Douglas Elliman Inc.

Welcome to Douglas Elliman's third quarter 2024 earnings conference call. This call is being recorded and simultaneously webcast. An archived version of the webcast will be available on the investor relations section of the company's website located at investors.elliman.com for one year. During this call, the terms adjusted EBITDA and adjusted net loss 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 EBITDA and adjusted net loss are contained in the company's earnings release, which has been posted to the investor relations section of the company's website. 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 applied by forward-looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings. Now, I would like to turn the call over to the Chairman and Chief Executive Officer of Douglas Elliman, Michael S. Leibowitz.

Good morning, and thank you for joining us. First and foremost, I'm honored to have been named Chairman and CEO of Douglas Elliman and to lead this storied company through an exciting new chapter of transformation, growth, and diversification. With me today on the call is Brian Kirkland, our Chief Financial Officer. On today's call, we will discuss the current operating environment and Douglas Elliman's financial results for the three and nine months ended September 30th, 2024. All numbers presented this morning will be as of September 30th, 2024, unless otherwise stated. We will then provide closing comments and open the call for questions. Before we turn to our third quarter 2024 results, I'd like to start by reflecting on my first few weeks leading Douglas Element. I've met with and spoke to many of our agents and staff across the organization. We truly have an outstanding roster of agents and employees. They've all made me feel truly welcome. We have an incredible foundation to build on and enhance our culture and create an even stronger culture of collaboration, respect, and integrity. Our brand, in my view, is the most recognizable brand in real estate. It's the reason I took this incredible opportunity. We must innovate and evolve to stay ahead and be the firm that provides expertise and added value with real estate services and in-depth analytics to differentiate Douglas Elliman from our competitors. We plan to grow and diversify the business to deliver value, and we have already created a strategic M&A unit to explore complementary acquisitions in ancillary businesses like title, escrow, staging, insurance brokerage, and property management that we are very excited about. We are already in discussions to expand our property management business into Florida where there's real opportunity as we expand our recurring revenue businesses. This approach will transform Douglas Elliman into a company with a diversified revenue stream and a sustainable growth engine. I look forward to sharing more of our plans in the weeks and months ahead. With that, I'll turn it over to Bryant, who will discuss our performance and the trend shaping the residential real estate industry.

Thank you, Michael. And the management team is enthusiastic about the vision for the new Douglas Elliman. With your leadership, our team at Douglas Elliman will be able to focus on increasing and diversifying revenues by logically investing in the business. We will capitalize on DouglasElements' competitive advantages in the ultra luxury residential real estate brokerage segment, as well as our expertise in the development marketing division. Before reviewing the financial performance, we will provide some updates on trends in home sale pricing, listings, and development marketing as well as accolades earned in some of our key markets. First, pricing for home sales remained strong. In the third quarter, our industry best average price per transaction rose to $1.6 million per home sale compared to $1.57 million per home sale in the comparable 2023 period. Year to date, Through September 30th, 2024, our average price per home sale transaction is $1.68 million compared to $1.6 million in the 2023 period. Second, we continue to build momentum from increased home sale listings. Our listing volume increased 6% in the third quarter of 2024 from the prior year period. Third, our development marketing division remains the preeminent industry player with a pipeline of actively marketed projects of approximately $26.8 billion of gross transaction value. Approximately $16.4 billion of this gross transaction value is in Florida alone. In addition to this active pipeline, I am pleased to report we have another $4.7 billion of gross transaction value that we expect will be coming to market through the end of 2025. We believe this foundation of business bodes well for the future as we will recognize commission income from these projects when they close, which is scheduled generally between the fourth quarter of 2024 and the year ended December 31st, 2029. Fourth, many of our brokerages continue to outperform their peers. We were recently named the number one brokerage by sales volume on Long Island, the Hamptons, Westchester, and the Hudson Valley and also eclipse sales records in North Miami and the North Fork of Long Island. Now, transitioning to updates on our expense structure. We continue to manage investments across our markets by focusing on return on investment. For the nine months ended September 30th, 2024, our real estate brokerage segment reduced its operating expenses, excluding commissions, depreciation and amortization, litigation settlement, restructuring expenses, and non-cash stock compensation expenses by approximately $11.9 million as compared to the corresponding period in 2023. Now, we will turn to Douglas Elliman's financial results for the three months ended September 30th, 2024. Douglas Elliman has maintained ample liquidity with cash and cash equivalents at September 30th, 2024 of approximately $151.4 million. Douglas Elliman reported $266.3 million in revenues compared to $251.5 million in the 2023 third quarter. Net loss attributed to Douglas Elliman for the third quarter was $27.2 million or 33 cents per diluted share compared to $4.9 million or 6 cents per diluted common share in the 2023 period. Net loss attributed to Douglas Elliman in the 2024 period included $20.2 million non-cash charge for change in the fair value of derivative embedded within convertible debt. Adjusted EBITDA reported to Douglas Elliman in the third quarter were a loss of $1.4 million compared to a loss of $3 million in the 2023 period. For comparison purposes, our real estate brokerage segment reported operating income of $454,000 this quarter compared to an operating loss of $2 million in the 2023 period. Adjusted EBITDA attributed to this segment were income of $3.8 million compared to $1.5 million in the 2023 period. Adjusted net loss attributed to Douglas Elliman in the third quarter was $6.5 million or $0.08 per share compared to $4.7 million or $0.06 per share in the 2023 period. Now, turning to Douglas Elliman's financial results for the nine months ended September 30th, 2024. Douglas Elliman reported 752.3 million in revenues, an increase from $741.4 million in the 2023 period. Net loss attributed to Douglas Elliman was $70.3 million or 84 cents per diluted share compared to $27.7 million or 34 cents per diluted share in the 2023 period. Net loss attributed to Douglas Elliman in the 2024 period included a $20.2 million non-cash charge for the fair value of derivative embedded within convertible debt in the third quarter and a $17.75 million litigation settlement charge in the first quarter. Adjusted EBITDA attributed to Douglas Elliman in the nine months ended September 30, 2024 were a loss of $17.3 million compared to a loss of $23 million in the 2023 period. For comparison purposes, our real estate brokerage segment reported an operating loss of $31.9 million for the first nine months of 2024 compared to $20.3 million in the 2023 period. Operating loss in the 2024 period included a $17.75 million litigation settlement charge. Adjusted EBITDA attributed to the real estate brokerage segment were a loss of $3.8 million compared to a loss of $9 million in the 2023 period. Adjusted net loss attributed to Douglas Elliman in the nine months ended September 30th, 2024 was $31.3 million or 38 cents per share compared to $26.4 million or 32 cents per share in the 2023 period. Now back to you, Michael. Thanks, Brian. And listen, to step away, I'd like to step away for a second.