DOUG - Earnings call transcript Q2 2022

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Operator

Welcome to Douglas Elliman Inc.’s Second Quarter 2022 Conference Call.

During this call, the terms adjusted net income and adjusted EBITDA 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 the adjusted net income and adjusted EBITDA are contained in the company’s earnings release, which has been posted in the Investor Relations section of the company’s website located at investors.elliman.com.

Before the call begins, I would like to read a Safe Harbor statement. results the statements that risks or that that cause during facts not and implied made from could forward-looking materially are are actual by statements forward-looking conference forth are call historical uncertainties those statements. These set differ in to subject to company’s risks These the described Commission Exchange more in and are filings. in detail Securities

Elliman Now Chief Executive and the Chairman, I’d President like to Lorber. of turn Inc., Douglas the M. call over to Howard Officer

Howard Lorber

me ended Scott today you Operating estate Douglas financial as thank morning and With well June our discuss our joining business. Good CEO brokerage our our call, Richard today's as for Douglas current real Chief trends results we markets. are us. Officer; three Elliman's the Chief in and Lampen, Financial will Durkin, of Kirkland, Bryant months XXth residential Realty, Officer; for Elliman luxury XXXX, and On six President and

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

take honor I away would Before Chesleigh, colleague earlier this moment passed our a like we who Karen beloved week. begin, to to

Senior President and at our was integral for will we of of Resources decades of miss Douglas two President Realty, and Douglas almost Human an part Resources Elliman daily. her Karen company Vice Elliman Human As at Vice

with family Our thoughts are this during Karen's and time. friends

of months months million per net XXth Douglas Elliman share, three compared ended to $X.XX to reviewing Starting income income the revenues, $XX.X first per Elliman's to quarter Now we reported $XX.X three $X.XX three Elliman's diluted June XXXX. the diluted quarter June financial results the million of million the $XXX.X of months begin for was will second in XXXX. second ended XXth and in Douglas with in Net for June or attributed share by XXXX. results XXth, compared for or $XXX XXXX XXXX. Elliman million six the financial ended Douglas Douglas

Douglas XXXX, as estate public was the began in brokerage June XXXX, three reported our Elliman compared income XXth in of second compared attributable business quarter company XXth segment million second Group quarter Adjusted estate segment months Therefore, Elliman of in three to reported million XXXX, Vector public of from the for $XX.X was million and standalone and attributed are purpose, brokerage real June million second real million XXXX. $XX.X three adjusted the to segment, for our brokerage the operating XXth our December million, by to are to a reported EBITDA in our Douglas incurred months For ended the $XX.X XXXX. comparison ended in brokerage the of company real operating spin-off XXXX. in XXXX. the $XX.X EBITDA other segment. XXXX, following ended operations quarter Expenses corporate its operations in $XX.X months estate for June the our $XX.X of to compared

We of XXXX. luxury XXth million challenging income lack of For market began to now of our also during markets of levels highest which in continued to experienced commission Massachusetts, Douglas prior Elliman's receipts City, June, decline of pleased quarter. trend see second $X.XX markets. the the the trend activity despite significant history new inventory of market see sales our decline from a this and homes volatility, increases entering adjusted market, revenues in been per second inventory We increases XXXX, the in second skewed with compared compared of across listing XXXX, or market, as many overview I ended our macroeconomic revenue or a lower financial this record quarter well months sensitivity an we during of Initially, interest quarter Elliman the in end the closed we million California will total and net towards were $X.XX share across rate was in quarter by the Douglas believe $X.X of period, income in the to and adjusted York quarterly its the the to Texas less three share, of quarter net June delivered the because performance caused per the ending a this of mortgage mortgage year has New $XX.X in listing provide second company. rates. July. as significant XXXX, of to and In individual increases. environment

due listing has XXXX. inventory since of financial to experienced as recently luxury of as been markets softness we luxury volatile homes well that the end markets, particular However, that existed in limited believe a has

optimistic are and that financial as selling luxury markets We rebound will homes. on we luxury markets remain laser-focused stabilize,

foundation luxury later, our has we As provide inventory Nonetheless began. for appreciation inventory price will listing highest pre-pandemic discuss accelerated pandemic levels to its the markets. firm level listing and recently in this future may below since a remains

We new the are homes our recognized are internationally City luxury profitable transactions our market and continues market largest The their our continued execute well expertise markets. selling recruit brokers, in and as proud our development for in highly base luxury remains of brokers, management projects to York who as region. team in to market and New

averaged lower and aggressively market, across all even entire attract record buyer markets. which growing the is on in time XX-days demand in this our reportedly homes luxury State, Texas the line are continues only the business We to market

bring year. and a in Texas will added local transaction in These annual of to Douglas joining approximately in $XXX Elliman reported for have and become market We already XXX are million confident, agents they State gross competitors Douglas prior future Elliman. agents serve from expertise the major value markets the this

Colorado, listing XXXX, We Hamptons due listed financial been the markets inventory as COVID-XX Turning listing XXXX, markets, of the in believe increased second well to outperformed in Elliman's have through the travel. of we summer sales and lack these of XXXX volatility markets Florida, while negatively potential. all XX%. fourth in of limited inventory, international to as restrained inventory quarter Douglas From quarter this impacted approximately significantly by the the to significantly declined pandemic

trend previously as believe temporary. mentioned, this will However, we be

XXXX The though second is were believe the still began, pre-pandemic sales in that's since markets show which during quarter level suggests highest below that than these listing up period. slowing we accelerate inventory levels, the of the pandemic

opportunity prices. As in all uncertainty higher a continues market a result, and uncertainty inventory subsides limited listing we see of for tremendous luxury drive growth when home to markets subsides our --

Moving financial the XXth now Douglas months ended Elliman's results six for XXXX. June to

six in For June ended in to million $XXX.X Elliman $XXX.X compared reported months revenues, the the million XXXX, XXth period. Douglas XXXX

have the year. the diluted for attributed Net compared XXXX $XX.X the June first half in net Elliman delivered six income or for period. was We per share, ended to are XXXX the record $XX.X revenues proud $X.XX of $X.XX million share of XXth million income per or to Douglas to these diluted months

EBITDA period. six XXXX, XXth to was adjusted million, ended months Elliman For June $XX.X $XX.X the the to attributed compared Douglas in XXXX million

$XX.X estate ended purposes, attributed brokerage the reported comparison ended XXXX million $XX.X for compared of six our EBITDA for For income the months June estate was the million period. our months million segment operating $XX.X Adjusted six to June real million XXXX for period. to for brokerage real XXXX, XXXX, to compared segment XXth $XX.X the XXth

our XXXX Elliman or million For $X.XX or with $XXX.X maintained platform was Douglas and cash continued far $X.XX and to market, sheet the XXth Elliman Douglas at June XXXX, XXXX. challenging in thus XXth balance differentiated of million a a the share performed summary, June per believe we in million six despite adjusted $XX share, position well per period. strong months ended net $XX.X also In compared for approach income us has XXXX, growth.

continued talent, and further to ahead, operational on empower adoption Looking we stockholder agents. value recruitment best-in-class of of creating innovative efficiencies, focused strategic our market are through expansion, solutions

It share will In addition, pay component our second we allocation now serve the this With is be answer going another our to will key per dividend happy $X.XX pleased to as questions. were our forward. a quarter, expectation Operator? to of capital that, dividend during stockholders. we

Operator

question Instructions] comes [Operator the Fannon Jefferies. with Your Dan first of line from

Dan Fannon

into clarify are few and because Wanted and you just mentioned morning. inventories you down I then mentioned things, clearly as but they Good think a were I July think said you Thanks. to improving. your that follow-up well,

the I by think in, dynamics activity more are as And they kind shorter-term? things second to sorry, understand -- were the in you the here about of, better, or just quarter bit where from inventory confused and I'm the a want So improving they're just commentary?

Howard Lorber

has Yes, have really in still I was, because improving, we down. They the market slowed the they're But below started were pre-pandemic. think inventory they where obviously, improved. commentary

lot starting And a of took inventory has -- now improve. pandemic last that of up is this the lasted and market the to out quarter much. pretty until it So

pay for brings the that lot inventory But better price see a we they price squeezes the could buyers -- somewhat inventory some which people believe, to the out lower inventory, it, business. there's sort to of the is whatever still the in [indiscernible] around, we not buyer The if think have the obviously more of, inventory, fact starts buyers, fact but it's going that that is, market, as if But we it's that also going obviously, and it price up inventory, all of I understand. obviously about not of inventory. think are pay. -- want So great

inventory up. big great, going such the but And sales run more, move -- is inventory a had more Did your I prices we've is So maybe answer comes because in that bad either, the not not the the stabilize may pricing up. which question? as as to

Dan Fannon

to other you That past discussed but got interest together, of here high-end, rates incremental you've being in lot to the And sense. incremental, be But the the been the obviously, mentioned makes seem -- resilient kind markets makes of terms is more mentioned negative bond additional I about an moving a really which volatility. think equity market, has you that sense. market's of you've That happening and is, markets rates, higher inputs of, the those I headwind. market okay. in more. that we've which guess Yes, about the -- and you as think Both financial

Howard Lorber

mortgages. I think rates fixed about I mortgages. now they're talk it [indiscernible]. that think rate saw think, like the X% or XX-year luxury it's But fixed not The rate they in I talking look, I did XX-year when this the mortgage buys about, market well, down, -- used Yes, morning

rates better the private mortgage. out there's the forth, and still so get you could banking XX-year down and/or or of, XX-year are the generally rates points. basis in or their adjustable to then X-year traditional of take customers wait come for know, that a plenty to go relationships luxury markets, XXX into And just in adjustables these and where -- it they threes, account at So obviously and have

of fact actual more So I really than it the is the rates it's being volatility the higher. think financial really

Dan Fannon

And sense. number And fits makes agents the in mentioned Okay, XXX region terms of that were a give Can Texas brought of the total that in in us on quarter. in now? then you you agents? that where

Howard Lorber

BK, do that you have number?

Bryant Kirkland

The XX-months, over the brokerage region for as about the Yes. of year million, had Texas first the half think we're far revenues. growing. $XX And so million the in as $XX region last we it's

Howard Lorber

But the many question agents? know is how agents? Do you how many

Bryant Kirkland

XXX.

Howard Lorber

-- is okay. XXX, step, numbers recruiting to to a we do lot up. Texas big that get a of we have

Dan Fannon

in efficiently. makes when you've aggregate just the base managing more think in said sense. the that in business being Yes, efficient about recruiting And and we cost

of there half stays and within As Is it revenue rates about a not, profitability? you expense Or first reasonable say, thinking think let's levels doesn't EBITDA kind just about run how be we these environment in had the be base? that's are to better, get and around efficiencies here? expense but should the

Howard Lorber

commission it way Well, structures. markets That's look, just different have is. the that different we're the in

overhead unbelievable forget, which So has as Don't that. in to most that bottom adjustable the line pay like and pandemic and that improve was it's that. never that cuts way highest like an line is But the New there to best York, it corporate we're is anything bottom have year, and end we won't cost We're top rates the been another profitable at looking can brokers. Florida and have the which opposed that lower forth. the so for is the we is for in we we're But really hopefully, looking fact XXXX see California, the probably always not -- make. on because bonuses commission's at the you we'll been, are have like somewhat just

whatever bottom do to do to going line our to make keep moving we're acceptable So we that is that and forward. have we sure

what year it we're like of And at plan to or the level, very make carefully. into the But keeps so that because going up a changes, to not going end next I year. we obviously, think watch lower probably that's see till it is. you're more the If

Dan Fannon

there that that's is isn't I obviously, the put in -- expense G&A or a have dollar Understood. so what persist? you're company that year. costs Just of anything and I I to that amount or other the what potentially come things could you guess that around -- like would a -- fold about know public amount but you bonus infrastructure? doing the to committee way you're subjected into said, others, if things this I today, not you proactively But not it's summary have necessarily guess, things and thinking do

Howard Lorber

to like less make you bonuses, would if up profits, the we it's brought be. that's supposed Of course, be while one less course, bonuses of the obviously, way

I trying good areas. We're money at the we're doing to very it spending and saying going look be And without again. may think which to and very goes certain that job we're save we efficient, to some be money, pretty more in a careful in So going we're careful.

Bryant Kirkland

and since and to has the on expenses that it, has we've that covers That XXXX if estate that shows expenses, million. we -- in expenses. $XXX.X operating cover $XXX.X that not X.X% the XX% public about that's drop, as And what based from segment's X.X%, does XX think and non-technology what occurred a you presentation based inflation But it been XXXX. this million there dropped slide in a since And the real of done XXXX. only Right. company is Page brokerage our non-activity

So we're on really that. laser focused

Howard Lorber

makes and changes think really carefully have renewing We to a And by we're people looking very something other as coming factor offices. not of it have drastically at relates going and way, we program the (ph) that unless a lot that is sense. office, to it leases the really [pieces] the just to and consolidating of

Dan Fannon

to Yes, through terms guess sense. one recruiting, would there agent rank markets makes agents? priorities already stack that understood. markets of I productive in regards That we would how And for attracting or went me, your Are you last other put just with Texas. you of

Howard Lorber

Florida, the biggest have us. are New still and business, a in land I lot we development York, there -- think construction And costs under new of Florida, Southeast still what We're now market we all development comes market for what's But to year, couple brokers in newer we doing really not our think region three action we're those is And of new did us, high, the a last pretty the -- years because I much New be old billion billion now just sort have Coast lot that and of we much and $XX developers prices I did say both high, are pretty we years. look which at we the of states backlog projects, have two two recruiting are into on right of see not that for when yet although little very it the in of a of and will Well, new $XX.X built if a on new will and next we're there a are a share. it's hasn't have that and that sort are started opening and there's to some lot brokers, projects is not projects. about shy have York we good product huge done new a Florida, market some some In of and sold new of state. you over a offices. we over Florida, did just going West the Florida, is

us big a plus for So that's going be also. to

Dan Fannon

Great. taking my questions. Thanks all for

Howard Lorber

you. Thank

Operator

of the with question comes from next Thalmann. John Your Massocca Ladenburg line

John Massocca

morning. Good

Howard Lorber

Good morning.

John Massocca

picking July. driving agents So that? kind and that Is given of your why commentary guys Have maybe is? maybe the around of any you the Why else specifically just inventory up anything in, kind supply? of, from June increase there about feedback

Howard Lorber

what want realistically, in sales. But into increase the comes people It’s waiting much Well. And also, for from their sell. could be market whatever to going Yes were reason with that And it they simple. the it's supply it's pretty inventory of the what's lower only pretty I supposed happens, of sales numbers, I really that's that's seen think think different? anything have that much you go down, more builds happen. in up, BK your a what to

Bryant Kirkland

what saying, No, that's I'm Howard.

Howard Lorber

Yes.

I think that's it pretty is. much what

John Massocca

activity then And and California. York strength in regions Okay. historic is absolute dollar that of, you basis? looking that that, mean, operate, in very been I weakness actual, levels I of there lot a little know, a you're and markets on obviously there those Massachusetts lapping you Florida. maybe And something is transaction of at you're kind different strength basically kind in of kind has of or which the a in less I seeing? you Or actual relative guess because New guess, bit mentioned

Howard Lorber

mean, a of way say it’s New somewhere would at The the bit peak was I and York, lot York that around people know, realize. we XXXX both. XXXX. Well, year of I look don't the fact New little you of and think I it figure that

So were increase transfer changes were taxes, ’XX, over ’XX, years. the people leaving, loss all managing obviously because they ’XX $XX,XXX. of (ph) deductions years, pre-pandemic the great the the And because the tax, The in loss rules. government of not in great not [sole]

that picked opposed other up up all years. years the So moving that some picked moving market they for up, not up of those during five sudden, from probably of a as but where level or markets a was it four to were

how people, it. exactly mean, New speak happy a pinpointed, York they maybe happening. other think some I than hard I to it's -- it's So different we're about

York to is strong a going I very be think still New market.

number home that, is market quoted think that's world, which one the saying I most second New people to fact, that, to been going I think been would say the In be always London. York I've

we that get weaker little think power happen the what to for to against other the a I need actually has is though currencies.

I think would international business the because strength summer that's not we're dollar. of of the thought that we see why seeing this we the

John Massocca

and answered that my makes you preemptively sense Okay, next question.

thank you So much. very

Howard Lorber

Okay.

Operator

Ladies we This our gentlemen, you the earnings second on have joining you hope day, conclude and that us We Thank may those now of you for XXXX conference disconnect. Douglas today. call. call. all Elliman’s will have and for quarter questions good a are

Howard Lorber

you. Thank

Douglas Elliman (DOUG) 5 Aug 222022 Q2 Earnings call transcript