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Takeaways:
- Realogy’s adjusted earnings were 66 cents per share; analysts polled expected 69 cents for the quarter.
- Net income for the second quarter was $97 million, a 43 percent increase over second-quarter 2014’s $68 million. Adjusted EBITDA was $282 million, a $13 million increase over second-quarter 2014’s $269 million.
- The “Zap” platform rollout is on schedule for third-quarter 2015.
While Realogy Holdings Corp.’s second-quarter earnings per share fell slightly below analysts’ expectations, the company expects to normalize its expenses following a few recent acquisitions and benefit from a strong summer selling season in the third quarter of this year.
In its quarterly earnings release today, the Madison, New Jersey-based real estate franchise and brokerage leader said its second-quarter financials continued the momentum it reported in the first quarter, in line with strong home-selling momentum.
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Adjusted earnings were 66 cents per share, compared with 58 cents per share during the same period last year. On average, 13 analysts polled by Thomson Reuters had expected the company to report earnings per share of 69 cents for the quarter.
For second-quarter 2015, Realogy reported revenue of $1.7 billion, a 9 percent increase over second-quarter 2014. Net income for the second quarter was $97 million, a 43 percent increase over second-quarter 2014’s $68 million. Adjusted EBITDA was $282 million, a $13 million increase over second-quarter 2014’s $269 million.
Realogy ended the second quarter with a cash and cash-equivalents balance of $359 million and no outstanding borrowings under its revolving credit facility. Total long-term corporate debt, including the short-term portion, net of cash and cash equivalents, totaled $3.5 million at the end of the quarter.
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The company’s Realty Franchise Group (RFG) posted a sales volume increase of 10 percent for the quarter, comprising a 5 percent increase in transaction sides and a 5 percent increase in average sales price, compared to the same period last year.
RFG experienced its best sales volume in the West and Midwest regions, with increases of 20 percent and 10 percent, respectively. The other two regions showed volume gains, but only in the low- to mid-single digits, Realogy said.
During the quarter, RFG added new franchise and sales production to its five residential brands, representing $85 million in franchisee gross commission income, “and continues to manage a pipeline of prospective franchisees,” Realogy said.
Through the first half of 2015, RFG achieved new franchise sales and sales production representing about $155 million in franchisee gross commission income. The segment’s existing franchise base saw a broker retention rate of more than 98 percent.
NRT LLC — a Realogy subsidiary that operates all company-owned real estate brokerage offices under Realogy’s Coldwell Banker, Coldwell Banker Commercial, Sotheby’s International Realty and ZipRealty brands, as well as The Corcoran Group and Citi Habitats — posted a sales volume increase of 9 percent, comprising a 13 percent increase in transaction sides, but offset by a 4 percent decrease in average sales price.
Richard A. Smith, Realogy’s chairman, CEO and president, noted that both ZipRealty, which Realogy acquired for $166 million last year, and Coldwell Banker United, which NRT acquired this spring for an undisclosed sum, have lower average sales prices.
“NRT’s average sales price would have been flat, excluding these acquisitions,” Smith added.
Realogy’s progress on the expected three-year rollout of ZipRealty’s “Zap” platform, which provides branded websites, a customer relationship management (CRM) system, transaction management, digital marketing and “agent coaching” reports, is proceeding as planned, Smith said. Zap, a white-label product, will be available to franchisees by the third quarter.
“The rollout is on schedule, and at a minimum, we will have about 300 franchisees operational by year-end,” Smith said.
Looking ahead to the third quarter, Anthony Hull, Realogy’s executive vice president, chief financial officer and treasurer, said the company is emboldened by the National Association of Realtors’ recent report on pending home sales, and based on NAR’s predictions, expects to see transaction volume gains in the range of 7 to 10 percent year over year on a companywide basis.
Looking beyond the third quarter, though, is difficult, with most economists unsure of what the housing market will look like at the end of the year, Smith said. However, he added that in order for the housing market recovery to continue to gain strength and momentum, “you need the first-time buyer, and they are slowly becoming more relevant.”
Realogy said it expects to end the year with a cash balance of approximately $650 million, more than double the balance the company reported at the end of 2014, “which positions us to further deliver our balance sheet,” Hull said.
Hull said Realogy’s adjusted EBITDA will be between $810 million and $840 million for the full year, and the company’s adjusted EBITDA margins will be between 14.1 and 14.3 percent.
Following the release of these results, Realogy’s shares fell 5.7 percent to $46.67 in early market trading. Nine analysts covering the company’s stock gave it an average recommendation of “hold.” Shares are expected to trade at about $51.17 in the short term.
