Douglas Elliman Inc.

Welcome to Douglas Elliman Inc.' 's first quarter 2022 conference call. During this call, the terms adjusted net income and adjusted EBITDA will be used. These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, other measures of financial performance prepared in accordance with GAAP. Reconciliations to adjusted net income and adjusted EBITDA are contained in the company's earning release, which has been posted to the investor relations section of the company's website located at investors.elemen.com. Before the call begins, I would like to read a safe harbor statement. The statements made during this conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the company's SecureNate and Exchange Commission filings. I would now like to turn the call over to the Chairman, President, and Chief Executive Officer of Douglas Elliman Inc., Howard M. Lorber.

Good afternoon, and thank you for joining us. Joining me today are Richard Lampin, our Chief Operating Officer, Brian Kirkland, our Chief Financial Officer, and Scott Durkin, President and CEO of Douglas Elliman Realty, our residential real estate brokerage business. On today's call, we will discuss the continued strength of the U.S. residential real estate market and how factors in the market contributed to our solid first quarter financial performance. We will then answer your questions before concluding today's call. During our last earnings call, we discussed why a brand name synonymous with luxury and a comprehensive suite of technology enabled real estate solutions positions Douglas Hellman to capitalize on the highly attractive dynamics in the US residential real estate market. During the first quarter, we demonstrated that this continued to be true. We saw an ongoing trend of strong demand for residential homes combined with low inventory, which continues to result in significant price appreciation, particularly across our luxury markets. These dynamics have propelled an increase in our revenues to $308.9 million for the three months ended March 31st, 2022, compared to $272.8 million for the first quarter of 2021. Our gross transaction value increased to $11.7 billion for the three months ended March 31, 2022, up from $10.1 billion for the three months ended March 31, 2021. And we reported $52.8 billion in gross transaction value or closed sales over the last 12 months. To date, our business has not been material impacted by higher mortgage rates, And we believe this is the result of our focus on our luxury markets, where a higher percentage of transactions occur in cash. We believe this momentum will continue for the residential real estate, an element in particular because of our strong presence in leading luxury markets. Also contributing to this momentum are factors such as the growing importance of millennial buyers, the return of international buyers, and limited supply due to underbuilding of new homes between 2007 and 2020. It is important to note that our luxury brand results in higher average sales prices versus our peers across all our markets. For the 12 months ended March 31st, 2022, Elliman had an average price per transaction of 1.62 million per home, substantially higher than our leading competitors outside of New York City. Our average price per transaction is approximately $1.5 million, which is well above the national average. We believe this creates a runway for us to continue to grow our business, not only in our existing markets, but in complementary markets as well. In addition to organic growth through recruiting in our major markets, we have significant opportunities to increase our market share in adjacent markets where the element name is well known and trusted. New York City remains our largest market with $17.3 billion in gross transaction value in the last 12 months ended March 31st, 2022. We also continue to be pleased with the strong performance of our South Florida market with $14.7 billion in gross transaction value in the same period and average selling price remained at approximately $2 million per home across New York City and South Florida. We also maintain strong market share in New York City and South Florida. For the last 12 months, our market share in New York City and South Florida was 21% and 20% respectively. We have also continued to expand our footprint across existing and new luxury markets. In Florida, we expanded to Vero Beach and Point Vedra Beach near Jacksonville in the first quarter. In Massachusetts, we opened a Nantucket office in April and recently broke at the highest price transaction ever in that market. We are opening two additional offices in Boston in the coming months. We also continue to aggressively grow our business in Texas. We are actively recruiting new agents in Houston, Dallas, and Austin. We believe Texas will be a major market for us in the future. Our residential brokerage is further differentiated and enhanced by our approach tech technology. In the first quarter of 2022, we continued rolling out refinements of our cloud-based MyDouglas agent portal by incorporating new features, including personalized distribution of data-driven videos for marketing and social media, a service designed to maximize our agents' digital presence, and our StudioPro agent concierge service. Concurrently, we continue to focus on reducing our expenses and rolled out two new packaged applications to automate our payment processing and streamlined escrow services. In addition to lowering expenses, these integrated applications will provide a more automated experience and superior service to our agents. Looking ahead, Element is focused on creating stockholder value through the expansion of our footprint, acceleration of our adoption of cutting-edge PropTech solutions, continued recruitment of best-in-class talent acquisitions, acqui-hires, and operational efficiencies. Before we discuss the financial results for the quarter, I'd like to express my deep gratitude to the Element agents and employees who work hard every day for our company and our clients. Our agents are consistently ranked among the best in the business and continue to power our company's success. With that backdrop, let us move on to Douglas Element's financial results. For the three months ended March 31st, 2022, Douglas Elliman reported $308.9 million in revenues compared to $272.8 million in the 2021 period, primarily driven by increased commission and other brokerage income in our luxury markets. Net income attributed to Douglas Elliman was $6.5 million or $0.08 per diluted share for the three months ended March 31st, 2022. compared to net income of 14 million or 18 cents per share in the prior year period. For the three months ended March 31st, 2022 adjusted EBITDA attributed to Douglas Elliman was 12.7 million compared to 16.4 million in the first quarter of 2021. For comparability purposes, Elliman began operating as a standalone public company in the first quarter of 2022. Expenses incurred by our public company operations are reported in the corporate and other segment, and the operations of our brokerage business are reported in our real estate brokerage segment. Therefore, for comparison purposes, our real estate brokerage segment reported operating income of $14.5 million for the three months ended March 31, 2022, compared to $14.2 million for the three months ended March 31, 2021. Our real estate brokerage segment reported adjusted EBITDA attributed to it of 17.7 million for the three months ended March 31st, 2022, compared to 16.4 million for the three months ended March 31st, 2021. For the three months ended March 31st, 2022, adjusted net income was 6.5 million or 8 cents per share compared to adjusted net income of 13.9 or 18 cents for share in the first quarter of 2021. Douglas Elliman also maintained a strong balance sheet with cash of $203.7 million at March 31, 2022. We believe this liquidity places us in a position of strength in the market. In summary, Elliman had a strong first quarter, and we believe we have a strong platform for continued growth. In addition, during the first quarter, we were pleased to begin paying a five cents per share dividend to our stockholders. It is our expectation the dividend will serve as a key component of our capital allocation going forward. With that, we will be happy to answer questions. Operator?

At this time, I would like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. Your first question comes from the line of Ritwik Roy from Jefferies. Your line is open.