Anywhere Real Estate Inc. (NYSE:HOUS), a global provider of residential real estate services, has demonstrated resilience in the face of a challenging housing market, leveraging its cost discipline and strategic execution to position the company for future growth.

Financials

In the fiscal year 2023, Anywhere Real Estate reported annual net income of -$97 million, annual revenue of $5,639 million, annual operating cash flow of $187 million, and annual free cash flow of $115 million. The company's performance reflects the broader industry trends, as the residential real estate market experienced a substantial downturn in 2023, with existing home sales declining to 4.09 million, the lowest level since 1995.

For the first quarter of 2024, Anywhere Real Estate reported revenue of $1,126 million, a slight decrease from the $1,131 million reported in the same period of the prior year. The company's operating EBITDA, a key metric, was negative $17 million, an improvement from the negative $52 million reported in the first quarter of 2023. This improvement was primarily driven by lower expenses across the enterprise, including a $15 million decrease in former parent legacy costs and $14 million in lower restructuring costs.

Segmental Performance

Anywhere Real Estate operates in three business segments: Anywhere Brands (Franchise Group), Anywhere Advisors (Owned Brokerage Group), and Anywhere Integrated Services (Title Group).

Anywhere Brands (Franchise Group) reported revenues of $200 million and operating EBITDA of $89 million in the first quarter of 2024, a decrease of $7 million and $8 million, respectively, compared to the same period in the prior year. The decline was primarily due to a $9 million decrease in revenue from the company's relocation operations and leads business, partially offset by a $2 million increase in royalty revenue.

Anywhere Advisors (Owned Brokerage Group) reported revenues of $919 million and operating EBITDA of negative $59 million in the first quarter of 2024, an increase of $4 million and $16 million, respectively, compared to the same period in the prior year. The revenue increase was driven by a 7% increase in average homesale price, partially offset by a 6% decrease in existing homesale transactions. The improvement in operating EBITDA was primarily due to a $10 million decrease in other operating costs, a $4 million decrease in marketing expense, and a $4 million increase in revenues, partially offset by a $3 million increase in commission expenses paid to independent sales agents.

Anywhere Integrated Services (Title Group) reported revenues of $71 million and operating EBITDA of negative $15 million in the first quarter of 2024, a decrease of $1 million and an increase of $2 million, respectively, compared to the same period in the prior year. The revenue decrease was primarily due to a decline in refinance and purchase units, partially offset by an increase in the average fee per closing unit. The improvement in operating EBITDA was primarily due to lower employee-related and other operating costs as a result of cost savings initiatives and declines in variable operating costs due to lower volume.

Cost Savings and Operational Efficiencies

Anywhere Real Estate has been proactive in addressing the challenging market conditions, implementing a strategic plan ("the Operational Efficiencies Plan") to optimize operational efficiency, reduce its office footprint costs, centralize certain aspects of its operational support structure, and drive changes in how it serves its affiliated independent sales agents and consumers.

During the first quarter of 2024, the company realized cost savings of approximately $30 million, of which approximately half related to specific restructuring activities. The company expects to realize at least $100 million in cost savings for the full year 2024, building on the multiple other cost reduction and spending reprioritization initiatives it has undertaken.

Litigation and Regulatory Developments

Anywhere Real Estate has been involved in several material litigation matters, including antitrust class action lawsuits and Telephone Consumer Protection Act (TCPA) claims. The company has settled certain of these cases, including a nationwide settlement in the Burnett antitrust sell-side class action litigation, which remains subject to final court approval.

The company is also closely monitoring the developments related to the National Association of Realtors (NAR) settlement, which includes practice changes that will impact the entire industry, including Anywhere's owned brokerages and those of its franchisees. Additionally, the Department of Justice has re-launched its investigation of NAR's rules and conduct, which could have further implications for the industry.

Liquidity

As of March 31, 2024, Anywhere Real Estate had $115 million in cash, cash equivalents, and restricted cash, a decrease of $4 million compared to the balance of $119 million at December 31, 2023. The company's primary sources of liquidity include cash flows from operations, distributions from its unconsolidated joint ventures, and funds available under its Revolving Credit Facility and Apple Ridge securitization facility.

The company's material cash requirements include working capital, business investment and capital expenditures, debt service, and potential onetime payments related to the Burnett antitrust settlement and a legacy tax matter. Anywhere Real Estate expects to meet its cash flow needs during the next twelve months through these sources, and in the event of liquidity changes, the company may explore additional debt financing, private or public offerings of debt or common stock, or consider asset disposals.

Outlook

Despite the challenging housing market, Anywhere Real Estate remains focused on executing its strategic priorities, including strengthening its franchise network, leveraging its luxury leadership position, and integrating and digitizing its brokerage and title operations.

The company is also exploring innovative investment opportunities, such as partnering with single-family rental companies to sell their homes directly to consumers, expanding its concierge auction business for luxury homes, and pursuing international expansion, particularly in its corporate and Sotheby's International Realty brands.

While the near-term outlook remains uncertain, Anywhere Real Estate is well-positioned to navigate the industry's evolving landscape, leveraging its cost discipline, strategic execution, and competitive advantages to deliver value for its agents, franchisees, and shareholders in the long term.

Risks and Challenges

Anywhere Real Estate faces several risks and uncertainties, including the cyclical nature of the residential real estate market, adverse macroeconomic conditions, the potential impact of pending litigation and regulatory developments, competition and industry disruption, and the ability to recruit and retain productive independent sales agents and teams.

The company's substantial indebtedness, the potential for further declines in housing affordability, and the risk of continued or accelerated declines in inventory and homesale transaction volume also pose challenges. Adverse outcomes in material litigation matters or the failure to obtain final approval of the Burnett antitrust settlement could have a material adverse effect on the company's business, results of operations, and financial condition.

Conclusion

Anywhere Real Estate has demonstrated resilience in the face of a challenging housing market, leveraging its cost discipline and strategic execution to position the company for future growth. While the near-term outlook remains uncertain, the company's focus on optimizing operational efficiency, strengthening its franchise network, and exploring innovative investment opportunities positions it well to navigate the industry's evolving landscape and deliver value for its stakeholders in the long term.