Q1 2024 Anywhere Real Estate Inc Earnings Call

April 25, 2024

Ryan M. Schneider: And we love expanding Corcoran on the franchise side with new cities like Boston and Portland coming online in Q1. And, finally, we continue to demonstrate our preeminent position selling the most expensive homes in America. Just to share some fun data, at the highest end of the market, we currently have 7 listings of $100 million plus homes, with 3 of them under contract, and 3 other $100 million plus homes whose sales we closed in Q1.

Good morning, and welcome to the anyway real estate first quarter 'twenty 'twenty four earnings conference call via webcast.

Operator: Good morning, and welcome to the Anywhere Real Estate First Quarter 2024 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 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.

Today's call is being recorded and a recent transcript will be made available and the investments are they snack section of the company's website tomorrow.

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

Ryan M. Schneider: Now we're also integrating and digitizing our brokerage and title operations, both agent and customer facing. We are better assisting agents and customers from contract to close, creating a more frictionless transaction experience. This integrated service is a win for our agents, as we provide them high-value transaction coordination services as part of the value proposition, saving them the time and hassle of either managing this work themselves or paying hundreds of dollars per transaction for someone else to handle it, so that they can focus on earning new business.

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

Alicia Swift: Thank you Kevin Good morning, and welcome to the first quarter 2024 earnings conference call for anywhere real estate.

Alicia Swift: Thank you, Gavin. Good morning, and welcome to the first quarter 2024 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 3 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.

Alicia Swift: On the call with me today are anywhere CEO, and President Ryan Schneider, and Chief Financial Officer, Charlotte Simonelli.

Alicia Swift: On slide three of the presentation the company will be making statements about its future results and other forward looking statements during this call.

Alicia Swift: These statements are based on 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.

Ryan M. Schneider: It's a win for consumers as we create a simpler transaction experience and a faster, more seamless closing process. And it's a win for anyone, as this should help us lower our title and mortgage capture rates and should contribute to a lower cost base. This more integrated and high-quality service is now available in about one-third of the U.S. and will be rolled out nationwide by the end of the year.

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

Alicia Swift: The references made to April month to date in these remarks reflect data through April 'twenty, one 'twenty 'twenty four.

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. Consequently, actual results may differ materially from those expressed or implied in the forward-looking statement.

Alicia Swift: Our discussion on an open volume basis reflects like for like number of business days.

Ryan M. Schneider: We are already seeing more than a third of transactions in available markets using the service, and we're seeing usage rates above 50% in some of our earliest launch lists. We're also combining more of our brokerage and title back offices to drive more and consistently better service and lower costs. And as I referred to in previous calls, this is actually one of the best examples of where we're able to use generative AI to improve our production process.

Alicia Swift: The timing of the reference litigation payments can be impacted by developments in the proceedings.

Alicia Swift: The reference to core franchise in his remarks is the franchise segment, excluding relocation and leave.

Alicia Swift: Finally, Charlotte's pro forma 'twenty 'twenty four illustration financial range is not a financial forecast or guidance for 2024.

Alicia Swift: He didn't provided purely to illustrate anywhere its financial octane gets home sale market for 2024 was five to $5 5 million compared to the $4 1 million existing home sale market in 2023 as reported by the National Association of Realtors.

Ryan M. Schneider: As we continue our generative AI agenda across many parts of the company, and now, finally, we really like some of the recent innovative and exciting investment opportunities we're finding to leverage our strategic assets. First, as single-family rental companies are shifting to selling their homes directly to consumers, we are finding that our national reach, our curated high-quality lead network, and the ability to integrate title are creating opportunities for us to be a great partner in selling their homes.

Alicia Swift: The references made to April month to date in these remarks reflect data through April 21, 2024. Our discussion on an open volume basis reflects leg for leg the number of business days. The timing of the reference litigation payments can be impacted by developments in the proceedings. The reference to core franchise in these remarks is the franchise segment excluding relocation and leave. Finally, Charlotte's Pro Forma 2024 illustration financial range is not a financial forecast or guidance for 2024.

Alicia Swift: The illustration includes higher mortgage joint venture earnings higher variable expenses related to our higher existing home sales environment, including increasing commission splits and royalty rates, but makes no adjustment and performance of our underwriter joint venture refinance volumes or relocation business.

Alicia Swift: Free cash flow excludes $100 million of one time anticipated payments related to the litigation and the sudden Cendant Tech legacy tax matter.

Ryan M. Schneider: Second, we like our innovation around different ways to sell homes and have been selling more luxury homes through auctions recently with our concierge auction business. And remember, the auction economic model is different as there's a buyer premium that we collect along with the seller commission. Many of you saw the TV coverage of our recent New York City Live Auction. We've also recently hosted auctions in Hong Kong and Los Angeles, and next month Concierge Auctions will be hosting the first ever live real estate auction at the historic Sotheby's London Auction House, with both Dubai and Hong Kong to follow later in 2024.

Alicia Swift: These assumptions are inherently subject to a high degree of uncertainty and risk.

Alicia Swift: Additionally, this illustration makes no assumptions regarding the potential financial impact of pending antitrust settlements or regulatory reform related to the communication negotiation or payment of buyer broker Commission.

Alicia Swift: See our forward looking statements for additional information.

Alicia Swift: It is provided purely to illustrate Anywhere's financial octane; its home sale market for 2024 was five to five and a half million compared to the 4.1 million existing home sale market in 2023, as reported by the National Association of Real Estate. The illustration includes higher mortgage joint venture earnings, higher variable expenses related to a higher existing home sale environment, including increasing commission splits and royalty rates, but makes no adjustment to the performance of our underwriter joint venture, refinance volumes, or relocation. Free cash flow excludes $100 million of one-time anticipated payments related to the litigation and the sentenced legacy tax matter.

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 April 25, 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: Thank you Alicia good morning, everyone I'm excited by anywhere real estate is positioned to drive success and to deliver value for our shareholders. We continue to demonstrate a powerful track record of delivery.

Ryan M. Schneider: In Q1, we opened four new SIR franchise offices in Greater London and recently listed a $218 million penthouse. And we're seeing similar success in Dubai's thriving luxury real estate market, where we just sold a $40 million home. Now, let me turn to housing. The Q1 market was a continuation of 2023, which was one of the toughest housing markets in the last 30 years. Unit transactions in the quarter as an industry were down versus Q1 of 2023, as limited inventory and supply challenges continue to mean demand outpaces supply.

Ryan M. Schneider: Teach at foresight energy.

Ryan M. Schneider: In Asia as we lead the industry through fast moving change and I'm really excited about how our efforts transforming how we operate anchored in our meaningful cost reduction should translate to financial octane and more normal housing markets.

Speaker Change: Well the first quarter of 2024 was another tough time in the housing market I'm proud of how our affiliated agents franchisees employees help customers navigate ongoing complexities.

Speaker Change: Everyday real estate agents guide consumers, whether the first time homebuyer, the growing family in search of more space or the retiree relocating for a lifestyle reboot during the meaningful life moments that come with these big decisions the value agents provide help homebuyers and sellers achieve their dreams and I wanted to start the call.

Alicia Swift: These assumptions are inherently subject to a high degree of uncertainty and risk. Additionally, this illustration makes no assumptions regarding the potential financial impact of pending antitrust settlements or regulatory reform related to the communication, negotiation, or payment of buyer-broker commissions. See our forward-looking statements for additional information. 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.

Speaker Change: By thanking them for their commitment and when.

Ryan M. Schneider: That showed up as higher prices in the market overall, and we saw that in our book with more than 90% of the country having year-over-year price growth in the quarter. It's hard to overstate how high mortgage rates are hurting housing, especially by keeping supply off the market and creating affordability issues.

Speaker Change: In the first quarter of 2024, we delivered $1 1 billion of revenue a negative $17 million of operating EBITDA.

Speaker Change: Remember this is the seasonally slow part of the year and we were in a very difficult housing market with a record low level of unit sales, but as we move into the selling season.

Ryan M. Schneider: And the recent inflation news has clearly put more headwinds against the timing of future rate cuts. Now, in our book, Q1 was the first quarter of year-over-year closed volume growth we've seen in about two years, as our closed volume was up 2% versus the prior year, with units down 4% and price up 7%. Our luxury segment continued to outperform, with our Sotheby's International Realty brand seeing close volume up 7% year-over-year, with about half of that from unit growth, as it again meaningfully outperformed both the market and our portfolio.

Speaker Change: Very excited because our March operating EBITDA was solidly positive.

Speaker Change: We realized approximately $30 million of cost savings in the quarter and are on track to deliver our 100 million permanent cost savings target. This year and we are working hard to exceed that initial target.

Speaker Change: Our capital allocation priorities remain focused on paying down debt and investing in the business and speaking of investing in the business. Unlike our competitors, we're still pulling back given the challenging 2020 for housing market. We continue to invest in our business to position us for future growth and to streamline our company. So for example, growing.

Alicia Swift: For those who listened to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, April 25th, 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, Alicia. Good morning, everyone.

Speaker Change: Our franchise network one of our most important strategic priorities by enhancing our value proposition for both new and existing franchisees, we are bringing them new profit sources like upward title, we are providing them excellent technology with our <unk> offering we are reducing their costs with products like our listings direct technology.

Ryan M. Schneider: We are seeing some improvement in areas like California and New York, where we have disproportionately owned brokerage businesses, with a meaningful piece of that improvement coming from growth in units. And we're beginning to see more growth in listings. We saw listings growth in our portfolio up 4% year-over-year in the quarter. This is the first time in a couple years that we have seen that kind of growth. And we're really excited about how listing growth is increasingly differentiated for us in luxury, as our million-dollar-plus listings in the quarter were up 16% versus a year ago.

Speaker Change: And we are using anywhere its data scale to provide actionable franchisee insights to help them run their businesses better through our affiliate insights tool.

Ryan M. Schneider: I'm excited by any real estate's position to drive success and to deliver value for our shareholders. Thank you all for joining us today, and I'm really excited about how our efforts transforming how we operate, anchored in our meaningful cost reductions, should translate to financial octane in more normal housing markets. Well, the first quarter of 2024 was another tough time in the housing market.

Speaker Change: Another strategic point is that we love in a strengthening in our luxury leadership position and remember we saw more million dollar plus homes at any one.

Speaker Change: Our Sotheby's International Realty brand continues to gain share as it consistently outperformed both the market and the rest of our portfolio, including again in Q1.

Speaker Change: Our Cortland brand dominates the important New York City market and was ranked as the number one brand in Manhattan for the fourth consecutive year, and we love expanding corporate on the franchise side with new cities like Boston and Portland coming online in Q1.

Ryan M. Schneider: Now look, we're clearly at a low point in the cycle, but the housing market is going to improve over time, and I still believe the medium-term outlook for housing should be quite strong, fueled by demographic demands and a continued desire for home ownership. And I really like our financial octane in stronger housing markets. Now, before I turn it over to Charlotte, there is substantial uncertainty in the industry in light of litigation and regulatory developments since we last talked.

Speaker Change: And finally, we continue to demonstrate our preeminent position selling the most expensive homes in America just to share some fun data at the highest end of the market. We currently have seven listings over $100 million plus homes with three of them under contract and three other $100 million plus homes through sales we closed in <unk>.

Ryan M. Schneider: I'm proud of how our affiliated agents, franchisees, and employees help customers navigate ongoing complexity. Every day, real estate agents guide consumers, whether the first-time homebuyer, the growing family in search of more space, or the retiree relocating for a lifestyle reboot, during the meaningful life moments that come with these big decisions. The value agents provide helps home buyers and sellers achieve their dreams, and I wanted to start the call by thanking them for their commitment.

Speaker Change: Q1.

Speaker Change: Now, we're also integrating and digitizing, our brokerage and title operations, both agent and customer facing and back office.

Ryan M. Schneider: We are excited about a level playing field on these topics and think there will be both interesting opportunities and challenges ahead, and we are bringing the same proactive thinking and leadership there that we demonstrated relative to the competition in our litigation strategy. And I also appreciate how the world continues to recognize Anywhere Real Estate for its leadership. Anywhere was recently named to Fortune's America's Most Innovative Companies list for the second year in a row, and once again, it was named one of the world's most ethical companies for the 13th consecutive year. With that, I'll turn it over to Charlotte.

Speaker Change: We are better assisting agents and customers consumers from contract to close creating a more frictionless transaction experience. This integrative service is a win for our agents as we provide them high value transaction coordination services as part of the value proposition saving them, the time and hassle of either managing this worked themselves are paying hundreds of dollars per.

Speaker Change: Action for someone else to handle it so that they could focus on earning new business.

Speaker Change: It's a win for consumers as we create a simpler transaction experienced in a faster and more seamless closing process and it's a win for anywhere as this should help us lower our title and mortgage capture should help excuse me as this should help our title and mortgage capture rates and should contribute to a lower cost base.

Ryan M. Schneider: Now, in the first quarter of 2024, we delivered $1.1 billion of revenue and negative $17 million of operating EBITDA. Remember, this is the seasonally slow part of the year, and we are in a very difficult housing market with a record low level of unit sales. But as we move into the selling season, I'm very excited because our March operating EBITDA was solidly positive. We realized approximately $30 million of cost savings in the quarter and are on track to deliver our $100 million permanent cost savings target this year, and we are working hard to exceed that initial target. Our capital allocation priorities remain focused on paying down debt and investing in the business.

Charlotte C. Simonelli: Good morning, everyone. We had solid financial and operational performance in the first quarter and continue to focus on what we can control, our cost savings and executing against our strategic goals. We continue to believe our execution, cost focus, and industry leadership will enable us to drive differentiated performance and emerge with even stronger financial results when the housing market improves. I will now highlight our first quarter financial results. Q1 revenue was $1.1 billion, essentially flat versus the prior year, as transaction volume growth was offset by softness and relocation.

Speaker Change: This more integrated and high quality service is now available in about one third of the U S and we won't be rolled out nationwide by the end of the year.

Speaker Change: We are already seeing more than a third of transactions and available markets using the service and we're seeing usage rates above 50% in some of our earliest large locations.

Speaker Change: We're also combining more of our brokerage and title back offices to drive more and consistently better service and to lower costs and as I referred to in previous calls. This is actually one of the best examples of where we're able to use generative AI to improve our production processes. As we continue continue our generative AI adjourn.

Speaker Change: Across many parts of the company.

Speaker Change: Now finally, we really like some of the recent innovative and exciting investment opportunities, we're finding to leverage our strategic assets first.

Charlotte C. Simonelli: We are encouraged by the improving volume trends, even while still off a low base. Q1 operating EBITDA was negative $17 million, improved versus the prior year due to transaction volume growth, lower expenses across the enterprise, and the absence of litigation accruals. We continue to prudently manage our cash. Cash on hand at the end of Q1 was $111 million, and Q1 free cash flow was negative $145 million.

Speaker Change: First as single family rental companies are shifting to selling their homes directly to consumers. We are finding that our national reach our curated high quality leads network and the ability to integrate title are creating opportunities for us to be a great partner and selling their homes.

Speaker Change: Second we like our innovation around different ways to sell homes and have been selling more luxury homes through auction recently with our conscientious auction business and remember the auction economic model is different as there is a buyer premium that we collect along with the seller commissions. Many of you saw the television coverage of our recent New York City lie.

Ryan M. Schneider: Speaking of investing in the business, unlike our competitors who are still pulling back given the challenging 2024 housing market, we continue to invest in our business to position us for future growth and to streamline our company. So, for example, growing our franchise network, one of our most important strategic priorities by enhancing our value proposition for both new and existing franchisees. We are bringing them new profit sources like Upward Title. We are providing them excellent technology, reducing their costs with products like our Listings Direct technology, and we are using Anywhere's data scale to provide actionable franchising insights to help them run their businesses better through our Affiliate Insights.

Charlotte C. Simonelli: This result is in line with what we normally see in the first quarter, our seasonally slowest. We expect our 2024 operating free cash flow, excluding one-time items, to be modestly positive as favorable working capital, robust savings programs, and our cash management discipline will help counterbalance another tough year in housing. And as a reminder, we have over $100 million in one-time payments anticipated this year between our $73.5 million class action litigation payment and the $39 million Legacy California tax matter.

Speaker Change: Auction. We've also recently hosted auctions in Hong Kong in Los Angeles, and next month <unk> auctions will be hosting the first ever live real estate auction at the historic Sotheby's, London auction house with both Dubai and Hong Kong to follow later in 2024.

Speaker Change: And third while we don't talk about international much we're seeing some interesting international expansion, especially in our Corcoran in Sotheby's International Realty brands, you'll remember for those two brands internationally, we do normal franchise agreements not master franchisee in Q1, we opened four new <unk> franchise offices in.

Speaker Change: Greater London, and recently lifted a $218 million penthouse and we're seeing similar success in Dubai is thriving luxury real estate market, where we just sold a 40 million dollar home.

Charlotte C. Simonelli: Now, let me go into more detail on our business segment performance. Our Anywhere Brands business, which includes leads and relocation, generated $89 million in operating EBITDA. However, operating EBITDA decreased $8 million year-over-year, primarily due to lower client volumes in the relocation business.

Speaker Change: Now, let me turn to housing.

Speaker Change: Q1 market was a continuation of 2023, which was one of the toughest housing markets in the last 30 years unit transactions in the quarter as an industry were down versus Q1 of 2023 as limited inventory and supply challenges continued to meet demand outpaces supply.

Charlotte C. Simonelli: We love our core franchise business and its margin stability over time. And in Q1, our core franchise margins were approximately 60%. Our Q1 Anywhere Advisors operating EBITDA was negative $59 million, an improvement of $16 million versus the prior year due to higher volume and lower operating and marketing costs. Commission splits in Q1 were 80.04%, down three basis points year over year, continuing the six-quarter trend of more stable splits. We are benefiting from the improved competitive environment, reduced amortization of prior recruiting and retention payments, and some reclassifications for one of our brands.

Ryan M. Schneider: Another strategic point is that we love and are strengthening our luxury leadership position. And remember, we sell more million-dollar-plus homes than anyone. Our Sotheby's International Realty brand continues to gain share as it consistently outperforms both the market and the rest of our portfolio, including again in Q1. Our Corcoran brand dominates the important New York City market and was ranked as the number one brand in Manhattan for the fourth consecutive year.

Speaker Change: That showed up as higher prices in the market overall, and we saw that in our book with more than 90% of the country, having year over year price growth in the quarter.

Speaker Change: It's hard to overstate, how high mortgage rates are hurting housing, especially about keeping supply off the market and creating affordability issues and the recent inflation news has clearly put more headwind against the timing of future rate cuts.

Speaker Change: Now in our book Q1 was the first quarter of year over year closed volume growth. We've seen in about two years as our closed volume was up 2% versus the prior year with units down, 4% and price up 7% or.

Speaker Change: Our luxury segment continued to outperform with our Sotheby's International Realty brand seen closed volume up 7% year over year with about half of that from unit growth as it again meaningfully outperformed both the market and our portfolio.

Charlotte C. Simonelli: This benefit, however, is offset in part by unfavorable agent mix, as we saw top agents take a greater share of transactions, and, to a lesser degree, geography, as we saw improvement in a few higher split markets, like California. Anywhere Integrated Services was negative $15 million in operating EBITDA in Q1.

Speaker Change: And I'm, a little more optimistic about the future because of our open volume, which represents new contracts and future closings was up year over year and improved each month during the quarter and so far in April are open volume is up 6% year over year.

Charlotte C. Simonelli: Operating EBITDA improved $2 million year over year due to lower operating expenses driven by cost savings initiatives. Moving on to costs, We delivered approximately $30 million of cost savings in the first quarter and expect to realize at least $100 million in cost savings this year. Some important items in our 2024 Cost Savings Program, which are also illustrated on slide 21 in our earnings presentation, include: We expect the cost savings to be recognized fairly evenly across the remainder of the year. We have identified 100% of the target, of which $40 million of the program is carryover savings from 2023 actions.

Speaker Change: We are seeing some improvement in areas like California, and New York, where we have disproportionate owned brokerage businesses with a meaningful piece of that improvement coming from growth in units.

Speaker Change: And we're beginning to see more growth in listings, we saw <unk> growth in our portfolio up 4% year over year in the quarter. This is the first time in a couple of years, we saw that listings growth.

Speaker Change: And we're really excited about how listings growth is increasingly differentiated for us in luxury as our million dollar plus listings in the quarter were up 16% versus a year ago.

Speaker Change: Look we're clearly at a low point in the cycle, but the housing market is going to improve over time and I still believe the medium term outlook for housing should be quite strong fueled by demographic demand and a continued desire for home ownership and I really like our financial octane in stronger housing markets now before I turn it over to Charlotte there is.

Charlotte C. Simonelli: We continue to have a relentless focus on changing how we operate to drive greater efficiencies across all areas of our company. We continue to realize cost savings by streamlining processes, reimagining roles and footprints, optimizing resources, or using AI to automate certain tasks. All of these actions will help to enhance our customer and agent experience while also improving our cost structure over the long term, and we believe these actions will actually help drive growth in the future.

Charlotte C. Simonelli: Substantial uncertainty in the industry in light of litigation and regulation developments. Since we last talked we were excited for a level playing field on these topics and think there will be both interesting opportunities and challenges ahead, and we are bringing the same proactive thinking and leadership there that we demonstrated relative to the competition in our litigation.

Speaker Change: <unk>.

Speaker Change: And I also appreciate how the world continues to recognize anywhere real estate for its leadership anywhere. It was recently named to Fortune's America's most innovative companies list for the second year in a row and once again was named one of the world's most ethical companies for the 13th consecutive year with that let me turn it over to Charlotte.

Charlotte C. Simonelli: It can be hard to see the full financial octane of our business transformation efforts, especially on the cost side, in this historically low housing market. We often get the question, "How will our cost work translate to the P&L in the future and in better housing markets?" Given that, we wanted to share the following.

Ryan M. Schneider: It's a win for consumers as we create a simpler transaction experience in a faster, more seamless closing process. And it's a win for everyone, as this should help us lower our title and mortgage capture rates and should contribute to a lower cost base. This more integrated and high-quality service is now available in about one-third of the U.S. and will be rolled out nationwide by the end of the year.

Charlotte C. Simonelli: Good morning, everyone.

Charlotte C. Simonelli: We had solid financial and operational performance in the first quarter and continued to focus on what we can control our cost savings and executing against our strategic goals.

Charlotte C. Simonelli: We put together a proforma of what 2024 would look like if we had a more normal housing market. Slide 22 in our earnings presentation shows our historic cost savings delivery over the past five years, which includes a mix of permanent and temporary cost reductions that total approximately $600 million, of which approximately $350 million has flowed through to our P&L. About 40% of the savings was offset by inflation, new investments, and other factors.

Charlotte C. Simonelli: We continue to believe our execution cost focus and.

Charlotte C. Simonelli: <unk> leadership will enable us to drive differentiated performance and emerge with even stronger financial acting when the housing market improves.

Ryan M. Schneider: We are already seeing more than a third of transactions in available markets using the service, and we're seeing usage rates above 50% in some of our earliest launch lists. We're also combining more of our brokerage and title back offices to drive more and consistently better service and lower costs. As I referred to in previous calls, this is actually one of the best examples of where we're able to use generative AI to improve our production process.

Charlotte C. Simonelli: I will now highlight our first quarter financial results.

Charlotte C. Simonelli: Q1 revenue was $1 1 billion essentially flat versus prior year as transaction volume growth was offset by softness in relocation.

Charlotte C. Simonelli: Alongside that, if you look at slide 23 in our earnings presentation, we've illustrated our pro forma 2024 financial octane combining our cost reductions, including our in-year target of $100 million, and a better housing market. This illustration implies an EBITDA range of $500 million to $600 million in a 5 to 5.5 million unit 2024 housing market. This also factors in higher mortgage delivery, as well as higher variable expenses, including commissions and royalties, for the higher unit rate environment.

Charlotte C. Simonelli: We are encouraged by the improving volume trends, even while still off a low base.

Charlotte C. Simonelli: Q1, operating EBITDA was negative $17 million improved versus prior year due to transaction volume growth lower expenses across the enterprise and the absence of litigation accruals.

Charlotte C. Simonelli: We continue to prudently manage our cash cash on hand at the end of Q1 was $111 million in Q1 free cash flow was negative 145 million. This is this result is in line with what we normally see in the first quarter our seasonally slowest.

Charlotte C. Simonelli: We expect our 2024 operating free cash flow, excluding onetime items to be modestly positive as favorable working capital robust savings programs and our cash management discipline will help counterbalance another tough year in housing.

Charlotte C. Simonelli: And to be clear, we are not assuming any consumer commission changes in this pro forma. Similarly, we believe we could see $200 to $300 million of free cash flow generation in that same $5 to $5.5 million existing home sale range, excluding any one-time payment. This shows how the strategic actions we've taken on cost can translate into strong financial delivery in a higher existing home sales unit market. The combination of our cost actions, current and future, in a more normal housing market should move us well down the path to getting back to double-digit EBITDA margins.

Charlotte C. Simonelli: And as a reminder, we have over $100 million of one time payments anticipated. This year between our $73 5 million class action litigation payment and the $39 million legacy, California tax matter.

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

Speaker Change: Our anywhere brands business, which includes leads and relocation generated $89 million and operating EBITDA.

Speaker Change: Operating EBITDA decreased $8 million year over year, primarily due to lower client volumes and the relocation business.

Charlotte C. Simonelli: I'm incredibly proud of our relentless focus on what we can control, enabling us to capitalize on the market when it returns. Let me now turn the call back to Ryan for some closing remarks. Thank you, Charlotte.

Speaker Change: We love our core franchise business and its margin stability over time and in Q1, our core franchise margins were approximately 60%.

Ryan M. Schneider: Thank you, Charlotte. I'm incredibly proud of how the Anywhere team continues to lead and deliver in the challenging housing market and the ongoing industry uncertainty. 2024 is about Anywhere real estate executing what we can control, delivering on our strategic agenda, and utilizing our competitive advantages to deliver value for our agents, franchisees, and shareholders. With that, we will take your questions.

Ryan M. Schneider: Second, we like our innovation around different ways to sell homes and have been selling more luxury homes through auctions recently with our concierge auction business. And remember, the auction economic model is different as there's a buyer premium that we collect along with the seller commission. Many of you saw the TV coverage of our recent New York City Live auction. We've also recently hosted auctions in Hong Kong and Los Angeles, and next month Concierge Auctions will be hosting the first ever live real estate auction at the historic Sotheby's London Auction House, with both Dubai and Hong Kong to follow later in 2024.

Speaker Change: Our Q1 anywhere advisors operating EBITDA was negative $59 million improved $16 million versus prior year due to higher volume and lower operating and marketing costs.

Speaker Change: Commission splits in Q1 were 80.04% down three basis points year over year, continuing the six quarter trend of more stable split.

Operator: If you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced. That is star one if you wish to ask questions. And your first question comes to the line of Matthew Bouley from Barclays. Your line is open.

Speaker Change: We are benefiting from the improved competitive environment reduced amortization of prior recruiting and retention payments and some re classes for one of our brands.

Speaker Change: This benefit however is offset in part by unfavorable agent mix as we saw top agents take a greater share of transactions and to a lesser degree geography as we saw improvement in a few higher split markets like California.

Matthew Adrien Bouley: Morning everyone. Thank you for taking the questions. I guess starting on all the news over the quarter, you know, obviously, helping agents communicate their value to consumers has always been part of your business, the brokerage business. What are you doing differently now, assuming homebuyers and sellers are kind of incrementally negotiating or questioning what commission rate they should pay? Thank you.

Speaker Change: Anywhere integrated services was negative $15 million and operating EBITDA in Q1.

Speaker Change: Operating EBITDA improved $2 million year over year due to lower operating expenses driven by cost savings initiatives.

Ryan M. Schneider: And third, while we don't talk about international much, we're seeing some interesting international expansions, especially in our Corcoran and Sotheby's international realty brands. Remember, for those two brands, internationally, we do normal franchise agreements, not master franchises. In Q1, we opened four new SIR franchise offices in Greater London and recently listed a $218 million penthouse. And we're seeing similar success in Dubai's thriving luxury real estate market, where we just sold a $40 million home.

Speaker Change: Moving on to costs.

Ryan M. Schneider: Well, let me say a couple of things, Matt. Thanks for the question.

Speaker Change: We delivered approximately $30 million of cost savings in the first quarter and expect to realize at least $100 million in cost savings this year.

Ryan M. Schneider: First off, you know, As I started my call, we just have an awesome group of agents and franchisees, and one thing I will say is, remember, our business does skew luxury, and that is a place where there's probably historically been both more complexity, more of the kind of negotiation that you're describing, and so I'm hearing from a lot of agents that they're just totally untroubled by continuing to communicate The other thing I would say, as again, we are sharing things across our ecosystem, across our six brands, leveraging the scale we have, is that because we made the decision to settle this litigation many months ago, we've been working on this longer than anybody else.

Speaker Change: Some important items on our 2020 for our cost savings program, which are also illustrated on slide 21 in our earnings presentation include.

Speaker Change: We expect the cost savings to be recognized fairly evenly across the remainder of the year.

Speaker Change: We have identified 100% of the target of which $40 million of the program is carryover savings from 2023 actions.

Speaker Change: We continue to have a relentless focus on changing how we operate to drive greater efficiencies across all areas of our company.

Speaker Change: We continue to realize cost savings by streamlining processes.

Speaker Change: Imagining roles and footprint optimizing resources or using AI to automate certain tasks.

Ryan M. Schneider: We were thinking very hard and actually had plans of how we thought buyer agreements could be a bigger part of our future way back in September, and so we're optimistic about our ability to have our agents be better than the average or better than the competition in utilizing this. And then, finally, I think buyer agency agreements are great. I think they're going to help us actually lock in some business that probably slipped through our fingers beforehand, and I really have confidence in our agents' ability to communicate their values.

Speaker Change: All of these actions will help to enhance our customer and agent experience, while also improving our cost structure over the long term and we believe these actions will actually helped drive growth in the future.

Ryan M. Schneider: Now, let me turn to housing. The Q1 market was a continuation of 2023, which was one of the toughest housing markets in the last 30 years. Unit transactions in the quarter as an industry were down versus Q1 of 2023, as limited inventory and supply challenges continued to mean demand outpaces supply. That showed up as higher prices in the market overall, and we saw that in our book with more than 90% of the country having year-over-year price growth in the quarter. It's hard to overstate how high mortgage rates are hurting housing, especially by keeping supply off the market and creating affordability issues.

Speaker Change: It can be hard to see the full financial octane of our business transformation efforts, especially on the cost side in this historically low housing market.

Speaker Change: We often get the question of how our costs work translate to the P&L in the future and in better housing markets.

Ryan M. Schneider: The sharing of best practices, the leveraging, the history we have, especially in the luxury area, of this kind of action already, and a time advantage in terms of our focus and rollout of these things are examples of both what we're doing, but also why we're excited on a relative basis for what we can do.

Speaker Change: Given that we wanted to share the following.

Speaker Change: We put together a pro forma of what 2024 would look like if we had a more normal housing market.

Speaker Change: Slide 22 in our earnings presentation shows our historic cost savings delivery over the past five years, which includes a mix of permanent and temporary cost reductions that totaled approximately $600 million of which approximately $350 million has flowed through to our P&L.

Matthew Adrien Bouley: Excellent. Well, thank you for that, Ryan.

Matthew Adrien Bouley: Second one, kind of a similar topic, of course, thinking around agent mix. Are you starting to see or perhaps considering the potential for lower-producing agents to leave the industry in a scenario like this? And if so, how do you think about the kind of profitability anywhere of lower producing agents versus the higher producing agents? The question around how commission splits may pay out, assuming that there might be a change in the kind of mix of agents in the industry. Thank you.

Speaker Change: About 40% of the savings were offset by inflation, new investments and other factors.

Speaker Change: Alongside that if you look at slide 23 in our earnings presentation. We've illustrated our pro forma 2024 financial octane, combining our cost reductions, including are in your target of $100 million and a better housing market.

Ryan M. Schneider: And the recent inflation news has clearly put more headwinds against the timing of future rates. Now, in our book, Q1 was the first quarter of year-over-year closed volume growth we've seen in about two years, as our closed volume was up 2% versus the prior year, with units down 4% and price up 7%. Our luxury segment continued to outperform, with our Sotheby's International Realty brand seeing close volume up 7% year-over-year, with about half of that from unit growth, as it again meaningfully outperformed both the market and our portfolio.

Speaker Change: This illustration implies an EBITDA range of $500 million to $600 million and a 5% to $5 5 million unit 2020 for housing market.

Ryan M. Schneider: Yeah. So look, Matt, we're already seeing that as an industry. We're seeing that as a company. And I don't think it's just tied to anything recent from a litigation or regulatory standpoint.

Speaker Change: This also factors in higher mortgage delivery as well as higher variable expenses, including commissions and royalties for the higher unit rate environment and.

Ryan M. Schneider: You know, people leave the industry in tough markets, and we've been in, you know, the lowest unit market here in like 30 years, so it's pretty tough out there if you don't have listings or if you don't, you know, have buyers. And you know, after the NAR settlement happened, I was on, I talked to, you know, I had calls with all of our agents and franchisees, and I told all of them I expect more agents to leave the industry, right? Because there will be agents who aren't good or articulated their value the way our, I think our agents are, and so, you know, we think that'll happen.

Speaker Change: And to be clear, we are not assuming any consumer commission changes in this pro forma.

Speaker Change: Similarly, we believe we could see $200 million to $300 million of free cash flow generation in that same $5 to $5 5 million existing home sale range, excluding any one time payments.

Speaker Change: This shows how the strategic actions, we've taken on cost can translate into strong financial delivery and a higher existing home sales in that market.

Speaker Change: The combination of our cost actions current and future in a more normal housing market should move us well down the path to getting back to double digit EBITDA margins.

Ryan M. Schneider: And I'm a little more optimistic about the future because our open volume, which represents new contracts and future closings, was up year-over-year and improved each month during the quarter. And so far in April, our open volume is up 6% year-over-year. We are seeing some improvement in areas like California and New York, where we have disproportionately owned brokerage businesses, with a meaningful piece of that improvement coming from growth in units. And we're beginning to see more growth in listings. We saw listings growth in our portfolio of properties up 4% year-over-year in the quarter.

Speaker Change: I'm incredibly proud of our relentless focus on what we can control, enabling us to capitalize on the market when it returns.

Ryan M. Schneider: But in terms of affecting the economy, I'm not that worried about it yet, in part because, you know, the trend of our best agents doing most of the deals is not new, and I think most of the people who are leaving the industry are going to be those, you know, non-productive or very low-productive agents you talked about. And so, you know, I'm sure there's some stuff on the margins.

Speaker Change: Let me now turn the call back to Ryan for some closing remarks.

Ryan M. Schneider: Your Charlotte I'm incredibly proud of how the anywhere team continues to lead and deliver through the challenging housing market and the ongoing industry uncertainty 'twenty.

Ryan M. Schneider: 24 is about anywhere real estate executing on what we can control delivering on our strategic agenda and utilizing our competitive advantages to deliver value for our agents franchisees and shareholders in the future with that we will take your questions.

Ryan M. Schneider: I mean, Charlotte even called out in this quarter that one of our commission split headwinds was our top agents doing, you know, 7% more deals or something this quarter in Q1 than they had a year ago. And so that macro trend is still there, and it kind of hits on the margin a bit, but, you know, when you're starting from a place where your top 50% of agents are already doing 90%, you know, 90%-plus percent of the deals, you know, it's not a big mover.

Speaker Change: Oh.

Speaker Change: If you wish to ask a question. Please press star followed by one on your telephone and wait for your name to be announced that is star. One if you wish to ask a question.

Speaker Change: Your first question comes from the line of Matthew Bouley from Barclays. Your line is open.

Matthew Adrien Bouley: Good morning, everyone and thank you for taking the questions.

Matthew Adrien Bouley: I can start starting on all the news over the quarter.

Matthew Adrien Bouley: Obviously, helping agents communicate their value to consumers has always been part of your business the brokerage business.

Ryan M. Schneider: This is the first time in a couple years that we saw such listings growth, and we're really excited about how it is increasingly differentiated for us in luxury. As our million-dollar-plus listings in the quarter were up 16% versus a year ago. Now look, we're clearly at a low point in the cycle, but the housing market is going to improve over time, and I still believe the medium-term outlook for housing should be quite strong, fueled by demographic demands and a continued desire for home ownership.

Matthew Adrien Bouley: What are you doing differently now assuming homebuyers and sellers.

Matthew Adrien Bouley: Or kind of incrementally negotiating or questioning what commission rate. They should pay thank you well, let me say a couple of things Matt. Thanks for the question first off.

Ryan M. Schneider: But we are, you know, also excited potentially by the cost we put into supporting non-productive agents going down. It's not free to have people in your ecosystem, and, you know, so we'll see how the integrated economics of this thing play out, but I totally expect the number of agents to go down.

Matthew Adrien Bouley:

Speaker Change: As I started my call with we just have just an awesome group of agents and franchisees and one thing I will say is you know remember our business does skew luxury and that is a place where theres, probably historically been both more complexity more.

Matthew Adrien Bouley: More of that kind of negotiation that you are describing and so you know.

Matthew Adrien Bouley: understood. Great caller. Thanks, Ryan. Good luck, guys.

Matthew Adrien Bouley: I'm hearing from a lot of agents that they're just totally on troubled by continuing to communicate what theyre doing but it's also a great pool of learning for us to share with our broader agent population.

Anthony Paolone: Your next question comes from the line of Anthony Paolone from J.P. Morgan. Your line is open.

Ryan M. Schneider: And I really like our financial octane in stronger housing markets. Now, before I turn it over to Charlotte, there is substantial uncertainty in the industry in light of litigation and regulatory developments since we last talked. We are excited about a level playing field on these topics and think there will be both interesting opportunities and challenges ahead, and we are bringing the same proactive thinking and leadership there that we demonstrated relative to the competition in our litigation strategy.

Anthony Paolone: Yeah, thanks. Good morning. Hi. So, your first question is, can you maybe just tell us what guidance you're providing system-wide to your agents in terms of how to handle these discussions and perhaps whether there's a part of the country that you see doing business already as it might look like in the future? Here's something that you know, tangible about how you might think this looks as this by-side commission matter unfolds. Yeah.

Matthew Adrien Bouley: The other thing I would say as again, we are sharing things across our ecosystem across our six brands leveraging the scale. We have as you know because we made the decision to settle this litigation.

Matthew Adrien Bouley: Many months ago, we've been working longer on this than anybody else right. We were thinking very hard and actually had plans of how we thought buyer agreements could be more part of our future way back in September and so we're optimistic.

Ryan M. Schneider: Yeah, so, Tony, I would say no place is doing it like the future yet, in a full way. But, you know, there's about 20 states today that use buyer agreements, and then there's a few others where they're kind of commonplace, so the idea of buyer agreements for us using them is not at all necessarily a new thing. However, you know... We need to build, and the industry needs to build, buyer agreements in states that don't yet exist.

Matthew Adrien Bouley: About our ability to have our agents be.

Matthew Adrien Bouley: Uh huh.

Matthew Adrien Bouley: <unk> than the average or better than the competition and utilizing this and then finally I think buyer agency agreements are great like I think theyre going to help us actually lock in some business that probably slip through our fingers beforehand.

Ryan M. Schneider: And I also appreciate how the world continues to recognize Anywhere Real Estate for its leadership. Anywhere was recently named to Fortune's America's Most Innovative Companies list for the second year in a row, and once again, it was named one of the world's most ethical companies for the 13th consecutive year. With that, I will turn it over to Charlotte. Good morning, everyone.

Matthew Adrien Bouley: And I really have confidence our agents' ability to communicate their their value. So you know the the sharing of best practices, the leverage and the history, we have especially in the luxury area of this kind of actions already and kind of a time advantage in terms of our.

Ryan M. Schneider: And even the buyer agreements that do exist need to be updated for some of the NAR settlement and even some of the things we wanted to do from our own settlement and put in there. And so we're in the middle of doing that.

Matthew Adrien Bouley: Focus and rollout of these things are examples of kind of both what we're doing but also why were excited on a relative basis, what we can do here.

Speaker Change: Excellent well, thank you for that Ryan.

Speaker Change: The second one.

Speaker Change: Kind of a similar topic of course thinking around agent mix.

Ryan M. Schneider: And then for us, it's a big pool of experimentation. We have a couple thousand franchisees here in the US, and many of them have already rolled out buyer agreements, or they're in a market where there are buyer agreements. And best practice sharing is a huge thing, not just in the agreements themselves but in articulating your value and pricing and things like that. And like I said, we have a little bit of an advantage because we've been working on it longer than I think anyone else because of our settlement timing, and we knew this would be an important thing for the future.

Ryan M. Schneider: Are you starting to see or perhaps considering the potential for lower producing agents to leave the industry in a scenario like this and if so how do you think about the kind of profitability to anywhere of lower producing agents versus the higher producing agents right is the question around.

Charlotte C. Simonelli: We had solid financial and operational performance in the first quarter and continue to focus on what we can control, our cost savings and executing against our strategic goals. We continue to believe our execution, cost focus, and industry leadership will enable us to drive differentiated performance and emerge with even stronger financial results when the housing market improves. I will now highlight our first quarter financial results. Q1 revenue was $1.1 billion, essentially flat versus the prior year, as transaction volume growth was offset by softness and relocation.

Speaker Change: You know how commission splits may pay out assuming that there might be a change in the kind of mix of agents in the industry. Thank you. Yeah. So look Matt we're already seeing that as an industry, we're seeing that as a company.

Speaker Change: And I don't think it is just tied to anything in recent from a litigation or a regulation standpoint, you know you see people leave the industry in tough markets and we've been in you know the the lowest unit market here in like 30 years. So it's pretty tough out there. If you don't have listings or if you don't.

Ryan M. Schneider: You know, now, there are markets, Tony, and you're well familiar with them. Washington State is an example where, you know, offers of compensation haven't been mandatory for a long time, right? And so, you know, there are places where the world has operated a little differently than a lot of the country. Again, I don't think that's the end state because there's some other stuff in these settlements that will change the agreements.

Speaker Change: How have buyers.

Speaker Change: And after the <unk> settlement happened I was on I talked to.

Speaker Change: Calls with all of our agents and franchisees I told all of them I expect more agents to lead the industry right.

Charlotte C. Simonelli: We are encouraged by the improving volume trends, even while still off a low base. D1 operating EBITDA was negative $17 million, improved versus the prior year due to transaction volume growth, lower expenses across the enterprise, and the absence of litigation accruals. We continue to prudently manage our cash. Cash on hand at the end of Q1 was $111 million, and Q1 free cash flow was negative $145 million.

Speaker Change: Because there will be agents, who are good at articulating their value the way our I think our agents are and so we think that'll happen.

Speaker Change: But in terms of affecting the economics I'm not that I don't lose a lot of sleep over it yet in part because.

Ryan M. Schneider: But there are places where we have some data of kind of what works and what doesn't. And again, you know, we have some really good stories, especially from your best agents, on how they're having these conversations and how they're being successful with them. And then sharing that with, you know, the 200,000 agents in our ecosystem. We think it is a powerful thing for the future, but no place is operating there yet.

Speaker Change: The trend of our best agents doing most of the deals is not new and I think most of the people who are leaving the industry youre going to be the those you know.

Speaker Change: Non productive or very low productive agents, you've talked about and so you know I'm sure. There's some stuff on the margin I mean, Charlotte even called out in this quarter one of our.

Speaker Change: Commission split headwinds was.

Speaker Change: Our top agents doing what 7% more deals or something this core in Q1 than they had a year ago and so that macro trend is still there and it kind of hits on the margin a bit but you know when youre starting from a place where you know your top 50% of agents are already doing 90, 90 plus percent of the deals.

Ryan M. Schneider: We all have a lot of work to do in terms of bringing these things to life, especially in markets where they're going to be a shock to the system. But I like our, you know, at least a slight kind of advantage in terms of being, having worked on it longer and having more kind of scale and examples to kind of, um, share stories from and cross-pollinate from.

Speaker Change: It's not a it's not a.

Speaker Change: Big mover.

Speaker Change: But we are.

Anthony Paolone: Do you think if you look out a year from now, there will be some amount of the Commission that will be borne by the buyer, or do you think it will just be managed such that there will remain offers of compensation? You know, the structure will just perhaps be a bit different, and I guess if so, what do you think the mechanism will be to offer that, like your website or some other portal?

Speaker Change: <unk> also excited potentially buy.

Speaker Change: The cost we put into supporting nonproductive agents going down it's not three to have people in your ecosystem and so.

Speaker Change: So we will see how the integrated economics of this thing play out, but I I totally expect the number of agents to go down.

Speaker Change: Understood Great color, Thanks, Brian and good luck guys.

Ryan M. Schneider: Yeah, so, you know, look, I mean, the NAR settlement clearly has, you know, displaying offers of compensation on broker websites, an explicit part of that, so obviously that's in their settlement, but that's more of a question for them. Look, you know, I think your question is very complicated. I think the real answer is I don't think anyone actually knows, but, you know, what I keep talking about with my employees and my agents and my franchisees and reminding them is, you know, negotiating home sales is not a new thing.

Speaker Change: Thank you. Thank you.

Speaker Change: Your next question comes from the line of Anthony Powell from J P. Morgan Your line is.

Anthony Powell: Yeah. Thanks, Good morning, Hi.

Anthony Powell: So I guess first question is can you maybe just tell us what guidance you are providing just system wide tier agents in terms of how to handle these discussions.

Speaker Change: And perhaps whether there is a part of the country that you see.

Speaker Change: Doing business already has as it might.

Speaker Change: It looked like in the future just trying to.

Speaker Change: Here's something tangible about how you might think this looks is this buy side Commission matter unfolds, yes, So Tony I would I would say no places doing it like the future yet in a full way but.

Ryan M. Schneider: And, you know, you know, could agents be paid more by buyers? Sure, that's absolutely possible in the future, but can offers to buy a house? You know, can they include, hey, sellers, we want you to pay for this thing, just like we want you to, you know, credit us for the furnace that's not working right, or that needs to be replaced, kind of thing. And so I think there's going to be a lot of experimentation.

Charlotte C. Simonelli: Now, let me go into more detail on our business segment performance. Our Anywhere Brands business, which includes Leeds and Relocation, generated $89 million in operating EBITDA. However, operating EBITDA decreased $8 million year-over-year, primarily due to lower client volumes in the relocation business.

Speaker Change: No.

Speaker Change: Theres about 20 states today that use buyer agreements and then there's a few others, where they're kind of commonplace. So the idea of buyer agreements for us using them is not at all necessarily a new thing. However, you know.

Speaker Change: We need to we need to build in the industry is to build buyer agreements in the states that don't exist and even the buyer agreements that do exist needs to be updated for some of the <unk> settlement and you know even some of the things we wanted to do from our own settlement and put it in there.

Ryan M. Schneider: And then we're all still a little handicapped, Tony, because there's a lot of rules that have not yet been written, right, whether they're MLS rules, or, you know, kind of settlement rules. So, you know, we'll we'll see. But I would like to think that we're, As thoughtful as anybody about planning for those scenarios thinking how it affects our cost base or you know other strategic moves We might do thinking about how we communicate with agents on them and share best practices And, you know, and again, there's gonna be, while there may be some challenges, there's gonna be some opportunities here because everybody out there is gonna face the same market, whether it's the macro that's tough or whether it's, you know, the change in how things operate. And I like our assets relative to others to go through that change. Great.

Charlotte C. Simonelli: We love our core franchise business and its margin stability over time. And in Q1, our core franchise margins were approximately 60%. Our Q1 Anywhere Advisors operating EBITDA was negative $59 million, improved $16 million versus the prior year due to higher volume and lower operating and marketing costs. Commission splits in Q1 were 80.04%, down three basis points year over year, continuing the six-quarter trend of more stable splits.

Speaker Change: And so we're in the middle of doing that and then you know.

Speaker Change: And then for US it's a big pool of experimentation you know we have a couple of thousand franchisees here in the U S and many of them have already rolled out the buyer agreements where they are in a market, where there's buyer agreements and the best practice sharing is a huge is a huge thing. We've got we've launched a lot of different training things you know on the not just.

Speaker Change: On the agreements themselves on articulating your value and pricing and things like that and like I said, we have a little bit of an advantage because we've been working on it longer than I think anyone else because of our our settlement timing and we knew this would be a important thing for the future.

Speaker Change: Now now there are markets, Tony and you're well familiar with them you know Washington State as an example, where <unk>.

Charlotte C. Simonelli: We are benefiting from the improved competitive environment, reduced amortization of prior recruiting and retention payments, and some reclasses for one of our brands. This benefit, however, is offset in part by an unfavorable agent mix as we saw top agents take a greater share of transactions and, to a lesser degree, geography, as we saw improvement in a few higher split markets like California. Anywhere Integrated Services was negative $15 million in operating EBITDA in Q1.

Anthony Paolone: Thanks for taking a crack at it.

Soham Jairaj Bhonsle: Your next question comes from Soham Bhonsle from BTIG. The line is open.

Speaker Change: Offers a compensation haven't been mandatory for a long time right and so you know there are places where.

Soham Jairaj Bhonsle: Good morning, Soham Bhonsle here. Hi, thanks for the questions. Ryan, I guess, you know, first one for you, curious about your thoughts, you know, on consolidation in the space long term. I think there are a hundred odd thousand brokers in the US today. And if we're in fact going to see some commission rate pressure here, you know, how do you think some of the boutiques will fair in that environment? And, you know, do agents need to be at the bigger brokers to effectively compete long term?

Speaker Change: You know the world has operated a little differently than a lot of the country.

Speaker Change: Again, I don't think that that's not the end state because theres. Some other stuff in these settlements that will change the agreements but.

Speaker Change: But there are places, where we have some data of kind of what works and what doesn't and again you know we have some you get really good stories, especially from your best agents on how they're having these conversations and how they're being successful with them and then sharing that with you know the 200000 agents in our ecosystem.

Speaker Change: We think is a powerful thing for the future, but no places operating there yet we all have a lot of work to do in terms of bringing things to life, especially in markets, where they're gonna be a shock to the system, but I like R. L.

Ryan M. Schneider: I think consolidation is inevitable. I've said it publicly, and I thought it was inevitable even before, you know, some of the litigation or regulatory developments of the last year.

Charlotte C. Simonelli: Operating EBITDA improved $2 million year over year due to lower operating expenses driven by cost savings initiatives. Moving on to costs, We delivered approximately $30 million of cost savings in the first quarter and expect to realize at least $100 million in cost savings this year. Some important items in our 2024 Cost Savings Program, which are also illustrated on slide 21 in our earnings presentation, include: We expect the cost savings to be recognized fairly evenly across the remainder of the year. We have identified 100% of the target, of which 40 million of the program is carryover savings from 2023 actions.

Speaker Change: At least slight kind of advantage in terms of being we're having worked on it longer and having more scale and examples to kind of.

Speaker Change: Sure sure stories from and cross pollinate from.

Ryan M. Schneider: And I think what happened last year is only going to accelerate that, especially if there is pressure, you know, on the commission side. I mean, this is a big business. I mean, the economics of this business at scale, as you can see, even what Charlotte showed, right, you know, a normal housing market. Look at just how much more octane we have just because of our scale. And And obviously, if there's ever revenue pressure, one way you have to deal with that is you got to get even more efficient at how you deliver your high-value services and focus on the cost side, and consolidation is one way to get there.

Speaker Change: Got it and do you think if you look out a year from now that there will be some amount of the commission that would be borne by the.

Speaker Change: The buyer or do you think it will just be navigated such that there will remain offers of compensation.

Speaker Change: The structural just perhaps be a bit different and I guess, if so what do you think the mechanism will be to offer that I Cook your website or some other port over yeah. So look I mean, you know the the settlement clearly has displaying offers a compensation on broker websites is an explicit part of that so obviously that's.

Speaker Change: Their settlement, but that's more of a question for them.

Speaker Change: Look I think your question is very complicated.

Speaker Change: I think the real answer is I don't think anyone actually knows but what I what I keep.

Speaker Change: Talking about with my employees and by agents and my franchisees and reminding them as you know negotiating home sales is not a new thing right and you know.

Ryan M. Schneider: So I think it's inevitable. I think, you know, providing good technology is another reason it's probably inevitable that not everyone can do it. And I think brand matters in our industry. And, you know, I know, there's different views on that. But one of our portal friends, you know, kind of stood up on stage and reminded the world that brands matter a lot, and, you know, quite recently, and I believe in that, and so I think that will be helpful in the future also.

Speaker Change: No.

Speaker Change: Could could agents be paid more by buyer sure that's absolutely possible in the future, but you know cat offers a compensation or I'm sorry, Ken offers to buy a house you know can they include Hey, sellers. We want you to pay this thing just like we want you to.

Speaker Change: Credit us further for the furnace, that's not working right or that needs to be replaced kind of thing and so.

Speaker Change: I think theres going to be a lot of experimentation.

Speaker Change: And then we're all still little handicap, Tony because there's a lot of rules that have not yet been written right, whether they're MLS rules or kind of settlement.

Ryan M. Schneider: Now, I will tell you, I think consolidation right now is a very strange thing. Because there is both the overhang from, you know, litigation payments and litigation that's still ongoing for a lot of companies. And with the uncertainty on the revenue side, you know, you know, I am, you know, incredibly cautious looking at consolidation right today. But I do think it's inevitable and, you know, and I think the bigger players just are going to have a lot of advantages here. And I'm hoping that a company like ours, especially with our six great brands, can differentiate itself over time.

Speaker Change: Rules, so we'll see but I would like to think that we're.

Speaker Change:

Speaker Change: As thoughtful as anybody about planning for those scenarios thinking how it affects our cost base or other strategic moves we might do thinking about how we communicate with agents on them and share best practices.

Charlotte C. Simonelli: It can be hard to see the full financial octane of our business transformation efforts, especially on the comp side, in this historically low housing market. We often get the question, "How will our cost work translate to the P&L in the future and in better housing markets?" Given that, we wanted to share the following. We put together a pro forma of what 2024 would look like if we had a more normal housing market.

Speaker Change: And and again theres going to be while there may be some challenges there's going to be some opportunities here because every everybody out there is going to face the same market, whether it's the macro that's tough or whether it's you know the change in how things operate and I.

Speaker Change: I like our assets relative to the other is to go through that change.

Speaker Change: Great. Thanks for taking a crack at it.

Speaker Change: Your next question comes from the line of southern beside from <unk>. Your line is open.

Soham Jairaj Bhonsle: Okay, great. And then Charlotte, you know, I guess there's just, just on the free cash flow, and then just tying that back to the balance sheet, right? There's about $110 million in cash, you're guiding to sort of modestly positive operating fee cash flow on the core business, but then you have this $100 million in one-time payments this year. So can you maybe just talk about, you know, how you intend to fund that expense and also sort of what you're baking into your positive operating fee cash flow guide?

Southern Beside: Hey, good morning, so I'm, mostly here.

Southern Beside: Hi, guys. Thanks for taking the questions Ryan I guess.

Southern Beside: First one for you curious on your thoughts on consolidation in the space long term and I think there is 100 odd thousand brokers in the U S today and if.

Southern Beside: We are in fact going to see some commission rate pressure here, how do you think some of the boutiques sort of fare in that environment.

Charlotte C. Simonelli: Slide 22 in our earnings presentation shows our historic cost savings delivery over the past five years, which includes a mix of permanent and temporary cost reductions that total approximately $600 million, of which approximately $350 million has flowed through to our P&L. About 40% of the savings were offset by inflation, new investments, and other factors.

Southern Beside: New agent seem to be at the bigger brokerage to effectively compete long term I think consolidation is inevitable I've said it publicly and I thought it was inevitable even before you know some of the litigation and regulatory developments over the last year.

Southern Beside: And and I think what's happened last year is only going to accelerate that especially if there is pressure on the commission side. I mean this is a scale business I mean, the economics of this business at scale as you can see even with Charlotte showed right you know a normal housing market look at just how much more octane, we have just because of our scale.

Charlotte C. Simonelli: Yeah, so depending on when the timing of these things happens, right now, if the settlement's approved in May, there's a possibility that we'll have to pay the last bit of the settlement in Q2, and we don't start generating positive free cash flow until right about now, so we'll likely fund that from the revolver. The California tax matter is likely to also hit in the second quarter, and so for the same reason, that will likely be funded by the revolver.

Southern Beside: And obviously, if there was ever revenue pressure one way you've got to deal with that is you got to get even more efficient on how you deliver your high value services and focus on the cost side and consolidation is one way to get there. So I think it's inevitable.

Charlotte C. Simonelli: Alongside that, if you look at slide 23 in our earnings presentation, we've illustrated our pro forma 2024 financial octane combining our cost reductions, including our in-year target of $100 million, and a better housing market. This illustration implies an EBITDA range of $500 million to $600 million in a 5 to 5.5 million unit 2024 housing market. This also factors in higher mortgage delivery as well as higher variable expenses, including commissions and royalties, for the higher unit rate environment.

Charlotte C. Simonelli: The good news is we have a ton of capacity on the revolver, and then we start moving into our positive sort of free cash flow generation, and we'll start chipping away at the revolver. As far as the guidance goes...

Southern Beside: Thank you know providing good technology is another reason is probably inevitable that not everyone can do and I think brand matters in our industry.

Southern Beside: You know I know, there's different views on that but one of our portal friends you know kind of stood up on stage and reminded the world that brands matter, a lot and quite recently and I believe in that and so I think that will be helpful. In the future also now I will tell you.

Charlotte C. Simonelli: So, you know, when we say modestly positive, that's excluding the one-time items. And so what's baked into that is our normal performance of the business, so the business, how it would perform during the year, excluding those one-time payments. So the guidance excluding the one-time payments is to be positive, but, you know, there's a probability that it will take us negative with the one-time payments, if that helps.

Southern Beside: I think consolidation right at this moment is a very strange thing.

Southern Beside: Because there is both the over theirs and we're in a tough macro but theres also the overhang from lit.

Charlotte C. Simonelli: And to be clear, we are not assuming any consumer commission changes in this profile. Similarly, we believe we could see $200 to $300 million of free cash flow generation in that same $5 to $5.5 million existing home sale range, excluding any one-time payment. This shows how the strategic actions we've taken on cost can translate into strong financial delivery in a higher existing home sales unit market. The combination of our cost actions, current and future, in a more normal housing market should move us well down the path to getting back to double-digit EBITDA margins.

Southern Beside: Litigation payments and litigation is still ongoing for a lot of companies and with the uncertainty on the revenue side.

Soham Jairaj Bhonsle: Have you contemplated what kind of market volumes you need to sort of hit that positive operating free cash flow?

Southern Beside: You know I am incredibly.

Southern Beside: Cautious looking at consolidation right today.

Southern Beside: But but I do think it's inevitable and you know and I think the bigger scale players just are going to have a lot of advantages here and.

Charlotte C. Simonelli: Yeah, well, in part, it's sort of the financial octane slide that I shared with you, right? So there's quite a large amount of free cash flow in a normal, what we'd call a normal housing market, 5 to 5.5 million units. And what we've said is, you know, that's going to take us to, we believe, 200 to 300 million of free cash flow. Now, that also excludes any one-time items. So absent the one-time item, it's modestly positive in this horrible housing market that we're in right now, but in a normal housing market, likely sort of like 200 to 300 million. So hopefully that will help. Okay.

Southern Beside: And I'm, hoping that a company like ours, especially with our sixth great brands you know.

Southern Beside: Can differentiate over time on that.

Speaker Change: Okay great.

Speaker Change: And then Charlotte.

Charlotte C. Simonelli: I guess.

Charlotte C. Simonelli: Just on the.

Charlotte C. Simonelli: The free cash flow and then just tying that back to the balance sheet right at about $110 million cash youre guiding to sort of modestly positive operating free cash flow on the core business. But then you have this $100 million in one time payments. This year. So can you maybe just talk about how you intend to fund that expense.

Charlotte C. Simonelli: It also sort of what you're baking into your positive operating free cash flow guide. Thanks.

Charlotte C. Simonelli: Yeah.

Speaker Change: So dips.

Speaker Change: Depending on when the timing of these things happen right now for settlement approved in May there is a possibility that we'll have to pay the last bit of the settlement in Q2, and we don't start generating positive free cash flow until right about now so well likely fund that from the revolver.

Soham Jairaj Bhonsle: And then I guess just if I can sneak one more in: on the hundred million cost savings for this year, you suggested that you could exceed that number as well. Can you just talk about what would put you in that sort of scenario? Thanks.

Speaker Change: <unk>, Yeah tax matter is likely to also hit in the second quarter and so for the same reason that will likely be funded by the revolver and the good news is we have a ton of capacity on the revolver. So and then we start moving into our positive sort of free cash flow generation will start chipping away at the revolver.

Charlotte C. Simonelli: Yeah, well, so think about it this way. You know, cost is a permanent journey, right? That's something that we'll be doing to, you know, help improve how we operate, just even for consumer satisfaction, agent satisfaction, but obviously also, you know, because we are always looking to enhance our profitability. So just the fact that we had 40 million of our 100 plus million this year was carryover savings, what's going to take us higher than 100 million are things that we're going to act upon now that we hadn't anticipated that will start to benefit us next year, this year into next year.

Ryan M. Schneider: I'm incredibly proud of how the Anywhere team continues to lead and deliver in the challenging housing market and the ongoing industry uncertainty. 2024 is about where real estate is executed and what we can control, delivering on our strategic agenda and utilizing our competitive advantages to deliver value for our agents, franchisees, and shareholders. With that, we will take your questions. If you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced.

Speaker Change: As far as the guidance.

Speaker Change: So when we say modestly positive that's excluding the one time items and so what's baked into that is our normal performance of the business.

Speaker Change: The business, how it would perform on the year, excluding those one time payments. So the guidance, excluding the onetime payments is to be positive but.

Speaker Change: There's a probability that it will take us negative with the onetime payments if that helps.

Speaker Change: Have you contemplated like what the market what kind of market volumes, you need to sort of hit that positive operating and free cash flow yes.

Charlotte C. Simonelli: So we don't stop working on costs just because we have 100% of our target achieved this year. It's a journey that is probably pretty endless for us. So new actions that were not anticipated are what's going to take us higher. And that's what we're feverishly working on right now.

Speaker Change: Well and part of it is sort of the financial octane slide that I shared with you right. So.

Speaker Change: Theres, a quite a big amount of free cash flow in a normal that you would call a normal housing market five to $5 5 million units and what we've said is that's going to take us to we believe two to 300 million of free cash flow now that also excludes any one time items. So absent the one time item, it's either modestly positive.

Operator: That is star number one if you wish to ask a question. And your first question comes on the line from Matthew Bouley from Barclays. Your line is open. Good morning, everyone.

Soham Jairaj Bhonsle: Okay, great; thanks a lot for the thoughts.

Thomas Patrick Mcjoynt: Your next question comes from Tom McMujoynt from KBW. Your line is open.

Thomas Patrick Mcjoynt: Hey, good morning, guys. Thanks for taking my questions.

Speaker Change: This horrible housing market that we're in right now but.

Matthew Adrien Bouley: Thank you for taking the questions. I guess starting on all the news over the quarter, you know, obviously, helping agents communicate their value to consumers has always been part of your business, the brokerage business. What are you doing differently now, assuming homebuyers and sellers are kind of incrementally negotiating or questioning what commission rate they should pay? Thank you. Well, let me say a couple things, Matt.

Speaker Change: But in a normal housing market likely sort of like $2 million to $300 million.

Thomas Patrick Mcjoynt: Actually, going back to one of Anthony's questions, I guess it was alluded to that one of the business practice changes of the NARS settlement is no longer displaying offers of compensation and enlistings on the MLS, but it does appear to carve out that those offers of compensation can be made off the MLS, such as on brokerage-owned websites. Is that the plan for any brokerage-owned websites to post those? And then, just if that's the case, you know, perhaps as a byproduct, what do you see as the future of the MLS?

Speaker Change: Hopefully that way.

Speaker Change: And then I guess, just if I can sneak one more in on the $100 million cost savings for this year. You suggested that you could exceed that number as well can you just talk about like what would put you in that sort of scenario.

Speaker Change: Well, so think about it this way.

Speaker Change: Cost is a permanent journey right, that's something that we'll be doing to help improve the how we operate just even for consumer satisfaction agent satisfaction, but obviously also because we are always working to enhance our profitability. So just the fact that we had $40 million of our 100 plus million this year with carryover savings.

Ryan M. Schneider: So, I think it's too early to speculate on either of those questions, unfortunately. Tommy, you know, on what we're going to do. Part of the answer is kind of we'll see. And part of the reason the answer is we'll see, as I referenced, I think, in the answer to Tony, was, you know, The actual rules on how these different ecosystems will work are yet to be written. And remember, they're like 700 MLS.

Ryan M. Schneider: Thanks for the question. First off, you know, as I started my call, we just have an awesome group of agents and franchisees. One thing I will say is, remember, our business does skew luxury, and that is a place where there's probably historically been more complexity, more of the kind of negotiation that you're describing. I'm hearing from a lot of agents that they're just totally untroubled by continuing to communicate what they're doing, but it's also a great pool of learning for us to share with our broader agent population.

Speaker Change: What's going to take us higher than the $100 million are things that we're going to act. Upon now that we hadn't anticipated that will start to benefit US next year. This year into next year. So we don't stop working on cost just because we have 100% of our target achieved this year and it's a journey that it's probably pretty endless right. So.

Speaker Change: New actions that were not anticipated, it's what's going to take us higher and that's what we're feverishly working on right now.

Speaker Change: Okay, great. Thanks, a lot for that.

Ryan M. Schneider: So you've got 700 people writing rules effectively. There's no guarantee here that the actual technical rules are gonna look the same across the United States. So we're in a little bit of a wait and see mode both on what we're gonna do and what it means for the future of the MLS. But I do think there's gonna be more innovation there. Right, I mean, there are portals in this industry, there are large brokerages, there are MLSs, you know, there are a number of third parties who work with this ecosystem from a data standpoint.

Timing: Your next question comes the line of timing with joined from K B W. Your line is open.

Speaker Change: Yeah.

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

Timing: Actually going back to one of Anthonys questions.

Speaker Change: I guess it was alluded to that one of the business practice changes of.

Speaker Change: Nor settlement is no longer displaying offers this compensation in listings on the MLS.

Ryan M. Schneider: The other thing I would say, as again, we are sharing things across our ecosystem, across our six brands, leveraging the scale we have, is that because we made the decision to settle this litigation many months ago, we've been working on this longer than anybody else. We were thinking very hard and actually had plans of how we thought buyer agreements could be more part of our future way back in September. We're optimistic about our ability to have our agents be better than the average or better than the competition by utilizing this.

Timing: It does appear to carve out that those offers have compensation can be made off MLS such as on brokerage owned websites is that the plan for anywhere as broker Jones websites to post those.

Timing: And then just if so perhaps as a byproduct what do you see as the future of the MLS is.

Ryan M. Schneider: And you know, so I think we'll all have a lot more clarity in kind of six to 12 months, both on how the ecosystem will evolve, how each of those different players will play in the ecosystem, you know, and, you know, even how companies will make, you know, kind of different choices. So it really is too early and, you know, we clearly have some hypotheses and are doing some game theory about what we do think we want to do.

Speaker Change: So I think it's too early to speculate on either of those questions. Unfortunately.

Speaker Change: Tommy.

Speaker Change: On what we're gonna do part of the answer is kind of we'll see.

Speaker Change: And part of the reason the answer is we will see as I referenced I think in the answer to Tony was.

Speaker Change: The actual rules on how these different ecosystems will work are yet to be written and remember there are like 700 MLS. So you've got 700 people writing rules effectively like Theres no guarantee here that the rules are the actual technical rules are going to look the same you know across.

Ryan M. Schneider: Then finally, I think buyer agency agreements are great. I think they're going to help us actually lock in some business that probably slipped through our fingers beforehand. I really have confidence in our agents' ability to communicate their values. The sharing of best practices, the leverage in the history we have, especially in the luxury area, of this kind of action already, and a time advantage in terms of our focus and rollout of these things are examples of both what we're doing but also why we're excited on a relative basis for what we can do here. Excellent. Well, thank you for that, Ryan.

Speaker Change: You know the United States. So we're in a little bit of wait and see bolt on what we're going to do and what it means for the future of the MLS is but I do think there's going to be more innovation in the industry right. I mean, there are portals in this industry. There are large brokerages or MLS is.

Ryan M. Schneider: And again, the most important thing is that we're charging ahead with our agents and their customers to make sure they're set up for success with buyer agency agreements, which we think are great and we think are actually going to be helpful.

Speaker Change: No there are a number of.

Speaker Change: Third parties, who work with this ecosystem from a data standpoint, and you know so.

Thomas Patrick Mcjoynt: It makes sense. Thanks.

Thomas Patrick Mcjoynt: And then switching gears, in your proforma illustration on slide 22, it looks like it sort of implies a 30 percent increase in transaction volumes, just going from 4.1 to call it 5.2 at the midpoint of existing home sales. What's the impact on commission splits that you're using in this analysis to get to the 500 to 600 million dollars of EBITDA? I guess it'd be helpful relative to the 80.2 percent that you did in 2023.

Speaker Change: I think we'll all have a lot more clarity and kind of six to 12 months both on how the ecosystem will evolve how each of those different players will play in the ecosystem.

Speaker Change: And you know even how companies will make different choices. So it really is too early and.

Speaker Change: We saw some of that stuff's supposed to be sorted out over the summer. So I think we'll have more some at least some more clarity. The next time, we talk to you, but hopefully you can feel that we're not just watching the issue closely but we you know we clearly have some hypotheses.

Speaker Change: You know kind of doing some game theory about what we do think we want to do and and again. Most important thing is we're charging ahead with our agents and their customers to make sure they're set up for success.

Charlotte C. Simonelli: Yeah, there's a modest increase implied as normal with volume increases, but it's not anything material. It's not, you know, 50 or 100 basis points of an increase. It's more of a modest increase

Speaker Change: You know with with buyer agency agreements, which we think are great and we think we're actually going to be helpful to us.

Thomas Patrick Mcjoynt: So if transaction volumes increased 30%, commission splits would increase less than 50 basis points? Is that what I'm hearing correctly?

Speaker Change: That makes sense. Thanks.

Speaker Change: Then switching gears.

Speaker Change: In your pro forma illustration on slide 22.

Charlotte C. Simonelli: I'm not, like I'm not disclosing the exact number used in our pro forma, but yeah, it's a modest increase.

Speaker Change: It looks like it sort of implies a 30% increase in transaction volumes, just going from 4.1 to call. It 5.2 at the midpoint existing home sales.

Ryan M. Schneider: And remember that those numbers will be different depending on where you're starting, right? You're gonna, you know, you could have the same increase in units, but if you started at five and a half million to six and a half, you'd get some different numbers than if you started in this kind of record kind of low area, you know, with the trends that we've seen, whether it's kind of, The stabilization we've seen or, you know, even in today's world, what, you know, with this past quarter, you know, one of our brands had commissions, let's go down again, you know, we've referenced that before.

Speaker Change: What's the impact on commission splits that that Youre using in this analysis to get to the $500 million to $600 million of EBITDA and I guess it would be helpful relative to the 82% that you did in 2023.

Speaker Change: Yes, there is a modest increase in flight as normal with volume increases, but it's not anything material.

Speaker Change: It's not a it's not like you know 50 or 100 basis points of an increase that's more of a modest increase.

Speaker Change: So transaction volumes increased 30% Commission splits would increase less than 50 basis points is that kind of what I'm hearing correctly I'm not like I'm not disclosing the exact number used in our pro forma but yeah, it's a modest increase.

Speaker Change: Okay, and thank you remember that those numbers will be different depending on where your starting right.

Ryan M. Schneider: So it's, you know, there's a little less extrapolation on that than maybe you're thinking. But I think Charlotte's got a good, good grasp on this, and hopefully, this kind of pro forma gives you a sense of just the financial octane, some of our cost work, you know, would give us in a more normal housing market as well as the octane, just a And keep in mind that the bigger thing here is.

Ryan M. Schneider: You know, people leave the industry in tough markets, and we've been in, you know, the lowest unit market here in like 30 years, so it's pretty tough out there if you don't have listings or if you don't, you know, have buyers. And you know, after the NAR settlement happened, I was on, I talked to, you know, I had calls with all of our agents and franchisees, and I told all of them: I expect more agents to leave the industry, right?

Speaker Change: You're going to you know you could have the same increase in units, but if you started at $5 5 million to six and a half you'd get some different numbers than if you started in this kind of his record kind of low area.

Speaker Change: The trends that we've seen whether it's kind of.

Speaker Change: The stabilization, we've seen or you know even in today's world. This past quarter, you know one of our brands had commissions splits go down again, we've referenced that before so.

Charlotte C. Simonelli: And keep in mind, like, the bigger thing here is that we're assuming a similar competitive environment. The volume is only going to create a modest increase in commission splits. If something changes in the competitive environment, that would be different. That is what drove much more increases to our commission splits over time.

Speaker Change: Yeah.

Speaker Change: A little less extrapolation on that then maybe you're thinking but I think Charles has got a good.

Speaker Change: Good grasp on on this and hopefully this kind of pro forma that gives you a sense of just the financial octane and some of our cost work you know wood wood would give us in a more normal housing market as well as the octane just a more normal housing market would give us think keep in mind like the the bigger thing here is that we're in.

Ryan McKeveny: Your next question comes from the line of Ryan McKeveny from Zellman & Associates. Your line is open.

Ryan M. Schneider: You know, because there will be agents who aren't good at articulating their value the way our, I think our agents are, and so, you know, we think that'll happen. But in terms of affecting the economy, I'm not that worried about it yet, in part because, you know, the trend of our best agents doing most of the deals is not new, and I think most of the people who are leaving the industry are going to be those, you know, non-productive or very low-productive agents you talked about.

Ryan McKeveny: Hey, good morning. Thank you for taking the time to answer the question. I know commission rates have been discussed a lot, but just one final one on that. You know, I know a lot of factors can move that a little bit here and there, but if we look at just the quarterly results, it looks like a small movement lower, call it one to two BIP. Franchise and Brokerage, I guess. What would you attribute that that downtick to?

Speaker Change: Assuming the similar competitive environments right.

Speaker Change: Alright, the volume is only going to create a modest increase in commission split.

Speaker Change: Changes in the competitive environment that would be different.

Speaker Change: That's what that is what drove.

Speaker Change: Much more increases to our commission splits over time.

Speaker Change: Okay.

Speaker Change: Got it thank you.

Speaker Change: Thanks Tommy.

Speaker Change: Your next question comes from the line of Ryan <unk> from Zelman and Associates. Your line is open.

Ryan M. Schneider: Hey, good morning, Thank you for taking the question.

Ryan M. Schneider: I know commission rates have been discussed a lot, but just one final one on that.

Ryan M. Schneider: I know a lot of factors can.

Charlotte C. Simonelli: Yeah, Frankly, in our brands business, for example, we were down two basis points, frankly driven by an increase in higher priced homes. You know, in our own brokerage business, we were flat.

Ryan M. Schneider: Can move that a little bit here and there, but if we look at just the quarter's results. It looks like small movement lower call. It one to two bps and franchise brokerage I guess, what would you attribute that.

Ryan M. Schneider: That downtick too.

Ryan M. Schneider: Yeah.

Ryan M. Schneider: Frankly in our brands business for example.

Ryan M. Schneider: We were down two basis points, frankly, driven by an increase in higher priced homes you know in our in our owned brokerage business. We were flat and then remember last year you know.

Charlotte C. Simonelli: And then remember last year, you know, ABCR actually increased two basis points for the full year. And again, that was really driven by the price mix of homes. So, you know, the real thing, you know, Ryan, we keep seeing moving the numbers around, albeit quite small numbers these days, is kind of the mix of homes that we're selling. And just because there's a pretty good range about what ABCR is, depending on the price of the home, with more expensive homes having, you know, lower ABCR.

Ryan M. Schneider: <unk> actually increased two basis points for the full year and again that was really driven by the price mix of homes. So the real thing Ryan we keep seeing moving the number around albeit quite small numbers. These days is kind of the mix of homes that we're selling and just because there's a pretty good.

Ryan M. Schneider: And so, you know, I'm sure there's some stuff on the margin, I mean, Charlotte even called out in this quarter, you know, one of our, you know, commission split headwinds was, you know, our top agents doing, what, 7% more deals or something this, in Q1 than they had a year ago, and so that macro trend is still there, and it kind of hits on the margin a bit, but, you know, when you're starting from a place where, you know, your top 50% of agents are already doing 90, you know, 90-plus percent of the deals, you know, it's not a big mover, but we are, you know, also excited potentially by, you know, the cost we put into supporting non-productive agents going down. It's not free to have people in your ecosystem, and, you know, so we'll see how the integrated economics of this thing play out, but I totally expect the number of agents to go down. We need to build, and the industry needs to build, buyer agreements in the states that don't exist, we think is a powerful thing for the future. But no place is operating there yet.

Ryan M. Schneider: Range about what a b C or is dependent on the price of the home with more expensive homes, having lower a b C or the <unk>.

Ryan McKeveny: And in the first quarter, we tend to see that result also sometimes due to amortization. If you're talking about ABCR and the brands business, driven by amortization of prior payments and other things over a smaller base.

Ryan M. Schneider: First quarter, we tend to see that that result, also sometimes due to the amortization if you're talking about a b C or in the brand's business driven.

Ryan M. Schneider: Driven by amortization of like prior payments and other things over a smaller base.

Ryan McKeveny: Got it. Okay, that makes sense.

Speaker Change: Got it okay that makes sense.

Ryan McKeveny: And then on the franchise side, you called out the strength in the share gains at Sotheby's, which is good to hear. I guess more broadly across the franchise network, obviously, very tough housing market. I guess anything you could share about the general financial health or performance of the actual franchisees and, you know, maybe some thoughts around how things like new franchise sales and renewals are going.

Speaker Change: And then on the franchise side, you called out the strength and the share gains that Sotheby's, which is good to hear I guess more broadly across the franchise network.

Speaker Change: Obviously very tough housing market I guess anything you can share about the general financial health or performance of the actual franchisees and maybe some thoughts around how things like new franchise sales and renewals are going.

Charlotte C. Simonelli: As far as the health of the franchisees is concerned, we're pretty much in a similar place to where we were over the last, I don't know, sort of five to six quarters. There's a process that we take when the market gets much softer, so we're sort of on top of it on a weekly basis. We're analyzing things, talking with our franchisees, and helping them to make sure that they're making the best decisions to run their business so that they stay in a healthy spot.

Speaker Change: Yeah as far as the health of the franchisees were pretty much in a similar place to where we've been over the last I don't know sort of five to six quarters.

Speaker Change: Yes.

Speaker Change: Process that we take when the market gets much softer that we were sort of on top of it on a weekly basis and we're analyzing things we're talking with our franchisees, we're helping them to make sure that theyre, making the best decisions.

Speaker Change: Run their business, so that they stay in a healthy spot.

Charlotte C. Simonelli: So while we are a little bit worse from a bad debt perspective than we would have been in a super healthy housing market, it's pretty stable actually. So there are always some things that one quarter could be some franchisee versus another one, so things come in and out. On the whole, we're sort of holding our own right now, and that's because we make a lot of effort to make sure that we're putting our best foot forward to help our franchisees throughout this time.

Speaker Change: Oh Wow.

Speaker Change: While we are a little bit worse from a bad debt perspective than we would have been in a super healthy housing market, it's pretty stable actually so there's always some things that one quarter can be some franchisee versus another one so things come in and out but on the whole, we're sort of holding our own right now.

Speaker Change: And Thats because we go through a lot of effort to make sure that we're putting our best foot forward.

Ryan M. Schneider: We all have a lot of work to do in terms of bringing these things to life, especially in markets where they're gonna be a shock to the system. But I like our at least slight kind of advantage in terms of having worked on it longer and having more kind of scale and examples to kind of. As thoughtful as anybody about planning for those scenarios thinking how it affects our cost base or you know other strategic moves We might do thinking about how we communicate with agents on them and share best practices, And, you know, and again, there's going to be, while there may be some challenges, there's going to be some opportunities here because everybody out there is going to face the same market, whether it's the macro that's tough or whether it's, you know, the change in how things operate.

Speaker Change: To help our franchisees throughout this time, yeah, I mean, I think our bad debts flat to a year ago, and you know having gone through a tough year and have it be flat.

Ryan M. Schneider: Yeah, I mean, I think our bad debt's flat to a year ago and, you know, having gone through a tough year and have it be flat, you know, that's, that's, that's a good thing, you know, on franchise sales, we're really excited, you know, and we've talked about this before, we had a, we had a record year of franchise sales in 2022. And I talked about kind of the flight to quality as the market got bad.

Speaker Change: That's a good thing on franchise sales, we're really excited you know and we've talked about this before we had a we.

Speaker Change: We had a record year of franchise sales in 2022, and I talked about kind of a flight to quality as the market got bad.

Ryan M. Schneider: And we really saw that effect then; 23 was a solid year for us. But you know, starting in the fall when we settled our litigation, we got a big increase in kind of inbound calls and interest, and I think it comes down to the questions that multiple people have asked here, which is, you know, if you're going to navigate an uncertain future, how are you going to do it? Well, one way to do it is to be with an industry leader who has, you know, hopefully shown some foresight and, you know, delivered, like I talked about, things that help drive their profits up, their costs down, their insights up, you know, provide the technology.

Speaker Change: And we really saw that effect, then 23 was a solid year for us, but you know hum.

Speaker Change: Starting in the fall when we settled our litigation.

Speaker Change: We got a big increase in kind of inbounds and interest.

Speaker Change: And I think it comes down to the questions that multiple people have asked here, which is if youre going to navigate an uncertain future. How are you going to do it well one way to do it is to you know us to be with an industry leader, who has you know hopefully shown some foresight and deliver.

Speaker Change: I talked about things that helped drive their profits up their costs down their insights up you know.

Speaker Change: Provide the technology and so we.

Ryan M. Schneider: And so, you know, we like the franchise sales pheromones that we're feeling right now from both the value prop we have, but also the kind of flight, call it quality, in this, you know, kind of uncertain future.

Speaker Change: We like the franchise sales.

Speaker Change: Pheromones that we're feeling right now.

Speaker Change: The value prop we have but also the.

Speaker Change: The kind of flight.

Speaker Change: Call it quality in this.

Ryan McKeveny: That's helpful. And if I could squeeze one more in on the listing side, Ryan, you talked about the growth that you saw in the first quarter, and obviously, industry-wide data shows a similar uplift in inventory from a low base. And I guess it seems to suggest that maybe the lock in effect on homeowners has lessened a bit. So I'm curious if that's your sense, you know, whether things, I don't know, life events, other reasons for movement are happening.

Speaker Change: Of uncertain future.

Speaker Change: That's helpful and if I could squeeze one more in on the on the listing side.

Speaker Change: Brian you talked about the growth that you saw in the first quarter and obviously industry wide data shows.

Speaker Change: Similar uplift in inventory from a low base and I guess it seems to suggest that maybe the lock in effect on the homeowners has lessened a bit.

Speaker Change: So I'm curious if that's your sense.

Speaker Change: Whether things I dunno life events other reasons for movement are happening that's that's offsetting the rate lock dynamic and then more recently with with interest rates moving much higher again in April I guess any indications of homeowners or prospective sellers kind of moving back to the sidelines given given the rate move or does it seem.

Ryan McKeveny: That's that's offsetting the rate lock dynamic. And then more recently, with interest rates moving much higher again in April, I guess, any indications of homeowners or prospective sellers kind of moving back to the sidelines given the rate move, or does it seem like those who want to sell are still kind of sticking with their list? Thank you.

Speaker Change: Like those who want to sell or still kind of sticking with their listing plans.

Ryan M. Schneider: Thank you. A lot of things in that question. Look, my quick answer is I don't think a 4% increase in listings, often incredibly below base, means the lock-in effect is. I mean, it's like, you know.

Speaker Change: A lot of things in that question look my quick answer is I don't think a 4% increase in listings.

Speaker Change: Incredibly blow base means the lock in effect has loosened.

Speaker Change: It's like you know.

Ryan M. Schneider: It's like a, you know, it's like a.., two or three percent increase in home sales. Yeah, that's better than a decline, but like off such a low base, it's still horrific kind of relative to history. So I don't think the lock-in thing has changed. I think people who do want to sell are selling, but it's at some pretty historical levels. For us, the thing I think we were more excited about was, you know, the fact that there is a lot more listings on the luxury side, and because we have more share and better economics and more success there, you know, the fact that those listings were up, you know, like 16% for us, like, wow, that's good, that's taking some share in luxury, you know, continuing the trend of Sotheby's International Realty outperforming, but I don't take too much comfort from the.., relatively small increase in listings vis-a-vis the lock-in, especially since a lot of the volume increase is still just price driven across our portfolio and in the industry numbers.

Speaker Change: It's like you know it's like a.

Speaker Change: Two or 3% increase in home sales, yeah, that's better than a decline, but like off such a low base, it's still horrific kind of relative to history. So I don't think the lock in thing has changed I think people, who do want to sell our selling but its add some pretty historical levels for us. The thing I think we're more excited about was.

Speaker Change: The fact that.

Speaker Change: There is a lot more listings on the luxury side, because we have more share and better economics and more success. There you know the fact that those listings were up like 16% for us like Wow. That's good that's some taken some share in luxury you know continuing the trend of <unk>.

Speaker Change: <unk> International Realty outperforming.

Speaker Change: But I I don't take too much comfort from the.

Speaker Change: Relatively small increase in listings because it'd be the lock in effect.

Speaker Change: Especially since a lot of the volume increase is still just price driven across our portfolio and in the industry numbers.

Ryan McKeveny: Yep, that makes sense. Okay. Thank you very much. Thank you, Ryan. Your next question comes from the line of John Campbell from Stephens Inc. Your line is open. Hey guys, this is

Speaker Change: Got it makes sense. Okay. Thank you very much thank you Ryan.

Speaker Change: Your next question comes from the line of John Campbell from Stephens, Inc. Your line is open.

Speaker Change: Hey, guys. This is Jonathan on for John Campbell, I wanted to quickly touch on.

John Robert Campbell: Your next question comes from the line of John Campbell from Stephens Inc. Your line is open. Hey guys, this is Jonathan Bass on for John Campbell. I wanted to quickly touch on

Jonathan: <unk> recently announced acquisition of them about what kind of potential do you guys see there with DOUMA and do you feel like you can improve attach rates overtime.

Ryan M. Schneider: So just for clarity, TRGC is a, we are a minority player in that. That used to be our underwriter. A couple years ago, we did a deal with Centerbridge that we really like, where we sold 70% of it, took $210 million in cash, and now we own that piece of it. And since then, we like what they've done with the business. They brought in Berkshire Hathaway, they've brought in Opendoor, they've brought in now with the dome acquisition, Lennar is now part of this thing, and the valuation's gone up.

Speaker Change: So.

Jonathan: Just for clarity so.

Jonathan: <unk> C is a we are a minority.

Speaker Change: Player in that that used to be our underwriter.

Speaker Change: A couple of years ago, we did a deal with Centerbridge centerbridge that we really like.

Speaker Change: Where we sold 70% of it Chuck took $210 million of cash and now we own that you know that kind of a piece of it and since then we like what they've done with the business right. They brought in Berkshire Hathaway they've brought in open door. They brought in now with the dome acquisition Lenarz now part of this thing and the.

Speaker Change: Evaluation has gone up and so you know at the end of this all we still think there's a chance that our our stake in this will be worth more than it was when we owned the thing. So we are very excited about that and we're really rooting for them.

Ryan M. Schneider: And so, at the end of this all, we still think there's a chance that our stake in this will be worth more than it was when we owned it. So we're very excited about that, and we're really rooting for them. I really can't speak for them too much, but if you look from where we sit as a minority player here, this is a chance for TRG to be a top five player in the market.

Speaker Change: I I really can't speak for them too much but if you look from where we sit as a minority player here you know this is a chance for.

Speaker Change: <unk> to be a top five player in the market you know expand their presence into both homebuilders in mortgage origination distribution channels and then they can increase their market share in places like Florida, and Texas and you know I think the transaction. They expect to close later half of this year they've got to do all kinds of closing stuff and like I said, Linda ours going in.

Ryan M. Schneider: Expand their presence in both homebuilders and mortgage origination distribution channels, and then they can increase their market share in places like Florida and Texas. And I think the transaction they expect to close in the latter half of this year. They've got to do all kinds of closing stuff, and like I said, Lennar's going to make an equity investment in this joint venture that we're a minority player in. So we're not really in the driver's seat on this one, per se, but we're obviously very excited for them to be successful, and hope that helps answer your question.

Speaker Change: Make an equity investment in this joint venture that we are a minority player and so you know we're not really in the driver seat on this one per se, but we're obviously you know a very excited for them to be successful and.

Speaker Change: Hope that helps answer your question.

Speaker Change: Yeah. Thank you and then.

Speaker Change: Maybe it change gears here, but could you give us the latest business trends for Carter's and maybe how thats changed over the past couple of years.

John Robert Campbell: Yeah, thank you, and then...

Charlotte C. Simonelli: Yeah. So, as I sort of mentioned in the script, Q1 was definitely softer than Q1 of last year, but Q1 of last year still held some pent-up demand from, you know, prior softness. It's a very sort of cyclical business, too, and it's kind of tied to, you know, what our clients are doing, and the macro is impacting our clients, which is having them pull back on some relocations. So, I think we still feel very good about our share and how our business is performing relative to others, but it was definitely much softer from a client initiation perspective.

Speaker Change: Yeah. So.

Speaker Change: As I sort of mentioned in the script Q1 was was definitely softer than Q1 of last year, but Q1 of last year still held some pent up demand from prior softness, it's a very sort of cyclical business too and it's kind of tied to.

Speaker Change: When our clients are doing and the macro is impacting our clients, which is having them pull back on some some relocation. So I think we still feel very good about you know our share and.

Speaker Change: How our business is performing relative to others, but it was definitely much softer from a client initiation perspective, I think you know that.

Charlotte C. Simonelli: I think, you know, that business tends to come back pretty quickly when, you know, the macro comes back. So, we'll see when that happens. I think we think about this year, you know, like it's going to be a TBD. I think we're planning for sort of a modest business this year, but that can all change on a dime because, you know, it's really dependent on the budgets that our clients have, and it can be, you know, it can flip-flop very quickly, but Q1 was definitely much softer than Q1 last year, but Q1 last year still had some pent-up demand from prior softness.

Speaker Change: That business tends to come back pretty quickly when you know the macro comes back so we'll see when that happens.

Speaker Change: We think for this year you know like it's gonna be a TBD I think we're planning for sort of a modest business. This year, but that can all change on a dime because it's really dependent on the budgets that our clients have.

Speaker Change: It can be it can flip flop very quickly, but Q1 was definitely much softer than Q1 last year that Q1 last year still had some pent up demand from prior softness. So we had a very strong 2022.

Charlotte C. Simonelli: So, we had a very strong 2022 for the same reason, pent-up demand, which lingered into Q1 of 23, but it's been much softer, mostly tied to our clients pulling back just due to the macro and what they're facing. Okay, thank you.

Speaker Change: For the same reason pent up demand, which lingered into Q1 of 'twenty three but it's it's been much softer mostly tied to our clients pulling.

Speaker Change: Pulling back just due to the macro and what they're facing.

Speaker Change: Okay. Thank you.

Operator: As there are no further questions, I would like to thank our speakers for today's presentation, and thank you all for joining us. If there is nothing to do for today's conference, you may now disconnect.

Speaker Change: As there are no further questions I would like to thank all speakers for today's presentation and thank you for joining US that concludes today's conference you may now disconnect.

Speaker Change: [music].

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