Good morning, and welcome to the Realogy Holdings Corp. First Quarter 2021 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 Realogy Senior Vice President, Alicia Swift. Please go ahead, Alicia..

Thank you, Brandy. Good morning, and welcome to the Realogy's first quarter 2021 earnings conference call. On the call with me today are Realogy's CEO and President, Ryan Schneider; and Chief Financial Officer, Charlotte Simonelli.

As shown on Slide 3 of the presentation, the company will be making statements about its future results and other forward-looking statements during this call. These statements are based on the current expectations and the current economic environment.

Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management, including, among others, the ongoing COVID crisis, inventory levels and uncertainties related to the continued strength of the housing market or refinancing volume.

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 made herein are as of today, April 29, 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 rules important information regarding these non-GAAP financial measures is included in our earnings press release.

Last, to help contextualize any comparisons to 2020 on today's call, just a reminder that due to the COVID crisis, we experienced a sharp decline in open and closed home sale transaction volume commencing in the final weeks of the first quarter of 2020 and continuing into the second quarter of 2020.

With open transactions turning back to positive late in the second quarter of 2020, kicking off the strong recovery that we have seen since then. The references made to April month-to-date in these remarks reflect data through April 23, 2021. Now I will call the -- I will turn the call over to our CEO and President, Ryan Schneider..

Thank you, Alicia. Good morning, everyone. I am incredibly excited to share our very powerful Q1 results. We delivered outsized top line and bottom line growth. Gained substantial market share and made great balance sheet progress. Our strategic actions, our focused execution and the strong housing market together are building momentum for our future.

Let's get straight to the highlights of an outstanding quarter. Realogy generated $162 million of operating EBITDA, $130 million above Q1 of 2020. Our brokerage and franchise businesses achieved truly outsized growth. We grew close transaction volume 44% year-over-year. Significantly above NAR's reported 28% year-over-year market volume growth.

This is now our third consecutive quarter of market share gain. We have gained almost 100 basis points of market share since Q2 of 2020 and continue to lead the industry with 15.7% share. Our share gains are a combination of our strategic initiatives getting traction and our luxury market success.

And more granularly, we outperformed the market in both our brokerage and franchise businesses as well as in both unit sales and price appreciation. Our title and mortgage businesses produced major bottom line growth, earning $61 million of operating EBITDA in the quarter.

We strategically expanded both businesses, and we are increasingly digitizing the home sale transaction. And our balance sheet is in its best position ever with a 3.1x net leverage ratio and a 0.64 senior secured leverage ratio. Now Q1 was an excellent quarter for Realogy, and we entered Q2 with substantial momentum.

All of our home sale metrics are showing very robust actual and future growth in the near term. March open transaction volume was up over 70% versus 2020. The April open transaction volume month-to-date is up nearly 175% versus 2020 and up a very exciting 45% ish versus 2019.

And April closed transaction volume month-to-date is up over 80% versus 2020 and up an equally exciting about 50%, 5-0 versus 2019. And New York City, which has been a tough market and a drag on our brokerage business results since COVID hit moved to year-over-year positive close transaction volume growth in March for the first time in the year.

New York City is now seeing a big rebound with March open transaction volume up 120% versus 2020 and up about 35% versus 2019. New York City April -- excuse me -- and New York City April open transaction volume is up nearly 400% versus 2020 and up about 20% versus 2019.

Now beyond the powerful near-term momentum in our numbers, let me comment strategically on where we are going longer term. We have been transforming Realogy. We're faster, we're leaner and more innovative.

We are the market leader leveraging our substantial current business to deliver results while building the products, technologies, integrated customer experiences and growth vectors for the future of real estate. To give you some color on this, let me share 5 important areas where we are investing to drive future growth.

First, we've delivered innovative marketing, technology and data products to help agents and franchisees be more productive and drive better economics And we're seeing the benefits in our results, productivity, recruiting, winning more listings, selling homes at higher prices, market share gains.

And we will continue to invest in unique products like Listing Concierge, RealVitalize, transaction manager, I prospects, leads engine and many others to propel growth and make Realogy a more attractive place for agents and franchisees. Second, we are the market leader in luxury.

We are growing our luxury position across Sotheby's International Realty, Corcoran and Coldwell Banker. We will continue investing in luxury franchise expansion both domestically and internationally in differentiated luxury products and technologies and in our unparalleled luxury referral networks.

Third, our open technology ecosystem is a competitive advantage. We continue to develop great Realogy products while expanding third-party technology integrations to better support agents and franchisees. For example, we recently added the MoxiWorks product suite to our open ecosystem.

Beyond its proven core technology and strong track record driving productivity, MoxiWorks shares our open architecture vision. Our agents and franchisees will have access to over 50 additional third-party products via our Moxi cloud integration.

And as I said in a recent interview, our journey is both really good engineering internally to build great products to support our agents and franchisees, while also curating strong products from others to connect to our world. Fourth, we have strategically expanded our national title and mortgage businesses.

Our progress is driving large increases in title and mortgage EBITDA, and we are demonstrating dramatic growth in our title -- excuse me, our digital title and mortgage product adoption.

We continue to invest in these businesses for growth with a special focus creating an end-to-end digital home sale transaction experience for consumers that is seamless, frictionless and easy. Finally, we really like what we're seeing from our real sure market pilots.

Remember, RealSure is a differentiated ibuying product that gives home sellers the best of both worlds, a guaranteed cash offer that combined with the opportunity to get an even higher offer from the market using one of our great agents.

The most exciting thing about RealSure is how it's helping us win listings, and we believe real sure could be a winner and a new growth vector. We are accelerating our RealSure product for the rest of 2021. We and our joint venture partner, Home Partners of America, are expanding to 20 markets. We are growing more aggressively in our existing markets.

And excitingly, we're going to be beginning to go direct-to-consumer. Now before I close, I want to recognize our exceptional real estate agents who are working hard, helping customers successfully buy and sell homes as customer demand both increases and changes.

And I have great appreciation for Realogy's employees, most of whom are in the field supporting our customers, agents and franchisees.

We are excited about our future brand and technology showcase headquarters as we pivot to a hybrid work environment, and I was incredibly proud this week to see Realogy name to the 2021 LinkedIn top companies list, to be 1 of 50 companies recognized for what we are doing on talent is a real lot.

So pulling way up, Realogy is off to an incredible start to 2021 and our current home sale metrics point to continued momentum as we drive outsized growth, gain substantial share, deliver powerful profitability and make great progress on our balance sheet.

Our investments are paying off, and we will continue to invest in both existing and new growth vectors. We are building on our success as we write the next chapter of our transformation, and we believe Realogy's future will be even more exciting. With that, let me turn it over to Charlotte to discuss the financials..

Thank you, Ryan. Good morning, everyone. Relate delivered a record start to 2021, achieving our highest Q1 revenue and operating EBITDA by far. We are streamlining and simplifying our operations and continue to drive greater operating efficiency with our cost savings initiatives.

Our balance sheet is in its best position since going public, and we continue to aggressively execute on deleveraging. Now I will go into more detail about our exceptional Q1 results as shown in the financial presentation. We delivered our strongest Q1 top and bottom line in company history.

First quarter revenue was $1.5 billion, an increase of $379 million versus 2020, and we generated $162 million in operating EBITDA, an increase of $130 million versus 2020. The integrated economics from our whole service business models are delivering considerable value.

Realogy brokerage group revenue was $1.2 billion, up $302 million versus prior year, driven by exceptional volume growth up 37% versus prior year. RBG operating EBITDA was negative $5 million, an increase of $46 million versus prior year.

RBG continues to generate substantial operating EBITDA for the enterprise when you consider the $76 million of intercompany royalties paid to our franchise segment. We grew our owned brokerage agent base 3% year-over-year and continue to maintain strong retention levels.

We are investing in recruiting and retention, and that, along with agent mix and higher volumes drove commission splits up approximately 130 basis points in the quarter. Business mix also drove a similar increase in split due predominantly to the exit of our property management business as well as timing in our corporate development business.

We like the investments we are making in our agents, and they are driving impressive results. We are also managing the bottom line and operating margins have improved or held stable for the last 6 quarters, with the exception of Q2 2020 amid COVID.

Realogy franchise group revenue was $254 million, up $34 million versus prior year, driven by strong franchise volume growth, up 47% versus prior year, and net royalty per side was $382, up $66 versus prior year. Our FG operating EBITDA was $141 million, an increase of $45 million versus prior year.

Our franchise business is incredibly powerful and drives operating leverage but Q1 revenues are muted due to a decline of $18 million in other revenue, driven primarily by headwinds and relocation.

Realogy Title group revenue was $201 million, up $64 million versus prior year, driven by strength in both refinance and purchase volumes as well as significant growth in our underwriter business. Title operating EBITDA was $61 million, an increase of $49 million versus prior year.

In title, we benefited from growth across the portfolio and our GRA mortgage JV contributed $21 million of the operating EBITDA increase. JV revenue more than doubled in the quarter. And while we only recognize our share of the earnings, we are working together to grow this business.

The JV grew its loan officer base by almost 30% since the beginning of 2020, and we remain focused on further expanding loan officers and our geographic footprint. Moving on to cost and the balance sheet. We are not letting go of the lessons learned under the COVID crisis, which has been a catalyst for finding new and better ways to work.

As previously identified, we will deliver $80 million in permanent cost savings in 2021. We are ahead of plan, and over 70% of this target has been actioned. Already realizing approximately $25 million in Q1.

Even as we realize additional permanent savings please recall the $150 million in temporary Covid related cost savings we executed in Q2 and Q3 2020 with approximately 2/3 of that in Q2 that will not repeat in 2021.

We made continued progress on our capital structure with lower net leverage at 3.1x, and our senior secured leverage ratio was 0.64x as of March 31. The our Q1 free cash flow improved $88 million versus prior year, and we ended the quarter with approximately $400 million of cash and 0 balance on our revolver.

Our top priority is to invest in the business. I am very excited about what Ryan shared earlier regarding the multiple places we are investing for growth. As CFO, I am pleased we have the cash flow to make these investments as well as the ability to use excess cash flow to delever.

And in April, we paid down an incremental $150 million of our term loan base. To reiterate, we had a phenomenal start to 2021. We are executing well from our leadership position, driving efficiencies, deleveraging and creating value. We have demonstrated Realogy's strength, agility and resilience and will continue to lead into the future.

With that, we are happy to take your questions..

[Operator Instructions]. Your first question comes from the line of Matt Gaudioso with Compass Point..

Congrats on a great start to the year. Maybe just a question for Ryan to start. You guys are clearly outperforming the market from a kind of volume standpoint with market share gains in both brokerage and franchise.

Just wondering if you could parse out some of the underlying drivers there between segment, geography, contribution from Corcoran franchises and then maybe comment on the sustainability of those share gains just as some of the market fluctuates?.

Yes. Look, the sustainability is obviously what we're shooting for, harder to promise or predict. But let's talk about what's actually happening, and I tried to give you the high level in the call. So look, the first is we've got a bunch of strategic initiatives that are actually working.

You cited one, right? We've gone from nothing to something material now and Corcoran franchising that's adding to market share. And we really like that, especially kind of the upscale side that it goes through.

And then I talked about some of the product things that we're seeing drive is help us win more listings, whether it's RealSure or some of the other lift that I gave. And so if you kind of go back to some of the different strategic vectors we've talked about in brokerage, we feel like we've hit our stride actually in the last kind of year plus.

Even Q1 of last year was a very nice kind of step-up from Q1 of '19. So there's just this list of kind of strategic progress that we're making that we think is paying off. The other is we are absolutely benefiting from our luxury leadership position. The luxury market is -- is probably the strongest part of the market right now.

And we're also in attractive geographies, right? I mean, Florida is just such a powerful engine of housing right at the moment, and that's our third biggest geography, right? And so we're just -- we're both in a nice spot with how we kind of have the company architected geographically and luxury wise, and we're going to continue to grow that, especially luxury.

But we're also equally excited about the strategic initiatives that are succeeding, which, again, there's a bit of a list of them, but you called out one that we've talked about before. And always happy to go deeper into others like RealSure, like RealVitalize, Listing Concierge, et cetera.

So that's kind of what's happening and leading to the outperformance, and we're pretty excited about it..

Got it. That's helpful color. Maybe just to follow-up and put a finer point on Corcoran. Just -- is there any way for you to size what you view that opportunity as from a market share perspective? And then what has been really the driver of success in those franchise sales? Clearly, the team is executing there..

Yes. Well, look, we've had 3 quarters in a row now where we've kind of grown more than the market, and we're excited about that. Obviously, Corcoran is part of that.

Look, we wouldn't have launched a franchise that made the investment that we're making in Corcoran if we didn't think it was a real opportunity to turn into something substantial, just like both our Sotheby's launch almost 20 years ago has done and our Better Homes and Gardens from 15 years ago has done. So we have our view on that.

We're not going to share that. But it's a really, really powerful brand. It's different than some of our other luxury brands and SIR and Coldwell Banker in its kind of upscale leisure thing and it plays really well in certain markets, a lot of success in California and Chicago and Denver and Florida. And we really like it.

The other thing on Corcoran, who during this quarter was named the #1 brokerage in New York City for 2020, by the way, is that New York City is starting to come back, right? And that's both a Corcoran and a Sotheby's thing. And that's been a drag on our brokerage business for a year on a relative basis.

And while it's still a little bit below the rest of brokerage to see New York City come back in both March and April. From a Corcoran and Sotheby standpoint, we think is a really exciting thing for the future there..

Your next question comes from the line of Ryan McKeveny with Zelman..

Congratulations on the strong results. So I wanted to parlay a bit off of the previous question.

So when we think about the outperformance that's going on within both the brokerage and the franchise side of things, I guess, can you pull up a little and talk to the value proposition that you see yourselves providing both at the agent level and also the franchisee level? And of course, we hear the products and services that you're adding to the suite, which adds to that proposition.

But I guess there's always the ongoing debate around how much of it is just economics and how much of it is sort of the incremental value or products or marketing, et cetera, that you might be providing.

So maybe just help us think through where you feel you're at in that proposition that you're providing to the agents and coincidentally with the franchise owners..

Well, look, we're all about -- we've got to deliver value for agents and franchisees, and that value has got to include economics, but also products, technology, et cetera. Because we only succeed if they succeed, right? I mean, we don't make any money if our agents and our franchisees are out there doing transactions being successful.

So we have incredibly aligned interest.

And as you've heard us talk about for a couple of years, we feel like we're actually having success, especially for the last kind of 5 or so quarters, accelerating our journey on all of those, right? We have this multi-brand strategy that gives people different choices and options if you're a franchisee of what the brand package opportunity that you're kind of looking for is and we've been adding that ecosystem with both our technology, but also third party technology.

We keep building new products to deliver things for agents, and we're executing on that strategy pretty substantially. And then we remain very economically competitive, right? Charlotte talked about our recruiting success. Consistent, steady recruiting growth. The previous question talked about our franchise sales kind of success.

And I think the proof is in the numbers. And so we're pretty excited about kind of what we're building. Remember, I believe this is a human-based business, but we've got to be a great real estate company, that's also great at technology.

And pairing the power of great technology products our open architecture is a differentiator, as I said in the script, with great agents and franchisees, has a lot of power, and we're seeing it in the market today, but also in the market for the past however many quarters, if you want to go back and look at our improved performance and share gain, for example..

Yes, that makes sense. And one question on the MoxiWorks announcement. So York and his team are, of course, great. So definitely exciting to see the headlines.

But can you maybe talk through what the partnership entails in terms of kind of what's different now under the current structure versus what might have been happening previously? Because I believe there are certain aspects of their product offering like Moxi present or different things that either you're using at the brokerage or franchises were using your agents might be using.

So what exactly changes with this? And by doing it at the corporate level, what's kind of that flow-through benefit to an agent as opposed to them maybe going off on their own and buying a product from them, for instance?.

Well, look, this is a very large change, and we're very excited about. Again, we develop a lot of products for agents and franchisees and deliver them, and we like that.

But I have a strong belief that in an independent contractor world, in a geographically diverse United States in a diverse brand thing, the ability of anybody to build a technology that works for everybody in this industry is actually a bit of a fool's errand. And we've even done that ourselves with our Zap platform, which I'm glad we have.

But boy, it's so diverse out there. And so we like bringing in third-party products for people to choose from if they would rather use that than something, say, we provide first party. And we love Moxi. We think it's a great product. It's not new to us. We we've had a few things where parts of our company have touched one of their products.

We had some franchisees who had their own relationship with MoxiWorks because they thought it was a great product. And we love all that. But what we're doing here is much bigger, right? We're bringing their whole product suite in not just the Moxi present side. We're bringing in their website capabilities.

We're bringing in the recruiting capabilities, their CRM, their presentation tools, everything. And we're integrating that into our ecosystem. So it to be incredibly easy for everybody to use. And it's going to be a part of our value proposition to our franchisees.

And again, we're still going to have first-party products that they can choose to use, and that's great. But if this is attractive to people. We've got great feedback about it from franchisees, from agents. We want to enable that kind of thing.

And then again, we are the one company who's really focused on this open architecture, and MoxiWorks agrees with that. They've built this thing called the Moxi cloud where they already have 50, 5-0 plus kind of integrations with third-party products, our agents and franchisees are getting get access to those through this integration.

So we're just accelerating our open architecture journey with a great product and a great partner and we can do it big at the corporate level in a way that none of our individual franchisees can ever do, and we're really excited about it..

Our next question comes from the line of Matthew Bouley with Barclays..

Congrats on the results. So if I could stick on the same topic of technology tools, you highlighted many full answer to the prior question, a lot with organic and acquisitions, and you've built out this open ecosystem.

So the direct question is, on the one hand, what specific tools going forward do you think you need from an agent's perspective? What are the next holes you want to fill if you had a wish list? And then the broader question, which is really a follow-up to everything that you just mentioned with MoxiWorks.

Is there actually some value at some point to actually simplifying and streamlining what seems to be just a wide and growing tech offering to agents?.

Well, let me start on the second one. Look, we're in a different world than we used to be, and it's not that new. It's been around for a few years.

But you can integrate things with APIs so much easier than you could, even 3, 5, 7, 10 years ago, right? So we don't view the fact that you can pick from more than one thing in our technology stack, if you're an agent, as complex, just no more than you picking whatever apps you want on your phone is some big complex problem these days. Not.

It's quite easy as intuitive people do it. And so the fact that you can now architect these open ecosystems that are much easier and simpler than they used to be, means I don't worry about the wide problem. We are going to be, as I said in my script, curators. We're not just opening up our open ecosystem to any product. We got -- it's got to be good.

We got to be excited about it. There's got to be demand for it. But the power of us developing great products and our agents having some choice and franchisees in the technology they use.

We think that's a differentiator because, again, I think these closed garden ecosystems are not the right -- aren't unlikely to meet the needs of agents and franchisees in the best way as this industry evolves. So that's my view on kind of the your second question.

On your first one, I don't think we have any gaps in the products today at all, but we will always want to keep making them better. We want to find new things that are innovative that drive results. I think RealSure is a nice example, that's a product we've now got.

It's pretty big, and agents can use it, and not everybody is going to have that in brokerage kind of thing. So we keep wanting to introduce unique products to people. But we also always want to go faster. We always want to work on the infrastructure stuff that makes the agent's life easier, even if it's not a market-facing product.

And then there's always the own infrastructure work we're doing as a company. So our technology journey is nowhere near over. I mean, it's -- in some ways, it's evergreen, and we're always in the early innings of this thing.

But I'm really excited by what we're providing today but also adding things like MoxiWorks and some of these other third-party products in there as our industry evolves.

And then the final thing I'll say is we are putting a lot of effort on the consumer side on technology, digitizing the transaction, right? We have a great title business that covers the lion's share of where we do brokerage. We've got a very strong mortgage joint venture.

We invested back in 2018 to build some digital products so that you could do digital kind of closings in these things. And as I told you in the last quarter, they took off massively as COVID hit, and they continue to take off not because of COVID, but because people think they're awesome experiences compared to the old way of doing it.

And so everybody is talking about simplifying the transaction. We are excited to have all these pieces and to be working and actually trying to do that, and we like the momentum we're getting. It shows up in our title and mortgage results.

And so you are going to see increasing technology focus on us making that customer experience for actually closing and getting from contract to close on your home, a better, more simple, integrated experience, which is a holy grail, a lot of people are chasing.

But I think we're actually doing more of it than people either think or would give us credit for at this point in the process. I think it shows up in our results..

Got it. That is very helpful color and is actually a perfect segue into what I wanted to ask next. So on the integrated transaction, this question is kind of like the inverse of attach rates. You scale up mortgage, you have a big title footprint.

What portion of agents -- not looking for any perfect number, but what portion of agents actually have access to all the integrated transaction offerings because in this type of market environment, where there's clearly friction to the process of selling and buying a home, does the ability to actually have that offering and to the extent they can advertise that actually drive volumes to the agents?.

Well, we'd like it to. I don't have enough proof yet. I think bluntly to pound the drum too much on it. But we've done, I think, a really good job with our owned brokerage agents, Matt, giving them access to this, and some of that's just through the core title and mortgage ships and technology that we've got.

We have a big undiscovered country still with franchisees, like we do some title joint ventures with franchisees but we -- our franchise agents are not in the title mortgage ecosystem, the way our own brokerage agents are yet.

Now that's an opportunity that we think is quite interesting, and we'd like to do more of, and we're working to do more of it. A little more complicated because you're obviously going to do it with the franchisee. But we feel good about where our 50,000 owned brokerage agents are in the ability to really access our title and mortgage.

And then the franchisees an opportunity. The last thing I'll say on this is we do a lot of this title and mortgage closing for non-Realogy agents in our title business. And they like this technology, and they can access it also.

And so we're not going to give the numbers, but a good part of our title mortgage business actually comes from non-Realogy agents who like what we're doing, and we have built relationships with, et cetera. So we're not confining what we're doing here to just our agents on the own brokerage side, and we think we've got some growth opportunity.

We think those are showing up in our numbers..

Got it. No, that's very helpful. If I could sneak in a quick just clarification.

Do you have the contribution of the relo business broken out within RFG?.

Yes. I don't believe we've disclosed that, but what I can tell you is what I did say in my script is the revenue was down $18 million, which was predominantly due to relocation. So you could sort of back into what the EBITDA piece of that was based on historical margins.

This is the last quarter where we're lapping pre-COVID so I think as we move into Q2 and beyond, when we start lapping the COVID period, the impact will not be as dramatic..

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

So you've discussed some market share gains kind of broadly across the country. Do you have any ways to think about or parse out new market share trends in just the high-end market? Obviously, it depends on how exactly you define it.

But any way you could put some numbers around that?.

Yes. Look, we know our market share of buy by both local geography and price band everywhere. It's -- we're unlikely to be disclosing like that kind of level of granularity. But as I said, we like not just the overall growth. We like what we're seeing in growth in the luxury side. And obviously, that's a big piece of our market share gain.

And then again, go back to the architecture thing a little bit of where we're at, right? Florida, such a powerful thing right now out there in the ecosystem.

The suburbs around New York City are just on fire, and we're incredibly strong in New Jersey, in Southern Connecticut and Westchester and Long Island, and so we're clearly gaining share here, and we're doing it, including in the luxury area. Some of it's an expansion like the Corcoran thing that came up earlier is a piece of it.

But some of it also is the geography and the architecture of what we've got and where the market is. And so we feel really, really good about what's happening overall in our company, but we feel even better about what's happening in luxury in our company..

Okay. Yes, that's helpful. And switching over, are you guys seeing less turnover among agents in the industry right now? Obviously, agents are very busy with the market.

Any sensing you think of?.

I would say it's still pretty competitive out there. We're a part of that, right? I mean, I think we're one of the people that are succeeding Charles talked about our agent growth. Our retention is definitely better.

It's kind of improved for -- it improved for like 5 quarters in a row, and then it was about the same here in Q1 as it was in Q4 of 2020, which was clearly a much better place than how the world was operating back in like late '18 and a lot of '19. So it's still pretty competitive out there.

But we like our results obviously better, and they're showing up in our numbers..

Great. And last one, if I could just sneak it in.

Do you have a good run rate for what the corporate segment should be on an EBITDA basis?.

Yes. So I think Q1 is not a bad first start. There are some timing and employee-related expenses. But you could look over the past year or 2 and sort of average it out.

And I think just keep in mind what we're lapping in the prior year is overweight in the back half, where we recognize more expenses in the back half of the year and that won't be the case this year. It will be more evenly phased..

Your next question comes from the line of Stephen Kim with Evercore ISI..

First question relates to the title and mortgage business. I know you talked a bunch about it already.

And the way I look at it, if you take -- put aside for a minute, the portion of the business that is directly tied to the amount of transactions that you do, there seems like there's also been -- there's obviously also a driver related to the mortgage rates and the refi wave that the low rate environment has created.

And yet you're also growing that business, making investments and doing things here to really make that business be more durable going forward. No matter what the rate environment is.

And so what I'm hoping you can do is maybe give us a little bit of perspective on how much do you think the current incredibly strong earnings out of that business may be tied to an unsustainable level of refinancing activity and how much of it do you think is more tied to -- in other words, what might be kind of like a core earnings level that we could expect if we were to model different trajectories of mortgage rates over the next year..

So a couple of different thoughts there. We've been in a very prolonged and extended refi gloom, maybe the longest in history. And the rates are still -- they dip down below 3%. So we're optimistic about that continuing for at least the near term. Keep in mind also, we do tend to make more money on purchase transactions versus refi.

So there's a mix impact as you think of the EBITDA. And to the extent that purchase volumes remain very strong. We're making a lot more money there. There's a third factor, which is the gain on sale margins. And that -- those have been very, very strong for us as well as I'm sure our competitors over the past year.

And so that's a third very important piece that will impact the profitability of this business going forward. So the wave of growing loan officers will continue. We're definitely getting leverage in that business on the expense side, so that will continue. We make more on purchase.

Yes, the refi thing -- the high volumes there have been a very favorable impact to us, but the gain on sale is also a very important thing to watch..

Got it. So would it be fair to say that maybe half of what we saw this quarter could be tied to things like gain on sale and maybe a greater refi wave.

And half of it is more from the growth in the actual underlying business, things that are sort of self help initiatives?.

It's not a bad benchmark, but I think you're probably a little undercutting the gain on sales piece and the refi piece. It's probably worth more than you've estimated..

Yes. I understand. That's helpful. Second question is a broader question about the fact that we're really -- we're in a really unusually strong sellers market today. And I'm wondering about the mix of your commissions that come from buy side agency versus sell-side agency.

I would think that in a seller's market like today, more of your commissions would be tied to buy side transactions because it's just so hard to buy a house today.

But longer term, buyers agency is also the side of the market that many investors tell us they're kind of worried about in terms of being vulnerable to falling commissions over the long term.

And so I'm wondering, can you tell us how much buy side commissions may have increased relative to the sell-side recently? And how this compares to the longer term trend?.

So there's both some, I think, good thoughts, but also maybe a few misperceptions in some of the stuff that you talked about. Look, we get about the same for buy and sell and bluntly, just because there's only one buyer and one seller. The commissions are pretty symmetric, and they've been symmetric in the past.

They've been symmetric today during this heavy demand kind of period that we're in. And so they've been pretty symmetric.

You can actually see our ABCR ticking up a little bit, which is, to me, comes back to the value that the agents are delivering and while it's a very strong market right now, that actually creates a bunch of complexity for sellers and buyers, where agents are probably earning their money a lot more than you might think given the intensity of the market and especially in some certain places.

So overall, we're always watching the trend in ABCR, and it stripped it down a little bit in the last decade, but that's mostly been mix, and I've talked about that so many times people are probably bored from hearing it. But the buy and the sell -- and the numbers are about the same.

Over time -- and I've said this for, over time, having the leverage of being a seller is just more certain that you're going to get a commission than working with a buyer, right? And then maybe a little bit of what you're getting to. And so it's always, I think, a stronger position to be the brokerage and the age that has the listing.

And that's why we like the listings growth we've had and helped drive some market share. And you saw in our numbers, our unit sales outperformed NAR, right? We're not gaining market share just because of price appreciation. We're gaining market share because we got more units being sold.

And so from an ABCR standpoint, you are correct that owning the listing does give you more power and the buy side, the customer just is competing with other buyers. So there's a little more potential for maybe disruption there. But it sure hasn't shown up in the numbers yet.

And again, we get about -- with our size and scale, we get about equal on both sides. So we watch it closely, but the disruption, people have been talking about disruption of the average broker commission rate forever. And unlike some other things that have been challenging in this industry that one is actually kind of hanging in there.

And in fact, again, even in this crazy high demand market, the numbers are actually ticking up a bit. So agents add a lot of value, and we watch this closely, but this has not been the thing that has been challenging for either Realogy or the industry when you look at the past however many years..

Yes. That's really helpful. I appreciate it. Sort of following up on that just a little bit, though. There's always been a pretty significant difference between your highest performing agents and those that are maybe newer in the business or not as focused on it as seriously.

And we've always -- you've always talked about that upper slice as being such a an important part of your business, the real engine.

I was curious as to whether during this unusual past year that you've seen any shifts in the relative productivity of the higher versus the lower if you think about the hierarchy of your agents, whether the higher end has -- or the more productive, more experienced agents have actually gained share or have actually lost share to the less productive agents?.

No, great question. Look, the higher growth agents have gained share over the last kind of 12 months. And it shows up in our financials, both in terms of we like the volume that those folks are getting because they're often gain share at the expense of others out in the world.

But it also has been one of the things that Charlotte's talked about that's been a bit of why our commission costs have gone up. It's been -- some of it's been the mix change for the higher producing, higher split agents.

And you saw the strongest, Stephen, actually during last summer when -- with some of the health and safety challenges and some of all the economic uncertainty, it was the best highest productive agents who powered through better than the average agent. And you saw some of it there.

And then it has continued, not as much as it did last summer, but it has continued -- though, again, in Q1 of 2020, it didn't look much different than Q4 of 20 -- excuse me, Q1 of 2021 that we're just talking about here, your phenomenon wasn't very different than Q4 of 2020.

But the acceleration of those folks did happen, but it was more of a Q2, Q3 last year kind of thing. And it's just kind of stayed there, and that's why we think it happened, by the way..

Your final question comes from the line of John Campbell with Stephens..

This is James Holly speaking for John Campbell with Stephens. My first question is for Charlotte. Charlotte, so there was $80 million of cost saves there. It sounds like you've already picked up about $25 million of that, but I'm curious about the phasings of the saves over the balance of the year.

And then if you could provide a bit of color on that and the sources of the save, that would be really helpful..

Sure. The rest of it is pretty evenly phased. We did overdeliver a little bit in the first quarter, but the rest of it is pretty evenly based. As far as where it's coming from, it's all the places that we've been talking about.

So it's coming from the administrative lease expense that we announced, we have an annualized run rate of $20 million of reduced lease expense. Just because we're working differently post COVID. There's also employee-related expenses that are down.

So whether it's the number of people or whether it's how they travel, we're doing very different things on meetings and conferences. We're doing a lot more virtually. There's also lower marketing expense. So those are the areas that we continue to see it come through and we're on a journey. We continue to look for more savings.

And so we'll continue to do that, but feeling really good about the program we have in place for this year..

Okay. Yes, that's great. And then just another question here. So on the mortgage JV side, the $21 million in the quarter, that was up over triple last year, but you're going up against some tough comps for the rest of the year. I know you don't have a crystal ball here on the mortgage origination side of the market.

But broadly, how should we be thinking about the mortgage JV trends here?.

No, it's a great question. I think it goes to the previous question on what's driving the profitability of that business and the increases and so what I sort of alluded to earlier is that it's sort of half ish driven by the gain on sale margins and the refi boom.

So to the extent that those wane a little bit, you definitely see an impact on a year-over-year basis on that component.

However, the growth on the purchase side and on the operating leverage because we have increased loan officers, is going to be a benefit but you've got to sort of like piece part it out between what you expect for refi and gain on sale, which has a sizable impact..

Yes. And James, just to ride away here. Look, mortgage is complicated, you'll be able to do what's happening with refi and gain on sale as well as we can. But I told you how exciting kind of our home sale transaction metrics for like April are in terms of the near term.

On Monday of this week, our JV had its largest day ever in its history of purchase volume loss. So we locked more business on Monday in this JV than we have ever done in its history.

Now again, there's refi, there is gain on sale, there's all kinds of things going in lots of directions, but there is some definite strong underlying strength to not just our home sale transactions, but this. And then we are going to keep investing, growing loan officers, things like that.

So yes, we're excited to be comparing to good results, and we look forward to doing our best and -- but a lot of moving pieces on mortgages, but that Monday purchase example was like the equivalent of the April volume examples I gave you for brokerage. So I want to pass that along..

And this does conclude today's conference call. Thank you for your participation, and you may now disconnect..