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Realogy Reports Financial Results For First Quarter 2016

MADISON, N.J., May 5, 2016 /PRNewswire/ -- Realogy Holdings Corp. RLGY, -0.76% the preeminent provider of residential real estate services in the United States, today reported financial results for the first quarter ended March 31, 2016, including the following highlights:

  • Revenue of $1.1 billion, a 7% increase as compared to the first quarter of 2015, was primarily driven by higher homesale transaction volume.
  • Net loss for the period was $42 million, compared to $32 million in the first quarter of 2015. Basic loss per share was $0.29, compared to $0.22 in first quarter of 2015 (See Table 1).
  • Adjusted net loss was $17 million, and adjusted basic loss per share was $0.12, improvements of 29% and 25% respectively, on a comparable basis to the first quarter of 2015. Adjusted net loss is adjusted for non-cash mark to market expense on interest rate swaps and restructuring charges (See Table 1a).
  • Adjusted (Covenant) EBITDA was $77 million, compared to $70 million in the first quarter of 2015, a year-over-year increase of 10% (See Table 6).
  • The Company repurchased $33 million, or 1 million shares, of Realogy's common stock in the open market at a weighted average market price of $33.45 per share, all under the $275 million repurchase plan announced in February 2016.
  • The Company implemented business optimization initiatives and remains on track to reach its annualized run-rate savings target of $40 million, of which $25 million is expected to be realized in 2016.

"During the quarter, we delivered solid revenue growth, and made progress on our key priorities to enhance the efficiency of our operations, strengthen our technology offerings and maximize the profitability of our integrated business model," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "The spring selling season is shaping up in line with industry forecasts for sales volume, and we are encouraged by the level of demand we are seeing in this inventory-constrained market. We are confident that our differentiated technology platform, and the continued investments we are making to enhance our value proposition, position us well to capitalize on an improving housing market."

Operational Results

In the first quarter of 2016, Realogy's franchise (RFG) and company-owned (NRT) business segments achieved a combined homesale transaction volume (transaction sides multiplied by average sale price) increase of 6% as compared to the first quarter of 2015. RFG reported a homesale transaction sides increase of 3% and an average homesale price increase of 3%. NRT reported a homesale transaction sides increase of 7% and an average homesale price decrease of 2%.

In the title and settlement services sector, TRG was involved in the closing of approximately 39,000 transactions during the quarter, reflecting a 35% increase in purchase units and a 2% increase in refinance units as compared to the first quarter of 2015. These results include the benefits of the acquisition of Independence Title late last year.

Looking Ahead

For the second quarter of 2016, Realogy expects to achieve homesale transaction volume gains in the range of 3% to 7% year-over-year. Based on the Company's closed and open sales activity in April and the first several days of May, Realogy expects second quarter homesale transaction sides to be up 3% to 5% year-over-year and average homesale price to be flat to up 2% on a company-wide basis. Realogy's guidance is in line with industry forecasts that expect an average of 5% transaction volume growth for the second quarter. In the current market environment, the Company is on track to continue to generate significant free cash flow for full year 2016.

"We continue to make significant progress toward our strategic financial objectives -- optimizing our cost structure, executing our share repurchase program and delevering the balance sheet, which is the strongest it has been since we went public," said Anthony E. Hull, executive vice president, chief financial officer and treasurer.

Balance Sheet

The Company ended the quarter with cash and cash equivalents of $283 million. Total long-term corporate debt, including the short-term portion, net of cash and cash equivalents, totaled $3.5 billion at March 31, 2016. The ratio of total corporate debt, net of cash and cash equivalents, to Adjusted (Covenant) EBITDA for the 12 months ended March 31, 2016 was 4.1 times. On May 2, 2016, the Company used a combination of cash on hand and borrowings under its revolving credit facility to retire the $500 million of 3.375% Senior Notes that matured at that time.

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

Investor Conference Call

Today, May 5, at 8:30 a.m. (EDT), Realogy will hold a conference call via webcast to review its first quarter 2016 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) 895-3527 (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 5 through May 19, 2016.

About Realogy Holdings Corp.

Realogy Holdings Corp. RLGY, -0.76% is a global leader in residential real estate franchising and brokerage with many of the best-known industry brands including Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, Corcoran®, ERA®, Sotheby's International Realty® and ZipRealty®. Collectively, Realogy's franchise system members operate approximately 13,600 offices with more than 257,200 independent sales associates conducting business in 110 countries and territories around the world. NRT LLC, Realogy's company-owned real estate brokerage, is the largest residential brokerage company in the United States, operates under several of Realogy's brands and also provides related residential real estate services. The Company also owns Cartus, a prominent worldwide provider of relocation services to corporate and affinity clients, and Title Resource Group (TRG), a leading provider of title, settlement and underwriting services. 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" 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 outstanding debt and interest obligations; variable rate indebtedness which subjects the Company to interest rate risk; the Company's inability to access capital or refinance or repay existing indebtedness; the Company's inability to realize the benefits from acquisitions; 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 and changes in state or federal employment laws or regulations that would require reclassification of independent contractor sales associates to employee status, and wage and hour regulations; the Company's inability to sustain improvements in its operating efficiency and to achieve anticipated cost savings from its business optimization initiatives; any adverse resolution of litigation, governmental or regulatory proceedings or arbitration awards; and the final resolution or outcomes with respect to Cendant's (our former parent) 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 Quarterly Report filed on Form 10-Q for the quarter ended March 31, 2016, and our Annual Report on Form 10-K for the year ended December 31, 2015, 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. 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.

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 and 8 for definitions of these non-GAAP financial measures and Tables 1a, 5a, 5b, 6, and 7 for reconciliations of the historical non-GAAP financial measures to their most comparable GAAP terms.

Investor Contacts:


Media Contact:

Alicia Swift


Mark Panus

(973) 407-4669


(973) 407-7215

alicia.swift@realogy.com


mark.panus@realogy.com




Jennifer Halchak



(973) 407-7487



jennifer.halchak@realogy.com



Table 1

REALOGY HOLDINGS CORP.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In millions, except per share data)(Unaudited)



Three Months EndedMarch 31,


2016


2015

Revenues




Gross commission income

$

826



$

781


Service revenue

190



171


Franchise fees

69



67


Other

49



43


Net revenues

1,134



1,062


Expenses




Commission and other agent-related costs

558



530


Operating

367



342


Marketing

58



56


General and administrative

86



78


Former parent legacy costs, net

1




Restructuring costs

9




Depreciation and amortization

48



46


Interest expense, net

73



68


Total expenses

1,200



1,120


Loss before income taxes, equity in earnings and noncontrolling interests

(66)



(58)


Income tax benefit

(24)



(24)


Equity in earnings of unconsolidated entities



(2)


Net loss

(42)



(32)


Less: Net income attributable to noncontrolling interests




Net loss attributable to Realogy Holdings

$

(42)



$

(32)






Loss per share attributable to Realogy Holdings:




Basic loss per share

$

(0.29)



$

(0.22)


Diluted loss per share

$

(0.29)



$

(0.22)


Weighted average common and common equivalent shares of Realogy Holdings outstanding:

Basic

146.5



146.3


Diluted

146.5



146.3


Table 1a

REALOGY HOLDINGS CORP. Adjusted Net Income (Loss) and Adjusted Earnings (Loss) 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. Below, we have presented 2015 quarterly reconciliations from Net loss to Adjusted net loss for purposes of comparability as certain adjustments below were not included in Adjusted net income (loss) and Adjusted earnings (loss) per share reported in prior periods.

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, which the Company believes will be significant as a result of the business optimization initiatives currently in progress; and (d) the loss on the early extinguishment of debt that results from refinancing and deleveraging debt initiatives. These items are shown on the tables below as net of income taxes.

Adjusted income (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 loss to Adjusted net loss for the three-month period...


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