Q4 2021 Realogy Holdings Corp Earnings Call

Good afternoon.

And welcome to the Realogy Holdings Corp, full year 2021 earnings conference call via webcast. Today's call is being recorded and a written transcript 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 over to <unk> Senior Vice President Alicia Swift. Please go ahead Alicia.

Thank you Michelle good afternoon, and welcome to <unk> full year 2021 earnings conference call on the call with me today are <unk>, 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 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 inventory level interest rates and uncertainties related to the continued strength of the housing market.

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 17, and have not been updated subsequent to the initial earnings call.

Important assumptions and 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 rules important information regarding these non-GAAP financial measures is included in our earnings press release and slides.

Today, Charlotte will discuss a target leverage ratio, which is a reference to our net debt leverage ratio. This metric is calculated in the manner shown in table eight of today's press release.

Charlotte's discussion of our results will use our three reportable segments, which Ryan uses to assess the performance of our company.

Brian will also provide a view of really do focus on the power of our brands and their positioning in the market.

This will include various references to estimated operating EBITDA contribution annual revenue and earnings growth rates by market position. However, we do not maintain discrete financial information at this level.

Such estimates include cost allocations and other assumptions and do not include intercompany royalties.

In addition, such 2021 contributions do not include corporate religion leaf group or Cardiff relocation services operating EBITDA of approximately negative $150 million.

We believe this alternative strategic view of our company may be useful to our stakeholders to understand our market focus within our business.

Lapped any forward looking to our reference during today's call is based on <unk>. Most recent public estimates as of January 27, 2022, which are subject to review and revision factors that may impact the comparability of our home sales statistics are outlined in our annual and quarterly reports filed with the SEC.

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

Good afternoon, everyone, we able to use on a transformation journey and I'm incredibly proud of what we have to live with.

We have gained market share we have driven greater profitability, we have massively improved our balance sheet 2021 completes the first chapter of our transformation I'm very excited about our momentum going into 2022 as we start religions next Chuck.

Our company delivered an extraordinary year of strategic and financial results in 2021.

<unk> Thats great agents grew overall transaction volume nearly 30% as we gained over 100 basis points of market share.

We achieved the strongest financial results in the company's history, approximately $8 billion of revenue and $902 million operating EBITDA.

We reduced net debt by $900 million since 2019 to $2 3 billion.

Stendal $1 9 billion of our debt to 2029 and beyond but we now have no debt above a 575% coupon.

Our powerful EBITDA and net debt reduction delivered a two four times net leverage ratio the best annual ratio in our company's history and finally, we advanced exciting new strategic partnerships designed to unlock future growth, including our real sure joint venture with home partners of America, our title underwriting joint venture with Centerbridge.

New luxury auction in joint venture with Sotheby's.

I'm incredibly proud of both our 2021 results and our transformation progress in recent years, driven by our technology and data led strategy, our operational excellence and our increasingly agile culture with great talent, both employees and agents at the core.

I will now turn the call over to Charlotte and I will come back to highlight <unk> next chapter.

Thank you Ryan and good afternoon, everyone I am excited to share real <unk> fourth quarter and full year 2021 results, which demonstrate continued financial and operating momentum and our best Q4 on record excluding the unseasonably high Q4 2020.

We believe we have never been better positioned financially strategically organizationally and technologically to thrive and grow in this dynamic housing market.

Our strategy is working we are competing effectively growing significant share in 2021.

Our financial discipline, and clearly defined capital allocation priorities enabled us to execute well on many strategic and operational objectives throughout the year, we delivered record top line growth and profitability and strong free cash flow, while taking actions to lower the cost profile of.

Our business and invest in new strategic ventures it.

It is this strong foundation that we believe that's real itchy up for future growth in 2022 and beyond as we continue to unlock incremental value across the business.

Full year 2021 revenue was approximately $8 billion up 28% or $1 8 billion versus 'twenty 'twenty led by strong transaction volume growth.

Full year 2021, operating EBITDA was an impressive $902 million up $176 million versus prior year. Despite 2020 benefiting from 150 million in temporary cost savings.

Q4 revenue was approximately 2 billion, an increase of 85 million or 4% versus prior year, Despite lapping 45% volume growth in Q4 2020.

Fourth quarter operating EBITDA was $157 million down 49 million versus prior year and up $31 million versus 2019.

Q4, 'twenty, one profitability was lower than prior year due to $31 million lower mortgage JV earnings expense increases versus prior year in real sure and timing and marketing and conference spend.

In 2021, we continue to drive cost savings across the business, we achieved our targeted 85 million savings in 2021, which helped fuel investments we have been making in the business.

In 2022, we are targeting an additional 70 plus million of cost savings for this program. We are focused on driving continued efficiency and agility, especially in automation systems integration and other personnel related efficiencies.

Now, let's move on to cash flow and the balance sheet.

For the full year real itchy generated 553 million of free cash flow largely flat to 2020, despite becoming a cash taxpayer in 2021.

We exited 2021 with a much stronger balance sheet, a senior secured leverage ratio of negative point, new two nine times and net debt leverage of two four times.

Our leverage ratio has improved significantly over the past few years as we have generated impressive financial results taken proactive steps to reduce our cost of capital and extend our maturity profile.

I will now discuss our business unit results in more detail.

Religion franchise group full year, 2021 revenue, which includes bleeds and relocation was $1 2 billion up $190 million versus prior year net royalty per side of $406 was up $53 versus prior year.

RFG full year operating EBITDA was $751 million, an increase of $157 million year over here.

Really cheap brokerage group's full year 2021 revenue was $6 2 billion up $1 4 billion versus prior year.

Transaction volume growth up 32% versus prior year was led by our strength in luxury which we believe positions us well for future growth.

Operating EBITDA was $109 million up $61 million year over year, despite lapping approximately $85 million and temporary cost savings and investing for growth and reassure and other strategic initiatives.

Also RV Chi generated substantial operating EBITDA of $516 million before the transfer of intercompany royalties and marketing fees paid to our franchise business.

We grew our owned brokerage agent base, 6% year over year with Q4, our sixth consecutive quarter of sequential agent growth.

And agent retention is now the highest on record for our B G.

For the full year Commission splits increased 215 basis points, driven predominantly by a 170 basis points increase due to strong volume growth recruiting and retention.

We also had a 45 basis points increase due to business mix predominantly driven by the sale of our property frameworks business most of which we have left.

Realogy title group revenue was 952 million up $216 million versus prior year driven by growth in both the agency and underwriter businesses.

Purchased unit fees and unit volume more than offset a decline in refinance volumes.

Operating EBITDA was 200 million a decrease of $26 million versus prior year, primarily due to a decline in mortgage JV earnings which were negatively impacted by gain on sale margin compression and lower mark to market on the loan pipeline.

Remember as interest rates begin to rise the mortgage market becomes more competitive which impacts our gain on sale margins.

Excluding $49 million in earnings from the mortgage JV RTG operating EBITDA was 151 million up $51 million versus last year.

Our underwriter joint venture with Central Bridge is expected to close in the first quarter.

We're excited about the growth prospects of this business and as a reminder, post close our retained a 30% ownership will be reported in equity earnings from unconsolidated businesses, along with our mortgage JV.

This will impact year over year comparisons to revenue and other P&L metrics.

I want to recognize the progress on our balance sheet.

We have benefited from multiple rating agency upgrades.

And in January 2022, we completed an Upsized 1 billion dollar notes offering at a 5.25% coupons to further improve our capital structure, while redeeming higher coupon notes generating approximately 40 million in annualized interest expense savings the way.

Average interest cost of our fixed cost debt is now approximately four 6%.

Going forward, we are now targeting a leverage ratio of three times on a through cycle basis, and we remain committed to repaying the $407 million of 2023 notes on or before their maturity.

As part of Realogy moving to our next chapter I will now share additional details on our financial outlook with you.

We are incredibly excited by our continued momentum and expect really June 2022, full year financials to look a lot like our outstanding performance in 2021.

That said, we expect a return to normal seasonality in 2022.

Specifically Q1 operating EBITA will be the smallest of our four quarters and will be well below the unseasonably high $162 million operating EBITA, we delivered in Q1 'twenty one.

Q1 will also be a substantial use of cash as it normally is and remember we will also lap unusually high mortgage JV earnings, which benefited from mark to market favorability.

Let me now turn to our full year 2022 guidance.

Remember, we made 902 million in operating EBITDA in 2021, but as we look at 2022, there are two important adjustments to keep in mind.

First approximately 40 million will drop off from our underwriter business due to the sale to Centerbridge and second a similar amount will drop off from increased investments and reassure and other strategic initiatives.

After those adjustments our 2022 guidance, it's pretty close to our outstanding 2021 financial performance.

And given what we know today, we expect full year operating EBITDA to be between 808 hundred 50 million based on mid single digit volume growth with the biggest swing factor being the housing market itself.

That volume has us growing above nars latest full year forecast, while also absorbing more than 150 basis points increase in agent Commission costs.

Wrapping up our fourth quarter and 2021 results reflect the strength of our leadership position strong execution and a solid foundation and we believe there is inherent upside in our business model.

Our track record and results bolster our confidence and we will continue to drive for additional opportunities as we remain committed to growth cost mitigation and unlocking additional value longer term I will now turn the call back to Ryan.

Thank you Charlotte.

22 represents the start of real juice next chapter one we believe will be headlined by greater growth as we increasingly simplify and integrate real estate transaction for consumers and remember when we say growth, we mean and deliver profitable growth.

We are changing our capital allocation priorities, we're focused more on with Charlotte is already given the new leverage ratio Department.

Going forward, our highest capital allocation priority will be investing for profitable growth. This includes investing more in the organic growth that has helped us grow share.

The story, you'll see a greater focus of Realogy on selective M&A to drive growth, we see opportunities for strategic M&A in our core business and we also see opportunities for M&A and investments and a J.

Current businesses and in technology to further accelerate our transformation.

Finally, if we have excess free cash flow beyond that we think are good investments, we intend to return capital to shareholders.

The board has authorized a $300 million stock repurchase program.

You will also see our increased focus on growth that our May 12 Investor day.

Outside of that we look forward to updating you on our current strategic progress and where we're going in the future.

Charlotte and I will share a multi year financial outlook with you for the first time and we will highlight some of our great technology and talent like our new Chief operating officer, Louis Mcsherry, who will join US next week to help lead real juice next chapter of transformation and growth and.

And as a preview I have consistently spoken about our strategic efforts in luxury.

Integrating title and mortgage in the transaction as we simplify the customer experience our franchise expansion and technology I wanted to give you a brand lens on our growth with actually tied to those strategic objectives.

So the stores are supposed to be the international real itchy luxury brands and I'll try and corker and lifestyle brand together are a very powerful growth engine across both franchise and owned businesses. These blend executed approximately 200000 transactions with an average sales price above a million.

In 2021.

And these brands have over 15% revenue and about 25% earnings CAGR. If you look over the past four years and they ended 2021 with about 300 million in estimated operating EBITDA.

Next our coldwell banker owned brokerage has incredibly deep synergies with our national title business and our mortgage joint venture.

Especially as we make progress integrating the real estate transaction to simplify and digitize the customer experience.

Coldwell banker owned brokerage plays in the premium part of the market with about a $560000 average price point and over 345000 transactions in 2021.

And this synergistic combination of Coldwell banker owned brokerage title and mortgage.

It was about 10% revenue and about 20% earnings CAGR in the last four years with $530 million in 2021 estimated operating EBITDA.

Even while absorbing the higher agent commission and competitive pressures in the market over those four years.

And third religious national franchise brands, better homes, and gardens real estate century, 21, Coldwell banker era or a.

Generated nearly a million transactions at a $330000 average price point in 2020 one at.

These franchise brands are very high margin with strong cash flow generation and we really like the long term franchise contracts with recurring royalty stream.

And over the past four years. These brands in Florida very study approximately 200 million in estimated operating EBITDA with pretty consist of rubber.

But look finally, all of our brands are powered by religion innovation and technology.

We provide powerful technology towards agents and franchisees as together, we are delivering a better home buying and selling experience where customers.

Our industry differentiator to open architecture approach, great virtual clothing products innovative marketing products and data insights are all examples of innovation and technology critical to our brand success and we're looking forward to our upcoming Investor day to sharing more about our future more about our brand level growth and more about our technology.

So pulling way up on what religion powerful profitability, our technology leadership, and our increasingly fast moving culture.

<unk> demonstrated above market growth and a transformed balance sheet, we are ready to move real due to its next chapter as we look to accelerate our growth and our innovation. We're very excited about 2022 and beyond as we continue to move real G and the industry to what's next with that Charlotte and I will take your questions.

I'd like to ask a question. Please press Star then one if.

If your question has been answered and like to move yourself into Q press the pound key.

Our first question comes from Tom and Mick joined with K B W. Your line is open.

Hey, guys. Good afternoon. Thanks for thanks for taking my questions here.

Just starting off at a high level, there's been clearly a pretty noticeable change with the introduction of the full year guidance and the authorization of the buyback. So I just want to start off by asking kind of why now is the right time to introduce those what I'd consider somewhat investor friendly items into the mix.

Well, what we are we think the right thing to do.

If you step back a bit.

Charlotte and I've been doing this together for about three years I've been I've been doing it for four but when we bolt came into this into into reality in this company that we love and we think there's great. There were really three challenges in front of US right. One challenge was frankly.

Get back to growth including market share.

The second challenge was we had a pretty rough balance sheet and you're at a four times leverage target and we weren't even a living to that leverage target yet and so there was a real transformed the balance sheet opportunity and there was a third there was the opportunity to lead our industry into a better place in terms of pathology and in our case, we think it's all about simplifying and integrating.

Great and the transaction for the consumer.

And you know and we think that over the last three or four years. We've made a lot of progress on those in 2021 kind of shows the payoff right with above market growth and above market profitability and the balance sheet progress and our technology forward and so you know.

Now is the time to just move the company to its next chapter like I described and I'm really excited to show even more at our Investor day.

Part of having those things she gives us the freedom to go farther with <unk>.

Telling you and here's what we're planning to deliver this year and kind of what it's based on in terms of the market. It gives our board and our management team and the ability to say look you know we don't have to fight with one hand tied behind our back because we're focused on paying down debt right. We've got our debt to a much better spot we can invest more for growth and we can actually if we don't have good opportunities.

Let's get the capital back to the shareholders in a way that we can look at how real it looks like as an investment in terms of buying back stock so for us the guidance and some of the buyback.

Buyback and even some of the strategic changes that we're pushing toward even doing some more M&A now is a manifestation of having delivered on these three really important things, but the journey is not over and Thats just a chapter but we're so excited to kind of go to this next chapter where it's not about playing the brokerage group.

It's about simplifying the transaction and its about digitizing the transaction and integrating it into title and mortgage at the extreme of real sure kind of thing you know and our competition for that isn't.

A lot of the other brokerages the competition for that is like Zillow and others are trying to do that so you just picked out two things that are part of a broader next chapter for us, but we think there are the totally right thing to do because of the progress that we've made and that we believe we demonstrated fully in 2021.

That's great I appreciate those thoughts and just kind of following up on the buyback authorization. So you do have a decent cash balance and you've done a great job of cleaning up the debt.

So could you just talk about kind of your appetite given the stock now do you guys look at the intrinsic value of the stock and are there any kind of restriction from you guys getting a little aggressive with that buyback or just kind of talk through the cadence there.

Yeah, well the priority as we said is to invest in the business. So you know our first one is how do we set up realogy for long term success and we've definitely been ramping up things, we've tried to be a little bit more communicative about that as well and as I also said, we remain committed to satisfying our near term mature.

The 2023 notes.

So think of it as the first one is investing in the business and we'll definitely take care of those 2023 notes like we said we would do.

But as far as evaluating you know share buybacks, yes, all of those things exist right. So you're you're looking at the intrinsic value.

As far as any handcuffs go like their our own handcuffs, because again, where we are comparing a share buyback against sort of the.

The opportunities we have to invest in ourselves.

Okay that makes sense guys I appreciate it.

Thank you Tommy.

Our next question comes from Matthew Bouley with Barclays. Your line is open.

Hey, this is actually Tim on for Matt today. So I guess just the first question I have is.

Mid single digit growth in transaction volumes for 'twenty, two is that mostly driven by price and assuming you know units flat to down just kind of considering the lack of supply of resale or what are the assumptions going into that outlook.

Yeah, It's a great question actually thank you for giving it to you.

We definitely.

More of the price increase is going to come from.

Price volume or excuse me more of a volume increase to cover the price side. We think transaction unit numbers are probably going to be down a little bit as an industry, but our number of bolt includes kind of the mix that you talked about it does also.

We believe we're going to continue to gain market share.

You know obviously, because it was trying to talk to us about the dollar number but.

We're really excited that in the last year or two the world has moved to the $6 million of homes.

So and remember for all of the last decade, it was like between five and five and a half moon. So even if the units back off a little bit you can still see from our guidance Charlotte gain that we got a really strong financial engine here and.

And we're just we're excited to it will we'll go a little bit where the market goes up or down from that number but we're very excited about both where the market is looking like.

Placement of our share gains and.

Given how strong the last couple of years be it up in volume like that I think we'll feel good for us.

Thanks for that color and then just are you seeing any bifurcation in the reaction to interest rates between you know the high end buyer versus the rest of the market.

Not yet no when do we actually the reality is we haven't seen much reaction of interest rates at all yet to be bought in the market.

The biggest issue affecting the market is the lack of supply that you mentioned that that's especially acute at the first time homebuyer thing the thing you've got to remember your question actually is look in luxury the mortgage rate.

The percent of people, who use a mortgage in luxury purchases just much lower than in the mass market I don't have the numbers handy, but I.

Roughly.

And so.

Even folks who are using mortgages again, we haven't seen it slow things down yet the number of houses that are getting offers immediately upon listings are still up the number of houses that are having price cuts are still is kind of all time lows that are on the market and Ah and again the luxury place where we are.

We're a market leader does have just less mortgages periods. So it's something we're watching closely but we've not seen anything yet and it hasnt bifurcated yet either.

Thanks, and I'll leave it there good luck.

Thank you.

Our next question comes from Anthony belong with Jpmorgan. Your line is open.

Yeah. Thank you.

First question is from Ryan are you finished off 21.

And Robin percent EBITA margin, where do you think the business should be as you look out over time.

Do you think that should go higher or is that just.

Did that just benefit from a strong year, just how are you thinking about margin.

So I think there's two forces as margin and I Wonder if you can just go back to our strategy.

You know again were.

We're the leading brokerage in the country, but over time, we've got to be the leading company, helping those one 5 million customers are met what happened on the transactions, we did better integrate the transaction Tony right. We've got a simplified we got a digitized gotta make it more integrated we're making a lot of progress there. So let's just talk what that means for margin right or brokerage or.

Only margins have gone down with commission split pressure, even though we have offset a lot of that with cost reductions, but you have this pushing down in margins in the industry on the brokerage side.

But our margins have actually gone up because of title and mortgage and the greater integration that I'm talking about in the more simplification. So in some ways I think the margin rates Tony is the strategic ways, but I've tried to reference a few times, which is the more success, we have integrating and simplifying and digitizing the.

And for the customer the more our margins I think can stay or go up because of the title and mortgage and the simplification and the cost takeout side.

Right without doubt right, we are going to I believe as an industry like it's been happening for 50 years keep having some margin pressure on the agent Commission side, it's been pushing things down that we've clearly had it worked out pretty well for us and it wasn't because of the hot markets. It was because of the progress that we've made but those are the two.

Horses.

Turning out for the future and for me. It just comes back to we've got to succeed on this really critical strategic objectives, which isn't the old brokerage game is really where the world's going with real estate transactions that we think we can leave there and Tony just keep in mind for the last five years, our margins have been at or around 11% they've been give or take you know so.

I mean, that's that's like a five year track record. So I think we've been delivering that.

Okay No I appreciate that and then so then on the sports side, there I think.

You mentioned kind of outside of the mixed pieces maybe 170.

Last year, and I think you mentioned 140 <unk>.

Do you expect in 'twenty, two alright, additional split level and then.

Do you envision that to be kind of the pace for a while or is there any.

The visibility that that ease up.

Yeah, just for the record I said above 150.

So you're close.

And again it comes down to like that as long as the volume remains at this high level. The ancients basically earned their split based on the volume they produce and where we're still calling for volume to remain at this level. So there's a piece of that and obviously the other piece driven by competition.

While at a much more rational level. The competition does continue and so to the extent that the competition continues we do expect it to continue to see that well. It range. Yeah. I think it's gonna range. I think you know we're trying to give you some direction on what we see going into this year, which is obviously very volatile based on you know geographic split.

As well as you know some of the other non recruiting and retention related pieces and sort of the new development business et cetera, So it's always going to be variable but.

Until the competition dies down.

Likely to continue to be increasingly they may not be 150 basis points, but there will be.

One thing Tony I mentioned, if you get a chance to join us at our Investor Day, a couple of months.

We are going to do a much longer term financial outlook, it'll give you more visibility on our thoughts on that question over a longer time period I think the one year.

He was kind of all we're really prepared to put out in front of you at the number today, but as part of the longer term outlook will be taken this long at all and it's a balance that you know theres always the cost efficiencies that we've been delivering so you know if.

Like I said over the past five years, our margins have been you know 10, 11 and 12, we've been around that and it's because we have a consistent savings program. So I think it's important to look at both the split with the savings together.

Okay, I understand and then last one if I could.

Any ability to give us some color on the first few months of the year here and what youre seeing to kind of get a sense as to what a return to normal seasonality might look like.

Well look I mean, a couple of things. So we are seeing volume so far kind of so far this year in line with our guidance like.

Like I talked about VW Ashley's question.

You know there there's absolutely some supply issues.

Out there, but you know that.

Mortgage rates hasn't really bluntly change the buyer speed or at a price cuts in housing.

So that's kind of what we're seeing but I mean, the biggest thing is again the COVID-19 just messed up seasonality. So much from Q2 of 'twenty, what it meant for Q3 and Q4 of 'twenty, one or 'twenty and then the rest of 'twenty one.

When you think about our guidance you've got a full year.

And you know the seasonality of our of our bottom line through that time will probably look a lot more like some of the previous kind of normal kind of years.

You know, there's nothing really in the first few months for.

For first six weeks is is.

But I suppose we can point to other than Italy.

It's looking feeling it actually executing like more of a normal year I expect January to be the smallest month of the year like it usually isn't that wasn't true in 2021 because of what happened through the pandemic. So.

That's probably as much color will be out.

Okay I appreciate the help thanks.

Thanks Tommy.

Our next question comes from Dennis Mcgill with Zelman and Associates. Your line is open.

Alright, thanks for taking the question.

I guess going back to the macro you had mentioned sort of maybe low single digit unit decline embedded in the guidance this year and it sounds like Youre pretty optimistic and I understand a lot of the key measures that you would look at today are pretty positive, but how do you think about balancing the risks of the macro you have got.

Prices at least in the RFG grew about 35% two years mortgage rates spiking again, clearly an affordability challenge that's out there. So if things were to shift how do you think about the rest of the business and what you would change in the strategy if anything well look I think the strategy in terms of.

I'm trying to simplify the transaction you know growing our luxury business et cetera.

Is there something you want to kind of be pushing on through cycle, given where the world is like I think the reality is today. We have we have continued stronger demand than we got low inventory I.

I think that demand is going to continue when you look at the demographics in the remote works, where more work trend and again.

If we're in the high five plus million units, that's still a big step up in the previous decade, you know what we watch on the macro as we watch the inventory thing pretty closely.

Portability matters, but it really matters.

Primarily in the first time homebuyers have you already own at home you benefited from the run up in terms of your asset values are going to buy another home.

And then the reality is the intersection of first time homebuyers.

And in mortgage and inventory is where all the pressure is that's actually the part of the market that we do the leaf business in some ways, but you know so well.

We watch all that stuff pretty closely we haven't seen I am seeing is really changing.

The view, yet, but we've shown we can be nimble on our cost reduction through kind of a down cycle.

And.

But strategically I think what we're focused on.

We do kind of more on a through cycle basis.

Even if the macro got a little bit worse.

Okay. That's helpful and then changing gears, a little bit maybe with the view on the relocation business can you give us any deep.

Detail on what Youre seeing just generally on relocations, where those stand today versus a year ago, even pre COVID-19 and then any learnings from geographic relocation from the migration discussion.

Yes so.

So it's like I said, that's been a tough business they've got two big hits right up the Covid hit but it also got the visa immigration restriction has under the last administration and even the Baidu administrations have been pretty slow to release some of that stuff. So it was down pretty far 30 or 40%.

Through kind of over and over time through the pandemic it's come back.

Better than that but its still down you know I don't know, 20% probably from what it was like pre COVID-19 .

We are seeing some.

Some geographic differences there.

Parts of Asia, where there's been more mobility.

In <unk> U S mobility has gone up a little bit versus <unk>.

Versus during Covid and I think Thats. Some of this company is bringing people back into some of their new hires are actually moving there.

But you know I think you should think about it is it was down 30% to 40% it's now down.

15% to 20% so it's come back some but it's definitely not back to where it was.

Pre pre COVID-19 .

You mentioned Asia and that number was that 15% to 20% number is that a global number.

20% of our our global number.

I think.

I don't have the geographic numbers at my fingertips.

But the.

No region is up versus pre COVID-19 that much I know for sure the reach down a little bit differently, but overall the timing adds up to the kind of 50 point okay.

Got it.

Good luck guys.

Thank you.

Our next question comes from John Campbell with Stephens, Inc. Your line is open.

Hey, this is Ajay here stepping in for John Thanks for taking my question and congrats on the quarter.

Yeah.

Of course, a quick question on Carters.

It's buried in the franchise segment results. So it's hard to see how it has fared in recent quarters just wanted to check in on how that recovery is look since the early stages of the pandemic just kind of wondering how far you are from prior peak levels and how you're thinking about over the next year or so.

Yes. It is kind of the same answer was the last question you know it was down a lot and you know 2020 and somewhat in 2021 with the.

What's the core impacts of the pandemic, especially in 2020, and then it kind of come back and so but it is not back all the way you know now size wise, you know that business.

Swamped by the rest of the franchise business I was kind of a rounding error on the franchise business, but.

But you know it's you know you know you know it'll be it'll be a positive contributor to our profitability this year, but not in any sort of a big number it won't move the needle.

But it won't be the challenge it was back in 2020, so it's a good part of the company, we like to lead generation.

<unk> gives us economics to improve as the market improves as a good thing, we probably gained a little market share of that business. We've got actually a bunch of new clients in the last year is a lot of other relocation companies I think are really struggling and they may not have the power of the other parts of realogy behind them to help them out.

But you know it's a it's.

It's pretty it's pretty much a rounding error in the in the in the financials.

But it's at least getting back into the positive territory than we'd like it to be but it's not financially what it was before.

Before before Covid, it and again compared to the rest of the franchise businesses.

Even the before Covid numbers were really small.

Gotcha, and just one more Charlotte I believe last quarter. You had said that you guys have a doubling up recruiting efforts for the mortgage entitled JV can you provide any update on loan officer recruiting and geographic expansion efforts.

Yeah. So we continue to be focused on that obviously.

With the slowdown in refinance volumes.

That may not be the same but yes were definitely still focused on growing that business I think I just want to remind you too. We've got like this one last quarter to lap in Q1 of <unk> outside of the Mark to market adjustments, but after that you know I think the business would be a lot easier to look at on a comparable basis.

Because I think it was really cloudy with all the mark to market adjustments. So I'm excited to be able to get past that after Q1. So you can kind of get a better view into the underlying performance of that business.

Got you. Thank you so much.

Thank you Ajay.

Our next question comes from Justin Ages with Bamberg. Your line is open.

Alright, thanks for taking the question.

Sure.

I'm, just hoping you could give me a flavor.

The kind of strategic M&A that you.

<unk>.

Part of the real estate transformation is it branching into new things like insurance or repair work or is it augmenting what you've already done just trying to get a sense of that.

Yeah, So first off.

Take you back we've demonstrated an ability to actually drive growth with our technology with our marketing products with our data insights and above market share growth and gain share. So we've shown in multiple businesses, but we can do more with the business. We've got and we were able to do in the past. So we like that I think you should take to think about our <unk>.

Selective M&A in two ways and I want to go back to the fourth quarter actually talk about one is.

We selectively likely are going to do things in our core business. The Warburg real estate acquisition in New York City. As an example of that right and things have to be very strategic and we have to like the economics of it but if you take that one it's incredibly strategic so its luxury it less a brand like coldwell banker and or a geography. It wasn't in the New York.

And it does things like strengthen our coldwell banker international luxury alliance with giving it in New York City. So a lot of strategic reasons to do it in our core business. We obviously like the economics and we liked the deal. The other thing we did in the fourth quarter was invest slash purchase.

A luxury auction company, that's an adjacency to what we do today, but we view it as both an additional growth channel as well as a way to provide some complement to what we're doing.

In the core luxury and the final thing is let me give you. The technology version of this which is a few years ago, we invested in an online remote node organization company and that's been an anchor part of our digital closing experience.

So we're really on the look out either for strategic accelerant in our core business.

Or adjacencies, whether their businesses or technology that are going to help us.

Simplify and integrate the transaction and drive more growth.

And.

And the fact that we've got a couple on the board already.

It gives us something to point to for you and others.

And we're excited to kind of open up the aperture to use our free cash flow for that but again, we're going to be selective we're focused on profitability.

And we're just going to be consistent with the strategic things that we've been articulating for you which is partly why I gave you that brand level view of our company because those are some of the strategic ways. We've talked about things and you could envision different types of M&A fitting in differently in luxury versus the title mortgage integration and simplification versus do.

It's something that's a pure franchise play so those are a couple of examples and kind of how I'm thinking about it.

No that's great.

The color there and then just one more if I can.

May.

You noted the tenant's financial impacts of the real estate investment can you just give us an update on how many markets are and what youre seeing what the response has been I imagine its been you know.

Positive given that you're continuing to invest in the business, but just wanted to hear your thoughts on it.

Sure absolutely. So look we're really excited about reassure you know in many ways real sure as the.

And point of true simplifying the transaction as we try to turn two transactions selling your house and buying your house into a single transaction with real sure sell and reassure buy and we put this joint venture together with home partners of America couple of years ago, We invested in it and then we stepped up our investment in Q4.

Or as we bolt told you we were going to do but also you see affecting our Q4 results and then Charlotte told you kind of the magnitude of the step up we're going to do in 2022 and remember for every dollar we invest home partners of America and best also so.

Together, we're putting a real amount of money in here.

On the sell side, we're in 24 cities, we love the reaction we're getting.

A lot of how we can get value and that is by winning listen we're not in it to buy and sell the house, primarily we want to help people sell their house and a lot of the way we do that along the way real sure benefits us is through people, who either take real sure and our agents celgene or even if they decline real sure, but they use our agents and I gave you the 70%.

Lifting staff in the last quarter's call. We've now launched our reassure byproduct in.

In three cities in Q4 and as of February we're now up to seven cities and that is letting people waive their mortgage and financing and appraisal contingencies and turning them into a cash buyer between us and the <unk>.

<unk> America, the reassure venture and our mortgage partners and the fact that we're now in seven cities with that we like it and youre going to see it in both our core traditional business and reassure continuing to push us simplify the transaction for the customer integrate it make it easier and make it more digital and we like that.

Investment and we're going to step it up this year as Charles talked about.

That's great. Thanks, a lot for the color.

Alright, Thanks Joseph.

Okay.

And our last question comes from Kwaku Brockwell with Goldman Sachs. Your line is open.

Thank you so much for taking my call and congrats on the quarter I just have a few follow ups on the questions that were just asked in terms of macro could you guys thought here you guys talked about the bifurcation question can you talk about in the context of geographic bifurcation. What are you seeing in your different regions.

Yeah, that's a great question.

Look.

Boy and where national so we see it through our franchise and our own business.

There's a series of geographies, if youre, just doing great right and they're not necessarily new ones.

Florida, Texas, all the attractive tax and whether destinations are really doing well continue to do well and frankly, we predict that they will.

Well in the future.

New York City is probably the market that's had the biggest change.

And we saw a really significant growth in the fourth quarter. It was the most and first market affected by Covid. It was the last to recover.

And you know it had a really strong fourth quarter and it's really started off great. In 2022, you know when we look at like Manhattan for January contract signed or up 4% in January versus before the year before first excuse me versus December excuse me versus December usually.

They are down in January like 20% versus the same so new York is having a really really nice comeback.

We like we like that we see it also in our new development business.

California's come back not not as much as like a Florida or New York City has come back, but it's back in a better place than it was.

And then obviously, you've got a bunch of flight out of the higher tax and less attractive whether destinations doesn't mean, we still do a lot of business there but.

Places like New York City, Florida, and these other attractive tax or other destinations are clearly leading the way.

Thank you so much for that question. So I guess, it's for Charlotte on the 2023 notes have you thought about or how are you guys thinking about like sort of a mix between utilizing cash versus refinancing.

These notes.

No.

It'd be satisfying them with with cats.

Thank you for that and just a last question here on the M&A. Thank you so much for giving the examples on the M&A that you've done so far is there any sort of how do we think of size in terms of how much you are willing to invest in bringing these seemingly talking to M&A is there.

How do we think about it or should we just wait for the Investor day.

To learn a little bit more.

Maybe a little more now I mean look I think you should think about it more as you know.

Well I don't want I don't think it's going to be as transformational.

910 figure deals right you know I think it'll be more.

You know attractive targeted things.

And the seven and eight figure range and many of those attractive and targeted things that round out our products product mix would be a technology thing.

So we view this as kind of selective M&A is about.

Growing and accelerating a lot of the success, we've already had right not about.

Looking for one kind of you know one kind of you know.

Big cost takeout opportunity by finding some massive thing to do so think about it more that way, we'll put a little more meat on the bone at the at the Investor day, but that's.

That's kind of why both of the deal for them from the fourth quarter or probably a pretty good example from a size standpoint also so.

About what the probably what I've said here is the way I'd have you think about it and we will share some more information in a couple of months and then just you know the tuck in acquisitions tend to be the most value, creating and so that's part of our strategy. You know the good news is we do have the liquidity if it's something amazing came up yeah, it's not like we're limited.

From a value creation perspective, and we think the tuck ins create a lot more value for our shareholders.

Thank you so much guys best of luck for the rest of the year.

Thanks same to you. Thank you.

There are no further questions. This concludes the program and you may now disconnect everyone have a great day.

Thank you Michelle.

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Yes.

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Yes.

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Good afternoon.

And welcome to the Realogy Holdings Corp for years, thousands wanting one earnings conference call via webcast today's call's being recorded and a written transcript will be made available and the investments. We made some section of the company's website tomorrow.

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

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

Thank you Michelle good afternoon, and welcome to <unk> full year 2021 earnings conference call on the call with me today are <unk>, 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 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 levels interest rate and uncertainties related to the continued strength of the housing market.

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 17, and have not been updated subsequent to the initial earnings call.

Important assumptions and 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 Paretsky rule important information regarding these non-GAAP financial measures is included in our earnings press release and slides.

Today, Charlotte will discuss a target leverage ratio, which is a reference to our net debt leverage ratio. This metric is calculated in a manner shown in table eight of today's press release.

Charlotte's discussion of our results will use our three reportable segments, which Ryan uses to assess the performance of our company.

Brian will also provide a view of really do focus on the power of our brands and their positioning in the market.

This will include various references to estimated operating EBITDA contribution annual revenue and earnings growth rates by market position Nov. However, we do not maintain discrete financial information at this level.

It's estimates include cost allocations and other assumptions and do not include intercompany royalties.

In addition, such 2021 contributions do not include corporate religion leaves group or Cardiff relocation services operating EBITDA of approximately negative $150 million.

We believe this alternative strategic view of our company may be useful for stakeholders to understand our market focus within our business.

Lapped any forward looking to our reference during today's call is based on <unk>. Most recent public estimates as of January 27, 2022, which are subject to review and revision factors that may impact the comparability of our home sales statistics are outlined in our annual and quarterly reports filed with the SEC.

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

Good afternoon, everyone real issues on a transformation journey and I'm incredibly proud of what we have delivered we have gained market share we have driven greater profitability and we are massively improved our balance sheet 2021 completes the first chapter of our transformation I'm very excited about our momentum going into 2022 as we start really.

<unk> next chapter of our company delivered an extraordinary year of strategic and financial results in 2021, Realogy and Thats great agents grew overall transaction volume nearly 30% as we gained over 100 basis points of market share.

We achieved the strongest financial results in the Companys history, approximately $8 billion of revenue and $902 million operating EBITDA.

We reduced net debt by $900 million since 2019 to $2 3 billion.

Extended $1 9 billion of our debt to 2029 and beyond and we now have no debt above a 575% coupon.

Our powerful EBITDA and net debt reduction delivered a two four times net leverage ratio the best annual ratio in our company's history and finally, we advanced exciting new strategic partnerships designed to unlock future growth, including our reassured joint venture with home partners of America, our title underwriting joint venture with Centerbridge.

Luxury auction joint venture with Sotheby's.

Credibly proud of both our 2021 results and our transformation progress in recent years, driven by our technology and data led strategy, our operational excellence and our increasingly agile culture with great talent, both employees and agents at the core.

I will now turn the call over to Charlotte and I will come back to highlight <unk> next chapter.

Thank you Ryan and good afternoon, everyone I am excited to share real <unk> fourth quarter and full year 2021 results, which demonstrate continued financial and operating momentum and our best Q4 on record excluding the unseasonably high Q4 2020.

We believe we have never been better positioned financially strategically organizationally and technologically to thrive and grow in this dynamic housing market.

Our strategy is working we are competing effectively growing significant share in 2021.

Our financial discipline, and clearly defined capital allocation priorities enabled us to execute well on many strategic and operational objectives throughout the year, we delivered record top line growth and profitability and strong free cash flow, while taking actions to lower the cost profile of our <unk>.

<unk> and invest in new strategic ventures.

It is this strong foundation that we believe sets realogy up for future growth in 2022 and beyond as we continue to unlock incremental value across the business.

Full year 2021 revenue was approximately $8 billion up 28% or $1 8 billion versus 2020 led by strong transaction volume growth.

Full year 2021, operating EBITDA was an impressive $902 million up $176 million versus prior year, Despite 2020, benefiting from $150 million and temporary cost savings.

Q4 revenue was approximately $2 billion, an increase of $85 million or 4% versus prior year. Despite lapping 45% volume growth in Q4 2020.

Fourth quarter operating EBITDA was $157 million down $49 million versus prior year and up $31 million versus 2019.

Q4, 'twenty, one profitability was lower than prior year due to $31 million lower mortgage JV earnings expense increases versus prior year, and real sure and timing and marketing and conference spend.

In 2021, we continue to drive cost savings across the business, we achieved our targeted 85 million savings in 2021, which helped fuel investments we have been making in the business.

In 2022, we are targeting an additional 70 plus million dollars of cost savings for this program. We are focused on driving continued efficiency and agility, especially in automation systems integration and other personnel related efficiencies.

Now, let's move on to cash flow and the balance sheet.

For the full year real itchy generated $553 million of free cash flow largely flat to 2020, despite becoming a cash taxpayer in 2021.

We exited 2021 with a much stronger balance sheet, a senior secured leverage ratio of negative two.

Two nine times and net debt leverage of two four times.

Our leverage ratio has improved significantly over the past few years as we have generated impressive financial results taken proactive steps to reduce our cost of capital and extend our maturity profile.

I will now discuss our business unit results in more detail.

<unk> franchise group full year 2021 revenue, which includes leads and relocation was $1 2 billion up $190 million versus prior year net royalty per side of $406 was up $53 versus prior year.

RFG full year operating EBITDA was $751 million, an increase of $157 million year over year.

Realogy brokerage group full year 2021 revenue was $6 2 billion up $1 4 billion versus prior year.

Transaction volume growth up 32% versus prior year was led by our strength in luxury which we believe positions us well for future growth.

Operating EBITDA was $109 million up $61 million year over year, despite lapping approximately $85 million and temporary cost savings and investing for growth and reassure and other strategic initiatives.

Also RBG generated substantial operating EBITDA of $516 million before the transfer of intercompany royalties and marketing fees paid to our franchise business.

We grew our owned brokerage agent base, 6% year over year with Q4, our sixth consecutive quarter of sequential agent growth.

And agent retention is now the highest on record for RPG.

For the full year Commission splits increased 215 basis points, driven predominantly by a 170 basis points increase due to strong volume growth recruiting and retention.

We also had a 45 basis points increase due to business mix predominantly driven by the sale of our property frameworks business most of which we have left.

Realogy title group revenue was $952 million up $216 million versus prior year driven by growth in both the agency and underwriter businesses.

Purchase unit fees and unit volume more than offset a decline in refinance volumes.

Operating EBITDA was $200 million, a decrease of $26 million versus prior year, primarily due to a decline in mortgage JV earnings which were negatively impacted by gain on sale margin compression and lower mark to market on the loan pipeline.

Remember as interest rates begin to rise the mortgage market becomes more competitive which impacts our gain on sale margins.

Excluding $49 million in earnings from the mortgage JV RTG operating EBITDA was $151 million up $51 million versus last year.

Our underwriter joint venture with Centerbridge is expected to close in the first quarter. We are excited about the growth prospects of this business and as a reminder, post close our retained a 30% ownership will be reported in equity earnings from unconsolidated businesses, along with our mortgage JV.

This will.

Impact year over year comparisons to revenue and other P&L metrics.

I want to recognize the progress on our balance sheet.

We have benefited from multiple rating agency upgrades.

And in January 2022, we completed an upsized $1 billion notes offering at a five 5% coupon to further improve our capital structure, while redeeming higher coupon notes generating approximately $40 million in annualized interest expense savings the wait.

Average interest cost of our fixed cost debt is now approximately four 6%.

Going forward, we are now targeting a leverage ratio of three times on a through cycle basis, and we remain committed to repaying the $407 million of 2023 notes on or before their maturity.

As part of <unk> moving to our next chapter I will now share additional details on our financial outlook with you.

We are incredibly excited by our continued momentum and expect <unk> 2022 full year financials will look a lot like our outstanding performance in 2021.

That said, we expect a return to normal seasonality in 2022.

Specifically Q1 operating EBITDA will be the smallest of our four quarters and will be well below the unseasonably high $162 million operating EBITDA, we delivered in Q1 'twenty one.

Q1 will also be a substantial use of cash as it normally is and remember we will also lap unusually high mortgage JV earnings, which benefited from mark to market favorability.

Let me now turn to our full year 2022 guidance.

Remember, we made $902 million in operating EBITDA in 2021, but as we look at 2022, there are two important adjustments to keep in mind.

First approximately $40 million will drop off from our underwriter business due to the sale to Centerbridge and second a similar amount will drop off from increased investment and reassure and other strategic initiatives.

After those adjustments our 2022 guidance is pretty close to our outstanding 2021 financial performance.

And given what we know today, we expect full year operating EBITDA to be between 800 $850 million based on mid single digit volume growth with the biggest swing factor being the housing market itself.

That volume has us growing above nars latest full year forecast, while also absorbing more than 150 basis points increase in agent Commission costs.

Wrapping up our fourth quarter and 2021 results reflect the strength of our leadership position strong execution and a solid foundation and we believe there is inherent upside in our business model.

Our track record and results bolster our confidence and we will continue to drive for additional opportunities as we remain committed to growth cost mitigation and unlocking additional value longer term.

I'll now turn the call back to Ryan.

Thank you Charlotte.

22 represents the start of real juice next chapter one we believe will be headlined by greater growth as we increasingly simplify and integrate the real estate transaction for consumers and remember when we say growth, we mean and deliver profitable growth.

We are changing our capital allocation priorities, we're focused more on growth Charlotte is already given the new leverage ratio target.

Going forward, our highest capital allocation priority will be investing for profitable growth. This includes investing more in the organic growth that has helped us grow share.

The story is that Youll see a greater focus on reality on selective M&A to drive growth, we see opportunities for strategic M&A in our core business and we also see opportunities for M&A and investments in adjacent businesses and in technology to further accelerate our transformation.

Finally, if we have excess free cash flow beyond that we think are good investments, we intend to return capital to shareholders to that end. The board has authorized a $300 million stock repurchase program.

You will also see our increased focus on growth on our May 12 industrial debt.

Outside of that we look forward to updating you on our current strategic progress and where we're going in the future.

Charlotte and I will share a multi year financial outlook with you for the first time and we will highlight some of our great technology and talent like our new Chief operating officer, most mature who will join US next week to help lead <unk> next chapter of transformation and growth and.

And as a preview I have consistently spoken about our strategic efforts in luxury.

Integrating title and mortgage in the transaction as we simplify the customer experience our franchise expansion and technology I wanted to give you a brand lens on our growth with actually tied to those strategic objectives.

So the stores are supposed to be the international Realty luxury brands that are client corker and lifestyle brand together are a very powerful growth engine across both franchise and owned businesses. These brands executed approximately 200000 transactions with an average sales price above a 1 million.

<unk>.

In 2021.

And these brands have over 15% revenue and about 25% <unk>. If you look over the past four years and they ended 2021 with about $300 million in estimated operating EBITDA.

Next our coldwell banker owned brokerage has incredibly deep synergies with our national title business and our mortgage joint venture.

Actually as we make progress integrating the real estate transaction.

<unk> and digitize the customer experience.

Coldwell banker owned brokerage plays in the premium part of the market with about a $560000 average price point and over 345000 transactions in 2021.

And this synergistic combination of Coldwell banker owned brokerage title and mortgage shows about 10% revenue and about 20% earnings CAGR in the last four years with $530 million in 2021 estimated operating EBITDA, even while absorbing the higher agent commissions.

And competitive pressures in the market over those four years.

And third we will address natural franchise brands better homes and gardens real estate century, 21, Coldwell banker DRA generated nearly 1 million transactions at a $330000 average price point in 2021.

Franchise brands are very high margin with strong cash flow generation and we really like the long term franchise contracts with recurring royalty is good.

And over the past four years these brands into Florida, very steady approximately 200 million in estimated operating EBITDA with pretty consistent revenue.

When look finally, all of our brands are powered by religion innovation and technology.

We provide powerful technology to our agents and franchisees as together, we are delivering a better home buying and selling experience for customers.

Our industry differentiator to open architecture approach, great virtual closing products innovative marketing products and data insights are all examples of innovation and technology critical to our brand success.

Looking forward to our upcoming Investor day, and sharing more about our future more about our brand level growth and more about our technology led growth.

So pulling way up on what religion powerful profitability, our technology leadership, and our increasingly fast moving culture, having demonstrated above market growth and a transformed balance sheet. We are ready to move <unk> into the next chapter as we look to accelerate our growth and our innovation, we're very excited about 2022.

And beyond as we continue to move real G and the industry to what's next with that Charlotte and I will take your questions.

Just wanted to ask a question. Please press Star then one.

For your question has been answered and we'd like to remove yourself from the queue press the pound key.

Our first question comes from Tom and Mick joined with K B W. Your line is open.

Hey, guys. Good afternoon. Thanks for thanks for taking my questions here. So just so just starting off just at a at a high level, there's been clearly a pretty noticeable change with the introduction of the full year guidance and the authorization of the buyback. So I just want to start off by asking kind of why now is the right time to introduce those what I would consider.

Somewhat investor friendly items into the mix.

Well, what we are we think the right thing to do.

If you step back a bit.

Bobby Charlton I've been doing this together for about three years I've been on the juniper for but when we bought came into this into into reality in this company that we love and we think is great. There were really three challenges in front of US right. One challenge was frankly.

Get back to growth including market share.

A second challenge was we had a pretty rough balance sheet and you had a four times leverage target and we werent even living to that level and so there was a real transformed the balance sheet opportunity and there was a third there was the opportunity to kind of lead our industry into a better place in terms of technology and in our case, we think it's all about simplifying.

Integrating the transaction further for the consumer and you know and we think that over the last three or four years. We've made a lot of progress on those in 2021 kind of shows the payoff right with above market growth and above market profitability and the balance sheet progress and our technology forward and so.

Now is the time to just move the company to its next chapter like I described and I'm really excited to show even more at our Investor day, the part of having those things achieved gives us the freedom to go farther with.

Telling and here's what we're planning to deliver this year and kind of what is based on in terms of the market. It gives our board and our management team and the ability to say look.

We don't have to fight with one hand tied behind our back because we're focused on paying down debt right. We've got our debt to a much better spot we can invest more for growth and we can actually if we don't have good opportunities, let's get the capital back to the shareholders in a way that we can look at how real is it looks like as an investment in terms of buying back stock. So.

For us the guidance and some of the buyers.

Buyback and even some of the strategic changes that we're pushing toward even doing some more M&A now as a manifestation of having delivered on these three really important things, but the journey is not over and Thats just the chapter, but we're so excited to kind of go to this next chapter where it's not about play into brokerage game, it's about simplify.

In the transaction and its about digitizing the transaction and integrating it in the title and mortgage at the extreme of real sure kind of thing.

And our competition for that isn't.

A lot of the other brokerages the competition for that is like Zillow and others are trying to do that so you just picked out two things that are part of a broader next chapter for us, but we think there are the totally right thing to do because of the progress that we've made and that we believe we demonstrated fully in 2021.

That's great I appreciate those thoughts and just kind of following up on the buyback authorization. So you do have a decent cash balance and you've done a great job of cleaning up the debt.

So could you just talk about kind of your appetite given the stock now do you guys look at the intrinsic value of the stock and are there any kind of restriction from you guys getting a little aggressive with our buyback or just kind of talk through the cadence there.

Yeah, well the priority as we said is to invest in the business. So our first one is how do we set up realogy for long term success and we've definitely been ramping up things, we've tried to be a little bit more communicative about that as well and as I also said, we remain committed to satisfying our near term mature.

The 2023 notes.

Think of it as first line is investing in the business and we'll definitely take care of those 2023 notes like we've said we would do.

But as far as evaluating share buyback, yes, all of those things exist right. So your youre looking at the intrinsic value.

As far as any handcuffs go like they are our own handcuffs, because again, where we're comparing a share buyback against sort of the.

The opportunities we have to invest in ourselves.

Okay that makes sense guys I appreciate it.

Thank you Tommy.

Our next question comes from Matthew Bouley with Barclays. Your line is open.

Hey, this is actually Tim on for Matt today.

So I guess just the first question I have is the mid.

Mid single digit growth in transaction volumes for 'twenty, two is that mostly driven by price and assuming units flat to down just kind of considering the lack of supply of resale or what are the assumptions kind of going into that outlook.

Yes, it's a great question Ashley Thank you for giving instruments look.

We definitely think more of the price increase is going to come from.

Price or excuse me more of the volume increase to cover the price side. We think transaction unit numbers are probably going to be down a little bit as an industry, but our number of bolt includes kind of the mix that you talked about it does also.

So we believe we're going to continue to gain market share.

Obviously as Charles talked about it's above the dollar number but.

We're really excited that in the last year or two the worlds moved to the $6 million of homes kind of.

So and remember for all of the last decade, it was like between five and $5 $5 million. So even if the units back off a little bit you can still see from our guidance Charles gave that we got a really strong financial engine here.

And.

And we're just we're excited to it we'll go a little bit where the market goes up or down from that number but we're very excited about both where the market is looking like our placement of our share gains.

Given how strong the last couple of years be it up in volume like that I think we'll feel good for us.

Thanks for that color.

Then just are you seeing any bifurcation in the reaction to interest rates between the high end buyer versus the rest of the market.

Not yet no when we actually the reality is we haven't seen much reaction and interest rates at all yet to be bought in the market.

The biggest issue affecting the market is the lack of supply that you mentioned that that is especially acute at the first time homebuyer thing the thing you've got to remember in your question actually is look in luxury the mortgage rate.

The percent of people, who use a mortgage in luxury purchases is just much lower than in the mass market I don't have the numbers handy, but.

I know up roughly.

And so even folks who are using mortgages again, we haven't seen a slow things down yet.

Number of houses that are getting offers immediately upon listings are still up the number of houses that are having pricing hubs are still it's kind of all time lows that are on the market.

And again, the luxury place, where we're a market leader does have just less mortgages periods. So it's something we're watching closely but we have not seen anything yet and it hasnt bifurcated yet either.

Thanks, and I'll leave it there good luck.

Thank you.

Our next question comes from Anthony <unk>, along with Jpmorgan. Your line is open.

Yes. Thank you.

First question is from Ryan.

You finished off 21 with a little over an 11% EBITDA margin, where do you think the business should be as you look out over time.

Do you think that should go higher.

You did.

Did that just benefit from a strong year, just how are you thinking about margin.

So I think there's two parts of this market and I Wonder if you just go back to our strategy.

Again were.

We're the leading brokerage in the country, but over time, we've got to be the leading company, helping those one 5 million customers around what happened on the transactions, we did better integrate the transaction Tony right. We've got a simplified we've got a digitizing we've got to make it more integrated we're making a lot of progress there. So let's just talk what that means for margin rate our brokerage AUM.

The margins have gone down with commission split pressure, even though we have offset a lot of that with cost reductions, but you have this pushing down the margin in the industry on the brokerage side.

But our margins have actually gone up because of title and mortgage and the greater integration that I'm talking about in the more simplification. So in some ways I think the margin rates Tony is the strategic ways, but I've tried to reference a few times, which is the more success, we have integrating and simplifying and digitizing the transaction.

For the customer.

More of our margins I think can stay or go up because of the title and mortgage and the simplification and the cost takeout side of it.

Right without that right, we are going to I believe as an industry like has been happening for 50 years keep having some margin pressure on the agent Commission side has been pushing things down now we've clearly had it worked out pretty well for us and it wasn't because of the hot market. It was because of the progress that we've made but those are the two.

Horses.

Turning now for the future and for me. It just comes back to we've got to succeed on this really critical strategic objectives, which isn't the old brokerage game is really where the world's going with real estate transactions that we think we can lead there and Tony just keep in mind for the last five years, our margins have been at or around 11% they've been give or take you know so.

That's like a five year track record so I think we've been delivering that.

Okay. No I appreciate that and then so then on the sports side. There I think Charlie you had mentioned.

Kind of the mixed pieces, maybe 170.

Last year, and I think you mentioned 140 <unk>.

You expect in 'twenty, two alright, additional split rubber and then.

Do you envision that to be kind of the pace for a while or is there any.

The visibility that that ease up.

Yes, just for the record I said above a 150.

So you're close.

And again it comes down to like the as long as the volume remains at this high level. The ancients basically earned their split based on the volume they produce and we're still calling for volumes to remain at this level. So there's a piece of that and obviously the other piece driven by competition.

While at a much more rational level. The competition does continue and so to the extent that the competition continues we do expect it to continue to see that well. It range. Yes, I think it's going to range I think we're trying to give you some direction on what we see going into this year, which is obviously very volatile based on geographic split.

As well as some of the other non recruiting and retention related pieces and sort of the new development business et cetera, So it's always going to be variable but.

Until the competition dies down.

Likely to continue to be increasingly they may not be 150 basis points, but there will be.

They are Tony I mentioned, if you get a chance to join us at our Investor Day, a couple of months.

We are going to do a much longer term financial outlook that will give you more visibility on our thoughts on that question over a longer time period I think the one year.

It's kind of all we're really prepared to put out in front of you at the number today, but as part of our longer term outlook will be taken this on at all and to balance that theres always the cost efficiencies that we've been delivering so.

Like I said over the past five years, our margins have been 10, 11, and 12, we've been around that and it's because we have a consistent savings program. So I think it's important to look at both the split with the savings together.

Okay, I understand and then last one if I can.

Good.

Any ability to give us some color on the first few months of the year here on what Youre seeing to kind of get a sense as to what a return to normal seasonality might look like.

Well, what I mean.

So we're seeing volume so far kind of so far this year in line with our guidance.

Like I talked about visa B Ashley's question.

There is absolutely some supply issues.

Out there.

But you know.

The mortgage rates hasn't really bluntly change the buyer speed or at a price cuts in housing.

So that's kind of what we're seeing but the biggest thing is again the COVID-19 just messed up seasonality. So much from Q2 of 'twenty, what it meant for Q3 and Q4 of 'twenty, one or 'twenty and then the rest of 'twenty one.

When you think about our guidance you've got a full year end.

The seasonality of our of our bottom line through that time will probably look a lot more like some of the previous kind of normal plenty of years.

There is nothing really in the first few months.

The first six weeks as is.

But I, absolutely can point to other than us.

It's looking feeling and actually executing like more of a normal year I expect January to be the smallest month of the year like it usually isn't that wasn't true in 2021 because of what happened through the pandemic. So.

That's probably as much color will be out.

Okay I appreciate the help thanks.

Thanks Tommy.

Our next question comes from Dennis Mcgill with Zelman and Associates. Your line is open.

Alright, thanks for taking the question.

I guess going back to the macro you had mentioned sort of a maybe low single digit unit decline embedded in the guidance this year and it sounds like Youre pretty optimistic and I understand a lot of the key measures issued today are pretty positive, but how do you think about balancing the risks of the macro you've got.

Home prices at least in the RFG grew about 35% two years mortgage rates spiking again, clearly an affordability challenge that's out there. So if things were to shift how do you think about the rest of the business and what you would change in the strategy.

Look I think the strategy in terms of.

To simplify the transaction growing our luxury business et cetera.

Is there something you want to kind of be pushing on through cycle, given where the world is like I think the reality is today. We are we have continued strong <unk> demand and then we've got low inventory.

I think that demand is going to continue when you look at the demographics in the remote works, where more work trend and again.

If we're in the high five plus million units, that's still a big step up in the previous decade.

When we watch on the macro as we watch the inventory thing pretty closely.

Credibility matters, but it really matters.

Primarily in the first time homebuyers majority Motorhomes you've benefited from the run up in terms of your asset values who's going to buy another home.

And then the reality is the intersection of first time homebuyers.

And mortgage and inventory is where all the pressure is that's actually the part of the market.

We do the leaf business and in some ways, but.

So while we watch all that stuff pretty closely we haven't been seeing is really changing.

The view, yet, but we've shown we can be nimble on our cost reduction through kind of a down cycle.

And.

But strategically I think what we're focused on we do kind of more on a through cycle basis.

Even if the macro got a little bit worse.

Okay. That's helpful and then changing gears, a little bit maybe with the view on the relocation business can you give us any deep.

The detail on what Youre seeing just generally on relocations, where those stand today versus a year ago, even pre COVID-19 and then any learnings from geographic relocation from the migration discussion.

Yes so.

So it's look it's a tough that's been a tough business they've got two big hits right up the Covid hit but it also got the visa immigration restriction here under the allows administration and even the binding administration has been pretty slow to release some of that stuff. So it was down pretty far 30%, 40%.

Through through kind of over and over time through the pandemic it's come back.

Better than that but its still down I don't know, 20% probably from what it was like pre COVID-19 .

We're seeing some some geographic differences there.

Parts of Asia, where there's been more mobility.

In <unk> U S mobility has gone up a little bit versus during.

Versus during Covid, and I think thats some of the companies, bringing people back into some of their new hires are actually moving there.

But you know I think you can think about it is it was down 30% to 40% it's now down.

15% to 20% so it's come back some but it's definitely not back to where it was.

Pre pre COVID-19 .

You mentioned Asia and that number was that 15% to 20% number is that a global number that you are expecting 20% of our global number.

I think.

I don't have the geographic numbers at my fingertips.

But the no region is up versus pre COVID-19 that much I know for sure the reach down a little bit differently, but overall it kind of adds up to the kind of 50 point.

Okay got it. Thank you good luck guys.

You.

Our next question comes from John Campbell with Stephens, Inc. Your line is open.

Hey, this is a J Hayes stepping in for John Thanks for taking my question and congrats on the quarter.

Thank you Ed Yes of course, a quick question on Carters.

It's buried in the franchise segment results. So it's hard to see how it has fared in recent quarters just wanted to check in on how that recovery is look since the early stages of the pandemic.

Kind of wondering how far you are from prior peak levels and how youre thinking about Carter's over the next year or so.

Yes, it's kind of the same answer was the last question you know it was down a lot in 2020 and somewhat in 2021 with the.

With the core impact of the pandemic, especially in 2020, and then it kind of come back and so.

It's not back all the way now now size wise, you know that business.

Swamped by the rest of the franchise business. So it was kind of a rounding error on the franchise business.

You know you know.

It'll be it'll be a positive contributor to our profitability this year, but not any sort of a big number won't move the needle.

But it won't be the challenge it was back in 2020, so it's a good part of the company, we like the lead generation.

It gives us economics to improve as the market improves as a good thing, we probably gained a little market share of that business. We've got actually a bunch of new clients in the last year is a lot of other relocation companies I think are really struggling or they may not have the power of the other parts of realogy behind them to help them out.

But you know it's.

It's pretty it's pretty much a rounding error in the in the financials.

But it's at least getting back into the positive territory, that's where we'd like it to be but it's not financially what it was before.

Before before Covid and it and again compared to the rest of the franchise businesses.

Given the before Covid numbers were really small.

Got you and just one more Charlotte I believe last quarter. You had said that you guys are doubling up recruiting efforts for the mortgage entitled JV can you provide any update on loan officer recruiting and geographic expansion efforts.

Yeah. So we continue to be focused on that obviously.

With the slowdown in refinance volume.

That may not be the same but yes were definitely still focused on growing that business I think I just want to remind you too. We've got like this one last quarter to lap in Q1 of outsized mark to market adjustments, but after that I think the business will be a lot easier to look at on a comparable basis.

Because I think it was really cloudy with all the mark to market adjustments. So I'm excited to be able to get past that after Q1. So you can kind of get a better view into the underlying performance of that business.

Got you. Thank you so much.

Hey, Thank you AJ.

Our next question comes from Justin agents with Bamberg. Your line is open.

Alright, thanks for taking the question.

Sure.

I'm, just hoping you could give me a flavor.

The kind of strategic M&A that you.

Decatur.

Part of the real estate transformation does it branching into new things like insurance or repair work or is it augmenting what you've already done just trying to get a sense of that.

Yes, so first off I wanted to take you back.

Demonstrated an ability to actually drive growth.

With our technology with our marketing products with our data insights and above market share growth and gain share. So we've shown in multiple businesses that we can do more with the business. We've got and we were able to do in the past. So we like that I think you should take to think about our selective M&A in two ways and I want to go back to the fourth quarter to actually <unk>.

About one is.

We selectively likely are going to do things in our core business. The Warburg real estate acquisition in New York City. As an example of that and didn't have to be very strategic and we have to like the economics of it but if you take that one.

Incredibly strategic so luxury and less a brand like coldwell banker in or a geography. It wasn't in the New York City and it does things like strengthen our coldwell banker International luxury alliance with giving it in New York City foothold. So a lot of strategic reasons to do it in our core business.

We like the economics, and we liked the deal the other thing we did in the fourth quarter was invest slash purchase.

Luxury auction company, that's an adjacency to what we do today, but we view it as both an additional growth channel as well as a way to provide some complement to what we're doing.

<unk>.

The core luxury and the final thing is let me give you the technology burden of this which is a few years ago, we invested in an online remote Notarize Asian company and that's been an anchor part of our digital closing experience and so we're really on the lookout either for strategic accelerants in our core.

Business.

Or adjacencies, whether their businesses or technology that are going to help us simplify and integrate the transaction and drive more growth.

And.

And the fact that we've got a couple on the board already.

It gives us something to point to for you and others.

And we're excited to kind of open up the aperture to use our free cash flow for that but again, we're going to be selective we're focused on profitability.

And we're just going to be consistent with the strategic things that we've been articulating for you which is partly why I gave you that brand level view of our company because those are some of the strategic ways. We've talked about things and you could envision different types of M&A fitting in differently in luxury versus the title mortgage integration and simplification versus <unk>.

Something thats a pure franchise play so those are a couple of examples and kind of how I'm thinking about it.

No that's great.

We shipped the color there and then just one more if I.

May.

You noted the tenant's financial impact of the real estate investment can you just give us an update on how many markets are and what youre seeing and what the response has been I imagine that's been you know.

Positive given that you're continuing to invest in the business, but just wanted to hear your thoughts on it.

Sure absolutely. So look we're really excited about reassure you know in many ways reassure as the.

And the point of true simplifying the transaction as we tried to turn two transactions selling your house and buying your house into a single transaction with reassure cell and reassured by and we put this joint venture together with home partners of America. A couple a couple of years ago, we invested in it and then we stepped up our investment in Q4.

Or as we both told you we were going to do but also you see affecting our Q4 results and then Charlotte told you kind of the magnitude of the step up we're going to do in 2022 and remember for every dollar we invest home partners of America, an vessels's. So.

Together, we're putting a real amount of money in here.

On the sell side, we're in 24 cities.

We love the reaction we're getting.

A lot of how we would get value and that is by winning listings, we're not in it to buy and sell the house, primarily we want to help people sell their house and a lot of the way we do that a lot of the way real sure benefits us is through people, who either take reassure and our agent cells or even if they decline real sure, but they use our agents and I gave you the 70%.

Lithium staff in the last quarter's call. We've now launched our reassure byproduct in.

In three cities in Q4 and as of February we're now up to seven cities and that is letting people waive their mortgage and financing in an appraisal contingencies and turning them into a cash buyer between us and the <unk>.

<unk> America, the reassure venture and our mortgage partners and the fact that we're now in seven cities with that we like it and Youre going to see us in both our core traditional business and reassure continuing to push us simplify the transaction for the customer integrate it and make it easier and make it more digital and we like that.

Investment and we're going to step it up this year as Charles talked about.

That's great. Thanks, a lot for the color.

Alright, Thanks Joseph.

Okay.

And our last question comes from Kwaku of Rockwell with Goldman Sachs. Your line is open hi.

Thank you so much for taking my call and congrats on the quarter I just have a few follow ups on the questions that were just asked in terms of macro could you guys thought here you guys talked about the bifurcation question can you talk about in the context of geographic bifurcation. What are you seeing in your different regions.

Yes, that's a great question.

Look.

Boy and where national so we see it through our franchise and our own business.

There is a series of geographies that are just doing great.

Right and they're not necessarily new ones.

Florida, Texas, all the attractive tax and whether destinations are really doing well continue to do well and frankly, we predict that they will.

Dwell in the future.

New York City is probably the market that's had the biggest change.

And we saw really significant growth in the fourth quarter. It was the most and first market affected by Covid. It was the last to recover.

And and you know it had a really strong fourth quarter and it's really start off right in 2022.

When we look at like Manhattan for January contracts signed or up 4% in January versus before the year before first excuse me versus December excuse me versus December usually theyre down in January like 20% versus the second So New York is having a really really nice comeback.

We like we like that we see it also in our new development business you know Cal.

California's come back not not as much as like a Florida or New York city's come back, but it's back in a better place than it was.

And then obviously, you've got a bunch of flight out of the higher tax and less attractive whether destinations doesn't mean, we still do a lot of business there but.

Places like New York City, Florida, and these other attractive tax or other destinations are clearly leading the way.

Thank you so much for this question. So I guess, it's for Charlotte on the 2023 notes have you thought about or how are you guys thinking about like sort of a mix between you.

Utilizing cash versus refinancing.

These notes.

No.

We'll be satisfying them with cash.

Thank you for that and just a last question here on the M&A. Thank you so much for giving the examples.

Great that you've done so far is there any sort of from how do we think the size in terms of how much you are willing to invest in bringing these seemingly talking to M&A is there.

How do we think about it or should we just wait for the Investor day.

To learn a little bit more.

I'll give you a little more now I mean look I think you should think about it more as you know.

I don't want I don't think its going to be as transformational.

910 figure deals right.

It'll be more.

You know attractive targeted things.

And the seven and eight figure range and many of those attractive targeted things could round out our products product mix or via technology.

So we view this kind of selective M&A is about growing and accelerating a lot of the success. We've already had great not about we're looking for one kind of you know.

One kind of.

Big cost takeout opportunity by finding some massive thing to do so think about it more that way, we'll put a little more meat on the bone at the at the Investor day, but.

Why both of the deals from the fourth quarter or probably a pretty good example from a size.

At a standpoint also.

So.

Think about what the probably what I said here is the way I'd have you think about it and we will share some more information in a couple of months and then just the tuck in acquisitions tend to be the most value, creating and so that's part of our strategy.

News is we do have the liquidity if something amazing came up yeah, it's not like we're limited.

That was from a value creation perspective, and we think that tuck ins create a lot more value for our shareholders.

Thank you so much guys and best of luck for the rest of the year.

Thanks same to you. Thank you.

You.

There are no further questions. This concludes our program and you may now disconnect everyone have a great day.