Realogy (RLGY) 10-Q2024 Q1 Quarterly report

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as "believe," "expect," "anticipate," "intend," "project," "estimate," "plan," and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could."

In particular, information appearing under "Management's Discussion and Analysis of Financial Condition and Results of Operations" includes forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, it is based on management's current plans and expectations, expressed in good faith and believed to have a reasonable basis. However, we can give no assurance that any such expectation or belief will result or will be achieved or accomplished.

More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission ("SEC"), including this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"), particularly under the captions "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings." Most of these factors are difficult to anticipate and are generally beyond our control. You should consider these factors in connection with any forward-looking statements that may be made by us and our businesses generally.

All forward-looking statements herein speak only as of the date of this Quarterly Report. Except as is required by law, we expressly disclaim any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this Quarterly Report. For any forward-looking statement contained in this Quarterly Report, our public filings or other public statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Anywhere Real Estate Inc. ("Anywhere" or the "Company") is a holding company for its consolidated subsidiaries including Anywhere Intermediate Holdings LLC ("Anywhere Intermediate") and Anywhere Real Estate Group LLC ("Anywhere Group") and its consolidated subsidiaries. Anywhere, through its subsidiaries, is a global provider of residential real estate services. Neither Anywhere, the indirect parent of Anywhere Group, nor Anywhere Intermediate, the direct parent company of Anywhere Group, conducts any operations other than with respect to its respective direct or indirect ownership of Anywhere Group. As a result, the consolidated financial positions, results of operations, comprehensive loss and cash flows of Anywhere, Anywhere Intermediate and Anywhere Group are the same.

The accompanying Condensed Consolidated Financial Statements include the financial statements of Anywhere and Anywhere Group. Anywhere's only asset is its investment in the common stock of Anywhere Intermediate, and Anywhere Intermediate's only asset is its investment in Anywhere Group. Anywhere's only obligations are its guarantees of certain borrowings and certain franchise obligations of Anywhere Group. All expenses incurred by Anywhere and Anywhere Intermediate are for the benefit of Anywhere Group and have been reflected in Anywhere Group's Condensed Consolidated Financial Statements.

The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America and with Article 10 of Regulation S-X. Interim results may not be indicative of full year performance because of seasonal and short-term variations. The Company has eliminated all material intercompany transactions and balances between entities consolidated in these financial statements. In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and the related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ materially from those estimates.

In management's opinion, the accompanying unaudited Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair statement of Anywhere and Anywhere Group's financial position as of March 31, 2024 and the results of operations and comprehensive loss for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023. The Consolidated Balance Sheet at December 31, 2023 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023.

Fair Value Measurements

The fair value of financial instruments is generally determined by reference to quoted market values. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques, as appropriate. The fair value of interest rate swaps is determined based upon a discounted cash flow approach.

The fair value of the Company’s contingent consideration for acquisitions is measured using a probability weighted-average discount rate to estimate future cash flows based upon the likelihood of achieving future operating results for individual acquisitions. These assumptions are deemed to be unobservable inputs and as such the Company’s contingent consideration is classified within Level III of the valuation hierarchy. The Company reassesses the fair value of the contingent consideration liabilities on a quarterly basis.

The Company's provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against the income before income taxes for the period. In addition, non-recurring or discrete items are recorded in the period in which they occur. The provision for income taxes was a benefit of $28 million and $46 million for the three months ended March 31, 2024 and 2023, respectively.

The Company estimates the allowance necessary to provide for uncollectible accounts receivable. The estimate is based on historical experience, combined with a review of current conditions and forecasts of future losses, and includes specific accounts for which payment has become unlikely. The process by which the Company calculates the allowance is performed in the individual business units where specific problem accounts are identified and reserved primarily based upon the age profile of the receivables and specific payment issues, combined with reasonable and supportable forecasts of future losses.

Significant non-cash transactions included finance lease additions of $3 million and $2 million during the three months ended March 31, 2024 and 2023, respectively, which resulted in non-cash additions to property and equipment, net and other non-current liabilities.

The Company's lease obligations as of March 31, 2024 have not changed materially from the amounts reported in the 2023 Form 10-K.

The Company systematically reviews and evaluates the relevance and implications of all Accounting Standards Updates ("ASUs"). While recently issued standards not expressly listed below were scrutinized, they were deemed either inapplicable or anticipated to not have a material impact on the Company's consolidated financial position or results of operations.

In March 2024, the SEC adopted final regulations aimed at improving and streamlining climate-related disclosures for publicly traded companies and in public offerings. These regulations represent the SEC's response to investors' calls for more uniform, comparable, and trustworthy data regarding the financial implications of climate-related risks on a company's operations, as well as its strategies for managing such risks. The registrants will be required to provide disclosure, subject to existing audit requirements, regarding the effects of severe weather events and other natural conditions on the financial statements; financial information related to certain carbon offsets and renewable energy certificates; and material impacts on financial estimates and assumptions that are due to severe weather events and other natural conditions or disclosed climate-related targets or transition plans. Additional disclosure requirements will include: material direct and indirect (Scope 1 and Scope 2) greenhouse gas emissions; governance and oversight of material climate-related risks; the material impact of climate risks on the company’s strategy, results of operations and financial condition; risk management processes for material climate-related risks; and material climate targets and goals. The new rules are effective 60 days after being published in the Federal Register and will be effective for all calendar year end companies for the fiscal year 2025 (with

Based on the Company’s amortizable intangible assets as of March 31, 2024, the Company expects related amortization expense for the remainder of 2024, the four succeeding years and thereafter to be approximately $67 million, $89 million, $89 million, $74 million, $68 million and $577 million, respectively.

The Company continues to execute on its strategic plan ("the Operational Efficiencies Plan" or "the 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 as well as consumers from a marketing and technology perspective. In January 2023, the Company executed a meaningful workforce reduction driven by worsening trends in the housing market beginning in 2022. The Company has and will incur additional costs in 2024, primarily associated with facility closures that are part of the continued execution of the Plan. These actions build on the multiple other cost reduction and spending reprioritization initiatives such as simplified and more integrated and digitized offerings, systems and support. Delivering the Company’s business model more digitally is an increasing part of improving the agent, franchisee and consumer experience and the Company's ongoing cost focus. The Company expects to continue to prioritize investments in efforts to support its independent sales agents, franchisees and consumers which includes investments in technology and innovative products, lead generation and franchisee support.

The Company is involved in claims, legal proceedings, alternative dispute resolution and governmental inquiries or regulatory actions related to alleged improper business practices, compliance, securities, franchise, brokerage, commercial, employment, regulatory, intellectual property, tax and contract disputes, including the matters described below.

The Company believes that it has adequately accrued for legal matters as appropriate. The Company records litigation accruals for legal matters when it is both probable that a liability will be incurred, and the amount of the loss can be reasonably estimated. Where the reasonable estimate of the probable loss is a range, the Company records as an accrual in its financial statements the most likely estimate of the loss, or the low end of the range if there is no one best estimate. For other litigation for which a loss is reasonably possible, the Company is unable to estimate a range of reasonably possible losses.

Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable developments and resolutions could occur and even cases brought by us can involve counterclaims asserted against us. Even in matters in which we are not a named party, regulatory investigations and other litigation can have significant implications for the Company, particularly in employment law, various regulatory compliance obligations and litigation involving trade associations or MLSs, as changes to their rules and practices can directly impact us. In addition, litigation and other legal matters, including class action lawsuits, multi-party litigation and regulatory proceedings challenging practices that have broad impact, can be costly to defend and, depending on the class size and claims, could be costly to settle. Insurance coverage may be unavailable for certain types of claims (including antitrust and Telephone Consumer Protection Act ("TCPA") litigation) and even where available, insurance carriers may dispute coverage for various reasons, including the cost of defense, there is a deductible for each such case, and such insurance may not be sufficient to cover the losses the Company incurs.

From time to time, even if the Company believes it has substantial defenses, it may consider litigation settlements based on a variety of circumstances.

Due to the foregoing factors as well as the factors set forth below, the Company could incur charges or judgments or enter into settlements of claims, based upon future events or developments, with liabilities that are materially in excess of amounts accrued and these judgments or settlements could have a material adverse effect on the Company’s financial condition, results of operations or cash flows in any particular period. As such, an increase in accruals for one or more of these matters in any reporting period may have a material adverse effect on the Company's results of operations and cash flows for that period.

The below captioned matters address certain current litigation involving the Company. The captioned matters described herein cover evolving, complex litigation and the Company assesses its accruals on an ongoing basis taking into account the procedural stage and developments in the litigation.

All of these matters are presented as currently captioned, but as noted elsewhere in this Quarterly Report, Realogy Holdings Corp. has been renamed Anywhere Real Estate Inc.

The cases included under this header, Antitrust Litigation, are class actions that challenge residential real estate industry rules and practices for the offer and payment of buyer-broker commissions and certain alleged associated practices. The issues raised by these cases are pending in multiple jurisdictions, are at various stages of litigation, claim to cover lengthy periods, involve different assertions with respect to liability and damages, include federal and certain state law claims, involve numerous and differing parties, and—given that antitrust laws generally provide for joint and several liability and treble damages—could result in a broad range of outcomes, making it difficult to predict possible damages or how legal, factual and damages issues will be resolved.

Further, since late October 2023, more than thirty additional lawsuits with similar or related claims have been filed against various real estate brokerages, NAR, MLSs, and/or state and local Realtor Associations, about a third of which name Anywhere, its subsidiaries or franchisees. In those cases, plaintiffs have generally either agreed to dismiss or stay the actions against Anywhere, its subsidiaries or franchisees pending final approval of the nationwide settlement that would release most claims asserted in the cases filed after October 2023. The Company believes that additional antitrust litigation and investigations related to other industry practices, may be possible beyond what has already been filed.

The plaintiffs allege that the defendants engaged in a continuing contract, combination, or conspiracy to unreasonably restrain trade and commerce in violation of Section 1 of the Sherman Act because defendant NAR allegedly established mandatory anticompetitive policies and rules for the multiple listing services and its members that require an offer of buyer-broker compensation when listing a property. The plaintiffs' experts argue that "but for" the challenged NAR policies and rules, these offers of buyer-broker compensation would not be made and plaintiffs seek the recovery of full commissions paid to buyers’ brokers as to both brokerage and franchised operations in the relevant geographic area.

The plaintiffs further allege that commission sharing, which provides for the broker representing the seller sharing or paying a portion of its commission to the broker representing the buyer, is anticompetitive and violates the Sherman Act, and that the brokerage/franchisor defendants conspired with NAR by requiring their respective brokerages/franchisees to comply with NAR’s policies, rules, and Code of Ethics, and engaged in other allegedly anticompetitive conduct including, but not limited to, steering and agent education that allegedly promotes the practice of paying buyer-broker compensation and discourages commission negotiation. Plaintiffs’ experts dispute defendants’ contention that the practice of offering and paying buyer-broker compensation is based on natural and legitimate economic incentives and benefits that exist irrespective of the challenged NAR policies and rules and plaintiffs also contend that international practices are comparable benchmarks.

In September 2019, the Department of Justice ("DOJ") filed a statement of interest and appearances for this matter and, in July 2020 and July 2021, requested the Company provide it with all materials produced in this matter.

The Court granted class certification on April 22, 2022 and as certified, includes, according to plaintiffs, over 250,000 transactions for which the plaintiffs are seeking a full refund of the buyer broker commissions. The Company and the plaintiffs engaged in several mediation sessions, the most recent of which was held at the end of August 2023 and resulted in a settlement of the litigation as against Anywhere (the "Anywhere Settlement") (later followed by similar settlements with the other corporate defendants as well as a settlement by NAR, with two of the corporate defendants and NAR settling after the jury trial referenced below).

The court granted preliminary approval of the Anywhere Settlement on November 21, 2023. Notice to the class was issued on February 1, 2024. A hearing for final approval of the Anywhere Settlement (and the settlements by two other corporate defendants) is scheduled for May 9, 2024. Several parties have objected to the terms of these three settlements (including the Anywhere Settlement), though the Company believes that, notwithstanding these objections, the Anywhere Settlement is fair, reasonable and adequate and anticipates receiving final court approval.

Under the terms of the proposed settlement, Anywhere has agreed to deposit into the settlement fund (i) $10 million within 14 business days after preliminary court approval is granted (which was paid in December 2023); (ii) $20 million within 14 business days after the court approval of fees and costs, which is typically granted with final approval; and (iii) the remaining balance within 21 business days after final court approval and all appellate rights are exhausted.

On November 1, 2023, following a several week trial, judgment was entered against the non-settling defendants and awarded damages to the plaintiffs from the non-settling defendants in the amount of $1.785 billion, before trebling, but the court did not make any determination of injunctive relief at that time. While the jury found that all named defendants violated Section 1 of the Sherman Act, the judgment does not alter the Anywhere Settlement or the settlement of the other corporate defendant who settled before trial.

On March 15, 2024, NAR announced that it had entered into a nationwide class action settlement under which it would pay $418 million and agree to certain practice changes. These practice changes include, but are not limited to, prohibiting offers of compensation to buyer brokers from being made on listings on an MLS, requiring Realtors® representing a buyer to enter into a written agreement with a buyer, setting forth the buyer broker’s fee and obligations before showing the buyer a property, and prohibiting Realtors® from representing their services as free, or collecting greater compensation than set forth in the written agreement with the buyer. The court granted preliminary approval of the NAR settlement on April 23, 2024.

On July 6, 2022, plaintiffs filed an amended complaint substituting in eight new named plaintiffs and containing allegations substantially similar to the original complaint but also adding certain claims under state antitrust statutes and consumer protection statutes. Motions to dismiss remain pending and discovery has not commenced. On February 20, 2024, the Court granted in part and denied in part the Defendants’ Motion to Dismiss. The court dismissed the federal Sherman Act claim and two state law claims, but rejected dismissal of the remaining state law claims. In addition, the court dismissed one corporate defendant for lack of personal jurisdiction in light of the dismissal of the federal Sherman Act claim. On April 15, Anywhere filed a Motion to Dismiss the remaining state law claims for lack of personal jurisdiction following the dismissal of the federal Sherman Act claims. Anywhere also filed an Answer to the amended complaint.

In March 2022, the Court granted plaintiffs’ motion for class certification for the foregoing classes as to the Anywhere defendants but not as to co-defendant Mojo and dismissed Mojo from the case. Plaintiffs and the Anywhere defendants’ cross-motions for summary judgment were denied without prejudice on May 11, 2022. The Company's petition for permission to appeal the class certification filed with the 9th Circuit Court of Appeals was denied and the plaintiffs’ class notice plan was approved on May 26, 2022.

Plaintiffs had claimed that approximately 1.2 million Do Not Call calls and approximately 265,000 Pre-Recorded Messages qualified for inclusion in the classes, but on March 29, 2023, filed a motion to narrow the classes to approximately 321,000 Do Not Call calls and approximately 165,000 Pre-Recorded Messages. On April 12, 2023, the Company opposed Plaintiffs' motion to modify the classes and sought to decertify them. The Court vacated the January 29, 2024 jury trial date (which had previously been rescheduled several times) and a status hearing is currently set for May 23, 2024. Plaintiffs' motion to narrow the classes, the Company’s opposition seeking to decertify the classes, as well as other pre-trial motions, are pending.

The Company disputes the allegations against it in this case, believes it has substantial defenses to both plaintiffs’ liability claims and damage assertions, and is vigorously defending this action.

Anywhere Group (then Realogy Corporation) separated from Cendant on July 31, 2006 (the "Separation"), pursuant to a plan by Cendant (now known as Avis Budget Group, Inc.) to separate into four independent companies—one for each of Cendant's business units—real estate services (Anywhere Group, formerly referred to as Realogy Group), travel distribution services ("Travelport"), hospitality services, including timeshare resorts ("Wyndham Worldwide"), and vehicle rental ("Avis Budget Group"). Pursuant to the Separation and Distribution Agreement dated as of July 27, 2006 among Cendant, Anywhere Group, Wyndham Worldwide and Travelport (the "Separation and Distribution Agreement"), each of Anywhere Group, Wyndham Worldwide and Travelport have assumed certain contingent and other corporate liabilities (and related costs and expenses), which are primarily related to each of their respective businesses. In addition, Anywhere Group has assumed 62.5% and Wyndham Worldwide has assumed 37.5% of certain contingent and other corporate liabilities (and related costs and expenses) of Cendant. The due to former parent balance was $39 million at March 31, 2024 and $38 million at December 31, 2023, respectively. The due to former parent balance was comprised of the Company’s portion of the following: (i) Cendant’s remaining contingent tax liabilities, (ii) potential liabilities related to Cendant’s terminated or divested businesses, and (iii) potential liabilities related to the residual portion of accruals for Cendant operations.

In December 2022, a hearing was held with the California Office of Tax Appeals ("OTA") on a Cendant legacy tax matter involving Avis Budget Group that related to a 1999 transaction. The case presented two issues: (i) whether the notices of proposed assessment issued by the California Franchise Tax Board were barred by the statute of limitations; and (ii) whether a transaction undertaken by Avis Budget Group in tax year 1999 constituted a tax-free reorganization under the Internal Revenue Code. In March 2023, the OTA decided in favor of the California Franchise Tax Board on both issues. As a result, the Company increased its accrual for this legacy tax matter in the first quarter of 2023 and as of March 31, 2024 the accrual is $39 million. On April 10, 2024, the Company's petition for rehearing was denied by the OTA, and the tax assessment is anticipated to become payable as early as the second quarter of 2024, even if judicial relief is sought.

The Company is subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording related assets and liabilities. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities whereby the outcome of the audits is uncertain. The Company believes there is appropriate support for positions taken on its tax returns. The liabilities that have been recorded represent the best estimates of the probable loss on certain positions and are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. However, the outcomes of tax audits are inherently uncertain.

As a service to its customers, the Company administers escrow and trust deposits which represent undisbursed amounts received for the settlement of real estate transactions. Deposits at FDIC-insured institutions are insured up to $250,000. These escrow and trust deposits totaled approximately $662 million at March 31, 2024 and while these deposits are not assets of the Company (and, therefore, are excluded from the accompanying Condensed Consolidated Balance Sheets), the Company remains contingently liable for the disposition of these deposits.

The Company has not included a statement of changes in equity for Anywhere Group as the operating results of Anywhere Group are consistent with the operating results of Anywhere as all revenue and expenses of Anywhere Group flow up to Anywhere and there are no incremental activities at the Anywhere level. The only difference between Anywhere Group and Anywhere is that the $1 million in par value of common stock in Anywhere's equity is included in additional paid-in capital in Anywhere Group's equity.

The Company may repurchase shares of its common stock under authorizations from its Board of Directors. Shares repurchased are retired and not displayed separately as treasury stock on the condensed consolidated financial statements. The par value of the shares repurchased and retired is deducted from common stock and the excess of the purchase price over par value is first charged against any available additional paid-in capital with the balance charged to retained earnings. Direct costs incurred to repurchase the shares are included in the total cost of the shares.

The Company's Board of Directors authorized a share repurchase program of up to $300 million of the Company's common stock in February 2022. The Company has not repurchased any shares under the share repurchase programs since 2022. As of March 31, 2024, $203 million remained available for repurchase under the share repurchase program. The Company is subject to limitations on share repurchases, which include compliance with the terms of our debt agreements.

During the first quarter of 2024, the Company granted restricted stock units related to 1.3 million shares with a grant date fair value of $6.09 and performance share units ("PSU") related to 1.3 million shares with a grant date fair value of $6.44. The Company granted all time-based equity awards in the form of restricted stock units which are subject to ratable vesting over a three-year period.

During the first quarter of 2024, the Company incorporated investor feedback in the design of its 2024 long-term incentive program in an effort to reduce volatility of payouts. The Company redesigned the PSU award tied to free cash flow achieved over a three-year period. Specifically, free cash flow targets are now set annually instead of a three-year cumulative goal set at the beginning of the three-year cycle, with the actual payout being the average of the payouts of the three separate annual achievements, subject to further adjustment based upon how Anywhere's common stock performed against a peer group over the three-year period. The actual payout, if any, will be subject to a 15% +/- adjustment if the total stockholder return of Anywhere's common stock is at or above the 75th percentile or below the 25th percentile of the total stockholder return of the peer group the Company's Compensation and Talent Management Committee uses to benchmark executive compensation (subject to additional weighting for the Company's direct peers in that peer group). With the foregoing change, the Company eliminated the separate PSU awards tied to the total stockholder return of Anywhere's common stock relative to the total stockholder return of the S&P MidCap 400 index, referred to as our RTSR PSU units.

Basic earnings (loss) per common share is computed based on net income (loss) attributable to Anywhere stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed consistently with the basic computation plus the effect of dilutive potential common shares outstanding during the period. Dilutive potential common shares include shares that the Company could be obligated to issue from its Exchangeable Senior Notes and warrants if dilutive and outstanding stock-based compensation awards. For purposes of computing diluted earnings (loss) per common share, weighted average common shares do not include potentially dilutive common shares if their effect is anti-dilutive. As such, the shares that the Company could be obligated to issue from its stock options, warrants and Exchangeable Senior Notes are excluded from the earnings (loss) per share calculation if the exercise or exchangeable price exceeds the average market price of common shares.

The Company uses the treasury stock method to calculate the dilutive effect of outstanding stock-based compensation. If dilutive, the Company uses the if converted method to calculate the dilutive effect of its Exchangeable Senior Notes. These notes will have a dilutive impact when the average market price of the Company’s common stock exceeds the initial exchange price of $24.49 per share. The Exchangeable Senior Notes were not dilutive as of March 31, 2024 as the closing price of the Company's common stock as of March 31, 2024 was less than the initial exchange price.

Our technology and data organization is dedicated to providing innovative technology products and solutions that support the productivity and success of Anywhere’s businesses, brands, brokers, agents, and consumers.

In the NAR Settlement, NAR has agreed to various industry practice changes, including the elimination of any requirement for a seller or listing agent to offer compensation to the buyer broker, the prohibition of communicating offers of compensation to the buyer broker on the MLS (or any site that contains a derivative use of MLS data), and the requirement that brokers working with buyers enter into written agreements with their buyers. Per the NAR Settlement, these changes are scheduled to go into effect prior to the practice changes agreed to in the Anywhere Settlement.

On April 23, 2024, the court granted preliminary approval of the NAR Settlement. There can be no assurance that third parties, including regulatory bodies, will not object to the terms of the NAR Settlement, that the NAR Settlement will receive final court approval, or that it will not be modified as part of any such approval.

Anywhere has agreed to deposit into the settlement fund an additional $20 million within 14 business days after court approval of fees and costs, which is typically granted with final approval; and the remaining balance of the settlement amount within 21 business days after final court approval and when all appellate rights are exhausted.

As disclosed in Note 6, Anywhere has agreed to certain practice changes, to be implemented within six months after final court approval and exhaustion of all appellate rights. The implementation timeline for certain practice changes required by the NAR Settlement will require the Company to accelerate the timing of certain practice changes contemplated by the Anywhere Settlement.

As further described in Part I., "Item 1.—Business—Government and Other Regulations—Antitrust, Competition and Bribery Laws" in our Form 10-K for the year ended December 31, 2023, the DOJ, which had previously agreed to a proposed consent decree to settle its antitrust claims against NAR, withdrew from the consent decree and re-launched its investigation of NAR’s rules and conduct via a new and comprehensive civil investigative demand ("CID"). After the lower court granted NAR’s petition to set aside the new CID, on April 5, 2024, the D.C. Circuit Court of Appeals ruled in favor of the DOJ, allowing the agency to move forward to reopen its antitrust investigation of NAR.

The residential real estate market is at historic lows. According to data from NAR, homesale transactions in 2023 totaled 4.09 million compared to 5.03 million transactions in 2022, marking the lowest amount since 1995. For the Company, the combined homesale transaction volume of Franchise Group and Owned Brokerage Group, calculated by multiplying closed homesale transaction sides with the average homesale price decreased by 19% in 2023 and by 14% in 2022, when compared to the previous year.

Market conditions in the residential real estate industry remained weak in the first quarter of 2024. According to NAR for the first quarter of 2024 as compared to first quarter of 2023, the existing homesale transactions decreased 3% to 829,000 from 859,000.

Several market factors contributed to the substantial declines in homesale transactions, the reduced activity in purchase and refinancing units and the reduced mortgage origination volume. These factors include the rapid escalation of mortgage rates starting in March 2022, persistent high inflation over the past two years, reduced housing affordability, low housing inventory, and broader macroeconomic concerns. The low housing inventory environment not only led to a decrease in closed homesale sides but also contributed to an elevation in the average homesale price over the past two years.

We saw, however, improvement in the first quarter of 2024, with homesale transaction volume on a combined basis up 2% year-over-year, driven by year-over-year increases in average homesale price. For 2024, as of its most recently released forecast, Fannie Mae is forecasting existing homesale transactions to increase 4% to 4.27 million.

Furthermore, refinancing title and closing units declined 8% and purchase title and closing units declined 2% at Title Group during the first quarter of 2024 compared with the same period in 2023 as a result of the high interest rate environment.

These actions build on the multiple other cost reduction and spending reprioritization initiatives such as simplified and more integrated and digitized offerings, systems and support. Delivering the Company’s business model more digitally is an increasing part of improving the agent, franchisee and consumer experience and our ongoing cost focus. The Company expects to continue to prioritize investments in efforts to support our independent sales agents, franchisees and consumers. This includes investments in technology and innovative products, lead generation and franchisee support.

A wide variety of factors can contribute to mortgage rates, including federal interest rates, Treasury note yields, inflation, demand, consumer income, unemployment levels, foreclosure rates, and fiscal and monetary policies, to name a few. Since March 2022, the U.S. Federal Reserve Board (the "Federal Reserve") has taken aggressive action intended to try to control inflation, including raising the target federal funds rate by over 400 basis points during 2022 and by an additional 100 basis points during 2023. Although these actions have had mixed results on the economy, the Federal Reserve has maintained unchanged rates since July 2023. In their most recent press release in March 2024, they conveyed their anticipation that inflation will gradually align with their target, prompting a reduction in rates. However, the timing of these cuts remains uncertain. Yields on the 10-year Treasury note were 4.20% as of March 31, 2024 compared to 3.48% as of March 31, 2023. Fiscal and monetary policies of the federal government and its agencies can also adversely impact mortgage rates.

The rising interest rate environment has negatively impacted multiple aspects of our business. Increases in mortgage rates typically correlate with diminished homesale transaction volume, reduced housing affordability and lower activity in both purchase and refinancing units and mortgage origination. We expect that our business will continue to be adversely impacted by the current high mortgage rate environment until the interest rate environment improves. For example, we believe the high mortgage rate environment is contributing to decreased homesale transaction volume, as potential home sellers choose to stay with their lower mortgage rate rather than sell their home and pay a higher mortgage rate with the purchase of another home and potential home buyers choose to rent rather than pay higher mortgage rates.

Aggressive competition for the affiliation of independent sales agents in this industry continues to make recruitment and retention efforts at both Franchise Group and Owned Brokerage Group challenging, in particular with respect to more productive sales agents, and had and may continue to have a negative impact on our market share. These competitive market factors along with other trends (such as changes in the spending patterns of independent sales agents, as more agents purchase services from third parties outside of their affiliated broker) are expected to continue to put upward pressure on the average share of commissions earned by independent sales agents. If independent sales agents affiliated with our company owned brokerages are paid a higher proportion of the commissions earned on a homesale transaction or the level of commission income we receive from a homesale transaction is otherwise reduced, the operating margins of our company owned brokerages could continue to be adversely affected. Similarly, franchisees have and may continue to seek reduced royalty fee arrangements or other incentives from us to offset the continued business pressures on such franchisees, which would result in a reduction in royalty fees paid to us.

For a discussion of the current legal and regulatory environment and how such environment could potentially impact us, see Part I., "Item 1.—Business—Government and Other Regulations" and Part I., "Item 1A.—Risk Factors" in our 2023 Form 10-K.

For Franchise Group, an additional metric, Net Royalty Per Side, is utilized. This metric represents the royalty payment to the Franchise Group for each homesale transaction side factoring in royalty rates, homesale prices, average homesale broker commission rates, volume incentives and other incentives. Net royalty per side is a comprehensive measure that accounts for changes in average homesale prices and all incentives and represents the royalty revenue impact of each incremental side.

For Owned Brokerage Group, we also gauge performance using Gross Commission Income Per Side. This metric is derived by dividing gross commission income (comprising commissions from homesale transactions and other activities, primarily leasing transactions) by closed homesale sides. Owned Brokerage Group, as a franchisee of Franchise Group, pays a royalty fee of approximately 6% per transaction to Franchise Group. The remaining gross commission income is distributed between the broker (Owned Brokerage Group) and independent sales agents based on their respective independent contractor agreements, specifying the agents share of the broker commission.

For Title Group, our assessment of operating performance centers on key metrics related to title and closing units differentiating between Purchase Title and Closing Units (resulting from home purchases), and Refinance Title and Closing Units (stemming from homeowners refinancing their home loans). The Average Fee Per Closing Unit metric represents the average fee earned on both purchase and refinancing title sides.

Declines in the number of closed homesale sides and/or declines in average homesale price adversely affect our results of operations by: (i) reducing the royalties we receive from our franchisees, (ii) reducing the commissions our company owned brokerage operations earn, and (iii) reducing the demand for services offered through Title Group, including title, escrow and settlement services or the services of our mortgage origination, title underwriter insurance, or other joint ventures. Additionally, declining closed homesale sides and/or declines in average homesale price increase the risk of franchisee default due to lower homesale volume. Further, our results have been and may continue to be negatively affected by a decline in commission rates charged by brokers, greater commission payments to independent sales agents, lower royalty rates from franchisees or an increase in other incentives paid to franchisees, among other factors.

Royalty fees are charged to all franchisees pursuant to the terms of the relevant franchise agreements and franchisees may receive volume incentives described in each of the real estate brands' franchise disclosure documents. Other incentives may also be used as consideration to attract new franchisees, grow franchisees (including through independent sales agent recruitment) or extend existing franchise agreements, although in contrast to volume incentives, the majority of other incentives are not homesale transaction based. See Part I., "Item 1.—Business—Anywhere Brands—Franchise Group—Operations—Franchising" in our 2023 Form 10-K for additional information.

Over the past several years, our top 250 franchisees have grown faster than our other franchisees through organic growth and market consolidation, which has had, and may continue to, put pressure on our ability to renew or negotiate franchise agreements with favorable terms due to their size and scale, and that has had, and could, adversely impact our royalty revenue.

We face significant competition from other national real estate brokerage brand franchisors for franchisees and we expect that the trend of increasing incentives will continue in the future in order to attract, retain, and help grow certain franchisees. Taking into account competitive factors, from time to time, we have and may continue to introduce pilot programs or restructure or revise the model used at one or more franchised brands, including with respect to fee structures, minimum production requirements or other terms. We expect to experience pressures on net royalty per side, largely due to the impact of competitive market factors noted above and continued concentration among our top 250 franchisees.

Owned Brokerage Group has a significant concentration of real estate brokerage offices and transactions in geographic regions where home prices are at the higher end of the U.S. real estate market, particularly the east and west coasts, while Franchise Group has franchised offices that are more widely dispersed across the United States. Accordingly, operating results and homesale statistics may differ between Owned Brokerage Group and Franchise Group based upon geographic presence and the corresponding homesale activity in each geographic region. In addition, the share of commissions earned by independent sales agents directly impacts the margin earned by Owned Brokerage Group. Such share of commissions earned by independent sales agents varies by region and commission schedules are generally progressive to incentivize sales agents to achieve higher levels of production.

Discussed below are our condensed consolidated results of operations and the results of operations for each of our reportable segments. The reportable segments presented represent those for which we maintain separate financial information regularly reviewed and utilized by our chief operating decision maker for performance assessment and resource allocation. The classification of reportable segments, also considers the distinctive nature of services offered by each segment. Management's evaluation of individual reportable segment performance centers on two key metrics: revenue and Operating EBITDA. Operating EBITDA is a non-GAAP financial measure and is defined as net income (loss) adjusted for depreciation and amortization, interest expense, net (excluding relocation services interest for securitization assets and securitization obligations), income taxes, and certain non-core items. Non-core items include restructuring charges, former parent legacy items, gains or losses on the early extinguishment of debt, impairments, and gains or losses on discontinued operations or the sale of businesses, investments or other assets. Operating EBITDA Margin is defined as Operating EBITDA as a percentage of revenues. Our presentation of Operating EBITDA may not align with similar measures employed by other entities. Variations may arise due to differences in the inclusion or exclusion of specific items and the interpretation of non-core elements within the calculation.

Equity in losses were $1 million during the first quarter of 2024 compared to losses of $2 million during the first quarter of 2023. Equity in losses during the first quarter of 2024 consisted of $2 million of losses for Guaranteed Rate Affinity, partially offset by $1 million of earnings for the operations of our other equity method investments. Equity in losses during the first quarter of 2023 consisted of $2 million of losses for Guaranteed Rate Affinity and $1 million of losses for the operations of our brokerage related equity method investments, partially offset by $1 million of earnings for the Title Insurance Underwriter Joint Venture.

The Company continues to execute on its 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 as well as consumers from a marketing and technology perspective. Under the Operational Efficiencies Plan we incurred $10 million of costs including $5 million of facility related costs and $5 million of personnel related costs primarily at Owned Brokerage Group during the first quarter of 2024 compared to $23 million of costs during the first quarter of 2023. Total expected restructuring costs under the Operational Efficiencies Plan are currently anticipated to be $90 million with $73 million incurred to date through the first quarter of 2024. During the first quarter of 2024, the Company realized cost savings of approximately $30 million of which approximately half related to specific restructuring activities. Furthermore, in connection with prior restructuring programs, we incurred $1 million of costs during the first quarter of 2024 compared to $2 million during the first quarter of 2023 primarily related to the transformation of our corporate headquarters. See Note 5, "Restructuring Costs", in the Condensed Consolidated Financial Statements for additional information.

The Company's provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against the income or loss before income taxes for the period. In addition, non-recurring or discrete items are recorded in the period in which they occur. The provision for income taxes was a benefit of $28 million for the three months ended March 31, 2024 compared to $46 million for the three months ended March 31, 2023. Our effective tax rate was 22% and 25% for the three months ended March 31, 2024 and 2023, respectively. The effective tax rate for the three months ended March 31, 2024 was primarily impacted by non-deductible executive compensation and equity awards for which the market value at vesting was lower than at the date of grant.