Full Year 2023 Anywhere Real Estate Inc Earnings Call

Speaker Change: [music].

Good morning, and welcome to that anywhere real estate year end 2023 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 or.

Operator: Good morning, and welcome to the Anywhere Real Estate Year End 2023 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 call over to Anywhere Senior Vice President, Alicia Swift. Please go ahead, Alicia.

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 anywhere Senior Vice President Alicia Swift. Please go ahead Alicia.

Alicia Swift: Thank you Briana good morning, and welcome to the yearend 2023 earnings conference call for anywhere real estate on the call with me today are anywhere CEO and President Ryan Schneider, and Chief Financial Officer, Charlotte Simonelli.

Alicia Swift: Thank you, Brianna. Good morning, and welcome to the year-end 2023 earnings conference call for Anywhere Real Estate. On the call with me today are Anywhere 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 current expectations and the current economic environment. Forward-looking statements, estimates, and projections are inherently subject to significant economic, competitive, antitrust, and other litigation, regulatory, and other uncertainties and contingencies, many of which are beyond the control of management, including, among others, industry and macroeconomic developments. Actual results may differ materially from those expressed or implied in this forward-looking statement.

Alicia Swift: 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.

Alicia Swift: These statements are based on our current expectations and the current economic environment.

Alicia Swift: Forward looking statements estimates and projections are inherently subject to significant economic competitive antitrust and other litigation regulatory and other uncertainties and contingencies, many of which are beyond the control of management, including among others industry and macroeconomic developments.

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

Alicia Swift: Last, the references made to January in these remarks are actual results for the month. For example, January 2024 included one more business day than January 2023. Our discussions on January closed volumes have been disclosed as both unadjusted and adjusted to reflect the like-for-like number of business days. The 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. For those who listened to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, February 15th, and have not been updated subsequent to the initial earnings call. Now, I will turn the call over to our CEO and President, Ryan Schneider. Thank you so much, Alicia. Good morning, everyone.

Alicia Swift: Last the references made to January in these remarks are actual results for the month.

Alicia Swift: January 2024 included one more business days in January 2023.

Alicia Swift: Our discussions on January closed volumes have been disclosed in both unadjusted and adjusted to reflect like for like number of business days.

Alicia Swift: 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.

Alicia Swift: For those who listen to the rebroadcast of this presentation. We remind you that the remarks made herein are as of today February 15th and have not been updated subsequent to the initial earnings call.

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

Ryan M. Schneider: So much Alicia good morning, everyone.

Ryan M. Schneider: I am incredibly excited about 2024. There's more optimism in the housing market. We have increasing competitive advantages as a company, and we continue to demonstrate our ability to deliver results. And I'm really proud of what Anywhere Real Estate accomplished in 2023. It was an incredibly difficult year in housing, with the fewest home sale transactions since 1995 combined with unprecedented industry litigation challenges.

Ryan M. Schneider: I'm incredibly excited about 2024, there's more optimism in the housing market, we are increasing competitive advantages as a company and we continue to demonstrate our ability to deliver results.

Ryan M. Schneider: And I'm really proud of what anywhere real estate accomplish in 2023. It was an incredibly difficult year in the housing market with the fewest home sale transactions since 1995, combined with unprecedented industry litigation challenges all the while the anywhere team stayed focus on our strategic agenda. We continue.

Ryan M. Schneider: All the while, the Anywhere Team stayed focused on our strategic agenda. We continued our track record of delivering meaningful results, even as we navigated challenging market conditions. We generated $200 million of Opry and EBITDA and $67 million of free cash flow in 2022. Our EBITDA would have been meaningfully higher without our litigation reserves, and our free cash flow would have been above $100 million without litigation payments and taxes related to debt transactions. The ability to generate these levels of EBITDA and free cash flow, even in such a challenging year for housing, demonstrates our financial octane, which is a clear competitive differentiation. We realized over $200 million of cost savings as we continue to simplify, automate, and streamline our operations for the future. And we have another $100 million of cost savings targeted for 2024. We continually focus on permanently lowering our cost base, which gives us significant earnings power, especially in more normal housing. And now, in 2023, we have also improved our capital structure with more than 300 million of debt reduction. Continuing debt reduction is critical and remains a top capital allocation priority.

Ryan M. Schneider: Our track record of delivering meaningful results, even as we navigated the challenging market conditions, we generated $200 million of operating EBITDA and $67 million of free cash flow in 2023, our EBITDA would have been meaningfully higher without our litigation reserves and our free cash flow would have been above.

Ryan M. Schneider: The 100 million without litigation payments and taxes related to debt transactions.

Ryan M. Schneider: Your ability to generate these levels of EBITDA and free cash flow even in such a challenging year for housing demonstrates our financial octane, which is a clear competitive differentiator.

Ryan M. Schneider: We realized over 200 million of cost savings as we continue to simplify automate and streamline our operations for the future and we have another $100 million of cost savings targeted for 2024, we continually focus on permanently lowering our cost base, which gives us significant earnings power, especially in more normal housing.

Ryan M. Schneider: And now in 2023, we also improved our capital structure with more than $300 million of debt reduction continuing debt reduction is critical and remains a top capital allocation priority.

Ryan M. Schneider: We utilized our competitively advantaged financials to invest in the business for future success. Unlike competitors who have had to pull back given the downturn in the 2023 housing market, we delivered products, marketing, data, AI, and automation wins to enhance our value proposition, help position us for future growth, and streamline our company.

Ryan M. Schneider: We utilized our competitively advantaged financials to invest in the business for future success.

Ryan M. Schneider: Unlike competitors, who have had to pull back given the down 2023 housing market, we delivered products marketing data.

Ryan M. Schneider: And automation wins, all to enhance our value proposition to help position us for future growth and to streamline our company.

Ryan M. Schneider: For example, integrating and digitizing, our brokerage and title operations to better assist agents and consumers from contract to close creating a more frictionless transaction experience.

Ryan M. Schneider: Integrating and digitizing our brokerage and title operations to better assist agents and consumers from contract to close, creating a more frictionless transaction. Growing our franchise network, one of our most important strategic priorities, through new and expanded offerings like Affiliate Insights, Listings Direct, and Upward Title. Strengthening our luxury leadership position through continued domestic and international expansion of our high-end brand, growing our auction partnership with Sotheby's Auction House and demonstrating our preeminent position selling the most expensive homes in America, including a $295 million listing that we recently brought to the market, and continuing our aggressive generative AI agenda across many parts of our company. Our biggest success scaling our generative AI pilots since we last spoke is happening across brokerage and title operations Finally, we successfully architected the first nationwide settlement in the Seller Antitrust Class Action litigation.

Ryan M. Schneider: So in our franchise network one of our most important strategic priorities through new and expanded offerings like affiliate insights listings direct an upward title.

Ryan M. Schneider: Strengthening our luxury leadership position through continued domestic and international expansion of our high end brands growing our auction partnership with Sotheby's auction house and demonstrating our preeminent position selling the most expensive homes in America, including a $295 million listing that we recently brought to the market.

Ryan M. Schneider: And continuing our aggressive generative AI agenda across many parts of our company our biggest success scaling our generative AI pilots since we last spoke are happening across brokerage and title operations and in marketing as we are automating operational tasks and increasing our efficiency.

Ryan M. Schneider: Finally, we successfully architected the first nationwide settlement in the cellar antitrust class action litigation, we are passionate about spending on leadership time and dollars growing our business and supporting our customers rather than on litigation.

Ryan M. Schneider: We are passionate about spending our leadership time and dollars growing our business and supporting our customers rather than on litigation. Others have written that our position is a competitive advantage relative to the competition who face large judgments or lawsuits. And we agree with that and hope to capitalize on it going forward, and we look forward to our final approval hearing on May 9th. Now, as I started the call, we are really excited about 2020. We are seeing more optimism and positivity around housing. The market was very weak throughout 2020, with R and the market volume down almost 20% year over year as there were only 4.1 million home sale transactions here in the United States. But we've started to see some green shoots in the macro economy. You know, mortgage rates have come down recently.

Ryan M. Schneider: Others have written that our position is a competitive advantage relative to the competition, who faced large judgments or lawsuits and we agree with that and hope to capitalize on it going forward and we look forward to our final approval hearing on May nine.

Ryan M. Schneider: So as I started the call. We are really excited about 2024, we are seeing more optimism and positivity around housing the market was very weak throughout 2023, with our and the markets volume down almost 20% year over year as there are only $4 1 million home sale transactions.

Ryan M. Schneider: Here in the United States, but we've started to see some green shoots in the macro economy, you know mortgage rates have come down over recent months consumer sentiment around housing is improving and recently hit a two year high this month.

Ryan M. Schneider: Consumer sentiment around housing is improving, and recently hit a two-year high this month, and there are possibilities for rate cuts in 2024. Now, beyond the macro-improving, we really like the early indicators we're seeing in our book. Our open volume in December was up 8% year-over-year, with growth in both units and price.

Ryan M. Schneider: And there are possibilities for rate cuts in 2024.

Ryan M. Schneider: Now beyond the macro improving we really like the early indicators, we're seeing in our book are.

Ryan M. Schneider: Our open volume in December was up 8% year over year with growth in both units and price. This was the first month, we saw positive open volume since December of 2021.

Ryan M. Schneider: This was the first month we saw positive open volume since December of 2021, and our January results continue the strengthening trend. January closed volume was up 9% year over year with growth in units and price.

Ryan M. Schneider: In our January results continued the strengthening trend January closed volume was up 9% year over year with growth in units and price. However, there was an additional business day in January but like for like January closed volume was still up 4% year over year.

Ryan M. Schneider: However, there was an additional business day in January, but like for like, January closed volume is still up 4% year over year. Now, home prices continue to be resilient, as more than 80% of the country saw price gains in our portfolio in the quarter. That continues to illustrate the lack of supply challenges in the market.

Ryan M. Schneider: Home prices continue to be resilient as more than 80% of the country saw price gains in our portfolio in the quarter.

Ryan M. Schneider: That continues to illustrate the lack of supply challenges in the market.

Ryan M. Schneider: One of the biggest factors that made 2023 such a tough year for housing. We see demand greater than supply also showing up in other metrics. For example, a larger percentage of homes in our portfolio are selling in the first two weeks than they have done in prior years. Now, beyond potentially turning the corner with some volume momentum, we like our differentiated results in the market. Most striking is the strength of our luxury business, particularly our Sotheby's International Realty brand, whose closed volume in the quarter was actually up year over year when both the market and our overall portfolio's volumes were down. And our luxury leadership will also serve us well moving forward, as the listings growth we're seeing today on million-dollar-plus homes is meaningfully outpacing the listings trajectory both in the market and in the rest of our portfolio. Now, while we have a lot of optimism heading into 2024, the two biggest issues of 2023 will both bear watching.

Ryan M. Schneider: One of the biggest factors that made 2023, such a tough year for housing.

Ryan M. Schneider: We see demand greater than supply also showing up in other other metrics for example, a larger percentage of homes in our portfolio are selling in the first two weeks than they've done in prior years.

Ryan M. Schneider: Now beyond potentially turning the corner with some volume momentum, we like our differentiated results in the market.

Ryan M. Schneider: Striking is the strength of our luxury business, particularly our Sotheby's International Realty brand, whose closed volume in the quarter was actually up year over year, when both the market and our overall portfolio as volumes were down.

Ryan M. Schneider: In our luxury leadership also serves us well moving forward as the listings growth. We're seeing today on million dollar plus homes is meaningfully outpacing the listings trajectory both in the market and in the rest of our portfolio.

Ryan M. Schneider: Now, while we have a lot of optimism heading into 2024.

Ryan M. Schneider: Two biggest issues of 2023 will both bear watching this year first with 2023, historically tough year for housing even meaningful growth above 2020, threes numbers will still be another challenging year for the housing ecosystem.

Ryan M. Schneider: First, with 2023 being a historically tough year for housing, even meaningful growth above 2023's numbers will still be another challenging year for the housing economy. And second, while we've settled our litigation, the industry and regulatory dynamics at play in residential real estate are still ongoing. You should know that we're bringing the same proactive thinking and leadership as the industry evolves that we demonstrated in our litigation strategy. And I continue to believe the medium-term outlook for housing is quite strong, given both future demographics and the potential for lower interest rates. And if you look at our 2023 results delivery relative to the competition, our business improvements throughout the year, and how our financial octane translates as the housing market rebounds, it's hard not to be excited like we are.

Ryan M. Schneider: And second while we settled our litigation the industry and regulatory dynamics at play in residential real estate are still ongoing you should know that we're bringing the same proactive thinking and leadership as the industry evolves that we demonstrated in our litigation strategy.

Ryan M. Schneider: I continue to believe the medium term outlook for housing is quite strong given both future demographics and the potential for lower interest rates and if you look at our 2023 results delivery relative to the competition our business improvements throughout the year and how our financial octane translates as the housing market rebound is.

Hard not to be excited like we are.

Ryan M. Schneider: I appreciate how the world is recognized anywhere real estates, great work as we have been named one of America's most innovative companies by fortune enter the Forbes list of world's best employers for the third year in a row. This is in addition to our track record as a world's most ethical company for a dozen years and a great place to work for six years.

Charlotte C. Simonelli: I appreciate how the world has recognized Anywhere Real Estate's great work, as we've been named one of America's most innovative companies by Fortune and on the Forbes list of the world's best employers for the third year in a row. This is in addition to our track record as the world's most ethical company for a dozen years and a great place to work for six years. Now everything I've spoken about is because of our great employees, agents, and franchisees who helped Anywhere Lead through 2020. I'd like to thank them for their commitment and energy in a tough year, and I love the optimism I'm hearing from our people about what's ahead for the housing market and for all real estate in 2020. With that, let me turn it over to Charlotte. Good morning, everyone.

Ryan M. Schneider: Now everything I've spoken about is because of our great employees agents and franchisees, who helped anywhere lead through 2023 I'd.

Ryan M. Schneider: I'd like to thank them for their commitment and energy in a tough year and I love the optimism I'm hearing from our people about what's ahead for the housing market and for anywhere real estate in 2024 with that let me turn it over to Charlotte.

Charlotte C. Simonelli: Good morning, everyone.

Charlotte C. Simonelli: We had many successes in 2023, despite the challenging market. We generated Meaningful Operating EBITDA. We over-delivered on cost savings. We mitigated future risk with our legal settlement.

Charlotte C. Simonelli: We had many successes in 2023, despite the challenging market lead.

Charlotte C. Simonelli: We generated meaningful operating EBITA.

We over delivered on cost savings.

Charlotte C. Simonelli: We mitigated future risks with our legal settlement.

Charlotte C. Simonelli: We improved our capital structure with sizable debt reduction.

Charlotte C. Simonelli: We improved our capital structure with sizable debt reduction. We saw the best commission split trends we've seen in years, and we prudently managed our cash. We continue to execute on our controllables and position everywhere for success going forward. We believe these accomplishments, along with our progress on strategic objectives, will drive differentiated results relative to our peers and lead us to deliver long-term value to our shareholders. I will now highlight our full year 2023 financial results. We delivered full year 2023 revenue of $5.6 billion and operating EBITDA of $200 million, even despite significantly lower industry transaction volume. Our operating EBITDA would have been meaningfully higher without approximately $50 million of litigation reserves that we took for both antitrust and non-antitrust litigation. We generated free cash flow of $67 million, and our free cash flow, without taxes related to debt transactions and litigation payments, would have been above $100 million.

Charlotte C. Simonelli: We saw the Best Commission split trends, we've seen in years, and we prudently managed our cash.

Charlotte C. Simonelli: We continue to execute on our controllable and positioned anywhere for success going forward.

Charlotte C. Simonelli: We believe these accomplishments along with our progress on strategic objectives will drive differentiated results relative to our peers and lead us to deliver long term value to our shareholders.

Speaker Change: I will now highlight our full year 2023 financial results.

Speaker Change: We delivered full year 2023 revenue of $5 6 billion and operating EBITDA of $200 million, even despite significantly lower industry transaction volumes.

Speaker Change: Our operating EBITDA would have been meaningfully higher without approximately $50 million of litigation reserves that we took for both antitrust and non antitrust litigation.

Speaker Change: We generated free cash flow of $67 million and our free cash flow without taxes related to debt transactions and litigation payments would have been above 100 million.

Speaker Change: Our free cash flow was up year over year due to improved working capital and lower Capex offset in part by lower EBITDA.

Charlotte C. Simonelli: Our free cash flow was up year over year due to improved working capital and lower CapEx, offset in part by lower EBITDA. Our improved working capital was primarily driven by lower incentives paid in Q1 2020. Consistent with our capital allocation priorities, we used our free cash flow to make selective investments in the business to drive growth, including attracting agents and franchisees at better margins and expanding products and services with the highest ROIs, and we continue to drastically improve both our cost and capital structures this year. We reduced debt by over $300 million in 2023, which represents over $900 million in debt reduction since 2019. We are always evaluating ways to further improve our capital structure, and I feel confident in our ability to weather the current market. With only about $200 million due before 2026 and ample liquidity remaining on our $1.1 billion revolver, we realized $222 million of cost savings, which was about 10% higher than our target last year.

Speaker Change: Our improved working capital was primarily driven by lower incentives paid in Q1 2023.

Speaker Change: Consistent with our capital allocation priorities, we used our free cash flow to make selective investments in the business to drive growth, including attracting agents and franchisees at better margins and expanding products and services with the highest rois.

Speaker Change: And we continue to drastically improve both our cost and capital structures. This year.

Speaker Change: We reduced debt by over $300 million in 2023, which represents over 900 million in debt reduction since 2019.

Speaker Change: We are always evaluating ways to further improve our capital structure and I feel confident in our ability to weather the current market with only about $200 million due before 2026 and ample liquidity remaining on our $1 $1 billion revolver.

Speaker Change: We realized 222 million of cost savings, which was about 10% higher than our target last year and we have identified another $100 million cost savings target for 2024, which continues our multi year trend of reducing costs in the business.

Charlotte C. Simonelli: And we have identified another $100 million cost savings target for 2024, which continues our multi-year trend of reducing costs in the business. Now, let me go into more detail on our business segment performance. Our Anywhere Brands business generated $527 million in 2023 operating EBITDA. While down versus the prior year driven by historically soft industry volumes, we love our powerful franchise business with its recurring royalty stream, high margins, and its relative stability over time. Our Anywhere Advisors operating EBITDA was negative $144 million in 2023.

Speaker Change: Now, let me go into more detail on our business segment performance.

Speaker Change: Our anywhere brands business generated $527 million in 2023 operating EBITDA.

Speaker Change: While down versus prior year, driven by historically soft industry volumes, we love our powerful franchise business with its recurring royalty stream high margins and its relative stability over time.

Speaker Change: Our anywhere advisors operating EBITDA was negative $144 million in 2023. However, this business generated 171 million in operating EBITDA before the transfer of intercompany royalties and marketing fees paid to our franchise business.

Charlotte C. Simonelli: However, this business generated $171 million in operating EBITDA before the transfer of intercompany royalties and marketing fees paid to our franchise business. Commission splits were 80.2% in 2023, up 46 basis points year over year, with 15 basis points of that increase coming from lower new development business in 2023. We continue to like the moderation we see in splits, with only four basis points of year-over-year increase in the fourth quarter. And in the fourth quarter, splits would have been down year over year, excluding the new development impact. The improvement in split pressure this year was driven by lower volumes, a more stable agent mix, better recruiting economics, and other proactive actions we have taken. And we see those continuing into 2024. Anywhere Integrated Services' operating EBITDA was negative $17 million in 2023 due to lower purchase and refinance volumes, which was partially offset by cost savings.

Speaker Change: Commission splits were 82% in 2023 up 46 basis points year over year with 15 basis points of that increase coming from lower new development business in 2023.

Speaker Change: We continue to like the moderation, we've seen splits with only four basis points of year over year increase in the fourth quarter.

Speaker Change: And in the fourth quarter splits would have been down year over year, excluding the new development impact.

Speaker Change: The improvement in split pressure. This year was driven by lower volumes more stable agent mix better recruiting economics and other proactive actions, we have taken and we see those continuing into 2024.

Speaker Change: Anywhere integrated services operating EBITA was negative $17 million in 2023, due to lower purchase and refinance volumes, which was partially offset by cost savings. We saw improved <unk> performance, which was 22 million better than prior year and given the tough market, we were pretty happy that our mortgage JV.

Charlotte C. Simonelli: We saw improved GRA performance, which was $22 million better than the prior year. And given the tough market, we were pretty happy that our mortgage JV was able to break even for the year. I will now provide our current outlook for 2020. As mentioned, we expect to deliver about $100 million in additional cost reductions in 2024, including carryover of approximately $40 million of actions already taken in 2023. Some of these savings will come from integrating and digitizing our support services for brokerage and title, further reducing our real estate footprint, product rationalization, and automation across the enterprise. However, these savings will be offset in part by inflationary pressure.

Speaker Change: Was able to breakeven for the year.

Speaker Change: I will now provide our current outlook for 2024.

Speaker Change: As mentioned, we expect to deliver about 100 million in additional 2020 for cost reductions, including carryover of approximately $40 million of actions already taken in 2023.

Speaker Change: Some of these savings will come from integrating and digitizing our support services for brokerage and title.

Speaker Change: Further, reducing our real estate footprint product rationalization.

Speaker Change: And automation across the enterprise.

Speaker Change: These savings will be offset in part by inflationary pressures.

Speaker Change: We like the free cash flow our business delivers and that we demonstrated in 2023. However, remember we have over $100 million of payments expected in 2024 between our $73 5 million class action litigation payment and the $38 million legacy, California tax matter as possible headwind.

Charlotte C. Simonelli: We like the free cash flow our business delivers and that we demonstrated in 2023. However, remember, we have over $100 million of payments expected in 2024 between our $73.5 million class action litigation payment and the $38 million Legacy California tax matter as possible headwinds. Strengths or weaknesses of the housing market will also be one of the biggest drivers of our free cash flow in the year. Consistent with Ryan's remarks, we are seeing a bit of volume improvement at the start of the year. But most of the overall improvement in industry forecasts comes in the back half of the year. And given that, you should expect the shape of our earnings in 2024 to look similar to the shape of 2023.

Speaker Change: Yes.

Speaker Change: The strength or weakness of the housing market will also be one of the biggest drivers of our free cash flow in the year.

Speaker Change: Consistent with Ryan's remarks, we are seeing a bit of volume improvement at the start of the year, but most of the overall improvement in industry forecast comes in the back half of the year.

Speaker Change: And given that you should expect the shape of our earnings in 2024 to look similar to the shape of 2023.

Charlotte C. Simonelli: We expect more normal seasonal volumes throughout the year, and Q1 is still at historically low unit volumes, which will likely drive our EBITDA negative in the quarter. As the market leader, we have proven our ability to navigate tough markets by continuing to prioritize investing for growth while also delivering efficiencies for today and tomorrow. We continue to be focused on reducing debt.

Speaker Change: We expect more normal seasonal volumes throughout the year and Q1 is still at historically low unit volumes, which will likely drive our EBITDA negative in the quarter.

Speaker Change: As the market leader, we have proven our ability to navigate tough markets by continuing to prioritize investing for growth, while also delivering efficiencies for today and tomorrow.

Speaker Change: We continue to be focused on reducing debt and all of this will position us for an even stronger future.

Ryan M. Schneider: And all of this will position us for an even stronger future. Let me now turn the call back to Ryan for some closing remarks. Thank you, Charlotte.

Speaker Change: Let me now turn the call back to Ryan for some closing remarks. Thank you Charlotte I'm incredibly proud of how the anywhere team led and delivered through the 'twenty two 'twenty three housing market, we generated meaningful operating EBITDA and free cash flow reduced our debt.

Ryan M. Schneider: I'm incredibly proud of how the Anywhere team led and delivered on the 2023 House. Regenerated Meaningful Operating EBITDA on free cash, and reduced our debt.

Ryan M. Schneider: We invested in the business for future growth, over-delivered on our cost savings, and mitigated risk by reaching a nationwide settlement in our antitrust litigation. 2024 is about real estate everywhere executing on what we can control, delivering on a strategic agenda and utilizing our competitive advantages to drive growth, outperform the market, and to deliver value for our agents, our franchisees, and our shareholders. With that, we will take your questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from Soham Bonsal with BTIG. Please go ahead. Hey, good morning everyone. I hope you're doing well.

Ryan M. Schneider: Invested in the business for future growth over delivered on our cost savings and mitigated risk by reaching a nationwide settlement in our antitrust litigation.

Ryan M. Schneider: 'twenty 'twenty four is about anywhere real estate executing on what we can control delivering on our strategic agenda and utilizing our competitive advantages to drive growth to outperform the market and to deliver value for our agents, our franchisees and our shareholders with that we will take your questions.

Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.

Speaker Change: Your first question. It comes from so on Bunzl with BTG. Please go ahead.

Son Bunzl: Hey, good morning, everyone hope you're doing well.

Bunzl: So I guess the first.

Soham Bonsal: So I guess the first one for either Ryan or Charlotte, thinking about the long-term margins for the business for a second. So, you know, over the past couple of years, obviously, you've been on this cost reduction journey. There's probably some that comes back as volumes come back, but, you know, it seems like you're trying to change how you operate altogether.

Bunzl: Great I guess, the first one for either Ian or Charlotte.

Bunzl: Thinking about the long term margins for the business for a second so you know over the past couple of years, obviously, you've been on this cost reduction journey are you know, there's probably some that comes back as volumes come back, but you know it seems like you're trying to change how you operate it all together. So I guess my question is you know historically this business has been call it a low double digit margin.

Bunzl: Business, but in a normalized market, where do you think your margins can go.

Bunzl: Yeah. So I think prior to the housing market that we're saying this year, meaning 2023, you know we have been at double low double digit margins I mean, the there have been different years. Some had been you know sort of huge year. Some had been more normal years. So I think it depends on the year, but yes, we have had lower double digit mark.

Charlotte C. Simonelli: So I guess my question is, you know, historically, this business has been called a low double-digit margin business. But in a normalized market, where do you think your margins could go? Yeah, so I think prior to the housing market that we're seeing this year, meaning 2023, you know, we have been at low double-digit margins. I mean, there have been different years.

Bunzl: And I think what's important to know for going forward is that yes. We are trying to change how we work and so the cost savings that we're taking out today are less likely to be added back when the housing market improves because these are like structural changes to our business. So I'm optimistic that we will be able to.

Charlotte C. Simonelli: Some have been, you know, sort of huge years. Some have been more normal years. So I think it depends on the year. But yes, we have had lower double-digit margins. I think what's important to know for going forward is that, yes, we are trying to change how we work. And so the cost savings that we're taking out today are less likely to be added back when the housing market improves because these are like structural changes to our business.

Bunzl: To keep more of this cost out of the business as the market come back comes back now sure. There's always going to be you know a bit of it.

Investment that we have to make as the market improves both in like people to support the transactions mm and other marketing related costs that will correlate to volume, but I'm actually very optimistic that a lot of the work. We're doing today are going to be costs that stay out of the business.

Charlotte C. Simonelli: So I'm optimistic that we will be able to, you know, keep more of this cost out of the business as the market comes back. Now, sure, there's always going to be a bit of investment that we have to make as the market improves, both in people to support the transactions and, you know, other marketing-related costs that will correlate to volume. But I'm actually very optimistic that a lot of the work we're doing today is going to be costs that stay out of the business. Yeah, and look, we've been explicit that, you know, two-thirds of our cost reduction we think is totally permissible. We've been explicit in the past on the temporal versus the permanent. Amen.

Bunzl: And look we've been explicit that.

Bunzl: Two thirds of our cost reduction we think is totally permanent right. We've been explicit in the past on the temp versus permanent split and then.

Bunzl: Remember you know within that total margin. We also have the the.

Bunzl: 40, plus percent margin franchise business that were loving our growth on and are strategically prioritizing along with the luxury area and.

Bunzl: And so you know we're always.

Bunzl: Hoping we can do even more on that that helps the overall margin, but you know that that's there.

Bunzl: Our franchise business and the financial octane, we get from that is you know frankly, probably one of the competitive advantages, we've got and keep in mind, none of the $100 million of cost savings, there's as temporary the 100 million for this year is all permanent.

Charlotte C. Simonelli: You know, remember, within that total margin, we also have the 40-plus percent margin franchise business that we're loving our growth on and are strategically prioritizing along with the luxury area. And so, you know, we're always, you know, hoping we can do even more on that that helps the overall margin, but, you know, that franchise business and the financial octane we get from that is, you know, frankly, probably one of the competitive advantages we've got. And keep in mind that none of the $100 million in cost savings is temporary. The $100 million for this year is all permanent.

Speaker Change: Yeah got it Okay, and then Charlotte B you know historically, the 15 to 17 million framework for every 100 basis points and volume is that still a fair way to think about the business. This year or you know is there any other puts and takes we should be thinking about yeah. I think that number is more on a normal housing market I think with the volumes that we're seeing today, it's definitely a little bit.

Charlotte: Lower than that and it's because more of this as you know impacted in units versus price. So yeah, I would say, it's definitely lower than that in that the housing market that we were in in 2023, and we'll see what happens to the housing market, but keep in mind off of this low base like even a 10% improvement in the housing market is still.

Charlotte C. Simonelli: Yeah, I got it. Okay. And then, Charlotte, historically, the 15 to 17 million framework for every 100 basis points in volume, is that still a fair way to think about the business this year? Or, you know, are there any other puts and takes we should be thinking about? Yeah, I think that number is more for a normal housing market. I think with the volumes that we're seeing today, it's definitely a little bit lower than that. And it's because more of this is, you know, impacted by units versus price. So yeah, I would say it's definitely lower than that in the housing market that we were in in 2023.

Charlotte: You know a low housing market.

Speaker Change: Right and then just last one on the comes around Commission split, it's obviously encouraging trends there but did.

Speaker Change: Did you mean to say you know in 2024, we should expect similar to what we saw in Q4, which was close to flat or what you sort of produced in all of 2023. So there's three factors that are going to drive the commission splits and I intentionally didnt give a number because the single biggest driver is going to be volume and I think those are going to evolve.

Speaker Change: Aleem will evolve over the year and I think you can look at the industry forecast like huge swing is expected in the back half, but we haven't seen those yet so that's part of the reason I'm not giving an actual numbers of volume is going to be a huge piece of that I think I called out the new development business for a reason over the five years I've been here it is.

Charlotte C. Simonelli: And we'll see what happens to the housing market. But keep in mind, off of this low base, like even a 10% improvement in the housing market is still, you know, a low housing market. Right.

Charlotte C. Simonelli: And then just last one, on the comments around commission splits, obviously encouraging trends there. But Charlotte, did you mean to say, you know, in 2024, we should expect something similar to what we saw in Q4, which was close to flat, or what you sort of produced in all of 2023? So there are three factors that are going to drive commission splits. And I intentionally didn't give a number because the single biggest driver is going to be volume.

Speaker Change: Never been more than a couple of basis points impact Europe year over year. This year. It was 15 basis points. So it was a huge impact. So you know to the extent that we get back to.

Speaker Change: A more normal new development business.

Speaker Change: Now it which is highly correlated to New York City, then that will be less of a headwind for us in 2020 for the third factor is sort of the amortization of recruiting and retention payments and so to the extent that we've had much improved economics in 2023 date.

Charlotte C. Simonelli: And I think, you know, volume will evolve over the year. And I think, you know, if you can look at the industry forecast, like huge swings expected in the back half, but you know, we haven't seen those yet. So that's part of the reason I'm not giving an actual number.

Speaker Change: The negative impact from that amortization will also be improved in 2024, but I think it can't really correlate one quarter to a year and so I think you know think of it year over year with the three factors that I've just given you it'll depend on volume you know if new.

Charlotte C. Simonelli: So volume is going to be huge. I think I called up the new development business for a reason. Over the five years I've been here, it's never been more than a couple of basis points impact like year over year. This year it was 15 basis points. It was a huge impact.

Speaker Change: Development is you know sort of a nil impact on an annual basis next year that will also be a favorable year over year comparison, and we should also see a slight favorable year over year comparison on the amortization.

Charlotte C. Simonelli: So to the extent that we get back to a more normal new development business, you know, which is highly correlated to New York City, then that will be, you know, less of a headwind for us in 2024. The third factor is sort of the amortization of recruiting and retention payments. And so, you know, to the extent that we had much improved economics in 2023, the negative impact from that amortization will also be improved in 2024. But I think you can't really correlate one quarter to a year. And so I think, you know, think of it year over year with the three factors that I've just given you. It will depend on volume.

Speaker Change: Okay understood. Thanks for all the color.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Matthew Bouley with Barclays. Please go ahead.

Matthew Bouley: Good morning, everyone. Thanks for taking the questions just wanted to ask around the you.

Matthew Bouley: You know all the commission rates news.

Matthew Bouley: Maybe one way to put the question would be and obviously congratulations on all the work with the settlement or this past year, but kind of as we think about maybe some of the risks from the Doj how does how does the settlement kind of shields you from that potential risk.

Matthew Bouley: And then maybe just kind of thinking a little beyond that.

Matthew Bouley: You know, if new development is, you know, sort of a nil impact on an annual basis next year, that will also be, you know, a favorable year over year comparison. And we should also see a slight favorable year over year comparison on the amortization. Okay, understood. Thanks for all the calls. Your next question comes from Matthew Bouley with Barclays. Please go ahead. Hey, good morning, everyone.

Matthew Bouley: The potential kind of range of outcomes in this industry from a commission perspective kind of how are you positioning the business communicating with agents and all of that.

Matthew Bouley: Just in case, you know you have a again a different range of potential outcomes. There. Thank you well look you know.

Speaker Change: First off we're very happy to have mitigated risk with the nationwide settlement and obviously protecting our agents and franchisees from that no exposure as it was a really important thing and we feel glad we can accomplish that and then obviously, we can spend our management time and dollars on.

Ryan M. Schneider: Thanks for taking the questions. Just wanted to ask you about all the commission rates news. Maybe one way to put the question would be, and obviously, congratulations on all the work with the settlement over this past year, but as we think about maybe some of the risk from the DOJ, how does the settlement kind of shield you from that potential risk? And then maybe just kind of thinking a little beyond that, just the potential kind of range of outcomes in this industry from a commission perspective, kind of how are you positioning the business, communicating with agents, and all that, just in case you have, again, a different range of potential outcomes there. Thank you.

Speaker Change: Growing the business and supporting those folks.

Speaker Change: Where we're not going to speculate on anything related to the Doj.

Speaker Change: You know, we do believe in the world that we need fewer mandatory MLS rules, we love the value agents provide and you know we are always thinking through different strategic ways that markets may evolve, but you know we were excited to get our settlement done get the preliminary approval back in <unk>.

Speaker Change: Remember and we look forward to the final approval on May 9th M. Beyond that I don't think we are in the speculation business.

Ryan M. Schneider: Well, look, you know. First off, we're very happy to have mitigated risk with the nationwide settlement. Obviously, protecting our agents and franchisees from that exposure was a really important thing, and we feel glad we've accomplished that. And then, obviously, we can spend our management time and dollars on... Rowey, supporting those. You know, we're not gonna speculate on anything related to the DOJ. You know, we do believe in the world that we need fewer mandatory MLS rules.

Speaker Change: Yeah got it okay. That's helpful.

Speaker Change: Secondly, maybe just kind of zooming into the more recent kind of market trends.

Speaker Change: I think you said January excluding the extra day, what was sort of up 4%.

Speaker Change: It sounds like you had a good result, there in December as well, so just kind of delving into that a little bit kind of what are you seeing regionally.

Speaker Change: Rate volatility has been you know extreme as always are these.

Speaker Change: Past few weeks, so kind of any additional kind of unpack any of those trends over these past few weeks. Thank you. Yeah. So you know look it's.

Ryan M. Schneider: We love the value agents provide, and, you know, we are always thinking through different ways that markets may evolve, but you know we were excited to get our settlement done and get the preliminary approval back in November, and we look forward to the final approval on May 9th, and beyond that, I don't think we're in the, Yeah, got it. Okay, that's helpful.

Speaker Change: It's obviously anytime that you're up versus down is good.

And so that's a good thing right. There you all see the same rate stuff, we see so I won't try to read too much of that.

Speaker Change: You know the geography mixes are different out there you know, Florida remains quite strong we wish we had more inventory to sell in Florida.

Ryan M. Schneider: Secondly, maybe just kind of zooming in on the more recent market trends. I think you said January, excluding the extra day, was sort of up 4%. It sounds like you had a good result there in December as well.

Speaker Change: That is just kind of an off awesome market is doing great.

Speaker Change: New York is kind of lagging you know New York, both Q4 and full year volume was down more than the market, our national numbers and more than our portfolio. Its a big market for us We love It I'll bet on New York coming back, but it's been a little bit of a headwind.

Matthew Bouley: So just kind of delving into that a little bit, kind of what are you seeing regionally? You know, rate volatility has been, extreme as always, these past few weeks. So any additional kind of unpacking of those trends over these past few weeks? Thank you.

Speaker Change: And then you know like I said on the call we're seeing.

Speaker Change: Listings, taking you know be about flat basically maybe a little bit positive year over year, but the places where lithium is are the best is actually in the luxury area, where we're the leader and we like that you know we're seeing cash offers are at.

Ryan M. Schneider: Yeah, so you know, look, it's, obviously, any time that you're up versus down is good. So that's a good thing right there. You know, you all see the same rate stuff we see, so I won't try to read you too much of that. You know, the geography mixes are different out there, you know. Florida remains, you know, quite strong; we wish we had more inventory to sell in Florida. You know, that is just, you know, kind of an awesome market that's doing great. You know, New York's kind of lagging. New York, both Q4 and full year volume was down, you know, more than the market national numbers and more than our portfolio. It's a big market for us. We love it. I'll bet on New York coming back.

Speaker Change: Pretty much historical high levels as I said in the script, we're seeing home selling in the first two weeks in our portfolio of historically high levels and so you know end of the day there is more demand than there is supply.

Speaker Change: Lower rates is going to help unlock more supply, obviously and we're rooting for that and then the.

Speaker Change: The geographic mix out there is definitely different by geography.

Speaker Change: Part of the country.

Speaker Change: But you know we're a we're excited that it's you know a little better than last year.

Great. Thanks, Brian and good luck guys.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Tom You Ms Joint with K B W. Please go ahead.

Ryan M. Schneider: But, you know, it's been a little bit of a headwind, and then, like I said on the call, we're seeing, you know, listings taking, you know, be about flat, basically, maybe a little bit positive year over year. But the places where listings are the best are actually in the luxury area where the leader and we like that, you know, we're seeing cash offers at pretty much historical high levels. As I said, in the script, we're seeing home sales in the first two weeks in our portfolio at historically high levels. And so, you know, end of the day, there is more demand than there is supply; lower rates are going to help unlock more supply, obviously, and we're rooting for that. And then, you know, the geographic mix out there is definitely different by geography, by part of the country, but we're excited that it's a little better. Thanks, Ryan.

Speaker Change: Hey, good morning, Thanks for taking my questions.

Speaker Change: Hey, Charlotte can I start with you. So can you help us walk through the available cash resources.

You have about $1 billion of capacity under the revolving credit facility and it looks like you tapped into that.

Tom: In January can you just help us think through how much you might need to tap into that in order to get through to the spring when cash flow dynamics naturally improve and then is the plan to pay that down quickly or will priorities be focused elsewhere, perhaps another dead or other areas of investment and just how do you think about that yeah.

Speaker Change: Yeah. So I think it's highly correlated to how well the housing market does how quickly we are able to you know sort of satisfy the revolver.

Speaker Change: We ended the year at a at a pretty low position on the revolver and its its kind of normal that we would use cash in the first quarter and even a decent housing market.

Matthew Bouley: Good luck, guys. Your next question comes from Tommy McJoint with KBW. Please go ahead. Hey, good morning.

Speaker Change: So you know I think what we're seeing now is actually a little bit better than our own internal forecast as far as revolver use yeah, and it's likely to build like it does throughout the first quarter, we even like I said in the Goodyear, we start generating free cash flow positive free cash flow in a meaningful way and sort of like the may time period.

Tommy McJoint: Thanks for taking my questions. Hey, Charlotte, can I start with you? So, can you help us walk through the available cash resources? You have about a billion dollars of capacity under the revolving credit facility, and it looks like you tapped into that in January. Can you just help us think through how much you might need to tap into that in order to get through to the spring when cash flow dynamics naturally improve? And then is the plan to pay that down quickly, or will priorities be focused elsewhere, perhaps on other debt or other areas of investment? Just how do you think about that?

Speaker Change: So yeah, it's the revolver balance is likely to go up.

Speaker Change: Due to the.

Speaker Change: Normal Q1 seasonality, but also due to the <unk>.

Speaker Change: Unusually soft housing market that we're in as far as like our plans for the future.

Speaker Change: You know that we're always opportunistic on our capital structure, we're always evaluating things we're super mindful of the small stub on the term loan a that's also becoming due.

Speaker Change: As you point out and as I said in the script, we have a $1 1 billion dollar facility and you can see that where we have tapped in so far but you know like I said, we're prudently managing our cash as well, we I feel very proud of the accomplishments of the teams are really hone in on every bit of cash that we spend last year I mean, it was <unk>.

Charlotte C. Simonelli: Yeah, so I think it's highly correlated to how well the housing market does, and how quickly we are able to satisfy the revolver. We ended the year at a pretty low position on the revolver, and it's kind of normal that we would use cash in the first quarter in even a decent housing market. So I think what we're seeing now is actually a little bit better than our own internal forecast as far as revolvers are concerned. Yeah, and it's likely to build like it did throughout the first quarter.

Speaker Change: <unk> and like I'm very proud of the economics, we had both on agent recruiting, but also on franchisee renewals and retention.

Charlotte C. Simonelli: Even like I said, in a good year, we start generating free cash flow, positive free cash flow in a meaningful way, in sort of like the May time period. So yeah, the revolver balance is likely to go up due to the normal Q1 seasonality, but also due to the unusually soft housing market that we're in. As far as our plans for the future are concerned, you know that we're always opportunistic in our capital structure. We're always evaluating things. We're super mindful of the small stub on the term loan A that's also becoming due. You know, as you point out, and as I said in the script, we have a $1.1 billion facility, and you can see where we have tapped in so far, but you know, like I said, we're prudently managing our cash as well. I feel very proud of the accomplishments of the team to really, you know, hone in on every bit of cash that we spent last year.

Speaker Change: So I feel a lot of that continuing into 2024.

Speaker Change: We really love our liquidity, we feel very comfortable with the liquidity that we have and we're going to continue to watch the markets and be opportunistic.

Quite a few different avenues, we could go.

Speaker Change: You know that the quicker the housing market comes back you can expect the faster, we'll be paying down that revolver too.

Speaker Change: Got it Thanks, and then next question with all the media attention that the Commission litigation has received have you started to see any increase in innovation around agent Commission structures, whether it be.

Speaker Change: That fee or smaller service offerings.

Speaker Change: Or has there really been no discernible shift away from the standard roughly two 5% rate that's out there.

Speaker Change: I wouldn't say that two and a half rate is standard I mean, it's there's a pretty wide variation when you look across our portfolio, but putting that aside to your question.

Charlotte C. Simonelli: I mean, it was sizable, and I'm very proud of the economics we had both on agent recruiting and on franchisee renewals and retention. So I see a lot of that continuing into 2024. You know, we really love our liquidity. We feel very comfortable with the liquidity that we have, and we're gonna continue to watch the markets and be opportunistic. There are quite a few different avenues we could go down. But, you know, the quicker the housing market comes back, you can expect the faster we'll be, you know, paying down that revolver. Got it, thanks.

Speaker Change: I would say no, but but I would actually started in a different place and I asked this question to agents all the time, which is what are they hearing from their customers and you know.

Speaker Change: While there is a big increase in press on this topic clearly.

Speaker Change: You know other than like the days that the stuff shows up in in a Wall Street Journal or New York Times, It doesn't get much consumer.

Speaker Change: Yeah.

Speaker Change: Attention is what I'm hearing obviously, there's a lot in the trade press that we all see and deal with everything. So for example, you know I I was I was at one of our Coldwell banker real Itchy offices I don't know 10 days ago in a meeting with like 20 of our agents who were kind of.

Ryan M. Schneider: And then next question: with all the media attention that the commission litigation has received, have you started to see any increase in innovation around agent commission structures, whether it be flat fee or smaller service offerings, or has there really been no discernible shift away from the standard roughly, you know, 2.5% rate that's out there? Well, I wouldn't say the two and a half rate is standard. I mean, there's a pretty wide variation.

The high end award winners for their 2023 results and I asked them that question you know how many of you have had customers ask you about this commission news or lawsuits and you know it was very few hands went up and it was you know yeah I got one question or whatever kind of thing I talked to another agent in Denver.

Ryan M. Schneider: You look across our portfolio, but putting that aside for your question, I would say no, but I would actually start in a different place. And I ask this question to agents all the time, which is, what are they hearing from their customers? And, you know, while there's a big increase in press on this topic, clearly, other than the days that the stuff shows up in a Wall Street Journal or New York Times, it doesn't get much consumer attention, is what I'm hearing.

Speaker Change: Or emailed with her about you know you know she said she had like four people issues addressed it with kind of thing.

Speaker Change: Yeah, I don't think it is like really.

Speaker Change: You know got into the water in a way that has led to anything meaningfully changing yet.

Speaker Change: Does not mean, we don't watch it closely and it doesn't mean, we're not you know as the earlier question asked thinking very strategically about the future, but you know you know I don't think it's really.

Ryan M. Schneider: Obviously, there's a lot in the trade press that we all know. So for example, you know, I was at one of our Coldwell Banker Realty offices, I don't know, 10 days ago, and I was meeting with like 20 of our agents who were kind of the high-end award winners for their 2023 results. And I asked them that question, how many of you have had customers ask you about commission news or lawsuits? And there were very few hands that went up, and it, you know, yeah, I got one question or whatever kind of thing. I talked to another agent in Denver or emailed her about, you know, she's had like four people, and she's addressed it with that kind of thing. So I don't think it is really that bad.

Speaker Change: Like I said kind of in the water yet in a way that's actually leading to anything on the flip side, though we want to be a had we wanted to be innovators. You know we're you know we're big.

Speaker Change: Big users of buyer agent agent agreements and we're gonna be expanding that dramatically and part of the reason we're doing that as you know we got a head on this settlement thing and so we kind of got a head start in doing that we think.

Speaker Change: And so you know it'll be a like I said in my script, you know theres a lot going on here, but we're going to keep you know being proactive thinking about it and hopefully the kind of strategic thinking and execution that led us to.

Speaker Change: Carve out a different position with the first nationwide settlement here.

Speaker Change: No.

Speaker Change: She gives you a little confidence that we'll be thinking strategically about these other topics and will hopefully steer us to better outcomes than a lot of our competitors are getting.

Ryan M. Schneider: You know, like I said, kind of in the water yet in a way that's actually leading to anything. On the flip side, though, you know, we want to be ahead. We want to be innovators. You know, we're, you know, we're, you know, big users of buyer-agent agreements, and we're going to be expanding that dramatically. And part of the reason we're doing that is, you know, we got ahead on this settlement thing, and so we kind of got a head start on doing that, we think. And so, you know, like I said in my script, there's a lot going on here, but we're going to keep, you know, being proactive, thinking about it, and hopefully, the kind of strategic thinking and execution that led us to... carve out It gives you a little confidence that we'll be thinking strategically about these other topics and will hopefully steer us to better outcomes than a lot of our competitors.

Speaker Change: Got it thanks, Brian.

Speaker Change: Your next question comes from John Campbell with Stephens, Inc. Please go ahead.

John Campbell: Hey, guys good morning, Hi, John.

John Campbell: So it was obviously encouraging to hear about the momentum you guys saw kind of exiting 'twenty three and then obviously the growth in closed volumes in January I'm, hoping Bryan maybe provide a little bit more color on the on the sides and price mix and then maybe to what extent you can just talk to the open listings activity and what that signaling as far as units surprised I'm guessing that was probably pretty soon.

Bryan: What you probably saw in the closed activity, but any kind of pull out there yes.

Bryan: When you look at like our December and January they saw this quarter in both units and price were up.

Bryan: And one of the months I think.

Bryan: Prices up a little more than the units were but we hadn't seen units up in a long time in fact, I think I said, we havent had opened volume be up.

Tommy McJoint: Thanks, Ryan. Your next question comes from John Campbell with Stevens Inc. Please go ahead.

Bryan: Since December 2021, we hadn't had units to be up year over year since may of 2021.

John Campbell: Hey, guys. Good morning. Hi, John.

John Campbell: Hey, so it was obviously encouraging to hear about the momentum you guys saw exiting 23 and then obviously the growth and closed volumes in January. I'm hoping, Ryan, maybe provide a little bit more color on the sides and price mix, and then maybe to what extent you can just talk about the open listings activity and what that's signaling as far as units and price. I'm guessing that was probably pretty similar to what you probably saw in the closed activity, but any kind of call out there?

Bryan: And then they were up in December and so you know the app. The App in both December and January was a little bit.

Bryan: Kind of both but like I said, you know like in January I think the price was up you know whatever five or 6% and the units were up 3% kind of thing. So it's a mix of both but it's also like I said with units being up.

Bryan: We haven't seen that for two and a half years kind of thing. So so that's encouraging and then like I mentioned.

Ryan M. Schneider: Yeah, you know, when you look at December and January, the months I was quoting, both units and prices were up in one of the months. I think prices were up a little more than the units were, but, you know, we hadn't seen units up in a long time. In fact, I think I said we hadn't had open volume up for a long time. Since December 20 of 21, we hadn't had units be up year over year since May of 20. And then they were up in December.

Bryan: Listings are kind of flat in Q4 year over year, but they're up in the places that were strongest.

Bryan: We saw that about 5% in the $750 million range, we saw them up.

Bryan: 4% in the $1 million to $5 million range and that was those numbers are better than the rest of our portfolio and kind of better in the market.

Bryan: And then we're also seeing you know about 40% of our listing sold either at or above list price you know in December.

Ryan M. Schneider: And so, you know, the increase in both December and January was a little bit of both. But like I kind of said, you know, in January, I think the price was up, you know, whatever, 5% or 6%, and the units were up, you know, 3% kind of thing. So it's a mix of both, but it's also, like I said, with units, you know, being up. We hadn't seen that for two and a half years, kind of thing.

Bryan: You know, 34% of our listings went under contract in two weeks or less and you know last year was 33% and in previous years. It was like in the Twenty's kind of percentages kind of thing.

Bryan: You know and then cancellation rates for US you know dropped you know in Q4 you know.

Bryan: A couple of points versus 2022.

Bryan: So you know so there is you know we're on a low base here, but there is some some green shoots here that you know it gave me the optimism to say what I said in the script.

Ryan M. Schneider: And then, you know, like I mentioned, listings are kind of flat in Q4 year over year, but they're up in the places that were strongest. You know, we saw them up 5% in the $750 to $1 million range. We saw them up, you know, 4% in the $1 to $5 million range.

Speaker Change: Yeah that all sounds great I appreciate all that color and then maybe for Charlotte here I know, it's early a lot's going to obviously depend on the level of volumes and then also the working cap swings you guys are going to see from cordis, but maybe if you could talk to you expect expectations for free cash flow conversion of EBITDA I know in the past you guys have kind of mentioned 25% to 55%.

Speaker Change: <unk> range is that still a good kind of rule of thumb to consider I think on a like for like basis. That's a good rule to consider I think.

Ryan M. Schneider: And that was, those numbers are better than the rest of our portfolio and kind of better in the market. And then we're also seeing, you know, about 40% of our listings sold either at or above list price. In December, you know, 34% of our listings went under contract in two weeks or less. And you know, last year was 33%.

Speaker Change: If you extract out some of the one timers last year, we were at the high end of that last year, but I did point out we do have one timers coming this year and I'll end there are sizable.

Speaker Change: If you.

Speaker Change: Do you have to think about it with or without the potential litigation settlements as well as what will or won't happen in this California legacy tax matter from literally 1999. So.

Ryan M. Schneider: And in previous years, it was like in the 20s kind of percentages, you know, and then cancellation rates for us dropped, you know, in Q4, a couple of points versus 2022, so we're on a low base here, but there are some green shoots here that gave me the optimism to say what I said in the script. Yeah, that all sounds great. I appreciate all that color.

Speaker Change: If you ask if you extract those one timers the range definitely still holds.

Speaker Change:

Speaker Change: It's just the timing of those payments and if that will happen or not its very subjective and so that's why I I Couldnt really give you a number but we're trying to give you the piece parts. So as things evolve and you can kind of do your own math.

Speaker Change: No that's very helpful. Thank you.

Speaker Change: Sure.

Speaker Change: Again, if you would like to ask a question. Please press star one.

John Campbell: And then maybe for Charlotte here, I know it's early, but a lot is going to obviously depend on the level of volumes and then also the working cap swings you guys are going to see from Cardus. But maybe if you could talk about your expectations for free cash flow conversion off of EBITDA. I know in the past, you guys have kind of mentioned a 25 to 55% conversion range. Is that still a good rule of thumb to consider? I think on a like for like basis, that's a good rule to consider.

Speaker Change: Your next question comes from Ryan <unk> with Zelman <unk> Associates. Please go ahead.

Ryan M. Schneider: Hey, good morning, Thank you.

Ryan M. Schneider: If I go to slide five in the deck, you've got kind of four pillars.

Ryan M. Schneider: <unk> brokerage and franchise settlement in mortgage can you give us an update on the leads category and I guess just thoughts there on.

Ryan M. Schneider: Is that's expanding either through maybe more traditional referral approaches or maybe even some kind of online lead gen.

Charlotte C. Simonelli: I think, you know, if you extracted out some of the one-timers last year, we were at the high end of that last year. But I did point out that we do have some one-timers coming this year, and their size. So you have to think about it with or without the potential litigation settlement, as well as what will or won't happen in this California legacy tax matter from literally 1999. So if you extract those one-timers, the range definitely still holds. It's just, you know, the timing of those payments and if they will happen or not. It's very subjective. And so that's why I couldn't really give you a number.

Speaker Change: There yeah.

Speaker Change: Yeah. So thanks for pointing that out you know it's funny one of the things that happens when the housing market is really tough like like it was in 'twenty two and 'twenty. Three is you actually get some return to basics.

Speaker Change: Right you know taking on cost and being you know really sharp and reengineering your business like Charlotte talked about a lot becomes really important you know another thing that became really important as lead generation.

Speaker Change: The number one thing our agents and franchisees one is high quality leads in a market. When you know there is obviously much fewer transactions and there isn't a normal kind of housing market. So you know so we think kind of the high quality lead ecosystem, we have as one of our competitive advantages and that we were able to continue to utilize.

John Campbell: But we're trying to give you a piece of the pie so as things evolve, then you can kind of do your own. Now. No, that's very helpful.

Ryan McKeveny: Thank you. Again, if you would like to ask a question, please press star 1. Your next question comes from Ryan McKeveny with Zellman & Associates. Please go ahead.

Speaker Change: Is it and so.

Ryan M. Schneider: Hey, good morning. Thank you. So if I go to slide five in the deck, you've got kind of four pillars, leads, brokerage, and franchise, settlement, and mortgage. Give us an update on the leads category, and I guess just thoughts there on ways that it's expanding, either through maybe more traditional referral approaches or maybe even some kind of online lead generation efforts there. Yeah, so thanks for pointing that out.

Speaker Change: We focus more on high quality referral leads you know our relocation business has always been a source there, but recently a lot of our expansion has come from a couple of places one is.

Speaker Change: Mortgage partners, we built a stable of of mortgage partners over the last four or five years to bring you know kind of high quality real estate leads to us.

Speaker Change: And we've.

Ryan M. Schneider: You know, it's funny, one of the things that happens when the housing market's really tough, like it was in 22 and 23, is you actually get some return to base, right, you know, taking on costs and being, you know, really sharp and reengineering your business, like Charlotte talked about a lot, becomes really important. You know, another thing that became really important is lead generation. The number one thing our agents and franchisees want is high-quality leads in a market where, you know, there's obviously much fewer transactions than there is in a normal kind of housing market. So we think the high-quality lead ecosystem we have is one of our competitive advantages and that we should be able to continue to utilize it. And so we focus more on high-quality referral leads. Our relocation business has always been a source there, but recently, a lot of our expansion has come from a couple of places. One is Mortgage Partners.

Speaker Change: It's worked out well for them and for us in the ecosystem and so that's been one place that we've kind of expanded.

Speaker Change: Second we continue to invest in with a our AARP, who just has such a track record of successful programs with their members across different financial and non financial products and we really like that.

Speaker Change:

Speaker Change: We still play in <unk>.

Speaker Change: Certain things kind of from an online lead standpoint, but.

Speaker Change: We're not as interested in kind of the low quality leads that convert at a 1% to 2% rate. We're more interested in you know much higher quality higher conversion of leads that you would get from affinity sources relocation sources et cetera.

Speaker Change: And and.

Speaker Change: And we are.

Speaker Change: We're excited to keep expanding that anytime we anytime we can.

Speaker Change: No that's helpful. Thanks, Ryan.

Ryan M. Schneider: And then last one just any updates on upward upward title.

Ryan M. Schneider: Maybe just kind of uptake thus far interest from franchisees et cetera. Thank you yeah. Yeah, we're really enjoying it you know it's an important thing for those of you who don't know upward title well, it's a way basically for our franchisees to.

Ryan M. Schneider: We built a stable of mortgage partners over the last four or five years to bring high-quality real estate leads to us, and that's worked out well for them and for us in the ecosystem. And so that's been one place that we've kind of expanded. Second, we continue to invest in AARP, who just has such a track record of successful programs with their members across different financial and non-financial products, and we really like that. We still play in certain things from an online lead standpoint, but we're not as interested in the low-quality leads that convert at a 1-2% rate. We're more interested in much higher-quality, higher-conversion leads that you get from affinity sources, relocation sources, etc., and we are excited to keep expanding that whenever we can. That's helpful.

Ryan M. Schneider: Join a title joint venture with multiple franchisees and doesn't have to all be in the same brand to help our franchisees, who don't have access to title directly expand their revenue and expand their business in the real estate ecosystem and leverage the assets. They have we have national title presence, we're good at running title companies.

Ryan M. Schneider: So that's what we bring to it and we bring them together.

Ryan M. Schneider: We introduced it in 2023.

Ryan M. Schneider: We're now up to six states.

Ryan M. Schneider: So we started obviously with one state and then went to Florida, and California was two states now we're up to six states, Florida, Socal, where in Texas, Pennsylvania, Colorado, Utah, We've got over 20 franchise partners in these things more to follow and were getting frankly, some of our big franchisees are joining as well.

Ryan M. Schneider: Thanks, Ryan. And last one, just any updates on Upward Title? kind of uptake thus far, interest from franchisees, et cetera. Yeah, yeah, we're really enjoying it. You know, it's an important thing for those of you who don't know Upward Title.

Ryan M. Schneider: Some of the more medium size ones, who can do title on their own. So we like it. It's the kind of thing of you know when you strategically want to grow your very high margin franchise business.

Ryan M. Schneider: Well, it's a way basically for our franchisees to join a title joint venture with multiple franchisees, and it doesn't have to all be in the same brand to help our franchisees who don't have access to title directly expand their revenue and expand their business in the real estate ecosystem and leverage the assets they have. We have a national title presence. We're good at running title companies. So, you know, that's what we bring to it, and we bring them together. You know, we introduced it in 2023.

Ryan M. Schneider: We're going to do the international and domestic expansion of brands like Sotheby's International Realty and Corker and for example, but another way you're going to grow your franchise business is to help them just grow their revenue and also create stickiness right. We love the long term kind of a 10 year average contracts and franchise, but.

Ryan M. Schneider: This is another way to create you know a strong connection to our ecosystem for franchisees and so you know we've gone from nothing to six states and we're excited to keep going.

Ryan M. Schneider: We're now up to six states. You know, we started obviously with one state and then went to Florida, and California was two states. Now we're up to six states. You know, Florida, SoCal, we're in Texas, Pennsylvania, Colorado, and Utah.

Speaker Change: Sounds great. Thanks, so much thank.

Speaker Change: Thank you Ryan.

Speaker Change: There are no further questions at this time this will conclude today's conference. Thank you all for joining US today you may now disconnect.

Ryan M. Schneider: We've got over, you know, 20 franchise partners in these things, more to follow. And we're getting, frankly, some of our big franchisees are joining as well as some of the more, you know, medium-sized ones who can't do title on their own. So we like it. It's the kind of thing where you strategically want to grow your very high-margin franchise business. We're going to do the international and domestic expansion of brands like Sotheby's International Realty and Corcoran, for example. But another way you're going to grow your franchise business is to help them just grow their revenue and also create stickiness. Right? We love the long-term kind of 10 year average contracts in franchise.

Speaker Change: [music].

Ryan M. Schneider: But this is another way to create a strong connection to our ecosystem for franchisees. And so, you know, we've gone from nothing to six states, and we're excited to keep going. Great, thanks so much.

Operator: Thank you, Ryan. There are no further questions at this time. This will conclude today's conference. Thank you all for joining us today. You may now disconnect.