HOUS - NYSE

Good morning and welcome to the Anywhere Real Estate First Quarter 2025 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.

Thank you, Rebecca. Good morning and welcome to the first quarter 2025 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, 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. References made to April month to date in these remarks are reflect data through April 25, 2025. We have three large, previously disclosed and expected one time free cash flow headwind in 2025, which total approximately $115 million. We have excluded from our free cash flow guidance and for further discussion of these matters, please see our SEC periodic report. 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 29th, 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. There's no one in Real Estate like Anywhere. We have distinct advantages across our iconic brands, luxury leadership, franchise, octane and end-to-end integrated business model. Our strengths are evident when you look at what's happening in the brokerage ecosystem in the first quarter of 2025. We continue to sell more luxury Real Estate than anyone else, gaining share even as others try to catch up to our industry leading position. We generate very strong economics from our high margin franchise business during a time when we saw private capital investing in this attractive market segment. Our integrated business model covers every step of the Real Estate transaction experience from brokerage to title and mortgage, a strategic opportunity clearly resonating with others as you saw by their actions in the quarter. We are transforming our business at scale with the early adoption of emerging technologies like all leading companies. You can see our advantaged position in our Q1 performance. Despite a historically challenging housing market, we continue to demonstrate strong financial performance and strategically invest in the business to propel us for future success faster. We generated $1.2 billion of revenue and effectively break even operating EBITDA. Our 6% volume increase, overwhelmingly organic, substantially outperformed NAR's 3% volume growth in the quarter. Our market share gain in the quarter was driven primarily by our luxury success. Our luxury segment outperformed our portfolio and the market with share gains driven by growth in both units and price. April volumes are relatively flat, softer than Q1 due to market and macroeconomic volatility and luxury continues to outperform in April. We launched Reimagine '25 in Q1 to transform how we operate as a company. Reimagine '25 enables us as early adopters of new technologies to jumpstart a more innovative future and will serve as the foundation of our continued efforts to deliver better experiences for our customers faster and at lower cost. And speaking of cost, we delivered $14 million of cost savings in Q1 and continue to target full year 2025 cost savings of $100 million, reinforcing our commitment to permanently lowering our cost base and enhancing our earnings power. Strategic growth highlights in Q1 include we meaningfully expanded our luxury leadership across Sotheby's International Realty, Corcoran and Caldwell Banker Global Luxury, which are fueled by our unique value propositions and targeted talented agent networks. Our luxury volume was up 16% year-over-year in the quarter with both unit and price growth. Luxury listings increased 12% year-over-year. We sell more luxury homes than anyone across all luxury price points. For example, in Q1 we sold 345 $10 million plus homes, nearly doubling our Q1 2024 results and our best Q1 results since 2022. We sold 35% more $5 million plus homes in Q1 than in Q1 2024. Our Concierge auction business, which earns both a buyer premium and a seller commission, ran successful auctions in New York City and Dubai in the quarter selling high end properties with an average sale price over 4 million. And our Corcoran brand is leveraging its unparalleled expertise in new development to expand within its franchise network. Excitingly, we are initiating our first new development project with a franchisee, an 84-unit development in Nashville slated to launch this spring. Now both our owned brokerage and franchise value propositions are increasingly resonating and paying off in our recruiting results. In Q1, our producing agent recruiting program and advisors delivered 30% year-over-year growth with growth over 100% versus some of our biggest competitors. And in franchise, we welcomed 11 new U.S. franchisees to our high margin franchise network and added a couple of new international franchisees, and we accelerated our aggressive AI agenda, deploying generative AI at scale across many parts of our business to drive better experiences faster and at lower cost. We expect it to increasingly shape our culture, employee training, goal setting and daily operations. We shared with you before AI driven successes in different parts of our company, customer facing applications like listing concierge, product strategy, operational efficiency like brokerage, document processing and employee productivity and since we last spoke, a couple of our newer developments include piloting AI assistance to enhance productivity for both agents and employees, experimenting with using AI to evaluate listing images to ensure the best photos are utilized for marketing the home and piloting the automating production of more complex documents like a first draft of a franchise agreement. And now as we approach the nine month mark since significant industry practice changes, we remain confident in our proactive approach to change and how our agents and franchisees have successfully navigated these shifts and consistently demonstrated their value to consumers. We are leveraging these changes to enhance our end-to-end capabilities. For instance, we are beginning to pilot mortgage and title marketing within the buyer broker agreements we use with customers to increase revenue capture opportunities and be a new avenue for future growth. Now, speaking of industry change, since we last spoke, NAR released a slightly modified Clear Cooperation Policy. The debates about private listings have continued and both Redfin and

Good morning everyone. Anywhere delivered strong Q1 2025 financial results achieving about break even Q1 operating EBITDA, which is our best Q1 since 2022, directly underscoring the power of having a core business that combines leading brands, technology powered agents and the ability to deliver an end-to-end real estate transaction. Because of this solid foundation and our proactive approach, we are actively executing on the offense as we embark on the next phase of our company's transformation. I will now highlight our Q1 2025 financial results. Q1 revenue was $1.2 billion, up 7% versus prior year and operating EBITDA was negative 1 million, an increase of 12 million or 92% versus prior year, primarily due to higher transaction volume and cost savings. We realized $14 million of cost savings and are on target to achieve $100 million of cost savings for 2025, with 85% of our savings already identified. Q1 free cash flow was negative $130 million, a $15 million year-over-year improvement despite the third consecutive year of a challenging market and our slowest seasonal quarter each year. Consistent with our capital allocation priorities, we used our free cash flow to invest for the future. We continue to make selective investments to drive growth, including attracting new agents and franchisees at better margins, expanding our technology platform with new products and services, and streamlining our operations to deliver better experiences faster at lower costs. We will continue to proactively seek opportunities to strengthen our capital structure and I am confident in our position with no springing maturities due before March 2026 and ample liquidity available on our revolver. Now let me go into more detail on our first quarter business segment performance. Our Anywhere Brands business, which includes leads and relocation generated 97 million in operating EBITDA. Operating EBITDA increased 7 million primarily due to increases in transaction volume and lower expenses. Our franchise business expanded margins in the quarter showing improved financial octane with modest changes driven by the market. Our Anywhere Advisors operating EBITDA was negative 47 million, an improvement of 12 million versus prior year driven by higher revenue and lower operating costs. This business generated 21 million in operating EBITDA before the transfer of intercompany royalties and marketing fees paid to our franchise business. Agent Commission splits were 80.4%, which marks 12 consecutive quarters with our agent commission split rate about 80% and this is all despite adding about 650 producing agents in Q1, underscoring our strong agent value proposition. Anywhere Integrated Services Q1 2025 operating EBITDA of negative $18 million was down $3 million from Q1, 2024. Revenue was up $7 million, however, that was offset by higher expenses due to volume, which included unfavorable commercial mix as well as timing of certain expenses and our continued investment in expansion of upward. Our strong core business also allows us the financial freedom to continue to think about the next phase of transformation for Anywhere. Years of financial discipline and proactive planning have strengthened our position today and forced our competitors to play catch up in buying or building the attractive assets we already have. We continue to enhance our operations through Reimagine '25, an ambitious multi-year transformation effort designed to set us up for greater growth and success in the future. This comprehensive program encompasses all aspects of our enterprise and we expect it will significantly contribute to our savings target for 2025. By leveraging technology to reduce manual processes, we aim to enhance our value proposition and unlock growth opportunities. No area of our business is out of scope for this transformation. All of our core businesses and corporate teams are engaged finding new and innovative ways to deliver better experiences faster and at lower cost. Some of our most recent examples include, in title operations we established a national operations center to seamlessly reassign specialists across states to cover surges in demand, showcasing the power of our newly centralized and standardized team without requiring incremental resources. We are piloting a new AI driven process to automate bank statement review and commission allocation, improving efficiency and enabling faster payments to agents and automation of journal entries and other manual accounting tasks has resulted in the reduction of about 35% of previously manual tasks with more to go. Our capital allocation priorities remain investing in the business and reducing debt. We plan to both reduce our gross debt and improve our earnings through the financial momentum we are building now. Using an illustrative 600 million operating EBITDA, our leverage would decrease by 2.9 turns based on EBITDA improvement alone. At 750 million operating EBITDA, leverage would be reduced by 3.8 turns. This brings us much closer to our target three times leverage and we will not stop there as deleveraging remains a top priority for us. Now turning to our 2025 estimates, given what we know today, we still expect operating EBITDA for the full year to be about 350 million, with the biggest swing factor being the housing market itself, which is inherently volatile. Q2 Operating EBITDA should look similar to prior year as we anticipate investments in the business will partially offset our savings delivery in the quarter. We have proven our free cash flow delivery remains strong in both good and bad markets and we anticipate our 2025 free cash flow excluding one-time items to be similar to 2024. Free cash flow like EBITDA is driven by the overall housing market and may also be impacted by additional investments we make to drive growth and advance our technology strategy. I am proud of what we have accomplished in the first quarter and even more excited for the future. We have demonstrated Anywhere’s strength, agility and resilience and I am even more excited for what comes next as our strong results afford us the ability to aggressively plan for tomorrow. We are transforming how we operate, driving new efficiencies. We are going to continue to lead from the front and will seize any opportunity to strengthen our market leading position. Let me now turn the call back to Ryan for some closing remarks.

Thank you Charlotte. Anywhere has proven our ability to deliver results in a tough housing market and through changing industry dynamics, all while propelling our strategic progress forward and delivering better experiences faster and at lower costs. As we accelerate our strategic growth and capitalize on our competitive advantages, we are ready to charge ahead. With that, we will take your questions.

[Operator Instructions] Your first question comes from the line of Anthony Polon with JPMorgan.

Thanks. Good morning.

Good morning.

I guess Ryan, you gave some views on your view on clear cooperation policy. Can you maybe just talk a bit more about how it's being approached just within the system by like your franchisees and your own brokers and also maybe just if we're thinking about it from the vantage point of investors like how to think about that coming back to either benefit or work against investors in the stock.

Yes, so look, I hear loud and clear not only from our own agents and franchisees, but I hear it from other companies agents that the consensus is you want as many people to see a listing as possible to get the best price. You want your buyers to have access to that inventory. And, it's the way people want to do business. They want to do what's best for the customer. Even if you could make a different decision and push for something that might be better for the brokerage. So I hear that out there in the market. And then I see,

Okay, that's really helpful. Thank you. And then just my second question is with regards to commission rates, they were down a little bit year-over-year. But can you maybe comment on what portion of that was maybe from pressure on buy side commissions and just maybe where we are in terms of finding out where that ultimately settles out here?

Yes, we're the one company that does that, shares this data publicly. And they were down, a few basis points, two basis points in one of our businesses and six basis points, in the other. A little bit of the drop was buy side and a little bit of the drop was on the list side. And so we've now had like three quarters in a row here where the -- there really hasn't been that much movement, frankly, less than we had predicted when we did our budget for this year to be honest. The one dynamic you should probably know is there's a little more drop in luxury. So where you actually see it showing up more is a little bit more in the luxury side. Tony, when I say a little bit more, we're talking single digit basis points here, not anything bigger than that. But, I do think there's something about the savvy buyer and seller maybe being a little more sophisticated and maybe negotiating a bit harder. But on the flip side, when you're doing $10 million, $50 million deals or whatever, there's always been a lot of commission negotiation happening there in history. So I'm probably not that surprised by it.

But to that point though, Tony, because we had twice as many 10 million and above listings that has a natural pressure on ABC because those price points tend to have twice as many sales.

Sorry, sales.

Yes, yes. That tends to put pressure on the ABCR, just the mix of the business.

Got it. Appreciate it. Thank you.

Your next question comes from the line of John Campbell with Stevens Incorporated.

Hey guys, good morning.

Hi, John.

Hey, so Ryan, I think you probably anticipated a few of these CCP questions. I'm hoping we can revisit that maybe zoom out a little bit on where you stand. So you obviously got. Just framing it up. You got

That's not right, John.

Okay, go ahead.

I'm for the

Okay, okay, that makes sense. Appreciate you clarifying that. And then maybe if you could share any kind of insights on. I know Corcoran launched the private listing network, kind of what your, what your sense is for trends there. If you're seeing anything different than the rest of the business?

No, I mean, we've got, we've had a private listing network in Corcoran before. It was just kind of. I don't know if relaunched with a different brand name is the right way to think about it. We have one in Sotheby's, we have one in Caldwell Banker. And we sell some listings, privately today. I know the number. I'm not going to disclose it, but it's, it's really is more of a niche thing, especially skewing in the luxury area. And we haven't seen any change in that trend because our agents, they just are usually, they're doing what is best for the customer, what the customers want, and in the vast majority of situations, the best thing to do is to get as many people looking at a listing as you can to get the best price and then also have our buyers be able to see as many listings as possible. So it's great to have the capabilities, it's great to use it in those niche cases that we've done for years and decades, frankly. It's great to have the capability just from a defensive standpoint. But there's not any sort of flood of customers to that approach because again, I think most people realize the best way to get the best price on your house is to have a lot of people looking at it.

Yes, makes a lot of sense. And then, Ryan, I apologize if I missed the details here, but did you provide the exact year-over-year change in April open versus closed volumes?

Yes, it was basically flat. Yes, open and closed volumes, basically flat so far. And that's through April 25th or something on through Friday looks really flat. The market and macro volatility, and I don't mean housing market, I mean the broader economy. There's clearly been a lot of volatility in April. That's the biggest thing I'm hearing from agents is what's affecting April versus Q1. So it's flat so far through the month. There may be a little headwind with where Easter fell this year versus last year in the April numbers, but mostly the overall market of macro volatility is what our agents are saying has it more flat in our data at least?

Yes, makes sense. And I mean, we've heard that's better than what we've heard from maybe some other market proxies. That sounds good on your end. I don't know if you have the granularity of this and it might not matter too much. But you mentioned volatility. We heard that a lot as well obviously rates moved a lot throughout April. Any sense for how the transaction trends move kind of week to week? Maybe what that exit rate was last week?

Not really. I mean, it moves around. But some of that is just bluntly kind of like how our reporting kind of works as we grab data for franchisees, some people report in one day, some people, it takes a few extra days sometimes. So not really anything week to week that we've seen. I just think kind of flat's a good number for the month. And it wasn't like March was flat. March was pretty consistent with the quarter, but definitely there was a lot of macro change here in our economy in April and I think you can see it kind of, getting us to kind of the flat year-over-year in opens and closed in the month so far.

Excellent. Thanks, Ryan.

Thank you, John.

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

Hey, good morning, guys.

Good morning, Tom.

Yes, a question on the integrated services or title segment. So the bottom line trends there underperformed the improvements seen in the brands and the advisor segments, and I think you called out some investments in that segment. Can you maybe quantify what that investment drag is and then when we will potentially see that conclude?

Yes, so on the investment side, it's a couple of different things. So we're making investments in the agents, the recruit, agents. And you saw our results there. Right. So we had about 650 producing agents recruited, but I think Ryan also mentioned that the GCI attributed to those was like 30% up. So they're very solidly producing agents and so there's a little bit of a. influx there. I think some of the other increases are around our technology investment because we are investing in the short term to deliver some of the efficiencies from our Reimagine '25 program and so the savings are actually more heavily weighted to the back half of the year, and so you'll see that come through. The other thing is upward, so it has a drag in title because until we have critical mass in that business, it's still in the build phase and a lot of these businesses take a year, two years, whatever to get to full critical mass. So that's another piece of some of the investments. But I think what you're going to see in the back half of the year across our businesses is that the savings are going to step up in a material way and then the longer some of these upward title ventures are on the books, they're starting to become much more productive. So this was always going to be the case. These things are pretty much on or ahead of our plans. So I feel good about it and I feel good that we also have 85% of our savings identified.

Got it. And can you just remind us sort of what success looks like in that, that upward title investments, whether it comes through in something quantifiable like attach rates on title or anything else that you guys can point to for metric wise?

Well, I mean look, each of them is their own company and remember it is us and a group of franchisees. So the core metric of success is just the bottom line results that come out of it. But it's got the strategic halo of being helpful to franchisees, open up a new profit pool that they never had access to before because they weren't big enough to have their own title company. And then it's got that also halo of, recruiting new franchisees with that as part of the value proposition and then again hopefully tightening the relationship with the franchisee that will again hopefully help us at renewal. So it's a pure, let's grow our bottom line kind of approach but with those kind of strategic franchise halos that complements a pretty, pretty attractive franchise business already.

And some of these individual units are already profitable individually. It's just that as we launch more there's startup costs, etcetera.

All makes sense. Thank you.

[Operator Instructions] Your next question comes from the line of Matthew Bouley with Barclays.

Morning everyone. Thanks for taking the questions. So maybe sticking on the listings exclusivity topic, just getting back to that questions on kind of the specific drawbacks that you guys see to I guess a more robust exclusive platform. You implied that the exclusive listings, I guess in a vacuum would benefit the big scaled brokerage financially. But I guess do you have any math around the benefit of broad public distribution or is it more really taking your own agent and home buyer seller feedback and I guess if you can extend that, how does that your position on this impact recruiting of agents today. Thank you.

So, two things. So first look, I mean, you can look at there are what I would consider some credible third party studies Bright MLS has done, I believe, two now that just show that broad distributional listings means homes sell for more than homes that are marketed privately. We've done our own analysis on that. Everybody's done, other people have done analysis on it. Almost everybody comes to the same conclusion, which is broad distributional listing means a higher price for the home. So that's the reason right there. Right. And what's best for the customer kind of thing. So we really start with that. And then the feedback from our agents, of course is important. But, like I said, some of our recent recruiting success, which is frankly was a lot better than it was a year ago as I gave you the stats on especially versus some of our bigger competitors is partly because agents like kind of the approach we're taking to listings. And so, again, while there's a role for exclusives and select cases and we sell a bunch of that stuff just because of our luxury presence, I don't, I don't think this is that hard of a, of a thing to think through. Right. I mean, the more listings I can do exclusively, my brokerage makes more money, but that may not be the best thing for the customer. And I think if you don't do the best thing for the customer in the long-term, businesses get into real trouble that way, as do industries. So that's why we believe what we believe and the way we're going to push it and we think it'll pay off in not just again, selling homes for higher prices for customers, but, recruiting agents who want to do business that way.

Yes, let's be clear. We do believe this is a better financial decision too. It is for the customer. But like to Ryan's point, the long-term for the agent recruiting and the stickiness of our agent base and selling homes at higher prices, we do believe that's a better financial outcome for us as well.

Got it. Okay. Yes, thank you both for that. And obviously there was going to be a lot of discussion on this topic today, so thank you for that. Second one, I'll shift to a different gear, the balance sheet. I guess just first, any thoughts here? As we said in April, how you're thinking about addressing the 2026 maturity and then just any further kind of step back and broader color around the MA environment as you guys spoke about last quarter, maybe looking across brokerages in real estate, prop tech and all that. Thank you.

Yes, sure. So we've spoken at credit conferences, we've spoken externally lots of different ways. We do plan to refinance the 20, the convertible notes. You can always assume that we're ready to go at any time. It's really a market thing. Obviously, the market volatility is not helping anybody in any industry right now. We are encouraged that, there's a lot of activity starting back up again in the investment grade side. So we're watching it very closely, but trying to refinance at the most volatile period is probably not the best course of action. So we're seeing glimmers of hope as things start to crack open a little bit. We will be ready to go. We will refinance them at some point. And we have options. We have options whether it's in the syndicated deal or on the private side. And as always, we'll be opportunistic to try to strike at the right time. But you can assume that we're going to be ready whenever that time presents itself.

Yes and on the M&A front. On the M&A front look, first off, we're open for business there and we're always looking at some things there and I do still think that industry consolidation is inevitable. Frankly, this whole industry could use more streamlining with all the margin pressure, scale helps, etcetera. But it's been really funny if you think about it. If you go to the start of this year, we're four months into the year there's been very, very, very little actual activity. And the biggest deals have all come out of the mortgage sector. And it's, and I find it interesting that the biggest deals have been around building that end to end capabilities, something we've been working on for a while and always think is critical. It's really hard whether you're us or some of the people who just invested to try to do more of that. But it's a real opportunity and we find it interesting to see that's where the M&A is. The other thing we saw in the quarter was we saw private capital actually invest in one of our franchise competitors, which I think is at least a positive signal about the opportunities and that kind of pretty high margin, pretty interesting business, albeit one that's been subject to all the changes our industries had going on. But we like that, especially given how our franchise network economics benchmark against other public franchise economic players. And then finally look, we're still seeing more firms looking to sell across brokerage, title, mortgage and proptech, but there's still a pretty big gap between the bid and the ask. And that's partly why I think there's just been fewer deals so far this year. We have helped our franchisees close some M&A deals in the first quarter, but there's some real opportunity. We're looking at it, spending more time on it as a leadership team, but bridging the bid ask is a bit of a challenge and but it's a great place to put our effort and we think there should be some opportunities there down the road.

Well, great, thanks guys. Appreciate the thoughts.

All right, thank you.

Your next question comes from the line of Nick McAndrew with

Hey guys, thanks for taking my question. Just one for you, Ryan. I'm curious. Obviously pretty strong ASP gains year-over-year and maybe just high level given all the macro volatility with the market sell off throughout April and maybe potential recession fears. Just anything to call out that you're noticing so far in April, specifically in a luxury price point in terms of either homes sitting longer in terms of days on market or maybe the behavior of that high price point seller if you're starting to see any more price reductions from a seller standpoint. Just kind of thoughts overall, just given that that sell off things

Yes, great question. Look, April, like I said, it's got a lot of kind of U.S. markets and macro volatility kind of thing and it's kind of led to, in our book, kind of flat opens and close. But just to rattle off some stuff, we haven't seen days on market change in our own portfolio, it's basically flat. We haven't seen cancellations change in April. That's something that's got a little bit of press write ups about of deals being canceled. But our cancellation rate hasn't really changed in April compared to Q1 or previous years. We're not seeing much there. And then we are still seeing price growth in April, across all segments, including, the ones that you asked about. But this trend of just not having enough homes and units being down and price being up, has continued in April both on our opened and our closed volumes. So the underlying trends around price versus units, around days on market or on cancellations haven't really changed. But there has been an overall just kind of drop in the level here, down to kind of flat year-over-year is what we've seen in April so far. But it is pretty volatile out there, so we're kind of watching it closely and not extrapolating too far from these things. But that is what we're, what we're seeing. And luxury continues to do well. I mean, like I said, our luxury listings in Q1 were up 12% year-over-year. That's much better than the rest of our portfolio. Probably some more share gain in that in the future, we're hoping. And luxury outperformed in April. I mean, luxury is not flat in April. Luxury is up in April in volume so far. So that's what we're seeing in terms of some of those more nuanced trends there, Nick.

Awesome. Yes, that all makes sense. Thank you guys.

Thank you, Nick.

Ladies and gentlemen, at this time, there are no further questions.

Thank you. Have a good rest of your day.