Q2 2024 Douglas Elliman Inc Earnings Call
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unknown: Welcome to Douglas Elliman's second quarter 2024 earnings conference call. This call has been 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 An archived version of the webcast will be available on the Investor Relations section of the company's website, located at investors.elliman.com, for one year.
Speaker Change: Welcome to Douglas Elliman Second Quarter 2024 Earnings Conference Call.
unknown: 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. Reconciliation Adjusted EBITDA and Adjusted Net Laws are contained in the company's earnings release, which has been posted to the investor relations section of the company's web site. Before the call begins, I would like to read a Safe Harbor Statement.
Speaker Change: Before the call begins I would like to read our safe Harbor statement.
unknown: These statements made during this conference call that are not historical are forward-looking statements that are subject to risk 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 filing. Now, I would like to turn the call over to the Chairman, President, and Chief Executive Officer of Douglas Elliman, Howard Lorber.
Speaker Change: 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 routes and describe it in more detail in the company's securities.
Speaker Change: And Exchange Commission filings.
Speaker Change: Now I'd like to turn the call over to the Chairman President and Chief Executive Officer of Douglas Elliman I worked lorber.
Howard 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 broker. On today's call, we will discuss the current operating environment and Douglas Elliman's financial results for the three and six months ended June 30, 2024. All numbers presented this morning will be as of June 30, 2024, unless otherwise stated. We will then provide closing comments and open the call for questions.
Howard Lorber: Good morning, and thank you for joining US with me today are Richard lapping, our Chief operating officer.
Speaker Change: Ryan Kirkland, our Chief Financial Officer, and Scott <unk>, President and CEO of Douglas Elliman Realty, a residential real estate brokerage business.
Speaker Change: On today's call, we will discuss the current operating environment and Douglas Elliman financial results for the three and six months ended June 30 of 2024.
Speaker Change: All numbers presented this morning will be as of June 30 of 2024, unless otherwise stated.
Speaker Change: He will then provide closing comments and open the call for questions before I turn to our results I want to begin with an update on certain matters first in July 2024, we were pleased to have received a 50 million dollar growth investment from Kennedy Lewis, a leading credit focused alternative asset management firm.
Howard Lorber: Before I turn to our results, I want to begin with an update on certain matters. First, in July 2024, we were pleased to have received a $50 million growth investment from Kennedy Lewis, a leading credit-focused alternative asset management firm. We believe this positions us for strategic growth and expansion, and we look forward to tapping into the network and knowledge base of Kennedy-Lewis as we collaborate to drive long-term stockholder value. Second, in June 2024, we were pleased to receive preliminary court approval of our settlement of the pending seller class action litigation relating to real estate brokerage fees, which will also resolve other similar pending litigation.
Speaker Change: We believe this positions us for strategic growth and expansion and we look forward to tapping into the network and knowledge base of Kennedy Louis as we collaborate to drive long term stockholder value.
Speaker Change: Second in June 2024, we were pleased to receive preliminary court approval of our settlement of the pending seller class action litigation relating to real estate brokerage fees, which will also resolved August similar pending litigation.
Speaker Change: Now we will discuss our outlook on our current operating environment as well as trends we are seeing in residential real estate.
Howard Lorber: Now we will discuss our outlook on our current operating environment, as well as the trends we are seeing in residential real estate. As discussed in previous quarters, generationally high interest rates have driven sustained listing inventory shortages across our luxury markets for more than two years. These shortages have resulted in significantly lower transaction volumes during this time.
Speaker Change: As discussed in previous quarters Generationally high interest rates have driven sustained listing inventory shortages across all luxury markets for more than two years.
Unknown Executive: As discussed in previous quarters, generationally high interest rates have driven sustained inventory shortages across our luxury markets for more than two years. We believe this bodes well for the future as we will recognize commission income from these projects when they close, a 6.7% increase in the first quarter compared to the first quarter of 2023 and a 25% increase in the fourth quarter of 2023 compared to the fourth quarter of 2022, representing a decline of approximately 7.9% compared to the prior year period.
Speaker Change: These shortages have resulted in significantly lower transaction volumes during this time.
Howard Lorber: While we expect these industry-wide challenges will continue to impact our results, we remain encouraged by recent improvements. First, our second quarter revenues and gross transaction values increased from the prior year period by approximately 4% and 7%, respectively. Further, average daily cash receipts from existing home sales in July increased by approximately 12% compared to July 2023. This continues a trend that began in October 2020.
Speaker Change: While we expect these industry wide challenges, we will continue to impact our results. We remain encouraged by recent improvements.
Speaker Change: First our second quarter revenues and gross transaction values increased from the prior year period by approximately 4% and 7% respectively.
Speaker Change: Alright.
Speaker Change: Average cash average daily cash receipt from existing home sales in July increased by approximately 12% compared to July 2023.
Speaker Change: This continues a trend that began in October 2023.
Howard Lorber: We believe this is evidence of the market's gradual adjustment to higher interest rates. Second, we continue to see momentum in our development marketing, a platform that differentiates Douglas Elliman from our competitors. 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 revenue potential for years as they are often hired to resell or rent those properties. Consequently, Douglas Elliman development marketing continues to be sought after by well-known real estate developers.
Speaker Change: We believe this is evidence of the markets gradual adjustment to higher interest rates.
Speaker Change: Second we continue to see momentum in our development marketing business a platform that differentiates doesn't it sounded from our competitors.
Speaker Change: Jewish development marketing Division Douglas Elliman employees, a hybrid broker model, where our top retail residential real estate agents work in tandem with our development marketing professionals and leveraging their extensive industry relationships for the benefit of our developer clients.
Speaker Change: <unk> can market and sell high profile developments that enhance their brands and provide additional commission potential for years.
Speaker Change: Often higher to resell our rent those very same units.
Speaker Change: Consequently, Douglas Elliman development marketing continues to be sought after by well known real estate developers.
Howard Lorber: This division has an active pipeline of signed and new projects of approximately $26.5 billion in gross transaction value, including approximately $16 billion in gross transaction value in Florida alone. We believe this bodes well for the future as we will recognize commission income from these projects when they close. Third, listing volume increased 23% in the second quarter of 2024 from the prior year period, as Douglas Elliman continues to be the leader in the luxury markets it serves.
Speaker Change: This division has an active pipeline of signed a new projects of approximately $26 $5 billion gross transaction value.
Speaker Change: Clothing, approximately $16 billion gross transaction value in Florida alone.
Speaker Change: We believe this bodes well for the future as we will recognize commission income from these projects when they close.
Speaker Change: Third listing volume increased 23% in the second quarter of 2024 from the prior year period as Douglas Elliman continues to be the leader in the luxury market should tariffs.
Howard Lorber: The advent of the $100 million listing is upon us, and we are well positioned to market and sell these prestigious homes. For example, during the quarter, we won significant nine-figure exclusives in Orange County, California, Snowmass College, and Coral Gables, Florida.
Speaker Change: The advent of the $100 million listing is upon us and we are well positioned to market and sell these prestigious homes.
Speaker Change: For example, during the quarter, we won significant nine figure exclusives in Orange County, California Snow mascot.
Speaker Change: Carl Gables, Florida.
Howard Lorber: The increases in total listing volume follow, a 6.7% increase in the first quarter compared to the first quarter of 2023 and a 25% increase in the fourth quarter of 2023 compared to the fourth quarter of 2022. We believe we are already seeing the impact of increased listing volume, and this trend will continue through the remainder of 2024 and into the first quarter of 2025. Consistent with the increase in listing volume, our average sales price per transaction remained an industry-best 1.81 million in the second quarter and was 1.64 million for the past four quarters. We believe the consistency in our average sales price per transaction reflects the strength of our luxury markets, as well as Douglas Elliman's reputation for offering the finest properties and client experience in real estate.
Speaker Change: The increases in total listing volume follows.
Speaker Change: A six 7% increase in the first quarter compared to the first quarter of 2023, and a 25% increase in the fourth quarter of 2023.
Speaker Change: Third to the fourth quarter of 2022.
Speaker Change: We believe we are already seeing the impact of increased listing volume and this trend will continue in the remainder of 2024 and into the first quarter of 2025.
Speaker Change: Consistent with the increase in listing volumes, our average sales price per transaction remained an industry best 1.81 million in the second quarter and was 164 million for the past four quarters.
Speaker Change: We believe the consistency in our average sales price per transaction.
Douglas Elliman: Flex the strength of our luxury markets as well as Douglas Elliman its reputation for offering the finest properties and client experience in real estate.
Howard Lorber: Finally, our cost-reduction efforts have been judicious, and the results of our strategy are beginning to flow to the bottom line. Over the past year, we have continued to adjust our core structure to better fit our business, including additional headcount reduction, cutting Costly Sponsorships, Streamlining Advertising, and Commencing a Program to Consolidate Offices.
Speaker Change: Finally, our cost reduction efforts had been judicious and the results of our strategy.
Speaker Change: All beginning to flow to the bottom line.
Speaker Change: Over the past year, we have continued to adjust our cost structure to better fit our business, including additional head count reductions.
Speaker Change: Cutting costly sponsorships streamlining advertising and commencing a program to consolidate office space.
Howard Lorber: Our real estate brokerage segment reduced its operating expenses, excluding commission expenses, litigation settlement expenses, restructuring, and other non-cash expenses, by $11.3 million in the first half of 2024, representing a decline of approximately 7.9% compared to the prior year period. Over the last 12 months ended June 30, 2024, our real estate brokerage segment has reduced its operating expenses, including commission expenses, litigation settlement expenses, restructuring, and other non-cash expenses by 21 million, or approximately 7.3% compared to the 12 months ended June 30, 2020.
Speaker Change: Real estate brokerage segment reduced its operating expenses, Excluding commission expenses litigation settlement expenses.
Speaker Change: Restructuring and other non cash expenses by $11 3 million in the first half of 2024.
Speaker Change: Representing a decline of approximately seven 9% compared to the prior year period.
Unknown Executive: Over the last 12 months ended June 30, 2024, our real estate brokerage segment has reduced its operating expenses, including commission expenses. We believe these efforts are enabling Douglas Elliman to meet industry challenges head on without significantly impacting the agent experience. The real estate brokerage segment had income of $6.6 million compared to $2.5 million in the 2023 period. Douglas Elliman reported $486 million in revenues compared to $489.9 million in the prior year period.
Speaker Change: Over the last 12 months ended June 32020 for a real estate brokerage segment has reduced its operating expenses, including excluding commission expenses litigation settlement expenses restructuring and other noncash expenses by $21 million or approximately seven 3% compared to the 12 months ended June 32.
Speaker Change: 23.
Howard Lorber: We believe these efforts are enabling Douglas Elliman to meet industry challenges head on without significantly impacting the aging experience. We are proud to share that our agent retention rate stands at 88%, and we continue to attract the industry's best talent.
Speaker Change: We believe these efforts are enabling Douglas Amit to meet industry challenges head on without significantly impacting the agent experience. We are proud to share that our agent retention rate stands at 88% and we continued to attract the industry's best talent.
Speaker Change: Now turning to Douglas Elliman financial results for the three months ended June 32024.
Howard Lorber: Now turning to Douglas Elliman's financial results for the three months ended June 30, 2024, Douglas Elliman reported $285.8 million in revenues compared to $275.9 million in the 2023 period. The net loss attributed to Douglas Elliman for the second quarter was $1.7 million or $0.02 per diluted share compared to $5.2 million or $0.06 per diluted share in the 2023 period. The adjusted EBITDA attributed to Douglas Elliman for the second quarter was an income of $2.4 million compared to a loss of $2.6 million in the 2023 period.
Selman: Selman reported $285 8 million in revenues compared to $275 9 million in the 2023 period.
Speaker Change: Net loss attributed to Douglas <unk> for the second quarter was $1 7 million or <unk> <unk> per diluted share compared to $5 2 million or <unk> <unk> per diluted share in 2023 period.
Speaker Change: Adjusted EBITDA attributed to Douglas summit in the second quarter were income of $2 4 million compared to a loss of $2 6 million in the 2023 period.
Howard Lorber: For comparison purposes, our real estate brokerage segment reported operating income of 2.9 million this quarter, compared to an operating loss of 1 million in the 2023 segment, with an income of $6.6 million compared to $2.5 million in the 2023 period. The adjusted net loss attributed to Douglas Elliman in the second quarter was $1.1 million or $0.01 per share compared to $4.9 million or $0.06 per share in the 2023 period. Douglas Elliman has maintained ample liquidity with cash and cash equivalents at June 30 of 2024 of approximately 92.9. Now turning to Doug turning to Douglas Elliman, Financial results for the six months ended June 30, 2024.
Speaker Change: For comparison purposes, our real estate brokerage segment reported operating income of $2 9 million this quarter compared to an operating loss of $1 million in 2023 period.
Selman: Adjusted EBITDA attributed to the segment were income of $6 6 million compared to $2 5 million in the 2023 period.
Speaker Change: Adjusted net loss attributed to Douglas Elliman in the second quarter was $1 1 million or one cent per share compared to $4 9 million or <unk> <unk> per share in the 2023 period.
Speaker Change: Douglas Elliman has maintained ample liquidity with cash and cash equivalents at June 30 of 2024 of approximately $92 9 million.
Speaker Change: Now turning to Doug turning to Douglas elements.
Selman: Financial results for the six months ended June 32024.
Howard Lorber: Douglas Elliman reported $486 million in revenues compared to $489.9 million in the prior year period. Nett Lawson, attributed to Douglas Humman for the second quarter, was 43.1 million or 52 cents per deluded share compared to 22.8 million or 28 cents per deluded share in the 2023 period. Net loss attributed to Douglas Elliman in the 2024 period included a $17.75 million litigation settlement charge, of which we have paid $7.75 million in June 2024, and Justin Iveda attributed to Douglas Elliman in the six months ended June 30, 2024, was a loss of $15.9 million compared to $20.2 million in the 2023 period.
Speaker Change: Douglas Elliman reported 486 point.
Speaker Change: $486 million in revenues compared to $489 9 million in the prior year period.
Speaker Change: Net loss attributed to Douglas <unk> for the second quarter was $43 1 million or <unk> 52 per diluted share compared to $22 8 million or 28 cents per diluted share in the 2023 period.
Speaker Change: Net loss attributed to Douglas Elliman into 2024 period included a $17 $75 million litigation settlement charge of which we have paid $775 million in June 2024.
Speaker Change: Adjusted EBITDA attributed to Douglas dominant and six months ended June 30 of 2024 were a loss of $15 9 million compared to $20 2 million in the 2023 period.
Howard Lorber: For comparison purposes, the real estate brokerage segment reported an operating loss of $32.3 million for the first six months of 2024 compared to $18.4 million in the 2023 period. The operating loss in the 2024 period includes the $17.75 million litigation settlement charge. Adjusted even thought it should be to the statement where a loss of 7.6 million compared to 10.5 million in the 2020. Justin's net loss attributed to Douglas Elliman in the six months ended June 30, 2024, was 24.8 million or 30 cents per share, compared to 21.6 million or 27 cents per share in the 2023 period.
Speaker Change: For comparison purposes, our real estate brokerage segment.
Speaker Change: Reported an operating loss of $32 3 million for the first six months of 2024 compared to $18 4 million in the 2023 peer at.
Speaker Change: Operating loss in the 2024 period includes the $17 $75 million litigation settlement charge.
Speaker Change: Adjusted EBITDA attribute to the segment were a loss of $7 6 million compared to $10 $5 billion into 2023 period.
Speaker Change: Adjusted net loss attributed to Douglas summit in the six months ended June 30th 2024 was $24 8 million or <unk> 30 per share compared to $21 6 million at <unk> 27 per share in the 2023 period.
Speaker Change: In summary, we are confident that Douglas elliman is positioned for long term success with its differentiated platform continued cost reduction efforts and strong luxury brand.
Howard Lorber: In summary, we are confident that Douglas Elliman is positioned for long-term success with its differentiated platform, continued cost reduction efforts, and strong luxury brand. 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. 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 age. With that, we'll be happy to answer questions. Operator?
Speaker Change: Proven management team that success 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.
Speaker Change: 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.
Speaker Change: With that we will be happy to answer your questions operator.
Speaker Change: Thank you and at this time, if you would like to ask a question. Please press the star and one on your telephone keypad.
Operator: Thank you. And at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw your question by pressing star two. Once again, to ask a question, please press the star and one on your telephone keypad. We'll take our first question from Soham. Bhonsle with VTIG, please go ahead; your line is open.
Speaker Change: Draw your question by things start to.
Speaker Change: Once again to ask a question. Please press the star and one on your telephone keypad will.
Speaker Change: We will take our first question from Johanna.
Soham Bhonsle: Bhonsle with BTIG, please go ahead; your line is open.
Johanna: Monthly with BT IAG. Please go ahead your line is open.
Soham Bhonsle: Hey, good morning, everyone. So, first one, you know, I guess Howard, more recently, we've seen an increase in inventory in some of your core markets like Florida and Texas. And I think he sort of noted that in your comments as well. So I'm wondering, you know, what you're hearing from agents as to why that's maybe not translated into more transaction unit growth this quarter. Because when I sort of break down your GTV performance into units and price, it looks like, you know, units were still down 3%. So yeah, any thoughts there would be helpful.
Soham Bhonsle: Good morning, everyone. So, first one, you know, Howard, more recently, we've seen an increase in inventory in some of your core markets like Florida and Texas, and I think you sort of noted that in your comments as well. So I guess I'm wondering what you're hearing from agents as to why that's maybe not translated into more transaction unit growth this quarter, because when I sort of break down your GTV performance into units and price, it looks like, you know, units were still down 3%. So yeah, any thoughts there would be helpful.
Johanna Monthly: Hey, good morning, everyone. So.
Speaker Change: So first one.
Johanna Monthly: I guess Howard more recently, we've seen an increase in inventory in some of your core markets like Florida, and Texas and I think you sort of noted that in your comments as well. So I guess wondering what you're hearing from agents as to why that's maybe not translated into more transaction unit growth. This quarter, because that's when I when I sort of break down your GTD performance into units and price it looks like units was still.
Speaker Change: Down 3%, so any thoughts there would be helpful. Thank you.
Howard Lorber: Yeah, I mean, look, I think people are still waiting, the inventory is building a little bit because they're still waiting for rate cuts. Okay, it's hard, you know, you have inventory to build, and then, you know, there are really fewer buyers at most levels, or especially at the lower end levels in the market because of rates. So, I'm hoping that we will have some rate cuts before the end of the year. Who knows
Speaker Change: Yeah, I mean look I think people are still waiting the inventories building a little bit because they're still waiting for rate cuts. Okay. It's hard you have inventory build and then.
Speaker Change: There's really less buyers.
Unknown Executive: at most levels, or especially at the lower end levels in the market because of rates. So I am hoping that we will have some rate cuts before the end of the year. Current Inventory.
Speaker Change: And most levels are especially at the lower end levels in the market because of our rates. So hoping that we will have some rate cuts before the end of the year.
Howard Lorber: I mean, we'd be really happy with, you know, two quarter point cuts. But there's also been talk of a half a point cut and then a quarter of a point cost before year end. And we sure will see the inventory really go down as people decide to make new purchases from Current Inventory.
Speaker Change: Who knows I mean, we'd be we'd be really happy with.
Speaker Change: Quarter point cut, but there's also been talk of a half a point cut and then a quarter of a point cut before year end and we sure I wont say that your inventory.
Speaker Change: Going down as people decide to make new purchases.
Speaker Change: Current inventory.
Brian Kirkland: Okay, and then Brian, I guess you did in the prepared comments say I think up 12% on cash receipts. Can you just remind us how that actually translates into revenue?
Brian: Okay, and then Brian I guess you didn't in the prepared comments, saying I think up 12% on cash receipts can you just remind us how that actually translates into revenue going forward.
Speaker Change: Sure.
Unknown Executive: Sure. I mean, obviously, you can see where we've had really good performance in 2024 compared to 2023 of 12%. Our margins are running anywhere between 20 and 25%. So that really depends on regions going forward.
Brian Kirkland: Sure. I mean, obviously, you can see where we've had really good performance in 2024 compared to 2023 of 12%. Our margins are running anywhere between 20 and 25%. So that really depends on regions going forward. But what we're seeing is a very strong performance.
Brian: You can obviously.
Brian: We've had really good performance in 2024 compared to 2023 up 12% our margins are running anywhere between 20 and 25%.
Speaker Change: That really depends on regions going forward.
Speaker Change: But what we're seeing is a very strong market.
Brian Kirkland: Soham, to add a little to the previous question, we are starting to see the impact of that listing as we've seen a strong July in particular. So it does take time because we recognize revenue when the earnings process is complete, that is, only when the sale occurs. So we think that looks positive going forward. Okay, great. And then I guess on the capital raise, you know, it sounds like you're looking to deploy that for growth.
Speaker Change: Okay.
Speaker Change: And then I guess.
Speaker Change: Thereafter.
Speaker Change: Just to add a little to the previous question. Yes, we are starting to see the impact of that listing as we've seen.
Speaker Change: Strong July in particular, so it does take because we recognize revenue when the earnings process is complete that's always been the sale occurs so we think that looks positive going forward.
Unknown Executive: Okay, great. And then I guess on the capital raise, you know, it sounds like you're looking to deploy that for growth. So can you maybe just talk about, you know, whether you envision that spend going towards, you know, acquisitions, or is it building out teams more organically, and then maybe just the markets that you'd be looking to target?
Brian Kirkland: So can you maybe just talk about, you know, whether you envision that spend going towards, you know, tucking in acquisitions, or is it building out teams more organically, and then maybe just the markets that you'd be looking to target?
Speaker Change: Okay great.
Speaker Change: And then I guess on the capital raise it sounds like you're looking to deploy that for growth.
Speaker Change: Can you maybe just talk about you know.
Speaker Change: Why do you envision that spend going towards tuck in acquisitions or is it building out teams more organically and then maybe just a market that you'd be looking to target. Thanks look.
Howard Lorber: Look, you know, our expansion is basically limited to the states that really are no income tax states because that's where people are going. So there are a number of markets we're not in that we could be in.
Speaker Change: We're basically our expansion is basically limited to the states that really are no income tax states, because thats where people are going.
Speaker Change: So.
Howard Lorber: We've held back a little bit, but we've had to have really I think most of the no tax states covered now. We're in we're in Texas, and we're doing well in Texas. We're in obviously Florida; Florida is still booming. It's almost shocking, because people just are coming to Florida and driving, And they're coming from all over. Most people think like most of Florida, you know, or a lot of it is coming from New York. But having said that, you know, we see California people also coming to Florida. And that's surprising.
Speaker Change: It's.
Speaker Change: A number of markets, we're not in that we could be in.
Speaker Change: We've held back a little bit but.
Speaker Change: But we've had has really.
Speaker Change: I think most of the no tax states covered now.
Speaker Change: We're in Texas, we're doing well in Texas.
Speaker Change: And.
Speaker Change: Obviously, Florida, Florida is still booming.
Speaker Change: It's somewhat shocking almost because people just are coming to Florida in droves.
Unknown Executive: It's almost shocking because people just are coming to Florida and driving developers, single-family home developers, and we're hoping to pick up some of that business if possible.
Speaker Change: And in.
Speaker Change: And they're coming from all over most people think like most of Florida, where a lot of it is coming from New York, but having said that we.
Speaker Change: We see California people also coming to Florida, and that's surprising.
Howard Lorber: You know, the general thinking was that anyone from California that wants to get out of the tax position there is going to go to Texas. Well, I think sometimes, you know, California is more aligned with Florida. And we've heard that a few times, you know, that people are I have neighbors in Florida on each side of me that came from California. So we know what's going on. And we're sort of happy with it.
Speaker Change: Most the general thinking was that anyone from California that wants to get out of the tax position. There is going to go to Texas, well I think sometimes you know, California is more aligned with Florida.
Speaker Change: And we've heard that a few times.
Speaker Change: That <unk>.
Speaker Change: People are I have a neighbor in Florida on each side of that came from California. So we know what's going on and.
Speaker Change: We're sort of happy with it and.
Howard Lorber: We're going to continue to be very careful with our money and work well. We will be working well with Kennedy Lewis, and we will hopefully get involved. They are a big lender to developers, single-family home developers, and we're hoping to pick up some of that business if possible.
Speaker Change: We're going to continue to be very careful with our with our money.
Speaker Change: And.
Speaker Change: Well, we will we will be working well with Kennedy Louis and we will be hopefully getting involved they are a big lender to two.
Speaker Change: To developers a single family home developers and we're hoping to pick up some of that business if possible.
Unknown Executive: Okay. And then, Brian, on expenses. So it looks like you've been able to bring down the G&A line nicely. But my question is more around the goal forward. So if, you know, volumes were to begin to inflect next year or in the back half of the year, you know, how are we sort of thinking about managing that line or just expenses, your fixed expenses in general, right? Should we expect that to continue to trend down as, you know, some of your prior actions sort of flow through? Or do you expect to add more folks to support the growth as you go forward?
Brian Kirkland: Okay. And then Brian on expenses. So it looks like you've been able to bring down the GNA line nicely. But my question is more around the goal forward. So if you know volumes were to begin to inflect next year or in the back half of the year, you know, how are we sort of thinking about managing that line or just expenses, your fixed expenses in general, right? Should we expect that to continue to trend down, as you know, some of your prior actions sort of flow through? Or do you expect to add more folks to support the growth as you go forward?
Speaker Change: Okay.
Speaker Change: And then Brian on expenses.
Speaker Change: So it looks like you've been minimal to bring down the G&A line nicely.
Speaker Change: But my question is more around the go forward.
Speaker Change: So.
Speaker Change: Volumes were to begin to inflect next year or in the back half of the year. How are you sort of thinking about managing that line or just expenses. Your fixed expenses in general rates should we expect that to continue to trend down.
Speaker Change: Some of your prior actions sort of flow through or do you expect to add more folks to support the growth as you go forward.
Brian Kirkland: So obviously, you're asking a question about scale. And to answer your question, we do think we can scale expenses going forward. And we think that when revenues return, that will impact the business favorably. But let's just talk about where we were and then where we're going.
Speaker Change: So obviously Europe and your question about scale and to answer. Your question. We do think we can scale expenses going forward.
Speaker Change: When revenues.
Speaker Change: When revenues return.
Speaker Change: That will impact the business driver Blake, but look let's just talk about where we were and where we're growing contribution to our profits from the expense reduction really do reflect the work over the last two years.
Brian Kirkland: So the contributions to our profits from the expense reductions really do reflect the work over the last 2 years. And this has been a gradual impact, and it's been building as management has been very deliberate in these expense cuts and has been focused on continuing expenses in a judicious manner. And otherwise, we're not penny wise and pound foolish. We're focused on continuing to enhance the agent experience, which is the number one driver of long-term stockholder value.
Speaker Change: And this has been a gradual impact and it's been building management has been very deliberate on these expense cuts and has been focused on continuing expenses in a judicious manner and otherwise, we're not pennywise and pound gain wish.
Speaker Change: We're focused on continuing to attack the agent experience, which that's the number one driver of long term stockholder value and while initially the deal.
Unknown Executive: And while initially the expense reductions came from lower advertising, which is somewhat variable to revenues and personnel expenses, we're now seeing the impact of the elimination of leases and long-term sponsorship.
Speaker Change: The reductions came from lower advertising, what youre somewhat variable to revenues personnel asbestos. We're now seeing the impact of the elimination of leases and sponsors and long term sponsorships. So we will continue to think smartly will continue to where there is a need to spend more on things like advertising, we will but we're going to continue to try.
Brian Kirkland: And while initially the expense reductions came from lower advertising, which is somewhat variable to revenues and personnel expenses, we're now seeing the impact of the elimination of leases and long-term sponsorship. So we'll continue to think smartly. Where there's a need to spend more on things like advertising, we will, but we're going to continue to try to scale our expenses to the maximum amount possible.
Speaker Change: To scale, our expenses to the maximum amount possible alright, let me add something to what I was talking about before an expansion.
Howard Lorber: Let me add something to what I was talking about before about expansion. Our way of expanding now is not to go buy a company or not to start from scratch. But what we do is we go into markets, and most of these developers are, you know, do business in multiple states. So, for instance, we have a project in Tennessee coming up. We don't have an office in Tennessee; we have a broker.
Speaker Change: Our way of expansion now is not to go buy a company.
Speaker Change: Not to start from scratch.
Speaker Change: What we do as we go into markets and most most of these developers are do business in multiple multiple states. So like for instance.
Speaker Change: We have projects in Tennessee, its coming up we don't have an office in Tennessee, we have a broker.
Howard Lorber: And so that may be just for a while, just doing new development projects. This is a great part of our business. And that's pretty much how we save money in opening, you know, opening other markets.
Speaker Change: And so that may be just for a while just doing new development projects, which is a great part of our business and that's pretty much how we save money in opening an opening in other markets.
Unknown Executive: This is a great part of our business. And that's pretty much how we save money in opening, you know, opening other markets.
Brian Kirkland: Okay, understood. And the last one on split, Brian, it was up 150 basis points. And look, we've seen pressure across the industry. Can you just maybe talk about some of the dynamics at play there? Thank you.
Brian: Okay understood and just last one on split Brian It was up 150 basis points and look we've seen pressure across the industry can you just maybe talk about some of the dynamics at play there. Thank you.
Brian Kirkland: Yeah, of course. And this is a similar answer to the first quarter, but I'll give you the walk forward. So, nothing has changed on the grid that we pay to agents in recent years. And we're looking region to region. If you look at the region to region commission splits, they're completely consistent. But what's happening is our margin analysis is really sensitive and mixed given the number of markets we're in. So specifically, Florida, which is a higher commission state, increased from 27% of our existing home sales in the 23rd second quarter to 30% of existing home sales in the second quarter of 2024.
Speaker Change: Yes of course.
Speaker Change: Similar answer to the first quarter, but I won't I'll give you the wallboard.
Speaker Change: So nothing has changed on the grid that we paid to agents in recent years.
Speaker Change: And we're looking region region. If you look at the region to region because commission splits they're completely consistent but what's happening is.
Unknown Executive: our margin analysis is really sensitive and mixed given the number of markets we're in. So specifically, Florida, which is a higher commission state, increased from 27% of our existing home sales in the 23rd second quarter to 30% of existing home sales in the second quarter of 2024. That accounted for, if you look at the difference between that and New York City, that accounted for about half, about 0.5% of the 1.5% change in the margin.
Speaker Change: Our margin analysis is really sensitive to the mix given the number of markets, where it so specifically, Florida, which has a higher commission side increase of 27% of our existing home sales in the 23 second quarter, but 30% of existing home sales in the second quarter of 2024.
Brian Kirkland: That accounted for, if you look at the difference between that and New York City, that accounted for about half, about 0.5% of the 1.5% change in the margin. The remainder was due to the Douglas Elliman development marketing, which you know that business is sensitive to revenue recognition accounting because we only recognize revenue and relate its profit to that business when the earnings process is complete or to so close. And as Howard said, we have a tremendous pipeline for that, and that looks good for future profits.
Speaker Change: That accounted for if you look at the difference between that and New York City that accounted for about half about <unk>.
Speaker Change: 5% of the one 5% change in the margin the remainder was due to Douglas.
Speaker Change: Douglas Elliman development marketing, which you know that business is sensitive to revenue recognition accounting because we only recognize revenue on be lightest profit on that business. When do your earnings process is complete or to sell closes.
Speaker Change: And as Howard said, we have a tremendous pipeline in that and that looks good for future profits.
Brian Kirkland: The final impact was higher commission payouts on a percentage basis. And that was due to - we're an ultra-luxury realtor. I mean, that's the bottom line. That's our market. And we had some really significant, record-breaking transactions, some nine-figure transactions during the quarter. And that's going to result in lower margins, but at the same time, it's going to result in higher absolute gross profit.
Howard Lorber: Final impact was higher commission payouts.
Speaker Change: On a percentage basis and that was due to.
unknown: Understandable. All right. Thanks a lot for the thoughts.
Speaker Change: We're an ultra luxury real I mean, that's the bottom line, that's our market ultra luxury and we have some really significant record breaking transaction. Some night bigger transactions during the quarter and that's going to result in lower margins, but at the same time, it's going to result in higher absolute.
Speaker Change: Gross profit.
Speaker Change: Understood Alright, thanks, a lot for that.
Speaker Change: Our next question comes from Peter Abramowitz with Jefferies. Please go ahead.
Peter Abramowitz: Our next question comes from Peter Abramowitz with Jeffries. Please go ahead.
Peter Abramowitz: Yes. Thank you for taking the question. So if we just look at overall transaction value.
Peter Abramowitz: Yes, thank you for taking the question. So if we just look at overall transaction value in your business versus the overall market, it would seem that you gained market share this quarter. So just wondering if you could provide any context or comments around that. Maybe what drove that and if you think that's something that's sustainable going forward.
Peter Abramowitz: In your business versus the overall market. It would seem that you gained market share of this quarter. So.
Peter Abramowitz: So just wondering if you can provide any context or comments around that.
Speaker Change: Maybe what drove that and if you think that's something that's sustainable going forward.
Unknown Executive: Record, obviously, record-breaking sales drug. We have the best agents, we're an ultra-ultra luxury residential real estate broker. And when you have a BK just to add, I you know, we have I think in the whole industry, in the whole country, we have the highest. This year was $1.8 million.
Speaker Change: Great Robert obviously record breaking sales stroke, we have the best agents, where an entre ultra luxury.
Howard Lorber: Obviously, record-breaking sales stroke. We have the best agents; we're an ultra-lustry resident of real estate broker. And when you have a
Speaker Change: Residential real estate broker.
Speaker Change: And when do you have.
Howard Lorber: BK, just to add, I think, in the whole industry, in the whole country, we have the highest level of sales. Our average sale is... This year it was $1.8 million. Yes, that's for the rest of the companies, even even, you know, companies, no matter what their size they are. There are, I don't think there's anyone that's even close to that. I think they're all a million or less.
Speaker Change: <unk> just to add.
Speaker Change: Have I think in the whole industry and the whole country, we have the highest.
Speaker Change: Level of sales.
Speaker Change: Our average sale is what is this year was 1.1 dollars 8 million I think right yes.
Speaker Change: That's for the rest of the companies even even comps.
Speaker Change: Companies no matter what size they are.
Speaker Change: I don't think there's anyone that's even close to that I think they are all a $1 million or less.
Speaker Change: Okay.
Unknown Executive: I believe you're correct, Howard, and we also are in a market that, in addition to record-breaking sales, in addition to being denamed and ultra-luxury real estate, we also are in markets that are less mortgage rate sensitive; mortgage rates were very high in the second quarter. So we are going to outperform in a quarter like that from that right from the interest rate perspective.
Howard Lorber: I believe Youre correct Howard and we also are in markets that in addition to record breaking sales. In addition to being the name an ultra luxury real estate. We also Ark in markets that are less mortgage rate sensitive mortgage rates were very high in the second quarter. So we are going to outperform in a quarter like that.
Speaker Change: <unk> dot right from the interest rate perspective.
Speaker Change: Okay. That's helpful. And then and then a question on just overall in the macro backdrop, obviously, some some volatile wild moves in the market and there seems to be maybe a little bit more concern around a recession today than there was a couple of weeks ago.
Howard Lorber: Okay, that's helpful. And then, and then a question just overall on the macro backdrop, obviously, some volatile and wild moves in the market. And there seems to be maybe a little bit more concern around a recession today than there was a couple weeks ago. Just, if you could help us think through how your business will be affected, I know that your core buyer is maybe less impacted by the macro backdrop and not as sensitive.
Speaker Change: Just if you could help us think through <unk>.
Speaker Change: Impact your business I know Youre, a core buyer is maybe less impacted by the macro backdrop and not as sensitive but have you had conversations internally about how that affects the business could you help us think through.
Howard Lorber: But have you had internal conversations about how that affects the business? And could you help us think through, you know, if we do go into a recession, you know, how we should think about sort of the go forward in the medium term? Yeah, that
Speaker Change: If we do go into a recession.
Speaker Change: How we should think about sort of the go forward sort of medium term yeah. That's that's a tough a tough question because we don't know how deep the recession would be if there even is one we keep hearing.
Howard Lorber: Yeah, that's a tough question because we don't know how deep the recession will be if there even is one. We keep hearing how many times that we have heard about, oh, recession is coming, recession is coming. I don't think there's going to be any serious recession. There may be others that think the opposite, but I still say that we are in the best position in the industry to weather a recession. And that's what's important. Because when you come out of that recession, if there is one, you will be number one, will continue to be number one, bro. Thank you for joining us. I'm Douglas Elliman.
Speaker Change: How many times that we heard about how recession is coming recession is coming.
Speaker Change: <unk>.
Speaker Change: I don't think theres going to be any serious recession, there may be others that think the opposite but I still say that we are in the best position.
Speaker Change: In the industry.
Speaker Change: The weather a recession.
Speaker Change: And that's what's important because when you come out of that recession. If there is one.
Speaker Change: We'll be the number one we will continue to be the number one broker in the country.
Speaker Change: Got it and then one more if I could.
Howard Lorber: Got it. And then one more, if I could, I think Howard, you mentioned in your comments toward the end there, just on strategic market expansion. Could you touch on maybe some of the markets where you're thinking that may be a possibility of whether acquiring new teams or potentially just kind of kind of beefing up for recovery? Just just the markets overall, where you think the business could be expanding over the next year or two? Yeah,
Speaker Change: I think Howard you mentioned in your comments towards the end there just on strategic market expansion.
Speaker Change: Could you touch on maybe some of the markets where youre thinking.
Speaker Change: That may be a possibility of weather.
Speaker Change: Acquiring new teams or potentially just.
Howard Lorber: Kind of kind of beefing up for recovery.
Speaker Change: Overall, we are where you think the business could be expanding over the next year or two.
Howard Lorber: Yeah, as I said, one of the ways we're doing it without spending a lot of money is through new, new, new development. Because there are some of these markets, there's, you know, really, pretty much no one that does new development sales. So that's what we're doing, as I said, in Tennessee. And that's how we're building our, you know, pretty much all our markets, all our newer markets, including Texas and including Las Vegas. We have some great projects.
Speaker Change: As I said one of the ways, we're doing it without spending a lot of money is through new development.
Speaker Change: Some of these markets there is really pretty much no one that does new development.
Speaker Change: Sales. So that's what we're doing as I said in Tennessee.
Speaker Change: And that's how we're building our.
Speaker Change: Pretty much all our markets all of our newer markets, including Texas, and including Las Vegas, We have some great projects and you don't have to spend much money to do that because we have the back office part of it in New York, and Florida and that can service the whole country pretty much.
Unknown Executive: We have some great projects, and you don't have to spend a lot of money to do them. Because we have the back office part of it in New York and Florida, and that can service the whole country pretty much. So we're not building like we're not going in and opening, you know, taking 5000 feet and opening a big, beautiful new office that we're not doing. We want to get business first before we open the office.
Howard Lorber: And you don't have to spend much money to do that, because we have the back office part of it in New York and Florida, and that can service the whole country pretty much. So we're not building like, we're not going in and opening, you know, taking 5,000 feet and opening a big, beautiful new office. That we're not doing. We want to get business first before we open the office.
Speaker Change: So we're not we're not building like we're not going in and opening.
Speaker Change: <unk> 5000 feet and opening a big beautiful new office that we're not doing we want to get business first before we opened the office and that has worked pretty well for us because we are very well known in the new development business.
Howard Lorber: And that has worked pretty well for us because we're very well known in the new development business. I mean, we have a huge market share. And if you look at Florida, we have a huge market share in Florida.
Unknown Executive: And that has worked pretty well for us because we're very well known in the new development business. I mean, we have a huge market share. And if you look at Florida, huge market share in Florida, and we haven't been there that long, I guess, how long have we been in Florida? Okay, maybe 11 years. And I was gonna say 10 years, 1011 years. And we built up where we're the number one broker in Miami Beach for the number one broker in Palm Beach County.
Speaker Change: We have huge market share and if you look at Florida huge market share in Florida, and we haven't been narrows that will I guess, how long we've been apart BK, maybe 11 years and I was going to say 10 years 10, 11 years and rebuilt up where we're the number one broker in.
Howard Lorber: And we haven't been there that long. I guess, how long have we been in Florida, BK? Maybe 11 years. 10, I was going to say 10 years, 10, 11.
Howard Lorber: And we built up to where we're the number one broker in Miami Beach, we're the number one bought broker in Palm Beach County, and we're all the way up, pretty much, we go halfway up on the east side. And we're now, you know, on the west coast of Florida. And they really don't have anyone that really knows the new development business like we do. And that's really been a huge help. And so we're going to be going to places where there is business. It doesn't matter, you know, really where they are. If we can do it, and do it economically, and make money, we're doing it.
Speaker Change: Miami Beach, we're the number one bulk broker and Palm Beach County.
Speaker Change: All the way up pretty much we go halfway up on the east side and we're now.
Unknown Executive: And we're all the way up. Pretty much, we go halfway up on the east side. And we're now, you know, on the west coast of Florida. And they really don't have anyone that really knows the new development business like they used to.
Speaker Change: On the West Coast of Florida.
Speaker Change: I really don't have anyone that's really knows the new development business like.
Speaker Change: We do it and that's really been a huge help.
Speaker Change: So we're gonna be go into places, where this business. It doesn't matter you know really where they are.
Speaker Change: If we can do it and do it economically I make money doing it.
Speaker Change: Okay.
unknown: All right, that's all for me. Thanks for the time. Those are all the questions that we have for today. Thank you for joining us on Douglas Elliman's Quality Earnings Conference Call. Hope you have a good day.
Speaker Change: Alright, that's all from me thanks for the time.
Speaker Change: Ladies and gentlemen, those are all the questions now we have for today.
Jason Edelman: and Jason Edelman. Those are all the questions that we have for today. Thank you for joining us on Douglas Elliman's call.
unknown: Those are all the questions that we have for today. Hope you have a good day, and this will conclude our call. Thank you.
Speaker Change: You for joining us from Douglas Kelley, Mike Crowley earnings Conference call.
Speaker Change: Hope you have a good day and this will conclude our call.
Speaker Change: Thank you.
Speaker Change: Thank you.
Jason Edelman: Yeah.
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: Okay.
Speaker Change: Okay.
unknown: Michael Warnock, Michael Reeve, Keith Alwyn, Roger Pitchford, Dave Pearce, R.L. Moore Weissmann, pragmatismYellow existe Don Rubin, The Drag Race Eureka! Thanks for watching!
Speaker Change: [music].
Speaker Change: Oh.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: No.
Speaker Change: [music].
Speaker Change: Hum.
Jason Edelman: Hum.
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Hum.
unknown: Do a location and hold, we do appreciate your chance of please continue to stand by.
unknown: Daniel Fannon, Howard Lorber, Daniel Fannon, Howard Lorber, Soham Bhons, Daniel Fannon, Howard Lorber, Soham Bhonsle, Daniel Fannon, Howard Lorber