Anywhere Real Estate, Inc. (HOUS) - 23-Feb-2023
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23-Feb-2023
Anywhere Real Estate, Inc. (HOUS)
Q4 2022 Earnings Call
Total Pages: 13
1-877-FACTSET www.callstreet.com Copyright © 2001-2023 FactSet CallStreet, LLCAnywhere Real Estate, Inc. (HOUS) Corrected Transcript
Q4 2022 Earnings Call 23-Feb-2023
CORPORATE PARTICIPANTS
Alicia Swift Charlotte C. Simonelli
Vice President-Financial Planning and Analysis & Investor Relations, Executive Vice President, Chief Financial Officer & Treasurer, Anywhere
Anywhere Real Estate, Inc. Real Estate, Inc.
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc.
.....................................................................................................................................................................................................................................................................
OTHER PARTICIPANTS
John Campbell Thomas McJoynt-Griffith
Analyst, Stephens, Inc. Analyst, Keefe, Bruyette & Woods, Inc.
Ryan McKeveny
Analyst, Zelman & Associates
.....................................................................................................................................................................................................................................................................
MANAGEMENT DISCUSSION SECTION
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's Senior Vice President Alicia Swift. Please go
ahead, Alicia.
.....................................................................................................................................................................................................................................................................
Alicia Swift
Vice President-Financial Planning and Analysis & Investor Relations, Anywhere Real Estate, Inc.
Thank you, Dennis. Good morning and welcome to the year-end 2022 earnings conference call for Anywhere
Real Estate. On the call with me today are Anywhere's 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 the current expectations and the
current economic environment. Forward-looking statements and projections are inherently subject to significant
economic, competitive, litigation, regulatory, and other uncertainties and contingencies, many of which are
beyond the control of management, including among others, rising inflation and mortgage rate, constrained
inventory, declining affordability, and other macroeconomic concerns as well as the impact of the foregoing on
consumer demand. Actual results may differ materially from those expressed or implied in the forward-looking
statements.
For those who listen to this rebroadcast of this presentation, we remind you that the remarks made herein are as
of today, as well as in our annual and quarterly SEC filings. In October 2022, the company initiated a plan to
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Q4 2022 Earnings Call 23-Feb-2023
integrate own brokerage group and tidal group. However, based on industry and business developments, during
the fourth quarter of 2022, the company determined that its reportable segments will remain consistent at
December 31, 2022, with prior period. For those who listen to the rebroadcast of this presentation, we remind you
that the remarks made herein are, as of today, February 23, 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.
.....................................................................................................................................................................................................................................................................
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc.
Thank you, Alicia. Good morning, everyone. Over the past few years, Anywhere has made powerful progress on
our transformation. We entered 2022 with real momentum, and even as the housing market worsened in the year,
we leveraged our unique advantages, stayed focused on our priorities and took quick actions that enabled us to
deliver $6.9 billion of revenue and $449 million in operating EBITDA. We accelerated our cost reductions from a
target of $70 million to realize over $150 million of cost savings in the year.
We rigorously prioritized our growth investments in CapEx and we capitalized on the improving competitive
environment. We remain committed to growing our advantage positions in our existing businesses, especially
franchised luxury and transaction services, along with simplifying the transaction for agents and consumers.
Now looking back on 2022, it was a rapidly changing year for housing, with substantial declines in the market that
got worse every single quarter. Effectively, all the market decline was from a drop in unit transactions, culminating
with Q4 market volume down more than 30%. Higher mortgage rates continue to put pressure on affordability and
these higher mortgage rates are hurting this new supply of inventory as many homeowners are locked into their
current home with low mortgage rates. I've been incredibly proud how our great agents and franchisees have
taken care of customers even in the midst of this tough housing market as they continue to demonstrate their
value in the marketplace.
2023 looks like a volatile year where the housing market will be meaningfully lower than 2022, driven by a
substantial drop in unit transactions. Industry 2023 forecasts for transactions are typically in the $4 million to $4.5
million unit range, down 10% to 20% from 2022. And remember, unit transaction declines have a disproportionate
impact on our business as unit declines also impact our mortgage and title opportunities. And we'll see what
happens on the price side of the volume equation.
We expect Q1 2023 market volume to be down around 30% versus 2022. But we expect those year-over-year
quarterly and comparisons to improve throughout the year. And I still believe the outlook for housing over the
decade is strong. And most importantly and potentially excitingly right now, we may be at or near a bottom
already. We are all seeing a number of the housing indicators in the macro economy exhibit more stability. In our
book from December 2021 to November 2022, our year-over-year volume comparisons all showed open volume
lower than our closed volume, effectively showing housing results decelerating.
That flipped in December 2022. Both in December 2022 and January 2023, our open volume comparisons were
higher than our closed volumes. So even with a tough and likely volatile 2023 market ahead I'm increasingly
optimistic about our position in the opportunities in front of us. So first, we are laser-focused on changing how we
operate our company to deliver greater efficiency and enhance our value proposition. We realized $150 million in
cost savings in 2022 and later in this call, Charlotte will share the equally powerful efficiencies we were expected
to drive in 2023.
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Q4 2022 Earnings Call 23-Feb-2023
And our excitement in this area is not just about lower costs, it's about re architecting our business for greater
success in the future. We are reimagining our real estate brokerage offices to be more efficient, flexible and
integrated with transaction services like title and mortgage, which means we can provide fewer but more impactful
agent and consumer support house.
Building on our past investments to digitize our operations we're automating processes across brokerage and title,
removing working friction for agents and consumers. And while we've lowered our marketing spend for 2023 given
market conditions, we are excited how we're using a more digital marketing mix to deliver greater value for agents
and franchisees. Second, we're rigorously prioritizing our growth investments, which include continuing to expand
our powerful franchise business, leaning into our luxury leadership position, and driving innovation in our naturally
scaled title and mortgage businesses.
Most importantly, we like the better competitive environments that we have seen evolve in 2022 and the
competitive differentiation we are achieving. We believe our results demonstrate a flight to quality and that there
will be growth benefits for us when the market rebounds. We experienced record franchise sales in 2022, bringing
in substantial new companies and helping our existing companies grow via M&A and agent recruiting. We
continue to have strong growth in our Anywhere advisors agent base up 4% year-over-year organically and most
excitingly in this better competitive environment. We were able to recruit at better economics than in the past few
years. And as we've been sharing with you throughout the year, we continue to have record high agent retention
in our own brokerage business.
Finally, we've recently brought to market a new innovative multi-franchisee title joint venture opportunity as part of
our franchise value proposition and are in the process of launching the first three in Florida and California. So
even in a challenging market, we like the flight to quality that we're seeing in a better competitive environment and
our growth vectors, which together we believe will pay substantial dividends for us when the market recovers.
Now I'll turn over to Charlotte to discuss our results in more detail.
.....................................................................................................................................................................................................................................................................
Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc.
Good morning, everyone. 2022 was a challenging year for the housing market, but we are excited about the
progress we've made and the position we are in to further our leadership in this industry. We continue to deliver
meaningful operating EBITDA and have taken the necessary steps to improve Anywhere's financial and
operational performance with our accelerated cost reductions and prioritization of our investments to drive growth.
Now, I will highlight our full year 2022 and Q4 financial results. Full-year revenue was $6.9 billion and operating
EBITDA was $449 million. Q4 revenue was $1.3 billion, down 33% in line with our transaction volume decline. Q4
operating EBITDA was $12 million down versus prior year due to lower transaction volume, higher agent
commission costs and various other items like the sale of our underwriter business; offset in part by additional
cost savings.
Our business delivered well above that number in the quarter, but operating EBITDA was reduced by several
specific items booked in Q4, including write-offs in our franchise business and at our GRA JV as well as additional
legal accruals. Cash on hand at the end of 2022 was $214 million and full-year free cash flow was negative $159
million due to a large negative working capital use in Q1 2022. This was driven by our 2021 outsized
performance, which drove sizeable accruals by year-end 2021, which were paid in Q1 2022.
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Q4 2022 Earnings Call 23-Feb-2023
We ended the year with a senior secured leverage ratio of 0.77 times and a net debt leverage ratio of 5.1 times.
We are pleased with the progress we have made on our balance sheet. We have a long dated maturity stock and
have lowered our cost of capital. We redeemed the 2023 notes in November and now have limited debt maturities
until 2026.
Now, let me go into more detail on our business segment performance. Our Anywhere brands business, which
includes leads and relocation generated $670 million in 2022 operating EBITDA. Operating EBITDA decreased
$81 million year-over-year, primarily due to lower revenue related to transaction volume declines, partially offset
by decreases in operating and marketing costs. Our relocation business substantially outperformed 2021 and
even exceeded its pre-COVID 2019 full-year performance, driven both by cost efficiencies and new client
signings. Our Anywhere Advisors operating EBITDA was negative $86 million, down to $195 million versus 2021.
However, this business generated $287 million in operating EBITDA before intercompany royalties and marketing
fees paid to our franchise business.
Our agent base was up 4% year-over-year like-for-like and commission splits were up 203 basis points year-over-
year. And for 2023, even as overall market volumes are anticipated to decline, we expect continued split pressure
driven mostly by continued agent mix, as the higher producing agents who earn the highest splits will continue to
drive more of our volume. We will also have pressure from previous recruiting amortization. That said, 2023 split
pressure is expected to look more like what we experienced in Q4 2022, where splits where about 130 basis
points higher year-over-year.
Anywhere Integrated Services delivered $9 million in operating EBITDA in 2022. Operating EBITDA declined
$191 million year-over-year due to lower mortgage JV earnings, lower purchase and refinance volumes and lower
earnings due to the sale of our title underwriter business. As you have already seen in our 8-K December, open
transaction volume was down 35%. Our January open volume was down 31%, and we expect our Q1 closed
volumes to be down about 30% year-over-year, which will drive our Q1 operating EBITDA unusually negative.
Consistent with industry forecasts, we expect the quarterly volume numbers to improve throughout the year, but
estimate that our annual transaction volumes will decline about 15% to 20%. With this range of volume declines,
our 2023 operating EBITDA will be below 2022. But despite the weak housing market, we expect our operating
free cash flow to be modestly positive, driven by favorable working capital, robust savings programs, focused
investments and judicious cash management.
As Ryan has mentioned, we have a relentless focus on driving efficiency in this challenging housing market. In
2022, we once again demonstrated our ability to rapidly change with market conditions, delivering efficiencies and
executing $150 million in cost savings. These are comprised of the original $70 million in savings we targeted in
the beginning of the year and another $80 million we proactively drove in the back half as market conditions
eroded.
For 2023, we expect to deliver about $200 million in additional cost reductions, including carryover of
approximately $50 million of actions taken in 2022. Let me give you more detail on how we are thinking about
these cost savings programs. The largest part of our cost structure today is tied to our operational real estate
footprint. This includes the physical brick-and-mortar of both our brokerage and title operations, but also the other
support components like staffing tools and resources and other non-agent activities.
As Ryan said, we are transforming our physical space locations both in quantity and in the way we deliver
services to agents and customers. We are also advancing our technology and product solutions, which not only
drive cost efficiencies for us, but also improve the agent value proposition.
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Q4 2022 Earnings Call 23-Feb-2023
Second, we continue to reduce our operating costs to better match the housing market demand and changing
how we work. We have lowered our head count down 11% from June 2022 as we right-size for this market. Other
examples of our savings programs include our ongoing efforts in procurement, ensuring our marketing spend is
positioned to deliver the highest ROIs, identifying software synergies and prudently managing other corporate
expenses. As much as possible these actions should not impact our agent and franchise partners, nor are plans
to transform the consumer experience.
However, these savings will be offset in part by inflation in our people costs, software costs and litigation costs,
driven by two action jury trials, which are scheduled this year to name a few. And while the housing market
remains a challenge, we continue to prioritize investing for growth while driving efficiencies for today and
tomorrow. We have made progress against the goals we shared with you at our Investor Day, both on our savings
targets and in creating an improved agent experience, and look forward to sharing further progress against these
goals in future calls.
Now, let me turn the call back to Ryan for some closing remarks.
.....................................................................................................................................................................................................................................................................
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc.
Thank you, Charlotte. Anywhere responded to the challenging 2022 for housing with agility. We reimagined how
we operate and strengthened our financial profile while continuing to make strategic progress and invest for
growth. In 2023 we remain committed to growing our advantaged positions, especially in franchised luxury and
transaction services and simplifying the transaction for agents and consumers. Standing here today in February,
we really like what looks to be a better competitive environment for us and potentially most excitingly, based off
the data in our book from December and January, we may have reached the bottom of the housing downturn. We
really like our positioning to win, especially as the market rebounds.
With that, we will take your questions.
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Q4 2022 Earnings Call 23-Feb-2023
QUESTION AND ANSWER SECTION
Operator: [Operator Instructions] Your first question is from the line of John Campbell with Stephens. Please go
ahead.
.....................................................................................................................................................................................................................................................................
John Campbell
Analyst, Stephens, Inc. Q
Hey, guys. Good morning.
.....................................................................................................................................................................................................................................................................
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc. A
Hi, John.
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John Campbell
Analyst, Stephens, Inc. Q
Hey. Nice. I want to check back on the rule of thumb you guys have raised in the past around the, you know, the
1% volume swing kind of equating to $15 million of EBITDA ostensibly, is that still a good measure to consider?
And then also on the $200 million, how should we be thinking about the net impact for the year?
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Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
Yeah it's a great question, John. I think, the $15 million is still pretty close. I think what I would say is when the
volume declines are more heavily based in sides, that can impact our business a little bit more because there's a
knock on impact to title and mortgage. So, you can add-ish there. It's definitely still a good analog to use as far as
the $200 million. I don't think that the full the flow through is going to be different than what we've seen in other
years. As you know, most of it flows through however, we do have those offsets that I mentioned in the script, like,
the enhanced people costs and some inflation around software and litigation. So I can't give you an exact
percentage, but the flow through is pretty consistent with what we've seen in previous years.
.....................................................................................................................................................................................................................................................................
John Campbell
Analyst, Stephens, Inc. Q
Okay. That's very helpful. And I'm sorry, Ryan.
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Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc. A
John, if I can if I can build on that a little bit, I want to just double down on a couple of things there. One is,
Charlotte's point and I said it in my script, when the decline is all units, it is a disproportionate hit on us because it
hurts the mortgage and tidal opportunities. Right. And we clearly see that in our 2022 results when units were
down pretty dramatically both in the market and for us. Right. So that's a big thing. The other thing on the cost
thing is it does get to just the question how volatile 2023 is going to be. Right.
In terms of what happens on the cost side, because obviously 2022 is a pretty wild housing market. Right. We
had all those unit declines. We had the rate environment change, political stuff, high inflation, et cetera. And I
chose the word volatile in my script for a reason. The biggest uncertainty is the housing market itself. Right. And
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Q4 2022 Earnings Call 23-Feb-2023
lower unit transaction forecast. We'll see what happens on price and depending on what happens with that will
probably drive some of our cost base also. Right. As you know, we're rooting for a stronger year, but that would
probably mean we'd bring some marginal cost back if it's a more challenging year than, obviously we keep looking
there.
But there's also the uncertainty on the competitive side. Like I said, we like the competitive environment that
we've got that's involved in there. And I think there'll be some real questions about which companies are going to
prosper and which ones are going to struggle in a in a kind of tough year. And so, we like our relative position.
What we're seeing on the growth side, we'll see if there's any opportunities there that that might create for us that
would change our spending potentially.
And then another area of volatility for 2023 is, is the litigation, right. Charlotte mentioned that that'll be a cost
headwind for us. We've got these two class action jury trials and then we got a couple of other multiple defendant
kind of industry class actions out there. And these are just the things we know about, the wild stuff in 2022, like
Ukraine, the inflation stuff, what the Fed did on rates, yeah we didn't know a lot of those stuff. So at the end of the
day, what happens with units will make a big difference in our – in all of our businesses of actively, including those
title and mortgage results you saw in 2022. And what happens with the macro and some of these other things will
make a will make a difference on the cost side.
But I think Charlotte giving you the right way to that we're thinking about it right now. And just like Charlotte gave
you our January results, we'll do our best throughout the year to keep you updated, just like we gave you our Q4
results six weeks ago just so you had them and you kind of see what we're using as we plan kind of going
forward. Hopefully that helps.
.....................................................................................................................................................................................................................................................................
Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
The other thing I'd say – yeah sorry, John. The other thing I would say is because of where the housing market
has been in the back half of last year, like the majority of that $200 million is identified.
.....................................................................................................................................................................................................................................................................
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc. A
Yeah.
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Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
So I feel very good about where we're starting off the year from an identified perspective. The other thing I would
tell you is it does not include of the more draconian things that we did during COVID. So hopefully that helps
round out your thinking on the savings programs.
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John Campbell
Analyst, Stephens, Inc. Q
Yeah, that's very helpful and that's a very good point on the unit impact, I hadn't thought about that too much. One
more here just relative to your guidance for the full year, you guys said modestly positive free cash flow from
operations. Charlotte, if we could dig into that for just a second, I know Curtis tends to have a pretty big influence
on the working caps, if you could talk to expectations there. And then also just moving down the total free cash
flow, what else should we be considering relative to the CapEx and maybe your capital allocation program?
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Q4 2022 Earnings Call 23-Feb-2023
Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
Sure. So as far as Cartus goes, it actually was a drain for us in the fourth quarter. Normally, on a full year basis,
we end up about zero on the securitization facility, give or take small single-digits one way or the other. We
actually had a pretty big drain of almost $50 million. So, that unwinds in the first quarter. Now, I can't tell you how
we're going to finish the year, but like I said, the majority of years that will neutralize over the year and we'll end
up on a zero basis.
So, it'll benefit us in the first quarter and hopefully on the full-year basis because of where we ended last year. So,
that's how I would think about the securitization, some other working capital components to think about as you
know, like all of our free cash flow, working capital declines from last year really happened in the first quarter and
for the reasons I called out in the script. So, we don't anticipate having that impact us in the same way in the first
quarter of this year. So, working capital, instead of being a hit like it was last year, should actually be slightly
positive for us.
So, other than that from a CapEx perspective, as I called out, we're being very judicious and we still have a
healthy CapEx forecast. It's on the lower end of what we've spent over the past sort of four or five years. But, it's
still very healthy and that is, obviously, focused around two things. First, driving our strategic goals, which is
improving sort of the customer experience and part of that happens in technology and part of that happens on the
facility side. So, it's still a healthy but focused budget, but on the lower end of what you've seen us spend over the
past four or five years.
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John Campbell
Analyst, Stephens, Inc. Q
Okay. Very helpful commentary. Thank you, guys.
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Operator: Your next question is from the line of Ryan McKeveny with Zelman Associates. Please go ahead.
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Ryan McKeveny
Analyst, Zelman & Associates Q
Hey. Good morning. Thank you. Charlotte, so on the cost savings, so realized $150 million this year, $200 million
expected next year. So that's $350 million in total. I think that compares to an expectation or a target of $300
million that you laid out at the Analyst Day between 2022 and 2026. So can you talk about how much of the 2022,
2023 dynamic is kind of structural cost actions that you were planning to take maybe just at a later point in time
that are being pulled forward or how much of the cost actions are more variable with the pullback in volumes such
as marketing spend?
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Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
Yeah. That's a great question. So to your point, we had a goal of about $300 million and you can see that we've
already delivered or we'll expect to deliver about $350 million in these two years alone. How I think about it is, it's
kind of like two-thirds, one-third. So a lot of this is structural stuff that we are you can call it pulling forward. I think
we weren't really specific about what year these savings were going to happen when we did Investor Day.
Anyway, I think this is the right cadence for how we would want to go attack some of those permanent structural
savings.
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Q4 2022 Earnings Call 23-Feb-2023
So I feel good about the progress against our goal. But to that point, a third of it probably is more variable tied to
the housing market. And to Ryan's point earlier, if the housing market comes back faster, some of that cost might
come back faster, too. So, I kind of think of it as like 60-40 or two-thirds, one-third of sort of more structural
savings versus tied to the housing market and variable or temporary.
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Ryan McKeveny
Analyst, Zelman & Associates Q
Got it. Okay, that's very helpful. Thank you. And then one higher level one. So if we go back in time to the
Realogy days, even the Cendant days in the GFC, obviously, very tough from a volume and profitability
perspective. But there were some operational offsets in the numbers at the time. So commission splits to the
agent went down, commission rates to the consumer went up, franchise royalty rates went up. So, it's a kind of
partial offsets against the volume environment at that time.
I guess, I'm curious, as you look at the business today and going forward in this tough environment, is it possible
that some of those partial offsets flow into things? Or is there any reason that it's different this time than previous
volume declines? And I know your commentary on the split suggests continued upward pressure, at least
modestly in 2023. But just curious if there are kind of levers beneath the surface in a tough volume environment
that may trend in a slightly better direction. Thank you.
.....................................................................................................................................................................................................................................................................
Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
Now, that's a great question. Why don't I start off and let Ryan fill in with other thoughts that he might have? So,
the fact of the matter is, like, if you think of the royalty rates and if you think of average broker commission rates
and things that are structural to this business, they're not really moving in a favorable direction because of either
size consolidation and franchisees or the mix of homes that are being sold tend to be at higher price points these
days, which tend to garner slightly lower average broker commission rates. So I don't anticipate those things
changing unless the mix of homes that are being sold with inventory coming back on. And that may help us in the
future, but I don't really see that helping us in 2023 per se.
From a commission split perspective, the good news is the competitive side of that is, is significantly more
rational. And like I called out, the biggest impact that we're going to have in our products is pure agent mix. So to
the extent that, again, we get more home sale transactions, there's a hopeful benefit in the future that the agent
mix kind of normalizes itself out. And we have agents across the spectrum delivering the home sale transactions,
because if that was the case today, if we didn't have this agent mix it, you'd probably see a significantly better
profile on commission split. But until that changes, we kind of are where we are. So probably not the answer you
wanted to hear, but that's kind of how I'm looking at it in the short-term.
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Ryan McKeveny
Analyst, Zelman & Associates Q
Yeah.
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Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc. A
Yeah I don't have a lot a lot more to add on that, Ryan. I mean, if you just talk on the franchise side with a little
more detail, our top 250 franchises or about 70% of our business right now, right. And our rebate tables are
public. So you can see how, the more business that people do, the lower royalty rate that they earn. And that's up
from, whatever, 65%, 5 years ago, which is up from 57% 10 years ago, which is up from whatever it was back in
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Q4 2022 Earnings Call 23-Feb-2023
the Cendant days that you're talking about. So I think that this concentration both on the franchise side and then
the agent, the best agents doing a higher percentage of deals or have both created a little bit of a different kind of
ecosystem in the margin. It probably makes it less likely that you'd get some of those effects that happened in the
downturn 15 years ago.
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Ryan McKeveny
Analyst, Zelman & Associates Q
Got it. That's very helpful. Thank you.
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Operator: [Operator Instructions] The next question is from the line of Tommy McJoynt with KBW. Please go
ahead.
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Thomas McJoynt-Griffith
Analyst, Keefe, Bruyette & Woods, Inc. Q
Hey. Good morning, guys. Thanks for taking my questions. Can you talk a little bit about what's embedded in your
guidance for the mortgage JV, and maybe for next year, either directionally or in absolute EBITDA terms, if you
want to be that clear?
absolutely EBITDA terms, if you want to be that clear?
.....................................................................................................................................................................................................................................................................
Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
Sure. Yeah. So as you know, it was a drain obviously on the year for us in 2022. The good news is I do expect it
to not be a drain in 2023 and then that has a benefit of a year-over-year impact as well. So I don't imagine that
we're going to be like making money like we did two years or three years ago. But the good news is it shouldn't be
a drain on us. It should be positive and there's a, obviously, a positive year-over-year benefit from that as well.
.....................................................................................................................................................................................................................................................................
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc. A
The mortgage is a place where the competitive environment Tommy, is also likely to help us. We've seen a
couple people in mortgage make some pretty big strategic shifts that means we're doing some things on the
recruiting and kind of building the depth of our kind of joint venture in a way that's pretty helpful, as you've seen
some other people pull back. And so, we're hoping to reap some of the competitive environment benefits on that
next year, even if it's obviously kind a bit of tough business.
.....................................................................................................................................................................................................................................................................
Thomas McJoynt-Griffith
Analyst, Keefe, Bruyette & Woods, Inc. Q
Thanks. And then just my second question. Can you remind us of some of the leverage covenants that you guys
have on your revolver and some of your debts? And are there any concerns on with the lower EBIDTA next year,
you guys running into breaching any of those covenants? Or do you feel like there's a pretty safe cushion?
.....................................................................................................................................................................................................................................................................
Charlotte C. Simonelli
Executive Vice President, Chief Financial Officer & Treasurer, Anywhere Real Estate, Inc. A
That was a bit of a softball, but thank you for that one. No, at the end of the day, our most restrictive covenant is
our senior secured leverage ratio at 4.75 times. And as you saw we're at 0.77 times. So, we don't have any
concerns about breaching the senior secured leverage covenant. We do have a covenant that at total debt
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Q4 2022 Earnings Call 23-Feb-2023
leverage of 4 times that we're unable to do share buybacks. So, we're clearly beyond that right now at 5.1 times.
But I don't really consider that overly restrictive.
And basically, at the end of the day, everything that we've done over the past two or three years to handle this
refinancing in a strong and positive market at the best terms possible, the significant transformation of the balance
sheet, I guess the lesson there for, for everyone is take care of that when times are good and then you'll be well
prepared when the housing market takes these cyclical dips like it tends to do. So we feel really, really proud of
what we've done over the past few years on the balance sheet. And, and it puts us in a good position to continue
investing behind our strategic priorities. And obviously we start to focus on the costs. That's just the right thing to
do for the business. But I'm not worried about those covenants.
.....................................................................................................................................................................................................................................................................
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc. A
Yeah. Tommy, that's one thing that I want to just double down on a bit here, which is. When you look at our
balance sheet today and I give Charlotte and our finance and legal and other teams all the credit for this. I mean,
we've seized the moment a couple of times to basically put a $2 billion of unsecured debt out to maturities like
2029 and 2030. We've got other moves beyond that. We paid off our 2023 notes. And we moved from a world
where we used to have a lot of secured debt to the point where our secured debt is incredibly low. Right.
And hence you – even in a tough year for housing, whether it's 2022 or 2023, you can see that our senior secured
leverage ratio is quite far away from our kind of most restrictive covenants. And it wasn't an accident there is a –
when I talk about our transformation. And the balance sheet part is as important as anything in this. And so, it is –
if we hadn't made those moves, we'd be having a pretty different conversation right now, staring at a tough 2023
for our industry. But, whether it's the lengthening maturities, whether it's the massive shift to unsecured, whether
it's frankly, the pretty low rates that Charlotte and the team got, on our lower interest expense than we used to
pay.
Like we're in a lot better position there and that does give us the room to even in what is looking like a pretty
volatile and kind of wild year in 2023. Keep making some of these investments, keep simplifying the company,
keep changing how we do, pile on mortgage, keep investing to have franchise sales growth, things like that.
So, love the question, still an important topic for us to stay focused on. We're never going to relax on the balance
sheet side but it – it's being prepared for these kind of challenges in the housing market and the cyclical
businesses is why, you want to get ahead of these things and hopefully, our owners feel like we've got the
company in a very different position on the balance sheet side.
.....................................................................................................................................................................................................................................................................
Thomas McJoynt-Griffith
Analyst, Keefe, Bruyette & Woods, Inc. Q
Agreed. Thanks, Ryan.
.....................................................................................................................................................................................................................................................................
Ryan M. Schneider
Director, Chief Executive Officer & President, Anywhere Real Estate, Inc. A
Thank you, Tommy.
.....................................................................................................................................................................................................................................................................
Operator: And we have come to the end of the Q&A session and with that, this concludes the Anywhere Real
Estate year-end 2022 conference call and webcast. We thank you for your participation. You may now
disconnect.
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Q4 2022 Earnings Call 23-Feb-2023
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