Anywhere(US:HOUS)2023-08-04 10:39PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Anywhere Real Estate Inc., covering operations, balance sheets, cash flows, and detailed notes for the periods ended June 30, 2023 and 2022 Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP reviewed the interim financial statements and found no material modifications needed for conformity with U.S. GAAP - The independent auditors, PricewaterhouseCoopers LLP, concluded their review and are not aware of any material modifications that should be made to the interim financial statements for them to be in conformity with U.S. GAAP2530 Condensed Consolidated Statements of Operations The company reported a significant decrease in net revenues and a shift from net income to a net loss for both the second quarter and six months ended June 30, 2023 Condensed Consolidated Statements of Operations Highlights (in millions) | Metric | Q2 2023 | Q2 2022 | YoY Change | H1 2023 | H1 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net revenues | $1,671 | $2,142 | -22.0% | $2,802 | $3,777 | -25.8% | | Total expenses | $1,649 | $2,016 | -18.2% | $2,962 | $3,606 | -17.9% | | Net income (loss) attributable to Anywhere | $19 | $88 | -78.4% | $(119) | $111 | N/A | Earnings (Loss) Per Share | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.17 | $0.76 | $(1.08) | $0.95 | | Diluted EPS | $0.17 | $0.75 | $(1.08) | $0.93 | Condensed Consolidated Balance Sheets As of June 30, 2023, total assets decreased to $6,219 million from $6,383 million at year-end 2022, with total liabilities slightly decreasing and total equity declining due to net loss Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $796 | $834 | | Total assets | $6,219 | $6,383 | | Total current liabilities | $1,334 | $1,305 | | Long-term debt | $2,475 | $2,483 | | Total liabilities | $4,566 | $4,616 | | Total equity | $1,653 | $1,767 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, net cash used in operating activities significantly improved to $20 million, with overall cash and equivalents decreasing by $30 million Six Months Ended June 30 Cash Flow Highlights (in millions) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20) | $(205) | | Net cash (used in) provided by investing activities | $(20) | $7 | | Net cash provided by (used in) financing activities | $9 | $(282) | | Net decrease in cash, cash equivalents and restricted cash | $(30) | $(481) | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's financial statements, covering business segments, debt structure, restructuring plans, and major legal proceedings - The company operates in three segments: Anywhere Brands (Franchise Group), Anywhere Advisors (Owned Brokerage Group), and Anywhere Integrated Services (Title Group)45 Total Indebtedness (in millions) | Debt Instrument | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Revolving Credit Facility | $350 | $350 | | Extended Term Loan A | $214 | $221 | | 5.75% Senior Notes | $899 | $899 | | 5.25% Senior Notes | $985 | $985 | | 0.25% Exchangeable Senior Notes | $396 | $394 | | Total Debt | $2,844 | $2,849 | - The company is involved in significant antitrust class-action lawsuits (Burnett and Moehrl) challenging industry rules for buyer-broker commissions, which could result in material liabilities, with the Burnett trial scheduled for October 2023929598 - A class-action lawsuit (Bumpus) alleges violations of the Telephone Consumer Protection Act (TCPA) by independent sales agents, with a jury trial scheduled for January 2024116119 - Subsequent to the quarter end, on July 25, 2023, the company commenced offers to exchange approximately $800 million of its 5.75% and 5.25% Senior Notes for new 7.00% Second Lien Senior Secured Notes due 2030142143 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant downturn in the residential real estate market, detailing segment performance, liquidity, debt covenants, and cost-saving initiatives in response to challenging conditions Current Business and Industry Trends The residential real estate market remained weak in H1 2023 due to high mortgage rates and low inventory, leading to a 23% decline in Q2 homesale transaction volume, partially offset by company cost savings Homesale Transaction Volume Change (YoY) | Metric | Q2 2023 | H1 2023 | | :--- | :--- | :--- | | Anywhere Combined Volume | (23)% | (27)% | | Closed homesale sides | (22)% | (25)% | | Average homesale price | (1)% | (2)% | - The company realized cost savings of approximately $50 million in Q2 2023 and $100 million year-to-date, with plans to realize an additional $100 million in savings during the rest of 2023155 - High mortgage rates, averaging 6.71% in June 2023, continue to negatively impact homesale transaction volume, housing affordability, and refinancing activity157159 Results of Operations Net revenues for Q2 2023 fell 22% to $1,671 million, and Operating EBITDA dropped 38% to $126 million, with all segments experiencing significant declines due to lower transaction volumes Q2 2023 vs Q2 2022 Segment Performance (in millions) | Segment | Revenues 2023 | Revenues 2022 | % Change | Operating EBITDA 2023 | Operating EBITDA 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Franchise Group | $284 | $339 | (16)% | $164 | $204 | (20)% | | Owned Brokerage Group | $1,380 | $1,775 | (22)% | $(10) | $11 | (191)% | | Title Group | $100 | $144 | (31)% | $10 | $21 | (52)% | | Total Company | $1,671 | $2,142 | (22)% | $126 | $202 | (38)% | H1 2023 vs H1 2022 Segment Performance (in millions) | Segment | Revenues 2023 | Revenues 2022 | % Change | Operating EBITDA 2023 | Operating EBITDA 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Franchise Group | $491 | $606 | (19)% | $261 | $342 | (24)% | | Owned Brokerage Group | $2,295 | $3,039 | (24)% | $(85) | $(29) | (193)% | | Title Group | $172 | $334 | (49)% | $(7) | $18 | (139)% | | Total Company | $2,802 | $3,777 | (26)% | $74 | $271 | (73)% | Financial Condition, Liquidity and Capital Resources As of June 30, 2023, the company held $188 million in cash, maintaining compliance with debt covenants, though market conditions and litigation outcomes could impact future liquidity - Cash, cash equivalents, and restricted cash stood at $188 million as of June 30, 2023, a decrease of $30 million from year-end 2022239 - The company has not repurchased any shares since 2022, with $203 million remaining available under its share repurchase program as of June 30, 2023234 - The company was in compliance with its senior secured leverage ratio covenant (not to exceed 4.75 to 1.00) as of June 30, 2023246 Item 3. Quantitative and Qualitative Disclosures about Market Risks The company's primary market risk is interest rate fluctuations on its $565 million variable-rate debt, with a 0.25% SOFR increase impacting annual interest expense by approximately $1 million - The company's main market risk exposure is to interest rate changes on its $565 million of variable-rate debt under the Revolving Credit Facility and Term Loan A Facility257260 - A 0.25% increase in the SOFR rate is estimated to have an approximately $1 million impact on the company's annual interest expense260 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective at the 'reasonable assurance' level261265 PART II OTHER INFORMATION Item 1. Legal Proceedings This section details significant legal risks from ongoing antitrust and TCPA class actions, noting that unfavorable outcomes could materially impact the company's financial condition and operations - The company faces significant legal risks from ongoing antitrust (Burnett, Moehrl) and TCPA (Bumpus) litigation, with trials scheduled for late 2023 and early 2024271 - The company warns that judgments or settlements could materially exceed accrued amounts and have a material adverse effect on its financial condition, results of operations, or cash flows270 Item 5. Other Information No Rule 10b5-1 trading plans or arrangements were adopted, modified, or terminated by directors or officers during the second quarter of 2023 - No Rule 10b5-1 trading plans were adopted, modified, or terminated by any director or officer during the three months ended June 30, 2023274 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and iXBRL formatted financial statements