Douglas Elliman Inc.

Q4 2022 Earnings Conference Call


spk_0: douglas elliman aches a fourth quarter twenty twenty two earnings conference call the called being recorded in simultaneously webcast in archived version of the webcast will be available on them best to relate and section of the company's website located that investors dot element dot com for one year during the call the turns adjusted a bit dark and adjusted net income will be use 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 gap reconciliations to adjusted ebitda and adjusted net income or contained in the company's going through leaks which have been posted to the investor relations section of the company's website before the call began that would like to read the 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 dakich cause actual results to differ from those set for in or implied by forward looking statements be the rest are described in more detail in the company securities and exchange commission filings now i'd like to turn to call over to chairman president and chief executive officer of douglas elliman howard lorber
spk_1: good morning
spk_2: you for joining us with me today are which had up with our chief operating officer brian kirkland or chief financial officer and scott garcon president and ceo of douglas elliman real date a residential real estate brokerage business andres call we will discuss transit residential real estate douglas elliman financial results with a free months and year ended december thirty first twenty twenty two and performance and a luxury markets all numbers presented this morning will be at that set the thirty first twenty twenty two unless otherwise stated we will that provide clothing panelists and open the call for questions i would like it begin by discussing the current operating environment for residents are real space and why we believe that the film and is well to get him after reaching a generalized generation of income twenty twenty one the residential real estate industry face significant the edward average and twenty twenty go with transaction volume and a guy with existing home sales each declining by more and thirty percent according to the national association of realtors despite these trends we're proud to report that does sound that outperform the industry and twenty twenty two which transaction volume and worse transaction volume declined by approximately eighteen and sixteen percent respectively he why were driven by significant increases and mortgage interest rates volatility in the financial markets and lifting and when terry shortages and luxury pockets in which we are active however because of the limited inventory available luxury market prices remain stable sudden increase with by were imposed bit strange supply from entering the housing market as homeowners remain reluctant to par with that lower mortgage rates obtained over the past several years looking ahead we continue to believe type supply will gradually ease as time passes and consumers to just i'm interest rates and their salaries are just price expectations accordingly and oily and residential real estate luckily want the i usually the last markets to enter it down cycle and the first block of to emerge when the cyclists therefore we pay significant growth opportunities in douglas elements luxury market when warfare uncertainty subsides and we believe we will be well positioned in these markets to capture got share by leveraging archie stress which includes first and most importantly a global network have been in relationship too with our outstanding ages we increased average campaign almost four hundred agents and twenty twenty two and quoted some of the industry's most celebrated teams and individuals and we made very proud of our eighty seven percent aged we catch a break we're so proud to operate a preeminent world class douglas elliman development bargain business it's business logic and second rate and to join the elementary and twenty twenty two we added three point five billion of grocery transaction doubting the joint development marketing business and florida new york california massachusetts and texas which will provide long term value of use transaction post over the next several years our next rape is our approach to expansion and exciting opportunities to expanded others don't and footprint and twenty twenty two redacted the las vegas dallas and dc that your markets as well as going back of such as part of the edge of the each hero beach we're talking uk in newport beach and the so colorado these markets represent approximately fifty billion of total of very valuable annual goes transaction guidance and law without market share their general just the markets are critical part of apple's proposition as we expand are distinct approach to technology will provide agents with state of your applications designed to increase their productivity and business oh the thousand virgins continue to raise these enhancements and technology magic critical component and recruiting i don't forget your profile what to buy flexibility and a competitive advantage to expand as of december thirty first twenty twenty two i strongly worded it consisted of one hundred sixty four million cash and cash equivalents and no one term get a strong balance sheet underscores douglas elements long history of profitability and the ability to adjust to various market conditions i put it provides us for the competitive advantage to grow up for brokerage business as well as scalar all the expenses when entering new workers turning to our stewardship of expenses as you will wear and twenty twenty we successfully reduce enterprise wide not activity based expenses of course or regions while we continue to monitor dispenses during twenty twenty one and forty two and two we also made opportunistic and fit opportunistic investments and i support network for ages as well as our technology infrastructure while this increase total expenses some twenty to twenty two we believe investments will provide long term value for her stockholders leveraging decades of real estate industry experience that was elements match from is taking additional steps to better position than the summoned for the future without impacting the surface level with the by to eight for example and twenty twenty three that's why we have frozen island and by normal attrition we do take down and the event of an opportunity to wear division bell said arranging at work we have implemented policies to reply to your approval for any new position we do sponsorships and streamlined advertising and had begun the process of consolidating office space which we would expect will begin to distract especially during twenty twenty three and one meaningful and second half of twenty twenty four we believe that these changes will result in a nimbler douglas elliman now we tried to does the sentiments financial results for the three months ended december thirty first twenty twenty two dollars sounded report to seven point three billion in revenues compared to three hundred and thirty four million in the twenty twenty one quarter that was attributed to dollars sanders and three months ended with a cane point four million or twenty four cents per diluted share the catcher net income of twenty point two million or twenty six per diluted share in the twenty twenty one point zero adjusted he the guy separated from their douglas on there was a lot of seventeen point one million prepared to anchor a twenty one point three nine and twenty twenty one point we do it though the town and began operating as a standalone public company and twenty two thousand and ten balawi good spin off of tactical expenses incurred by a public company operations are reporting in the corporate another second and the operations of our bloggers businesses are employed in are real estate brokers said for comparison purposes a real estate brokerage said me reporting operate was to fifteen point six hundred and twenty twenty two prepared to operate income of nineteen point two million and it's twenty twenty one connolly billy adjusting the guy it into a real estate brokerage that was a lot of twelve point six million and twenty twenty two periods of beds with a cover twenty one point three million and twenty twenty one point we theory adjusted nevertheless it should be rigid other salmond was eighteen point four million or twenty four cents per share the to adjusted net income of eighteen point six million or twenty four cents per share and twenty twenty one for review it we anticipate that results for the first quarter of twenty twenty three will reflect he said friends have significant year over year blacks moving out that the salomon's financial results for the year ended december thirty first planning twenty two though the suffered we voted one point one five billion in revenues and twenty twenty two cats have one point three five them and twenty twenty one that more conservative than the sun was five point six nine or obsessed mood share the to net income of ninety eight point eight nine or a dollar twenty seven cents per diluted share and twenty twenty one adjusted ebitda attributed to done the salmon was fifteen nine compared to one hundred and ten point seven million twenty twenty one for comparison purposes a real estate broker certainly reported operating income of twenty two point of it oh million compared to one hundred and two point one million and twenty twenty one but yesterday with dogs should be good for most people would show was thirty four point five million compared to one hundred and ten thousand seven hundred and twenty twenty one adjusted net was attributed to double someone was six point two million or nine cents per share the care to the just a net income of one hundred point five million or a dollar twenty nine cents per share of twenty twenty one in summary douglas always whether the bachelor macro economic challenges that point and twenty two and we believe on differentiated platform positions us from one tomorrow are proven management team has it's the sexual history of navigated many economic cycles and applying financial discipline that a the importance of maintaining revenue and managing operating expenses and create long term stockholm looking ahead and distracted driving operational efficiency we are focused on spooky get walk and expansion and tricky recruitment of that's been in town and further adoption of innovative solutions to our allergies finally during the fourth quarter we were pleased to pay another five cents per share dividends less battles a low expectations that given all the serve as a key component of a capital allocation and phone with that we will be happy to answer questions operator
spk_0: the canaries now question to ask the question it's time please press star one telephone he at any point like to withdraw from a complete trust or one again you can provide it opportunity to ask one question and one for their follow up question if you will now take a moment to render a roster our first question comes from the line daniel from jeffries llc please proceed
spk_3: thank you good morning
spk_4: oh wanted to follow up on the common the objects around the current environment i think he said it and you're prepared remarks that once you would be similar to forge you with hoping you could maybe expand upon a regions or areas where there is some change or thing that might be looking a little better or worse more inventory more the oh activity i guess there's any delineation across the geography that would be helpful
spk_2: sure i think that that when you look new york especially manhattan as problem for been the best but that's because it had years of a sub par performance even before the pandemic so the comparison to twenty twenty one realistically it is not a really good comparison probably better comparison sites listed years writing for the game that well as i said he had twenty sixteen seventeen eighteen nineteen so will you do the patterson there you know that the and new york city is looking pretty strong arm the other bloggers which are pocket such as a aspen i'm asking when up tremendously and that twenty twenty one as come down to small degree the real issue that i said is a the fact that there is very little inventory the only place where his inventory a new england died is new develop that's why we're very strong and have signed up many new development projects and the a development projects we are in the market with now i doing well
spk_5: again
spk_2: i think is a number of reasons for that first first of all on his thoughts salary new development project it's generally clad for years until the projects finished and close things are happening and that gets people also that period of time to hope that interest rate mortgage rates will be lower during that that three year period of time so that's why yeah that's why the market is producing the most new inventory as we said people are worried about when they have today at it because they may not be able to find something else to buy and then at the same time as even if they go down to be getting up a lot mortgage rate and going into a much higher monitoring apart
spk_4: the okay one at wanted to follow just on on the balance sheet you mentioned the dividend but i'll have it you have a lot cash and thinking a new given where the started with years and he thought them the buyback potentially and also just looking at the the could change and guys have i heard you correctly he said one hundred and sixty four million
spk_2: that's around twenty nine million change a quarter of a quarter didn't lose that much lighter with a lot of cutbacks in the quarter does your isn't to use the cash and how we should think about that going forward
spk_6: a baker you want to go through that
spk_4: i've want addition to the on the or even our last we also pay a dividend every quarter which is about four million dollars but i think if you do that or longer working capital that reckon thought the cash and panel that are by that it never like debt repayment of three million dollars i in october again and the by back or of these is a cash is northrop when i back then because we were it's one hour from that are group and at the end of two thousand and twenty one arm our ability to buyback stock it's somewhat limited until we get to your path that been out
spk_7: and after them the company will always be opportunistic i'm using didn't tigers about a stock over the last year
spk_4: and
spk_8: we we always be that is a very good guy you because you're buying one of about night and real effect
spk_9: and douglas elliman
spk_4: understood okay that's helpful thank you and and the all the initiatives that you announce proactively around expensive the frozen hiring reduce sponsor consolidate office space a in i know it's it's gonna come true later in the year but is there a way to put a dollar amounts around some of those
spk_10: those initiatives
spk_2: well look i mean yes we have eliminated certain expenses on a yeah on marketing and advanced options than bedside ah my i don't think we can give you a really exact amount of this particular moments where we do know is we don't know when we should lives spite of gates and that's why we believe for instance that that is year and next year will be the first couple of years that really show reductions and expenses and with consolidation of some of our offices
spk_11: and there you know
spk_2: so much as someone that
spk_4: watched leases and that we've been stuck with for many years and that we really don't need that space anymore and so when those consolidation style average which they will know that they share next year i think that will really be as a big help to getting our numbers more in line with really want to be
spk_12: and ended last lady i think another number he threw out with an eighty seven percent retention rate with that's a the fourth quarter that for the full year
spk_4: four year
spk_6: the that changed much in for you
spk_0: not i was able i believe it was eighty eight percent and a bird at the temperate dirty it or not too much for a late september thirtieth two thousand and twenty two done thank you ladies and gentlemen don't are all the questions that we have today

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