Q4 2020 Realogy Holdings Corp Earnings Call

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby and thank you for your patience.

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Ladies and gentlemen, thank you for standing by your conference call, where they can in one minute. Thank you for your patience and please continue to standby.

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Good morning, and welcome to the Realogy Holdings Corporation's fourth quarter 2020 earnings Conference call via webcast. Today's call is being recorded and a weakened transcript will be made available in the investor information section of the company's website tomorrow and webcast replay.

And we'll also be made available on the company's website and this time and I will like to turn the conference All day, two VLT Senior Vice President Alicia Swift. Please.

Please go ahead Alicia.

Thank you Carmen and good morning, and welcome to Realogy fourth quarter, 'twenty and 'twenty earnings Conference call on the call with me today are really be CEO and President Ryan Schneider.

And Chief Financial Officer, Charlotte Simonelli.

As shown on slide three of the presentation. The company will be making statements about its future results and other forward looking statements during this call.

These statements are based and the current expectations and the current economic environment.

Forward looking statements and projections are inherently subject to significant economic competitive and other uncertainties and contingencies, many of which are beyond the control of management, including among others. The ongoing COVID-19 crisis and uncertainties related to the continued strength and the housing market or refinancing volume.

Actual results may differ materially from those expressed or implied in the forward looking statements.

For those who listen to the rebroadcast of this presentation. We remind you that the remarks made herein are as of today February 23, and have not been updated subsequent to the initial earnings call.

Important assumptions and other important factors that could cause actual results to differ materially from those and the forward looking statements are specified in our earnings release issued today.

As well as our annual and quarterly SEC filings.

Also certain non-GAAP financial measures will be discussed on this call and per SEC rule important information regarding these non-GAAP financial measures is included in our earnings press release.

Additionally, the Cardiff relocation business has been reclassified and to continuing operations and is now included within the RFG segment. The lease growth also remains and the RFP brakeman.

Reported financial information has been restated to reflect this change and can be found in table six of the press release.

Slide 12 of our Q4 Investor presentation also refers to this change and the reporting structure.

And now ill turn the call over to our CEO and President Ryan Schneider.

Thank you Alicia and good morning, everyone isn't true.

And informing realogy for the past few years, we are faster.

Faster, we are leaner and leaner more innovative.

We're driving more organic growth.

We are differentiating with technology, we are working to get closer to the consumer and we feel are substantially improving our balance sheet.

And even in the most from 'twenty and 'twenty challenges you were able to accelerate our transformation.

We delivered incredible 'twenty and 'twenty operating results $726 million operating and EBITDA 555 million and free cash flow.

Double digit transaction volume growth and market share gains and the back half of the year, all while streamlining our businesses.

We reduced net debt by half a billion dollars and our consolidated net leverage ratio was three four times the lowest level since realogy went public in 2012.

And we entered 2021 with great momentum.

December open volume was up 51% year over year and January open volume was up 45% year over year.

Our closed volume in January and January was up 32% year over year, even with January having two fewer business days and 2020.

We believe realogy is well positioned strategically for where the residential real estate market is today and where it's going in the future.

Yeah.

The future is creating a more integrated customer home buying and selling experience and and capturing a greater share of the overall economics.

And 2020, and we leveraged our title and mortgage businesses and technology products to deliver a better closing experience for customers and over $150 million and incremental operating EBITDA versus 2019.

Our digital title and closing products and 1500% usage growth year over year, and our mortgage joint venture saw its digital closing and product usage increased four times year over year.

Strategically expanding these businesses combined with our technology product and vessels from 2018 and 2019, creating.

Creating a better customer experience help customers more easily close on their homes and improved our economics.

The future and using data and technology to support the agents, who remains central to this transaction today and into the future.

And digital marketing products and technology products and data insights we resolved.

Ranging from when a consumer starts looking for a home all the way to clothing and home.

And advantages with the acceleration of digital adoption in 2020.

These differentiated products and insights helps our agents and franchisees drive substantial volume throughout 2020, including market share gains in Q3, and Q4 when volumes were the highest and the industry.

The future of distinctive brands, especially at the high and we.

And we're well positioned with multiple strong brands to capture growth across all parts of the market and.

And we are having outsized success with our higher and brands.

<unk> successfully launched and expanded the corporate and franchise brands in 2020, and even in the midst of a 10 day.

And we are seeing incredible power from our Sotheby's International Realty brand.

It demonstrates real differentiation in the market driving volume growth and the brand up over 60% in the back half of the year.

And finally, the future requires the ability to invest as the industry evolves.

Our strong free cash flow allows us not just to invest and the customer experience and technology and and brands.

Positions us to invest and different real estate and models.

For example, our real sure I volume joint venture provides our agents a differentiated offering and to compete and the market and gives us the ability to go head to head against pure play AI buyers and.

And we are incredibly excited that our joint venture partner home partners of America is deeply experienced and buying and selling homes and they've already purchased over 18000 homes and their core business.

Our program is live and 11 markets, we are planning to be and about 20 markets and 2021 and this gives us a real option value as the industry evolves.

The Realogy is great 'twenty and 'twenty results and our strong position for the future starts with the successes of our affiliated agents.

The power of the agent's role as a trusted advisor was clearly demonstrated as they skillfully help customers navigate and extraordinarily challenging year.

Her expertise and creativity third with our strategic progress on technology marketing and data insights enabled them to get more deals done even in the most difficult circumstances of 'twenty and 'twenty.

Realogy field employees also found ways to safely support customers and agents utilizing investing in personal practices and enhanced technology.

And our corporate staff to seamlessly transition to hybrid remote work.

We are transforming Realogy headquarters from 270000 square feet of offices to 60000 square feet of brand and technology showcases with an emphasis on collaboration.

And our employees have been resilient as they've embraced new ways of working and our results during this transition and speak for themselves.

Now, let me share now and what we're seeing and the housing market.

Relative to Q4, 'twenty and 'twenty closed transaction volume increased 45% year over year.

With similar growth across brokerage and franchise, even with brokerages, and New York City volume still be and negative year over year.

As I told the 'twenty, one 'twenty 'twenty, one is off to a strong start.

January closed volume is up 32% year over year, even with the two fewer business days in the month versus prior year, we closed volume per franchise ahead of brokers.

January and opened volume on a same day basis was up 45% and we.

And we're very excited that it's up equally across brokerage and franchise and.

And we also saw and New York City opened volume growth move to positive in January.

So what's driving this momentum so first our actions are working.

We are growing our owned brokerage agent base, our agent retention has improved every quarter for the past five quarters.

Our corporate and franchise business is already operating in 'twenty domestic markets and.

And we just opened our first international franchise and this month.

Our Sotheby's International Realty business is showing differentiated performance.

And our investments to deliver technology products marketing products and data products to help agents do more transactions are paying off.

Second the housing market is clearly doing great.

And thought the senior common stock from the low five plus million units per year. The market has been out for almost a decade.

With 2020, ending the year at $5 6 million units sold.

With our national footprint, other franchise side, and our attractive market footprint and owned brokerage and we're well positioned to capitalize on the strong demand.

The consumer trends propelling the market for the past six months are continuing and consumers are rotating from urban to suburban and geographies across the country.

They are rotating within suburban geographies to find homes that better meet their needs and they are accelerating the existing trend to attractive tax and what other destinations.

While the Covid crisis originate and many of these behaviors more remote work and work from home is clearly driving these trends forward.

Finally, very low interest rates are good for housing and we're seeing millennials continue to increase their homeownership rates.

Now, while I love, telling you about the strength of the housing market keep in mind, we are sold and the method of public health and macro uncertainty and when.

We can't predict the future. So we were especially monitor and the macro inventory constraints and consumer trends given the potential uncertainty of the housing market.

So pulling way up Realogy had an exceptional year of execution.

We deliver powerful profitability and free cash flow, we significantly improved our capital structure, and we demonstrated strategic success and the market.

We believe realogy is well positioned to deliver and lead into the future now.

Now I will turn the call over to Charlotte for a review of the financials.

Thank you Ryan good morning, everyone.

Tony was a tremendous year of operational and financial execution for Realogy.

Full year, 'twenty and 'twenty revenue grew 6% from $6 $2 billion, and we delivered 726 million and operating EBITDA.

And increase of 23% from 2019.

We also generated 554 million of free cash flow of 329 million versus prior year.

Operationally, our agents and franchisees, one 4 million transactions during 2020, and we saw a 13% year over year transaction volume growth. Despite the dramatic Q2 housing market contraction and the ear non headwinds and the New York City market.

What remains most compelling and impactful is the fact that unit growth was up double digits and Q3 and Q4.

Unit growth was two thirds of our Q4 brokerage growth and one of our Q4 franchise growth.

We delivered two consecutive quarters of market share gains and Q3, and Q4 and held our full year market share study at 15, 3%.

Having been under market share price here for a few years, we were very pleased by these two quarters of consecutive market share growth.

We had a record year and mortgage and title, which we have been investing in and expanding over the past few years.

We delivered 226.002 million 20, operating EBITDA of 158 million versus prior year.

We continue to aggressively lower car sales.

And 83 million and permanent cost savings and.

And over $150 million and temporary cost savings.

We expect to deliver an additional $80 million of permanent savings in 2021.

Covid brought new ways of working and some of these changes will drive savings going forward.

Even as we realize additional permanent savings free do not lose sight of the $150 million and temporary cost savings, we executed in Q2 and Q3 amid COVID-19.

And not Ricky and 2021.

Commission splits increased 265 basis points year over year, and a very high volume here.

The lion's share of that approximately 200 basis points was driven by two things.

We saw upward pressure as a greater share of our transactions were closed by higher split agents and other agents produce tomorrow and progressed up the commission rate schedule.

We also saw upward pressure from our investments to grow agents and improve retention.

Our owned brokerage agent base growth, 2% and reports and improve each quarter and we like the net economics of our ancient investment.

The remaining 60 basis points was driven primarily by the loss of the lower split you, let's say a business and the previous year.

The sale of our property and frameworks business and geographic mix.

We expect continued pressure on splits and 2021, Richard part will depend on the strength of from housing market and we will work to offset increases by growing our agent base, leveraging our ongoing cost reduction program and by capturing more economics from the consumer transaction.

We improved our capital structure and reduced net debt by approximately 500 million versus 2019 and have also substantially improved our balance sheet.

Our total net leverage ratio was three four times and a senior secured leverage ratio forgot and all time low of one seven times as of December 31, 2020.

Our senior secured leverage ratio is now below one times on a pro forma basis after our recent refinancing transactions.

We ended the year with approximately 520 million of cash, including $150 million of statutory cash.

Our revolver balance and Q4 was zero for the first time and several years and have been zero since October despite Q1, typically being a negative free cash flow quarter.

And early 2021, and we aggressively and Opportunistically tackled our capital structure, taking proactive steps to address portions of our 2023 and 2025 maturity.

We originally raised 900 million senior unsecured notes with a 575% coupon maturing in 2029.

We used the proceeds to reduce our senior secured debt.

Term loans outstanding borrowings were reduced by 250 million and from won't be by $655 million.

We also finalized and amendment and extension of slightly more than 50% of our term loan a and close to two thirds of our revolver.

As a result of these transactions and we shifted our capital structure and substantially more unsecured note and lengthened our debt maturity profile.

We now have only approximately 600 million and maturities in 2020 free down 50% from year end, and we remain confident and our ability to satisfy those maturities.

Our capital allocation priorities are unchanged, we will continue to prioritize investing and our business and paying down debt and 2021.

Wrapping up we exited 2020 with tremendous momentum.

We delivered exceptional financial results and we are operating more efficiently and effectively.

The strength of our operating results in conjunction with significant improvements to our capital structure.

And a position of strength entering 2021.

And I am extremely proud of the team and the results we executed in 2020.

I'm excited for the future and we continue to leverage the power of Realogy size scale and full service business model to deliver profitable growth.

With that we will open it up for your questions.

Thank you and ladies and gentlemen to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

That is star one to get into queue. Please standby, while we compile the Q&A roster.

Our first question is from John Campbell with Stephens. Your question. Please.

Hey, guys. Good morning, Congrats on wrapping up and Greg here.

And thank you John.

Yeah on the <unk>.

From a transaction volume lift I mean that was that was impressive throughout the year you guys really I mean, it really stood out and the back half of the year and that's all.

That's a good result, considering the continued headwinds out of the New York.

But Ryan can you talk to maybe the organic share gains and and what you think helped drive that and the back half, particularly.

Yeah look it's no secret we've been under some market share pressure with some competitive separate a couple of years.

Really excited to show some pretty substantial market share gains relative to <unk> and both Q3 and Q4.

Really two things that drove this John and so what is our assets.

But our agent growth is off the Charlotte talked about our retention and up in Charlotte and I both talked about.

<unk> franchise expansion success, and some of our brands or just to get a great.

And is the strongest part of the housing market.

Was at the higher and and we are very well positioned at the higher and which is a place I think if you really want to be with our Sotheby's brand, our corporate brand or coldwell banker brand as well as the geographic footprint and both our franchise and their own business. So I would say a bunch of the share gain was our actions of the list that I just gave you and the piece.

And so that was also the fact that we're just well positioned at the high end and that was a stronger part of the housing market for the last half of 'twenty and 'twenty.

Yeah makes sense. Thanks for that color and then on the mortgage JV impact and just a couple of quick questions. There. So first how much did that contribute in the quarter and then.

And what was the full 2020 impact versus 2019, and then I know a lot depends on the macro but just at a high level, how should we be thinking about that contribution in particular just throughout 2021.

Well Charlie can give you some numbers, but let me just give you a little bit of strategy here and so there's just like I gave you the answer and market share Theres two things going on in Florida.

One is obviously it was a strong year for mortgage and a good refinance market and we benefited from that but the other and the thing I hope people don't lose sight of is you know two years ago. We started it was brand new mortgage joint venture and we lost money at it and you know I have to eat some dirt and all that kind of stuff.

But we've been strategically expanding this thing our coverage of our brokerage business is greater with it our loan officer expansion has been really good our service quality is doing great and.

So part of what we got in 'twenty and 'twenty was this just strategic expansion and more geographic coverage better penetration et cetera, along with the hot market.

So for US you know if the refi market goes a little bit backwards from 2020 that will affect us, but a lot of what we build and grew in 2020 was our strategic expansion.

Our digital title clothing product getting a lot more usage and so we like the strategic trajectory, we're going to move with the macro on the refi side and 'twenty and 'twenty, There's clearly a great year for that but just like the market share. Some of it was the market and some of it was us and we're excited about that Charles do you want to give joining and the numbers he asked about.

Yes sure.

Title Group and total Q4, operating EBITDA was $58 million, which was up $44 million versus the prior year. So as you can see mortgage is a big piece of that and we had outstanding results.

To Bryan's point, there's a lot more to weapons.

There's other things that we've done the growth of business Theres, a refinancing and practice also higher gain on sale margins, which were prevalent last year. So all those things I think we're watching what we're excited about and it's still off to a good start this year and we'll continue to watch it.

Okay, great. Thank you.

Thank you. Our next question comes from Ryan and I gave a knee with Zelman and associates. Your question. Please.

Yes, good morning, and congrats on the performance true through the year.

And I wanted to follow up on John's question around the mortgage and title performance, So Ryan and I hear you're calling out obviously a combination of.

Market dynamics some of the strategic expansion the uplift on the digital side of things.

So I guess my question is maybe from a geographic standpoint.

Whereas the guaranteed rate JV or even on the title side of things in terms of the actual coverage and breadth across across Realogy customers.

Is there kind of a clear runway for just ex.

Expansion of getting more loan officers across the country from where we are today.

Or has the heavy lifting kind of been done in terms of that footprint and now it's more of the execution and just trying to separate sort of.

The clear growth potential incrementally versus just kind of leveraging what's already built at this point.

Well, let me start with the strategic answer and I tried to talk about this a little bit and the future Ryan which as you.

We have a vision, which a lot of people I think have that there can be much more done to create and integrated transaction for the customer to just make the process easier and and most of that process by the way is the closing process.

And we have the pieces of it with title and mortgage and some of the digital products, we've invested and plus our leading position and brokerage and in 2020, we started to put that together and you can just see how much we were capturing more of the economics.

By creating a better close and experience and beginning to integrate and stuff.

We think strategically there is a lot more room to go on that.

On the more tactical practical side.

Our title business is pretty well architected across the nation, but we are still expanding and we expanded in Idaho, we expanded and Utah, We got a couple of other ones kind of coming up so we got a little bit more expansion. There mortgage has more room to expand and the expansion is.

Both are a little bit more geographic coverage, but it's also that you know.

We have a visit or you know whatever one loan officer to every 25 agents right. We're not at that vision right. We're more like one and 50 kind of thing and so along with kind of finishing the geographic coverage of our brokerage footprint, which.

Which we have a little bit more to go on and we want to get more depth right and you know there's real power and I think what our agents can do to help loan officers drive business and so we think there is room for that so those are a little bit of a place where I think we've got more to go.

But it all and the architect of strategically how do we integrate these businesses. We've got the technology that we've been building to create a better experience capture more of these transactions both title and mortgage and drive more integrated economics like we actually demonstrated more in 2020 than we'd ever done before.

Yes, that's very helpful. Ryan Thank you and a follow up to it.

And so.

And I'm trying to tie it back a bit to the to the brokerage.

Agent split dynamics so.

Big picture strategy Wise, I guess, my assumption would be the stronger performance and contribution you can get out of title and mortgage.

Theoretically that'll that allows a bit more leeway and flexibility on the split side of things.

Especially with just industry splits tending to move up and up and up so.

So is it fair to think that kind of the strategy around mortgage entitled ties back to how you guys kind of game plan and strategize within.

And of the performance you put up within directly within the brokerage segment.

Kind of tying to I think the concept you mentioned around the integrated transaction and all the pieces. We obviously see the segments broken out, but just curious if you could talk about the bigger picture strategy of kind of tying it all together on a company wide basis. Thank you. So much yeah. I think you actually answered the question Ryan for Us, which we are true.

Appreciate and Charlotte talked about this which is in a world where not just real G. But our industry has some increase and upward pressure and agent commissions.

Being strong on our cost you know approach year over year on operating cost as a way to offset some of that margin pressure and then the more we can capture the integrated transaction economics, obviously, that's another way not just to offset the pressure, but if you look at 2020, Dolby audio offsetting the pressure with our mortgage and title results and so that.

How the business works and you know one thing is as you know we report mortgage and title separately.

And those businesses wouldn't exist without brokerage right and when you do talk to our franchisees, we're running brokerages and they don't report that separately.

Brokerage mortgage title its an integrated business and that's how we are trying to deal with run. It also and so when you think about the power of our brokerage business, which makes hundreds of millions of dollars on the owned brokerage side the title and mortgage economics are an integral part of that and you can think of them all as a whole that we're trying to maximize and.

Craig and more integration for the customer is a big part of our future and that we believe and we've got some early success on but it's also with mortgage and title and these integrated economics, a way to deal with some of the margin pressure that's been in this industry and for our company on Commission splits.

Makes sense. Thank you very much.

Thank you. Our next question comes from Matthew Bouley with Barclays. Your question from.

Good morning, Thank you for taking the questions.

Following up actually and the last point around Commission splits.

You mentioned that I think you said 200 basis points of the pressure and in 2020.

And was from a confluence of few factors mix.

Yeah.

And the lack of or excuse me at your own efforts to recruit and then just agents moving up the split schedule earlier. My question is why wouldn't those three factors drive a similar increase and splits and 2021 and you know just thinking about the timing of how strong volume and started.

The year is there risk to agents moving up the split tables you know.

Even earlier than normal.

Sure.

The same and it really does depend on the volume because it's not just the mix the mix combined with just how high volume of work and you'll start to see that a lot and the back half.

And so yes, the drivers will be the same day amount of the impact and vary based on just the housing market in general as far as how they progressed at the table.

Not just like one shut off point throughout the year Theyre pretty evenly seasonal lives.

Contracts per day, so yes, there can be a point, where folks who do drop off but then they reset based on where they finished the year and so if they finish their strong on their table then they'll remain at that table until the following year when we see how their performance value.

For those mechanics.

One thing to add to that and remember look on our on our investments, which we like and they are frankly worked out pretty well force and we look back at our integrated economics from 2020.

We get to own our choices on that right and we liked the choices on that so on that metric. We do have actually some real control over how this metric goes and then as Charles said because.

And not everybody and resets on January one so it's a little more of a.

And what kind of we'll see on the on the on the volume thing but.

But at the end of the day I think Charlotte laid out pretty much what the drivers are and and you know you'll look back and very strong housing market years, whether it was 2020 or others the pressures even higher and in years like 2019, where the housing market is bluntly.

Flattish or slightly negative or whatever it was is free.

Frankly, much lower so the housing volume.

Correlates pretty interestingly with this and.

Obviously, we're rooting for a high volume year, but we have some choices and this that we are also going to be making.

Right. Okay, no that's helpful color.

The second one just on the model.

Looking at the G&A and Q4 was a little bit higher than we expected was that just you know employee incentives and what else drove that and obviously I'm trying to understand how to think about leverage on G&A going forward and in 2021. Thank you.

You hit the nail and there have been definitely led from finally unemployment related profit and there were some other non employee related expenses that finding had Q4. So yeah. That's the right way to think about it so that was a timing issue and not repeated.

Okay. Thank you very much.

Thank you. Our next question comes from telling me and Mike joined with K B W. Your question. Please.

Hey, good morning, guys. Thanks for taking my question.

Could you just talk about the outlook for the Carnage relocation business now that it's part of franchise.

And do you think that business and expect to be profitable and either GAAP or EBITDA basis going forward.

Well look look we like the Carter's reload business, we always have and primarily we liked it because it's a really good part of our value proposition, especially from franchisees around lead generation.

Right now I think we've given you.

More detailed and we've ever given you are and the harvest reload economics.

Because it was in discontinued ops for the period and it was.

So you can actually see what the true economics were even through most of 'twenty and 'twenty, because we've already seen those out there.

At the moment like the <unk> market is under are under some pressure right. It has not experienced and the same recovery as the housing market.

And that's really driven by two things right. The obvious one is COVID-19 and what that's done both too.

International moves and domestic news, but the other one is actually visa restrictions and so the visa restrictions that were in place or have been in place and the.

The last kind of year or two have actually been a pretty big headwind for the relocation industry, especially.

And especially for a global player like us.

So we moved pretty quickly to take cost out bluntly and.

And I thought and we like how we've done on that.

And you know we we.

We still have a pretty strong position and this business and so we're looking forward to probably what it'll be more of a gradual recovery.

And the biggest dynamic there'll probably be how much work from home does affect the reload side of kind.

And the global economy.

But work from home very substantially right and Theres a lot of geographies.

I'm not going to name them, where frankly work from home probably won't be as big of a trend as it is and the U S. Because the ability to work from home, whether it's internet connection or you know.

While we like the number of people and AR and AR and a building or a house or a apartment doesn't make it was viable and it does and the U S. So we'll see what happens on that but one thing I would tell you is I think we are in an advantaged position relative to most of our competitors on reload.

Because for US re lo is.

Important, but not very big part of a pretty decent sized company, we mostly compete against pure play a remote companies who have all the pressure that we just talked about but haven't none of the benefits of Realogy is economics technology and data scale et cetera et cetera.

So you know so it's so you've got a lot of transparency about the business and we're excited to keep working on it but it's.

It's got some headwinds at the moment a different shape recovery, but we are we like the lead generation and still give it even today and we.

And we like the actions and the management team has taken on the cost side.

Thanks, Yeah, that'll that'll make sense.

Switching over some other you've got leverage down and order.

And refinanced the debt and there was a pretty strong outlook for housing and how do you think about capital priorities from here and does that include potentially re and I sit and the dividend.

Yes, so and I tried to cover that a little bit and the script, yes, our capital priorities remain the same so we're going to continue focusing and investing in our business and paying down debt and we're very excited by the progress we made last year, but it is definitely still remains a top priority for us.

Yes, if I can just comment on that a little bit look.

Look we made 725 million of EBITDA and we did have a 1 billion and debt reduction and we like and a lot.

But I did and my section with the fact that there's a lot of uncertainty both public health and macro right. So you know we think for now at least stay and the cores on the capital side as the weighted.

The one thing that we used to do that I don't think it's probably going to be.

One thing we used to do that I can't imagine us ever coming back is our dividend. So let's just put that out there for you guys to have that.

As we get farther into 2021 as our progress continues I.

I think we will continue to always be revisiting our capital allocation strategy and we want to do our best for our investors on that but for right now investing at the business is absolutely at the top of the list. We have the capacity to do that we're going to continue to do that we're going to stay the course on debt Paydown for right now and put the dividend thing aside you know it will.

And the uncertainty.

And a determined how long and we stay in this quarters versus do something different but you should assume we're on the path. We're on until we tell you differently.

Makes sense thanks, guys.

Thank you. Our next question comes from Japanese Schenkel with Susquehanna. Your line is open.

Hi, good morning, everybody.

And following up on that question you had a pretty active 2021 and the on the balance sheet side already that where you are.

And are a bit more comfortable sounds like youre going to pretty much hold Pat until 2023 on that maturity.

So we're with the business, where it's at and the volumes. When there is a lot of cash generation, probably again in 'twenty, one and we're already been invest and the business is going to be.

<unk> is there some sort of technology piece, and then you talked about mortgage and improving.

You know maybe the ratio of lenders to agents, where should we expect that investment really the phone call and two are in the coming year.

Well the first thing I'd say is you know even if you look back at 18 19 or 20, we have never starve herself for investing in the business. So even in the midst of.

Q2 of Covid, when we were doing.

You know 50, and 90% salary reductions for folks and hours cut across the board and all of that kind of stuff. We did not stop Jack at all and vessel and our technologies. For example, we did not stop the launch of our corporate and franchise and try to start that.

So you know we have.

But a pretty substantial amount of money into investing and kind of a core business that gets paid off and some of the different things we talked about whether it's on the agent growth retention side on the mortgage side on the corporate franchise launched other technologies have to we're going to keep doing that.

The two places that I think there are potential for more investment and the business if the opportunities are there.

One would be continued and the technology area. You know I always look I've said, many times I'm surprised we haven't quite gotten even more purchasing and are investing in technology companies.

And part of it up because I think the there aren't that many differentiated solutions and industry, but we've done some and like our investment in remote and own amortization product paid off dramatically in 2000, 2050, and 100% usage and create huge part of our title growth, but and kind of capturing more economics kind of thing.

So we're open to continuing to do that you know the other.

Other is as we watched the world change we have planted a lot of seeds for different business models and approaches. So for example.

And we formalized our joint venture with home partners of America to do I buy and if he wants to do it now nobody using high volume today, because the market is very hot and it's not a I needed thing, but we love our agents, having and offer so they can go toe to toe with anybody on that day and.

And if we're trying to place warehouses, depending on the world evolves, we might end up investing more.

And the buying homes part is off balance sheets, and we're not taking that on but we may invest more and that joint venture.

And we've done a partnership with home advisor to actually help customers prepare their house for selling renting them. The money and then using at home advisers, Great network of service.

Service providers to coordinate the repair so it's kind of a turnkey for the homeowner we love it it's a great thing we bought national with it.

And to put as much into that as we need to so you know these themes will continue to be there and then we're always watching how the market evolves, if we need to make a bigger investment and something to turbocharge. It.

And you should assume that we have not starve ourselves even in the worst time investing and the business as our Q2 investments and technology, and corker and franchising and agent retention and recruiting demonstrated and showed up and our 2020 results.

Got it thanks and then.

Charlotte looking at and you talked about another $80 million.

<unk> expense savings this year.

And then we've all been impressed with the performance of mortgage and title.

If volume is kind of hanging in here and I know that's a big if.

How do we think about EBITDA margins for the year do we leverage from here do we do we do we look flat.

To 'twenty and then we had we didn't have that air pocket and the second quarter.

Just curious how we should sort of think about the full year I'm on the margin side based on what you see today.

Yes.

And drivers now I think the issue and the temporary cost saves are material and our Q2 and Q3, so you'll see the margins vary quarter by quarter, depending on what we're lapping youre right, we do get a leverage benefit from volume and a longer that the volume glass. The other thing that we get is because the JV is.

And minority interest and we consolidate only the earnings and not the revenue. So that helps on margin. So is that all of the drivers right. It will depend on volume, but you can't ignore the humongous and temporary cost savings.

Two quarters discreetly will have their own impact.

Okay. Thank you.

Thank you. Our next question comes from non comes also with Compass point Your question. Please.

Hey, good morning.

Actually just to follow up on that on that point on operating expenses I'm wondering if you could kind of expand on where those $80 million of additional cost savings are coming and.

And maybe.

Some are there any kind of call outs on inflationary pressures elsewhere and the business on the expense side.

And to offset that.

Yeah. So we will we always experienced and placement and the single biggest thing I can point out or like merit increases and things like that.

Other things as inflation that will all et cetera.

First the $80 million and where we're benefiting so we.

We have an ongoing effort across just automating things amongst all of our business that fits and brokerage that sits and relocation.

Theres definitely ongoing savings of travel and entertainment and conferences and meetings and things that we consider to be temporary and 2020, but you know we've just found different ways of working and now we can move them into the permanent.

Section of the savings so.

And they're going to hit across the P&L and you'll see them incorporate your feed them and brokerage and relocation et cetera, but.

The drivers will be you know sort of on the marketing the travel.

And some salary and staff.

And that's basically where you should expect to find.

And they're pretty evenly please and alive throughout the year.

And your models.

And they are relatively easily easy seasonal like evenly throughout the quarter from a year.

Great.

Really helpful. And then maybe just another one sort of a modeling question, but in the fourth quarter and the corporate and other section or segment.

Just with $25 million and lower operating EBITDA was that also the timing.

Aspect that you called out earlier or was there anything else driving that and what.

It's a good run rate for that going.

And it's the same question as before and for sure so ex that.

Ending on employee related expenses, but also there was some timing on some other corporate expenses Q.

And so.

I think if you look back at and previous quarter. If you can sort of do and average and get a good run rate from a corporate should look like.

Great. Thank you for clarifying.

Thank you and ladies and gentlemen, this concludes our Q&A session and conference for today. Thank you for your participation and you may now disconnect.

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Yes.

And the numbers.

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And then.

Yeah.

And.

And.

And then.