Anywhere Real Estate Inc (HOUS) 2021 Q4 法說會逐字稿

Good afternoon, and welcome to the Realogy Holdings Corp. Full Year 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's Senior Vice President, Alicia Swift. Please go ahead, Alicia.

Thank you, Michelle. Good afternoon, and welcome to Realogy's Full Year 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, interest rates and uncertainties related to the continued strength of the housing market.

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, February 17, and have not been updated subsequent to the initial earnings call. Important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our earnings release issued today as well as in our annual and quarterly SEC filings.

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 and slides.

Today, Charlotte will discuss a target leverage ratio, which is a reference to our net debt leverage ratio. This metric is calculated in the manner shown in Table 8b of today's press release. Charlotte's discussion of our results will use our 3 reportable segments, which Ryan uses to assess the performance of our company.

Ryan will also provide a view of Realogy focus on the power of our brands and their positioning in the market. This will include various references to estimated operating EBITDA contribution, annual revenue and earnings growth rates by market position.

Note, however, we do not maintain discrete financial information at this level. Such estimates include cost allocations and other assumptions and do not include intercompany royalties.

In addition, such 2021 contributions do not include corporate, Realogy Leads Group or Cartus Relocation Services operating EBITDA of approximately negative $150 million. We believe this alternative strategic view of our company may be useful to our stakeholders to understand our market focus within our business.

Last, any forward-looking NAR reference during today's call is based on NAR's most recent public estimates as of January 27, 2022, which are subject to review and revision. Factors that may impact the comparability of our home sale statistics to NAR are outlined in our annual and quarterly reports filed with the SEC.

Now I will turn the call over to our CEO and President, Ryan Schneider.

Good afternoon, everyone. Realogy is on a transformation journey. And I'm incredibly proud of what we have delivered. We have gained market share, we have driven greater profitability, and we have massively improved our balance sheet. 2021 completes the first chapter of our transformation, and I'm very excited about our momentum going into 2022 as we start Realogy's next chapter.

Our company delivered an extraordinary year of strategic and financial results in 2021. Realogy and its great agents grew overall transaction volume nearly 30% as we gain over 100 basis points of market share.

We achieved the strongest financial results in the company's history, approximately $8 billion of revenue and $902 million operating EBITDA. We reduced net debt by $900 million since 2019 to $2.3 billion, extended $1.9 billion of our debt to 2029 and beyond, and we now have no debt above a 5.75% coupon. Our powerful EBITDA and net debt reduction delivered a 2.4x net leverage ratio, the best annual ratio in our company's history.

And finally, we advanced exciting new strategic partnerships designed to unlock future growth, including our RealSure joint venture with Home Partners of America, our title underwriting joint venture with Centerbridge and our new luxury auction joint venture with Sotheby's.

I'm incredibly proud of both our 2021 results and our transformation progress in recent years, driven by our technology and data-led strategy, our operational excellence and our increasingly agile culture with great talent both employees and agents at the core.

I will now turn the call over to Charlotte, and I will come back to highlight Realogy's next chapter.

Thank you, Ryan. Good afternoon, everyone. I am excited to share Realogy's Fourth quarter and full year 2021 results which demonstrate continued financial and operating momentum and our best Q4 on record, excluding the unseasonably high Q4 2020. We believe we have never been better positioned financially, strategically, organizationally and technologically to thrive and grow in this dynamic housing market. Our strategy is working. We are competing effectively, growing significant share in 2021. Our financial discipline clearly defines capital allocation priorities enabled us to execute well on many strategic and operational objectives throughout the year.

We delivered record top line growth and profitability and strong free cash flow, while taking actions to lower the cost profile of our business and invest in new strategic ventures. It is this strong foundation that we believe sets Realogy up for future growth in 2022 and beyond as we continue to unlock incremental value across the business.

Full year 2021 revenue was approximately $8 billion, up 28% or $1.8 billion versus 2020, led by strong transaction volume growth. Full year 2021 operating EBITDA was an impressive $902 million, up $176 million versus prior year, despite 2020 benefiting from $150 million in temporary cost savings. Q4 revenue was approximately $2 billion, an increase of $85 million or 4% versus prior year, despite lapping 45% volume growth in Q4 2020.

Fourth quarter operating EBITDA was $157 million, down $49 million versus prior year and up $31 million versus 2019. Q4 '21 profitability was lower than prior year due to $31 million lower mortgage JV earnings, expense increases versus prior year in RealSure and timing and marketing and conference spend.

In 2021, we continue to drive cost savings across the business. We achieved our targeted $85 million savings in 2021, which helped fuel investments we have been making in the business. In 2022, we are targeting an additional $70-plus million of cost savings. For this program, we are focused on driving continued efficiency and agility, especially in automation, systems integration and other personnel-related efficiencies.

Now let's move on to cash flow and the balance sheet. For the full year, Realogy generated $553 million of free cash flow, largely flat to 2020, despite becoming a cash taxpayer in 2021. We exited 2021 with a much stronger balance sheet, a senior secured leverage ratio at negative 0.29x and net debt leverage of 2.4x. Our leverage ratio has improved significantly over the past few years as we have generated impressive financial results, taken proactive steps to reduce our cost of capital and extend our maturity profile.

I will now discuss our business unit results in more detail. Realogy Franchise Group full year 2021 revenue, which includes leads and relocation, was $1.2 billion, up $190 million versus prior year. Net royalty per side of $406 was up $53 versus prior year.

RFG full year operating EBITDA was $751 million, an increase of $157 million year-over-year. Realogy Brokerage Group full year 2021 revenue was $6.2 billion, up $1.4 billion versus prior year. Transaction volume growth, up 32% versus prior year, was led by our strength in luxury, which we believe positions us well for future growth.

Operating EBITDA was $109 million, up $61 million year-over-year, despite lapping approximately $85 million in temporary cost savings and investing for growth in RealSure and other strategic initiatives. Also, RBG generated substantial operating EBITDA of $516 million before the transfer of intercompany royalties and marketing fees paid to our franchise business. We grew our owned brokerage agent base 6% year-over-year, with Q4 our sixth consecutive quarter of sequential agent growth, and agent retention is now the highest on record for RBG.

For the full year, commission splits increased 215 basis points, driven predominantly by a 170 basis points increase due to strong volume growth, recruiting and retention. We also had a 45 basis points increase due to business mix, predominantly driven by the sale of our Property Frameworks business, most of which we have left. Realogy Title Group revenue was $952 million, up $216 million versus prior year, driven by growth in both the agency and underwriter businesses. Higher purchase unit fees and unit volume more than offset a decline in refinance volumes.

Title operating EBITDA was $200 million, a decrease of $26 million versus prior year, primarily due to a decline in mortgage JV earnings which were negatively impacted by gain on sale margin compression and lower mark-to-market on the loan pipeline. Remember, as interest rates begin to rise, the mortgage market becomes more competitive, which impacts our gain on sale margins. Excluding $49 million in earnings from the mortgage JV, RTG operating EBITDA was $151 million, up $51 million versus last year.

Our underwriter joint venture with Centerbridge is expected to close in the first quarter. We are excited about the growth prospects of this business, and as a reminder, post close, our retained 30% ownership will be reported in equity earnings from unconsolidated businesses, along with our mortgage JV. This will impact year-over-year comparisons to revenue and other P&L metrics.

I want to recognize the progress on our balance sheet. We have benefited from multiple rating agency upgrades, and in January 2022, we completed an upsized $1 billion notes offering at a 5.25% coupon to further improve our capital structure while redeeming higher coupon notes, generating approximately $40 million in annualized interest expense savings. The weighted average interest cost of our fixed cost debt is now approximately 4.6%. Going forward, we are now targeting a leverage ratio of 3x on a through-cycle basis, and we remain committed to repaying the $407 million of 2023 notes on or before their maturity.

As part of Realogy moving to our next chapter, I will now share additional details on our financial outlook with you. We are incredibly excited by our continued momentum and expect Realogy's 2022 full year financials to look a lot like our outstanding performance in 2021. That said, we expect a return to normal seasonality in 2022. Specifically, Q1 operating EBITDA will be the smallest of our 4 quarters and will be well below the unseasonably high $162 million operating EBITDA we delivered in Q1 '21. Q1 will also be a substantial use of cash as it normally is, and remember, we will also lap unusually high mortgage JV earnings, which benefited from mark-to-market favorability.

Let me now turn to our full year 2022 guidance. Remember, we made $902 million in operating EBITDA in 2021. But as we look at 2022, there are 2 important adjustments to keep in mind: first, approximately $40 million will drop off from our underwriter business due to the sale to Centerbridge; and second, a similar amount will drop off from increased investments in RealSure and other strategic initiatives. After those adjustments, our 2022 guidance is pretty close to our outstanding 2021 financial performance. And given what we know today, we expect full year operating EBITDA to be between $800 million and $850 million based on mid-single-digit volume growth with the biggest swing factor being the housing market itself. That volume has us growing above NAR's latest full year forecast, while also absorbing more than 150 basis points increase in agent commission costs.

Wrapping up, our fourth quarter and 2021 results reflects the strength of our leadership position, strong execution and a solid foundation, and we believe there is inherent upside in our business model. Our track record and results bolster our confidence and we will continue to drive for additional opportunities as we remain committed to growth, cost mitigation and unlocking additional value longer term.

I will now turn the call back to Ryan.

Thank you, Charlotte. 2022 represents the start of Realogy's next chapter, one we believe will be headlined by greater growth as we increasingly simplify and integrate the real estate transaction for consumers. And remember, when we say growth, we mean and deliver profitable growth. We are changing our capital allocation priorities to focus more on growth. Charlotte has already given the new leverage ratio target. Going forward, our highest capital allocation priority will be investing for profitable growth. This includes investing more in the organic growth that has helped us grow share. New to the story is that you'll see a greater focus from Realogy on selective M&A to drive growth. We see opportunities for strategic M&A in our core business, and we also see opportunities for M&A and investments in adjacent businesses and in technology to further accelerate our transformation.

Finally, if we have excess free cash flow beyond what we think are good investments, we intend to return capital to shareholders. To that end, the Board has authorized a $300 million stock repurchase program. You will also see our increased focus on growth at our May 12 Investor Day. At that event, we look forward to updating you on our current strategic progress and where we are going in the future. Charlotte and I will share a multiyear financial outlook with you for the first time, and we will highlight some of our great technology and talent, like our new Chief Operating Officer, Melissa McSherry, who will join us next week to help lead Realogy's next chapter of transformation and growth.

And as a preview, I have consistently spoken about our strategic efforts in luxury, integrating title and Mortgage in the transaction as we simplify the customer experience, our franchise expansion and technology.

I want to give you a brand lens on our growth that actually ties to those strategic objectives. So to start, our Sotheby's International Realty luxury brand and our high-end Corcoran lifestyle brands together are a very powerful growth engine across both franchise and owned businesses. These brands executed approximately 200,000 transactions with an average sales price above $1 million in 2021. And these brands have over 15% revenue and about 25% earnings CAGR, if you look over the past 4 years, and they ended 2021 with about $300 million in estimated operating EBITDA.

Next, our Coldwell Banker owned brokerage has incredibly deep synergy with our national title business and our mortgage joint venture, especially as we make progress integrating the real estate transaction to simplify and digitize the customer experience. Coldwell Banker owned brokerage plays in the premium part of the market, with about a $560,000 average price point and over 345,000 transactions in 2021. And this synergistic combination of Coldwell Banker owned brokerage, title and mortgage, shows about 10% revenue and about 20% earnings CAGR in the last 4 years, with $530 million in 2021 estimated operating EBITDA, even while absorbing the higher agent commissions and competitive pressures in the market over those 4 years.

And third, Realogy's national franchise brands, Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker and ERA generated nearly 1 million transactions at a $330,000 average price point in 2021. Now these franchise brands are very high margin with strong cash flow generation, and we really like the long-term franchise contracts with recurring royalty streams. And over the past 4 years, these brands have delivered a very steady approximately $200 million in estimated operating EBITDA with pretty consistent revenue.

And look, finally, all of our brands are powered by Realogy's innovation and technology. We provide powerful technology to our agents and franchisees, as together, we are delivering a better home buying and selling experience for customers. Our industry differentiated open architecture approach, great virtual closing products, innovative marketing products and data insights are all examples of innovation and technology critical to our brand success. And we're looking forward to our upcoming Investor Day in sharing more about our future, more about our brand level growth and more about our technology-led growth.

So pulling way up, I look Realogy's powerful profitability, our technology leadership and our increasingly fast-moving culture. Having demonstrated above-market growth and a transformed balance sheet, we are ready to move Realogy to its next chapter as we look to accelerate our growth and our innovation. We're very excited about 2022 and beyond as we continue to move Realogy and the industry to what's next.

With that, Charlotte and I will take your questions.

(Operator Instructions) Our first question comes from Tommy McJoynt with KBW.

So just starting off, just at a high level, there's been clearly a pretty noticeable change with the introduction of the full year guidance and the authorization of the buyback. So just want to start off by asking kind of why now is the right time to introduce those, what I'd consider somewhat investor-friendly items into the next?

Well, look, we think they're the right thing to do. If you step back a bit Tommy, Charlotte, and I, have been doing this together for about 3 years. I've been doing it for 4. But when we both came into this -- into Realogy, in this company that we love, we think is great, there were really 3 challenges in front of us, right?

One challenge was, frankly, get back to growth, including market share growth. A second challenge was, we had a pretty rough balance sheet. We had a 4x leverage target, and we weren't even living to that leverage target yet. And so there was a real transform the balance sheet opportunity. And then third, there was the opportunity to kind of lead our industry into a better place in terms of technology. And in our case, we think it's all about simplifying and integrating the transaction for the consumer.

And we think that over the last 3 or 4 years, we've made a lot of progress in those. In 2021 kind of shows the payoff, right, with above market growth and above market profitability and the balance sheet progress and our technology board. And so now is the time to just move the company to its next chapter, like I described, I'm really excited to share even more at our Investor Day. But part of having those things achieved, gives us the freedom to go farther with, telling you, here's what we're planning to deliver this year and kind of what it's based on in terms of the market. It gives our Board and our management team, the ability to say, look, we don't have to fight with one hand tied behind our back because we're focused on paying down debt, right? We've got our debt to a much better spot. We can invest more for growth and we can actually -- if we don't have good opportunities let's give the capital back to the shareholders in a way that we can look at how Realogy looks like as an investment in terms of buying back stock.

So for us, the guidance and some of the buyback and even some of the strategic changes that we're pushing toward, even doing some more M&A now is a manifestation of having delivered on these 3 really important things.

But the journey is not over. That's just a chapter, but we're so excited to kind of go to this next chapter where it's not about playing the brokerage game. It's about simplifying the transaction, and it's about digitizing the transaction and integrating it in the title and mortgage and at the extreme or RealSure kind of thing. And our competition for that isn't a lot of the other brokerages. The competition for that is like Zillow and others are trying to do that. So you just picked out 2 things that are part of a broader next chapter for us, but we think they're the totally right thing to do because of the progress that we've made and that we believe we demonstrated fully in 2021.

That's great. I appreciate those thoughts. And just kind of following up on the buyback authorization. So you do have a decent cash balance and you've done a great job of cleaning up the debt. So could you just talk about kind of your appetite given the stock now? Do you guys look at the intrinsic value of the stock? And are there any kind of restrictions from you guys getting a little aggressive with that buyback? Or just kind of talk through the cadence there?

Yes. Well, the priority, as we've said, is to invest in the business. So our first lens is how do we set up Realogy for long-term success? And we've definitely been ramping up things. We've tried to be a little bit more communicative about that as well. And as I also said, we remain committed to satisfying our near-term maturity at the 2023 notes. So think of it as first lens investing in the business, and we'll definitely take care of those 2023 notes like we've said we would do.

But as far as evaluating share buybacks, yes, all of those things exist, right? So you're looking at the intrinsic value as far as any handcuffs go, like they're our own handcuffs because, again, we're comparing a share buyback against sort of the opportunities we have to invest in ourselves.

Our next question comes from Matthew Bouley with Barclays.

This is Ashley Kim on for Matt today. So I guess just the first question I have is, the mid-single-digit growth in transaction volumes for '22, is that mostly driven by price and assuming units flat to down, just kind of considering the lack of supply of resale or what are the assumptions kind of going into that outlook?

Yes, it's a great question, Ashley. Thank you for giving it to us. Look, we definitely, it will -- I think take more of the price increase is going to come from the price side -- or excuse me, more of the volume increase comes from the price side. We think transaction unit numbers are probably going to be down a little bit as an industry, but our number both includes kind of the mix that you talked about. It does also include that we believe we're going to continue to gain market share. Obviously, as Charlotte talked about, it's above the NAR number.

But we're really excited that in the last year or 2, the world's moved to the 6 million homes kind of sold. And remember, for all of the last decade, it was like between 5 million and 5.5 million. So even if the units back off a little bit, you can still see from the guidance Charlotte gave that we got a really strong financial engine here. And we're just -- we're excited to it. We'll go a little bit where the market goes up or down from that number but we're very excited about both where the market is looking like or placing it or share gains. And given how strong the last couple of years, being up in volume like that, I think, will feel good for us.

And then just are you seeing any bifurcation in the reaction to interest rates between the high-end buyer versus the rest of the market?

Not yet. No. And we actually -- the reality is we haven't seen much reaction to interest rates at all yet, to be blunt, in the market. The biggest issue affecting the market is the lack of supply that you mentioned, they're not especially achieved at the first-time homebuyer thing. But then you've got to remember in your question actually is, look, in luxury, the mortgage rate is -- the percent of people who use a mortgage and luxury purchases is just much lower than in the mass market. I don't have the numbers handy, but I know them roughly.

And so even folks who are using mortgage again, we haven't seen it slow things down yet. The number of houses that are getting offers immediately upon listings are still up. The number of houses that are having price cuts are still at kind of all-time lows that are on the market. And again, the luxury place where we're a market leader does have just less mortgages period. So it's something we're watching closely, but we have not seen anything yet, and it hasn't bifurcated yet either.

Our next question comes from Anthony Paolone with JPMorgan.

First question is for Ryan. You finished off '21 with a little over an 11% EBITDA margin. Where do you think the business should be as you look out over time? Do you think that should go higher? Was that just -- did that just benefit from a strong year? Just how are you thinking about margin?

Look, so I think there's 2 parts of this market, and I want to go please, go back to our strategy. Again, we're the leading brokerage in the country. But over time, we've got to be the leading company helping those 1.5 million customers or 1.5 million transactions we did better integrate the transaction, Tony, right? We got to simplify. We got to digitize it. We've got to make it more integrated. We're making a lot of progress there.

So let's just talk what that means for margin, right? Our brokerage, only margins have gone down with commission split pressure even though we've offset a lot of that with cost reduction, but you have this pushing down the margin in the industry on the brokerage side. But our margins have actually going up because of title and mortgage and the greater integration that I'm talking about and the more simplification. So in some ways, I think the margin rate, Tony, is the strategic race that I've tried to reference a few times, which is, the more success we have integrating and simplifying and digitize the transaction for the customer, the more our margins, I think, can stay or go up because of the title and mortgage and the simplification and the cost takeout side of it, right?

Without that, right, we are going to, I believe, as an industry, like it has been happening for 50 years, keep having some margin pressure on the agent commission side has been pushing things down. Now we've clearly had it worked out pretty well for us, and it wasn't because of the hot market, it was because of the progress that we've made -- but those are the 2 forces that will determine that for the future. And for me, it just comes back to we've got to succeed on this really critical strategic objective, which isn't the old brokerage game. It's really where the world is going with real estate transactions that we think we can lead there.

And Tony, just keep in mind, for the last 5 years, our margins have been at or around 11%. They've been, give or take. So I mean, that's like a 5-year track record. So I think we've been delivering that.

Okay. No, I appreciate that. So then on the split side, though, I think, Charlotte, you mentioned outside of the mix piece, it was maybe 170 last year, and I think you mentioned 140 you expect in '22 additional split level. And then do you envision that to be kind of the pace for a while? Or is there any visibility that, that eases up?

Yes. Just for the record, I said above 150. So you are close. And again, it comes down to like the -- as long as the volume remains at this high level, the agents basically earn their split based on the volume they produce. And we're still calling for volume to remain at this level. So there's a piece of that. And obviously, the other piece driven by competition, while in a much more rational level, the competition does continue. And so to the extent that the competition continues, we do expect to continue to see that.

Will it range? Yes, I think it's going to range. I think we're trying to give you some direction on what we see going into this year, which is obviously very volatile based on geographic split as well as some of the other nonrecruiting and retention-related pieces and sort of the new development business, et cetera. So it's always going to be variable. But until the competition dies down, there's likely to continue to be increases. They may not be 150 basis points, but there will be increase.

And one thing, Tony, I mentioned, if you get a chance to join us at our Investor Day in a couple of months, we are going to do a much longer-term financial outlook that will give you more visibility on our thoughts on that question over a longer time period. I think the 1-year view is kind of how we're really prepared to put on front of you at the number today, but as part of a longer-term outlook, we'll be taking this on one head on.

And to balance that, there's always the cost efficiencies that we've been delivering. So like I said, over the past 5 years, our margins have been 10%, 11%, 12%. We've been around that, and it's because we have a consistent savings program. So I think it's important to look at both the splits with the savings together.

Okay. I understand. And then last one, if I could. Any ability to give us some color on the first few months of the year here on what you're seeing to kind of get a sense as to what a return to normal seasonality might look like?

Well, look, I mean, a couple of things. So we're seeing volume so far kind of -- so far this year in line with our guidance, like, I talked about to the Ashley's question, there's absolutely some supply issues out there. But the mortgage rates hasn't really lowly changed the buyer speed or kind of price cuts in housing. So that's kind of what we're seeing. But I mean the biggest thing is, again, the COVID just messed up seasonality so much that Q2 of '20 was meant for Q3 and Q4 of '20 and then the rest of '21 they just when you think about our guidance, you've got our full year in the seasonality of our bottom line through that time will probably look a lot more like some of the previous kind of normal kind of years.

There's nothing really in the first few months or first 6 weeks as that I exclusively can point to other than it will just -- it's looking, feeling and actually executing like more of a normal year, I expect January to be the smallest month of the year, right? Like, it usually is, and that wasn't true in 2021 because of what happened through the pandemic. So that's probably as much color as we have.

Our next question comes from Dennis McGill with Zelman & Associates.

I guess going back to the macro, you had mentioned sort of maybe a low single-digit unit decline embedded in the guidance this year. And it sounds like you're pretty optimistic, and I understand a lot of the key measures that you look at today are pretty positive, but how do you think about balancing the risks of the macro? You've got home prices, at least in the RFG Group, up 35% in 2 years. Mortgage rates spiking again, clearly an affordability challenge that's out there. So if things were to shift, how do you think about the risk of the business and what you would change in the strategy, if anything?

Well, look, we're -- I think the strategy in terms of trying to simplify the transaction, growing our luxury business, et cetera, is something you want to kind of be pushing on through cycle given where the world is.

Look, I think the reality is, yes, today, we have continued strong demand, and we've got low inventory. I think that demand is going to continue when you look at the demographics and the remote work, remote work trends. And again, if we're in the high 5-plus million units, that's still a big step up than previous decade. What we watch on the macro is, we watch the inventory thing pretty closely.

Affordability matters, but it really matters primarily in the first-time homebuyer. If you already own a home, you benefited from the run-up in terms of your asset value, if you're going to buy another home. And then the reality is the intersection of first-time home buyers and mortgage and inventory is where all the pressure is. That's actually the part of the market that we do the least business in some ways.

But so we're watching all that stuff pretty closely. We have to understand it's really changing the view yet. But we've shown we can be nimble on our cost reduction through kind of down cycles and -- but strategically, I think what we're focused on, we do kind of more on a through-cycle basis even if the macro got a little bit worse.

Okay. That's helpful. And then changing gears a little bit, maybe with the view on the relocation business, can you give us any detail on what you're seeing just generally on relocations, where those stand today versus a year ago, even pre-COVID? And then any learnings from geographic relocations from the migration discussion?

Yes. So it's -- look, it's a tough -- it's been a tough business. It got 2 big hits, right? It got the COVID hit, but it also got the visa immigration restriction hit under the last administration. And even the Biden administration has been pretty slow to release some of that stuff. So it was down pretty far, 30%, 40% through kind of over time through the pandemic. It's come back, it's better than that, but it's still down, I don't know, 20% probably from what it was like pre COVID.

We are seeing some geographic differences there. There's parts of Asia where there's been more mobility, some intra-U.S. mobility has gone up a little bit versus during COVID. And I think that's some of just companies bringing people back and so some of their new hires are actually moving there. But I think you could think about it as, it was down 30% to 40%. It's now down 15% to 20%. So it's come back some, but it's definitely not back to where it was pre COVID.

And you mentioned Asia in that number, was that 15% to 20% number? Is that a global number? Is that a U.S. number?

I think these 20% is our global number. I think -- I don't have the geographic numbers at my fingertips, but no region is up versus pre COVID. That much, I know for sure. The reach down a little bit differently, but overall, it kind of adds up to the kind of 15% to 20%.

Our next question comes from John Campbell with Stephens Inc.

This is AJ Hayes stepping in for John. A quick question on Cartus. It's paired in the franchise segment results. So it's hard to see how it's fared in recent quarters. Just wanted to check in on how that recovery has looked since the early stages of the pandemic. Just kind of wondering how far you are off from prior peak levels and how you're thinking about Cartus over the next year or so?

Yes. It's kind of the same answer as the last question. It was down a lot in 2020 and somewhat in 2021 with the core impact of the pandemic, especially 2020, and then it's kind of come back. And so -- but it's not back all the way. Now size-wise, that business was swamped by the rest of the franchise business that was kind of a rounding error on the franchise business. But it's -- it will be a positive contributor to our profitability this year, but not any sort of a big number. It won't move the needle. But it won't be the challenge it was back in 2020.

So it's a good part of the company. We like the lead generation and, in this economics, to improve as the market improves is a good thing. We probably gained a little market share in that business. We've got actually a bunch of new clients in the last year as a lot of other relocation companies, I think, are really struggling. They may not have the power, the other parts of Realogy behind them to help them out. But it's pretty much a rounding error in the financials. But it's at least getting back into the kind of positive territory regions that we'd like it to be, but it's not financially what it was before COVID. And again, compared to the rest of the franchise business, it's just even the before-COVID numbers were really small.

Got you. And just one more. Charlotte, I believe -- last quarter, you had said that you guys were doubling up recruiting efforts for the mortgage and title JV. Can you provide any update on loan officer recruiting and geographic expansion efforts?

Yes. So we continue to be focused on that. Obviously, with the slowdown in refinance volumes, the pace of that may not be the same. But yes, we're definitely still focused on growing that business. I think I just want to remind you, too, we've got like this one last quarter to lap in Q1 of outside of mark-to-market adjustments. But after that, I think the business would be a lot easier to look at on a comparable basis because I think it was really cloudy with all the mark-to-market adjustments. So I'm excited to be able to get past that after Q1, so you can kind of get a better view into the underlying performance of that business.

Our next question comes from Justin Ages with Berenberg.

Just hoping you could give me a flavor on the kind of strategic M&A that you indicated as part of the Realogy transformation. Is it branching into new things, like insurance or repair work? Or is it augmenting what you've already done? Just trying to get a sense of that.

Yes. So first off, I want to take you back. We've demonstrated an ability to actually drive growth with our technology, with our marketing products, with our data insights and above market share growth and gain share. So we've shown in multiple businesses that we can do more with the business we've got than we were able to do in the past. So we like that.

I think you should think about our selective M&A in 2 ways, and I want to go back to the fourth quarter to actually talk about it. One is, we selectively likely are going to do things in our core business. The Warburg reality acquisition in New York City is an example of that, right. And things have to be very strategic. We have to like the economics of it. But if you take that one, it's incredibly strategic. So it's luxury, and that's a brand like Coldwell Banker enter a geography that wasn't in the New York City, and it does things like strengthen our Coldwell Banker International luxury alliance with giving it a New York City foothold. So a lot of strategic reasons to do it in our core business. We obviously like the economics and we like the deal.

The other thing we did in the fourth quarter was invest/purchased a luxury auction company. That's an adjacency to what we do today, but we view it as both an additional growth channel as well as a way to provide some complement to what we're doing in the core luxury.

And the final thing is, let me give you the technology version of this, which is a few years ago, we invested in an online remote notarization company, and that's been an anchor part of our digital closing experience. And so we're really on the lookout either for strategic accelerants in our core business or adjacencies, whether they're businesses or technology that are going to help us simplify and integrate the transaction and drive more growth. And the fact that we've got a couple up on the board already gives us something to point to for you and others, and we're excited to kind of open up the aperture to use our free cash flow for that.

But again, we're going to be selective. We're focused on profitability, and we're just going to be consistent with the strategic things that we've been articulating for you, which is partly why I gave you that brand level view of our company because those are some of the strategic ways we've talked about things, and you could envision different types of M&A fitting in differently in luxury versus the title mortgage integration simplification versus doing something that's a pure franchise play. So those are a couple of examples and kind of how I'm thinking about it.

No, that's great. I appreciate the color there. And then just one more, if I may. You noted the kind of financial impact of the real estate investment. Can you just give us an update on how many markets you're in, what you're seeing and what the response has been? I imagine it's been positive given that you're continuing to invest in the business, but just wanted to hear your thoughts on it.

Sure. Absolutely. So look, we're really excited about RealSure. In many ways, RealSure is the endpoint of true simplifying the transaction as we try to turn to transactions, selling your house and buying your house into a single transaction with RealSure Sell and RealSure Buy. And we put this joint venture together with Home Partners of America a couple of years ago. We invested in it and then we stepped up our investment in Q4 as we both told you we were going to do, but also you see affecting our Q4 results.

And then Charlotte told you kind of the magnitude of the step-up we're going to do in 2022. And remember, for every dollar we invest Partners of America invests also. So together, we're putting a real amount of money in here.

On the sell-side, we're in 24 cities. We love the reaction we're getting. A lot of how we get value in that is by winning list. We're not in it to buy and sell the house primarily. We want to help people sell their house and a lot of the way we do that, a lot of the way RealSure benefits us is through people who either take RealSure and our agent sells it or even if they decline RealSure, but they use our agents. And I gave you the 70% listing stat in the last quarter's call.

We've now launched our RealSure byproduct in 3 cities in Q4. And as of February, we're now up to 7 cities. And that is letting people waive their mortgage and financing and appraisal contingencies and turning them into a cash buyer between us and the Realogy and Partners of America, the RealSure Venture and our mortgage partners. And the fact that we're now in 7 cities with that, we like it. And you're going to see us in both our core traditional business and RealSure continuing to push to simplify the transaction for the customer, integrate it, make it easier, make it more digital. And we like that investment and we're going to step it up this year, as Charlotte talked about.

And our last question comes from Kwaku Abrokwah with Goldman Sachs.

I just have a few follow-ups on the questions that were just asked. In terms of macro, can you guys -- you guys talked about the bifurcation question. Can you talk about in the context of geographic bifurcation, what are you seeing in your different regions?

Yes, that's a great question. Look, boy -- we're national, so we see it through our franchise and our own business. Look, there's a series of geographies that are just doing great. right? And they're not necessarily new ones. Florida, Texas, all the attractive tax and weather destinations are really doing well, continue to do well. And frankly, we predict that they will do well in the future.

New York City is probably the market that's had the biggest change, and we saw really significant growth in the fourth quarter. It was the most and first market affected by COVID. It was the last to recover, and it had a really strong fourth quarter, and it's really started off great in 2022. When we look at like Manhattan for January, contracts signed are up 4% in January versus before -- the year before -- excuse me, versus December -- excuse me, versus December, usually they're down in January like 20% versus December. So New York is having a really, really nice comeback. We like that. We see it also in our new development business.

California has come back, not as much as like Florida or New York City has come back, but it's back in a good, better place than it was. And then obviously, you've only got a bunch of flight out of the higher tax and less attractive weather destinations that -- we still do a lot of business there. But places like New York City, Florida and these other attractive tax and weather destinations are clearly leading the way.

And this question, I guess, is for Charlotte. On the 2023 notes, have you thought about or how are you guys thinking about like sort of the mix between utilizing cash versus refinancing to address these notes?

Yes. No, we will be satisfying them with cash.

And just last question here. On the M&A, thank you so much for giving the examples on the M&A that you've done so far. Is there any sort of -- how do we think of size in terms of how much you're willing to invest and bring in these seemingly tuck-in M&As. Is there -- how do we think about it? Or should we just wait for the Investor Day to learn a little bit more?

I'll give you a little more now. I mean, look, I think you should think about it more as -- I don't think it's going to be a transformational 9, 10 figure deals, right? I think it will be more attractive, targeted things in the 7- and 8-figure range. And many of those attractive targeted things could round out our product mix or be a technology thing.

So we view this kind of selective M&A is about growing and accelerating a lot of the success that we've already had, right? Not about -- we're looking for one kind of big cost-takeout opportunity by finding some massive thing to do. So think about it more that way, we'll put a little more meat on the bone at the Investor Day. But that's kind of why both of the deals from the fourth quarter are probably a pretty good example from a size kind of standpoint also. So think about probably what I said here is the way I'd have you think about it, and we will share some more information in a couple of months.

Yes, just the tuck-in acquisitions tend to be the most value creating. And so that's part of our strategy. The good news is, we do have the liquidity. If something amazing came up, it's not like we're limited. But from a value creation perspective, we think the tuck-ins create a lot more value for our shareholders.

There are no further questions. This concludes the program, and you may now disconnect. Everyone, have a great day.

Thank you, Michelle.