Q3 2021 Realogy Holdings Corp Earnings Call

October 28, 2021

Good morning, and welcome.

Don't really see Holdings Corp, third quarter 2021.

Earnings Conference call via webcast.

Today's call is being recorded.

Keith will be made available in the Investor information section of the company's website tomorrow.

A webcast replay will also be made available on the company's website.

At this time I would like to turn the conference.

<unk> Senior Vice President Alicia Smith. Please go ahead Alicia.

Thank you Mary Good morning, welcome to Realty third quarter 2021 earnings conference call on the call with me today are 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 on our 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 inventory level and uncertainties related to the continued strength of the housing market.

Actual results may differ materially from those expressed 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 October 28, 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 in the forward looking statements are specified in our earnings release issued today as well as in 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.

Nardi I referenced during todays call is based on <unk>. Most recent public estimates, which are subject to review and revision.

That impacts comparability of our home sales statistics dinar outlined in our annual and quarterly reports filed with the SEC.

The references made to October month to date in these remarks reflect data through October 20, <unk> 2021 for.

We're closed transaction volume October 2021 will have one less business day than October 2020, However, our discussions on both open and closed volume on a month to date basis have been adjusted to reflect like for like number of business days.

Now I will turn the call over to our CEO and President Ryan Schneider.

Thank you Alicia good morning, everyone religion, you delivered excellent top and bottom line results this quarter as we innovate the future of real estate.

We are driving outsized growth with Q3, our fifth consecutive quarter of market share gain.

We are simplifying the home sale transaction for consumers, both in our existing business and with real sure.

We are strengthening our capital structure with debt reduction.

Strong cash position.

And we entered into a title underwriting venture designed to unlock future growth upside and return capital to reinvest in our strategic priorities. So let's dive straight into our terrific financial results and strategic group quite as demonstrated in Q3.

Realogy delivered 12% transaction volume growth year over year, we outpaced nars, 9% volume growth again in Q3 and gained market share for the fifth quarter in a row.

We thought even higher transaction volume growth in our owned brokerage business at plus 17% year over year driven in part by an exciting come back in the New York City market, one of our largest markets, where we have the market leading position with Corcoran and Sotheby's International Realty and now Coldwell banker.

Revenue grew $277 million to $2 2 billion with strong momentum across our brokerage franchise and title businesses with.

We generated $273 million operating EBITDA in the quarter and this is flat to last year. After excluding 40 million of 2020 temporary cost savings and is up $50 million five zero versus Q3 of 2019.

We produce significant free cash flow $282 million and finally, we made continued progress strengthening our capital structure. We ended the quarter with a two three times net leverage ratio and $700 million of cash even after repaying $435 million of debt in September.

Now these accomplishments would not be possible without really strong culture and talent, we are demonstrating incredible agility in how we operate our workforce supporting hundreds of thousands of agents in the field shifting to remote work and transitioning our corporate offices into collaboration and innovation hubs.

We continue to be recognized for attracting and retaining great talent Forbes just named <unk> to its list of world's best employers earlier this month, which follows Linkedin top 50 company recognition earlier this year and really was just awarded a great place to work designation for the fourth consecutive year.

Now let me update you on some of our exciting growth factors first we are enthusiastic about our real sure progress remember reassures our joint venture with home partners of America.

Our current product is in 24 cities today, it's real sure sell and simply put a homeowner can get a guaranteed 45 day offer with the option to also lift their home on the open market with one of our imaging agents the.

The consumer can accept the offer they prefer giving them the best of both worlds and putting them in control of how they sell their home.

Excitingly 77 zero percent of customers, who request a real sure offer are actually listed in their homes with one of our agents.

Now we recently appointed Katie can again is real sure CEO named one of fast company's most creative people Kt has a successful background, Washington scaling consumer centric companies, including companies that she found it.

He also has experience incubating in innovation and driving growth within much larger corporate enterprises, such as Walmart and we're incredibly excited to have Katie leading reassure.

We are launching our next real short product in five cities later this year, it's called reassured by and it helps our buyer provide a cash offer with bidding on the home something increasingly important in today's very competitive market and like our sell product or by offering has mortgage entitled integration is a core component.

So the value proposition.

Finally, a real sort of investment will step up meaningfully in Q4 as we continue to scale launch this new product expand our direct to consumer marketing and substantially build out the business and the team even more under Katie's leadership.

Shifting to another strategic growth vector, we continue to invest in and love. The growth results were getting from our luxury leadership position Sotheby's International Realty volume is up over 50% this year with its international business growing even more with royalties up over 80% year to date.

Corcoran has doubled its volume from where it was a year ago driven by strong growth in our owned business, especially as New York City, rebalance and even more importantly, driven by the substantial growth in the franchise business, we launched last year.

And finally, we recently made a luxury brokerage acquisition, we acquired the iconic Warburg Realty company in the important New York City market strategically we're excited to operate this new part of our company under the Coldwell banker global luxury brand. This strengthens our luxury network and enhances the coldwell banker brand with its New York So.

Any presence.

Now Similarly, we remain incredibly focused investment in technology and product innovation. Our open architecture approach of technology is a competitive differentiator and one proof point is how it enables our agility since we last spoke we've taken a new product in our open ecosystem Moxie works and deploy it to hundreds of companies and <unk>.

Tens of thousands of agents in just a few months and clearly our continued focused delivering great and new technology marketing and data products to our agents and franchisees is helping drive our growth.

Finally, as you know we operate a national title settlement in escrow business, which works directly with customers and agents to close real estate transactions. This business is very strategic and is a core part of creating a more seamless consumer and agent experience as we innovate the real estate transaction both in our existing.

Business and with <unk>.

Now separate though from our title settlement business. We also have a title underwriter that provides the actual title insurance behind customer facing home transactions. We were very excited to announce a new underwriter venture. This month, we found a great partner in Centerbridge, which is purchasing a 70% stake in our under.

A writer business, especially given Centerbridge is track record driving growth.

US maintain a meaningful stake in this business to capitalize on future growth while at the same time, freeing up capital to invest in our strategic priorities.

Now, let me close with what we're seeing in the housing market.

Housing demand remains very strong driven by remote work strong relocation, especially to attractive tax and whether geographies low mortgage rates and positive demographic trends.

Lack of supply is increasingly an issue given the strong demand and you can see that in both the substantial price appreciation.

And the unit sales declines in our business and in the market.

Now looking forward our September opened volume and October month to date open and closed volume data are all basically flat versus 2020.

But it's a little too early to extrapolate the whole quarter from those numbers.

The Q4 2020 comparison was extremely strong.

We're up 45% year over year in volume last year substantially above the market.

So look given the supply and the unit pressures in the market.

The market is seeing today, we would expect like nor is forecasting that overall Q4, 2021 volume is likely to be slightly down versus the extremely strong Q4 of 2020.

So as we near the end of 2021 lets just look back and remember housing it's been about a five to $5 5 million resale unit transaction market for basically the last decade.

2020 had $5 6 million unit sales, but those were largely concentrated in the second half of the year.

During 2021, the market's it's trending to about 6 million units.

Which is great for Realogy, given our market, leading position and our meaningful share gain during this time.

So while heading into Q4 unit sales as the market seem to be trending a little lower than the surge in the second half of 2020, both for <unk> in the market.

Units are still settling in at a higher and healthier number than the past decade, which we liked a lot.

So between the high demand in that fact, we remain very excited about the housing market and our growth potential and we'll pull it up it was a terrific quarter, both financially and strategic progress and we're very excited to drive further innovation and growth with that I'm going to hand, it over to Charlotte to discuss the financials.

Thank you Ryan Good morning Realty delivered strong financial performance in the third quarter with $273 million and operating EBITDA and $282 million in free cash flow.

<unk> operating momentum in our core business and aggressively executed against our strategic priorities.

In September we proactively repaid $435 million of debt, including all outstanding term loan B and the non extended portion of the term loan a.

We are focused on driving value creation and announced plans to form a strategic partnership and title underwriting which enables us to focus on our core business, while also unlocking capital and future growth upside.

The team has done a remarkable job and I feel great about our progress and where our business is positioned right now.

With that I will cover our Q3 results in more detail.

Third quarter revenue was $2 2 million, an increase of $277 million versus 2020.

Year to date revenue was just above $6 billion, which showcases continued momentum across our business.

Volume was up an impressive 12% year over year in the quarter and outpaced the market again.

Lapping very substantial volume growth last year remember, we grew volume, 28% in Q3 and 45% in Q4 last year and we expect this year to have more normal seasonality.

Third quarter operating EBITDA was 273 million down $40 million versus prior year. This would be flat to prior year. After excluding the benefit of the $40 million and temporary cost savings taken last year.

We also faced an additional $40 million headwind from outsized prior year mortgage JV earnings, which benefited from higher gain on sale margins and a sizeable portfolio mark to market adjustments.

All things considered year to date operating EBITDA was an impressive $745 million up $225 million versus last year.

Additionally, I am pleased with our continued focus on managing expenses, especially in a business that is driving and driving above market growth.

We are delivering on the $80 million and permanent cost savings, we outlined for 2021 with $78 million of this target already action and $70 million realized year to date.

We are also aggressively working on our savings programs for 2022, and I will share more detail on what you can expect next quarter.

We continue to improve our capital structure and I am thrilled with all of the progress we have made on our balance sheet.

We ended the quarter with approximately $700 million of cash even after deploying 435 million to retire secured debt last month.

Net leverage was two three times and our senior secured leverage ratio was below zero times as of September 30th which are both historic lows and we have had zero borrowings on our revolver for a year now.

We generated impressive free cash flow of $282 million in the quarter and $458 million year to date.

And the underwriting venture we announced when close we will provide additional benefits by bringing capital back into the core business that we can deploy against our strategic priorities and towards Delevering.

Now I will talk about our business unit results in more detail.

Really cheap brokerage group revenue was $1 7 billion up $226 million versus prior year.

Transaction volume growth was up 17% year over year with sides flat and price up 17% led by the power of our luxury position.

RBG operating EBITDA was $51 million, a decrease of $10 million versus prior year, which was largely driven by the absence of temporary cost savings taken amid COVID-19 last year.

<unk> generated substantial operating EBITDA of 162 million before the transfer of intercompany royalties and marketing fees paid to our franchise business.

We grew our owned brokerage agent base, 5% year over year with Q3, our fifth consecutive quarter of sequential agent growth and retention remained very strong.

Commission split increases moderated sequentially in the third quarter of 171 basis points year over year in line with our expectations.

Continued increases in transaction volume and ongoing investment in recruiting and retention trips splits up 143 basis points in the quarter.

Business mix drove the remaining 29 basis points increase which was lower than in Q2 as we begin to lap the sale of our property management business.

We are happy with the agent success, we are delivering.

And we are deliberate with the investments we are making.

Realogy franchise group revenue, which includes leads and relocation was $342 million up $28 million versus prior year.

Our franchise business delivered transaction volume growth up 9% versus prior year with units down 6% year over year and price up 16% year over year and net royalty per side at $401 was up $34 versus prior year.

RFG operating EBITDA was $211 million, an increase of $11 million versus prior year due to growth in the core franchise business.

We are also pleased to be hosting in person conferences and meetings with all of our franchisees and agents, which energize our brands and drive growth in sales.

These important gatherings have been on hold for the last 18 months and we are catching up in Q3 and Q4 to ensure a strong start to 2022.

Which will be a bit of a cost headwind versus prior year.

Religion title group revenue was $250 million up $37 million versus prior year driven by growth in both the agency and underwriter businesses.

Purchase unit fees and unit volume more than offset the decline in <unk>.

Refinance units.

Title operating EBITDA was $54 million, a decrease of $41 million versus prior year, primarily due to a decline of $40 million and mortgage JV earnings.

Excluding the mortgage JV operating EBITDA was flat versus last year as we continue to invest in the growth of this business.

Mortgage joint venture earnings were $11 million in the quarter versus.

The split there.

Strong purchase volumes up approximately 20% year over year were more than offset by the impact of mark to market adjustments on the mortgage loans on the mortgage loan pipeline.

Lower gain on sale margins and declines in refinance volumes, which will all be a headwind in Q4 as well.

We continue to invest in this business for future growth and have almost doubled the number of loan officers recruited since the end of last year versus what we recruited in 2020 year to date.

As I said earlier, we have unleashed a tremendous amount of flexibility in the balance sheet to drive growth in our business.

Looking back since the end of 2019, we have reduced gross debt by approximately $430 million and reduced net debt by $875 million.

Paid all outstanding term loan B and non extended term loan a.

And change the mix with the majority now unsecured.

We lengthened the maturity profile and we only have approximately $400 million of debt due before 2025 and looking forward. We will continue to be opportunistic in the capital markets to enhance our balance sheet and expect to be in an even healthier position by mid 2022.

We have ample cash on hand, we will use to invest in the business and satisfy our near term maturities and we remain committed to debt reduction.

<unk> third quarter results are a continuation of the strong momentum we have been delivering.

We are competing effectively and gaining share and our strong execution has led to quality financial results, which are flowing through to the bottom line. We are positioning our core business for growth longer term, while pursuing value accretive transactions and partnerships to drive shareholder value.

I believe realogy isn't a great position, because we have the right resources and unique capabilities to continue leading the market.

We are positioned to enter 2022 with solid momentum and I look forward to what the future holds.

Let me turn it back to Ryan for some closing comments.

Thank you Charlotte I would like to wrap up with a personal story.

Tomorrow, I'll actually be closing the sale of our family members home.

Like many of you I've bought and sold a few homes over the years, but this time the increase seamlessness of the transaction.

Combined with how our technology and products are making our great agents and myself as a customer even more successful with striking.

I watch my Great Coldwell banker agent utilized one of Realty is open ecosystem technology products and our real time data to create a phenomenal listing presentation of powerful pricing analysis incredibly quickly.

I watched the agent utilize our real Vitalize program that we offer in partnership with Engie to do some much needed renovation on this frankly older Hall.

Including painting, many repairs bathroom renovations landscaping and staging it was an amazing customer experience I didn't have to do a single thing.

My agent deployed our lifting contour is custom marketing program to do an incredible job marketing the property across multiple channels generating a huge amount of interest as the property came to market and to utilize our virtual technology, including virtual tours to substantially increase the exposure of the hull.

And all of this came together and we were blessed to get 10 offers with nine of them above list price and.

And living this experience in the past eight weeks pad has me, especially excited about the progress <unk> is making to simplify and transform the home transaction experience both for our customers our agents and be on my anecdote.

The proof of <unk> transformation success is showing up in our financial numbers and above market growth.

Our momentum and strong results have me and all of Realty, even more committed to keep innovating both on our existing business and with new growth vectors like real sure.

All to drive change and lead into the future with that Charlotte and I will take your questions.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound.

Please standby will be compiled a comedian lawsuit.

Our first question comes from the line of Ryan Mcgee from Zelman and Associates. Your line is open.

Hey, good morning, Smith's job on the quarter and thanks for taking my question.

Wanted to start with real sure.

Obviously.

So I'm very excited about it.

We've been focused on in our research are aspects of the model that can has more of a direct to consumer approach where there's.

Tangible value to build the agents as well as the consumer and it certainly seems that reassures checking those boxes.

But was hoping you can talk to the go to market strategy with that is this being we're going to be pushed.

From a marketing perspective.

We're in that direct to consumer angle or is this.

Agents, bringing this to the listing presentation and saying Hey, we have this available and I guess, what I'm kind of getting at is.

Is this product, helping when the listing when that listing appointment is already in place or is this actually spurring more listing appointments to even have that initial discussion. Thank you.

So Ryan good to hear your voice. Thanks for the question the beauty of it and part of the reason we think it's a competitively advantaged model and we're competitively advantaged with our agent distribution is both right. So this is a product that we're distributing through agents. It's at the lifting for them to help win listings and it's doing that but it's also a product where we're increasingly doing dirt.

After consumer marketing and for consumers, who are interested part of the value proposition is the connection with the Asia to list their house and if they get a better offer in the market. They can take it and make even more money for themselves and so it's also going to generate more listings for realty and our and our and our agents on the direct to consumer side.

So we're really excited about both.

And as I told you in the script this was new information.

70% of the people who actually.

Request one of these offers list with US now they don't all.

They're all take the real sure offer but even if they don't take the offer they typically list with us and so we're finding a powerful.

Both in the reassure business.

And.

And then just generating additional listings of show up in our brokerage business. So we're excited about it we're stepping up our investment again here in Q4, we had a great CEO, we think in Katy and we're launching a new product on the buy side to help buyers later this quarter. So we're big fans. We're excited we think it's part of <unk>.

Waiting towards the future real estate is going and we think.

Geographic expansion as well as just beefing up certain markets. So it's a little bit of both and we'll continue to do a little bit of both going into next year as well.

We don't disclose anything on attach rates. So there's not much more I can tell you there, but I think the majority of it anyway is really being driven by the geographic expansion as well as just overall loan officer increase.

Which is sizable but thank you for your question.

Got it thanks very much.

Well. The next question comes from the line of Tommy Moll joined from P. B double you line is open.

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

So the the sale of the title underwriter JV you want to ask about that the unlocking of capital is.

It's clear there's benefits there could you add some more details on what you think some of the strategic benefits of our partnering with the with Centerbridge and then could you also.

Comment on what led you to keep the agency and settlement business separate.

Absolutely absolutely. So let me actually start with your second one because its easier look.

The agency and settlement business.

Tommy is incredibly critical to the transaction tomorrow I'll be doing a house closing and.

It's that it's the agent as the agency and the settlement of an escrow part and <unk>.

Owning and running that business is a critical thing as we seamlessly integrate that with the brokerage transaction integrated with mortgage and make it much simpler for customers capture more grow our title and mortgage business like we've been doing so that is just as strategically core as it gets we got to keep it there is no scenario where.

Isn't it shouldnt be a huge part of our future. That's true in our current businesses were innovating for simplicity. It's also a big part of real sure as I talked about title and mortgage being part of the core value proposition and the economics, so that we got to keep.

I think we're the only player in real estate, who owns their own title underwriter.

Centerbridge as a company and their track record as an owner and an investor in businesses speaks for itself and its clearly a good track record of driving a lot of growth and we like the partnership and the venture because we think it can unlock a lot of growth.

Again, the underwriting side isn't core to the transaction the way the agency and settlement businesses and we've probably been paying a little bit of a penalty in terms of maybe some people who don't want to work with realty on the underwriting side, because we're more and more of a competitor to them.

Whereas this debenture kind of owned by Centerbridge.

I think be able to unlock a lot of growth potential.

Above and beyond the growth vision that they even had when they came into the business. So.

So we're really excited about it.

Look forward to close the transaction hopefully early in 2022.

That's great that all makes sense. Thank you.

And just switching over real quick could you guys remind us of the availability and your appetite to take out some additional debt either in the fourth quarter or kind of as we look out into next year.

Absolutely you know its obviously something we continue to monitor and.

Rates in the market today are still really strong. So it is something we look at we had some higher cost debt that we're evaluating in the future to do something with we have a bit of a.

A lag here now because a lot of our higher cost debt does not actually callable until sort of like the end of the first quarter next year and the beginning of the second quarter.

And so that's why I made reference to even healthier position before and the first half of 2022, but it's definitely something we're looking at.

And obviously, we have enough cash on the balance sheet to take out the 2023 notes.

At any point again, they are not callable as well until the future year.

We're looking at all of it.

Makes sense thanks Charlotte.

Sure.

Our next question comes from the line of Matthew Kelley.

From Barclays. Your line is open.

Good morning, everyone. Thank you for taking the questions and congrats on the results and Brian Congrats on your upcoming closing tomorrow.

So back on the reassure.

Sounds like Youre going to offer a by product now.

So folks can buy with cash I guess I'm just curious if you can expand a little bit on that part of the model. This is like a buy before you sell type of product or what else differentiates that how big can that be as part of the whole platform. Thank you.

You can see in the market today with the strong demand I talked about that frankly.

Theres a lot of price appreciation, but theres also the phenomenon.

Sellers like cash offers a lot better than they like.

More complicated offer so that's always been true is probably even more true right now and we think theres a real opportunity to both help people who are trying to buy for the first time be cash buyers, but also do what you said which is.

Let people make a cash offer.

Without having yet sold their previous house and the power of what we at home partners are doing as well.

We helped people make a cash offer then for some reason something falls through we can step in and be the buyer of the house.

And then either rented Lisa do something else with it.

Katy I tell you all of our strategic Plaza and stuff, but there is a real market opportunity and the fact that we've got the sell side up and running in 24 markets.

As powerful and we're excited to keep growing that getting the buy side going in five markets feels like a good a good step for US and then remember both of these things get supported by our mortgage and title right. So when we help people buy a house is not just to help them do the house buying part and help our agents and things like that.

Actually also to capture the mortgage without buyer due to title with that buyer and you can see in our financials, that's increasingly important and again all of this is about.

Integrating and creating a more seamless transaction right and I think thats something that is really critical for the future of real estate and we're doing that both in our existing business is frankly kind of my anecdote hopefully gave people a sense of some reality on that but also with real sugar and we are really excited about that kind of <unk>.

Asian, and we think it is a big part of the future and we think we're competitively advantaged it because again.

Have some competitive advantages versus other eye buying models back to Ryan's question on our distribution, both direct to consumer and the agent distribution. We also has some advantages on title and mortgage that many of our competitors don't have so we're excited about it and that's the path we're going down.

No that's great color. Thanks, Thank you for that Ryan.

The second one on the market share.

Obviously, the headline is that Realogy outperformed.

And certainly.

Highlighting New York City, and the brokerage footprint was a big piece of that can you tell within the brokerage footprint or maybe even if you could tell within New York City because of how strong. It was just kind of how real do you share.

Is trending within your own footprint simply because new York was that strong.

Clearly that's a big Tam.

Yes, Great question, Matt I've looked at the numbers, we would about we outperformed nor even without the New York City.

So.

In our brokerage business, our brokerage business up 17% I'm not going to give you the numbers, but even without the New York City growth our brokerage was still still outperformed our.

So so we're excited about that we obviously, we're excited about New York City being a little extra strong is thats, an important market for us and frankly, it's been kind of a drag on our results even though our results have been great. So.

So we were excited.

About the share gains, especially in our owned business.

And.

And we had him again, New York City drove a chunk of those but we also outperformed our even without New York city's numbers.

Perfect. Thank you very much yeah. Thank you Matt.

Our next question comes from the line of John Campbell from Stephens. Your line is open.

Hey, Good morning. This is James how is stepping in for John Campbell I appreciate the time and taking the question.

So.

You had a few moving pieces within the title segment around refi gain on sale and upcoming swings in the title JV you put up about $126 million last year, that's coming down a bit broadly speaking can you frame up your expectations around titled segment EBITDA in the quarters.

Given all the moving parts.

You mean for Q4, sorry Q4.

Yes, so what I can tell you is.

The drivers that impacted this quarter will remain.

And impact next quarter because of what we're lapping so it's not really what's happening today, it's more what we're lapping from last year. So relatively speaking it's somewhat similar.

Okay, Yeah. Thank you Dana.

Mark to market and those are the big drivers and while we're on this there is one thing I've kind of always wanted to do which is let's talk on the mortgage side.

Because this is a business we love that we're having a lot of success integrating it in the different transactions, where I talked about.

Two years ago, we made about $15 million in our mortgage business last year. We made 126 as you kind of cited on the mortgage side.

This year, it's going to clearly settled between those two things and I think thats a good thing and I think thats helpful to all of you from a more of a.

Run rate kind of standpoint, because I think early on when we lost money in 2018 and 19 when he made a few bucks we were investing a ton to grow this thing and I think last year had some real tailwind to Charlotte talked about with margin and gain on sale and so.

We're we're excited to have kind of a.

Pretty solid mortgage.

This year.

And then we will continue to grow that title and mortgage as we keep investing in Charlotte talked about.

And.

And so.

The investment we made at the start of the extra kind of juice, we got last year in the mortgage market and then kind of.

Kind of.

More growing thing that we want to start building off of this year was just a little bit of context, I've always had the back of my mind to share if I ever got a question like yours got.

Got you.

And then just a second one here.

You've clearly made a ton of progress in the cost save initiatives do you think you've captured most of the lowest hanging fruit there and are there any areas you would continue to find more efficiencies and then if so like what areas do you think you would point to there.

Sure Yeah, it's interesting what you determine as low hanging fruit like yesterday's low hanging fruit you still have to go back and get some additional selling here Youre bar may change on what is low hanging.

My philosophy on this is a well run companies will always continue to look for cost savings and good times and in that it's just what's necessary to drive both efficiency from a cost perspective, but also simplification for how you work so.

Business remains highly manual sell highly manual and and the teams are really looking into what we're going to do next year.

Sure you know this is not something I'm, giving up I think we have a ton of headspace here and.

This is something that will continue to be on my agenda for years to come so as far as like areas I've referred to the manual nature of this business. So interested how operating expenses G&A and things like that that will still continue to add to find savings.

Which comes it can either come through people through footprint.

And.

Because it is manual and the more we can automate and that's just really going to help us.

I appreciate the time, thanks, Brian Thanks Charlotte.

Thank you.

Our last question comes from the line of Justin.

Your line is open.

Hi, Thanks for taking the question guys.

And sorry, if I missed it.

Could you.

Could you expand on what's kind of driving that average broker commission rates.

Going down.

And the franchise and the brokerage groups.

Yes.

Is something that tends to move around a couple of bits here and there sometimes it's up sometimes its down usually in times, where the prior year, we had tons of price appreciation, which helped drive up so while it is down a couple of basis points, it's not something that I'm super alarmed about because.

It's pretty common, especially if youre lapping such a high period of price depreciation.

Alright that makes sense and then one more if I could just expanding on the market share question.

Based on the global luxury report that you guys put out it seems like you are doing.

Doing well, there and outperforming now.

Has it been market share gains like across the board on kind of some of the lower tiers.

The luxury.

If you say if you mean just below the luxury like where you draw the line I'm not sure where youre drawing the line.

We're both architected to do a little bit more kind of at the 500000 and up right across multiple brands and geographies and we've been gaining share there obviously from the numbers.

Place, where I'd say, we've been a little more with the market is clearly at the lower price points. That's more on the franchise side and you can see that a little bit in our numbers this quarter, where our franchise numbers were a little bit we're a lot more like frankly kind of the overall market.

Trunk adapters, driven by the kind of bottom half of the market.

At R. R R kind of.

Market comparable position, there, but not a big advantage, whereas we I think have been getting more.

Market share gain and growth in the luxury side.

We're excited by the strength of the luxury business. We gave you some data on some individual brands that was.

Pretty exciting that we haven't really shared before and.

We just think we're very well positioned in a lot of where the world is going.

Understood. Thanks for taking the question.

There are no further questions at this time that concludes today's conference call. Thank you everyone for participating you may now disconnect.

[music].

Good morning, and welcome to the real estate Holdings Corp, third quarter 2021 earnings conference call via webcast today.

This call is being recorded and a written transcript will be made available in the investor information section of the company's website tomorrow all.

Well, that's because we believe will also be made available on the company's website.

At this time I would like to turn the conference over to religion, and senior Vice President Alicia Swift. Please go ahead Alicia.

Thank you Mary.

Morning, and welcome to <unk> third quarter 2021 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 on our current expectations and the current economic environment.

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.

Nardi our referenced during todays call is based on <unk>. Most recent public estimates, which are subject to review and revision.

That impacts comparability of our homes just statistics Gennaro are outlined in our annual and quarterly reports filed with the SEC.

The references made to October month to date in these remarks reflect data through October 22021.

We're closed transaction volume October 2021, we will have one less business day than October 2020, However, our discussions on both open and closed volumes on a month to date basis have been adjusted to reflect like for like number of business days.

Now I will turn the call over to our CEO and President Ryan Schneider.

Thank you Alicia good morning, everyone Realty delivered excellent top and bottom line results this quarter as we innovate the future of real estate.

We are driving outsized growth with Q3, our fifth consecutive quarter of market share gain.

We are simplifying the home sale transaction for consumers.

Our existing business and with real sure we're strengthening our capital structure with debt reduction and a very strong cash position.

Realogy delivered 12% transaction volume growth year over year, we outpaced nor is 9% volume growth again in Q3 and gain market share for the fifth quarter in a row.

We thought even higher transaction volume growth in our owned brokerage business at plus 17% year over year driven in part by an exciting comeback in the New York City market, one of our largest markets, where we have the market leading position with Corcoran and Sotheby's International Realty and now Coldwell banker.

Revenue grew $277 million to $2 2 billion with strong momentum across our brokerage franchise and title businesses.

We generated $273 million operating EBITDA in the quarter and this was flat to last year. After excluding $40 million of 2020 temporary cost savings and is up $50 million five zero versus Q3 of 2019.

Now these accomplishments would not be possible without <unk> strong culture and talent, we are demonstrating incredible agility in how we operate our workforce supporting hundreds of thousands of agents in the field shifting to remote work and transitioning our corporate offices and the collaboration and innovation hubs.

We continue to be recognized for attracting and retaining great talent Forbes just named <unk> to its list of world's best employers earlier this month, which follows Linkedin top 50 company recognition earlier this year and Realogy was just awarded a great place to work designation for the fourth consecutive year.

Now let me update you on some of our exciting growth factors first we are enthusiastic about our reassure progress remember reassures our joint venture with home partners of America.

Our current product is in 24 cities today, it's real for cell and simply put a homeowner can get a guaranteed 45 day offer with the option to also lift their home on the open market with one of our imaging agents the.

The consumer can accept the offer they prefer giving them the best of both worlds and putting them in control of how they sell their house.

Excitingly 77 zero percent of customers, who request a real sure offer are actually listed in their homes with one of our agents.

Now we recently appointed Katie Finnegan is real sure CEO named one of fast company's most creative people Kt has a successful background launching and scaling consumer centric companies, including companies that she founded.

He also has experience incubating in innovation and driving growth within much larger corporate enterprises, such as Walmart and we're incredibly excited to have Katie leading reassure.

We are launching our next real short product in five cities later this year, it's called reassured by and it helps our buyer provide a cash offer with bidding on the home something increasingly important in today's very competitive market and like our cell product or by offering has mortgage entitled integration is a core component.

The value proposition.

Finally, our return on investment will step up meaningfully in Q4 as we continue to scale launch this new product expand our direct to consumer marketing and substantially build out the business and the team even more under Katie's leadership.

The presence.

Now Similarly, we remain incredibly focused investment in technology and product innovation. Our open architecture approach and technology is a competitive differentiator and one proof point is how it enables our agility since we last spoke we've taken a new product in our open ecosystem Moxie works and deployed it to one hundreds of companies and <unk>.

Tens of thousands of agents in just a few months and clearly our continued focus delivering great and new technology marketing and data products to our agents and franchisees is helping drive our growth.

Finally, as you know we operate a national title settlement in escrow business, which worked directly with customers and agents to close real estate transactions. This business is very strategic and is a core part of creating a more seamless consumer and agent experience as we innovate the real estate transaction both in our existing.

Business and with real sugar.

Now separate though from our title settlement business. We also have a title underwriter that provides the actual title insurance behind customer facing home transactions. We were very excited to announce a new underwriter adventure. This month, we found a great partner in center bridge, which is purchasing a 70% stake in <unk>.

Our underwriter business, especially given Centerbridge is track record driving growth. This led us maintain a meaningful stake in this business to capitalize on future growth while at the same time, freeing up capital to invest in our strategic priorities.

Now, let me close with what we're seeing in the housing market housing.

Housing demand remains very strong driven by remote work strong relocation, especially to attractive tax and whether geographies low mortgage rates and positive demographic trends.

Lack of supply is increasingly an issue given the strong demand and you can see that in both the substantial price appreciation and the unit sales declines in our business and in the markets.

Now looking forward our September open volume and October month to date open and closed volume data are all basically flat versus 2020.

But it's a little too early to extrapolate the whole quarter from those numbers.

The Q4 2020 comparison was extremely strong.

We were up 45% year over year in volume last year substantially above the market.

So if you look given the supply and the unit pressures in the market.

The market is seeing today, we would expect like nor is forecasting that overall Q4, 2021 volume is likely to be slightly down versus the extremely strong Q4 of 2020.

So as we near the end of 2021 was lets just look back and remember housing it's been about a five to $5 5 million resale unit transaction market for basically the last decade.

2020 had $5 6 million unit sales, but those were largely concentrated in the second half of the year.

Here in 2021, the market is trending to about 6 million units, which.

Which is great for Realogy, given our market, leading position and our meaningful share gain during this time.

So while heading into Q4 unit sales as the market seem to be trending a little lower than the surge in the second half of 2020, both for <unk> in the market.

<unk> are still settling in at a higher and healthier number than the past decade with key liked a lot.

So between the high demand in that fact, we remain very excited about the housing market and our growth potential and we'll pull it up it was a terrific quarter, both financially and our strategic progress and we're very excited to drive further innovation and growth with that I'm going to hand, it over to Charlotte to discuss the financials.

Thank you Ryan Good morning Realty delivered strong financial performance in the third quarter with $273 million and operating EBITDA and $280 2 million and free cash flow.

We delivered operating momentum in our core business and aggressively executed against our strategic priority.

In September we proactively repaid $435 million of debt, including all outstanding term loan B and the non extended portion of the term loan a.

We are focused on driving value creation and announced plans to form a strategic partnership and tighter underwriting which enables us to focus on our core business, while also unlocking capital and future growth upside.

The team has done a remarkable job and I feel great about our progress and where our business is positioned right now.

With that I will cover our Q3 results in more detail.

Third quarter revenue was $2 2 million, an increase of $277 million versus 2020.

Year to date revenue was just about $6 billion, which showcases continued momentum across our business.

Volume was up an impressive 12% year over year in the quarter and outpaced the market again in spite of lapping very substantial volume growth last year remember, we grew volume, 28% in Q3 and 45% in Q4 last year and we expect this year to have more normal seasonality.

We also faced an additional $40 million headwind from outsized prior year mortgage JV earnings, which benefited from higher gain on sale margins and our size of our portfolio mark to market adjustments.

All things considered year to date operating EBITDA was an impressive $745 million up $225 million versus last year.

Additionally, I am pleased with our continued focus on managing expenses, especially in a business that is driving and driving above market growth.

We are delivering on the $80 million and permanent cost savings, we outlined for 2021 with $78 million of this target already action and $70 million realized year to date.

We are also aggressively working on our savings programs for 2022, and I will share more detail on what you can expect next quarter.

We continue to improve our capital structure and I am thrilled with all of the progress we have made on our balance sheet.

We ended the quarter with approximately $700 million of cash even after deploying 435 million to retire secured debt last month.

We generated impressive free cash flow of $282 million in the quarter and $458 million year to date.

And the underwriting venture we announced when closed will provide additional benefits by bringing capital back into the core business that we can deploy against our strategic priorities and towards Delevering.

Now I will talk about our business unit results in more detail.

Realogy brokerage group revenue was $1 7 billion up $226 million versus prior year.

Transaction volume growth was up 17% year over year with sides flat and price up 17% led by the power of our luxury position.

RBG operating EBITDA was $51 million, a decrease of $10 million versus prior year, which was largely driven by the absence of temporary cost savings taken amid COVID-19 last year.

<unk> generated substantial operating EBITDA of 162 million before the transfer of intercompany royalties and marketing fees paid to our franchise business.

We grew our owned brokerage agent base, 5% year over year with Q3, our fifth consecutive quarter of sequential agent growth and retention remained very strong.

Commission split increases moderated sequentially in the third quarter up 171 basis points per year in line with our expectations.

Continued increases in transaction volume and ongoing investment in recruiting and retention drove splits up 143 basis points in the quarter.

Business mix drove the remaining 29 basis points increase which was lower than in Q2 as we begin to lap the sale of our property management business.

We are happy with the agent success, we are delivering.

We are deliberate with the investments we are making.

Realogy franchise group revenue, which includes leaves the relocation was $342 million up $28 million versus prior year.

The franchise business delivered transaction volume growth of 9% versus prior year with units down 6% year over year and price up 16% year over year and net royalty per side at $401 was up $34 versus prior year.

RFG operating EBITDA was 211 million, an increase of $11 million versus prior year due to growth in the core franchise business.

We are also pleased to be hosting in person conferences and meetings with all of our franchisees and agents, which energize our brands and drive growth in sales.

These important gatherings have been on hold for the last 18 months and we're catching up in Q3 and Q4 to ensure a strong start to 2022, which will be a bit of a cost headwind versus prior year.

Realogy title group revenue was $250 million up $37 million versus prior year driven by growth in both the agency and underwriter businesses.

Higher purchase unit fees and unit volume more than offset the decline in refinance units.

Title operating EBITDA was $54 million, a decrease of $41 million versus prior year, primarily due to a decline of $40 million and mortgage JV earnings excluding.

Excluding the mortgage JV operating EBITDA was flat versus last year as we continue to invest in the growth of this business.

Mortgage joint venture earnings were $11 million in the quarter versus.

The split there.

Strong purchase volumes up approximately 20% year over year were more than offset by the impact of mark to market adjustments on the mortgage loan pipes on the mortgage loan pipeline.

Lower gain on sale margins and declines in refinance volumes, which will all be a headwind in Q4 as well.

We continue to invest in this business for future growth and have almost doubled the number of loan officers recruited since the end of last year versus what we recruited in 2020 year to date.

As I said earlier, we have unleashed a tremendous amount of flexibility in the balance sheet to drive growth in our business.

Looking back since the end of 2019, we have reduced gross debt by approximately $430 million and reduced net debt by $875 million.

Repaid all outstanding term loan B and non extended term loan a.

And changed the debt mix with the majority now unsecured.

We have ample cash on hand, we will use to invest in the business and satisfy our near term maturities and we remain committed to debt reduction.

<unk> third quarter results are a continuation of the strong momentum we have been delivering.

I believe <unk> is in a great position, because we have the right resources and unique capabilities to continue leading the market. We are positioned to enter 2022 with solid momentum and I look forward to what the future holds.

Let me turn it back to Ryan for some closing comments.

Thank you Charlotte I would like to wrap up with a personal story.

Tomorrow, I'll actually be closing the sale of our family members home.

Like many of you are bought and sold a few homes over the years, but this time the increase seamlessness of the transaction.

Combined with how our technology and products are making our great agents and myself as a customer even more successful with striking.

I watch my Great Coldwell banker agent utilize one of <unk> open ecosystem technology products, and our real time data to create a phenomenal lithium presentation and powerful pricing analysis incredibly quickly.

What's the agent utilize our real Vitalize program that we offer in partnership with Engie to do some much needed renovation on this frankly older Hall.

Including painting, many repairs bathroom renovations landscaping and staging it was an amazing customer experience I didn't have to do a single thing.

My agent deployed our lifting contour as customer marketing program to do an incredible job marketing the property across multiple channels generating a huge amount of interest as the property came to market and utilize our virtual technology, including virtual tours to substantially increase the exposure of the hall.

And all of this came together and we were blessed to get 10 offers with nine of them about list price and.

And living this experience in the past eight weeks.

<unk> has me, especially excited about the progress <unk> is making to simplify and transform the home transaction experience both for our customers our agents and beyond my anecdote.

Proof of real of these transformation success is showing up in our financial numbers and above market growth our momentum and strong results have me and all of Realogy, even more committed to keep innovating both at our existing business and with new growth vectors like real sharp also drive change and lead into the future with that Charlotte.

I'll take your questions.

As a reminder to ask a question you will need to press star one on your telephone to withdraw.

For your question Mr. Peng.

Please standby will be compiled the kudu lawsuit.

Our first question comes from the line of Ryan <unk> from Zelman and Associates. Your line is open.

Hey, good morning, nice job on the quarter and thanks for taking my question.

Wanted to start with real sure. Obviously, you guys sound very excited about it.

It's something we've been focused on in our research are aspects of the model that can has more of a direct to consumer approach where there is <unk>.

Tangible value to build the agents as well as the consumer and it certainly seems that reassures checking those boxes.

But was hoping you can talk to the go to market strategy with that is this being or going to be pushed from a marketing perspective.

More in that direct to consumer angle or is this.

Agents, bringing this to the listing presentation and saying Hey, we have this available and I guess, what I'm kind of getting at is.

Is this product, helping when the listing when that listing appointment is already in place or is this actually spurring more listing appointments to even have that initial discussion. Thank you.

So Ryan good to hear your voice. Thanks for the question the beauty of it and part of the reason we think it's a competitively advantaged model and we're competitively advantaged with our Asian distribution is both right. So this is a product that we're distributing through agents. It's at the lifting for them to help win listings and it's doing that but it is also a product where we're increasingly doing direct.

To consumer marketing.

And for consumers, who are interested part of the value proposition is the connection with the Asia to list their house and if they get a better offer in the market. They can take it and make even more money for themselves and so it is also going to generate more listings for realty and our and our and our agents on the direct to consumer side. So we're really excited about both.

Sure.

As I told you in the script this was new information.

70% of the people who actually.

Requests one of these offers list with US now they don't all railroads are there I'll take the real sure offer but even if they don't take the offer they typically list with us and so we're finding a powerful.

<unk> in the <unk> business.

And.

And then just generating additional listings of show up in our brokerage business. So we're excited about it we're stepping up our investment again here in Q4, we had a great CEO, we think in Katy and we're launching a new product on the buy side to help buyers. You know later this quarter. So we're big fans. We're excited we think it's part of <unk>.

Get into where the future real estate is going and we think.

Home partners of America's history, and data combined with our data and our agent distribution is a really powerful combination.

That's great it sounds exciting thank you for that Ryan.

One on mortgage and title so Charlotte I believe your comment was that the mortgage JV saw purchase volume up about 20% and that would be ahead of 12% overall volume growth, 17% brokerage volume growth and even on the title side. It looks like the purchase closings growth was ahead of brokerage sides growth.

It would seem that the math suggests the capture rate or the attach rate is picking up and I guess my question is as we look going forward how much of that is geographic expansion.

Adding <unk>, adding more markets, where this is available and how much is just deeper integration with your agents.

To drive that attach rate higher on both the title and the mortgage side of things. Thank you.

Sure. So what I would say is you've picked up on a good point, we have been aggressively recruit recruiting loan officers and so the fact that we've almost doubled our recruiting this year versus last.

That's what's really driving that increase in volumes versus what we're seeing in the other parts of our business. It's a little bit of a combination of both geographic expansion as well as just beefing up certain markets. So it's a little bit of both and we'll continue to do a little bit of both going into next year as well.

We don't disclose anything on attach rates.

There's not much more I can tell you there, but I think the majority of it anyway is really being driven by the geographic expansion as well as just overall loan officer increase.

Which is sizable but thank you for your question.

Got it thanks very much.

Our next question comes from the line of Tommy Ma'am joined from BBW. Your line is open.

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

So the the sale of the title underwriter JV I wanted to ask about that the unlocking of capital is clear there's benefits there could you add some more details on what you think some of the strategic benefits of our partnering with with Centerbridge and then could you also.

Comment on what led you to keep the agency and settlement business separate.

Absolutely absolutely. So let me actually start with your second one because easier look the the agency and settlement business.

Tommy is incredibly critical to the transaction tomorrow I'll be doing a house closing and.

It's the agent as the agency and the settlement of an escrow part.

And.

Isn't it shouldnt be a huge part of our future that's true in our current businesses, we're innovating and for simplicity. It's also a big part of real sure as I talked about in our title and mortgage being part of the quarter value proposition and the economics, so that we got to keep.

I think we're the only player in real estate, who owns their own title underwriter.

Whereas this new venture kind of owned by Centerbridge.

I think be able to unlock a lot of growth potential.

Above and beyond the growth vision that they even had when they came into the business. So.

So we're really excited about it.

<unk>.

Look forward to close the transaction hopefully our early in 2022.

That's great that all makes sense. Thank you.

Just switching over real quick could you guys remind us of the availability and your appetite to take out some additional debt either.

The fourth quarter or kind of as we look out into next year.

Absolutely you know Thats, obviously, something we continue to monitor and.

Rates in the market today are still really strong. So it is something we look at we had some higher cost debt that we're evaluating in the future to do something with we have a bit of a.

Lag here because a lot of our higher cost debt is not actually callable until sort of like the end of the first quarter next year and the beginning of the second quarter.

And so that's why I made reference to even healthier position before and the first half of 2022, but it's definitely something we're looking at.

And obviously, we have enough cash on the balance sheet to take out the 2023 notes.

At any point again, they are not callable as well until the future year, but so we're looking at all of that.

Makes sense thanks Charlotte.

Sure.

Our next question comes from the line of Matthew Kelley.

From Barclays. Your line is open.

Good morning, everyone.

Thank you for taking the questions and congrats on the results and Brian Congrats on your upcoming closing tomorrow.

So back on the <unk>.

Sure.

Sounds like Youre going to offer a by product now.

So folks can buy with cash I guess I'm just curious if you can expand a little bit on that part of the model is this like a buy before you sell type of product or what else differentiates that how big can that be as part of the whole platform. Thank you.

You can see in the market today with the strong demand I talked about that frankly.

A lot of price appreciation, but theres also the phenomenon.

Sellers like cash offers a lot better than they like.

More complicated offers and that's always been true is probably even more true right now and we think theres a real opportunity to both help people who are trying to buy for the first time via cash buyers, but also do what you said which is.

Let people make a cash offer.

Without having yet sold their previous house and the power of what we had home partners are doing as well.

We helped people make a cash offer then for some reason something falls through we can step in and be the buyer of the house.

And then either rented Lisa do something else with it.

Katy I tell you all of our strategic Plaza and stuff, but there is a real market opportunity and the fact that we've got the sell side up and running in 24 markets.

As powerful and we're excited to keep growing that getting the buy side going in five markets feels like a good good step for US and then remember both of these things get supported by our mortgage and title right. So when we help people buy a house is not just helping them do the house buying part and help our agents and things like that.

Actually also to capture the mortgage without buyer due to title with that buyer and you can see in our financials, that's increasingly important and again all of this is about.

Integrating and creating a more seamless transaction and I think thats something that is really critical for the future of real estate and we're doing that both in our existing business is frankly kind of my anecdote hopefully gave people a sense of some reality on that but also with real sugar and we are really excited about that kind of <unk>.

Asian, and we think it is a big part of the future and we think we're competitively advantaged because again.

Have some competitive advantages versus other eye buying models back to <unk>.

<unk> question on our distribution, both direct to consumer and the agent distribution. We also has some advantages on title and mortgage that many of our competitors don't have so we're excited about it and that's the path we're going down.

No that's great color. Thank you for that Ryan.

The second one on the market share.

Obviously, the headline is that Realogy outperformed <unk>.

And certainly E.

Highlighted in New York City, and the brokerage footprint was a big piece of that can you tell within the brokerage footprint or maybe even if you could tell within New York City because of how strong. It was just kind of how real do you share.

Is trending within your own footprint simply because new York was that strong.

Clearly it will take time.

Yes, Great question, Matt I've looked at the numbers, we would have out we outperformed nor even without the New York City.

So.

In our brokerage business, our brokerage business is up 17% I'm not going to give you the numbers, but even without the New York City growth our brokerage was still still outperformed our.

So so we're excited about that we obviously, we're excited about New York City, B and a little extra strong as Thats, an important market for us and frankly, it's been kind of a drag on our results even though our results have been great. So.

So we were excited.

About the share gains, especially in our own business.

And.

And we had him again, New York City drove a chunk of those but we also outperformed our even without New York city's numbers.

Perfect. Thank you very much yeah. Thank you Matt.

Our next question comes from the line of John Campbell from Stephens. Your line is open.

Hey, Good morning. This is James how is stepping in for John Campbell I appreciate the time and taking the question.

So.

Given all the moving parts.

You mean for Q4, sorry Q4.

Yes, so what I can tell you is the drivers that impacted this quarter will remain.

Impact next quarter because of what we're lapping so it's not really what's happening today, it's more what we're lapping from last year. So relatively speaking it's somewhat similar.

Okay. Yeah. Thank you for the gain on the Mark.

Mark to market and those are the big drivers and while we're on that Theres. One thing I've kind of always wanted to do which is let's talk on the mortgage side.

This is a business, we love and we're having a lot of success integrating it in the different transactions, where I talked about <unk>.

Two years ago, we made about $15 million in our mortgage business last year. We made 126 as you kind of cited on the mortgage side.

This year, it's going to clearly settled between those two things and I think thats a good thing and I think thats helpful to all of you from a more of a.

The run rate kind of standpoint, because I think early on when we lost money in 18 and 19 when he made a few box we were investing a ton to grow this thing and I think last year had some real tailwind to Charlotte talked about with margin and gain on sale and so.

We're we're excited to have kind of a.

Pretty solid mortgage.

This year.

And then we will continue to grow that title and mortgage as we keep investing in Charlotte talked about.

And.

And so.

The investment we made at the start of the extra juice, we got last year in the mortgage market and then kind of.

Kind of.

More growing thing that we want to start building off of this year was just a little bit of context, I've always had the back of my mind the share buyback question like Yours got.

Got you.

And then just a second one here.

Sure, Yes, it's interesting we're determined as low hanging fruit like yesterday's low hanging fruit you still have to go back and get some additional selling here youre borrowing may change on what is low hanging.

My philosophy on this is a well run companies will always continue to look for cost savings and good times and in bad. It's just what's necessary to drive both efficiency from a cost perspective, but also simplification for how you work. So this business remains highly manual sell highly manual and.

And the teams are really looking into what we're going to do next year, but rest assured you know this is not something im giving up I think we have a ton of headspace here and.

And.

Because it is manual and the more we can automate and that's just really going to help us.

I appreciate the time, thanks, Brian Thanks Charlotte.

Thank you.

Our last question comes from the line of Justin agents will Sternberg. Your line is open.

Hi, Thanks for taking my question guys.

And sorry, if I missed it.

Could you.

Could you expand on what's kind of driving that average broker commission rates.

<unk> down.

And the franchise and the brokerage groups.

Yes.

Is something that tends to move around a couple of bets here and there sometimes it's up sometimes its down usually in times, where in the prior year, we had tons of price depreciation, which helped drive that up so while it is down a couple of basis points, it's not something that I'm super alarmed about because.

It's pretty common, especially if youre lapping such a high period of price depreciation.

Alright that makes sense and then one more if I could just expanding the market share question.

Based on the global luxury report that you guys put out it seems like Youre doing.

Doing well, there and outperforming there.

Has it been market share gains across the board on kind of some of the lower tiers just below the luxury.

I mean, if you say if you mean just below the luxury like redrawn.

Where you draw the line I'm, not sure where youre drawing a line, but we're both architected to do a little bit more kind of at the 500000 and up right across multiple brands and geographies and we've been gaining share there obviously from the numbers.

The place where I would say we've been a little more with the market is clearly at the lower price points. That's more on the franchise side and you can see that a little bit in our numbers this quarter, where our franchise numbers were a little bit we're a lot more like frankly kind of the overall market.

And a chunk of that was driven by the kind of bottom half of the market.

At R. R R.

Market comparable position, there, but not a big advantage, whereas we I think have been getting more.

Market share gain and growth in the luxury side.

Which again, we're really excited about and we do that purposely like we make investments there we over index on it we did an acquisition this quarter on that and so we're just excited about the overall share gains for now five quarters in a row. We're excited by the strength of the luxury business. We gave you some data on some individual brands that was pretty.

Exciting that we haven't really shared before and.

We just think we're very well positioned in a lot of where the world is going.

Understood. Thanks for taking the question.

Hi.

There are no further questions at this time that concludes today's conference call. Thank you everyone for participating you may now disconnect.

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