The Real Deal National

Realogy stock soars 19% despite revenue slide

Agent recruitment rose 2% after years of decline
By E.B. Solomont | August 08, 2019 10:51AM

Realogy CEO Ryan Schneider (Credit: iStock)

Realogy CEO Ryan Schneider (Credit: iStock)

After months of free-falling, Realogy’s stock soared more than 19 percent on Thursday as the company said it grew its agent base “for the first time in a long time.”

But overall, the company’s second-quarter revenue dropped 5 percent year over year to $1.7 billion. Net income remained in the black but profits slid 44 percent to $69 million, from $123 million a year prior. At NRT, the division that includes the Corcoran Group and Coldwell Banker, the volume of closed deals dropped 5 percent to 95,251.

During an earnings call Thursday, company executives played up key points of Realogy’s turnaround plan: A $70 million cost-savings plan, new partnerships (like one announced last month with Amazon) and a plan to get commission expenses under control even while retaining and recruiting agents in an uber-competitive market.

In recent days, Realogy’s stock has been trading around $5 per share, down more than 77 percent from around $22 a year ago. The conglomerate’s stock jumped to $6.06 per share after the call Thursday. That was a 19 percent bump from $5.08 at market close yesterday, but the figure settled at $5.84 as of publication time.

In a major bright spot for the quarter, Realogy said NRT grew its agent base by 2 percent to 51,000 during the second quarter. “We’re trying to recruit people with the most potential,” said CEO Ryan Schneider, who said Realogy has been using machine learning to guide recruitment.

But the fight is hardly over.

This week, Compass hired Coldwell Banker’s long-time No. 1 agent, Chris Cortazzo, who is based in Malibu and whose 16-person team closed more than $500 million in sales last year.
“Especially in some of the California cities and Chicago, the competition intensity is spinal tap 11 kind of thing,” Schneider said during the earnings call.

Unlike competitors who throw bonuses at new agents, Schneider said when Realogy has the choice between losing money and retaining agents, it won’t lose money.

“If you want the highest split possible, you can go to RE/MAX,” he said, referencing its high-commission split model. “Our value proposition isn’t just the money… We have to be competitive on that, but we’re also trying to emphasize the benefits we bring with the products, partnerships, power of scale, referrals.”

Realogy has been fighting off intense competition on multiple fronts.

Last month, it filed a scathing lawsuit accusing Compass of illegal business practices and attempts at price fixing.
It also announced a blockbuster partnership with Amazon, called “TurnKey,” in which homebuyers get $5,000 in Amazon home services and product and Realogy agents benefit from leads.

“Look, we’ve got big dreams for the thing. We want it to be as big as possible,” Schneider said Thursday. “Obviously we have a partner who does things very large.”

Although the Amazon deal temporarily boosted Realogy’s stock price, analysts have said they’re not sure it’s a panacea.

As part of its turnaround, Realogy gave updates on the $70 million cost-savings plan it announced earlier this year. The company said it cut $22 million in costs during the second quarter, and reduced its total debt by $113 million. Its corporate debt is still $3.5 billion as of June 30.

In a statement, CFO Charlotte Simonelli projected more sales in the third and fourth quarters would lead to financial improvements. The company is “committed to using our strong free cash flow to reduce our debt and to invest in our business,” she said. “Making Realogy much more efficient is and will be a priority for me,” she added during the earnings call.