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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 October 29, 2025, Douglas Elliman Inc. had 88,818,970 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 (“PropTech”) investment business and is seeking to acquire or invest in additional real estate services businesses. The condensed consolidated financial statements of Douglas Elliman include the accounts of DER Holdings LLC and DOUG Ventures, LLC (f/k/a New Valley Ventures LLC) (“DOUG Ventures”), a directly and an indirectly wholly owned subsidiary of the Company, respectively. 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 DOUG 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 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, 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 DOUG 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. Additionally, Douglas Elliman will consolidate an entity that is not deemed a VIE upon a determination that it has a controlling financial interest. If Douglas Elliman determines that it does not have a controlling financial interest in an entity that is a VIE, it does not consolidate the entity. 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 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. There were no outstanding non-participating securities during the three and nine months ended September 30, 2025 and 2024. The Company did not pay a cash dividend during the three and nine months ended September 30, 2025 and 2024.

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

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

The following was outstanding during the three and nine months ended September 30, 2025 and 2024, but were not included in the computation of diluted EPS because the effect was anti-dilutive:

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

Restricted cash amounts in current assets and included in 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.

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:

Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment on an annual basis, as of October 1, or whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. The Company follows ASC 350, Intangibles – Goodwill and Other, and subsequent updates including ASU 2011-08, Testing Goodwill for Impairment and ASU 2017-14, Simplifying the Test for Goodwill Impairment. The amendments permit entities to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying value or chooses to bypass the optional qualitative assessment, the Company then assesses recoverability by comparing the fair value of the reporting unit to its carrying amount; otherwise, no further impairment test would be required.

In the three months ended September 30, 2025, the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the assessment performed the Company concluded that it is not more likely than not that a reporting unit’s fair value is less than its carrying value and determined no further impairment test would be required for September 30, 2025.

(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, dated December 21, 2021, by and between the Company and Vector Group (the “Transition Services Agreement”) during the three and nine months ended September 30, 2024, respectively. Additionally, the Company paid Vector Group $235 and $1,830 under certain aircraft lease agreements entered into with affiliates of Vector Group (the “Aircraft Lease Agreements”) during the three and nine months ended September 30, 2024, respectively. In October 2024 and December 2024, the Aircraft Lease Agreements and Transition Service Agreement, respectively, were terminated.

Real estate commissions. Real estate commissions include approximately $3,133 and $12,116 for the three and nine months ended September 30, 2025, respectively, and $308 and $2,325 for the three and nine months ended September 30, 2024, 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 had previously invested in through its real estate venture investments.

(h) Investment and Other Gains (Losses):

Investment and other gains (losses) consist of the following:

(i) Restructuring:

Employee severance and benefits expensed for the nine months ended September 30, 2025 relate entirely to the reduction in staff and are cash charges. The amount expensed for the nine months ended September 30, 2025 was $1,092 and was 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 Company’s restructuring plan for the nine months ended September 30, 2025:

(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) Impairment of Fixed Assets:

The Company recorded an impairment charge of $2,275 for the three and nine months ended September 30, 2025 due to the abandonment of an agent onboarding application.

(l) Sale of Douglas Elliman Property Management:

On October 24, 2025 (the “Closing Date”), Douglas Elliman Realty, LLC (“DER”) sold its subsidiary, Residential Management Group, LLC, which conducts business as Douglas Elliman Property Management (“DEPM”), for a base purchase price of $85,000, subject to adjustments for cash, indebtedness, transaction expenses and working capital amounts at closing (the “DEPM Sale”). The tax impact of the sale of DEPM will be treated as a discrete item in the fourth quarter of 2025. The DEPM Sale is governed by an agreement (the “Equity Purchase Agreement”) that includes representations and warranties for a transaction of this type. DER provided standard seller representations and warranties including, but not limited to, representations and warranties as to valid title to the equity interests in DEPM, due formation, valid existence and good standing, and due authorization to execute the Equity Purchase Agreement and consummate the DEPM Sale. DEPM provided similar standard representations and warranties, as well as validity of material permits and compliance with applicable laws. The purchaser of DEPM provided standard buyer representations and warranties including, but not limited to, representations and warranties regarding due organization, valid existence and good standing, due authorization to execute the Equity Purchase Agreement and perform its obligations thereunder, solvency and investment intent in consummation of the DEPM Sale. The Purchaser has obtained a representations and warranties insurance policy with such coverage serving as the Purchaser’s sole remedy with respect to any breach of representations and warranties by DEPM and DER, except for claims related to fraud and specific indemnities.

The parties agreed to a five-year non-competition covenant applicable to DER in specified territories and a five-year non-solicitation covenant, in each case subject to exceptions. Pursuant to the non-competition covenant, DER has agreed not to own, manage, operate or control any entity engaged in the management of cooperative, condominium and rental apartment buildings in New York and Texas, as well as the other locations where the Purchaser and its affiliates provide services.

DER and DEPM also entered into a trademark license agreement pursuant to which DER will continue to own all right, title and interest in and to certain trademarks and names of DER and DEPM, including the trademark and name “Douglas Elliman,” as well as all logos used by DEPM as of the Closing Date. DEPM will have the right for five years to use certain trade names, marks and logos, which were being used as of October 24, 2025, in connection with certain commercial and real estate property management services as well as other ancillary services. In connection with the DEPM Sale, the Purchaser and DEPM have agreed to maintain a referral arrangement with the Company during the term of the trademark license to continue DEPM’s long-standing business relationship with the Company.

(m) Subsequent Events:

The Company has evaluated subsequent events through November 5, 2025, the date the financial statements were issued and determined that the following events required disclosure:

Sale of Douglas Elliman Property Management. See Note 1(l), “Sale of Douglas Elliman Property Management” to the Company’s condensed consolidated financial statements.

Redemption and Repayment of 7.0% Senior Secured Convertible Note. See Note 7, “Notes Payable and Other Obligations” to the Company’s condensed consolidated financial statements.

(n) New Accounting Pronouncements:

ASUs to be adopted in future periods:

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The ASU requires that all public entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The ASU is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and will adopt the standard in the year ending December 31, 2025.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220) – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses. The ASU requires enhanced disclosures around disaggregation of certain income statement expense lines into specified categories. The new standard is effective on a prospective basis for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and anticipates adopting the standard in the year ending December 31, 2026.

In September 2025, the FASB issued ASU 2025-06, Intangibles, Goodwill and Other, Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 modernizes the accounting for internal-use software under ASC 350-40 by aligning it with current development practices, especially agile and iterative methods. ASU 2025-06 clarifies when to begin capitalizing costs, improves operability across different development approaches, and enhances disclosure requirements. ASU 2025-06 is effective for interim and annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and anticipates adopting the standard in the year ending December 31, 2028.

2.    REVENUE RECOGNITION

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

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

The Company recognized revenues of $9,615 and $20,460 for the three and nine months ended September 30, 2025, respectively, that were included in the contract liabilities balances at December 31, 2024. The Company recognized revenues of $8,293 and $12,508 for the three and nine months ended September 30, 2024, respectively, that were included in the contract liabilities balances at December 31, 2023.

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 Agent receivables, net 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 of receivables from agents, 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 $4,835 and $4,783 at September 30, 2025 and December 31, 2024, respectively.

The following table summarizes changes in the allowance for credit losses for the nine months ended September 30, 2025:

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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, 2024:

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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 as well as 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, 2025, maturities of lease liabilities were as follows:

As of September 30, 2025, the Company had a $2,020 undiscounted lease payment relating to a real estate lease that has not yet commenced. The operating lease will commence in the fourth quarter of 2025 with a lease term of approximately 10.3 years.

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.

(3) These amounts are included in “Equity-method investments” on the condensed consolidated balance sheets.

Net realized and unrealized gains (losses) on long-term investment securities were as follows:

These securities are classified as trading debt securities and are accounted for at fair value. The remaining convertible note matures in February 2027.

The following is a summary of net unrealized gains (losses) on long-term investment securities at fair value during the three and nine months ended September 30, 2025 and 2024, respectively:

The Company has unfunded commitments of $480 related to long-term investment securities at fair value as of September 30, 2025.

Equity securities without readily determinable fair values that do not qualify for the NAV practical expedient consisted of investments in various limited liability companies as of September 30, 2025. The total carrying value of equity securities without readily determinable fair values that do not qualify for the NAV practical expedient was $6,150 as of September 30, 2025 and $6,400 as of December 31, 2024. The Company did not record an impairment expense for the nine months ended September 30, 2025.

The Company recorded an impairment expense of $489 for the nine months ended September 30, 2024. The impairment was included in “Investment and other gains (losses)” on the condensed consolidated statements of operations.

6. EQUITY METHOD INVESTMENTS

Equity method investments consisted of the following:

At September 30, 2025, the Company’s ownership percentages in these investments ranged from 5.3% to 50.0%. Due to the Company’s ability to exercise significant influence, but not control, related to these investments, the Company applies the equity method of accounting for these investments.

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.

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 $2,197 as of September 30, 2025.

7.    NOTES PAYABLE AND OTHER OBLIGATIONS

Notes payable and other obligations consisted of:

*The fair value of the derivative embedded within the 7.0% Convertible Notes ($63,413 at September 30, 2025 and $30,253 at December 31, 2024), is separately classified as a derivative liability in the condensed consolidated balance sheets.

7.0% Convertible Notes due 2029:

In connection with and upon consummation of the DEPM Sale, on October 24, 2025, the Company repaid and redeemed all of its 7% Convertible Notes due 2029 (the “Convertible Notes”) for an aggregate payment of $95,000, including approximately $1,400 of accrued interest (the ”Redemption”). The liens on the assets of the Company and the subsidiary guarantors were released upon Redemption. The Redemption was effected because the noteholders informed the Company that they were not willing to waive their contractual redemption rights with respect to the Convertible Notes but would agree to a redemption of the Convertible Notes in connection with the consummation of the DEPM Sale.

A summary of non-cash interest expense associated with the amortization of the debt discount created by the embedded derivative liability associated with the Company’s convertible debt is as follows:

A summary of non-cash changes in fair value of derivative embedded within convertible debt is as follows:

Fair Values of Notes Payable and Other Obligations:

The estimated fair value of the Company’s notes payable is as follows:

Notes payable and other obligations are recorded on the condensed consolidated balance sheets at amortized cost. The determinations of fair values disclosed above would be classified as Level 3 under the fair value hierarchy disclosed in Note 10. “Fair Value Measurements” to the Company’s condensed consolidated financial statements if such liabilities were recorded on the condensed consolidated balance sheets at fair value.

As of September 30, 2025 and December 31, 2024, the Company had outstanding $2,645 and $2,990, respectively, of letters of credit, collateralized by certificates of deposit. The letters of credit have been issued as security deposits for leases of office space.

8.    COMMITMENTS AND CONTINGENCIES

The Company leases office space under non-cancellable operating lease agreements. See Note 4. “Leases” to the Company’s condensed consolidated financial statements for further discussion.

The Company is involved in litigation in the normal course of its business and otherwise. Some claims are covered by the Company’s insurance policies in excess of any applicable retention. Other claims are not covered by the Company’s insurance policies, and the Company seeks contribution toward the payment of costs and expenses from agents for non-covered claims when applicable pursuant to the Company’s agent 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.

In October 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 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).

Thereafter, additional litigation was filed by other plaintiffs on behalf of putative classes of home sellers from 2019 to the present against certain real estate brokerage firms, including the Company and/or its subsidiaries, alleging anticompetitive behavior, similar to the Gibson case: (i) the March case (November 2023 – Southern District of New York) – a putative class action on behalf of home sellers in Manhattan from November 2019 through the present; (ii) the Friedman case (January 2024 – Southern District of New York) – a putative class action on behalf of home sellers in certain parts of Brooklyn from January 2020 through present; (iii) the Umpa case (December 2023 - Western District of Missouri) – putative class action on behalf of home sellers nationwide (with certain markets excluded) from December 2019 through present, which has now been consolidated into the Gibson case; (iv) the Whaley case (January 2024 - District of Nevada) – putative class action on behalf of home sellers in Nevada from January 2020 through the present, and (v) the Boykin case (February 2024 - District of Nevada) – putative class action on behalf of home sellers in Nevada from February 2020 through the present, which has now been consolidated into the Whaley case.

In April 2024, the Company entered into a settlement agreement (the “Settlement Agreement”) to resolve, on a nationwide basis, the Gibson and Umpa cases (the “Lawsuits”). On April 30, 2024, the Court in the Lawsuits preliminarily approved the settlement, preliminarily certified the proposed settlement class and stayed the cases against the Company pending final approval of the Settlement Agreement. The Settlement Agreement is currently being challenged on appeal in the U.S. Court of Appeals for the Eighth Circuit.

After preliminary approval, the Company obtained stays of the remaining actions against it, other than the Lutz case described below. The final approval hearing for the settlement took place on October 31, 2024, and on November 4, 2024, the Settlement Agreement received final court approval and became effective as of that date.

The settlement resolves all claims on a nationwide basis by the plaintiffs and proposed settlement class members in the Lawsuits, which includes, but is not limited to, all claims concerning brokerage commissions by the proposed settlement class members that were asserted in other lawsuits against the Company and its subsidiaries (collectively, the “Claims”), and releases the Company, its subsidiaries, and affiliated agents from all Claims. The settlement is not an admission of liability, nor does the Company concede or validate any of the claims asserted against it.

Under the Settlement Agreement, the Company paid $7,750 into an escrow fund on June 12, 2024, and agreed to pay two $5,000 contingent payments subject to certain financial contingencies on or before December 31, 2027 (collectively, the “Settlement Amount”). The contingent payments may be accelerated under certain circumstances. The Company recognized an expense of $17,750 for the year ended December 31, 2024.

In addition, the Company agreed to make certain changes to its business practices and emphasize certain practices that have been a part of the Company’s longstanding policies and practices, including: reminding its brokerages and agents that the Company has no rule requiring agents to make or accept offers of compensation; requiring its brokerages and agents to clearly disclose to clients that commissions are not set by law and are fully negotiable; prohibiting its brokerages and buyer agents from claiming buyer agent services are free; requiring its brokerages and agents to disclose to the buyer the listing broker’s offer of compensation for prospective buyers’ agents as soon as possible; prohibiting its brokerages and agents from using any technology (or manual methods) to sort listings by offers of compensation, unless requested by the client; reminding its brokerages and agents of their obligation to show properties regardless of compensation for buyers’ agents for properties that meet the buyer’s priorities; and developing training materials for its brokerages and agents that support all the practice changes outlined in the injunctive relief.

While most of the industry-wide antitrust class action lawsuits launched by plaintiffs on behalf of a putative class of home sellers have been settled (although appeals challenging the settlements are still pending), including those against the Company, certain suits launched by plaintiffs on behalf of a putative class of home buyers are still pending. In November 2023, individual plaintiffs filed an action on behalf of a putative national class of home buyers from 1996 to the present in the Northern District of Illinois against certain real estate brokerage firms (the “Batton II case”), including the Company, alleging anticompetitive behavior similar to the now resolved Gibson case. In June 2024, plaintiffs voluntarily dismissed this action against the Company without prejudice. However, on June 11, 2024, plaintiffs’ counsel from the Batton II case added the Company as a defendant in the Lutz case in the United States District Court for the Southern District of Florida, No. 4:24-cv-10040 (KMM). This case was brought by individual plaintiffs who filed an action on behalf of a putative national class of home buyers from December 1996 through the present against certain real estate brokerage firms, alleging anticompetitive behavior in violation of federal antitrust laws, state antitrust and consumer protection laws, as well as asserting an unjust enrichment claim. The allegations and claims in the Lutz case are similar to the Batton II case. As this case was brought by a putative national class of home buyers, it is not subsumed within the Settlement Agreement resolving the antitrust actions brought by home sellers against the Company, except to the extent that the class includes home buyers who also are part of the home sellers settling class referenced above that released their claims as home buyers. On July 15, 2025, all of the Lutz plaintiffs’ claims against the Company were dismissed. The federal antitrust claim was dismissed with prejudice, and the state antitrust, consumer protection, and unjust enrichment claims were dismissed without prejudice with 21 days to replead. The Lutz plaintiffs filed their Third Amended Complaint on August 5, 2025, which the Company has moved to dismiss. The Company has not provided any amounts in the condensed consolidated financial statements for unfavorable outcomes for these industry-wide home buyer antitrust class action lawsuits as management concluded that it is not probable that a loss has been incurred and is unable to reasonably estimate the possible loss or range of loss that could result from an unfavorable outcome of any pending industry-wide home buyer antitrust class action lawsuits.

Two real estate salespersons formerly associated with the Company as independent contractors, have, together or separately, been named as defendants in multiple complaints by women accusing them of sexual assault and related wrongdoing, and face criminal charges related to similar alleged conduct. The Company and its former Chief Executive Officer were named as defendants in one of these lawsuits. Plaintiffs have brought claims against the Company under the New York Gender-Motivated Violence Act and sex trafficking, negligence, and negligent hiring, retention, and supervision claims. The Company denies liability and intends to defend vigorously against these claims. The Company is aware that other claims may be asserted against it and possibly against certain former Company leadership arising out of matters related to the two former real estate salespersons.

Litigation is subject to uncertainty, and it is possible that there could be adverse developments in pending cases or that more cases, including antitrust lawsuits, could be commenced. With the commencement of any new case, the defense costs and the risks relating to the unpredictability of litigation increase. Legal defense costs are expensed as incurred. 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 litigation matters. For the three and nine months ended September 30, 2025, the Company incurred legal expenses and settlement costs totaling $9,638 and $17,447, respectively (included within “General and administrative expenses” on the condensed consolidated statements of operations, of which include $5,014 and $3,740 for settlement expenses, respectively). For the three and nine months ended September 30, 2024, the Company incurred legal expenses and settlement costs totaling $5,708 ($4,648 is included within “General and administrative expenses”, of which includes $54 for settlement expense, and $1,060 is included within “Operations and support expenses” on the condensed consolidated statement of operations) and $27,446 ($17,750 is included within “Antitrust litigation settlement expense”, $6,807 is included within “General and administrative expenses”, of which includes $431 for settlement expense, and $2,889 is included within “Operations and support expenses” on the condensed consolidated statement of operations), respectively. The Company’s condensed 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 condensed consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

9.    INCOME TAXES

Income tax expense was $11 for the three and nine months ended September 30, 2025, and $0 and $1,368 for the three and nine months ended September 30, 2024, respectively. Effective March 31, 2024, the Company established a valuation allowance for the full amount of deferred tax assets and recorded an expense related to the change in the prior year valuation allowance of $977.

Calculation of provision for income taxes in interim periods. The Company calculates its provision for income taxes for interim reporting periods by estimating its annual effective income tax rate based on full year projections, which do not include the impact of discrete items. It then applies the annual effective income tax rate against year-to-date pretax income to record income tax expense and then adjusts its provision for income tax expense for any discrete items. Because the Company had established a full valuation allowance against its deferred tax assets at each of December 31, 2024 and September 30, 2025, there were no discrete items for the three and nine months ended September 30, 2025.

The tax impact of the sale of the Company’s property management division in October 2025 will be treated as a discrete item in the fourth quarter of 2025.

Valuation Allowance. The Company records a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized.