Realogy Holdings Corp.

Good morning and welcome to the RealG Holdings Corporation's fourth quarter 2020 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 RealG Senior Vice President Alicia Swift. Please go ahead, Alicia.

Thank you, Carmen. Good morning and welcome to Realogy's fourth quarter 2020 earnings conference call. On the call with me today are Realogy CEO and President Brian Schneider and Chief Financial Officer Charlotte Simonelli. As shown on slide three of the presentation, the company will be making statements about its future results and other forward-looking statements during this call. These statements are based on the current expectations and the current economic environment. Forward-looking statements and projections are inherently subject to significant economic, competitive, and other uncertainties and contingencies, many of which are beyond the control of management, including, among others, the ongoing COVID crisis and uncertainties related to the continued strength of the housing market or refinancing volumes. Actual results may differ materially from those expressed or implied in the forward-looking statements. For those who listened to the rebroadcast of this presentation, We remind you that the remarks made herein are as of today, February 23rd, and have not been updated subsequent to the initial earnings call. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our earnings release issued today, as well as our annual and quarterly SEC filings. Also, certain non-GAAP financial measures will be discussed on this call, and per SEC rules, important information regarding these non-GAAP financial measures is included in our earnings press release. Additionally, the Cardiff relocation business has been reclassified into continuing operations and is now included within the RFG segment. The Leeds Group also remains in the RFG segment. All reported financial information has been restated to reflect this change and can be found in Table 6 of the press release. Slide 12 of our Q4 investor presentation also refers to this change in the reporting structure. Now I will turn the call over to our CEO and President, Ryan Schneider.

Thank you, Alicia. Good morning, everyone. We have been transforming Realogy for the past few years. We are faster, we are leaner, and we are more innovative. We are driving more organic growth. We are differentiating with technology, We were working to get closer to the consumer, and we are substantially improving our balance sheet. And even in the midst of 2020's challenges, we were able to accelerate our transformation. We delivered incredible 2020 operating results. $726 million operating EBITDA, $555 million free cash flow, double-digit transaction volume growth, and market share gains in the back half of the year. all while streamlining our businesses. We reduced net debt by half a billion dollars, and our consolidated net leverage ratio is 3.4 times the lowest level since Realogy went public in 2012. And we entered 2021 with great momentum. December open volume was up 51% year over year, and January open volume was up 45% year over year. Our closed volume in January was up 32% year over year, even with January having two fewer business days than 2020. We believe Realogy is well positioned strategically for where the residential real estate market is today and where it's going in the future. The future is creating a more integrated customer home buying and selling experience and then capturing a greater share of the overall economics. In 2020, we leveraged our title and mortgage businesses and technology products to deliver a better closing experience for customers and over $150 million in incremental operating EBITDA versus 2019. Our digital title closing products had 1,500% usage growth year over year, and our mortgage joint venture saw its digital closing product usage increase four times year over year. Strategically expanding these businesses, combined with our technology product investments from 2018 and 2019, created a better customer experience, helped customers more easily close on their homes, and improved our economics. The future is using data technology to support the agents who remain central to the transaction today and into the future. The digital marketing products, technology products, and data insights we are developing ranging from when a consumer starts looking for a home all the way to closing on a home, created advantages with the acceleration of digital adoption in 2020. These differentiated products and insights helped our agents and franchisees drive substantial volume throughout 2020, including market share gains in Q3 and Q4 when volumes were the highest in the industry. The future is distinctive brands, especially at the high end. We are well positioned with multiple strong brands that capture growth across all parts of the market. And we are having outside success with our higher end brands. We successfully launched and expanded the corporate franchise brand in 2020, even in the midst of a pandemic. And we are seeing incredible power from our Sotheby's International Realty brand. It demonstrates real differentiation in the market, driving volume growth in the brand up over 60% in the back half of the year. And finally, the future requires the ability to invest as the industry evolves. Our strong free tax flow allows us not just to invest in the customer experience, in technology, and in brands, but positions us to invest in different real estate models. For example, our RealSure iBuying joint venture provides our agents a differentiated offering to compete in the market and gives us the ability to go head-to-head against pure play iBuyers. And we are incredibly excited that our joint venture partner, Home Partners of America, is deeply experienced at buying and selling homes, as they've already purchased over 18,000 homes in their core business. Our program is live in 11 markets. We are planning to be in about 20 markets in 2021. This gives us real option value as the industry evolves. Now, Realogy's great 2020 results and our strong position for the future starts with the successes of our affiliated agents. The power of the agent's role as a trusted advisor was clearly demonstrated as they skillfully helped customers navigate an extraordinarily challenging year. Their expertise and creativity, paired with our strategic progress on technology, marketing, and data insights, enabled them to get more deals done, even in the most difficult circumstances of 2020. Realty's field employees also found ways to safely support customers and agents, utilizing inventive in-person practices and enhanced technology. And our corporate staff has seamlessly transitioned to hybrid remote work. We are transforming Realogy's headquarters from 270,000 square feet of offices to 60,000 square feet of brand and technology showcases, with an emphasis on collaboration. Our employees have been resilient as they've embraced new ways of working, and our results during this transition speak for themselves. Now let me shift now to what we're seeing in the housing market. Realty's Q4 2020 closed transaction volume increased 45% year over year with similar growth across brokerage and franchise, even with brokerages New York City volume still being negative year over year. As I told you, 2021 is off to a strong start. January closed volume is up 32% year-over-year, even with the two fewer business days in the month versus prior year. We closed volume for franchise ahead of brokerage. January open volume on a same-day basis was up 45%, and we are very excited that it's up equally across brokerage and franchise. And we also saw New York City open volume growth move to positive in January. So what's driving this momentum? So first, our actions are working. We are growing our own brokerage agent base. Our agent retention has improved every quarter for the past five quarters. Our corporate franchise business is already operating in 20 domestic markets, and we just opened our first international franchise this month. Our Sotheby's international realty business is showing differentiated performance. and our investments to deliver technology products, marketing products, and data products to help agents do more transactions or paying off. Second, the housing market is clearly doing great. In fact, it seemed to come unstuck from the low 5-plus million units per year the market's been at for almost a decade, with 2020 ending the year at 5.6 million units sold. With our national footprint on the franchise side and our attractive market footprint in owned brokerage, we're well positioned to capitalize on this strong demand. The consumer trends propelling the market for the past six months are continuing. Consumers are rotating from urban to suburban geographies across the country. They are rotating within suburban geographies to find homes that better meet their needs. And they are accelerating the existing trend to attractive tax and weather destinations. While the COVID crisis originated in many of these behaviors, more remote work and work from home is clearly driving these trends forward. Finally, very low interest rates are good for housing, and we're seeing millennials continue to increase their home ownership rates. Now, while I love telling you about the strength of the housing market, keep in mind we are still in the midst of a public health and macro uncertainty, and we can't predict the future. So we are especially monitoring the macro inventory constraints, and consumer trends given the potential uncertainty of the housing market. So pulling way up, Realogy had an exceptional year of execution. We delivered powerful profitability and free cash flow. We significantly improved our capital structure, and we demonstrated strategic success in the market. We believe Realogy is well positioned to deliver and lead into the future. Now I will turn the call over to Charlotte for a review of the financials.