Earnings call transcript Q4 2022

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Operator

Good morning and welcome to the Anywhere Real Estate Year End 2022 Earnings Conference Call via webcast. Today's call is being recorded and a written transcript will be made available in the Investor Information section of the company's website tomorrow. A webcast replay will also be made available on the company's website.

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

Alicia Swift

Dennis. you, Thank welcome for and year-end earnings XXXX Good real to estate. call Anywhere conference morning the

On with Charlotte Ryan Schneider; the and and CEO call Chief me today Financial Officer, Simonelli. Anywhere, are President.

of current As shown making about current expectations statements during and future its are presentation, statements environment. company and forward-looking call. will the statements other the results this on be the based X Slide These on economic the

many other of subject inherently are to economic connection uncertainties, are and of projections are regulatory, the contingencies, developments. The control others and litigation. statements the developments impact Forward-looking among in of the with pending and in liabilities industry which incurrence demand macroeconomic competitive beyond that significant of including excess such accrued litigation, management, consumer of on and amounts

materially the in issued Actual that factors our quarterly materially in in earnings statements cause or SEC those from annual Important and our statements. results assumptions from expressed may forward-looking differ forward-looking as to and as implied well differ specified filings. those actual results could are the today, in release

company the XXXX, that reportable on developments initiated XX, December industry period segments the remain prior business plan of Owned Brokerage to the determined Group however, and and October In during quarter consistent at fourth based company integrate has Title XXXX, Group a will its XXXX with

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

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

Ryan Schneider

everyone. morning, Good you, Thank Alicia.

took momentum worsened even entered actions $X.X powerful year, revenue that us advantages, deliver billion progress leveraged in XXXX our focused of priorities as has the enabled the Over with operating our on made EBITDA and market our Anywhere transformation. on years, $XXX the stayed unique quick and we to housing million past We and real few

CapEx over realize environment. million our in and capitalized cost a improving $XXX cost rigorously we savings target reductions in to accelerated of the from our the year. investments million on We prioritized $XX We of growth competitive

committed and to franchise, businesses, remained agents services luxury the for consumers. positions our existing We in along our with and transaction especially growing simplifying transaction advantaged

on declines XXXX, housing than from unit a the got changing worse market Now rapidly was single in year QX all decline down looking for was more culminating with it the a transactions market volume in back every with quarter. Effectively substantial market drop XX% that

homeowners supply Higher pressure higher and as inventory to many mortgage mortgage into their rates. rates current with home of put affordability on are these this hurting mortgage continued locked new rates are low

a customers, the great like of unit XXXX I driven as by they year in am looks franchisees in value taken this incredibly in continued proud be their substantial lower housing midst the how a transactions. care are marketplace.XXXX tough of will market housing even and demonstrate our market drop agents to where meaningfully the volatile than

XXXX to title improve see market year-over-year price down the XXXX volume the to we'll QX on impact mortgage on those of volume XX% XXXX we and disproportionate XX% forecast around X business million transaction and comparisons in in from also are happens opportunities XXXX quarterly million down the unit and X.X for impact range and unit side as declines expect unit have our versus be we declines what the throughout to where year. to our expect remember, Industry typically transactions XX% a

excitingly most be or outlook believe the we And for near and a strong is at may potentially now, I right bottom already. importantly still decade housing over the and

macro exhibit economy number indicators We the have all stability. seen housing a the of more in

December flipped year-over-year closed showed XXXX in closed and volume, results our volume Both XXXX, November housing effectively XXXX December open volume to XXXX, that open our from in than volume showing than higher comparisons outlook, were our January lower volumes. decelerate, all comparisons December our In XXXX.

I'm our market even likely XXXX volatile optimistic increasingly us. and about tough position with in and the So ahead, front the of opportunities

first, deliver value how proposition. operate in efficiencies in greater Charlotte on our we enhance So equally $XXX cost company the our XXXX expected to to later and are in change efficiency We in are share XXXX. focused million in and will we this we call, laser savings realized powerful drive

future. about in this costs, just our it's success is in excitement Our for re-architecting lower not the about greater business area

impactful We support with more offices services are efficient, be more provide to reimagining and fewer we estate like can transaction flexible, and and consumer costs. which means brokerage our integrated agent title but real mortgage,

Building to mix our in are and are past consumers our title, lowered franchisees. given friction for brokerage excited, market for we've we and across while and using processes marketing to automating investments agents spend work we on digitize conditions, digital and agents operations, we're marketing for greater XXXX a our value more how removing deliver

investments, our businesses. business continuing to franchise leadership our mortgage growth prioritizing expand into luxury our powerful we innovation our and leaning driving scaled position, rigorously include and Second, title which in are nationally

the the the rebounds. are environment believe We our achieving. benefits we differentiation in have results demonstrate competitive there will be market like growth that for quality us evolve importantly, that flight we Most better we and a seen competitive when XXXX to and

substantial franchise via new our existing companies companies record M&A. XXXX grow of in experienced and sales We bringing helping

we environment, Advisors the agent to and have business. able retention to better continue have And base Anywhere at in our high you as than economics competitive continued growth we've in better year-over-year recruit excitingly in few in sharing Brokerage most to strong our X% we past agent years. Owned been up were this record throughout the year, organically We with

in multi-franchisee we our venture to franchise the title part joint proposition three are and as recently first the of Florida of California. market in opportunity new brought Finally, a innovative value launching and process

pay the we dividends market, Even to the which recovers. the will substantial and we that us vectors challenging seeing quality believe in when environment better in flight growth we're a like for competitive our together, market

in Charlotte results our to it turn more discuss to will detail. I Now over

Charlotte Simonelli

morning, everyone. Good

this into for challenging a our further was but made the we XXXX we the are housing leadership about market, excited year industry. are position progress in we've and the

We deliver and have financial our growth. to necessary our improve drive cost continue steps meaningful prioritization EBITDA investments to accelerated and to reductions with of taken performance operational and Anywhere's operating the

cost down higher underwriter and lower various business million of operating sale our prior EBITDA year highlight Now, like commission and full-year additional in part items our revenue XX% $XX line transaction results. QX was transaction was costs agent I QX the our $XXX offset revenue decline. $X.X was QX with financial and due versus will EBITDA to volume XXXX billion volume, in other operating Full $X.X savings. billion, down year million. was by

QX, Our write-offs quarter at business specific in and EBITDA was legal GRA franchise business but that as reduced our number delivered above accruals. well several booked JV, well additional in in by items our the as including operating

at end use full free and XXXX. $XXX XXXX was performance, negative QX hand in year working by driven the outsized in This accruals a cash was was QX sizable which XXXX to on $XXX were paid million of 'XX end million which year due XXXX. capital our negative Cash flow large by drove

of the ended times leverage senior a leverage X.X debt and year We X.XX with the times. ratio ratio of secured net

We we a our We now balance November are redeemed XXXX. maturity lowered XXXX have pleased until made sheet, limited stack the and long-dated in have on progress the have with of maturities debt have our and we notes capital. cost

into performance. on go me let our Now detail more business segment

declines, Anywhere volume and to $XXX EBITDA. partially related in operating transaction EBITDA generated and revenue to offset million includes year-over-year million business, due which decreases Our decreased operating Brands leads lower XXXX by in relocation costs. $XX Operating marketing primarily

even XXXX both signings. pre-COVID full client outperformed by efficiencies Our performance year and relocation XXXX exceeded and substantially business its cost new driven

million, million before XXXX business Our intercompany generated $XXX this in Advisors operating business. fees to However, Anywhere royalties our down EBITDA million negative operating was EBITDA marketing and franchise versus paid $XXX $XX

commission year-over-year, splits base year-over-year. agent basis up were points was up Our XXX X% and like-for-like

even market drive And split volumes earned producing who will are as to overall to the anticipated the expect decline, highest pressure higher by continue agent agents more we continued as volume. of our mostly for mix splits continued driven XXXX

recruiting from amortization. have pressure also will We previous

Operating split year-over-year. delivered $X That Integrated said, in what pressure where experienced about declined splits expected were like JV to more Anywhere $XXX lower of QX earnings XXXX million underwriter title million our purchase year-over-year and due in the refinance in XXX lower mortgage Services higher to points and EBITDA is business. XXXX. volumes XXXX lower look EBITDA we earnings sale operating due basis to

you As open was already X-K, transaction December down have seen volume XX%. in our

will volumes be expect to QX about EBITDA year our down Our to will volumes about which to improve Consistent that volume closed annual we our QX volume but operating expect the January drive the And estimate XX% forecasts, XX% our industry quarterly with unusually year-over-year, down XX%. open transaction negative. XX%. numbers throughout we was decline

will our despite flow focused operating weak be working XXXX this XXXX. free below our positive volume programs, investments of expect range EBITDA modestly savings management. With market, capital, to judicious declines, But and favorable driven be by to cash robust we operating cash housing

are we relentless XXXX, executing As market market These the targeted the half at year once as cost in this market. proactively in we driving another of housing efficiencies with in on a $XX delivering we in a conditions beginning savings drove $XX eroded. million the million comprised we original rapidly the and ability of $XXX savings. back have million our conditions focus efficiency mentioned, Ryan and demonstrated has In challenging again to change

For $XX XXX XXXX. of in XXXX, carryover million deliver in million about actions approximately we cost additional including expect to taken of reductions,

how programs. these Let me give you more detail about are cost thinking we savings on

real tools also this our and includes title our cost operations staffing, operational brick and The other non-agent and components part support the of of today largest footprints, mortar is to but the resources estate like brokerage other tied our physical structure both activities. and

in As transforming in we agents to our space both and quantity locations Ryan deliver and way the physical customers. are said, services we

technology which our product for solutions, advancing only improve agent and also also the are proposition. value us, efficiencies We cost but drive not

cost Second, to and we operating changing our market better work. continued demand we to match the how reduce housing

down XXXX, XX% have right-size from this as market. we June for We our lowered headcount

Other ROI, positioned ensuring savings corporate identifying software efforts spend expenses. synergies examples the our in of marketing is managing deliver ongoing our other highest to and procurement programs include prudently our

by software driven as possible, consumer experience, plans name much to are few. however, the costs, savings As be action part costs scheduled jury in costs and a our to class offset in our partners, impact and not people these by which our this transform should trials, litigation nor franchise two agent will inflation year these actions

we the market challenge, a to efficiencies for today tomorrow. while And growth prioritize housing investing for remains continued driving and while

against look these an Investor sharing further to improved against the calls. Day, agent goals made in forward progress both we you in and shared our and on savings future have with We targets at progress creating our experience goals

remarks. closing me let some Now the Ryan call back to turn for

Ryan Schneider

Charlotte. you, Thank

the We for remain agility. the to make operate growing in and profile XXXX, and financial strengthened franchise, our XXXX responded housing continuing challenging how Anywhere our growth. to and progress invest services positions agents advantaged and luxury transaction with for simplifying consumers. while we we to for and especially reimagined transaction strategic committed In

better looks especially have reached the the from market Standing what like in the for February, positioning excitingly to our to really off as downturn. most in really December be and and bottom like here January, of win, our based today, housing book potentially We we a environment may rebounds. us, the data competitive we

your With questions. that, will take we

Operator

Instructions] Your Campbell from Please of go is Stephens. the ahead. John line [Operator question first with

John Campbell

of impact the guys X% $XXX be how year? the around to good also want EBITDA million for I the then of sensitivity. that to check about measure volume to equating a we thinking you in Is million, should of rule consider? And still thumb back have the net Hi, kind past the on swing the provided on $XX

Charlotte Simonelli

great It's Yes. a question, John.

impact is the based are think, bit is declines mortgage. knock-on little million impact more, there to in close, would think I our volume still I more that is pretty can size, and a when say because the title I $XX business what heavily

definitely So it's you -- It's can a good use. still there. analog to

don't be the what other far years. different seen is going think that's flow-through to than the we've as I $XXX As million, in

we however, and costs I have some the As enhanced you people those mentioned and litigation. offsets through, that around script like do software most of know, it inflation flows in

seen can't So years. the percentage, you an pretty give I we've flow-through exact but previous what with is in consistent

John Campbell

Okay. That's helpful. Ryan, I'm sorry, very

Ryan Schneider

right? in it dramatically, is wanted on couple us on for is both thing. when So I right, hit double when because point on Charlotte's bit, it just the that's things John, decline see is the in and One all our of I if clearly down said it my little pretty I that mortgage can hurts XXXX in title and down build units and a a were disproportionate and opportunities, there. units, script, market the a to us, we a results, that big

it just all on those XXXX of obviously is housing terms the thing The is question be, had wild what in on does right, is, cost side, the because going the a volatile other unit pretty thing cost market We how declines. XXXX give to right? happens

change, for We word cetera, a environment have I rate script chose et political inflation, stuff, the the my volatile in and reason. high

market unit will of The forecast biggest and that, housing on our also, lower right? we'll price some the what drive probably see right, base itself, and cost with on depending is uncertainty and happens what transaction we happens

actions I said that to the back, which then I bring on We're year a industry mentioned in going we us. mean headwind of cost we're obviously that'll rooting a the probably stronger multiple side, right, questions type more be keep and but is XXXX which potentially a there. competitive a there ones on class also there'll some the are it's these we'd to there's and trials of litigation, growth action we area and of change we've kind cost like environment so seeing we but prosper that, for us our couple side. that competitive looking that any evolved got, jury got might Charlotte position, create for for some would be would year, volatility challenging that if going of uncertainty there relative other see if are two spending got another a opportunities that's then companies class we kind real the year and defending think we've like about our then of and struggle is out what for there we'll

we the Fed these in about, and the we did know things those stuff, stuff. Ukraine what of And XXXX rates, a stuff the are just didn't lot wild like know the inflation on

units XXXX our and So things other right you big happens best of difference you weeks gave a those make you we keep but end in hadn't, I these that some our will about do results will mortgage the of the side, in like way of throughout you the the thinking day, including plan gave the effectively, now what then year macro you given to -- results going January on we're right make businesses forward. and all just happens in difference and six cost updated, like you think with ago, title saw we'll you of what and a we're -- QX with kind our kind our it we see just Charlotte just what of results, as our using Charlotte

Charlotte Simonelli

last $XXX the of the the because thing of - other has I say of John, back half where thing sorry, housing is the is, identified. other The been in would year, market that like majority million

where about felt we're identified very starting good year I the perspective. So, from an off

include that we during more it I the would you draconian thing does did COVID. not is, other The tell things

programs. the thinking So that round on your helps savings out hopefully

John Campbell

helpful if relative caps, program? point the a I One your expectations year, moving and pretty the flow, hadn't that just Yeah. Cartus impact, cash know good on your total it's I second, considering to into a Charlotte, that the to a then working also full you be we guidance what influence That's more relative we CapEx on much. capital dig and big to for and there modestly else to talk here allocation free for tends positive could have cash too said the maybe should just could you very about guys free if unit operations. from thought flow just the very down

Charlotte Simonelli

Sure.

drain goes, that a $XX first it fourth as big the normally actually Cartus in in drain quarter. take the of the single far for end was year actually a give in us had on securitization basis, we as a so facility, way one pretty or the digits almost full on a other. up million, small quarter, zero or So unwinds about We

neutralize end a year like in the we Now, how first benefit finish over to the hopefully a going of and on basis, will the we'll can't last tell you so full year. where of year basis the and us that year, zero year I will I it ended because majority we're on up said, but quarter

would about I how that's So think securitization. the

about capital like I script. working in last the flow the called think first other happened from components cash and in declines all to for as Some our of reasons free working out year capital really the quarter

us impact same that having anticipate don't first of the way we quarter year. in this in So the

for working a positive last So was instead being it actually of year slightly us. should hit like be capital

out, a very we from perspective still have forecast. other CapEx that than So called and CapEx a being judicious healthy I as we're

what the on very which happens technology but obviously four of two customer happens first part the goals, It's we've of driving around years, of experience past spent focused healthy lower the sort facility strategic that end and still improving five of and that in is part the on or it's that and is sort over side. of things, our

it's focus end lower what four you've seen the So over spend but a the five us or budget, healthy on years. but still of past

Operator

is next McKeveny Associates. from and Ryan Zelman line ahead. the Please go question of with Your

Ryan McKeveny

Thank morning. year, $XXX year, cost realized million million $XXX expected Charlotte, on so $XXX so good next you. million this the savings, that so in Hi, total.

or at XXXX the expectation of laid an Analyst a million that you to XXXX. compares between that Day think and I target $XXX out

variable volumes, spend? to at that marketing you as dynamic point is with the forward? pulled that So much of much Or time in of how were later talk actions you more XXXX cost how in cost of XXXX, such take being just actions planning a are can kind about structural the are pullback the maybe

Charlotte Simonelli

That's Yes. great a question.

see had we'll that is that it $XXX point, $XXX pulling alone. so one-third, can stuff your of million lot call it's of or forward. about and million of to can we structural it, deliver like in expect a already this years we I delivered goal you we've a these two to about you are How think -- about So two-thirds, kind is

savings think we for year these to some I this think we right want about going really I anyway, permanent we were is this of is, go those Day, happen how attack weren't which the savings. cadence specific to Investor when structural would did

probably progress to comes of faster that Ryan's tied market feel housing the is might back about against point, a to variable housing but earlier, to the good I some it back market if more our So, and faster, that point goal third come costs the too. of

So I like XX, versus it one-third market two-thirds, as tied and kind of or think savings of housing sort to XX of the temporary. more variable or of structural

Ryan McKeveny

it. Got

Okay, then there in you. very tough go GFC, at profitability operational days, that's helpful. the one, And we the a perspective, numbers the and the in if level Cendant were even volume Thank time higher reality in but time. offsets so, Days obviously some to one from back very

So agent rates commission volume time. to the so environment went up, the rates franchise splits that it commission of royalty consumer is at the went against offsets partial to went kind up, down,

is environment, there levers of And in in a Thank the that I'm XXXX continued know curious tough upward those you possible slightly your look of Or as forward that than in better flow commentary if today time tough is split going at may in into that trend curious guess this things? it different modestly are I partial on there previous at pressure any just business beneath offsets I declines? but kind volume reason least volume environment, you. direction. the it's and the this suggest some surface

Charlotte Simonelli

and other start with That's let Why might I he Ryan don't a thoughts question. that in great off fill have. then

at and rates of of think royalty rates favorable days, in if fact average price that business, matter you broker like a if tend the the being moving of to commission you really and tend of think franchisees that points average the this these slightly higher to lower So not broker is, garner structural things direction because the are are commission they're which or to either homes consolidation size sold of be rates. in mix

of I back inventory with per and coming homes that future, in that anticipate are that us don't us I may helping sold things the the see really those changing se. in being don't So mix XXXX help unless on, but

impact news is From split pure the the to side that have the competitive and that going significantly us is we're I a commission more mix. like in perspective, agent called of good rational out is biggest

that itself So we normalizes more kind benefit to get There the a future the again that home is mix extent transactions. hopeful sale in out. agent the of

we kind across but on didn't that have the delivering hit, if this are. the have we we If until commission today transactions. spectrum, the are profile case significantly And probably changes, where sale agent was we mix splits, that home a better see agents we of

hear, So short at probably but you kind how not that's of the it the I'm answer to looking term. in wanted

Ryan Schneider

Cendant tables I just XXX And don't the talking to the business franchise whatever XX% you about. which rebate up right earn from rate have in royalty our days people add more how they that. a five lot I on are do years ago, XX% XX% talk now. little our more the franchisees was more so are business from that's lower the you mean, it years on and detail, about Ryan, is our Yes, that can if public, see a ago, that with top back whatever from you're which up XX side of is up that

in agents the bit think downturn doing different kind on a both of the this a it that So years of the both have little that probably less of of concentration, higher and those ago. ecosystem -- the best you that effects makes I deals side, agent the XX get then likely in that some happened percentage margin franchise created a

Operator

the next McJoynt go of with from Tommy Your is Instructions] Please question KBW. line [Operator ahead.

Tommy McJoynt

to clear? or questions. taking mortgage bit absolute your Could you the if what's little talk you EBITDA be guidance Thanks terms embedded guys. for for morning about good Hi, that a either for year directionally want my JV in next

Charlotte Simonelli

Sure.

for the was drain as year obviously a is, the year-over-year to in expect a of not do benefit has XXXX XXXX, be drain a news well. on I it good know, then the it in and us that you As impact

that to I positive news year-over-year shouldn't ago, we're a making is there two three and obviously or the be benefit positive from on us. like a going we but be drain that don't imagine like It that is money did it So years should well. as good be

Ryan Schneider

mortgages to The recruiting is environment pretty a seen couple our also of kind - We've where big people means venture competitive some of kind shifts in likely mortgage some the help that that's strategic of we're us. doing Tommy in pretty a make way depth the the and things building joint helpful. on

that you've year, seen the business. reap tough pull we're As it's people some of obviously some to environment on and so kind if of competitive benefits bit even back hoping next a

Tommy McJoynt

question. next breaching leverage with lower safe just pretty on of any covenants you a that -- my cushion? second concerns those debt? guys there there's you And Can some like are feel of us have into on And do the the your Thanks. your running Or any EBITDA you remind year then guys and you of some revolver guys of covenants?

Charlotte Simonelli

of at times we that you That do concerns ratio any do buybacks. have X.XX and unable we covenants day, to leverage one. are you covenants. of so times, was covenant four about that's We but secured senior a the have X.XX our total senior debt breaching don't At at secured share bit most our a leverage we're restrictive the is a the saw, end No. that thank of for softball, as times leverage

terms good, a X.X market at guess then So possible, there when handle two the positive cyclical housing times the we're when for consider best right don't take be that well the over dips of when the years everyone clearly past balance I care end prepared do. you'll sheet, and three that in of I overly times -- everything takes significant the at we've are to the this beyond times that, it done these but of the at now restrictive is like or tends transformation market and day, basically, to and really the refinancing strong that lesson

of about we So, on thing that's worried on over those to to but feel what start we priorities proud a do and to really balance I puts for done investing good it past and years business, strategic continue position focus sheet in the covenants. our really, few cost, just obviously the behind am the us the we've right the not

Ryan Schneider

want the Yes. of other is that's but basically, to and of our we've double and finance today when down Charlotte debt our which all couple teams a on give a one here, a the this, that I look of legal moment to thing Tommy, just seized and I times for you mean I and to billion couple 'XX credit sheet bit and like 'XX. at unsecured out balance maturities

as our as from anything -- away that our in hence a a covenants -- of pretty senior secured to where at most world we far and even be the it tough kind it quite in an wasn't industry. -- I when hadn't used this and to have We and 'XX about as we'd staring is and have important accident, secured lot whether moves, it's so is sheet where now those for XXXX or see debt balance XXXX other conversation 'XX, a there's right we done low, made know, can our a transformation our restricted from point housing the that, you different leverage ratio right incredibly moves beyond tough of paid part debt, you talk our for our if is you a year secured off notes moved having and we we

the rates it's sales is a give like a and company, interest us does in like even simplifying things that whether position growth, pretty keep frankly investments, we're low we our keep lower lengthening how and the wild and the looking these it's massive franchise the better keep changing pay whether in room investing the to But unsecured, do shift a kind mortgage, and it what maturities, of to used got to pretty there was lot title we keep team XXXX, that. volatile of Charlotte in whether expense that to have some like year making and

So housing focused to on for on. question, I get still we company the side. feel our these being position ahead why on we've for want never relax important topic challenges us We're owners going very market in It's things the hopefully and these different to the of love like the prepared kind sheet cyclical the an side, a to and businesses. balance stay but it's in balance got sheet of

Operator

And of that, Estate session. the you to Anywhere We Real XXXX and We concludes Q&A your end conference year have this disconnect. participation, may you the with thank webcast. come now the for call end

Anywhere Real Estate (HOUS) 23 Feb 232022 Q4 Earnings call transcript