Anywhere(HOUS) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the company's unaudited financial statements, management's discussion, market risks, and internal controls for the reporting period Financial Statements (Unaudited) Presents unaudited condensed financial statements and notes, revealing declines in net revenues and income due to market conditions and significant debt refinancing Financial Statements Reports Q3 and nine-month declines in net revenues and income, with reduced cash and operating cash flow reversal Condensed Consolidated Statements of Operations (Q3 & 9-Months) | Metric | Q3 2022 (In millions) | Q3 2021 (In millions) | 9-Months 2022 (In millions) | 9-Months 2021 (In millions) | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $1,808 | $2,186 | $5,585 | $6,009 | | Income before income taxes | $66 | $153 | $237 | $374 | | Net income attributable to Anywhere | $55 | $114 | $166 | $296 | | Diluted EPS | $0.48 | $0.95 | $1.42 | $2.46 | Condensed Consolidated Balance Sheet Highlights | Metric | Sept 30, 2022 (In millions) | Dec 31, 2021 (In millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $272 | $735 | | Total current assets | $913 | $1,188 | | Total assets | $7,013 | $7,210 | | Total current liabilities | $1,342 | $1,052 | | Long-term debt | $2,486 | $2,940 | | Total liabilities | $4,797 | $5,018 | | Total equity | $2,216 | $2,192 | Condensed Consolidated Statements of Cash Flows (9-Months) | Metric | 9-Months 2022 (In millions) | 9-Months 2021 (In millions) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(71) | $489 | | Net cash used in investing activities | $(25) | $(68) | | Net cash used in financing activities | $(367) | $(238) | | Net (decrease) increase in cash | $(466) | $183 | Notes to Condensed Consolidated Financial Statements Details company name change, title underwriter sale, significant debt refinancing, and ongoing antitrust and TCPA litigation - The company changed its name from Realogy Holdings Corp. to Anywhere Real Estate Inc. effective June 9, 2022[45] - On March 29, 2022, the company sold its title insurance underwriter for $210 million, recognizing a $131 million gain and retaining a 30% equity stake in a new joint venture[50] - In Q1 2022, the company issued $1 billion of 5.25% Senior Notes due 2030 and used the proceeds to redeem $1.1 billion of higher-rate notes, resulting in a $92 million loss on early extinguishment of debt[92][113] - The company is defending against several significant class-action lawsuits, including antitrust litigation (Burnett and Moehrl cases) and a Telephone Consumer Protection Act (TCPA) case, with the Burnett trial scheduled for February 2023 and the TCPA trial for April 2023[140][142][154] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Analyzes performance decline due to adverse market conditions, detailing cost-saving initiatives, segment results, and liquidity Current Business and Industry Trends Adverse market trends, including rising mortgage rates and inflation, significantly impacted Q3 performance, causing a 17% drop in homesale volume Homesale Transaction Volume Changes vs. Prior Year | Metric | Q3 2022 | 9-Months 2022 | | :--- | :--- | :--- | | Anywhere Combined Volume | (17)% | (7)% | | Closed homesale sides | (21)% | (16)% | | Average homesale price | 5% | 10% | | Franchise Group Volume | (19)% | (10)% | | Owned Brokerage Group Volume | (13)% | (2)% | - Rapidly rising mortgage rates, high inflation, and reduced affordability had a significant detrimental impact on consumer demand during Q3 2022[197] - The Title Group's results were negatively impacted by the high interest rate environment, with refinancing title and closing units declining 65% and purchase units declining 13% for the nine months ended September 30, 2022[203] - Equity in earnings from the Guaranteed Rate Affinity mortgage JV declined from earnings of $49 million in the first nine months of 2021 to a loss of $12 million in the same period of 2022 due to higher mortgage rates and margin compression[204] Results of Operations Consolidated net revenues and income declined significantly in Q3 and nine-month periods, with operating EBITDA falling 41% due to lower volumes Q3 2022 vs. Q3 2021 Consolidated Results | Metric (In millions) | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Net revenues | $1,808 | $2,186 | $(378) | | Net income attributable to Anywhere | $55 | $114 | $(59) | 9-Months 2022 vs. 9-Months 2021 Consolidated Results | Metric (In millions) | 9-Months 2022 | 9-Months 2021 | Change | | :--- | :--- | :--- | :--- | | Net revenues | $5,585 | $6,009 | $(424) | | Net income attributable to Anywhere | $166 | $296 | $(130) | Segment Operating EBITDA (9-Months) | Segment (In millions) | 9-Months 2022 | 9-Months 2021 | Change | | :--- | :--- | :--- | :--- | | Franchise Group | $544 | $576 | $(32) | | Owned Brokerage Group | $(30) | $116 | $(146) | | Title Group | $27 | $170 | $(143) | | Total Company | $437 | $745 | $(308) | Financial Condition, Liquidity and Capital Resources Cash decreased significantly due to financing activities, including share repurchases and debt refinancing, while maintaining a $1.1 billion revolving credit facility - Cash, cash equivalents and restricted cash decreased by $466 million during the first nine months of 2022, ending the period at $277 million[302] - The company repurchased and retired 8.8 million shares of common stock for $97 million during the nine months ended September 30, 2022, with $203 million remaining available under the share repurchase program[290] - In Q1 2022, the company issued $1 billion of 5.25% Senior Notes and used proceeds to redeem $1.1 billion of higher-rate debt, subsequently announcing the redemption of its remaining $340 million of 4.875% Senior Notes in November 2022[292][294] - The company amended its Senior Secured Credit Facility in July 2022, extending the maturity of its $1.1 billion Revolving Credit Facility to July 2027 and transitioning the benchmark rate from LIBOR to SOFR[293] Quantitative and Qualitative Disclosures about Market Risks Identifies interest rate fluctuations on variable-rate debt as the primary market risk, with a $1 million impact for a 0.25% LIBOR increase - The primary market risk is interest rate fluctuations on variable rate borrowings, which include the $225 million Term Loan A Facility[326][329] - A hypothetical 0.25% increase in LIBOR would have an approximately $1 million impact on the company's annual interest expense[329] - As of September 30, 2022, the company had interest rate swaps with a notional value of $450 million to manage a portion of its interest rate exposure[330] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the disclosure controls and procedures for both Anywhere Real Estate Inc. and Anywhere Real Estate Group LLC are effective at the "reasonable assurance" level[333][337] - There were no material changes in the company's internal control over financial reporting during the quarter[334][337] PART II - OTHER INFORMATION Provides additional information including legal proceedings, equity security sales, and a list of filed exhibits Legal Proceedings Details ongoing legal proceedings, including antitrust and TCPA class actions, with trials scheduled for early 2023 and potential material adverse effects - The company refers to Note 8 of the financial statements for detailed information on its legal proceedings[339] - 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 flows[342] - Key trials are scheduled for early 2023: the Burnett antitrust case in late February 2023 and the TCPA case in April 2023[343] Unregistered Sales of Equity Securities and Use of Proceeds Details Q3 2022 share repurchase activity, with approximately $203 million remaining under the authorized program Share Repurchases (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | August 2022 | 3,804,071 | $10.99 | | September 2022 | 1,101,786 | $9.54 | - As of September 30, 2022, approximately $203 million remained available for repurchase under the $300 million program authorized in February 2022[348] Exhibits Lists various exhibits filed with the report, including credit agreement amendments and CEO/CFO certifications - Lists various exhibits filed with the report, including an amendment to the credit agreement, CEO/CFO certifications, and financial data formatted in iXBRL[350]