
|
|
|
|
Equity:
|
|
|
|
Realogy Holdings
preferred stock: $0.01 par value; 50,000,000 shares authorized,
none issued and outstanding at September 30, 2020 and
December 31, 2019
|
—
|
|
|
—
|
|
Realogy Holdings
common stock: $0.01 par value; 400,000,000 shares authorized,
115,440,569 shares issued and outstanding at September 30,
2020 and 114,355,519 shares issued and outstanding at
December 31, 2019
|
1
|
|
|
1
|
|
Additional paid-in
capital
|
4,856
|
|
|
4,842
|
|
Accumulated
deficit
|
(3,073)
|
|
|
(2,695)
|
|
Accumulated other
comprehensive loss
|
(55)
|
|
|
(56)
|
|
Total stockholders'
equity
|
1,729
|
|
|
2,092
|
|
Noncontrolling
interests
|
4
|
|
|
4
|
|
Total
equity
|
1,733
|
|
|
2,096
|
|
Total liabilities
and equity
|
$
|
7,048
|
|
|
$
|
7,543
|
|
Table
3
|
|
REALOGY HOLDINGS
CORP.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
millions)
|
(Unaudited)
|
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
Operating
Activities
|
|
|
|
Net loss
|
$
|
(376)
|
|
|
$
|
(141)
|
|
Net loss from
discontinued operations
|
114
|
|
|
5
|
|
Net loss from
continuing operations
|
(262)
|
|
|
(136)
|
|
Adjustments to
reconcile net loss from continuing operations to net cash provided
by operating activities:
|
Depreciation and
amortization
|
134
|
|
|
126
|
|
Deferred income
taxes
|
(70)
|
|
|
(29)
|
|
Impairments
|
460
|
|
|
243
|
|
Amortization of
deferred financing costs and debt discount
|
8
|
|
|
7
|
|
Loss (gain) on the
early extinguishment of debt
|
8
|
|
|
(5)
|
|
Equity in earnings of
unconsolidated entities
|
(98)
|
|
|
(15)
|
|
Stock-based
compensation
|
18
|
|
|
22
|
|
Mark-to-market
adjustments on derivatives
|
59
|
|
|
50
|
|
Other adjustments to
net loss
|
—
|
|
|
(3)
|
|
Net change in assets
and liabilities, excluding the impact of acquisitions and
dispositions:
|
|
|
|
Trade
receivables
|
(30)
|
|
|
(17)
|
|
Other
assets
|
13
|
|
|
(6)
|
|
Accounts payable,
accrued expenses and other liabilities
|
115
|
|
|
14
|
|
Dividends received
from unconsolidated entities
|
59
|
|
|
2
|
|
Other, net
|
(16)
|
|
|
(3)
|
|
Net cash provided
by operating activities from continuing operations
|
398
|
|
|
250
|
|
Net cash provided
by (used in) operating activities from discontinued
operations
|
20
|
|
|
(20)
|
|
Net cash provided
by operating activities
|
418
|
|
|
230
|
|
Investing
Activities
|
|
|
|
Property and
equipment additions
|
(60)
|
|
|
(71)
|
|
Payments for
acquisitions, net of cash acquired
|
(1)
|
|
|
(1)
|
|
Investment in
unconsolidated entities
|
(2)
|
|
|
(10)
|
|
Other, net
|
(12)
|
|
|
3
|
|
Net cash used in
investing activities from continuing operations
|
(75)
|
|
|
(79)
|
|
Net cash used in
investing activities from discontinued operations
|
(9)
|
|
|
(7)
|
|
Net cash used in
investing activities
|
$
|
(84)
|
|
|
$
|
(86)
|
|
Financing
Activities
|
|
|
|
Net change in
Revolving Credit Facility
|
$
|
(50)
|
|
|
$
|
(5)
|
|
Proceeds from
issuance of Senior Secured Second Lien Notes
|
550
|
|
|
—
|
|
Proceeds from
issuance of Senior Notes
|
—
|
|
|
550
|
|
Redemption and
repurchases of Senior Notes
|
(550)
|
|
|
(533)
|
|
Amortization payments
on term loan facilities
|
(31)
|
|
|
(22)
|
|
Debt issuance
costs
|
(14)
|
|
|
(9)
|
|
Cash paid for fees
associated with early extinguishment of debt
|
(7)
|
|
|
(5)
|
|
Repurchase of common
stock
|
—
|
|
|
(20)
|
|
Dividends paid on
common stock
|
—
|
|
|
(31)
|
|
Taxes paid related to
net share settlement for stock-based compensation
|
(5)
|
|
|
(6)
|
|
Payments of
contingent consideration related to acquisitions
|
(1)
|
|
|
(3)
|
|
Other, net
|
(22)
|
|
|
(18)
|
|
Net cash used in
financing activities from continuing operations
|
(130)
|
|
|
(102)
|
|
Net cash used in
financing activities from discontinued operations
|
(73)
|
|
|
(2)
|
|
Net cash used in
financing activities
|
(203)
|
|
|
(104)
|
|
Effect of changes in
exchange rates on cash, cash equivalents and restricted
cash
|
—
|
|
|
—
|
|
Net increase in cash,
cash equivalents and restricted cash
|
131
|
|
|
40
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
266
|
|
|
238
|
|
Cash, cash
equivalents and restricted cash, end of period
|
397
|
|
|
278
|
|
Less cash, cash
equivalents and restricted cash of discontinued operations, end of
period
|
17
|
|
|
25
|
|
Cash, cash
equivalents and restricted cash of continuing operations, end of
period
|
$
|
380
|
|
|
$
|
253
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information
|
|
|
|
Interest payments for
continuing operations
|
$
|
128
|
|
|
$
|
124
|
|
Income tax (refunds)
payments for continuing operations, net
|
(9)
|
|
|
7
|
|
Table
4a
|
|
REALOGY HOLDINGS
CORP.
|
2020 vs. 2019 KEY
DRIVERS
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
%
Change
|
|
2020
|
|
2019
|
|
%
Change
|
Realogy Franchise
Group (a)
|
|
|
|
|
|
|
|
|
|
|
|
Closed homesale
sides
|
336,737
|
|
|
299,937
|
|
|
12
|
%
|
|
778,010
|
|
|
803,976
|
|
|
(3)
|
%
|
Average homesale
price
|
$
|
367,095
|
|
|
$
|
314,984
|
|
|
17
|
%
|
|
$
|
341,427
|
|
|
$
|
312,224
|
|
|
9
|
%
|
Average homesale
broker commission rate
|
2.48
|
%
|
|
2.47
|
%
|
|
1
|
bps
|
|
2.48
|
%
|
|
2.47
|
%
|
|
1
|
bps
|
Net royalty per
side
|
$
|
367
|
|
|
$
|
329
|
|
|
12
|
%
|
|
$
|
341
|
|
|
$
|
323
|
|
|
6
|
%
|
Realogy Brokerage
Group
|
|
|
|
|
|
|
|
|
|
|
|
Closed homesale
sides
|
101,890
|
|
|
92,399
|
|
|
10
|
%
|
|
235,806
|
|
|
248,092
|
|
|
(5)
|
%
|
Average homesale
price
|
$
|
563,513
|
|
|
$
|
509,425
|
|
|
11
|
%
|
|
$
|
537,602
|
|
|
$
|
522,050
|
|
|
3
|
%
|
Average homesale
broker commission rate
|
2.44
|
%
|
|
2.41
|
%
|
|
3
|
bps
|
|
2.43
|
%
|
|
2.41
|
%
|
|
2
|
bps
|
Gross commission
income per side
|
$
|
14,315
|
|
|
$
|
13,000
|
|
|
10
|
%
|
|
$
|
13,685
|
|
|
$
|
13,343
|
|
|
3
|
%
|
Realogy Title
Group
|
|
|
|
|
|
|
|
|
|
|
|
Purchase title and
closing units
|
45,788
|
|
|
41,619
|
|
|
10
|
%
|
|
106,540
|
|
|
111,865
|
|
|
(5)
|
%
|
Refinance title and
closing units
|
18,387
|
|
|
8,014
|
|
|
129
|
%
|
|
44,834
|
|
|
17,295
|
|
|
159
|
%
|
Average fee per
closing unit
|
$
|
2,239
|
|
|
$
|
2,288
|
|
|
(2)
|
%
|
|
$
|
2,189
|
|
|
$
|
2,308
|
|
|
(5)
|
%
|
|
|
|
|
|
(a)
|
Includes all
franchisees except for Realogy Brokerage Group.
|
Table
4b
|
|
REALOGY HOLDINGS
CORP.
|
2019 KEY
DRIVERS
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
March 31,
2019
|
|
June 30,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
December
31,
2019
|
Realogy Franchise
Group (a)
|
|
|
|
|
|
|
|
|
|
|
Closed homesale
sides
|
|
202,662
|
|
|
301,377
|
|
|
299,937
|
|
|
257,524
|
|
|
1,061,500
|
|
Average homesale
price
|
|
$
|
298,361
|
|
|
$
|
318,799
|
|
|
$
|
314,984
|
|
|
$
|
322,713
|
|
|
$
|
314,769
|
|
Average homesale
broker commission rate
|
|
2.48
|
%
|
|
2.47
|
%
|
|
2.47
|
%
|
|
2.46
|
%
|
|
2.47
|
%
|
Net royalty per
side
|
|
$
|
303
|
|
|
$
|
331
|
|
|
$
|
329
|
|
|
$
|
338
|
|
|
$
|
327
|
|
Realogy Brokerage
Group
|
|
|
|
|
|
|
|
|
|
|
Closed homesale
sides
|
|
60,442
|
|
|
95,251
|
|
|
92,399
|
|
|
77,560
|
|
|
325,652
|
|
Average homesale
price
|
|
$
|
511,922
|
|
|
$
|
540,725
|
|
|
$
|
509,425
|
|
|
$
|
523,024
|
|
|
$
|
522,282
|
|
Average homesale
broker commission rate
|
|
2.41
|
%
|
|
2.41
|
%
|
|
2.41
|
%
|
|
2.39
|
%
|
|
2.41
|
%
|
Gross commission
income per side
|
|
$
|
13,212
|
|
|
$
|
13,758
|
|
|
$
|
13,000
|
|
|
$
|
13,147
|
|
|
$
|
13,296
|
|
Realogy Title
Group
|
|
|
|
|
|
|
|
|
|
|
Purchase title and
closing units
|
|
28,044
|
|
|
42,202
|
|
|
41,619
|
|
|
34,345
|
|
|
146,210
|
|
Refinance title and
closing units
|
|
4,011
|
|
|
5,270
|
|
|
8,014
|
|
|
9,294
|
|
|
26,589
|
|
Average fee per
closing unit
|
|
$
|
2,267
|
|
|
$
|
2,356
|
|
|
$
|
2,288
|
|
|
$
|
2,267
|
|
|
$
|
2,297
|
|
|
|
|
|
|
(a)
|
Includes all
franchisees except for Realogy Brokerage Group.
|
Table
5a
|
|
REALOGY HOLDINGS
CORP.
|
NON-GAAP
RECONCILIATION - OPERATING EBITDA AND
|
OPERATING EBITDA
INCLUDING DISCONTINUED OPERATIONS
|
THREE MONTHS ENDED
SEPTEMBER 30, 2020 AND 2019
|
(In
millions)
|
Set forth in the
tables below is a reconciliation of Net income (loss)
attributable to Realogy Holdings to Operating EBITDA and Operating
EBITDA including discontinued operations for the three-month
periods ended September 30, 2020 and 2019:
|
|
|
Three Months Ended
September 30,
|
|
2020
|
|
2019
|
Net income (loss)
attributable to Realogy Holdings
|
$
|
98
|
|
|
$
|
(113)
|
|
Less: Net (loss)
income from discontinued operations
|
(46)
|
|
|
8
|
|
Add: Income tax
expense (benefit) from continuing operations
|
54
|
|
|
(23)
|
|
Income (loss) from
continuing operations attributable to Realogy Holdings before
income taxes
|
198
|
|
|
(144)
|
|
Add:
Depreciation and amortization
|
43
|
|
|
42
|
|
Interest expense,
net
|
48
|
|
|
66
|
|
Restructuring costs,
net (a)
|
13
|
|
|
11
|
|
Impairments
(b)
|
6
|
|
|
240
|
|
Former parent legacy
cost, net (c)
|
1
|
|
|
1
|
|
Gain on the early
extinguishment of debt (c)
|
—
|
|
|
(10)
|
|
Operating
EBITDA
|
309
|
|
|
206
|
|
Contribution to
Operating EBITDA from discontinued operations
|
4
|
|
|
17
|
|
Operating EBITDA
including discontinued operations
|
$
|
313
|
|
|
$
|
223
|
|
The following table reflects Revenue, Operating EBITDA and
Operating EBITDA margin by reportable segments:
|
Revenues
(d)
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA Margin
|
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
Change
|
Realogy Franchise
Group
|
$
|
262
|
|
|
$
|
240
|
|
|
$
|
22
|
|
|
9
|
%
|
|
$
|
196
|
|
|
$
|
170
|
|
|
$
|
26
|
|
|
15
|
%
|
|
75
|
%
|
|
71
|
%
|
|
4
|
|
Realogy Brokerage
Group
|
1,479
|
|
|
1,222
|
|
|
257
|
|
|
21
|
|
|
61
|
|
|
31
|
|
|
30
|
|
|
97
|
|
|
4
|
|
|
3
|
|
|
1
|
|
Realogy Title
Group
|
213
|
|
|
170
|
|
|
43
|
|
|
25
|
|
|
95
|
|
|
31
|
|
|
64
|
|
|
206
|
|
|
45
|
|
|
18
|
|
|
27
|
|
Corporate and
Other
|
(97)
|
|
|
(82)
|
|
|
(15)
|
|
|
*
|
|
|
(43)
|
|
|
(26)
|
|
|
(17)
|
|
|
*
|
|
|
|
|
|
|
|
Total
|
$
|
1,857
|
|
|
$
|
1,550
|
|
|
$
|
307
|
|
|
20
|
%
|
|
$
|
309
|
|
|
$
|
206
|
|
|
$
|
103
|
|
|
50
|
%
|
|
17
|
%
|
|
13
|
%
|
|
4
|
|
Contribution from
discontinued operations
|
|
4
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
Total including
discontinued operations
|
|
$
|
313
|
|
|
$
|
223
|
|
|
|
|
|
|
|
|
|
|
|
The following table reflects Realogy Franchise and Brokerage
Groups' results before the intercompany royalties and marketing
fees, as well as on a combined basis to show the Operating EBITDA
contribution of these business units to the overall Operating
EBITDA of the Company:
|
Revenues
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA Margin
|
|
Change
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
Realogy Franchise
Group (e)
|
$
|
165
|
|
|
$
|
158
|
|
|
$
|
7
|
|
|
4
|
%
|
|
$
|
99
|
|
|
$
|
88
|
|
|
$
|
11
|
|
|
13
|
%
|
|
60
|
%
|
|
56
|
%
|
|
4
|
|
Realogy Brokerage
Group (e)
|
1,479
|
|
|
1,222
|
|
|
257
|
|
|
21
|
|
|
158
|
|
|
113
|
|
|
45
|
|
|
40
|
|
|
11
|
|
|
9
|
|
|
2
|
|
Realogy Franchise and
Brokerage Groups Combined
|
$
|
1,644
|
|
|
$
|
1,380
|
|
|
$
|
264
|
|
|
19
|
%
|
|
$
|
257
|
|
|
$
|
201
|
|
|
$
|
56
|
|
|
28
|
%
|
|
16
|
%
|
|
15
|
%
|
|
1
|
|
(a)
|
Restructuring charges
incurred for the three months ended September 30, 2020 include
$11 million at Realogy Brokerage Group and $2 million at Corporate
and Other. Restructuring charges incurred for the three
months ended September 30, 2019 include $2 million at Realogy
Franchise Group, $8 million at Realogy Brokerage Group and $1
million at Corporate and Other.
|
(b)
|
Impairments for the
three months ended September 30, 2020 relate to lease asset
impairments. Impairments for the three months ended
September 30, 2019 include a goodwill impairment charge of
$237 million (which reduced the net carrying value of Realogy
Brokerage Group by $180 million after accounting for the related
income tax benefit of $57 million) and $3 million related to lease
asset impairments.
|
(c)
|
Former parent legacy
items and Gain on the early extinguishment of debt are recorded in
Corporate and Other.
|
(d)
|
Includes the
elimination of transactions between segments, which consists of
intercompany royalties and marketing fees paid by Realogy Brokerage
Group of $97 million and $82 million during the three months ended
September 30, 2020 and 2019, respectively.
|
(e)
|
The segment numbers
noted above do not reflect the impact of intercompany royalties and
marketing fees paid by Realogy Brokerage Group to Realogy Franchise
Group of $97 million and $82 million during the three months ended
September 30, 2020 and 2019, respectively.
|
Table
5b
|
|
REALOGY HOLDINGS
CORP.
|
NON-GAAP
RECONCILIATION - OPERATING EBITDA AND
|
OPERATING EBITDA
INCLUDING DISCONTINUED OPERATIONS
|
NINE MONTHS ENDED
SEPTEMBER 30, 2020 AND 2019
|
(In
millions)
|
Set forth in the
tables below is a reconciliation of Net loss attributable to
Realogy Holdings to Operating EBITDA and Operating EBITDA including
discontinued operations for the nine-month periods ended
September 30, 2020 and 2019:
|
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
Net loss attributable
to Realogy Holdings
|
$
|
(378)
|
|
|
$
|
(143)
|
|
Less: Net loss from
discontinued operations
|
(114)
|
|
|
(5)
|
|
Add: Income tax
benefit from continuing operations
|
(67)
|
|
|
(22)
|
|
Loss from continuing
operations attributable to Realogy Holdings before income
taxes
|
(331)
|
|
|
(160)
|
|
Add:
Depreciation and amortization
|
134
|
|
|
126
|
|
Interest expense,
net
|
208
|
|
|
209
|
|
Restructuring costs,
net (a)
|
38
|
|
|
29
|
|
Impairments
(b)
|
460
|
|
|
243
|
|
Former parent legacy
cost, net (c)
|
1
|
|
|
1
|
|
Loss (gain) on the
early extinguishment of debt (c)
|
8
|
|
|
(5)
|
|
Operating
EBITDA
|
518
|
|
|
443
|
|
Contribution to
Operating EBITDA from discontinued operations
|
2
|
|
|
21
|
|
Operating EBITDA
including discontinued operations
|
$
|
520
|
|
|
$
|
464
|
|
The following table reflects Revenue, Operating EBITDA and
Operating EBITDA margin by reportable segments:
|
Revenues
(d)
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA Margin
|
|
Change
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
Realogy Franchise
Group
|
$
|
609
|
|
|
$
|
679
|
|
|
$
|
(70)
|
|
|
(10)
|
%
|
|
$
|
419
|
|
|
$
|
448
|
|
|
$
|
(29)
|
|
|
(6)
|
%
|
|
69
|
%
|
|
66
|
%
|
|
3
|
|
Realogy Brokerage
Group
|
3,281
|
|
|
3,369
|
|
|
(88)
|
|
|
(3)
|
|
|
25
|
|
|
16
|
|
|
9
|
|
|
56
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Realogy Title
Group
|
510
|
|
|
444
|
|
|
66
|
|
|
15
|
|
|
168
|
|
|
54
|
|
|
114
|
|
|
211
|
|
|
33
|
|
|
12
|
|
|
21
|
|
Corporate and
Other
|
(220)
|
|
|
(224)
|
|
|
4
|
|
|
*
|
|
|
(94)
|
|
|
(75)
|
|
|
(19)
|
|
|
*
|
|
|
|
|
|
|
|
Total
|
$
|
4,180
|
|
|
$
|
4,268
|
|
|
$
|
(88)
|
|
|
(2)
|
%
|
|
$
|
518
|
|
|
$
|
443
|
|
|
$
|
75
|
|
|
17
|
%
|
|
12
|
%
|
|
10
|
%
|
|
2
|
|
Contribution from
discontinued operations
|
|
2
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
Total including
discontinued operations
|
|
$
|
520
|
|
|
$
|
464
|
|
|
|
|
|
|
|
|
|
|
|
The following table reflects Realogy Franchise and Brokerage
Groups' results before the intercompany royalties and marketing
fees, as well as on a combined basis to show the Operating EBITDA
contribution of these business units to the overall Operating
EBITDA of the Company:
|
Revenues
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA
|
|
$
Change
|
|
%
Change
|
|
Operating
EBITDA Margin
|
|
Change
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
Realogy Franchise
Group (e)
|
$
|
389
|
|
|
$
|
455
|
|
|
$
|
(66)
|
|
|
(15)
|
%
|
|
$
|
199
|
|
|
$
|
224
|
|
|
$
|
(25)
|
|
|
(11)
|
%
|
|
51
|
%
|
|
49
|
%
|
|
2
|
|
Realogy Brokerage
Group (e)
|
3,281
|
|
|
3,369
|
|
|
(88)
|
|
|
(3)
|
|
|
245
|
|
|
|
240
|
|
|
5
|
|
|
2
|
|
|
7
|
|
|
7
|
|
|
—
|
|
Realogy Franchise and
Brokerage Groups Combined
|
$
|
3,670
|
|
|
$
|
3,824
|
|
|
$
|
(154)
|
|
|
(4)
|
%
|
|
$
|
444
|
|
|
$
|
464
|
|
|
$
|
(20)
|
|
|
(4)
|
%
|
|
12
|
%
|
|
12
|
%
|
|
—
|
|
|
|
|
|
|
*
|
not
meaningful.
|
(a)
|
Restructuring charges
incurred for the nine months ended September 30, 2020 include
$1 million at Realogy Franchise Group, $32 million at Realogy
Brokerage Group, $3 million at Realogy Title Group and $2 million
at Corporate and Other. Restructuring charges incurred for
the nine months ended September 30, 2019 include $3 million at
Realogy Franchise Group, $18 million at Realogy Brokerage Group, $2
million at Realogy Title Group and $6 million at Corporate and
Other.
|
(b)
|
Impairments for the
nine months ended September 30, 2020 include a goodwill
impairment charge of $413 million (which reduced the net carrying
value of Realogy Brokerage Group by $314 million after accounting
for the related income tax benefit of $99 million), an impairment
charge of $30 million (which reduced the carrying value of
trademarks at Realogy Franchise Group) and $17 million related to
lease asset impairments. Impairments for the nine months
ended September 30, 2019 include a goodwill impairment charge
of $237 million (which reduced the net carrying value of Realogy
Brokerage Group by $180 million after accounting for the related
income tax benefit of $57 million) and $6 million related to lease
asset impairments.
|
(c)
|
Former parent legacy
items and Loss (gain) on the early extinguishment of debt are
recorded in Corporate and Other.
|
(d)
|
Includes the
elimination of transactions between segments, which consists of
intercompany royalties and marketing fees paid by Realogy Brokerage
Group of $220 million and $224 million during the nine months ended
September 30, 2020 and 2019, respectively.
|
(e)
|
The segment numbers
noted above do not reflect the impact of intercompany royalties and
marketing fees paid by Realogy Brokerage Group to Realogy Franchise
Group of $220 million and $224 million during the nine months ended
September 30, 2020 and 2019, respectively.
|
Table
6a
|
|
REALOGY HOLDINGS
CORP.
|
SELECTED 2020
FINANCIAL DATA
|
(In
millions)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
2020
|
|
2020
|
|
2020
|
Net revenues
(a)
|
|
|
|
|
|
Realogy Franchise
Group
|
$
|
168
|
|
|
$
|
179
|
|
|
$
|
262
|
|
Realogy Brokerage
Group
|
869
|
|
|
933
|
|
|
1,479
|
|
Realogy Title
Group
|
137
|
|
|
160
|
|
|
213
|
|
Corporate and
Other
|
(58)
|
|
|
(65)
|
|
|
(97)
|
|
Total
|
$
|
1,116
|
|
|
$
|
1,207
|
|
|
$
|
1,857
|
|
|
|
|
|
|
|
Operating
EBITDA
|
|
|
|
|
|
Realogy Franchise
Group
|
$
|
101
|
|
|
$
|
122
|
|
|
$
|
196
|
|
Realogy Brokerage
Group
|
(51)
|
|
|
15
|
|
|
61
|
|
Realogy Title
Group
|
12
|
|
|
61
|
|
|
95
|
|
Corporate and
Other
|
(25)
|
|
|
(26)
|
|
|
(43)
|
|
Total
|
$
|
37
|
|
|
$
|
172
|
|
|
$
|
309
|
|
|
|
|
|
|
|
Non-GAAP
Reconciliation - Operating EBITDA
|
|
|
|
|
|
Operating
EBITDA
|
$
|
37
|
|
|
$
|
172
|
|
|
$
|
309
|
|
Contribution from
discontinued operations
|
(5)
|
|
|
3
|
|
|
4
|
|
Operating EBITDA
including discontinued operations
|
32
|
|
|
175
|
|
|
313
|
|
|
|
|
|
|
|
Less:
Depreciation and amortization
|
45
|
|
|
46
|
|
|
43
|
|
Interest expense,
net
|
101
|
|
|
59
|
|
|
48
|
|
Income tax (benefit)
expense
|
(132)
|
|
|
11
|
|
|
54
|
|
Restructuring costs,
net (b)
|
11
|
|
|
14
|
|
|
13
|
|
Impairments
(c)
|
447
|
|
|
7
|
|
|
6
|
|
Former parent legacy
cost, net (d)
|
—
|
|
|
—
|
|
|
1
|
|
Loss on the early
extinguishment of debt (d)
|
—
|
|
|
8
|
|
|
—
|
|
Adjustments
attributable to discontinued operations (e)
|
22
|
|
|
44
|
|
|
50
|
|
Net (loss) income
attributable to Realogy Holdings
|
$
|
(462)
|
|
|
$
|
(14)
|
|
|
$
|
98
|
|
|
|
|
|
|
(a)
|
Transactions between
segments are eliminated in consolidation. Revenues for
Realogy Franchise Group include intercompany royalties and
marketing fees paid by Realogy Brokerage Group of $58 million, $65
million and $97 million for the three months ended March 31, 2020,
June 30, 2020 and September 30, 2020, respectively. Such
amounts are eliminated through Corporate and Other.
|
|
Revenues for Realogy
Franchise Group include $2 million, $3 million and $3 million of
intercompany referral commissions related to Realogy
Advantage Broker Network paid by Realogy Brokerage Group during the
three months ended March 31, 2020, June 30, 2020 and
September 30, 2020, respectively. Such amounts are
recorded as contra-revenues by Realogy Brokerage Group.
|
(b)
|
Includes
restructuring charges broken down by business unit as
follows:
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
2020
|
|
2020
|
|
2020
|
Realogy Franchise
Group
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Realogy Brokerage
Group
|
9
|
|
|
12
|
|
|
11
|
|
Realogy Title
Group
|
1
|
|
|
2
|
|
|
—
|
|
Corporate and
Other
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Total
Company
|
$
|
11
|
|
|
$
|
14
|
|
|
$
|
13
|
|
|
|
(c)
|
Impairments for the
three months ended March 31, 2020 include a goodwill impairment
charge of $413 million (which reduced the net carrying value
of Realogy Brokerage Group by $314 million after accounting
for the related income tax benefit of $99 million) and an
impairment charge of $30 million (which reduced the carrying
value of trademarks at Realogy Franchise Group). In
addition, the three months ended March 31, 2020, June 30,
2020 and September 30, 2020 include charges primarily related
to lease asset impairments of $4 million, $7 million and $6
million, respectively.
|
(d)
|
Former parent legacy
items and Loss on the early extinguishment of debt are recorded in
Corporate and Other.
|
(e)
|
Includes depreciation
and amortization, interest expense, income tax and restructuring
charges related to discontinued operations. In addition,
includes the adjustment to record assets and liabilities held for
sale at the lower of carrying value or fair value less any costs to
sell based on a market price that is reasonable in relation to fair
value.
|
Table
6b
|
|
REALOGY HOLDINGS
CORP.
|
SELECTED 2019
FINANCIAL DATA
|
(In
millions)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
Net revenues
(a)
|
|
|
|
|
|
|
|
|
|
Realogy Franchise
Group
|
$
|
179
|
|
|
$
|
260
|
|
|
$
|
240
|
|
|
$
|
207
|
|
|
$
|
886
|
|
Realogy Brokerage
Group
|
816
|
|
|
1,331
|
|
|
1,222
|
|
|
1,040
|
|
|
4,409
|
|
Realogy Title
Group
|
114
|
|
|
160
|
|
|
170
|
|
|
152
|
|
|
596
|
|
Corporate and
Other
|
(55)
|
|
|
(87)
|
|
|
(82)
|
|
|
(69)
|
|
|
(293)
|
|
Total
|
$
|
1,054
|
|
|
$
|
1,664
|
|
|
$
|
1,550
|
|
|
$
|
1,330
|
|
|
$
|
5,598
|
|
|
|
|
|
|
|
|
|
|
|
Operating
EBITDA
|
|
|
|
|
|
|
|
|
|
Realogy Franchise
Group
|
$
|
98
|
|
|
$
|
180
|
|
|
$
|
170
|
|
|
$
|
140
|
|
|
$
|
588
|
|
Realogy Brokerage
Group
|
(62)
|
|
|
47
|
|
|
31
|
|
|
(12)
|
|
|
4
|
|
Realogy Title
Group
|
(9)
|
|
|
32
|
|
|
31
|
|
|
14
|
|
|
68
|
|
Corporate and
Other
|
(25)
|
|
|
(24)
|
|
|
(26)
|
|
|
(23)
|
|
|
(98)
|
|
Total
|
$
|
2
|
|
|
$
|
235
|
|
|
$
|
206
|
|
|
$
|
119
|
|
|
$
|
562
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Reconciliation - Operating EBITDA
|
|
|
|
|
|
|
|
|
|
Operating
EBITDA
|
$
|
2
|
|
|
$
|
235
|
|
|
$
|
206
|
|
|
$
|
119
|
|
|
$
|
562
|
|
Contribution from
discontinued operations
|
(6)
|
|
|
10
|
|
|
17
|
|
|
7
|
|
|
28
|
|
Operating EBITDA
including discontinued operations
|
(4)
|
|
|
245
|
|
|
223
|
|
|
126
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Depreciation and amortization
|
41
|
|
|
43
|
|
|
42
|
|
|
43
|
|
|
169
|
|
Interest expense,
net
|
63
|
|
|
80
|
|
|
66
|
|
|
40
|
|
|
249
|
|
Income tax (benefit)
expense
|
(32)
|
|
|
33
|
|
|
(23)
|
|
|
—
|
|
|
(22)
|
|
Restructuring costs,
net (b)
|
9
|
|
|
9
|
|
|
11
|
|
|
13
|
|
|
42
|
|
Impairments
(c)
|
1
|
|
|
2
|
|
|
240
|
|
|
6
|
|
|
249
|
|
Former parent legacy
cost, net (d)
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Loss (gain) on the
early extinguishment of debt (d)
|
5
|
|
|
—
|
|
|
(10)
|
|
|
—
|
|
|
(5)
|
|
Adjustments
attributable to discontinued operations (e)
|
8
|
|
|
9
|
|
|
9
|
|
|
69
|
|
|
95
|
|
Net (loss) income
attributable to Realogy Holdings
|
$
|
(99)
|
|
|
$
|
69
|
|
|
$
|
(113)
|
|
|
$
|
(45)
|
|
|
$
|
(188)
|
|
|
|
|
|
|
(a)
|
Transactions between
segments are eliminated in consolidation. Revenues for
Realogy Franchise Group include intercompany royalties and
marketing fees paid by Realogy Brokerage Group of $55 million, $87
million, $82 million and $69 million for the three months ended
March 31, 2019, June 30, 2019, September 30, 2019 and
December 31, 2019, respectively. Such amounts are
eliminated through Corporate and Other.
|
|
Revenues for Realogy
Franchise Group include $3 million, $5 million, $6 million and $4
million of intercompany referral commissions related to Realogy
Advantage Broker Network paid by Realogy Brokerage Group during the
three months ended March 31, 2019, June 30, 2019, September 30,
2019 and December 31, 2019, respectively. Such amounts
are recorded as contra-revenues by Realogy Brokerage
Group.
|
(b)
|
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,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
Realogy Franchise
Group
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
4
|
|
Realogy Brokerage
Group
|
4
|
|
|
6
|
|
|
8
|
|
|
7
|
|
|
25
|
|
Realogy Title
Group
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
3
|
|
Corporate and
Other
|
4
|
|
|
1
|
|
|
1
|
|
|
4
|
|
|
10
|
|
Total
Company
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
42
|
|
|
|
(c)
|
Impairments for the
three months ended September 30, 2019 and the year ended December
31, 2019 include a goodwill impairment charge of $237 million
(which reduced the net carrying value of Realogy Brokerage Group by
$180 million after accounting for the related income tax
benefit of $57 million). In addition, the three months ended
March 31, 2019, June 30, 2019, September 30, 2019 and December 31,
2019 include charges primarily related to lease asset impairments
of $1 million, $2 million, $3 million and $6 million,
respectively.
|
(d)
|
Former parent legacy
items and Loss (gain) on the early extinguishment of debt are
recorded in Corporate and Other.
|
(e)
|
Includes depreciation
and amortization, interest expense, income tax and restructuring
charges related to discontinued operations. In addition, the
three months and year ended December 31, 2019 includes the
estimated loss on the sale of discontinued operations of $22
million and the related tax expense of $38 million.
|
Table
6c
|
|
REALOGY HOLDINGS
CORP.
|
2019 CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In millions,
except per share data)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
Revenues
|
|
|
|
|
|
|
|
|
|
Gross commission
income
|
$
|
799
|
|
|
$
|
1,310
|
|
|
$
|
1,201
|
|
|
$
|
1,020
|
|
|
$
|
4,330
|
|
Service
revenue
|
129
|
|
|
183
|
|
|
191
|
|
|
170
|
|
|
673
|
|
Franchise
fees
|
70
|
|
|
112
|
|
|
108
|
|
|
96
|
|
|
386
|
|
Other
|
56
|
|
|
59
|
|
|
50
|
|
|
44
|
|
|
209
|
|
Net
revenues
|
1,054
|
|
|
1,664
|
|
|
1,550
|
|
|
1,330
|
|
|
5,598
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Commission and other
agent-related costs
|
575
|
|
|
955
|
|
|
875
|
|
|
751
|
|
|
3,156
|
|
Operating
|
330
|
|
|
343
|
|
|
343
|
|
|
329
|
|
|
1,345
|
|
Marketing
|
68
|
|
|
69
|
|
|
63
|
|
|
62
|
|
|
262
|
|
General and
administrative
|
80
|
|
|
68
|
|
|
69
|
|
|
71
|
|
|
288
|
|
Former parent legacy
cost, net
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Restructuring costs,
net
|
9
|
|
|
9
|
|
|
11
|
|
|
13
|
|
|
42
|
|
Impairments
|
1
|
|
|
2
|
|
|
240
|
|
|
6
|
|
|
249
|
|
Depreciation and
amortization
|
41
|
|
|
43
|
|
|
42
|
|
|
43
|
|
|
169
|
|
Interest expense,
net
|
63
|
|
|
80
|
|
|
66
|
|
|
40
|
|
|
249
|
|
Loss (gain) on the
early extinguishment of debt
|
5
|
|
|
—
|
|
|
(10)
|
|
|
—
|
|
|
(5)
|
|
Total
expenses
|
1,172
|
|
|
1,569
|
|
|
1,700
|
|
|
1,315
|
|
|
5,756
|
|
(Loss) income from
continuing operations before income taxes, equity in earnings and
noncontrolling interests
|
(118)
|
|
|
95
|
|
|
(150)
|
|
|
15
|
|
|
(158)
|
|
Income tax (benefit)
expense from continuing operations
|
(32)
|
|
|
33
|
|
|
(23)
|
|
|
—
|
|
|
(22)
|
|
Equity in earnings of
unconsolidated entities
|
(1)
|
|
|
(7)
|
|
|
(7)
|
|
|
(3)
|
|
|
(18)
|
|
Net (loss) income
from continuing operations
|
(85)
|
|
|
69
|
|
|
(120)
|
|
|
18
|
|
|
(118)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
discontinued operations, net of tax
|
(14)
|
|
|
1
|
|
|
8
|
|
|
(2)
|
|
|
(7)
|
|
Estimated loss on the
sale of discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(60)
|
|
|
(60)
|
|
Net (loss) income
from discontinued operations
|
(14)
|
|
|
1
|
|
|
8
|
|
|
(62)
|
|
|
(67)
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
(99)
|
|
|
70
|
|
|
(112)
|
|
|
(44)
|
|
|
(185)
|
|
Less: Net income
attributable to noncontrolling interests
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(3)
|
|
Net (loss) income
attributable to Realogy Holdings
|
$
|
(99)
|
|
|
$
|
69
|
|
|
$
|
(113)
|
|
|
$
|
(45)
|
|
|
$
|
(188)
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss)
earnings per share attributable to Realogy Holdings
shareholders:
|
|
|
Basic (loss) earnings
per share from continuing operations
|
$
|
(0.75)
|
|
|
$
|
0.59
|
|
|
$
|
(1.06)
|
|
|
$
|
0.15
|
|
|
$
|
(1.06)
|
|
Basic (loss) earnings
per share from discontinued operations
|
(0.12)
|
|
|
0.01
|
|
|
0.07
|
|
|
(0.54)
|
|
|
(0.59)
|
|
Basic (loss) earnings
per share
|
$
|
(0.87)
|
|
|
$
|
0.60
|
|
|
(0.99)
|
|
|
(0.39)
|
|
|
(1.65)
|
|
Diluted (loss)
earnings per share attributable to Realogy Holdings
shareholders:
|
|
|
Diluted (loss)
earnings per share from continuing operations
|
$
|
(0.75)
|
|
|
$
|
0.59
|
|
|
$
|
(1.06)
|
|
|
$
|
0.15
|
|
|
$
|
(1.06)
|
|
Diluted (loss)
earnings per share from discontinued operations
|
(0.12)
|
|
|
0.01
|
|
|
0.07
|
|
|
(0.54)
|
|
|
(0.59)
|
|
Diluted (loss) earnings
per share
|
$
|
(0.87)
|
|
|
$
|
0.60
|
|
|
$
|
(0.99)
|
|
|
$
|
(0.39)
|
|
|
$
|
(1.65)
|
|
Weighted average
common and common equivalent shares of Realogy Holdings
outstanding:
|
|
|
|
|
|
|
Basic
|
114.0
|
|
|
114.3
|
|
|
114.3
|
|
|
114.3
|
|
|
114.2
|
|
Diluted
|
114.0
|
|
|
114.9
|
|
|
114.3
|
|
|
114.3
|
|
|
114.2
|
|
Table
7
|
|
REALOGY HOLDINGS
CORP.
|
NON-GAAP
RECONCILIATION - FREE CASH FLOW AND
|
FREE CASH FLOW
INCLUDING DISCONTINUED OPERATIONS
|
THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
|
(In
millions)
|
|
A reconciliation of
net income (loss) attributable to Realogy Holdings to Free Cash
Flow and Free Cash Flow including discontinued operations is set
forth in the following table:
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income (loss)
attributable to Realogy Holdings
|
$
|
98
|
|
|
$
|
(113)
|
|
|
$
|
(378)
|
|
|
$
|
(143)
|
|
Less: Net (loss)
income from discontinued operations
|
(46)
|
|
|
8
|
|
|
(114)
|
|
|
(5)
|
|
Net income (loss)
from continuing operations attributable to Realogy
Holdings
|
144
|
|
|
(121)
|
|
|
(264)
|
|
|
(138)
|
|
Income tax expense
(benefit), net of payments
|
63
|
|
|
(24)
|
|
|
(58)
|
|
|
(29)
|
|
Interest expense,
net
|
48
|
|
|
66
|
|
|
208
|
|
|
209
|
|
Cash interest
payments
|
(26)
|
|
|
(29)
|
|
|
(128)
|
|
|
(124)
|
|
Depreciation and
amortization
|
43
|
|
|
42
|
|
|
134
|
|
|
126
|
|
Capital
expenditures
|
(19)
|
|
|
(21)
|
|
|
(60)
|
|
|
(71)
|
|
Restructuring costs
and former parent legacy items, net of payments
|
7
|
|
|
2
|
|
|
12
|
|
|
1
|
|
Impairments
|
6
|
|
|
240
|
|
|
460
|
|
|
243
|
|
(Gain) loss on the
early extinguishment of debt
|
—
|
|
|
(10)
|
|
|
8
|
|
|
(5)
|
|
Working capital
adjustments
|
78
|
|
|
(29)
|
|
|
26
|
|
|
(33)
|
|
Free Cash
Flow
|
344
|
|
|
116
|
|
|
338
|
|
|
179
|
|
Contribution from
discontinued operations
|
51
|
|
|
58
|
|
|
(51)
|
|
|
(30)
|
|
Free Cash Flow
including discontinued operations
|
$
|
395
|
|
|
$
|
174
|
|
|
$
|
287
|
|
|
$
|
149
|
|
A reconciliation of net cash provided by operating activities to
Free Cash Flow and Free Cash Flow including discontinued operations
is set forth in the following table:
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net cash provided
by operating activities
|
$
|
385
|
|
|
$
|
174
|
|
|
$
|
418
|
|
|
$
|
230
|
|
Less: Net cash
provided by (used in) operating activities from discontinued
operations
|
22
|
|
|
37
|
|
|
20
|
|
|
(20)
|
|
Net cash provided by
operating activities from continuing operations
|
363
|
|
|
137
|
|
|
398
|
|
|
250
|
|
Property and
equipment additions
|
(19)
|
|
|
(21)
|
|
|
(60)
|
|
|
(71)
|
|
Effect of exchange
rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Free Cash
Flow
|
344
|
|
|
116
|
|
|
338
|
|
|
179
|
|
Contribution from
discontinued operations
|
51
|
|
|
58
|
|
|
(51)
|
|
|
(30)
|
|
Free Cash Flow
including discontinued operations
|
$
|
395
|
|
|
$
|
174
|
|
|
$
|
287
|
|
|
$
|
149
|
|
|
|
|
|
|
|
|
|
Net cash used in
investing activities
|
$
|
(21)
|
|
|
$
|
(24)
|
|
|
$
|
(84)
|
|
|
$
|
(86)
|
|
Net cash used in
financing activities
|
$
|
(671)
|
|
|
$
|
(150)
|
|
|
$
|
(203)
|
|
|
$
|
(104)
|
|
Table
8a
|
|
NON-GAAP
RECONCILIATION - SENIOR SECURED LEVERAGE RATIO
|
FOR THE
FOUR-QUARTER PERIOD ENDED SEPTEMBER 30, 2020
|
(In
millions)
|
|
The senior secured
leverage ratio is tested quarterly pursuant to the terms of the
senior secured credit facilities*. For the four-quarter
period ended September 30, 2020, Realogy Group LLC was required to
maintain a senior secured leverage ratio not exceed 6.50 to
1.00. The senior secured leverage ratio is measured by
dividing Realogy Group LLC's total senior secured net debt by the
trailing four quarters EBITDA calculated on a Pro Forma Basis, as
those terms are defined in the Senior Secured Credit
Agreement. Total senior secured net debt does not include the
7.625% Senior Secured Second Lien Notes, our unsecured
indebtedness, including the Unsecured Notes, or the securitization
obligations. EBITDA calculated on a Pro Forma Basis, as
defined in the Senior Secured Credit Agreement, includes
adjustments to Operating EBITDA for retention and disposition
costs, non-cash charges and incremental securitization interest
costs, as well as pro forma cost savings for restructuring
initiatives, 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
trailing four-quarter period. The Company was in compliance
with the senior secured leverage ratio covenant at
September 30, 2020 with a ratio of 2.29 to 1.00.
|
|
A reconciliation of
net loss attributable to Realogy Group to Operating EBITDA
including discontinued operations, Operating EBITDA and EBITDA
calculated on a Pro Forma Basis, as those terms are defined in the
Senior Secured Credit Agreement, for the four-quarter period ended
September 30, 2020 is set forth in the following
table:
|
|
|
|
|
Less
|
|
Equals
|
|
Plus
|
|
Equals
|
|
Year
Ended
|
|
Nine Months
Ended
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Twelve
Months
Ended
|
|
December
31,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
September
30,
2020
|
|
September
30,
2020
|
Net loss attributable
to Realogy Group (a)
|
$
|
(188)
|
|
|
$
|
(143)
|
|
|
$
|
(45)
|
|
|
$
|
(378)
|
|
|
$
|
(423)
|
|
Income tax
benefit
|
(22)
|
|
|
(22)
|
|
|
—
|
|
|
(67)
|
|
|
(67)
|
|
Loss before income
taxes
|
(210)
|
|
|
(165)
|
|
|
(45)
|
|
|
(445)
|
|
|
(490)
|
|
Depreciation and
amortization
|
169
|
|
|
126
|
|
|
43
|
|
|
134
|
|
|
177
|
|
Interest expense,
net
|
249
|
|
|
209
|
|
|
40
|
|
|
208
|
|
|
248
|
|
Restructuring costs,
net
|
42
|
|
|
29
|
|
|
13
|
|
|
38
|
|
|
51
|
|
Impairments
|
249
|
|
|
243
|
|
|
6
|
|
|
460
|
|
|
466
|
|
Former parent legacy
cost, net
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
(Gain) loss on the
early extinguishment of debt
|
(5)
|
|
|
(5)
|
|
|
—
|
|
|
8
|
|
|
8
|
|
Adjustments
attributable to discontinued operations (b)
|
95
|
|
|
26
|
|
|
69
|
|
|
116
|
|
|
185
|
|
Operating
EBITDA including discontinued operations (c)
|
590
|
|
|
464
|
|
|
126
|
|
|
520
|
|
|
646
|
|
Less: Contribution to
Operating EBITDA from discontinued operations
|
|
9
|
|
Operating
EBITDA
|
|
637
|
|
Bank covenant
adjustments:
|
|
|
Pro forma effect of
business optimization initiatives (d)
|
49
|
|
Non-cash charges
(e)
|
|
29
|
|
Pro forma effect of
acquisitions and new franchisees (f)
|
|
6
|
|
EBITDA as
defined by the Senior Secured Credit Agreement*
|
|
$
|
721
|
|
Total senior secured
net debt (g)
|
|
$
|
1,654
|
|
Senior secured
leverage ratio*
|
|
2.29
|
x
|
|
|
|
|
|
(a)
|
Net loss attributable
to Realogy consists of: (i) loss of $45 million for the fourth
quarter of 2019, (ii) loss of $462 million for the first quarter of
2020, (iii) loss of $14 million for the second quarter of 2020 and
(iv) income of $98 million for the third quarter of
2020.
|
(b)
|
Includes depreciation
and amortization, interest expense, income tax and restructuring
charges related to discontinued operations. In addition,
includes the adjustment to record assets and liabilities held for
sale at the lower of carrying value or fair value less any costs to
sell based on a market price that is reasonable in relation to fair
value.
|
(c)
|
Consists of Operating
EBITDA including discontinued operations of: (i) $126 million for
the fourth quarter of 2019, (ii) $32 million for the first quarter
of 2020, (iii) $175 million for the second quarter of 2020 and (iv)
$313 million for the third quarter of 2020.
|
(d)
|
Represents the
four-quarter pro forma effect of business optimization
initiatives.
|
(e)
|
Represents the
elimination of non-cash expenses including $24 million of
stock-based compensation expense, $4 million for the change in the
allowance for doubtful accounts and notes reserves and $1 million
of other items for the four-quarter period ended September 30,
2020.
|
(f)
|
Represents the
estimated impact of acquisitions and franchise sales activity, net
of brokerages that exited our franchise system as if these changes
had occurred on October 1, 2019. Franchisee sales
activity is comprised of new franchise agreements as well as growth
through acquisitions and independent sales agent recruitment by
existing franchisees with our assistance. We have made a
number of assumptions in calculating such estimates and there can
be no assurance that we would have generated the projected levels
of Operating EBITDA had we owned the acquired entities or entered
into the franchise contracts as of October 1, 2019.
|
(g)
|
Represents total
borrowings under the senior secured credit facilities (including
the Revolving Credit Facility and Term Loan B Facility) and Term
Loan A Facility and borrowings secured by a first priority lien on
our assets of $1,884 million plus $33 million of finance lease
obligations less $263 million of readily available cash as of
September 30, 2020. Pursuant to the terms of our senior
secured credit facilities, total senior secured net debt does not
include our securitization obligations, 7.625% Senior Secured
Second Lien Notes or unsecured indebtedness, including the
Unsecured Notes.
|
|
|
*
|
Our senior secured
credit facilities include the facilities under our Amended and
Restated Credit Agreement dated as of March 5, 2013, as amended
from time to time (the "Senior Secured Credit Agreement"), and the
Term Loan A Agreement dated as of October 23, 2015 (the "Term Loan
A Agreement"), as amended from time to time. Our Senior
Secured Second Lien Notes include our 7.625% Senior Secured Second
Lien Notes due 2025.
|
|
On July 24, 2020,
Realogy Group LLC entered into amendments to the Senior Secured
Credit Agreement and Term Loan A Agreement (referred to
collectively herein as the "Amendments"), pursuant to which the
senior secured leverage ratio (the financial covenant under such
agreements) has been temporarily eased and certain other covenants
have been temporarily tightened during the covenant period.
See the Company's Current Report on Form 8-K filed on July 30, 2020
for additional information.
|
|
Pursuant to the
Amendments, the definition of "Consolidated Net Income" (as defined
in the Senior Secured Credit Agreement) should be adjusted for
discontinued operations (pending divestiture) solely for purposes
of calculating compliance with the senior secured leverage
ratio. Such adjustment is not reflected in the calculation
above for consistency with the presentation of Consolidated
Leverage Ratio under the 9.375% Senior Notes and 7.625% Senior
Secured Second Lien Notes. Had discontinued operations been
included for the four-quarter period ended September 30, 2020,
the senior secured leverage ratio for the four-quarter period ended
September 30, 2020 would have been 2.24x.
|
Table
8b
|
|
NET DEBT LEVERAGE
RATIO
|
FOR THE
FOUR-QUARTER PERIOD ENDED SEPTEMBER 30, 2020
|
(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
September 30, 2020 (referred to as net debt leverage ratio) is
set forth in the following table:
|
|
|
|
As of September
30, 2020
|
Revolver
|
|
$
|
140
|
|
Term Loan
A
|
|
694
|
|
Term Loan
B
|
|
1,050
|
|
7.625% Senior Secured
Second Lien Notes
|
|
550
|
|
4.875% Senior
Notes
|
|
407
|
|
9.375% Senior
Notes
|
|
550
|
|
Finance lease
obligations
|
|
33
|
|
Corporate Debt
(excluding securitizations)
|
|
3,424
|
|
Less: Cash and cash
equivalents
|
|
379
|
|
Net Corporate Debt
(excluding securitizations)
|
|
$
|
3,045
|
|
|
|
|
EBITDA as defined by
the Senior Secured Credit Agreement (a)
|
|
$
|
721
|
|
|
|
|
Net Debt
Leverage Ratio(b)
|
|
4.2
|
x
|
|
|
|
|
|
(a)
|
See Table 8a for a
reconciliation of Net loss attributable to Realogy Group to EBITDA
as defined by the Senior Secured Credit Agreement.
|
(b)
|
Net Debt Leverage
Ratio is substantially similar to Consolidated Leverage Ratio (as
defined under the indentures governing the 9.375% Notes and 7.625%
Senior Secured Second Lien Notes), except that when the
Consolidated Leverage Ratio is measured at March 31 of any given
year, the calculation includes a positive $200 million seasonality
adjustment to cash and cash equivalents. In addition, the
indentures do not allow for the adjustment to Consolidated Net
Income (as defined in the indentures) described in the asterisk
footnote to Table 8a.
|
Table 9
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 (gain) loss on the early
extinguishment of debt, impairments, the tax effect of the
foregoing adjustments and net income (loss) from discontinued
operations. The gross amounts for these items as well as the
adjustment for income taxes are presented.
Operating EBITDA is defined by us as net income (loss) before
depreciation and amortization, interest expense, net, income taxes,
and other items that are not core to the operating activities of
the Company such as restructuring charges, former parent legacy
items, gains or losses on the early extinguishment of debt,
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, gains or losses on the early extinguishment
of debt, former parent legacy items, 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.
Operating EBITDA including discontinued operations includes
Operating EBITDA, as defined above plus the Operating EBITDA
contribution from discontinued operations on the same basis.
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, impairments,
(gain) loss on the early extinguishment of debt and working
capital adjustments. Free Cash Flow including
discontinued operations includes Free Cash Flow, as defined above
plus the Free Cash Flow contribution from discontinued operations
on the same basis. 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.
We present Operating EBITDA including discontinued operations
and Free Cash Flow including discontinued operations to facilitate
period over period results, however, these non-GAAP terms are
subject to the same limitations noted above for Operating EBITDA
and Free Cash Flow and, in addition, include the add-back of
earnings and cash from discontinued operations, which is not
indicative of the results of our continuing operations.
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SOURCE Realogy Holdings Corp.