Douglas Elliman Inc. Q3 FY2024 earnings call

• Michael Liebowitz expressed honor in leading Douglas Elliman, emphasized the strong brand, focus on culture, innovation, and creating a strategic M&A unit to explore complementary acquisitions in ancillary businesses.
• Bryant Kirkland discussed strong home sale pricing, increased home sale listings, a preeminent development marketing division with a large pipeline of gross transaction value, brokerages outperforming peers, and managed operating expenses in the real estate brokerage segment.

For the three months ended September 30, 2024, Douglas Elliman reported revenues of $266.3 million compared to $251.5 million in the 2023 third quarter. Net loss attributed to Douglas Elliman for the third quarter was $27.2 million or $0.33 per diluted share compared to $4.9 million or $0.06 per diluted common share in the 2023 period. Adjusted EBITDA reported a loss of $1.4 million in the third quarter of 2024 compared to a loss of $3 million in the 2023 period. The real estate brokerage segment reported operating income of $454,000 this quarter compared to an operating loss of $2 million in the 2023 period. For the 9 months ended September 30, 2024, revenues were $752.3 million compared to $741.4 million in the 2023 period. Net loss attributed to Douglas Elliman was $70.3 million or $0.84 per diluted share compared to $27.7 million or $0.34 per diluted share in the 2023 period. Adjusted EBITDA attributed to Douglas Elliman in the 9 months ended September 30, 2024 were a loss of $17.3 million compared to a loss of $23 million in the 2023 period. The real estate brokerage segment reported an operating loss of $31.9 million for the first 9 months of 2024 compared to $20.3 million in the 2023 period. Adjusted EBITDA attributed to the real estate brokerage segment were a loss of $3.8 million compared to a loss of $9 million in the 2023 period.

• Focus on ROI and diversification through M&A and new businesses. - Optimism about the future performance of Douglas Elliman, expecting growth and sustainability through strategic initiatives. - Hope for additional rate cuts and regulatory changes to boost real estate activity.

Q: Could you dig in a little bit just on the accounting side to that charge from the embedded derivative change in the convertible debt?

A: Bryant Kirkland explained that the charge was primarily driven by a 71% increase in the company's stock price between the debt issuance and the end of the quarter, requiring valuation of the conversion feature of the debt separately from the debt. - Q: Since the Fed has embarked on its easing cycle here, the long end of the curve has remained sort of stubbornly high. So just wondering if you can sort of help us think through how that might impact the sales market as we look ahead to '25?

A: Bryant Kirkland stated that when rates increase, they generally outperform peers as they have a higher percentage of cash buyers, but are hopeful for additional rate cuts. Michael Liebowitz added optimism about activity picking up post-election and potential regulatory easing. - Q: Just curious, you mentioned talking about ROI targets on all your investments, whether new or existing across the company. Just wondering if you could help us think through kind of quantifying how you're thinking about what the hurdles and return rates you're looking for to sort of create value here within the company?

A: Michael Liebowitz said they are discussing ROI targets for each business segment, focusing on quality over quantity with agents, being smart and disciplined about new agent growth to increase ROI for existing agents.