Douglas Elliman Inc. Q1 2023 Earnings Call

Welcome to Douglas elements first quarter 2023 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 An archived version of the webcast will be available on the Investor Relations section of the company's website located at investors thought element dotcom.

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During this call the terms adjusted EBITDA and adjusted net income 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 income are contained in the company's earnings release, which has been posted to the Investor Relations section of the Companys website.

Before the pulp sorry 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 Securities and Exchange Commission filings now I would like to turn the call over to the Chairman President and Chief Executive Officer of Doug Douglas Elliman.

Lorber. Please go ahead.

Good morning, and thank you for joining US with me today are Richard <unk>, Our Chief operating Officer, Brian <unk>, Our Chief Financial Officer.

Scott <unk>, President and CEO of Douglas Elliman Realty, our residential real estate brokerage business.

On today's call, we will discuss Douglas Elliman financial results for the three months ended March 31, 2023, and then our thoughts on the current operating environment as well as trends in residential real estate all number of presenters. This morning will be as of March 31, 2023, unless otherwise stated.

We will then provide closing comments and open the call for questions.

Okay.

First let us discuss Douglas Elliman financial results for the three months ended March 31 2023.

We are pleased with the unwavering dedication that Douglas Elliman agents have displayed this quarter, even if Mitch had mixed at Nic a mix.

Current challenges facing the U S residential real estate market.

As we have mentioned on previous calls after reaching a generational peak in 2021 residential real estate industry faced significant challenges in 2022 due to the sharp increases in interest rates ongoing market volatility and sustained listing inventory shortages in the luxury market for sure.

Although although Douglas although Douglas Elliman.

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Outperform the industry in 2022 because of stable pricing in our luxury markets as well as the competitive advantage from a strong development marketing business. Our results in the second half of 2022, and thus far in 2023 had been impacted by these industry wide.

Winds.

In the first quarter Douglas Elliman reported $214 million in revenue as compared to $308 9 million in the 2022 period.

Net loss attributed to Douglas Amit for the first quarter was $15 1 million or <unk> 20 per diluted share compared to net income of $6 $5 million of point <unk>.

Per diluted share in the 2022 period adjusted EBITDA attributed to Douglas Elliman was a loss of $14 4 million in the call.

Compared to income of $12 7 million into 2022 periods.

For comparison purposes, our real estate brokerage segment reported an operating loss of $14 1 million in the first quarter of 2023 compared to income of $14 5 million in the first quarter of 2022.

Adjusted EBITDA attributed to Douglas Elliman as real estate brokerage segment was a loss of $9 7 million in the first quarter of 2023.

<unk> to income of $17 7 million in the first quarter of 2022.

Adjusted net loss attributed to Douglas Elliman was $14 $3 million or <unk> 19 per share in the first quarter compared to adjusted net income of $6 5 million or eight cents per share in the 2022 periods.

Now we will discuss our outlook on the operating environment for Douglas Elliman as well as trends in residential real estate.

While we expect this challenging operating environment to continue and will impact our results in the first half of 2023, we are encouraged by some improvements in trends we are seeing specifically.

Specifically.

Our first quarter 2020 through results was sequentially flat with the fourth quarter of 2022 in terms of a revenue number of transactions gross transaction value and average selling price brown.

Second following two quarters of significant declines in listings in the first quarter of 2023 saw a 40% increase in listings from the fourth quarter of 2022.

Given the conversion of listings to revenues generally takes three to nine months. This is an encouraging sign for the second half of 2023.

Importantly, the luxury markets in which Douglas Elliman operates are usually the first markets to emerge from the down cycle as buyers are less mortgage reliant.

We also expect listings to increase in a tight supply of inventory to gradually ease as consumers adjust to higher interest rates and sellers adjust price expectations.

Douglas Elliman and strong financial position, a cost reduction strategy make it well positioned to successfully navigate near term industry challenges.

We maintained ample liquidity with cash and cash equivalents of approximately $124 million and no debt as of March 31 2023.

Our strong balance sheet underscores Douglas elliman as long history of profitability and provides us flexibility to adjust to various market conditions.

This liquidity continues to provide us with a competitive advantage in growing our core brokerage business as well as scaling our overhead expenses when entering new markets.

We have also made thoughtful efforts to adjust our cost structure to fit our business more appropriately.

In the first quarter, we reduced head count by approximately 35 positions cut costs sponsorships streamlining to advertising and commenced a program to begin consolidating office space. We believe that these changes will result in a more nimble Douglas elliman without significantly impacting the agent experience.

Based on these encouraging trends on a solid financial profile, we continue to be optimistic about Douglas Elliman and has significant growth opportunities, we see in our luxury markets to capture market share by leveraging our key strengths, which include first and most importantly, our global network and our strong relationship with our 69.

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Outstanding agents. These agents include some of the industry's most celebrated teams and individuals and we remain very proud of our 86% agent retention rate.

We are also proud to operate a pre eminent Douglas element developed marketing business for the 12 months ending.

March 31, 2023, we signed and brought to market $6 3 billion of gross transaction value to the pipeline of our development marketing business.

This will provide long term value as these transactions close over the next several years.

In summary, Douglas Elliman is weathering the current macroeconomic challenges and we believe our differentiated platform and the existing strength of our business make us well positioned for long term growth and success.

A proven management team has a successful history of navigating many economic cycles and applying financial discipline that balances the importance of maintaining revenues managing operating expenses to create long term stockholder value.

Looking ahead in addition to driving operational efficiencies. We are focused on strategic market expansion continued recruitment of outstanding talent and further adoption of innovative solutions to empower our agents.

With that we will be happy to answer your questions operator.

Okay.

Thank you we will.

I'll now be glad to begin the question and answer session. If you have a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue simply press Star. One again again that is star one to ask a question.

One moment please.

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Okay.

As there are no questions at this time, we would like to thank you for joining us on Douglas elements first quarter 2020, 'twenty, Sorry, 2023 earnings Conference call. We hope you have a good day and this will conclude our call.

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