Realogy reported a net loss of $70 million in the third quarter of 2019, a major swing from the $103 million in profit it posted in the third quarter of 2018. The loss was driven primarily by a $180 million impairment at NRT, Realogy’s own-side brokerage, according to the company.
The company also posted an adjusted earnings per share of $0.65, missing the consensus estimate of $0.85 per share.
“In the third quarter of 2019, we leveraged the strength of Realogy’s size, scale and brands to grow our agent base, launch three new high impact products, and introduce two new high-quality lead generation programs,” Realogy CEO and President Ryan Schneider said in a statement.
“We are energized by our new products and partnerships, which we believe will win more listings, attract more agents and franchisees, and drive growth,” he added.
The goodwill impairment is an accounting adjustment for NRT’s total value, showing the value of NRT, which had been on the books since Apollo Global Management acquired Realogy in 2006, had to be adjusted to reflect the current market. The impairment doesn’t affect company cash flow, according to a spokesperson.
Transaction volume was mostly flat for Realogy’s franchise business, but down 3 percent year-over-year for NRT. Much of that was based on the market and competitor headwinds and declining sales in certain markets like California and New York City, according to Schneider. New York City, was impacted by the mansion tax.
Perhaps the biggest splash of the quarter was the announcement of a partnership with tech giant Amazon. The partnership gives consumers a value package of Amazon goods and services for getting a Realogy agent through the platform. In turn, Realogy agents affiliated with Cartus get valuable buyer leads.
Realogy recently also revamped its iBuyer platform, called RealSure, to give sellers a cash offer from Home Partners of America on their home that’s good for 45 days. The seller can accept the offer after a 30-day waiting period – that Realogy calls a “peace of mind” period – giving them the security of knowing just how much they could get for their home.
Schneider said Realogy remains skeptical about using its own capital to fund homebuying and selling, like iBuyer competitors Zillow and Opendoor.
“We don’t see a path to profitability and we don’t like the risk.,” Schneider said.
The company also announced on Thursday it was selling off Cartus’ relocation services, in a transaction valued at $400 million. The sale of Cartus to SIRVA Worldwide, a global relocation firm, will allow Realogy to pay down corporate debt and use the balance to reinvest in the business.
Realogy has been focused on reducing costs and paying down debt, a strategy that has continued in the quarter.
Through the third quarter of 2019, the company has already realized $44 million of its goal of $70 million in cost savings in 2019. The company reduced net debt by $163 million and has mechanisms in place to generate an expected savings of $80 to $100 million in 2020.
Overall agent count at NRT climbed an additional 1 percent in the third quarter and is up roughly 3 percent year-to-date. The company also saw lower agent commission split pressure than anticipated.
Schneider said the industry actually saw a substantial decline in agent recruitment intensity in September and October, which greatly benefited NRT.
“This is by far the biggest change in the competitive environment to our benefit that we’ve seen in the past two years,” Schneider said, on the company’s third-quarter earnings call.
“All the disruption was coming from one financially disruptive competitor, especially at the high end,” Schneider added later, when asked about the changes. “Something changed in the ecosystem and I believe it’s [an] investor focus on profitability.”
The company’s stock has surged in recent weeks after reaching record lows this summer. Realogy’s stock dipped below $4.50 per share in early September, but has since climbed back up to $9.60 at the close of trading Wednesday. That’s still below where it opened the year, and far below where it was at this time last year when it closed the trading day at $18.90.
After the company released its initial earnings figures and announced the sale of Cartus’ relocation business, the company’s stock dropped more than 10 percent in pre-market trading.