Alicia Swift - SVP, Investor Relations Richard Smith - Chairman, President and CEO Anthony Hull - CFO, Treasurer and EVP.

Will Randow - Citigroup Brandon Dobell - William Blair David Ridley-Lane - Bank of America Mike Dahl - Credit Suisse Ryan McKeveny - Zelman & Associates Stephen Kim - Barclays Tony Paolone - JPMorgan John Campbell - Stephens Incorporated Jason Deleeuw - Piper Jaffray Jason Weaver - Sterne, Agee.

Good morning, and welcome to the Realogy Holdings Corporation Second quarter 2015 Earnings Conference Call via webcast. Today’s call is being recorded, and a hand written transcription will be made available in the investor information section of the company’s website later today.

A webcast replay will also be made available on the company’s website until August 14. At this time, I would like to turn the conference over to Realogy’s Senior Vice President, Alicia Swift. Please go ahead, Alicia..

Thank you, Sean. Good morning, and welcome to Realogy’s second quarter 2015 earnings conference call. On the call with me today are Realogy’s Chairman, CEO and President, Richard Smith and Chief Financial Officer, Tony Hull.

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

Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. Actual results may differ materially from those expressed or implied in the forward-looking statements.

For those who listen to the rebroadcast of this presentation, we remind you that the remarks are made herein as of today, July 31 and have not been updated subsequent to the initial earnings call.

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

Also certain non-GAAP financial measures will be discussed on this call, and per SEC rule important information regarding these non-GAAP financial measures are included in our earnings release - press release. Now, I will turn the call over to our Chairman CEO and President, Richard Smith..

Thank you, Alicia, and good morning, everyone. And thank you for joining our call. Let me begin my comments by stating that our overall observation is that the housing recovery continues to gain strength.

The National Association of Realtors, which I’ll refer to as NAR report on existing homesales for June, points to the highest pace of sales in more than eight years. While inventory levels have essentially remained flat year-over-year, demand continues to outstrip supply.

According in ours latest release properties typically stayed on the market for 34 days in June, the shortest time since NAR began this metric in 2011.

And a change that we believe is necessary for a more robust housing recovery, first time buyers represented 31% of our existing wholesale transactions during the second quarter of 2015, which is up 3 percentage points from the same period last year.

Mortgage rates continue to be appealing, mortgage credit is more available today than in recent years and housing affordability continues to be attractive. And improving job market and the positive trends in the household formation, all bode well for the continuation of the housing recovery.

Our second quarter results reflect the improved market conditions, on the strength of our model, our business units have performed well, against both our short-term and long-term goals and objectives. And the free cash flow characteristics of our business model continued to deliver, generating $273 million free cash flow for the quarter.

Operationally and financially, this was a strong quarter.

Our second quarter results continued the momentum from the first quarter, looking at our segment results, as you can see on slide four, the Realogy Franchise Group which I referred to is RFG, posted a sales volume increase of 10% in the second quarter, which was comprised of a 5% increase in transaction sides and a 5% increase in average sales price year-over-year.

For NRT, our company owned brokerage segment sales volume was up 9% with the sales - the size increase of 13% and slightly offset by a 4% decrease in average sales price.

The increase in NRT’s transaction size was bolstered by the strategic addition of the Coldwell Banker United and the ZipRealty brokerage operations which have lower average sales prices. NRT’s average sales price would have been flat, excluding these acquisitions.

In terms of regional color, RFG experienced a strong sales volume gains in the West and Midwest with increases of 20% and 10% respectively. The other two regions also showed volume gains, although in the low to mid-single-digits. Now let me discuss some operational highlights from the quarter.

Turning to slide five, the ZipRealty technology development and rollout plan is proceeding as scheduled and we’re very pleased with our progress thus far.

We have a substantial backlog of franchisees who have already registered to receive the proprietary technology we call Zap, which you will recall as a single integrated end-to-end technology platform. The rollout is on schedule and at the minimum we will have about 300 franchisees operational by year-end.

As to our franchise sales growth, RFG added new franchise and sales production to its five residential brands representing $85 million in franchisee gross commission income, which we refer to as GCI during the second quarter and continues to manage a strong pipeline of prospective new franchisees.

To the first half of 2015, RFG has achieved new franchise sales and sales production representing about $155 million in franchisee GCI. As to our existing franchise base, our broker retention rate exceeds by 98%.

As a result of this recruiting efforts and acquisitions over the prior 12 months, NRT ended the second quarter with 46,700 sales associates compared to 43,000 at June 30, 2014. And as retention rate of its top two quartiles sales associates remained above 90%.

On July 1, Title Resource Group, TRG, completed the previously announced acquisition of Independence Title, which was the largest independent title agency in Texas. This positions TRG to capitalize on NRT’s acquisition of Coldwell Banker United brokerage operation in April.

Independence Title has 55 locations and about 350 employees throughout the state of Texas. TRG now has over 100 office locations across the state. And that’s including its existing Texas American Title Company Operations.

Cartus, our employee relocation company that serves half of the Fortune 100, recently added two new companies from that list, highlighted by Caterpillar along with a Fortune 50 company in the technology sector. In the first half of 2015, Cartus signed total of 48 new companies to its global client roster.

As our press release indicates, we are providing adjusted EBITDA guidance for the full year at the close of the second quarter as opposed to the end of the third quarter as in previous years.

Based on guidance, we anticipate that we will end the year with a cash and cash equivalents balance of approximately $650 million and our net debt to adjusted EBITDA ratio will be at or below four times. In summary, the key housing indicators are supportive of widely held view of an improving, healthy, and sustainable housing market.

In concert with the positive macro environment, we’re pleased with the progress we’ve made on our strategic objective year-to-date. ZipRealty strategy is well underway and the strong demand from our franchisees reinforces our decision to bring Zip into the company more than a year ago.

In addition our acquisition strategy continues to perform as expected and our organic growth initiatives continue to create long-term value. Our business model is producing substantial free cash flow, which we believe given our capital allocation discipline will permit us to drive long-term growth and value in our business.

The focus on which is to de-lever the balance sheet and create shareholder value. With that, I’ll turn this over to Tony Hull, our CFO for discussion our financial results.

Tony?.

Thanks. Richard. Before getting into more detailed discussion of the quarter, I’d like to highlight several key areas of Realogy’s Q2 performance on slide six. Revenue increased 9%, driven by transaction volume gains of 10%, adjusted EBITDA was $282 million, an increase of 5% compared to the second quarter of 2014.

Net income was $97 million compared to $68 million in the prior year quarter an increase of 43% and we generated $273 million of free cash flow up $75 million in the same period last year, which equates to $1.86 per share in the second quarter.

As the second quarter adjusted EBITDA, it’s increase of 5% trial the revenue increase in the quarter, mainly due to performance incentive accruals which were $20 million higher in Q2, 2015 than Q2, 2014.

This is the result of the achievement of higher performance levels in the current year, as well as a reversal in reduction of certain bonus accruals in the second quarter of last year. As headwind was the most prominent, it will be for the year in the second quarter and will be substantially reduced in the third quarters and fourth quarters.

Another item worth mentioning is that, we settled some outstanding litigation during the quarter, subject to court approval, which totaled approximately $5 million. These charges are reflected as a corporate expense and settling with the litigation, we avoided future litigation costs. We would have had and incurred in defending our position.

Now let’s take a few minutes to drill down into a little more detail on the second quarter results. First I will discuss our key revenue drivers for in the second quarter, which you will see on slide seven. Average broker commission rate ABCR decreased 1 basis point at both RFG and NRT.

Commission splits at NRT improve improved 10 basis points to 68.6% and RFG’s net effective of royalty rate increased 2 basis points to 4.48% in the second quarter of 2015 versus 2015 versus 2014. For the full year, we continue to expect commission splits in net effective royalty rates to be approximately flat to 2014 levels.

RFG homesales side increased 5% year-over-year and average homesale price increased 5%. NRT homesale size increased 13% compared to the second quarter of 2014 and average homesale price decreased 4%.

As we discussed last quarter, the acquisitions of ZipRealty and Coldwell Banker United were expected of the certain impacts on the comparability of NRT and RFG to the prior year as shown on slide eight.

In the middle portion of the slide, you can see that NRT’s transaction sites increased 13% besides gains from Zip and CB United more than doubled NRT’s organic gains. You’ll recall that we shared our expectations that NRT’s average sales price would decrease and in fact that occurred.

The average sales price for the acquired transactions in the second quarter was approximately $279,000, well below NRT’s core average sales price of over $500,000. The addition of those entities to NRT’s overall mix have the expected impact on the average sales price.

Excluding, the impact of these two acquisitions, NRT’s transaction sites increase was 4%. Many of NRT’s high-end markets or sites declines are flattening versus last year because of inventory constraints, specifically in New York City, sites were down 8%, New England was down 4%, Florida was down 2% and California was flat.

Conversely, the lower price Midwest region had transaction sites gains of 8%. NRT’s average sales price was flat year-over-year because of this geographic shift and the mix of business and tough comparables against Q2 2014, when NRT’s higher price markets were performing quite well.

In fact, NRT’s average sales price reached about $512,000 in that period, which was the highest quarterly average sales price since 2007. Given that tough comparison, NRT’s average sales remaining flat year-over-year on the same-store basis as a noteworthy accomplishment in itself.

As to RFG shown on the top portion of slide eight, the shift sides to NRT from its acquisition of the CB United franchisee reduced RFG sides increased from 7% to 5%, but modestly increased its the average sales price.

As to comparisons to NAR recall that its data based on national surveys and has often been restated, whereas our aggregated data is based on a combination of RFG, which is national in nature and NRT, which is heavily concentrated in certain markets with average sales prices that are twice the national average.

As a result, it is relevant to compare RFG’s results to those reported by NAR, rather than our combined result results. For the second quarter and for the next several periods, RFG comparisons to NAR complicated - further complicated by the switch of CB United from RFG’s drivers to NRTs.

On an apples-to-apples basis, with those sides restored, RFG’s pro-forma transaction sides increased 7% compared to NAR at 8% and RFG average sales price increases in the quarter came in at 6%, a point higher than what NAR reported. Overall RFGs pro-forma transaction volume increase of 13% was at the same pace as NAR’s in the quarter.

Now let’s look at revenue and EBITDA at the business unit level for the second quarter of 2015 compared to the prior year period as shown on slide nine. RFG revenue increased 9% as third-party domestic franchise volume increases of 10% were modestly offset by lower international revenue.

RFG’s EBITDA increase of 7% was below its growth - the revenue growth as higher revenue was partially offset by $6 million of incremental employee costs including an increase in performance in semi-accruals and staffing costs related to Zap platform rollout.

NRT revenue increased 9% versus Q2, 2014 due to NRT transaction volume increases of that amount in the period.

NRT EBITDA increase of 7% trail its revenue increase as higher gross profit and $2 million increase in PHH home loans joint venture earnings were partially offset by a $13 million increase in acquisition related costs and $8 million of incremental performance incentive accruals.

Cartus EBITDA increased $3 million due to an increase in referrals, as well as positive impacts of foreign exchange rates on expenses. Finally TRG EBITDA increased $3 million primarily due to higher purchase and refi volume.

Corporate expense decreased $6 million year-over-year, but recall that the 2014 quarter included $17 million of early extinguishment of debt charges, excluding those corporate expense increased $11 million compared to the prior year due to $6 million, $6 million litigation acquisition related expenses, $2 million of ZipRealty corporate expenses and $4 million of increased performance incentive plan accruals at the corporate level.

Slide 10 provides cash flow guidance for 2015, which is similar to what has been provided in the past. But to point out a few highlights, we continue to expect corporate cash interests, expense to be approximately $210 million for the year. Year-to-date it was $105 million compared to $123 million in the year earlier period.

Capital expenditures remain projected at about $85 million for the year. Looking at our expectations for the third quarter of 2015, on slide 11, we forecast our homesale transaction volume will increase in the range of 7% to 10%, with 5% to 7%, coming from homesale side’s growth, and 2% to 3% on average sales price growth.

We expect NRT sides and price will move in a similar manner to what we saw in Q2. Slide 12, depicts transaction volume forecast and five industry forecasters for full year 2015. We saw a pretty sizable increase in a number of full year forecasts in July.

NAR remains the highest with projected transaction volume growth of 14%, whereas the other forecasters are looking for existing homesale gains of between 6% and 12%. The average of the five forecasts has increased three percentage points to 10% compared to 7% at the time of our last call.

Turning to slide 13, we currently expect our full year 2015 volume growth to be in the range of 8% to 11% range, although, we have very limited visibility into the fourth quarter at present.

As shown on slide 13, with these and anticipated transaction volumes, we forecast Reology’s adjusted EBITDA will be between $810 million to $840 million for the full year 2015 and expect our adjusted EBITDA margins will be between 14.1% and 14.3%.

Our net debt to adjusted EBITDA ratio was 4.4 times at June 30, 2015, given our high cash flow conversion, we expect this ratio will be approximately four times at the end of the year.

To summarize with the continuing strength of the housing market and constant with our anticipated strong cash generation, we expect to continue deleveraging the balance sheet, while simultaneously making strategic investments in the business. With that, I’ll turn it over to the operator, who will open this call for Q&A..

[Operator Instructions] Your first question comes from the line of Will Randow from Citigroup. Your line is open..

Hey good morning guys and thanks for taking my questions..

Good morning..

I guess, in terms of the NAR data, I mean, we saw a transaction volume up about 14% in the second quarter. In addition some of the forward looking data, in terms of contracts, as well as closings, we’re seeing closings up 15% in terms of transaction volume. In July, net cadence hasn’t slowed in contracts.

So what are you seeing differently versus over the national indicators we’re seeing?.

The NAR data is based on surveys, and we’ve seen this pattern before where they put - trying to get win a recovery year like if you look back in 2012, they - there are, we sort of lagged them.

If you look at 2012, it’s sort of lagged them for the first half of the year, and then we ended the year actually exceeding their volume, when they came out with actual numbers.

So it’s really just a difference, it’s just their methodology, which is based on surveys versus ours, which is based on surveys for the historical and then a black box for the forecast versus ours, which is sort of based on our actual results for the first half of the year.

And our forecasts is based on what we’re seeing with our opens in July and our closes in July. And so, it’s really just a question of where we’re well in within the range of the average of forecasts for the year..

Got it. And I guess, we also look at transaction data and so on, [indiscernible] there is a U.S. though. And so those numbers are just mentioned that’s what we’re seeing. In addition, when you think about the fact in terms of splits in average brokerage commission.

How do you feel about those going forward?.

Well, splits, we said - we expect splits to be flat to last year, for the full year and ABCR as price increases as we’ve said many times, we expect there is to be some pressure on ABCR and that’s what we’re - we’re seeing.

We were lucky that you know during the sort of 2011 through 2014 period, ABCR sort of stayed pretty constant, even our prices were going up, but at this point that’s catching up to us a little bit. So there is some pressure on ABCR, but it vary, obviously it’s 1-basis-point. So, it’s a very modest decline..

Well, this is Richard, it’s very competitive, and the management works very hard to manage that in all the markets in which we operate in, and as you know that - it’s only relevant to NRT. It’s - our franchises deal with that on their own.

So, you know it’s very competitive, no more than it has been in the prior periods and if we can manage to the single basis point swing one way or the other, that’s - that’s a good outcome..

All right, thanks guys and good luck on the next quarter..

Thank you..

Your next question comes from the line of Brandon Dobell from William Blair. Your line is open..

Thanks, good morning guys..

Good morning..

If you look at the July opens and I guess closes.

How does the - the behavior or trend with first-time buyers look relative to how the second quarter came in, so that - that specific kind of that transaction?.

We don’t, you know at this point we don’t have that kind of data.

We don’t have that kind of stratification until we have a full quarters data, but you know the trend this year is clearly you know which I think you know we all think is very important for our sustainable, you know sustainable recovery in housing market is that the first-time buyer is coming back and they certainly you know in the 2012 to 2014 period, there - there were not big dips in the recovery, but the fact there, you know strengthening is part of the recovery this year is very important and critical for a good, you know a good housing market recovery over the next several years..

Yes, if you look at the public comments made by lot of the builders, most [indiscernible] and few others, I will speak to the growing strength of the first time buyer in their product mix.

Right now, they tend to be pretty bullish on that and as we have said over a number of quarters for the recovery to continue to gain momentum and strengthen, you need a first time buyer more relevant and they are slowly becoming more relevant as we predicted then.

It’s nice to see that public builders speak favorably about the, the rise in increase in the first time buyer. So, it’s necessary part of the recovery and we’re happy to see it..

Is there a point - you can talk about 31% of buyers at first time, is there a point where that percentage becomes a noticeable tailwind to the key metric that you guys would think about, they should be influencing, is it 35%, is it 40%, we need to get back to where we were pre-crisis to that metric to really make a difference for the P&L?.

I think we hope that eventually gets to somewhere around 40%, others think it’s higher as we speak. But I think the NAR report is probably more relevant so, 31% we will pick up a few points here and there and I think we’ll eventually get to about 40% of the market will be first time buyer, which I think is about a normal market.

But the bottom line Brandon, again as I said earlier, the higher percentage first time buyers, it’s much more normal housing market and it speaks to a much more sustainable housing recovery and one that’s going to go for a lot longer than once in the past..

Yeah. The one thing we call out is that as you I am sure recognize the growing importance of the first time buyer, that’s going to be at a lower price point. So across the market - across the board in all markets, they tend to have much lower average sales price than the midmarket..

Right. And then final one for me.

It doesn’t sound like you changed any of your spending expectations around technology at the back half of year versus where you started out thinking they would be at the outset of the year, but just want to make sure, we’re all on the same page with the dollars that you guys think are going out the door to support the Zip rollout and other technology initiatives in the back half? Thanks..

Yeah. We are right on where we had forecasted. Zip between the Corporate and RFG as we got $16 million - $16 million for the year, which is about $12 million increment versus last year..

Okay. Thanks, guys..

Your next question comes from the line of David Ridley-Lane from Bank of America. Your line is open..

Sure. Richard, you alluded to increase in mortgage availability, could you provide some details on what you are seeing in the market..

[indiscernible] I didn’t understand..

Mortgage availability?.

Yeah. No, it’s - I think as the mortgage index that indicates its improved a couple of point. So it’s not that it’s easy, but it’s a bit more available than it has been in the recent past. So we’re seeing, the standard is still tough but manageable.

So we’re seeing a bit improvement, I think, the balance of the industry seeing the same thing, I mean NAR has come and done this as well, mortgage credit is more available than it has been in the recent past.

So we’re encouraged by this, not because of regulation of changes just because lenders have gotten more comfortable with their underwriting standards..

Got it. And then, the net effective royalty rate in RFG continues to be up a bit.

Is this sort of the trends between the smaller franchisees, maybe playing catch up versus the larger franchisees or there are other factors in play that are helping that?.

Not yet, I mean, I think that will become more relevant, when we get to sort of 5 million, 6 million, 5 million home units nationally. But what we’re seeing now is the impact of us raising a threshold to get rebates, which we’ve done over the last two years. So I think that’s - you’re seeing the benefit of that..

Got it. And then, just a quick numbers question.

What’s the rough benefit to the TRG’s segment from the independent title accession in Texas?.

It’s about a $10 million annual EBITDA run rate..

Thanks very much..

Yeah, you’re welcome..

Your next question comes from the line of Mike Dahl from Credit Suisse. Your line is open..

Hi. Thanks for taking my questions.

Tony, I just wanted to go to the guidance for a second, and you made the comment that within the transaction guide, you expect NRT size and price to move similarly to 2Q, was that mean to be - so should we expect rate in at up 13, down 4 type of range or was that relative to like the 2X the rate of RFG that we were seeing in 2Q, if you could just break those out?.

Those [indiscernible]. So it’s going to be, size is up in the teams and priced down a couple of percentage points..

Okay, got it. And then on the - on the split rates, obviously there is a lot of mix shifts going on in NRT right now. And so you’ve managed the business to be about flat year-on-year, I believe you’ve guided to.

Just wanted a sense of what the benefit from mixes that you’re seeing, just given some of the softer trends in the high price, high split markets plus some of the acquisitions that are layering on? I guess, just a sense of what’s kind of same-store versus mix?.

Well, it’s - I think it’s more of mix towards the Zip transactions and those are much more attractive splits and all the activities we are pursuing in terms of getting more transactions to be e-leads, we’ve talked about Investor Day e-lead transactions.

So I think those two things are having the portfolio shift effect that we - that we anticipated, but that’s just to be very clear it’s competitive about their, especially the high end markets’ regions. So I think that we’re managing at really well I think, and our energy is doing a great job of managers to be flat.

I think again just to the point earlier, I think at some point you’re going to see again when we get to a 5.5 million units, 5.6 million units. You’re going to see some of the third quarter and fourth quartile agents to do the more business and that should further take pressure off splits.

So that’s - so short-term we are managing with the portfolio of shift to the lower split transactions and over time, I think we’ll get to just a shift in who’s doing the business.

Right now, 90% of the business being done that by the top two core total agents, that should float down to 85%, 86%, 87% over time and that will further takes pressure of the splits. But that’s going to be a longer term, but between the two we have a stable outlook here for a pretty good runway..

Sure, that makes sense. And one last clarification, just on the guidance, you mentioned to the last question at the TRG acquisition was a $10 million run rate.

Is that full $10 million included in the $8.10 to $8.40 guide?.

No. It will be less than that. It will be less than that..

For this year..

For this year..

For this year? Even though there is - there is typically the pro forma adjustment made..

Right, but a lot of the - not a lot, but a portion of the $10 million is going to come from synergies and that’s not included in that pro forma adjustment..

Okay. Got it. Thank you..

Your next question comes from the line of Ryan McKeveny from Zelman & Associates. Your line is open..

Hi. Thanks and good morning.

First question on the acquisition pipeline for NRT, maybe you could just update us on what you’re currently seeing from a competitive standpoint? And for this year, given the Coldwell Banker United, Realtors acquisition, how would you think about other acquisitions this year and then next year just comparing acquisitions versus other potential cash uses?.

This is Richard, from a competitive standpoint, the usual competitors are showing up although rarely. So we don’t find a lot of competition for the traditional acquisition model. And the fear that we do see - we find the target less interesting for a variety of different reasons.

As you recall, we make every effort to acquire companies in the markets in which we exist, so that we capitalize on the synergies that are realized in those acquisitions.

The Coldwell Banker United was a departure from that, because we want to grow into a market that we see as a very strong housing - growing housing market and thus the Texas market, Southeast and the Southwest, and that has proven to be exactly what we thought it was going to be the opportunity to add tag along acquisitions in those markets.

So it’s a robust pipeline. We’re very disciplined in our approach. We never overpay for any of these and we’re pretty encouraged by what we see on the horizon, so it’s the market we expected it to be..

Great. Thanks.

And with the United realtors, I think he had discussed before, but it seems like that maybe more of a one-off or it just turned out to be the right deal, but there is no meaningful strategy shift to really take franchises back into the NRT segment, correct?.

No, no. We intend to grow both simultaneously. We only buy a franchisee out of necessity and in this particular case, the only way we could substantially enter that market was through the acquisition of what the seventh largest brokerage firm in the United States.

So if we hadn’t acquired him, we couldn’t have gone into that market under the Coldwell Banker name, so it was a necessary acquisition, but is the exception..

Great.

Thanks and so just last one on PHAH and we’ve heard lately the CFPB has been pressuring some lenders to stop marketing service agreements with some realtors as part of their interpretation of RESPA, is there any impact or potential impact on you guys from either appropriate standpoint or the mortgage joint venture with PHH?.

No..

Nothing - sorry, nothing significant..

No, nothing on the mortgage JV..

The JV is RESPA compliant and its permitted under RESPA, it’s not on an MSA. So that - that continues fine and the MSA numbers are very minor..

Okay. Perfect, thanks..

You’re welcome..

Stephen Kim Your next question comes from the line of Stephen Kim with Barclays. Your line is open..

Thanks very much, guys. Yeah, I guess the first thing I would say is thanks very much for the adjustments, the acquisition adjustments that was very helpful, also if you could make those available for, let’s say 1Q, 4Q and 3Q last year, that would be also I think very useful for us as we model going forward so, just a comment.

I guess the first question I have is about your overall market share because the adjustments that you talked about, really don’t change or affect or influence. One of the metrics we look at, which is your total company combined share of size.

And if we look at that metric, what we see is that it generally drops pretty significantly in the second quarter which can be a distortion and can make this quarter look very bad, but even if you look back going to 2010 there is a downward trend, just generally in that series.

And which would suggest that you’re basically, slowly losing market share, relative to NARs existing homesales data days.

So my first question is have you observed such a trend, do think that - and if you could provide any color around, why you may think that, that is happening?.

Well, actually I - first of all we get paid on total volume and actually we’ve beaten NAR last year by 4 percentage points on total volume and I think if I recall for Investor Day, we beat - since 2010 we’ve beaten NAR by 30 percentage points in that period..

So I think we’re - [indiscernible].

First price, right coming that size....

Well that’s what we get paid on..

Right..

So I don’t so to long-term we’re doing just fine. And I think, in the second quarter, again you’ll have to wait a year, to see what NAR does with its 2015 numbers and to judge, how we did. But again, if you compare RFG volume to NAR’s volume in the second quarter, we were exactly the same as them.

And again, if you go back to 2012, is a good example, you can see that we trailed NAR in the first half and then we beat them for the full year. And the same thing happened in 2013, in the third quarter when we had that big rush, because mortgage rates went up. We were below the NAR reported number, but by the end of the year we’ve outperformed NAR.

So we’re just doing - I think we’re holding our own improving our franchise sales and M&As. So I think we are in good shape or we’re beating NAR by point or two every year over the long-term. And that’s - that’s what our goal is to do..

Steven, another point, as you do your modeling. The builders are gaining share with their products is builders are, new construction is growing for very low [indiscernible] growing. So that’s one observation you may want to pay attention to.

And the second would be, we’ve never - we never ever positioned this company as a market share story because the business models are so diverse. We have no interests whatsoever and being concerned with the business models that are paying a 100% commission to agents, that’s not our business.

So that, you got we’ve always been based on profitability always, and we made that clear in every single meeting with every single investor that’s the purpose at the end of the day. So, the real measure of our success is - are we generating the cash flow that we predicted we’re going to generate..

Great and I really appreciate that. That’s helpful. I guess that the second question I had relates to Zip. And some of the things you guys are doing there, which seems very exciting.

I know that the hope longer term is that the - the work you’re doing on that side of the business is going to be a benefit to both, the company overall as well as individual agents and so forth.

One of the metrics is of course the street is going to be looking at is the splits, right and so I was curious if you could give us just some range, not a range, but sort of an idea of if the zip platform ultimately proves to be a very successful and it really gains momentum.

The impact that we might see from that on your, splits could it be as big as a percentage point or two or is it likely to be much more incremental than that?.

Well, I just want to breakdown your question into two pieces, the first is we’re seeing the impacts on splits at R&T from zip, I mean zip is doing - the zip brokerage operation is performing extremely well.

It’s ahead of where we thought it was going to be in our model, so that we’re very happy with that and so on the Zap platform, going to our franchisee split is not a relevant factor because again we get paid off the top from our franchisees.

What’s important is, can their agents - can the agents of our franchisees use that platform to become more productive and I think the measure is, and again if 50,000 or 100,000, let’s say 50,000 of the agents can do one more transaction, we’re making INR 300 a transaction then RFG’s royalties will go up, whatever the math is there.

So, that’s really the - it yields increased productivity that’s really going to be the driver of its success on the RFG side. And as we said, it’s going to be a - it’s going to happen, but it’s going to take several years for it to really, to really pay off in terms of the return, in terms of that increased productivity..

May I just reinforce one point, Tony is absolutely right. On the energy side, we’ve been very pleased with the operating results and the financial results of the Zip model at NRT, in fact so much so that we have a number of markets that are new markets that we will accelerate opening in those markets because of the success of that model.

So, it’s going to be very well relevant. NRT has no impact whatsoever on the franchise side except to increase the productivity of the broker and the agent, so we’re pretty bullish on that front as well..

Great. Thanks very much, guys..

You’re welcome..

Your next question comes from the line of Tony Paolone from JPMorgan. Your line is open..

Thanks and good morning.

First, Tony, just to clarify in that $282 million of adjusted EBITDA, did that - did that or did that not add back these legal costs that you’ve highlighted?.

Did not. Did not..

Okay. And then if you think about your EBITDA guide for the year and the implicit revenue and think about incremental margin, it looks like about 10% thereabouts year-over-year on the incremental side.

And I know, you’ve got the incremental costs and comp and stuff like that, but and I guess in this legal item too, anyway you can tie that together as to what it would have been without some of these incremental costs, and whether that’s something that you think is more normalized as we look ahead?.

I haven’t looked at that specifically because it’s not, again we think we gave you what we think the margin is going to be overall and what the EBITDA is expected to be for the year. So, but obviously we talk about the acquisition cost coming in it.

It’s tough with, I guess you could try to back out all those things, but again I think the incremental margin is kind of we’ve been trying to stay away from that because of the M&A and the headwinds from the bonus issue kind of clouded, but we’re trying to get to there with giving you the margin, which is and hopefully enough information on those costs for the year that you can do the analysis..

Okay.

And I guess just another follow-up to that though - in terms of thinking about the roll out of technology as you look out into next year, do you think there is another incremental step up as the rollout expands or is this kind of - is the numbers you kind of outlined for this year [indiscernible] and that’s the new run rate?.

It will be - I think it will be much more modest than what we’re seeing this year as we just, once we lap it will be maybe a couple of million, I don’t know we haven’t done our budgeting for next year, but from what I’m hearing in terms of the requirements with the roll out, it shouldn’t be that much of an incremental cost..

Okay.

And then in terms of the net effective royalty rate, I think you addressed this a little bit and some of the puts and takes there, but did the CB United moving from RFG to NRT have any appreciable positive impact on that?.

It definitely had - it definitely had a positive impact on it. And that’s one of the many factors that we discussed..

Okay.

And then this last thing in terms of you gave sort of cash balance for the end of the year, but is there anything else from a balance sheet point of view you anticipate doing or is this - is just sort of cash build until the prepayments open up next year?.

Well just to remind you, 15 days after the end of the year our high-cost debt becomes callable, so we are very focused on that..

Okay.

But it sounds like, there is not much then to contemplate until that occurs, like we shouldn’t expect to try and do something early?.

We may be - we may position ourselves we’ll be able to deal with those issues next year. But that’s it..

Okay. Thank you..

Your next question comes from the line of John Campbell from Stephens Incorporated. Your line is open..

Hey guys good morning..

Good morning..

In our key commission rates, I know that was down modestly, kind of year-over-year, but I think you guys put at the first or - first sequential gain from 1Q, I mean I think that was the first time in like five years or so. And I know, you guys touched on this a few minutes ago.

But was that sequential improvement aided all by United or the Zip acquisition?.

In the first quarter?.

In the second quarter..

No, it wasn’t material. They - well a little bit from Zip, but not - but probably not from CB United, they have some similar splits..

And that just more a product of a little bit lower average homesale price?.

No, it’s more impacted by who is doing the business, which of our agents is doing the business..

Got it. Got it. And then just as a follow-up, just looking at the industry, I mean, just two questions here.

First, can you guys provide any kind of update on project upstream and then secondly, just related to the Zillow’s recent acquisition of Dotloop, has that changed anything with respect to your ongoing relationship with either of those companies?.

No, probably not on the Zillow side. I mean there - I think it’s may be more relevant to individual franchises, who may have relationships with other providers, there is DocuSign or a number of different companies in that space. So there is nothing that unique about it.

It’s a good product and we - we across the [indiscernible] we will make it even more attractive to franchisees, but we’ll see - but it has no immediate impact on our relationship.

As to upstream as best we can determine, it continues to progress, I don’t think it has had any meaningful impact on the relationship with [indiscernible] or anyone else for that matter. So I think that’s something that will be more relevant next year, it’s not really relevant this year..

Got it, got it. Thanks for that. And then if I could squeeze is one more.

Do you guys feel pretty comfortable getting your leverage down to four times by the end of next year?.

We....

By the end of this year..

By the end of this year?.

Oh, excuse me, this year, yeah..

Yes, we feel very confident..

Yeah, we’re very focused on that..

Thanks, guys..

Yeah..

Your next question comes from the line of Rob [indiscernible] from CLSA. Your line is open..

Hi, good morning. Couple of follow-ups on the Zap’s rollout. Is that helping some of your lower tier brokers more than it would help more established quartile broker.

And what, well how would we think about the impact on broker splits, if it’s successful and it helps your brokers to be more productive?.

We are focused initially on the smaller brokerage firms because we believe they need the technical assistance and they also need to displace the cost of otherwise using just parent systems that are not integrated. So we’re focused there, but it’s interesting. We have the same level of interest coming from our larger broker.

So we’re trying to accomplish the rollout to both small brokerage firm, midsize brokerage firms, but a number of large ones have asked to be part of the initial rollout as well. Remember this has no impact on the ABCR, the splits they realized with their agents, really doesn’t impact relationship with us because our royalties at the top.

That said, we suspect that this technology will help them achieve more favorable splits, but that’s something, they’ll have to manage through.

We’re giving the tools, they’ll have to manage accordingly, and we are optimistic that it will help accomplish that in a way that maybe meaningful to their brokerage operation, but again has no impact on our top line royalty. But it’s progressing very well.

We’ve got a lot of interest from our franchisees, has been phenomenal as to the level of interest and we are - we are currently, we have made announcements, we currently have about 75 brokerage firms operational now, that includes about almost 6,000 agents using the technology, that has been very well received.

So we are very bullish on the rollout next year..

Okay, great. And then, just one bigger picture question. It seem like if I look at the number of branches and the number of brokers at NRT has been growing the number of brokers per branch.

Does that mean that some of that excess capacity you talked about at the time of the IPO is being taken out of the system? And how should we view that, if it’s relevant or?.

I don’t know, I don’t think that’s....

Yes, it’s improved the - the capacity utilizations improved a couple of percentage points. But there is still - there is still more to go there..

So there is still more opportunity there..

I mean NRT is peculiar to the markets they operate in. So the national data doesn’t really, it’s not really relevant to them. And it’s also something to think about, although head count, agent head count is an interesting metric, it’s really productivity per agent, that’s more relevant at the end of the day.

And that’s going to more so as technology has a bigger impact on the productivity of each individual agent and the brokerage firm in general..

Okay. Thanks for taking my questions..

You’re welcome..

Your next question comes from the line of Jason Deleeuw from Piper Jaffray. Your line is open..

Thank you, and good morning. Question on the EBITDA margin guidance for the year, you guided to the upper half of the range.

Is that simply because the revenue and volume expectations are now coming at the higher end of your expectations or has there been any change to your expense, expectations for the year?.

It’s just what falls out, when we looked at our forecasts for the year..

But as your expectations for volume, is that kind of come in a little bit higher than what you guys were originally expecting or...?.

We never really gave an original expectation. So it’s hard to compare that, we’re just, we’re very happy that, it’s coming in especially compared to 2014 at 8% to 11% range. So I think that’s a great outcome for the year..

Okay. And then on the inventory constraints in some of the markets that you guys pointed out.

Do you think those will persist for a long period of time? Are these - is this an intractable issue or is this something that you think eventually gets sorted out over time?.

We think it gets sorted out over time. I don’t think there is any structural issue here, it’s just the timing, it is squandering I mean, we - in various different markets, whatever if you list a home and it’s properly priced, it sells pretty quickly. So the turnover is terrific, so the demand is substantially greater than the ability of the inventory.

So I think it corrects over time, we see no structural impediment to inventory becoming more robust. Now bear in mind, it’s about five months, some markets substantially lower than that, I mean San Francisco as an example less than two months of inventory, New York City. I mean just virtually every major market is having pressure on inventory.

But eventually that will correct and we’ll get back to that six month inventory norm that the industry has enjoyed for a very long time..

Jason, the good news is as the list - when the listing comes on, the average days of market is incredibly low. So there is demand to absorb the inventory, when it comes on. So I think that’s hugely beneficial..

Yeah. And then lastly, I don’t think we got any update on the international buyer trends or international - sales trends from international buyers.

I mean could you just give us an update there on what you’re seeing from some of your key markets?.

Yeah, it’s down. The international buyer is not as robust, as you can imagine and the markets they were - they were previously very robust. Florida, California, specifically, LA and San Francisco, New York City have seen a decline in the foreign buyer activity. And we expect no significant change to that this year, given the world economic conditions..

All right. Thank you very much..

Yeah. You’re welcome..

We have time for one more question today. Your last question comes from the line of Jason Weaver from Sterne, Agee. Your line is open..

Thanks for taking my question. I was - I wanted to ask about the full year volume forecast that you’ve put out there.

And see, if you can ballpark or quantify the impact of increase in interest rates on demand for the later part of that year, what that forecast incorporates as far as better?.

Well, I think at this point of the year, the increase in mortgage rates, which has been off opt. Worried about, but never materialized and has not yet - by this time everyone expected to have materialized and in this year obviously has not come. I think if we do see an increase in mortgage rates this year.

It will actually have a beneficial effect in 2015, because what we’ve seen in the past is if there is - if there is a somewhat meaningful like 50 basis point increase in rates. You see your unit activity accelerate.

So I think what actually be perversely reversely will - it would be a positive for this year?.

Okay. Thank you..

You’re welcome..

That concludes today’s question-and-answer session. Alicia, I turn the call back to you..

Thank you. We thank you for taking the time to join us on the call and we look forward to speaking you over the quarter. Thank you..

This concludes today’s conference call. You may now disconnect..