Q1 2024 Douglas Elliman Inc Earnings Call
Operator: Good day, and welcome to Douglas Elliman's first quarter 2024 earnings conference call. This call is being recorded and simultaneously webcast.
Good day and welcome to Douglas elements first quarter 2024 earnings Conference call.
Operator: An archived version of the webcast will be available on the Investor Relations section of the company's website, located at investors.elliman.com, for one year. 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.
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An archived version of the webcast will be available on the Investor Relations section of the company's website.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 got Ellemann Dot com for one year.
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 loss are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's website.
Operator: Before the call begins, I would like to read a safe harbor statement. 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 Security and Exchange Commission filing. Now, I would like to turn the call over to Howard Lorber, Chairman, President, and Chief Executive Officer of Douglas Ellumann. Please go ahead. Good morning.
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 security and Exchange Commission filings.
Now I would like to turn the call over to the Chairman President and Chief Executive Officer of Douglas Elliman Howard Lorber. Please go ahead.
Howard M. Lorber: Good morning, and thank you for joining us. With 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. On today's call, we will discuss the current operating environment and Douglas Elliman's financial results for the three months ended March 31, 2024. All numbers presented this morning will be as of March 31, 2024, unless otherwise stated. We will then provide closing comments and open the call for questions.
Howard M. Lorber: Good morning, and thank you for joining US with me today are Richard Lamping, Our Chief operating Officer, Brian Kirkland, Our Chief Financial Officer, and Scott <unk>, President and CEO of Douglas Elliman real estate residential real estate brokerage business.
Howard M. Lorber: On today's call, we will discuss the current operating environment and Douglas Elliman financial results for the three months ended March 31 2024.
Howard M. Lorber: All numbers presented this morning, we will be as of March 31, 2024, unless otherwise stated.
Howard M. Lorber: We will then provide closing comments and open the call for questions before.
Howard M. Lorber: Before I turn to our first quarter 2020 results, I want to begin with an update on the Industry Brokerage Commission litigation. We are pleased to have recently announced a settlement agreement to resolve on a nationwide basis the pending class action litigation relating to real estate brokerage fees in the Gibson and Umpa cases pending in the Western District of Missouri, which will also resolve other similar pending litigation. The settlement agreement reflects our commitment to mitigating future uncertainties and limiting legal costs. It is not an admission of liability or of the validity of any claim.
Howard M. Lorber: Before I turn to our first quarter 2024 results I want to begin with an update on industry brokerage Commission litigation.
Howard M. Lorber: We are pleased to have recently announced a settlement agreement to resolve on a nationwide basis, the pending class action litigation relating to real estate brokerage fees and at Gibson.
Howard M. Lorber: Cases pending in the Western district of Missouri, which will also resolve other similar pending litigation.
Howard M. Lorber: Settlement agreement reflects our commitment to mitigating future uncertainties and limiting legal cost is not an admission of liability or the validity of any claim.
Howard M. Lorber: Now we will discuss our outlook on the current operating environment for Douglas Elliman, as well as the trends we are seeing in residential real estate. As we have discussed, generationally high interest rates have driven sustained listing inventory shortages across our luxury markets for almost two years. These shortages have resulted in significantly lower transaction volumes during this time.
Howard M. Lorber: Now we will discuss our outlook on the current operating environment for Douglas Elliman as well as trends, we are seeing in residential real estate.
Howard M. Lorber: As we have discussed generationally high interest rates have driven sustained listing inventory shortages across our luxury markets for almost two years.
Howard M. Lorber: These shortages have resulted in significantly lower transaction volumes during this time.
Howard M. Lorber: While we expect these industry-wide challenges will continue to impact our results in 2024, we remain encouraged by recent improvements. First, although our commission receipts were down in March compared to the prior year, they were up from the prior year in January, February, and April 2024. This continues the trend that began in October 2023.
Howard M. Lorber: While we expect these industry wide challenges will continue to impact our results in 2024, we remain encouraged by recent improvements.
Howard M. Lorber: First although our commission receipts were down in March compared to the prior year they were all.
Howard M. Lorber: From the prior year in January and February and April 2024.
Howard M. Lorber: This continues a trend that began in October 2023.
Howard M. Lorber: We believe this signals that the market is in the early stages of adjusting to higher interest. Second, we're also seeing promising momentum in our development marketing business, a platform that further differentiates Douglas Elliman from our principal competitors. As a reminder, through its development marketing division, Douglas Elliman employs a hybrid broker model where our top resale residential real estate agents work in tandem with our development marketing professionals and leverage their extensive industry relationships for the benefit of our developer clients. Our agents can market and sell high-profile developments that enhance their brands and provide additional commission potential for years to come, as they are often hired to resell or rent those very same units.
Howard M. Lorber: We believe this signals that the market is in the early stages of adjusting to higher interest rates.
Howard M. Lorber: Second we are also seeing promising momentum in our development marketing business and platform that further differentiate starting assortment from our principal competitors.
Howard M. Lorber: As a reminder, for which development marketing Division Douglas.
Howard M. Lorber: Douglas Elliman employees, a hybrid broker model, where our comp retail residential real estate agents work in tandem with our development marketing professionals and leverage their extensive industry relationships for the benefit of our developer clients.
Our agents can market and sell a high profile developments that enhance their brands and provide additional commission potential for years to come as they are often higher to resell our rent does very same units.
Howard M. Lorber: We believe this model provides a competitive advantage to our development marketing business while also increasing the attractiveness of the Douglas Elliman platform to current and prospective clients. Our development marketing division is sought after by well-known real estate developers and continues to create a foundation for long-term value over the next several years. This division has an active pipeline of signed and new projects that are approximately $25 billion in gross transaction value, including approximately $15 billion in gross transaction value in Florida alone. Furthermore, approximately $5 billion of additional transaction value from our development marketing business is scheduled to come to market in the next year.
Howard M. Lorber: We believe this model will provide a competitive advantage to our development marketing business, while also increasing the attractiveness of the Douglas Elliman platform to current and prospective patients.
Howard M. Lorber: Our development marketing Division is sought after by well known real estate developers and continues to create a foundation for long term value over the next several years.
Howard M. Lorber: This division has an active pipeline of signed and new projects and approximately $25 billion gross transaction value.
Howard M. Lorber: Including approximately $15 billion of gross transaction value in Florida alone.
Howard M. Lorber: Further approximately $5 billion of additional transaction value from our development marketing business is scheduled to come to market in the next year. We believe this bodes well for the future as we will recognize commission income from these projects when they closed in the future.
Howard M. Lorber: We believe this bodes well for the future as we will recognize commission income from these projects when they close in the future. Third, consistent with the trend we saw in the fourth quarter of 2023, total listing volume improved in the first quarter of 2024, up 6.7% from the first quarter of 2023, with gains in listings reported in California, the Hamptons, Florida, and Long Island compared to the first quarter of 2023. This followed a 25% increase in total listing volume in the fourth quarter of 2023 compared to the fourth quarter of 2022.
Consistent with the trend we saw in the fourth quarter of 2023 total listing volume improved in the first quarter of 2024 up six 7% from 2023 first quarter with gains in listings reported in California, The Hamptons, Florida and long island compared to the first quarter of 2023.
Howard M. Lorber: <unk>.
This followed a 25% increase in total listing volume in the fourth quarter of 2023 campaigns in the fourth quarter of 2022.
Howard M. Lorber: Because we recognize revenues when a sale closes, we expect that we will begin to see the impact of increased listing values in the second half of 2024. Consistent with the increase in listings, our average sales price per transaction remained an industry-best 1.595 million in the first quarter. However, over the past three quarters, this remained flat and was $1.58 million for the first quarter of 2023.
Because we recognize revenues when the sale closes we expect that we will begin to see the impact of increased listing volume in the second half of 2024.
Okay.
Howard M. Lorber: Consistent with the increase in listings our average sales price per transaction remained an industry best one $595 million in the first quarter.
Howard M. Lorber: Over the past three quarters vis remained flat and was $1 $5 8 million for the first quarter of 2023, we've.
Howard M. Lorber: We believe the consistency in average price per transaction reflects the strength of the luxury markets we operate in, as well as Douglas Elliman's reputation for offering the finest properties and client experience in real estate. Finally, our cost reduction efforts have been judicious, and the results of our strategy are beginning to float to the bottom line. Over the past year, we have continued to adjust our core structure to better fit our business, including additional headcount reductions, cutting costly sponsorships, streamlining and advertising, and commencing a program to consolidate offices.
Howard M. Lorber: We believe the consistency in average price per transaction reflects the strength of the luxury markets, we operate in as well as Douglas Elliman and his reputation for offering the finest properties and client experience in real estate.
Howard M. Lorber: Finally, our cost reduction efforts have been judicious and the results of our strategy are beginning to flow to the bottom line.
Howard M. Lorber: Over the past year, we have continued to adjust our cost structure to benefit our business, including additional head count reductions cutting costly sponsorships streamlining advertising and commencing a program to consolidate office space.
Howard M. Lorber: Our real estate brokerage segment reduced its operating expenses, including commission expenses, litigation settlement expenses, restructuring, and other non-cash expenses by $5.4 million in the first quarter of 2024, representing a decline of approximately 7.6% compared to the prior year period. For the last 12 months ended March 31, 2021-2024.
Howard M. Lorber: Our real estate brokerage segment reduced its operating expenses, including Commission expenses litigation settlement expenses restructuring and other noncash expenses by $5 4 million in the first quarter of 2024, representing a decline of approximately seven 6% compared to the prior year period.
Howard M. Lorber: Over the last 12 months ended March 31, 'twenty, one 2020 for a real estate brokerage segment has reduced its operating expenses Excluding commission expenses.
Howard M. Lorber: Our real estate brokerage segment has reduced its operating expenses excluding commission expenses, litigation, settlement expenses, restructuring, and other non-cash expenses by $18.9 million, or 6.6%. We believe these efforts enable Douglas Elliman to meet industry challenges head on without significantly impacting the aging experience. We are proud to share that our aging retention rate stands at 90%, and we continue to attract the industry's best talent.
Howard M. Lorber: Litigation settlement expenses restructuring and other noncash expenses by $18 9 million or six 6%.
Howard M. Lorber: We believe these efforts enabled Douglas element to meet industry challenges head on without significantly impacting the agent experience.
Howard M. Lorber: We are proud to share that our agent retention rate stands at 90% and we continue to attract the industry's best talent.
Howard M. Lorber: Now turning to Douglas Elliman's financial results for the three months ended March 31st, 2024, for the first quarter of 2024. Douglas Elliman reported 200.2 million in revenue compared to 214 million in the first quarter of 2023. The net loss attributed to Douglas Elliman for the first quarter was $41.5 million or $0.50 per diluted share compared to $17.6 million or $0.22 per diluted share in the 2023 period. The net loss attributed to Douglas Elliman in the first quarter of 2024 included a $17.75 million litigation settlement charge, of which we have agreed to pay $7.75 million by June 12, 2024, and up to two additional $5 million contingent payments between December 31, 2025 and December 31, 2027.
Now turning to Douglas Elliman financial results for the three months ended March 31 2024.
For the first quarter of 2020 for Douglas Elliman reported $242 million of revenue compared to $214 million in the first quarter of 2023.
Howard M. Lorber: Net loss attributed to Doug assignments in the first quarter was 41 5 million or <unk> 50 per diluted share compared to $17 6 million or <unk> 22 cents per diluted share in the 2023 period net loss attributed to Douglas Elliman in the first quarter of 2024 included a $17 $75 million litigation.
Howard M. Lorber: <unk> settlement charge of which we have agreed to pay $7 $75 million by June 12, 2024, and up to two additional $5 million contingent payments between December 31, 2025, and December 31 2027.
Howard M. Lorber: Suggested EBITDA attributed to Douglas Elliman in the first quarter was a loss of $18.2 million compared to $17.6 million in the 2023 period. For comparison purposes, our real estate brokerage segment reported an operating loss of $32.8 million this quarter, compared to $17.3 million in the 2023 period, which included the $17.75 million litigation settlement charge in the 2024 period. Adjusted EBITDA attributed to the segment was a loss of $14.2 million compared to $13 million in the 2023 period. The adjusted net loss attributed to Douglas Elliman in the first quarter was $23.7 million or $0.28 per share compared to $16.8 million or $0.21 per share in the 2023 period.
Howard M. Lorber: Adjusted EBITDA attributed to Douglas Elliman and in the first quarter were a loss of $18 2 million compared to $17 6 million into 2023 period.
For comparison purposes, our real estate brokerage segment reported an operating loss of $32 8 million this quarter compared to $17 3 million in 2023 period, which included a $17 $75 million litigation settlement charge in the 2024 period.
Howard M. Lorber: Adjusted EBITDA attributed to the segment were a loss of $14 2 million compared to $13 million in the 2023 period.
Howard M. Lorber: Adjusted net loss attributed to Douglas Elliman in the first quarter was $23 7 million or <unk> 28 per share compared to $16 8 million or <unk> 21 per share in the 2023 period.
Operator: Douglas Elliman has maintained ample liquidity with cash and cash equivalents of approximately $91.5 million, or $1 per common share, and no debt. In summary, despite industry-wide headwinds, we're confident that Douglas Elliman is positioned for long-term success with its differentiated platform, continued cost reduction efforts, and strong luxury brands. Our proven management team has a successful history of navigating many economic cycles and applying financial discipline that balances the importance of maintaining revenues and managing operating expenses to create long-term shareholder value.
Howard M. Lorber: Douglas Elliman has maintained ample liquidity with cash and cash equivalents of approximately $91 5 million or $1 per common share and no debt.
Howard M. Lorber: In summary, despite industry wide headwinds, we are confident that <unk> is positioned for long term success with its differentiated platform continued cost reduction efforts and strong luxury brand.
Howard M. Lorber: Our proven management team has a successful history of navigating many economic cycles, and applying financial discipline that balances the importance of maintaining revenues and managing operating expenses to create long term stockholder value.
Operator: 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 brokers. With that, we will be happy to answer questions.
Howard M. Lorber: 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 brokers.
Speaker Change: With that we will be happy to answer your questions operator.
Operator: The floor is now open for your questions. If you would like to ask a question at this time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2. Once again, to ask a question, please press star one. Our first question will come from Soham Bhonsle with BTIG. Please go ahead.
Speaker Change: The floor is now opened for your questions. If you would like to ask a question at this time. Please press star one on your telephone keypad.
Speaker Change: You may remove yourself at any time by pressing star two.
Speaker Change: Once again to ask a question please press star one.
So Bunzl: Our first question will come from so bunzl with <unk>. Please go ahead.
Soham Jairaj Bhonsle: Hey guys, good morning. I hope you're all doing well.
So Bunzl: Hey, guys. Good morning, hope, you're all doing well.
Howard M. Lorber: Look, so I know it's a tough market out there, especially with rates and inflation just being so volatile and inventory being so tight. But look, you know, we could be here for a while, just depending on where inflation ends up and how the Fed reacts. So can you maybe just talk about your desire to get the business to break even or even modest profitability if we sort of hang around these levels for a little longer?
So Bunzl: So I know, it's a tough market out there, especially with rates and just means a volatile and inventory being so tight but look we could be here for a while just depending on where inflation ends up and how the fed reacts. So can you maybe just talk about your desire to get that business to breakeven or even modest profitability. If we sort of hang around these levels for a little long.
So Bunzl: <unk>.
Howard M. Lorber: Well, you know, that's what we're doing in our cost cutting. We're not going to sit here and just keep it the way it is now and hope that the market changes quicker than it may or may not. We're also trying to do it judiciously, not doing everything at once, and spreading it out and also making sure that we're not affecting the experience, our customers' experience, obviously, our customers to us, or our brokers. So that's, that's really what we're working on.
So Bunzl: Well.
Speaker Change: Yes, that's what we're doing in our cost cutting.
Speaker Change: We're not going to sit here and just keep it the way it is now and hope that the market changes quicker than it may or may not.
Speaker Change: But we're also trying to do it judiciously not doing everything at once.
Speaker Change: And spreading it out and also making sure that were not affecting the experience our customers experience, obviously, our customers to us or our brokers. So that's that's really what we're working on.
Soham Jairaj Bhonsle: Okay, and then Brian, I guess on expenses. Can you maybe just talk about, you know?
Speaker Change: Okay, and then Brian I guess on expenses can you maybe just talk about how we should think about the run rate for the various opex lines as we go through the year and any items that we should be thinking about thank you.
Brian Kirkland: Well, I mean, as you know, this is a seasonal business at times, so expenses move from quarter to quarter in a different way. However, we have cut expenses $18.9 million over the last 12 months. About $3 million of that was advertising. The majority of the remainder was in personnel, sponsorships, and travel. We're continuing to look at that. We did eliminate 100 positions.
Well I mean.
Brian Kirkland: As you know difficult seasonal business at times or expenses.
Brian Kirkland: <unk> moved from quarter to quarter, it a different way however.
Brian Kirkland: We have.
Carlos versus $18 9 million over the last 12 months about $3 million of that was advertising.
Brian Kirkland: Georgia remainder was personnel on sponsorships and travel were continuing to look at that we did eliminate a 100 positions in 2023, we're continuing to look at ways to deliver excellent customer service to our agents more efficiently and well.
Brian Kirkland: I'll be updating you in.
Brian Kirkland: In future quarters.
Soham Jairaj Bhonsle: Okay, and then if I could just squeeze one more in, it looks like, you know, just if I look at unit share this quarter, at least on a national basis, it was down, but I know you guys aren't in all the markets across the country, so can you maybe just talk about your share in some of your core markets, like New York, Florida, and California, any other trends we should be sort of thinking about? Thank you.
Speaker Change: Okay, and then if I could just squeeze one more in it looks like just if I look at unit share.
This quarter at least on a national basis, It was down but I know you guys arent in all the markets across the country. So can you maybe just talk about your share in some of your core markets like New York, Florida, and California, and any other trends, we should be sort of thinking about thank you.
Howard M. Lorber: Well, look, our market share in New York is down, I think a small amount. Florida has been very strong. And that's basically because of our new development business. It's amazing.
Speaker Change: Well.
Speaker Change: Our market share in New York.
Speaker Change: Has that is down I think the small amount of Florida has been very strong and that's basically because of our new development business.
Speaker Change: It's amazing.
Howard M. Lorber: How it's transitioned from the best new development marketing revenue for us was always from New York, and now it's Florida substantially above what's going on in New York for new development. So California has really very little new development. It's never really been a great place for high-rise construction. My own view of that is that the problem really is, you know, usually when people are going from a house to a condo, they want to bank some money; they want to sell their house for, let's say, $10 million and buy something for $5 million.
Speaker Change: How its transition from the best New development marketing.
Speaker Change: Revenue for US was always from New York and now it's.
Speaker Change: Florida substantially.
Speaker Change: Substantially above what's going on in New York on New development.
Speaker Change: So, California is really very little new development, that's never really been a great great place for high rise construction.
Speaker Change: My own view of that is that the problem the problem really is.
Speaker Change: Usually when people are going.
Speaker Change: From a house.
Speaker Change: A condo.
Thanks for the money they want to sell their house for a.
Speaker Change: Let's say $10 million and buy something for $5 million. The problem. There is the new construction there youre going to sell your house at $10 million and Youre going to have to spend $15 million against something delivered.
Howard M. Lorber: The problem is the new construction there; you're going to sell your house for $10 million, and you're going to have to spend $15 million to get something you live in. So that's not a great market. So we've, We are really now concentrating on the new development business in Texas. Texas is a good place for new development. Also, in Las Vegas, we have a couple of projects there we just opened in the last couple of years.
Speaker Change: So that's not a great market so.
Speaker Change: We've really now are really concentrating on the new debt new debt business in Texas, Texas is a good place for new development.
Speaker Change: Las Vegas, we have.
Speaker Change: Couple of projects that we just opened in the last.
A couple of years. So we think we're in good spots.
Howard M. Lorber: So we think we're in good spots as it relates to where we are in the country. If you look at our proportion of revenues, the southern and western regions, which are Florida, Nevada, California, and Texas, went from about 50.5% of revenues on existing health sales to 54% of existing health sales for the three month period. If you look at the year over year period, that actually would be consistent with the fact that mortgage rates dip.
Speaker Change: As it relates to where we are in the country.
Speaker Change: You look at our proportion of revenues.
Speaker Change: So I'll start on Western region, which is Florida, Nevada, California taxes.
Speaker Change: We're.
Speaker Change: We're firm about 55% of revenues, if you'd be able to just take home sales to 54% of existing home sales for the three months period. If you look at the year over year period.
Speaker Change: Actually it would be consistent with the fact that mortgage rates dipped.
Speaker Change: In the fourth quarter.
Unknown Executive: Douglas Elliman, Founder & General Partner, Pinnacle Investments
Speaker Change: Those markets are less because those markets are more mortgage rate sensitive.
Speaker Change: New York market, which is primarily cash buyers.
Soham Jairaj Bhonsle: And if I could just one more, Brian, on the commission split, 79%, it's trended up a little higher. So what should we expect going forward? And maybe you could just talk about some of the trends within that number, some of the drivers. That's that.
Speaker Change: Yes, and then if I could just one more Brian on the commission split 79%, it's trended up a little higher so what should we expect going forward and maybe just talk about some of the trends within that number some of the drivers.
Brian Kirkland: That's a great question. We are watching commission splits very closely as we do all expenses. It is an effort that management is watching very closely. Now, if you have to look at us, we're different than some of our national competitors because of our limited number of markets. So, the three buckets that impact commission splits for us are new development, which is by far our highest margin in New York, and Long Island, which are higher margins in Florida and California.
Brian Kirkland: That's a great question, we are watching commissions, but whats very closely as we do all expenses. It is an effort that management is watching very closely now.
Speaker Change: You have to look at us.
Speaker Change: Currently some of our national competitors because of our limited number of markets. So.
Speaker Change: Are the three buckets that impact commissions, what for US are new development, which is by far our highest margin.
Speaker Change: New York and long Island, which are higher margins are Florida, and California. What happened. This quarter was there was a 189 basis point decline.
Brian Kirkland: What happened this quarter was a 189 basis point decline in gross margin, and that was driven by a 45% shift in the mix that I mentioned earlier in existing home sales in Florida and California going from 50% of our revenues from existing homes to 54%. And then in addition to that, because, as you know, we only recognize revenues on development marketing when the earnings process is complete or when a home sells.
Speaker Change: Gross margin and that was driven by a 45% shift in the mix.
Speaker Change: Earlier in existing home sales.
Speaker Change: Florida, California going from 50% of our revenues for the Steakhouse, a 54% and then in addition to that because as you know we.
Speaker Change: We only recognize revenues on development marketing when the earnings process is complete or when a home sales.
Brian Kirkland: We're in a period where we're not recognizing significant revenues because we're bringing in significant cash from deposits, but the things that would normally be closing now were things that began construction in 2020 and 21, when you know the whole country was closed during that time. So that was the other impact on the commission's list. That was about 145 basis points. The bottom line is, when we look at region to region, the commission splits were consistent from 2023 first quarter to 2024 first quarter. So we're not seeing any competitive pressures on that. Okay, perfect.
Speaker Change: We're in a period, where we're not recognizing significant revenues, because we're bringing in significant cash or deposits.
Speaker Change: Things that would normally be closing now where things that began construction in 2020, and 21, where you know the market the whole country was closed during that time.
Speaker Change: So.
Speaker Change: The other impact on commission splits out was about 145 basis points no. The bottom line is is when we look at region to region to Commission splits were consistent from 2023 first quarter to 2020 for first quarter. So we're not seeing any competitive pressures on that.
Soham Jairaj Bhonsle: Okay, perfect. Thank you so much.
Speaker Change: Okay perfect. Thank you so much.
Peter Abramowitz: Thank you. We'll take our next question from Peter Abramowitz with Jeffries. Please go ahead.
Speaker Change: Thank you we'll take our next question from Peter Abramowitz with Jefferies. Please go ahead.
Peter Abramowitz: Thank you. Yes. So I just want to go back to some comments.
Peter Abramowitz: Thank you, yes. So I just wanted to go back to some comments I think you said total listings.
Howard M. Lorber: I think you said total listings were up year-over-year versus the first quarter of 2023. So I just want to kind of unpack that. Does that kind of imply that even though total listings are up, your transaction volume is still down pretty significantly? Does that just kind of imply that kind of decision-making from buyers and sellers is happening a little bit more slowly? I just want to kind of get a little more context and understanding of the dynamic there.
We're up year over year versus the first quarter of 'twenty three.
Peter Abramowitz: So I just want to kind of unpack that does that kind of imply that.
Peter Abramowitz: Even though total listings were up your transaction volumes still still down pretty significantly does that kind of imply that that total of like kind of decision, making from from buyers and sellers is happening a little bit more slowly I just wanted to kind of get.
Peter Abramowitz: A little more context and understanding of the dynamic there.
Howard M. Lorber: Yeah, I think that, you know, the listings may be up. But what happens is that the buyers you have have sort of a lack of buyers because someone that's going to buy today, and it generally has something to sell. So they're stuck. It's a quandary because they can buy something and pay a higher rate. And then what they're going to sell probably has a lower rate on it because they've owned it for a while. And that sort of puts a damper on their thinking and the process of whether they should move or not move. Right? And
I think that.
Peter Abramowitz: Listings may be up but what happens is that the buyers.
Peter Abramowitz: You haven't you have sort of a lack of buyers because some of that is going to buy today.
Peter Abramowitz: Generally has something to sell so they're stuck it's a quandary because they can buy something and pay a higher rate and then what theyre going to sell probably has a lower rate on it because they have owned it for a while and that sort of puts a damper on their thinking and process, whether they should move or not.
Howard M. Lorber: Right, and that we are more immune to that pressure than some of our competitors because we have such a high percentage of ourselves are ultra luxury and cash. However, what I think you're seeing is with the 25% increase in the fourth quarter and the 7% increase in the first quarter is that you see, you're now starting to see the markets are loosening up. People didn't have to do anything for two years after 2021, when mortgage rates were at historical lows and then went to generational highs, as we know.
Peter Abramowitz: We are more immune to that pressured on some of our competitors because we have such a high percentage of ourselves.
Peter Abramowitz: Our ultra luxury and cash.
What I think youre seeing us with a 25% increase in the fourth quarter and a 7% increase in the first quarter. As you are now starting to see the markets are loosening up people didnt have to do anything for two years. After 2021 when mortgage rates were at historical lows and then went to generational highs as we know.
Howard M. Lorber: Now we're seeing people have reasons to move, and they're going to list their homes, and that's going to create more volume for us in the future. Our average sales price continues to be very strong, at almost $1.6 million per home. So we have a lot of competitive advantages in this area. Okay, that's helpful.
Peter Abramowitz: Now, we're seeing people have reasons to move and they're going to list their homes and that's going to create more volume for us in the future. Our average sales price continues to be very strong at almost $1 6 million for all so we have a lot of competitive advantages in this area.
Peter Abramowitz: Okay, that's helpful. Do you have a breakdown of what percentage of the buyers within the transactions that you're involved in are all cash versus using fines?
Speaker Change: Okay. That's helpful. Do you have a breakdown of what percentage of the buyers.
Speaker Change: Within within transactions that your.
Speaker Change: You are involved in are all cash versus using financing.
Speaker Change: That's more difficult to say because many times people will make a cash offer and actually use financing when interest rates are low.
Howard M. Lorber: Douglas Elliman, Founder & General Partner, Real Value Investment Services, www.realvalueinvestment.com, because the seller doesn't want to see that, doesn't want to hear about that, okay? Because that's, you know, troublesome. So we really don't have an idea. And I agree with what BK is saying that many people just don't just say make an all cash offer, but then they're financing it outside of that, right?
Speaker Change: In New York, It's clearly still a significant percentage and also in the ultra luxury of Florida, because you have just a different character buyer.
Speaker Change: In these markets and the high end markets you don't have people, making offers subject to mortgage contingencies.
Speaker Change: The seller doesn't want to see that doesn't want to hear about that okay because thats.
Speaker Change: Troublesome. So we really don't have an idea and I agree with what Bryan VK is saying is that many people.
Speaker Change: Just say make an all cash offer but then they're financing it outside of that right.
Peter Abramowitz: Got it. And then last one for me, I know you're still working on some of these kinds of operational improvements and improving the cost structure. I guess we're trying to think about the timing and trajectory of when you can kind of get the brokerage segment back to back to break even positive territory from the EBITDA perspective. Is it, you know, is it kind of a rate trajectory? Is there an absolute level of transaction volume that you need to see? And I guess just any comments around, you know, possible timing of when you expect that to happen? Well, we
Speaker Change: Got it.
Speaker Change: And then last one for me I know Youre still youre still working on some of these kind of operational improvement and improving cost structure.
Speaker Change: I guess I'm, just trying to think about the timing and trajectory of one you can kind of get the brokerage segment back to back to breakeven positive territory from an EBITDA perspective as it.
Speaker Change: Is it kind of.
Speaker Change: Trajectory of rates is an absolute level of transaction volume that you'd need to see and I guess just any comments around.
Speaker Change: Possible timing of when you expect that to happen.
Howard M. Lorber: Well, look, you know, the quicker rates go down, it will really prove how fast it's going to happen. But we don't look at it that way, because what if they stay where they are now or go up or go down a bit? That may not be that meaningful. We just have to focus on getting the business to make money for the shareholders and not wait and worry about where the volume is at any particular point.
Speaker Change: Well look.
Speaker Change: The quicker rates go down.
Speaker Change: <unk> is going to really prove what the how fast it's going to happen, but we don't look at it that way because what if they stay where they are now or go up or go down a drop that may not be that meaningful we just have to focus on getting the business to make money.
Speaker Change: For the shareholders.
Speaker Change: And not wait and worry about where.
Howard M. Lorber: So I think that that's what we're really, it's really much more of a guesswork, but because one way or another, it's going to happen, but we want to, we want to keep trimming down the business until we really can't trim anymore, and you know we started a new series of cuts, and we're happy about that, and we're going to continue doing that into the foreseeable future.
Speaker Change: Where the volume is at any particular point, so I think that that.
Speaker Change: Thats what were really it's really much more of a.
Speaker Change: Yes.
Speaker Change: It's not it's not guesswork, but because one way or another it's going to happen, but we want to we want to keep trimming down the business until we really can't trim anymore.
Speaker Change: And.
Speaker Change: We are starting we started a new series of cuts and we're happy about that and we're going to continue doing that.
Speaker Change: Into the foreseeable future.
Unknown Executive: And with a strong balance sheet, we do have time to do this right. We're not going to be under pressure from debt covenants or from historical losses because of our strong balance sheet.
Speaker Change: And with a strong balance sheet, we do have time to do this right, we're not going to be under pressure from dot carbon us or or from historical losses, because of our strong balance sheet.
Peter Abramowitz: Right. I guess just one more to follow up on Howard's comments. I mean, in terms of, you know, what rates mean for transaction volume, say they are stable but high on an absolute level, do you think that stability would be enough to kind of see the market start to loosen up, or do you think rates need to be going down?
Speaker Change: Right.
Speaker Change: Just one more as a follow up then to Howard's comments.
Speaker Change: I mean in terms of then.
Speaker Change: What rates mean for transaction volume say they are stable, but high on an absolute level do you think that stability.
Speaker Change: Stability would be enough to kind of see the market start to loosen up or do you think rates need to be going down for that to happen.
Howard M. Lorber: I think people are used to these rates, or starting to get used to these rates already, and no one really trusts what anyone else says. You know, what were they saying about six or seven cuts this year? They were saying six or seven cuts this year maybe three, three, four months ago.
Speaker Change: I think people are used to these rates starting to get used to these rates already and no one really trust what anyone else says.
Speaker Change: What are they saying, 6% or seven cuts they were saying six or seven cuts this year and that was maybe.
Peter Abramowitz: Now, all of a sudden, it's not constant, then someone starts talking about there may be one cut. So I don't think you could run, well, I know for sure you can't run. We can't run our business by worrying about that. We worry about it. We hope that we're gonna have cuts, but we're gonna try to get ourselves in a position that no matter which way it goes, or even if it stays this way for a while, we'll be profitable. Alright, that's all for me.
Speaker Change: Three or four months ago now all of a sudden it's no card spend.
Speaker Change: <unk>.
Speaker Change: Someone starts talking about there may be being one cut so I don't think I don't think you can I know for sure you can't run we can run our business by worrying about that we worry about it we hope that is going to we're going to have cuts, but looking at try to get ourselves in a position that no matter, which way it goes.
Or even if it stays this way for a while that will be profitable.
Peter Abramowitz: All right, that's all for me. Thank you. Thank you, Peter.
Speaker Change: Alright, that's all from me thank you.
Speaker Change: Thank you Peter.
Operator: Thank you. Ladies and gentlemen, those are all the questions that we have for today.
Speaker Change: Thank you Les.
Speaker Change: Ladies and gentlemen, those are all the questions that we have for today. Thank.
Operator: Thank you for joining us on Douglas Elliman's quarterly earnings conference call. We hope you have a good day. This will conclude our call.
Speaker Change: Thank you for joining us on Douglas elements quarterly earnings Conference call.
unknown: [inaudible]
Speaker Change: We hope you have a good day this will conclude our call.
Speaker Change: Okay.
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