Realogy Corporation, a global leader in real estate and relocation services, recently reported results for the first quarter ended March 31, 2012. Realogy’s net revenue for the first quarter was $875 million, an increase of 5 percent compared to 2011. Realogy’s EBITDA before restructuring and other items for the year was $36 million, a year-over-year increase of $11 million, or 44 percent. This was attributable to an increase in sales volume at both the franchised and company-owned real estate services segments offset by incremental compensation expense. Realogy’s reported EBITDA for the first quarter of 2012 was $30 million. For the quarter, Realogy recorded a net loss attributable to the Company of $192 million, which includes $170 million of interest expense and $45 million of depreciation and amortization.
“Despite the seasonality that typically makes the first quarter the weakest quarter of the year in our industry, on a relative basis, we are pleased with what we saw both in the market and in our operating results during the first quarter of 2012,” says Richard A. Smith, Realogy’s chairman, chief executive officer and president. “During the fourth quarter of 2011, we spoke about seeing signs of a stabilizing market. In the first quarter of 2012, we believe we saw the beginnings of a housing recovery. Looking ahead, assuming current economic trends remain unchanged, we believe that the housing recovery should continue to gain traction. We believe demand is increasing, and home values are starting to stabilize.”
Compensation expense recorded in the first quarter of 2012 increased by $10 million. The incremental expense in the first quarter of 2012 was due to the impact of recording both the previously instituted retention plan as well as the 2012 bonus plan. Realogy did not have an annual bonus plan in 2011 but implemented the retention plan in November 2010, which will be expensed through September 2012. Excluding the expense of $11 million for the retention plan, Realogy’s EBITDA before restructuring and other items for the first quarter of 2012 would have been $47 million.
Looking at Realogy’s core business drivers, Realogy Franchise Group (RFG) had a year-over-year 7 percent increase in homesale transaction sides across all price ranges, while NRT, the company-owned brokerage unit, had an 8 percent year-over-year increase. Average homesale price was flat at RFG and declined 3 percent at NRT for the first quarter of 2012 as compared to 2011. RFG and NRT homesale unit increases were in line with the national trends reported in the first quarter by the National Association of Realtors (NAR), which had existing homesale transactions up 7 percent. NAR also reported average sale price for first quarter 2012 as flat year-over-year. Cartus experienced a 7 percent increase in initiations and a 11 percent increase in broker referrals, while Title Resource Group experienced an 8 percent increase in purchase title and closing units and a 31 percent increase in refinance title and closing units offset by an 11 percent decrease in the average price per closing unit due to the increase in refinance volume along with geographic mix of business in resale units.
“Our first quarter closed homesale sides were the highest we have seen in the past four years,” says Anthony E. Hull, Realogy’s CFO and treasurer. “The current market conditions—increased demand for housing and upward pressure on prices—reflect the tight inventory that is prevalent in many markets as well as increased sales activity at the high end. On a combined Realogy basis, we anticipate our second quarter 2012 homesales to increase at a high single-digit pace ahead of last year, and average homesale price will be flat to modestly up year-over-year as indicated by our preliminary April results.”
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