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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 conference over to Anywhere Senior Vice President, Alicia Swift. Please go ahead, Alicia.

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. Forward-looking statements, estimates and projections are inherently subject to significant economic, competitive antitrust and other litigation, regulatory and other uncertainties and contingencies, many of which are beyond the control of management, including among others, industry and macroeconomic developments. Actual results may differ materially from those expressed or implied in the forward-looking statements. 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 like-for-like 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 leads. Finally, Charlotte's pro forma 2024 illustration financial range is not a financial forecast or guidance for 2024. It is provided purely to illustrate anywhere financial octane its home sale market for 2024 was $5 million to $5.5 million compared to the $4.1 million existing home sale market in 2023 as reported by the National Association of Realtors. 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 in performance of our underwriter joint venture, refinance volume or relocation business. Free cash flow excludes the $100 million of onetime anticipated payments related to the litigation and the pendant Tech legacy tech matter. 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 Bayer 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. 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. Now I will turn the call over to our CEO and President, Ryan Schneider.

Thank you, Alicia. Good morning, everyone. I'm excited by anywhere real estate's position to drive success and to deliver value for our shareholders. We continue to demonstrate a powerful track record of delivery, strategic foresight and innovation 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 reductions should translate to financial octane in more normal housing markets. While the first quarter of 2024 was another tough time in the housing market. I'm proud of how our affiliated agents, franchisees and employees help customers navigate ongoing complexities. 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 moment to come with these big decisions. The value agents provide helps homebuyers and sellers achieve their dreams, and I want to start the call by thanking them for their commitment. 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. And 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 with our Moxyworks offering. We are 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 tool. 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 #1 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. 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 through sales we closed in Q1. Now we're also integrating and digitizing our brokerage and title operations, both agent and customer-facing and back office. We are better assisting agents and consumers 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 could focus on earning new business. 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 anywhere as this should help us lower our title and mortgage capture should help as this should help 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 1/3 of the U.S., and we will be rolled out nationwide by the end of the year. We are already seeing more than 1/3 of transactions in available markets using the service, and we're seeing usage rates above 50% in some of our earliest large locations. We're also combining more of our brokerage and title back offices to drive more and consistently better service and to 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 processes as we continue our generative AI agenda across many parts of the company. 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 leads network and the ability to integrate title are creating opportunities for us to be a great partner in selling their homes. 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 is a buyer premium that we collect along with the seller commissions. 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. And third, while we don't talk about international much, we're seeing some interesting international expansions, especially in our corporate and Sotheby's International Realty brands. Remember, for those 2 brands internationally, we do normal franchise agreements, not master franchising. In Q1, we opened 4 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 is 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. 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. And the recent inflation news has clearly put more headwind 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 2 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 closed volume up 7% year-over-year with about half of that from unit growth as it again meaningly outperformed both the market and our portfolio. 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 disproportionate 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 of years we saw that listings growth. And we're really excited about how listings growth is increasingly differentiated for us in luxury as our $1 million-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 homeownership. And I really like our financial octane in stronger housing markets. Now before I turn over to Charlotte, there is substantial uncertainty in the industry in light of litigation and regulation development since we last talked. We are 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 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 was named one of the World's most Ethical Companies for the 13th consecutive year. With that, let me turn it over to Charlotte.

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 octane when the housing market improves. I will now highlight our first quarter financial results. Q1 revenue was $1.1 billion, essentially flat versus prior year as transaction volume growth was offset by softness in relocation. We are encouraged by the improving volume trends even while still off a low base. 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. 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. This result is in line with what we normally see in the first quarter are seasonally slowest. 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. And as a reminder, we have over $100 million of onetime payments anticipated this year between our $73.5 million class action litigation payment and the $39 million legacy California tax matter. 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. Operating EBITDA decreased $8 million year-over-year primarily due to lower client volumes in the relocation business. 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 prior year due to higher volume and lower operating and marketing costs. Commission splits in Q1 were 80.04%, down 3 basis points year-over-year, continuing the 6-quarter trend of more stable splits. 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 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. Operating EBITDA improved $2 million year-over-year due to lower operating expenses driven by cost savings initiatives. Moving on to cost. 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 on 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. 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 footprint, 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. It could 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 of 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. Slide 22 in our earnings presentation shows our historic cost savings delivery over the past 5 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. 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 million 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. And to be clear, we are not assuming any consumer commission changes in this pro forma. Similarly, we believe we could see $200 million to $300 million of free cash flow generation in that same 5 million to 5.5 million existing home sale range, excluding any onetime payments. This shows how the strategic actions we've taken on cost can translate into strong financial delivery in a higher existing home sale 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. 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. I'm incredibly proud of how the newer team continues to lead and deliver through the challenging housing market and the ongoing industry uncertainty. 2024 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.

[Operator Instructions] And your first question comes from the line of Matthew Bouley from Barclays.

I guess starting on all the news over the quarter. 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.

Well, let me say a couple of things, Matt. Thanks for the question. First of as I started my call with, we just have just 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 what they're doing, but it's also a great pool of learning for us to share with our broader agent population. The other thing I would say is, again, we are sharing things across our ecosystem across our 6 brands, leveraging the scale we have is because we made the decision to settle this litigation 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 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. Like I think they're going to help us actually lock in some business that probably slip through our fingers beforehand. And I really have confidence in our agents' ability to communicate their value. So the sharing of best practices, the leverage and the history we have, especially in the luxury of this kind of actions already and kind of a time advantage in terms of our focus and rollout of these things are examples of kind of both what we're doing but also why we're excited on a relative basis what we can do here.

Excellent. 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 to anywhere of lower-producing agents versus the higher-producing agents, right? Is 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?

Yes. 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 a regulation standpoint. You see people leave the industry in tough markets. And we've been in 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 have buyers. And after the NAR settlement happened, I had calls with all of our agents and franchisees. I told all of my expect more agents to lead the industry, right? Because there will be agents who aren't good to articulate in their value, the way are, I think our agents are. And so we think that will happen. But in terms of affecting the economics, I don't lose a lot of sleep over it yet, in part because 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 nonproductive or very low productive agents you talked about. And so I'm sure there's some stuff on the margin. I mean, Charlotte even called out in this quarter, one of our commission split headwinds was 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 when you're starting from a place where your top 50% of agents are already doing 90-plus percent of the deals, it's not a big mover. But we are also excited potentially by the costs we put into supporting nonproductive agents going down. It's not 3 to have people in your ecosystem. And so we'll see how the integrated economics of this thing play out, but I totally expect the number of agents to go down.

Your next question comes from the line of Anthony Paolone from JPMorgan.

So I guess, first question is, can you maybe just tell us what guidance you're providing just 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? Just trying to hear something that tangible about how you might think this looks as this buy-side commission matter unfolds?

Yes. So Tony, I would say no place is doing it like the future yet in a full way. But 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, we need to build and the industry needs to build buyer agreements in the states that don't exist. 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. And then for us, it's a big pool of experimentation. We have a couple of thousand franchisees here in the U.S., and many of them have already rolled out the buyer agreements or they're in a market where there's bioagreements. And the best practice sharing is a huge thing. We've launched a lot of different training things on the not just on the agreements themselves, but 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 settlement timing, and we knew this would be an important thing for the future. Now there are markets, Tony, and you're well familiar with them, Washington State is an example where offers of compensation haven't been mandatory for a long time, right? And so there are places where the world has operated a little differently than a lot of the country. Again, that's not the end state because there's some other stuff in these settlements that will change the agreements. But there are places where we have some data of kind of what works and what doesn't. And again, 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 the 200,000 agents in our ecosystem, we think, is a powerful thing for the future. But no place is operating there yet. We all have a lot of work to do in terms of bringing the things to life, especially in markets where they're going to 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 share stories from and cross-pollinate from.

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 buyer? Or do you think it will just be navigated such that there will remain offers of compensation, 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 or?

Yes. So look, I mean, the NAR settlement clearly has displaying offers of compensation on broker websites is an explicit part of that. So obviously, that's in their settlement, but that's more of a question for them. Look, I think your question is very complicated. I think the real answer is I don't think anyone actually knows. But what I keep talking about with my employees and my agents and my franchisees and reminding them is negotiating home sales is not a new thing, right? And could agents be paid more by buyers? Sure, that's absolutely possible in the future, but can offers of compensation or sorry, can offers to buy a house, can they include, hey, sellers, we want you to pay this thing just like we want you to 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. 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 kind of settlement rules. So 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 other strategic moves we might do, thinking about how we communicate with agents on them and share best practices. And again, there's going to be, well, 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 the change in how things operate. And I like our assets relative to others to go through that change.

Your next question comes from the line of Soham Bhonsle from BTIG.

Ryan, I guess, first one for you. Curious on your thoughts on consolidation in the space long term. And I think there's 100-oddhousand brokers in the U.S. today. And if we're in fact going to see some commission rate pressure here, how do you think some of the boutiques sort of fair in that environment and new agents need to be at the bigger brokers to effectively compete long term?

I think consolidation is inevitable. I've said it publicly, and I thought it was inevitable even before some of the litigation or regulatory developments over the last year. 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 what Charlotte showed, right, a normal housing market, look at just how much more octane we have just because of our scale. And obviously, if there's 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. I think providing good technology is another reason it's probably inevitable that not everyone can do. And I think brand matters in our industry. And I know there's different views on that, but one of our portal friends kind of stood up on stage and reminded the world that brands matter a lot quite recently. And I believe in that. And so I think that will be helpful in the future also. Now I will tell you, I think consolidation right at this moment is a very strange thing because there were both we're in a tough macro, but there's also the overhang from litigation payments and litigation that's still ongoing for a lot of companies. And with the uncertainty on the revenue side, I am incredibly cautious looking at consolidation right today. But I do think it's inevitable and I think the bigger scale players just are going to have a lot of advantages here and I'm hoping that a company like ours, especially with our 6 great brands can differentiate over time on that.

Okay. Great. And then Charlotte, I guess, 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 free cash flow on the core business, but then you have this $100 million in onetime payments this year. So can you maybe just talk about how you intend to fund that expense? And then also sort of what you're baking into your positive operating free cash flow guidance?

Yes. So depending on when the timing of these things happen right now, if the settlement is 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 almost. 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. 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 shipping away back at the revolver. As far as the guidance, so when we say modestly positive, that's excluding the onetime items. And so what's baked into that is our normal performance of the business. So the business, how it would perform on the year, excluding those onetime payments. So the guidance, excluding the onetime payments is to be positive, but there's a probability that it will take us negative with the onetime payments, if that helps.

And have you contemplated like what kind of market volumes do you need to sort of hit that positive operating free cash flow?

Yes. Well, in part, it's sort of the financial octane slide that I shared with you, right? So there's quite a big amount of free cash flow in a normal what we'd call a normal housing market, 5 million to 5.5 million units. And what we've said is that's going to take us to, we believe, $200 million to $300 million of free cash flow. Now that also excludes any onetime items. So absent the onetime item, it's either modestly positive in this horrible housing market that we're in right now. But in a normal housing market, likely sort of like $200 million to $300 million. So hopefully, that will help.

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 will put you in that sort of scenario?

Yes. Well, so think about it this way. 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 looking to enhance our profitability. So just the fact that we had $40 million of our $100-plus million this year with carryover savings, 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 this year into next year. 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 is what's going to take us higher and that's what we're feverishly working on right now.

Your next question comes from the line of Tommy McJoynt from KBW.

Actually, going back to one of Anthony's questions, I guess it was alluded to one of the business practice changes of NAR settlement is no longer displaying offers of compensation and listings on the MLS. But it does appear to carve out that those offers of compensation can be made off in less such as on brokerage on websites. Is that the plan for anywhere as brokerage websites to post those? And then just if so, perhaps as a by-product, what do you see as the future of the MLSs?

So I think it's too early to speculate on either of those questions, unfortunately, Tommy, 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 the actual rules on how these different ecosystems will work are yet to be written. And remember, they are like 700 MLSs. So you've got 700 people writing rules effectively. Like there's no guarantee here that the actual technical rules are going to look the same across the United States. So we're in a little bit of wait and see, both on what we're going to do and what it means for the future of the MLSs. 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, there are MLSs. There are a number of third parties who work with this ecosystem from a data standpoint. And so I think we'll all have a lot more clarity in kind of 6 to 12 months, both on how the ecosystem will evolve, how each of those different players will play in the ecosystem and even how companies will make kind of different choices. So it really is too early. And some of that stuff is supposed to be sorted out over the summer. So I think we'll have 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 clearly have some hypotheses and are kind of doing some game theory about what we do think we want to do. And again, the most important thing is 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 to us.

That makes sense. And then switching gears. In your pro forma illustration on Slide 22, 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 of existing home sales. What's the impact on commission splits that you're using in this analysis to get to the $500 million to $600 million of EBITDA, I guess it would be helpful relative to the 80.2% that you did in 2023.

Yes. There's a modest increase implied as normal with volume increases, but it's not anything material. It's not like 50 or 100 basis points of an increase. It's more of a modest increase.

So transaction volumes increased 30%, commission splits would increase less than 50 basis points. Is that kind of what I'm hearing correctly.

Like I'm not disclosing the exact number used in our pro forma, but yes, it's a modest increase.

And remember those numbers will be different depending on where you're starting, right? You could have the same increase in units, but if you started at $5.5 million to $6.5 million, you'd get some different numbers than if you start in this kind of this record kind of low area with the trends that we've seen, whether it's kind of the stabilization we've seen or even in today's world, this past quarter, one of our brands had commission splits go down again. We've referenced that before. So there's a little less extrapolation on that than maybe you're thinking. But I think Charlotte's got a good grasp on this. And hopefully, this kind of pro forma it gives you a sense of just the financial octane, some of our cost work would give us in a more normal housing market as well as the octane just a more normal housing market would give us.

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

Your next question comes from the line of Ryan McKeveny from

I know commission rates have been discussed a lot, but just one final one on that. I know a lot of factors can move that a little bit here and there. But if we look at just the quarter's results, it looks like a small movement, lower, call it, 1 to 2 bps in franchise and brokerage. I guess, what would you attribute that downtick to?

Yes. Frankly, in our brands business, for example, we were down 2 basis points, frankly, driven by an increase in higher-priced homes. In our owned brokerage business, we were flat. And then remember, last year, ABCR actually increased 2 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 range about what ABCR is dependent on the price of the home with more expensive homes having lower ABCR.

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

Got it. Okay. That makes sense. 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 maybe some thoughts around how things like new franchise sales and renewals are going?

Yes. As far as the health of the franchisees, we're pretty much in a similar place to where we've been over the last, I don't know, sort of 5 to 6 quarters. There's a process that we take when the market gets much softer that we were sort of on top of it on a weekly basis. We're analyzing things. We're talking with our franchisees. We're helping them to make sure that they're making the best decisions to run their business so that they stay in a healthy spot. 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's always some things that one quarter could 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, and that's because we go through a lot of effort to make sure that we're putting our best foot forward to help our franchisees throughout this time.

Yes. I mean I think our bad debt is flat to a year ago and having gone through a tough year and have it be flat, that's a good thing. On franchise sales, we're really excited, and we've talked about this before. 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. And we really saw that effect then. 23 was a solid year for us, but starting in the fall, when we settled our litigation we got a big increase in kind of inbounds and interest. And I think it comes down to the questions that multiple people have asked here, which is 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 hopefully shown some foresight and deliver, like I talked about, things that help drive their profits up, their costs down, their insights up, provide the technology. And so we like the franchise sales fair mounts that we're feeling right now from both the value prop we have but also the kind of flight to, call it, quality in this kind of uncertain future.

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 whether things, I don't know, life events, other reasons for movement are happening 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 listing plans?

A lot of things in that question. Look, my quick answer is I don't think a 4% increase in listings off an incredibly low base means the lock-in effect has loosened. I mean it's like a 2% or 3% increase in home sales. Yes, 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're more excited about was the fact that there is a lot more listings on the luxury side because we have more share and better economics and more success there, the fact that those listings were up like 16% for us, like, wow, that's good. That's taken some share in luxury continuing the trend of Sotheby's International Reality outperforming. But I don't take too much comfort from the relatively small increase in listings vis-a-vis the lock-in effect, especially since a lot of the volume increase is still just price driven across our portfolio and in the industry numbers.

Got it. Yes, makes sense.

Your next question comes from the line of John Campbell from Stephens Inc.

This is Jonathan Bass on for John Campbell. I wanted to quickly touch on TRG's recently announced acquisition of Doma. What kind of potential do you guys see there with Doma, and do you feel like it can improve attach rates over time?

So just for clarity, so TRGC we are a minority player in that. That used to be our underwriter. A couple of years ago, we did a deal with Centerbridge that we really like, where we sold 70% of it took $210 million of cash. And now we own that kind of 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 Opendoor. They brought in now with the Dome Acquisition Lennar's now part of this thing and the valuation has gone up. And so at the end of this call, we still think there's a chance that our stake in this will be worth more than it was when we own the thing. So we are very excited about that, and we're really rooting for them. Look, 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 5 player in the market, expand their presence into 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 the latter half of this year, they got to do all kinds of closing stuff. And like I said, Lennar is 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 seat on this one, per se, but we're obviously very excited for them to be successful, and I hope that helps answer your question.

Yes. And then maybe change gears here, but could you give us the latest business trends for Cartus and maybe how that's changed over the last couple of years?

Yes. 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 prior softness. It's a very sort of cyclical business, too, and it's kind of tied to 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. I think that business tends to come back pretty quickly when the macro comes back. So we'll see when that happens. I think we think for this year, 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 $0.10 because it's really dependent on the budgets that our clients have, and 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. 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.