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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

(Exact name of registrant as specified in its charter)

(Address, including zip code and telephone number, including area code,

of the principal executive offices)

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

    Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes x No

    At November 3, 2023, Douglas Elliman Inc. had 88,707,320 shares of common stock outstanding.

(Dollars in Thousands, Except Share Amounts)

(Dollars in Thousands)

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of Presentation:

Douglas Elliman Inc. (“Douglas Elliman” or the “Company”) is engaged in the real estate services and property technology investment business and is seeking to acquire or invest in additional real estate services and property technology, or PropTech, companies. The condensed consolidated financial statements of Douglas Elliman include the accounts of DER Holdings LLC and New Valley Ventures LLC (“New Valley Ventures”), directly and indirectly wholly owned subsidiaries of the Company. DER Holdings LLC owns Douglas Elliman Realty, LLC and Douglas Elliman of California, Inc., which are engaged in the residential real estate brokerage business with their subsidiaries. The operations of New Valley Ventures consist of minority investments in innovative and cutting-edge PropTech companies.

Certain references to “Douglas Elliman Realty” refer to the Company’s residential real estate brokerage business, including the operations of Douglas Elliman Realty, LLC and Douglas Elliman of California Inc., unless otherwise specified.

The unaudited, interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and, in management’s opinion, contain all adjustments, consisting only of normal recurring items, necessary for a fair statement of the results for the periods presented. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. References to U.S. GAAP issued by the Financial Accounting Standards Board (“FASB”) are to the FASB Accounting Standards Codification, also referred to as the “Codification” or “ASC.” These condensed consolidated financial statements should be read in conjunction with the combined consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”). The condensed consolidated results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the entire year.

In presenting the condensed consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates.

(b) Principles of Consolidation:

The condensed consolidated financial statements include the assets, liabilities, revenues, expenses and cash flows of DER Holdings LLC and New Valley Ventures as well as all other entities in which Douglas Elliman has a controlling financial interest. All intercompany balances and transactions have been eliminated in the condensed consolidated financial statements.

When evaluating an entity for consolidation, Douglas Elliman first determines whether an entity is within the scope of the guidance for consolidation of variable interest entities (“VIE”) and if it is deemed to be a VIE. If the entity is considered to be a VIE, Douglas Elliman determines whether it would be considered the entity’s primary beneficiary. Douglas Elliman consolidates those VIEs for which it has determined that it is the primary beneficiary. Douglas Elliman will consolidate an entity that is not deemed a VIE upon a determination that it has a controlling financial interest. For entities where Douglas Elliman does not have a controlling financial interest, the investments in such entities are classified as available-for-sale securities or accounted for using the equity or cost method, as appropriate.

(c) Estimates and Assumptions:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Significant estimates subject to material changes in the near term include impairment charges and valuation of intangible assets. Actual results could differ from those estimates.

(d) (Loss) Earnings Per Share (“EPS”):

The Company has restricted stock awards which will provide dividends at the same rate as paid on the common stock with respect to the shares underlying the restricted stock awards. These outstanding restricted stock awards represent participating securities under authoritative guidance. The participating securities holders do not participate in the Company’s net losses. The Company paid a cash dividend during each of the quarters beginning with the quarter ended March 31, 2022 through March 31, 2023. As a result, in its calculation of basic EPS and diluted EPS for the three and nine months ended September 30, 2022, the Company adjusted its net income for the effect of these participating securities. There were no outstanding non-participating securities during the three and nine months ended September 30, 2023.

Basic EPS is computed by dividing net (loss) income available to common stockholders attributed to Douglas Elliman Inc. by the weighted-average number of shares outstanding, which will include vested restricted stock.

Information concerning the Company’s common stock has been adjusted to give retroactive effect to the 5% stock dividend distributed to Company stockholders on June 30, 2023. All per share amounts and references to share amounts have been updated to reflect the retrospective effect of the stock dividend.

Basic and diluted EPS were calculated using the following shares of common stock for the periods presented below:

(e) Reconciliation of Cash, Cash Equivalents and Restricted Cash:

Restricted cash amounts included in current assets and other assets represent cash and cash equivalents required to be deposited into escrow for amounts required for letters of credit related to office leases, and certain deposit requirements for banking arrangements. The restrictions related to the letters of credit will remain in place for the duration of the respective lease. The restrictions related to the banking arrangements will remain in place for the duration of the arrangement. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables.

The components of “Cash, cash equivalents and restricted cash” in the condensed consolidated statements of cash flows were as follows:

(f) Goodwill and Other Intangible Assets:

In the three months ended September 30, 2023, the Company utilized third-party valuation specialists to prepare a quantitative assessment of its goodwill and trademark intangible assets, based on the current market conditions in the residential real estate brokerage industry. While the quantitative assessments did not result in impairment charges to goodwill or to the trademark intangible assets as of September 30, 2023, the Company could experience an impairment of goodwill and other intangible assets if current market conditions continue to deteriorate. Such situation could then result in an impairment loss.

(g) Related Party Transactions:

Agreements with Vector Group Ltd. (“Vector Group”) The Company paid Vector Group $1,050 and $3,150 under the Transition Services Agreement during the three and nine months ended September 30, 2023 and 2022, respectively, and $452 and $1,748 under the Aircraft Lease Agreements during the three and nine months ended September 30, 2023 and $352 and $1,529 for the three and nine months ended September 30, 2022, respectively.

Vector Group has agreed to indemnify the Company for certain tax matters under the Tax Disaffiliation Agreement. The Company received $581 as of September 30, 2022 and recorded $28 and $581 as a component of “Investment and other income” in its condensed combined consolidated statements of operations for three and nine months ended September 30, 2022 related to the tax indemnification and did not record any income for the three and nine months ended September 30, 2023 related to the tax indemnification.

Real estate commissions. Real estate commissions include commissions of approximately $104 and $946 for the three and nine months ended September 30, 2023 and $115 and $1,216 for the three and nine months ended September 30, 2022, respectively, from projects where the Company has been engaged by certain developers as the sole broker or the co-broker for real estate development projects that Vector Group owns an interest in through its real estate venture investments.

(h) Investment and Other Income:

Investment and other income consists of the following:

(i) Restructuring:

Employee severance and benefits expensed for the three and nine months ended September 30, 2023 relate entirely to the reduction in staff and are cash charges. All of the amounts expensed for the three and nine months ended September 30, 2023 are included in Restructuring expense in the Company’s condensed consolidated statements of operations. The following table presents the changes in the employee severance and benefits liability under the Real Estate Brokerage segment restructuring plan for the nine months ended September 30, 2023:

(j) Other Comprehensive Income:

The Company does not have any activity that results in Other Comprehensive Income; therefore, no statement of Comprehensive Income is included in the condensed consolidated financial statements.

(k) Subsequent Events:

The Company has evaluated subsequent events through November 9, 2023, the date the financial statements were issued. See Note 7. “Contingencies” for additional information.

(l) New Accounting Pronouncements:

Accounting Standards Updates (“ASUs”) adopted in 2023:

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The standard also requires certain disclosures for equity securities that are subject to contractual restrictions. The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

On March 21, 2022, the SEC proposed rule changes that would require registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rules would require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant's greenhouse gas emissions, which have become a commonly used metric to assess a registrant's exposure to such risks. In addition, under the proposed rules, certain climate-related financial metrics would be required in a registrant's audited financial statements. The Company is currently evaluating the impact of the proposed rule changes.

2.    REVENUE RECOGNITION

In the following tables, revenue is disaggregated by major services line and primary geographical market:

			Three Months Ended September 30, 2023
			New York City						Northeast						Southeast						West						Total
Revenues:
Commission and other brokerage income - existing home sales			$	70,997					$	52,138					$	57,261					$	45,010					$	225,406
Commission and other brokerage income - development marketing			7,453						50						5,616						730						13,849
Property management revenue			8,509						188						—						—						8,697
Escrow and title fees			258						158						—						3,180						3,596
Total revenue			$	87,217					$	52,534					$	62,877					$	48,920					$	251,548

			Three Months Ended September 30, 2022
			New York City						Northeast						Southeast						West						Total
Revenues:
Commission and other brokerage income - existing home sales			$	95,854					$	50,811					$	50,426					$	43,624					$	240,715
Commission and other brokerage income - development marketing			17,060						—						1,820						382						19,262
Property management revenue			8,394						147						—						—						8,541
Escrow and title fees			792						322						—						2,956						4,070
Total revenue			$	122,100					$	51,280					$	52,246					$	46,962					$	272,588

The following table provides information about contract assets and contract liabilities from development marketing and commercial leasing contracts with customers:

The Company recognized revenue of $7,688 and $14,085 for the three and nine months ended September 30, 2023, respectively, that were included in the contract liabilities balances at December 31, 2022. The Company recognized revenue of $623 and $5,978 for the three and nine months ended September 30, 2022, respectively, that were included in the contract liabilities balances at December 31, 2021.

3.    CURRENT EXPECTED CREDIT LOSSES

Real estate broker agent receivables: Douglas Elliman Realty is exposed to credit losses for various amounts due from real estate agents, which are included in Other current assets on the condensed consolidated balance sheets, net of an allowance for credit losses. The Company estimates its allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, historical experience of collections from the individual agents, and current and expected future market trends. The Company estimated that the credit losses for these receivables were $12,666 and $10,916 at September 30, 2023 and December 31, 2022, respectively.

The following table summarizes changes in the allowance for credit losses for the nine months ended September 30, 2023:

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(1) The current period provision for the real estate broker agent receivables is included in “General and administrative expenses” in the Company’s condensed consolidated statements of operations.

The following table summarizes changes in the allowance for credit losses for the nine months ended September 30, 2022:

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(1) The current period provision for the real estate broker agent receivables is included in “General and administrative expenses” in the Company’s condensed consolidated statements of operations.

4.    LEASES

The Company has operating leases for corporate and sales offices and equipment. The components of lease expense were as follows:

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to leases was as follows:

As of September 30, 2023, maturities of lease liabilities were as follows:

As of September 30, 2023, the Company had no undiscounted lease payments relating to operating leases for office space and equipment that have not yet commenced.

5.    LONG-TERM INVESTMENTS

Long-term investments consisted of the following:

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(1) These assets are measured at net asset value (“NAV”) as a practical expedient under ASC 820.

(2) These amounts are included in Other current assets on the condensed consolidated balance sheets.

Net realized and unrealized gains recognized on long-term investment securities were as follows:

These securities are classified as trading debt securities and are accounted for at fair value. The maturities of all convertible notes range from December 2023 to February 2025.

The following is a summary of unrealized gains (losses) recognized in net income on long-term investment securities at fair value during the three and nine months ended September 30, 2023 and 2022, respectively:

The Company has unfunded commitments of $895 related to long-term investment securities at fair value as of September 30, 2023.

Equity securities without readily determinable fair values that do not qualify for the NAV practical expedient consisted of investments in various limited liability companies at September 30, 2023. During the nine months ended September 30, 2023, New Valley Ventures invested $250 into one new PropTech venture and $50 into an existing PropTech venture. The total carrying value of equity securities without readily determinable fair values that do not qualify for the NAV practical expedient was $9,164 as of September 30, 2023. No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the nine months ended September 30, 2023.

6. EQUITY METHOD INVESTMENTS

Equity method investments consisted of the following:

At September 30, 2023, the Company’s ownership percentages in these investments ranged from 10.9% to 50.0%; therefore, the Company accounts for these investments under the equity method of accounting.

The Company has determined that the Company is not the primary beneficiary of any of its equity method investments because it does not control the activities that most significantly impact the economic performance of each investment. The Company determined that the entities were VIEs but the Company was not the primary beneficiary. Therefore, the Company’s equity method investments have been accounted for under the equity method of accounting.

In July 2023, Douglas Elliman Realty entered into an agreement to acquire a 50% interest in ClearPoint Mortgage, LLC. The joint venture plans to operate a mortgage brokerage business in the state of Florida. The venture is a VIE; however Douglas Elliman Realty is not the primary beneficiary. Douglas Elliman Realty accounts for this investment under the equity method of accounting. Douglas Elliman Realty has no exposure to loss as a result of its investment in ClearPoint Mortgage, LLC as of September 30, 2023.

The Company’s maximum exposure to loss from its equity method investments consists of the net carrying value of the investments adjusted for any future capital commitments and/or guarantee arrangements. The maximum exposure to loss was $1,984 as of September 30, 2023.

7.    CONTINGENCIES

The Company is involved in litigation through the normal course of its business. The majority of claims are covered by the Company’s insurance policies in excess of any applicable retention. Some claims are not covered by the Company’s insurance policies. The Company believes that the resolution of ordinary course matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

On October 31, 2023, individual plaintiffs filed an action on behalf of a putative national class of home sellers from October 2019 through the present in the Western District of Missouri against the National Association of Realtors (“NAR”) and certain real estate brokerage firms, including the Company, alleging anticompetitive behavior in violation of federal antitrust laws arising from the NAR’s requirement that sellers’ agents for Multiple Listing Service (“MLS”) listed properties offer to pay a portion of commissions received on the sale of such properties to buyers’ agents (the Gibson case). Also, on November 2, 2023, additional individual plaintiffs filed an action on behalf of a putative national class of home buyers from December 1996 through the present in the Northern District of Illinois against certain real estate brokerage firms, including the Company, alleging anticompetitive behavior, similar to the Gibson case, in violation of federal antitrust laws, state antitrust and consumer protection laws, as well as asserting an unjust enrichment claim (the Batton case).

On November 8, 2023, additional individual plaintiffs filed an action on behalf of a putative class of home sellers in Manhattan from November 2019 through the present in the Southern District of New York against certain real estate brokerage firms, including the Company, alleging anticompetitive behavior, similar to the Gibson case, in violation of federal antitrust and state antitrust laws, as well as asserting an unjust enrichment claim (the March case). The Company may become involved in additional litigation or other legal proceedings concerning the same or similar claims.

Litigation is subject to uncertainty and it is possible that there could be adverse developments in pending cases. With the commencement of any new case, the defense costs and the risks relating to the unpredictability of litigation increase. Management reviews on a quarterly basis with counsel all pending litigation and evaluates the probability of a loss being incurred and whether an estimate can be made of the possible loss or range of loss that could result from an unfavorable outcome. An unfavorable outcome or settlement of pending litigation could encourage the commencement of additional litigation. The Company is unable to reasonably estimate the financial impact of these litigations. The Company’s consolidated financial position, results of operations or cash flows could be materially adversely affected from an unfavorable outcome in, or settlement of, any of these matters.

Accounting Policy. The Company and its subsidiaries record provisions in their consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur: (i) management has concluded that it is not probable that a loss has been incurred in any of pending cases; or (ii) management is unable to reasonably estimate the possible loss or range of loss that could result from an unfavorable outcome of any pending cases and, therefore, management has not provided any amounts in the condensed consolidated financial statements for unfavorable outcomes, if any.

8.    INCOME TAXES

The Company’s income tax (benefit) expense consisted of the following:

9.    INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities subject to fair value measurements were as follows: