Realogy Holdings Corp. recently reported financial results for the full year ended Dec. 31, 2017, including the following highlights:
Revenue was $6.1 billion, an increase of 5% compared to 2016, driven by increases in homesale transaction volume (transaction sides multiplied by average sale price).
- Realogy grew its U.S. marketshare of existing home-sale transaction volume to 15.9 percent, up from 15.7 percent in 2016.
- Combined 2017 home-sale transaction volume for Realogy increased 7 percent year-over-year, which exceeded the National Association of REALTORS® reported annual industry volume increase of 6 percent in 2017.
- Net income was $431 million for 2017, compared to $213 million for 2016. Basic earnings per share was $3.15 compared with basic earnings per share of $1.47 in 2016. This reflects the recognition of a $216 million tax benefit, most of which is due to the 2017 Tax Cuts and Jobs Act, which reduces Realogy’s effective tax rate from an estimated 41 percent to an estimated 29 percent.
- Adjusted net income per share for 2017 was $1.59 compared with $1.64 for 2016.
- Free cash flow for 2017 was $559 million compared with $456 million for 2016, an increase of $103 million. Free cash flow for 2017 includes $27 million relating to the transition to a new mortgage joint venture partner.
- Operating EBITDA for 2017 was $732 million, compared with $770 million for 2016. The 5 percent decline was primarily attributable to higher agent commission rates, reduced earnings in our relocation segment, and several non-recurring charges.
- In 2017, Realogy returned $325 million of capital to stockholders through share repurchases and dividends.
“Realogy is at the heart of the attractive U.S. residential real estate market, and I believe we have a compelling combination of critical and unique advantages as the market leader,” says Ryan Schneider, Realogy’s new CEO and president. “Success requires that we deliver better business results, and we are moving quickly to drive change to enhance shareholder value. Our strategy is anchored by an aggressive focus on serving and supporting agents to help them become more successful, in large part by leveraging our technology and data scale.”
“During the past three years, Realogy has generated $1.5 billion in free cash flow,” says Anthony E. Hull, Realogy’s executive vice president, CFO and treasurer. “The majority of our strong cash flow was allocated to repurchase shares, pay dividends and reduce debt. We expect to continue this capital management strategy going forward.”
In 2017, RFG and NRT’s 192,000 U.S.-based affiliated sales agents helped consumers with 1.5 million home-sale transactions. In aggregate, Realogy achieved home-sale transaction volume of approximately $508 billion, an increase of 7 percent compared with 2016. NRT average home-sale price increased 5 percent and home-sale transaction sides increased 3 percent, while RFG reported an average home-sale price increase of 6 percent and a home-sale transaction sides increase of 1 percent.
In the title and settlement services sector, TRG was involved in the closing of approximately 188,000 transactions in 2017, reflecting a 4 percent increase in purchase units compared with 2016, and notwithstanding a 44 percent decrease in refinance units, which is consistent with industry trends.
In the relocation segment, Cartus’ results in 2017 decreased from the prior year due to reductions in their global relocation activity and lower overall volume. Cartus continues to be an important part of the company’s value proposition, generating highly qualified leads for its network of affiliated agents and helping them to build their businesses. Cartus generated referral opportunities to agents that resulted in approximately 76,000 in-network home-sale closings for Realogy and its brands in 2017.
Capital Allocation, Quarterly Dividend and New Share Repurchase Authorization
Since the share repurchase program’s inception in February 2016, the company has repurchased approximately 18 million shares at an average price of $28.60 for $515 million in the aggregate, thereby reducing its share count by 11 percent in that time period. As a result, Realogy had approximately 130.2 million shares of common stock outstanding as of Feb. 23, 2018.
Realogy has announced that its Board of Directors has authorized a new share repurchase program of up to $350 million of the company’s common stock. This is in addition to the $60 million remaining under the current $300 million share repurchase authorization announced in February 2017. Repurchases may be made at management’s discretion from time to time on the open market or through privately negotiated transactions. The size and timing of these repurchases will depend on price, market and economic conditions, legal and contractual requirements and other factors. The repurchase program has no time limit and may be suspended or discontinued at any time.
On Feb. 26, 2018, the Board of Directors of the company declared a quarterly cash dividend of $0.09 per share of the company’s common stock. This dividend payment will be made on Mar. 26, 2018 to shareholders of record as of the close of business on Mar. 12, 2018.
Balance Sheet
The company ended the year with cash and cash equivalents of $227 million. Total long-term corporate debt, including the short-term portion, net of cash and cash equivalents (net corporate debt), totaled $3.2 billion at Dec. 31, 2017. The company’s net debt leverage ratio was 3.9 times at Dec. 31, 2017.
In February 2018, the company announced that it had completed the refinancing of its senior secured credit facilities and extended its maturity dates. Specifically, the company made the following changes:
- increased its revolving credit facility by $350 million to a $1.4 billion total facility and extended its maturity by three years to February 2023;
- combined its existing two tranches of term loan A and term loan A-1 into a new single tranche of $750 million and extended the current maturities to February 2023; and
- extended the maturity of its approximately $1.1 billion term loan B by three years to February 2025.
“We have decreased our debt from $3.9 billion at the end of 2013 to $3.3 billion at the end of 2017,” Hull says. “The refinancing of our term loan facilities increased our revolver capacity to $1.4 billion and furthered our capital structure strategy of creating a staggered maturity profile on our debt structure.”
At year-end, the company’s net operating loss carryforwards were $1.0 billion, which it expects will allow it to continue to pay minimal cash taxes through 2019.
For more information, please visit www.realogy.com.
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