SEC Form 10-Q filed by Douglas Elliman Inc.

8/9/24 4:40:42 PM ET

Real Estate

Finance

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doug-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2024

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

SECURITIES EXCHANGE ACT OF 1934

DOUGLAS ELLIMAN INC.

(Exact name of registrant as specified in its charter)


Delaware	1-41054	87-2176850
(State or other jurisdiction of incorporation	Commission File Number	(I.R.S. Employer Identification No.)
incorporation or organization)

4400 Biscayne Boulevard

Miami, Florida 33137

305-579-8000

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

of the principal executive offices)

Securities Registered Pursuant to 12(b) of the Act:


Title of each class:	Trading	Name of each exchange
	Symbol(s)	on which registered:
Common stock, par value $0.01 per share	DOUG	New York Stock Exchange

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.

x Yes o No

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).

x Yes o No

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.

☐

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging Growth Company

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 August 2, 2024, Douglas Elliman Inc. had 91,832,616 shares of common stock outstanding.

DOUGLAS ELLIMAN INC.

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION

Item 1. Douglas Elliman Inc. Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023			2

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023			3



Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2024 and 2023			4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023			6

Notes to Condensed Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24

Item 3. Quantitative and Qualitative Disclosures About Market Risk			35

Item 4. Controls and Procedures			35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			36

Item 1A. Risk Factors			36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38

Item 5. Other Information			39

Item 6. Exhibits			40

SIGNATURE			41

DOUGLAS ELLIMAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	June 30, 2024		December 31, 2023
ASSETS:
Current assets:
Cash and cash equivalents	$	92,864	$	119,808
Receivables	27,503		21,809
Agent receivables, net	13,503		11,721
Income taxes receivable, net	—		5,292
Restricted cash and cash equivalents	7,557		7,171
Other current assets	20,032		15,474
Total current assets	161,459		181,275
Property, plant and equipment, net	38,665		39,718
Operating lease right-of-use assets	99,676		108,172
Long-term investments (includes $4,204 and $3,983 at fair value)	11,192		12,871
Contract assets, net	39,277		36,040
Goodwill	32,230		32,230
Other intangible assets, net	72,634		72,964
Deferred income taxes, net	—		977
Equity-method investments	1,970		1,960
Other assets	6,827		7,212
Total assets	$	463,930	$	493,419
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:


Current operating lease liability	20,533		22,235
Income taxes payable, net	337		—
Accounts payable	2,725		6,136
Commissions payable	23,405		24,561
Accrued salaries and benefits	3,369		12,912
Contract liabilities	14,831		11,234
Other current liabilities	25,672		20,171
Total current liabilities	90,872		97,249


Non-current operating lease liabilities	103,165		110,705
Contract liabilities	62,075		51,178
Litigation settlement	10,000		—
Other liabilities	310		133
Total liabilities	266,422		259,265
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, par value $0.01 per share, 10,000,000 shares authorized	—		—
Common stock, par value $0.01 per share, 250,000,000 shares authorized, 91,714,666 and 87,925,412 shares issued and outstanding	917		879
Additional paid-in capital	286,685		279,904
Accumulated deficit	(90,691)		(47,552)
Total Douglas Elliman Inc. stockholders' equity	196,911		233,231
Non-controlling interest	597		923
Total stockholders' equity	197,508		234,154
Total liabilities and stockholders' equity	$	463,930	$	493,419

The accompanying notes are an integral part of the condensed consolidated financial statements.

DOUGLAS ELLIMAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenues:
Commissions and other brokerage income	$	272,313	$	262,489	$	460,578	$	464,525
Property management	9,694		9,375		18,741		18,152
Other ancillary services	3,744		4,048		6,671		7,217
Total revenues	285,751		275,912		485,990		489,894

Expenses:
Real estate agent commissions	216,457		204,802		365,473		360,904
Sales and marketing	22,153		22,161		43,451		43,400
Operations and support	17,999		17,324		36,798		36,217
General and administrative	24,855		31,259		51,871		63,554
Technology	5,433		6,163		11,276		12,175
Depreciation and amortization	1,929		1,993		3,910		4,032
Litigation settlement	—		—		17,750		—
Restructuring	598		507		598		1,717
Operating loss	(3,673)		(8,297)		(45,137)		(32,105)

Other income (expenses):
Interest income, net	1,048		1,370		2,424		2,475
Equity in losses from equity-method investments	(2)		(80)		(13)		(153)
Investment and other gains	1,020		536		629		82
Loss before provision for income taxes	(1,607)		(6,471)		(42,097)		(29,701)
Income tax expense (benefit)	173		(1,293)		1,368		(6,683)

Net loss	(1,780)		(5,178)		(43,465)		(23,018)

Net loss (income) attributed to non-controlling interest	116		(41)		326		175

Net loss attributed to Douglas Elliman Inc.	$	(1,664)	$	(5,219)	$	(43,139)	$	(22,843)

Per basic common share:

Net loss applicable to common shares attributed to Douglas Elliman Inc.	$	(0.02)	$	(0.06)	$	(0.52)	$	(0.28)

Per diluted common share:

Net loss applicable to common shares attributed to Douglas Elliman Inc.	$	(0.02)	$	(0.06)	$	(0.52)	$	(0.28)

The accompanying notes are an integral part of the condensed consolidated financial statements.

DOUGLAS ELLIMAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in Thousands, Except Share Amounts)

Unaudited


	Douglas Elliman Inc. Stockholders' Equity
				Additional Paid-In				Non-controlling
	Common Stock					Retained
	Shares	Amount		Capital		Earnings		Interest		Total
Balance as of April 1, 2024	91,535,412	$	915	$	283,223	$	(89,027)	$	713	$	195,824
Net loss	—	—		—		(1,664)		(116)		(1,780)

Restricted stock grants	407,800	4		(4)		—		—		—
Withholding of shares as payment of tax liabilities in connection with restricted stock vesting	(9,921)	—		(11)		—		—		(11)
Restricted stock grant cancelled	(218,625)	(2)		2		—		—		—

Stock-based compensation	—	—		3,475		—		—		3,475

Balance as of June 30, 2024	91,714,666	$	917	$	286,685	$	(90,691)	$	597	$	197,508


	Douglas Elliman Inc. Stockholders' Equity
				Additional Paid-In				Non-controlling
	Common Stock					Retained
	Shares	Amount		Capital		Earnings		Interest		Total
Balance as of April 1, 2023	84,416,022	$	844	$	271,678	$	(22,624)	$	1,321	$	251,219
Net (loss) income	—	—		—		(5,219)		41		(5,178)
Distributions and dividends on common stock	(372)	—		(1)		—		—		(1)
Withholding of shares as payment of tax liabilities in connection with restricted stock vesting	(3,935)	—		(11)		—		—		(11)

Effect of stock dividend	4,220,604	42		(42)		—		—		—
Stock-based compensation	—	—		3,401		—		—		3,401

Balance as of June 30, 2023	88,632,319	$	886	$	275,025	$	(27,843)	$	1,362	$	249,430

The accompanying notes are an integral part of the condensed consolidated financial statements.


	Douglas Elliman Inc. Stockholders' Equity
				Additional Paid-In				Non- controlling
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Interest		Total
Balance as of January 1, 2024	87,925,412	$	879	$	279,904	$	(47,552)	$	923	$	234,154
Net loss	—	—		—		(43,139)		(326)		(43,465)

Restricted stock grants	4,017,800	40		(40)		—		—		—
Withholding of shares as payment of tax liabilities in connection with restricted stock vesting	(9,921)	—		(11)		—		—		(11)
Restricted stock grant cancelled	(218,625)	(2)		2		—		—		—

Stock-based compensation	—	—		6,830		—		—		6,830


Balance as of June 30, 2024	91,714,666	$	917	$	286,685	$	(90,691)	$	597	$	197,508


	Douglas Elliman Inc. Stockholders' Equity
				Additional Paid-In				Non- controlling
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Interest		Total
Balance as of January 1, 2023	80,881,022	$	809	$	273,111	$	(5,000)	$	1,537	$	270,457
Net loss	—	—		—		(22,843)		(175)		(23,018)
Distributions and dividends on common stock ($0.05 per share)	(372)	—		(4,222)		—		—		(4,222)
Restricted stock grants	3,535,000	35		(35)		—		—		—
Withholding of shares as payment of tax liabilities in connection with restricted stock vesting	(3,935)	—		(11)		—		—		(11)
Effect of stock dividend	4,220,604	42		(42)		—		—		—
Stock-based compensation	—	—		6,224		—		—		6,224

Balance as of June 30, 2023	88,632,319	$	886	$	275,025	$	(27,843)	$	1,362	$	249,430

The accompanying notes are an integral part of the condensed consolidated financial statements.

DOUGLAS ELLIMAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

Unaudited


	Six Months Ended
	June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(43,465)	$	(23,018)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,910		4,032
Non-cash stock-based compensation expense	6,830		6,224
Loss on sale of assets	205		—
Deferred income taxes	977		(6,682)
Net gains on investment securities	(629)		(82)
Equity in losses from equity-method investments	13		153

Non-cash lease expense	10,991		10,877

Provision for credit losses	2,243		2,750
Changes in assets and liabilities:
Receivables	(9,719)		(5,358)
Income taxes receivables, net	5,629		(100)
Accounts payable and accrued liabilities	934		14,148
Operating right-of-use assets and operating lease liabilities, net	(11,737)		(11,414)
Accrued salary and benefits	(9,543)		(11,709)
Litigation settlement	10,000		—
Other	7,388		(2,961)
Net cash used in operating activities	(25,973)		(23,140)
Cash flows from investing activities:


Purchase of debt securities	—		(25)
Proceeds from sale or liquidation of long-term investments	2,523		408
Purchase of equity securities	—		(300)
Purchase of long-term investments	(185)		(180)
Capital expenditures	(2,967)		(4,614)
Net cash used in investing activities	(629)		(4,711)
Cash flows from financing activities:

Dividends on common stock	—		(4,222)

Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting	(11)		(11)

Net cash used in financing activities	(11)		(4,233)
Net decrease in cash, cash equivalents and restricted cash	(26,613)		(32,084)
Cash, cash equivalents and restricted cash, beginning of period	129,517		171,382
Cash, cash equivalents and restricted cash, end of period	$	102,904	$	139,298

The accompanying notes are an integral part of the condensed consolidated financial statements.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

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, 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 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, 2023 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.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

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 six months ended June 30, 2024 and 2023, respectively. The Company paid a cash dividend during each of the quarters beginning with the quarter ended March 31, 2022 through March 31, 2023.

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.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net loss attributed to Douglas Elliman Inc.	$	(1,664)	$	(5,219)	$	(43,139)	$	(22,843)
Income attributable to participating securities	—		—		—		(307)
Net loss available to common stockholders attributed to Douglas Elliman Inc.	$	(1,664)	$	(5,219)	$	(43,139)	$	(23,150)

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:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2024	2023	2024	2023
Weighted-average shares for basic and diluted EPS	83,336,516	82,195,791	83,335,308	82,194,781

(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.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

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


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	92,864	$	119,808
Restricted cash and cash equivalents included in current assets	7,557		7,171
Restricted cash and cash equivalents included in other assets	2,483		2,538
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	102,904	$	129,517

(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. The fair value of the intangible asset associated with the Douglas Elliman trademark is determined using a “relief from royalty payments” method. This approach involves two steps: (i) estimating reasonable royalty rates for its trademark associated with the Douglas Elliman trademark and (ii) applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of the trademark.

In the quarterly period ended December 31, 2023, the Company utilized third-party valuation specialists to prepare a quantitative assessment of goodwill and trademark intangible assets related to Douglas Elliman, based on the current market conditions in the residential real estate brokerage industry. The quantitative assessments did not result in impairment charges to goodwill or to the trademark intangible assets as of December 31, 2023. The Company performed a qualitative assessment as of June 30, 2024, which did not result in impairment charges related to its goodwill or trademark. If the Company fails to achieve the financial projections used in the quantitative assessments of fair value and current market conditions continue to deteriorate, additional impairment charges could result in future periods, and such impairment charges could be material.

(g) Related Party Transactions:

Agreements with Vector Group Ltd. (“Vector Group”). The Company paid Vector Group $1,050 and $2,100 under the Transition Services Agreement during the three and six months ended June 30, 2024 and 2023, respectively. The Company paid Vector Group $1,000 and $1,595 under the Aircraft Lease Agreements during the three and six months ended June 30, 2024, respectively, and $734 and $1,296 for the three and six months ended June 30, 2023, respectively.

Real estate commissions. Real estate commissions include commissions of approximately $793 and $2,017 for the three and six months ended June 30, 2024, respectively, and $0 and $842 for the three and six months ended June 30, 2023, 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.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(h) Investment and Other Gains:

Investment and other gains consist of the following:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net gains recognized on PropTech convertible trading debt securities	$	—	$	540	$	—	$	188
Net unrealized gains (losses) recognized on long-term investments at fair value	39		(4)		128		(106)
Net gains recognized on long-term investment securities without a readily determinable fair value that does not qualify for the NAV practical expedient	981		—		501		—


Investment and other gains	$	1,020	$	536	$	629	$	82

(i) Restructuring:

Employee severance and benefits expensed for the six months ended June 30, 2023 relate entirely to the reduction in staff and are cash charges. The amount expensed for the six months ended June 30, 2023 was $1,717 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 Real Estate Brokerage segment restructuring plan for the six months ended June 30, 2024:


	Employee Severance and Benefits
Severance liability balance at January 1, 2024	$	767
Severance expense	598
Severance payments	(860)
Severance liability at June 30, 2024	$	505

(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.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(k) Subsequent Events:

The Company has evaluated subsequent events through August 9, 2024, the date the financial statements were issued. On July 2, 2024, the Company issued $50,000 in aggregate principal amount of senior secured convertible notes (the “Convertible Notes”) due on July 2, 2029 to funds advised by Kennedy Lewis Investment Management LLC (“KLIM”). The Convertibles Notes bear interest at a rate of 7.0% per annum payable in cash, or, at the Company’s election, 8.0% per annum paid in kind, due semi-annually. The Convertible Notes are convertible into common stock at an initial conversion rate equal to $1.50 per share, subject to certain customary anti-dilution adjustments. The Company intends to use the net proceeds from the sale of the Convertible Notes for general corporate purposes.

(l) New Accounting Pronouncements:

ASUs to be adopted in future periods:

In December 2023, the FASB issued 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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The ASU requires that all public entities improve the reportable segment disclosure primarily through enhanced disclosures about significant segment expenses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

(m) SEC Rule Changes:

On March 6, 2024, the SEC passed rule changes that will require registrants to provide certain climate-related information in their registration statements and annual reports. The rules 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 will also include disclosure of a registrant's greenhouse gas emissions. In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements. On April 4, 2024, the SEC voluntarily stayed the rules pending the resolution of certain legal challenges. The Company is currently evaluating the impact of the rule changes.

2. REVENUE RECOGNITION

Disaggregation of Revenue

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

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	Three Months Ended June 30, 2024
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income - existing home sales	$	78,786	$	50,620	$	78,082	$	53,685	$	261,173
Commission and other brokerage income - development marketing	6,202		156		3,597		1,185		11,140
Property management revenue	9,508		186		—		—		9,694
Escrow and title fees	210		108		19		3,407		3,744
Total revenue	$	94,706	$	51,070	$	81,698	$	58,277	$	285,751

	Three Months Ended June 30, 2023
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income - existing home sales	$	82,448	$	48,948	$	66,889	$	50,095	$	248,380
Commission and other brokerage income - development marketing	6,900		242		6,217		750		14,109
Property management revenue	9,195		180		—		—		9,375
Escrow and title fees	526		227		—		3,295		4,048
Total revenue	$	99,069	$	49,597	$	73,106	$	54,140	$	275,912

	Six Months Ended June 30, 2024
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income - existing home sales	$	128,026	$	85,206	$	135,712	$	93,938	$	442,882
Commission and other brokerage income - development marketing	10,921		221		4,922		1,632		17,696
Property management revenue	18,354		387		—		—		18,741
Escrow and title fees	421		257		19		5,974		6,671
Total revenue	$	157,722	$	86,071	$	140,653	$	101,544	$	485,990

	Six Months Ended June 30, 2023
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income - existing home sales	$	140,246	$	82,053	$	121,343	$	87,994	$	431,636
Commission and other brokerage income - development marketing	14,663		861		16,277		1,088		32,889
Property management revenue	17,775		377		—		—		18,152
Escrow and title fees	925		437		—		5,855		7,217
Total revenue	$	173,609	$	83,728	$	137,620	$	94,937	$	489,894

Contract Balances

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

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	June 30, 2024		December 31, 2023

Receivables, which are included in receivables	$	2,114	$	1,846
Contract assets, net, which are included in other current assets	8,899		6,030
Contract assets, net, which are in other assets	39,277		36,040
Payables, which are included in commissions payable	1,552		1,357
Contract liabilities, which are in current liabilities	14,831		11,234
Contract liabilities, which are in other liabilities	62,075		51,178

The Company recognized revenue of $3,053 ($2,163 of consulting, administration and net commissions) and $4,216 ($2,987 of consulting, administration and net commissions) for the three and six months ended June 30, 2024, respectively, that were included in the contract liabilities balances at December 31, 2023. The Company recognized revenue of $7,568 ($4,847 of consulting, administration and net commissions) and $11,362 ($6,461 of consulting, administration and net commissions) for the three and six months ended June 30, 2023, respectively, that were included in the contract liabilities balances at December 31, 2022.

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, 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 $5,506 and $5,575 at June 30, 2024 and December 31, 2023, respectively.

The following table summarizes changes in the allowance for credit losses for the six months ended June 30, 2024:


	January 1, 2024		Current Period Provision			Write-offs		Recoveries		June 30, 2024
Allowance for credit losses:

Real estate broker agent receivables	$	5,575	$	2,242	(1)	$	2,311	$	—	$	5,506

_____________________________

(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 six months ended June 30, 2023:


	January 1, 2023		Current Period Provision			Write-offs		Recoveries		June 30, 2023
Allowance for credit losses:

Real estate broker agent receivables	$	10,916	$	2,750	(1)	$	1,320	$	—	$	12,346

_____________________________

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

4. LEASES

The Company has operating leases for corporate and sales offices and equipment. The components of lease expense, which were included in Sales and marketing expense on the condensed consolidated statements of operations, were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Operating lease cost	$	7,682	$	8,320	$	16,260	$	16,645
Short-term lease cost	193		375		449		653
Variable lease cost	1,072		1,052		2,061		2,130
Less: Sublease income	(31)		(156)		(87)		(309)
Total lease cost	$	8,916	$	9,591	$	18,683	$	19,119

Supplemental cash flow information related to leases was as follows:


	Six Months Ended
	June 30,
	2024		2023
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	17,020	$	17,231

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	3,469		6,296

Supplemental balance sheet information related to leases was as follows:



	June 30,		December 31,
	2024		2023
Weighted average remaining lease term:
Operating leases	6.14		6.38

Weighted average discount rate:
Operating leases	8.66	%	8.63	%

As of June 30, 2024, maturities of lease liabilities were as follows:


	Operating Leases
Period Ending December 31:
Remainder of 2024	$	15,720
2025	28,886
2026	26,263
2027	23,224
2028	20,266
2029	16,214
Thereafter	31,049
Total lease payments	161,622
Less imputed interest	(37,924)
Total	$	123,698

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

As of June 30, 2024, the Company had $86 undiscounted lease payments relating to real estate leases that have not yet commenced. The operating leases will commence in the third quarter of 2024 with lease terms ranging between 1.4 years and 1.5 years.

5. LONG-TERM INVESTMENTS

Long-term investments consisted of the following:


	June 30, 2024		December 31, 2023
PropTech convertible trading debt securities	$	1,162	$	1,162
Long-term investment securities at fair value (1)	3,042		2,821
PropTech investments at cost	8,150		8,888
PropTech investments under equity method	565		570
Total investments	12,919		13,441
Less PropTech current convertible trading debt securities (2)	1,162		—
Less PropTech investments accounted for under the equity method (3)	565		570
Total long-term investments	$	11,192	$	12,871

_____________________________

(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 recognized on long-term investment securities were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net realized gains recognized on PropTech convertible trading debt securities	$	—	$	540	$	—	$	188
Net unrealized gains (losses) recognized on long-term investments at fair value	39		(4)		128		(106)
Net gains recognized on long-term investment securities without a readily determinable fair value that does not qualify for the NAV practical expedient	981		—		501		—
Net realized and unrealized gains recognized on long-term investment securities	$	1,020	$	536	$	629	$	82

(a) PropTech Convertible Trading Debt Securities:

These securities are classified as trading debt securities and are accounted for at fair value. The remaining convertible note matures in February 2025.

(b) Long-Term Investment Securities at Fair Value:

The following is a summary of unrealized gains (losses) recognized in net loss on long-term investment securities at fair value during the three and six months ended June 30, 2024 and 2023, respectively:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net unrealized gains (losses) recognized on long-term investment at fair value	$	39	$	(4)	$	128	$	(106)

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

The Company has unfunded commitments of $733 related to long-term investment securities at fair value as of June 30, 2024.

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 June 30, 2024. The total carrying value of equity securities without readily determinable fair values that do not qualify for the NAV practical expedient was $8,150 as of June 30, 2024 and $8,888 at December 31, 2023, respectively. The Company recorded an impairment of $489 for the six months ended June 30, 2024. The impairment was included in “Investment and other gains” on the condensed consolidated statements of operations. No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the three and six months ended June 30, 2023.

6. EQUITY METHOD INVESTMENTS

Equity method investments consisted of the following:


	June 30, 2024		December 31, 2023
Ancillary services ventures	$	1,970	$	1,960

At June 30, 2024, the Company’s ownership percentages in these investments ranged from 5.9% to 50.0%; therefore, the Company accounts for these investments under the equity method of accounting.

VIE Consideration:

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.

Maximum Exposure to Loss:

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 $1,970 as of June 30, 2024.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

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. Other claims may not be 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.

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 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).

In November 2023, additional individual plaintiffs filed an action on behalf of a putative national class of home buyers in the Northern District of Illinois against certain real estate brokerage firms, including the Company, alleging anticompetitive behavior, in violation of antitrust laws, and state consumer protection laws, as well as asserting an unjust enrichment claim (the Batton case). In June 2024, plaintiffs voluntarily dismissed this action without prejudice. Thereafter, on June 11, 2024, plaintiffs’ counsel from the Batton case added the Company to a previously filed action on behalf of a putative national class of home buyers in the Southern District of Florida (the Lutz case). The allegations and claims in the Lutz case are similar to the Batton case.

In November 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).

In December 2023, individual plaintiffs filed an action on behalf of a putative class of home sellers in certain parts of Brooklyn from January 2020 through present in the Eastern District of New York against certain real estate brokerage firms, including the Company, alleging anticompetitive behavior, similar to the March case, in violation of federal antitrust and state antitrust laws. On January 18, 2024, the case was voluntarily dismissed and refiled in the Southern District of New York (the Friedman case).

In December 2023, individual plaintiffs filed an action on behalf of a putative national class of home sellers (with certain markets excluded) from December 2019 through present in the Western District of Missouri against certain real estate brokerage firms, including the Company and Douglas Elliman Realty, LLC, alleging anticompetitive behavior, similar to the Gibson case, in violation of federal antitrust laws (the Umpa case). On April 23, 2024, the District Court in the Western District of Missouri consolidated the Umpa case into the Gibson case.

In January 2024, an individual plaintiff filed an action on behalf of a putative class of home sellers in Nevada from January 2020 through the present in the District of Nevada against certain real estate trade associations and MLSs, alleging anticompetitive behavior, similar to the Gibson case, in violation of federal antitrust and state unfair trade practices laws (the Whaley case). On January 25, 2024, the plaintiff filed an amended complaint that added one of the Company’s brokerage subsidiaries, among other real estate brokerage firms, as a defendant in the action.

Multidistrict Litigation. In December 2023, the Gibson and Umpa plaintiffs moved to transfer and centralize nine actions, including the Gibson, Umpa, and March cases in the Western District of Missouri. In response, NAR moved to consolidate all real estate commission antitrust cases, including all of the cases that the Gibson and Umpa plaintiffs sought to consolidate, as well as Batton, Friedman, March, and Whaley, and several other actions in which the Company is not named as a defendant, in the Northern District of Illinois. Many of the defendants opposed plaintiffs’ motion to transfer and centralize the antitrust actions. The Judicial Panel on Multidistrict Litigation denied the motion on March 28, 2024, with leave to refile at a later date.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

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 now-consolidated Gibson case (which includes the Umpa case) preliminarily approved the settlement, preliminarily certified the proposed settlement class and stayed the case as against the Company pending final approval of the Settlement Agreement. The final approval hearing for the settlement will take place on October 31, 2024.

After preliminary approval, the Company obtained stays of the remaining actions against it, other than the Lutz case.

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 into an escrow fund $7,750 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 six months ended June 30, 2024.

In addition, the Company agreed to make certain changes to its business practices and emphasize certain practices that have been a part of Douglas Elliman’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.

The Settlement Agreement remains subject to final court approval and will, if approved, become effective thereafter.

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. 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, other than with respect to the Lawsuits: (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.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

8. INCOME TAXES

ASC 740, Income Taxes, requires the Company to establish 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. If such determination is made and future losses are incurred over the period in which the net deferred tax assets are deductible, the Company believes it will be more likely than not that the benefits of these deductible differences will not be realized, and as a result will be required to maintain a valuation allowance for the full amount of the deferred tax assets. During the three months ending June 30, 2024, the Company analyzed the likelihood of utilizing its deferred tax assets and determined it will be more likely than not that the benefits of these deductible differences will not be realized, and as a result established a valuation allowance for the full amount of the deferred tax assets. The Company’s income tax expense (benefit) and valuation allowance consisted of the following:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Loss before provision for income taxes	$	(1,607)	$	(6,471)	$	(42,097)	$	(29,701)
Income tax benefit	(330)		(1,456)		(8,630)		(6,683)

Changes in effective tax rates	—		163		—		—


Current period valuation allowance	503		—		9,021		—
Change in prior year valuation allowance	—		—		977		—
Income tax expense (benefit)	$	173	$	(1,293)	$	1,368	$	(6,683)

9. INVESTMENTS AND FAIR VALUE MEASUREMENTS

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


	Fair Value Measurements as of June 30, 2024
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Assets:
Money market funds (1)	$	42,262	$	42,262	$	—	$	—
U.S. treasury bills (2)	41,898		41,898		—		—
Certificates of deposit (3)	507		—		507		—
PropTech convertible trading debt securities	1,162		—		—		1,162
Long-term investments

Long-term investment securities at fair value (4)	3,042		—		—		—


Total assets	$	88,871	$	84,160	$	507	$	1,162

Nonrecurring fair value measurements
Long-term investments (5)	$	—					$	—	$	(489)
	$	—					$	—	$	(489)

_____________________________

(1)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets, except for $7,557 that is included in current restricted cash and cash equivalents and $2,483 that is included in non-current restricted assets within Other assets.

(2)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets.

(3)Amounts included in Other assets on the condensed consolidated balance sheets.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(4)In accordance with ASC Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

(5)Long-term investments with a carrying amount of $489 were written down to their fair value of $0, resulting in an impairment charge of $489, which was included in earnings.


	Fair Value Measurements as of December 31, 2023
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (1)	$	59,595	$	59,595	$	—	$	—
U.S. treasury bills (2)	51,200		51,200		—		—
Certificates of deposit (3)	507		—		507		—

Long-term investments
PropTech convertible trading debt securities	1,162		—		—		1,162
Long-term investment securities at fair value (4)	2,821		—		—		—
Total long-term investments	3,983		—		—		1,162
Total assets	$	115,285	$	110,795	$	507	$	1,162

_____________________________

(1)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets, except for $7,171 that is included in current restricted assets and $2,538 that is included in non-current restricted assets within Other assets.

(2)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets.

(3)Amounts included in Other assets on the condensed consolidated balance sheets.

(4)In accordance with ASC Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

The fair value of the Level 2 certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is the rate offered by the financial institution.

The fair values of the Level 3 PropTech convertible trading debt securities were derived using a discounted cash flow model utilizing a probability-weighted expected return method based on the probabilities of different potential outcomes for the convertible trading debt securities.

The long-term investments are based on NAV per share provided by the partnerships based on the indicated market value of the underlying assets or investment portfolio. In accordance with ASC Subtopic 820-10, these investments are not classified under the fair value hierarchy disclosed above because they are measured at fair value using the NAV practical expedient.

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows as of June 30, 2024:

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at

June 30,
2024

Valuation
Technique

Unobservable
Input

Range
(Actual)

PropTech convertible trading debt securities

1,162

Discounted cash flow

Interest rate

Maturity

Feb 2025

Volatility

40.25%

Discount rate

30.37%

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows as of December 31, 2023:

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at

December 31,
2023

Valuation Technique

Unobservable
Input

Range
(Actual)

PropTech convertible trading debt securities

1,162

Discounted cash flow

Interest rate

Maturity

Feb 2025

Volatility

40.25%

Discount rate

30.37%

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record assets and liabilities at fair value on a nonrecurring basis. Generally, assets and liabilities are recorded at fair value on a nonrecurring basis because of impairment charges. The Company had no nonrecurring nonfinancial assets subject to fair value measurements as of June 30, 2024 and December 31, 2023, respectively.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

10. SEGMENT INFORMATION

The Company’s business segments were Real Estate Brokerage and Corporate and Other. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Financial information for the Company’s operations before taxes and non-controlling interests for the three and six months ended June 30, 2024 and 2023 were as follows:


	Real Estate Brokerage			Corporate and Other		Total
Three months ended June 30, 2024
Revenues	$	285,751		$	—	$	285,751
Operating income (loss)	2,947		(1)	(6,620)		(3,673)
Adjusted EBITDA attributed to Douglas Elliman (3)	6,632			(4,273)		2,359
Depreciation and amortization	1,929			—		1,929

Three months ended June 30, 2023
Revenues	$	275,912		$	—	$	275,912
Operating loss	(1,014)		(2)	(7,283)		(8,297)
Adjusted EBITDA attributed to Douglas Elliman (3)	2,481			(5,043)		(2,562)
Depreciation and amortization	1,993			—		1,993

Six months ended June 30, 2024
Revenues	$	485,990		$	—	$	485,990
Operating loss	(32,339)		(4)	(12,798)		(45,137)
Adjusted EBITDA attributed to Douglas Elliman (3)	(7,566)			(8,321)		(15,887)
Depreciation and amortization	3,910			—		3,910
Capital expenditures	2,967			—		2,967

Six months ended June 30, 2023
Revenues	$	489,894		$	—	$	489,894
Operating loss	(18,357)		(5)	(13,748)		(32,105)
Adjusted EBITDA attributed to Douglas Elliman (3)	(10,503)			(9,704)		(20,207)
Depreciation and amortization	4,032			—		4,032
Capital expenditures	4,614			—		4,614

_____________________________

(1) Operating income includes $598 of restructuring expense.

(2) Operating loss includes $507 of restructuring expense.

(3) The following table reconciles operating income to Adjusted EBITDA attributed to Douglas Elliman for the three and six months ended June 30, 2024 and 2023.

(4) Operating loss includes $17,750 of litigation settlement and $598 of restructuring expense.

(5) Operating loss includes $1,717 of restructuring expense.

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Real estate brokerage segment
Operating income (loss)	$	2,947	$	(1,014)	$	(32,339)	$	(18,357)
Depreciation and amortization	1,929		1,993		3,910		4,032
Stock-based compensation	1,128		1,161		2,353		2,180
Litigation settlement	—		—		17,750		—
Restructuring	598		507		598		1,717
Adjusted EBITDA	6,602		2,647		(7,728)		(10,428)
Adjusted EBITDA attributed to non-controlling interest	30		(166)		162		(75)
Adjusted EBITDA attributed to Douglas Elliman	$	6,632	$	2,481	$	(7,566)	$	(10,503)

Corporate and other segment
Operating loss	$	(6,620)	$	(7,283)	$	(12,798)	$	(13,748)
Stock-based compensation	2,347		2,240		4,477		4,044
Adjusted EBITDA attributed to Douglas Elliman	$	(4,273)	$	(5,043)	$	(8,321)	$	(9,704)

11. ESCROW FUNDS IN HOLDING

As a service to its customers, Portfolio Escrow Inc., a subsidiary of the Company, administers escrow and trust deposits which represent undisbursed amounts received for the settlement of real estate transactions. Deposits at FDIC-insured institutions are insured up to $250. Portfolio Escrow Inc. had escrow funds on deposit in the amount of $34,314 and $41,338 as of June 30, 2024 and December 31, 2023, respectively, and corresponding escrow funds in holding of the same amount. While these deposits are not assets of the Company (and, therefore, are excluded from the accompanying condensed consolidated balance sheets), the subsidiary of the Company remains contingently liable for the disposition of these deposits.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

The following discussion should be read in conjunction with our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Audited Consolidated Financial Statements as of and for the year ended December 31, 2023 and Notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”), and our Condensed Consolidated Financial Statements and related Notes as of and for the quarterly period and six months ended June 30, 2024.

Overview

We are a holding company and engaged principally in two business segments:

Real Estate Brokerage: the residential real estate brokerage services through our subsidiary Douglas Elliman Realty, which operates the largest residential brokerage company in the New York metropolitan area and also conducts residential real estate brokerage operations in Florida, California, Texas, Colorado, Nevada, Massachusetts, Connecticut, Maryland, Virginia and Washington, D.C.

Corporate and other: the operations of our holding company as well as our investment business that invests in select PropTech opportunities through our New Valley Ventures subsidiary.

Key Business Metrics and Non-GAAP Financial Measures

In addition to our financial results, we use the following business metrics to evaluate our business and identify trends affecting our business. To evaluate our operating performance, we also use Adjusted EBITDA attributed to Douglas Elliman, Adjusted EBITDA attributed to Douglas Elliman Margin and financial measures for the last twelve months ended June 30, 2024 (“Non-GAAP Financial Measures”), which are financial measures not prepared in accordance with GAAP.

Key Business Metrics


	Last twelve months ended			Six months ended June 30,						Year ended December 31, 2023
	June 30, 2024			2024			2023
Key Business Metrics
Total transactions (1)	21,297			10,362			10,671			21,606
Gross transaction value (in billions) (2)	$	35.0		$	17.8		$	17.2		$	34.4
Average transaction value per transaction (in thousands) (3)	$	1,642.7		$	1,718.7		$	1,614.3		$	1,592.3
Number of Principal Agents (4)	5,107			5,107			5,386			5,150
Annual Retention (5)	88		%	N/A			N/A			92		%
Net loss attributed to Douglas Elliman Inc.	$	(62,848)		$	(43,139)		$	(22,843)		$	(42,552)
Net loss income margin	(12.93)		%	(8.88)		%	(4.66)		%	(4.45)		%
Adjusted EBITDA attributed to Douglas Elliman	$	(36,373)		$	(15,887)		$	(20,207)		$	(40,693)
Adjusted EBITDA attributed to Douglas Elliman Margin	(7.48)		%	(3.27)		%	(4.12)		%	(4.26)		%

_____________________________

(1)We calculate total transactions by taking the sum of all transactions closed in which our agent represented the buyer or seller in the purchase or sale of a home (excluding rental transactions). We include a single transaction twice when one or more of our agents represent both the buyer and seller in any given transaction.

(2)Gross transaction value is the sum of all closing sale prices for homes transacted by our agents (excluding rental transactions). We include the value of a single transaction twice when our agents serve both the home buyer and home seller in the transaction.

(3)Average transaction value per transaction is the quotient of (x) gross transaction value divided by (y) total transactions.

(4)The number of Principal Agents is determined as of the last day of the specified period. We use the number of Principal Agents, in combination with our other key business metrics such as total transactions and gross transaction value, as a measure of agent productivity.

(5)Annual Retention is the quotient of (x) the prior year revenue generated by agents retained divided by (y) the prior year revenue generated by all agents. We use Annual Retention as a measure of agent stability.

Non-GAAP Financial Measures

Adjusted EBITDA attributed to Douglas Elliman is a non-GAAP financial measure that represents our net income adjusted for depreciation and amortization, investment and other income, stock-based compensation expense, benefit from income taxes, and other items. Adjusted EBITDA attributed to Douglas Elliman Margin is the quotient of (x) Adjusted EBITDA attributed to Douglas Elliman divided by (y) revenue. Last twelve months (“LTM”) financial measures are non-GAAP financial measures that are calculated by reference to the trailing four-quarter performance for the relevant metric.

We believe that Non-GAAP Financial Measures are important measures that supplement analysis of our results of operations and enhance an understanding of our operating performance. We believe Non-GAAP Financial Measures provide a useful measure of operating results unaffected by non-recurring items, differences in capital structures and ages of related assets among otherwise comparable companies. Management uses Non-GAAP Financial Measures as measures to review and assess operating performance of our business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (Non-GAAP Financial Measures) of our business. While management considers Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, and net income. In addition, Non-GAAP Financial Measures are susceptible to varying calculations and our measurement of Non-GAAP Financial Measures may not be comparable to those of other companies.

Reconciliations of these non-GAAP measures are provided in the table below.

Computation of Adjusted EBITDA attributed to Douglas Elliman


	Last twelve months ended		Six months ended June 30,				Year ended December 31, 2023
	June 30, 2024		2024		2023
Net loss attributed to Douglas Elliman Inc.	$	(62,848)	$	(43,139)	$	(22,843)	$	(42,552)
Interest income, net	(5,762)		(2,424)		(2,475)		(5,813)
Income tax (benefit) expense	(7,002)		1,368		(6,683)		(15,053)
Net loss attributed to non-controlling interest	(765)		(326)		(175)		(614)
Depreciation and amortization	7,904		3,910		4,032		8,026
Stock-based compensation (a)	13,681		6,830		6,224		13,075
Equity in losses from equity method investments (b)	28		13		153		168
Litigation settlement (c)	17,750		17,750		—		—
Restructuring	1,258		598		1,717		2,377
Other, net	(1,180)		(629)		(82)		(633)
Adjusted EBITDA	(36,936)		(16,049)		(20,132)		(41,019)
Adjusted EBITDA attributed to non-controlling interest	563		162		(75)		326
Adjusted EBITDA attributed to Douglas Elliman	$	(36,373)	$	(15,887)	$	(20,207)	$	(40,693)

Real estate brokerage segment
Operating loss	$	(50,751)	$	(32,339)	$	(18,357)	$	(36,769)
Depreciation and amortization	7,904		3,910		4,032		8,026
Stock-based compensation	4,712		2,353		2,180		4,539
Litigation settlement (c)	17,750		17,750		—		—
Restructuring	1,258		598		1,717		2,377
Adjusted EBITDA	(19,127)		(7,728)		(10,428)		(21,827)
Adjusted EBITDA attributed to non-controlling interest	563		162		(75)		326
Adjusted EBITDA attributed to Douglas Elliman	$	(18,564)	$	(7,566)	$	(10,503)	$	(21,501)

Corporate and other segment
Operating loss	$	(26,778)	$	(12,798)	$	(13,748)	$	(27,728)
Stock-based compensation	8,969		4,477		4,044		8,536
Adjusted EBITDA attributed to Douglas Elliman	$	(17,809)	$	(8,321)	$	(9,704)	$	(19,192)




Total adjusted EBITDA attributed to Douglas Elliman	$	(36,373)	$	(15,887)	$	(20,207)	$	(40,693)

_____________________________

(a)Represents amortization of stock-based compensation. $4,712, $2,353, $2,180, and $4,539 are attributable to the Real estate brokerage segment for the last twelve months ended June 30, 2024, the six months ended June 30, 2024, and 2023, and the year ended December 31, 2023, respectively. $8,969, $4,477, $4,044, and $8,536 are attributable to the Corporate and other segment for the last twelve months ended June 30, 2024, the six months ended June 30, 2024, and 2023, and the year ended December 31, 2023, respectively.

(b)Represents equity in losses recognized from the Company’s investment in an equity method investment that is accounted for under the equity method and is not consolidated in the Company’s financial results.

(c)Represents the settlement of litigation related to the resolution on a nationwide basis of pending class action litigations against NAR and the Company.

Recent Developments

Convertible Debt. On July 2, 2024, we issued $50,000 in aggregate principal amount of senior secured convertible notes due on July 2, 2029 (the “Convertible Notes”) to funds advised by KLIM. The Convertibles Notes bear interest at a rate of 7.0% per annum payable in cash, or, at the our election, 8.0% per annum paid in kind, due semi-annually. The convertible notes are convertible into common stock at an initial conversion rate equal to $1.50 per share, subject to certain customary anti-dilution adjustments. We intend to use the net proceeds from the sale of the Convertible Notes for general corporate purposes.

Litigation Settlement. On April 26, 2024, we entered into a settlement agreement (the “Settlement Agreement”) to resolve, on a nationwide basis, the Gibson and Umpa cases (the “Lawsuits”). 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 us and our subsidiaries (collectively, the “Claims”), and releases us, our subsidiaries, and affiliated agents from all Claims. The settlement is not an admission of liability, nor do we concede or validate any of the claims asserted against us.

Under the Settlement Agreement, we 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. We recognized an expense of $17,750 in the six months ended June 30, 2024.

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

The Settlement Agreement remains subject to final court approval and will, if approved, become effective at that time. See Note 7 - “Contingencies” to our condensed consolidated financial statements.

Update on Expense Reduction. Since June 2022, our operating results have been negatively impacted by a reduction of revenues from existing home sales caused, in part, by lower listing inventory and the volatility in the financial markets as well as increases in mortgage rates. As a result, during 2023 and 2024, we have endeavored to adjust our cost structure to better fit our business, including through, among other things, reductions in personnel and incentive compensation expense, eliminating certain corporate sponsorship events, streamlining advertising expenditures and beginning a process of consolidating offices as leases expire. These efforts have been undertaken to increase the efficiency of our operations without significantly impacting the agent experience.

During the six months ended June 30, 2024, our real estate brokerage segment reduced its operating expenses, excluding commissions, litigation settlement, restructuring expenses and non-cash stock compensation expenses by approximately $11,300 (7.9%) as compared to the corresponding period in 2023. These reductions during the six months ended June 30, 2024 included approximately $10,700 of general and administrative expenses.

In 2023, we actively executed expense reduction programs that reduced expenses in our business, including our headcount by approximately 100 employees in 2023. These programs are continuing in 2024. In addition, in the second quarter of 2024, a lease on property used by one of our subsidiaries expired and it has moved its operations to a new location resulting in an approximate $4,000 reduction in annual occupancy costs on an ongoing basis.

Results of Operations

The following discussion provides an assessment of our results of operations, capital resources and liquidity and should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this report.

Three months ended June 30, 2024 Compared to the Three months ended June 30, 2023

The following table sets forth our revenue and operating (loss) income by segment for the three months ended June 30, 2024 compared to the three months ended June 30, 2023:


	Three Months Ended June 30,
	2024		2023
	(Dollars in thousands)
Revenues by segment:
Real estate brokerage segment	$	285,751	$	275,912

Operating (loss) income by segment:
Real estate brokerage segment	$	2,947	$	(1,014)
Corporate and other segment	(6,620)		(7,283)
Total operating loss	$	(3,673)	$	(8,297)

Real estate brokerage segment
Operating income (loss)	$	2,947	$	(1,014)
Depreciation and amortization	1,929		1,993
Restructuring	598		507
Stock-based compensation	1,128		1,161
Adjusted EBITDA	6,602		2,647
Adjusted EBITDA attributed to non-controlling interest	30		(166)
Adjusted EBITDA attributed to Douglas Elliman	$	6,632	$	2,481

Corporate and other segment
Operating loss	$	(6,620)	$	(7,283)
Stock-based compensation	2,347		2,240
Adjusted EBITDA attributed to Douglas Elliman	$	(4,273)	$	(5,043)

Revenues. Our revenues were $285,751 for the three months ended June 30, 2024 compared to $275,912 for the three months ended June 30, 2023. The $9,839 increase in revenues was primarily due to increases in commission and other brokerage revenues which primarily related to increases in revenues from existing home sales.

Operating expenses. Our operating expenses were $289,424 for the three months ended June 30, 2024 compared to $284,209 for the three months ended June 30, 2023. The increase of $5,215 was due primarily to an increase in real estate agent commissions of $11,655 arising primarily from increases in commissions and other brokerage revenue partially offset by declines in general and administrative expenses.

Operating loss. Operating loss was $3,673 for the three months ended June 30, 2024 compared to $8,297 for the same period in 2023. The $4,624 decline in operating loss was due to the net impact of increases in commission and other brokerage revenues partially offset by the increases in operating expenses.

Other income. Other income was $2,066 for the three months ended June 30, 2024 compared to $1,826 for the three months ended June 30, 2023. For the three months ended June 30, 2024, other income primarily consisted of interest income, net of $1,048, investment and other income, primarily associated with our PropTech investments of $1,020. This was partially offset by equity in losses from equity method investments of $2.

Loss before provision for income taxes. Loss before income taxes was $1,607 and $6,471 for the three months ended June 30, 2024 and 2023, respectively.

Income tax expense (benefit). Income tax expense was $173 compared to income tax benefit of $1,293 for the three months ended June 30, 2024 and 2023, respectively.

Real Estate Brokerage.

The following table sets forth our condensed consolidated statements of operations data for the Real Estate Brokerage segment for the three months ended June 30, 2024 compared to the three months ended June 30, 2023:


	Three Months Ended June 30,
	2024			2023
	(Dollars in thousands)
Revenues:
Commissions and other brokerage income	$	272,313	95.3%	$	262,489	95.1%
Property management	9,694		3.4%	9,375		3.4%
Other ancillary services	3,744		1.3%	4,048		1.5%
Total revenues	$	285,751	100%	$	275,912	100%

Operating expenses:
Real estate agent commissions	$	216,457	75.8%	$	204,802	74.2%
Sales and marketing	22,153		7.8%	22,161		8.0%
Operations and support	17,999		6.3%	17,324		6.3%
General and administrative	18,235		6.4%	23,976		8.7%
Technology	5,433		1.9%	6,163		2.2%
Depreciation and amortization	1,929		0.7%	1,993		0.7%

Restructuring	598		0.2%	507		0.2%
Operating income (loss)	$	2,947	1.0%	$	(1,014)	(0.4)%

Revenues. Our revenues were $285,751 for the three months ended June 30, 2024 compared to $275,912 for the three months ended June 30, 2023. The increase of $9,839 was primarily related to an increase in our commission and other brokerage income, as a result of an increase in revenues from existing home sales.

Our revenues from commission and other brokerage income were $272,313 for the three months ended June 30, 2024 compared to $262,489 for the three months ended June 30, 2023, an increase of $9,824. In the three months ended June 30, 2024, our commission and other brokerage income generated from the sales of existing homes increased by $11,193 in the Florida market, $3,590 in the West region, and $1,672 in the Northeast region, which excludes New York City. This was partially offset by declines of $3,662 in New York City. In addition, our revenues from Development Marketing declined by $2,969 in the 2024 period compared to the 2023 period.

Operating Expenses. Our operating expenses were $282,804 for the three months ended June 30, 2024 compared to $276,926 for the three months ended June 30, 2023, an increase of $5,878, due primarily to increases in real estate brokerage commissions, partially offset by reductions in general and administrative and technology expenses. The primary components of operating expenses are described below.

Real Estate Agent Commissions. As a result of increases in our commissions and other brokerage income, our real estate agent commissions expense was $216,457 for the three months ended June 30, 2024 compared to $204,802 for the three months ended June 30, 2023. Real estate agent commissions expense, as a percentage of revenues, increased to 75.8% for the three months ended June 30, 2024 compared to 74.2% for the three months ended June 30, 2023. The increase in real estate agent commissions expense as a percentage of revenue in the 2024 period was primarily driven by a higher percentage of revenues being generated in the Southeast (Florida), which traditionally pay higher commission rates than other regions, as well as a lower percentage of commission revenues derived from Development Marketing, which generally pays lower commission rates.

Sales and Marketing. Sales and marketing expenses were $22,153 for the three months ended June 30, 2024 compared to $22,161 for the three months ended June 30, 2023.

Operations and support. Operations and support expenses were $17,999 for the three months ended June 30, 2024 compared to $17,324 for the three months ended June 30, 2023. The increase is primarily related to an increase in legal expense in the 2024 period.

General and administrative. General and administrative expenses were $18,235 for the three months ended June 30, 2024 compared to $23,976 for the three months ended June 30, 2023. The decline is primarily related to reductions in personnel as well as lower incentive compensation expense in the 2024 period.

Technology. Technology expenses were $5,433 for the three months ended June 30, 2024 compared to $6,163 for the three months ended June 30, 2023. The decline resulted from continued expense reduction efforts in 2024, which included the negotiation of existing licensing agreements in an effort to improve our technology efficiency

Operating income (loss). Operating income was $2,947 for the three months ended June 30, 2024 compared to operating loss of $1,014 for the three months ended June 30, 2023. The increase in operating income is primarily associated with the net impact of increased commission and other brokerage revenues and partially offset by increases in operating expenses.

Corporate and Other.

Corporate and Other loss. The operating loss at the Corporate and Other segment was $6,620 for the three months ended June 30, 2024 compared to $7,283 for the three months ended June 30, 2023. The decline was primarily attributable to a decline in operating expenses.

Six months ended June 30, 2024 Compared to Six months ended June 30, 2023

The following table sets forth our revenue and operating loss by segment for the six months ended June 30, 2024 compared to the six months ended June 30, 2023:


	Six Months Ended June 30,
	2024		2023
	(Dollars in thousands)
Revenues by segment:
Real estate brokerage segment	$	485,990	$	489,894

Operating loss by segment:
Real estate brokerage segment	$	(32,339)	$	(18,357)
Corporate and other segment	(12,798)		(13,748)
Total operating loss	$	(45,137)	$	(32,105)

Real estate brokerage segment
Operating loss	$	(32,339)	$	(18,357)
Depreciation and amortization	3,910		4,032
Litigation settlement	17,750		—
Restructuring	598		1,717
Stock-based compensation	2,353		2,180
Adjusted EBITDA	(7,728)		(10,428)
Adjusted EBITDA attributed to non-controlling interest	162		(75)
Adjusted EBITDA attributed to Douglas Elliman	$	(7,566)	$	(10,503)

Corporate and other segment
Operating loss	$	(12,798)	$	(13,748)
Stock-based compensation	4,477		4,044
Adjusted EBITDA attributed to Douglas Elliman	$	(8,321)	$	(9,704)

Revenues. Our revenues were $485,990 for the six months ended June 30, 2024 compared to $489,894 for the six months ended June 30, 2023. The $3,904 decline in revenues was primarily due to a decline in commissions and other brokerage

income because of lower revenues from existing home sales caused, in part, by lower listing inventory associated with continued high mortgage rates.

Operating expenses. Our operating expenses were $531,127 for the six months ended June 30, 2024 compared to $521,999 for the six months ended June 30, 2023. The increase of $9,128 was due primarily to the litigation settlement of $17,750 and increases in real estate brokerage commissions of $4,569 partially offset by a decline in other operating expenses of $13,191.

Operating loss. Operating loss was $45,137 for the six months ended June 30, 2024 compared to $32,105 for the six months ended June 30, 2023. The $13,032 increase in operating loss was primarily due to the litigation settlement and the net impact of declines in commissions and other brokerage revenues partially offset by a decline in operating expenses.

Other income. Other income was $3,040 for the six months ended June 30, 2024 compared to $2,404 for the six months ended June 30, 2023. For the six months ended June 30, 2024, other income primarily consisted of interest income, net of $2,424 and $629 of investment and other losses primarily associated with our PropTech investments. This was partially offset by equity losses from equity method investments of $13.

Loss before provision for income taxes. Loss before income taxes was $42,097 for the six months ended June 30, 2024 and $29,701 for the six months ended June 30, 2023.

Income tax expense (benefit). Income tax expense was $1,368 for the six months ended June 30, 2024 compared to income tax benefit of $6,683 for the six months ended June 30, 2023.

We calculate our provision for income taxes based upon our estimate of the annual effective income tax rate based on full year projections and apply the annual effective income tax rate against year-to-date pretax income to record income tax expense, adjusted for discrete items, if any. During the six months ended June 30, 2024, we analyzed the likelihood of utilizing our deferred tax assets and determined it will be more likely than not that the benefits of these deductible differences will not be realized, and as a result we established a valuation allowance for the full amount of the deferred tax assets. We refine annual estimates as current information becomes available.

Real Estate Brokerage.

The following table sets forth our condensed consolidated statements of operations data for the Real Estate Brokerage segment for the six months ended June 30, 2024 compared to the six months ended June 30, 2023:


	Six Months Ended June 30,
	2024			2023
	(Dollars in thousands)
Revenues:
Commissions and other brokerage income	$	460,578	94.8%	$	464,525	94.8%
Property management	18,741		3.9%	18,152		3.7%
Other ancillary services	6,671		1.4%	7,217		1.5%
Total revenues	$	485,990	100%	$	489,894	100%

Operating expenses:
Real estate agent commissions	$	365,473	75.2%	$	360,904	73.7%
Sales and marketing	43,451		8.9%	43,400		8.9%
Operations and support	36,798		7.6%	36,217		7.4%
General and administrative	39,073		8.0%	49,806		10.2%
Technology	11,276		2.3%	12,175		2.5%
Depreciation and amortization	3,910		0.8%	4,032		0.8%
Litigation settlement	17,750		3.7%	—		—%

Restructuring	598		0.1%	1,717		0.4%
Operating loss	$	(32,339)	(6.7)%	$	(18,357)	(3.7)%

Revenues. Our revenues were $485,990 for the six months ended June 30, 2024 compared to $489,894 for the six months ended June 30, 2023. The decline of $3,904 was primarily related to a decline in our commission and other brokerage income because of lower revenues from development marketing sales.

Our revenues from commission and other brokerage income were $460,578 for the six months ended June 30, 2024 compared to $464,525 for the six months ended June 30, 2023, a decline of $3,947. In 2024, our commission and other brokerage income generated from the sales of existing homes declined by $12,220 in New York City. This was partially offset

by increases of $14,369 in our Florida market, $5,944 in the West region and $3,153 in the Northeast region, which excludes New York City. In addition, our revenues from Development Marketing declined by $15,193 in the 2024 period compared to the 2023 period.

Operating Expenses. Our operating expenses were $518,329 for the six months ended June 30, 2024 compared to $508,251 for the six months ended June 30, 2023, an increase of $10,078, due primarily to the litigation settlement partially offset by declines in other operating expenses.

Real Estate Agent Commissions. Our real estate agent commissions expense was $365,473 for the six months ended June 30, 2024 compared to $360,904 for the six months ended June 30, 2023, an increase of $4,569. Real estate agent commissions expense, as a percentage of revenues, increased to 75.2% for the six months ended June 30, 2024 compared to 73.7% for the six months ended June 30, 2023. The increase in real estate agent commissions expense as a percentage of revenue in the 2024 period was primarily driven by a lower percentage of commission revenues derived from Development Marketing, which generally pays lower commission rates, during six months ended June 30, 2024 compared to the prior year period. In addition, during the six months ended June 30, 2024, a higher percentage of our revenues was generated from locations (primarily Florida, California, Texas, Colorado and Nevada) which generally pay higher commission rates.

Sales and Marketing. Sales and marketing expenses were $43,451 for the six months ended June 30, 2024 compared to $43,400 for the six months ended June 30, 2023.

Operations and support. Operations and support expenses were $36,798 for the six months ended June 30, 2024 compared to $36,217 for the six months ended June 30, 2023.

General and administrative. General and administrative expenses were $39,073 for the six months ended June 30, 2024 compared to $49,806 for the six months ended June 30, 2023.The decline is primarily related to reductions in personnel as well as lower incentive compensation expenses.

Technology. Technology expenses were $11,276 for the six months ended June 30, 2024 compared to $12,175 for the six months ended June 30, 2023.

Operating loss. Operating loss was $32,339 for the six months ended June 30, 2024 compared to $18,357 for the six months ended June 30, 2023. The increase in operating loss is primarily associated with the litigation settlement of $17,750 and decline in revenues partially offset by a decline in operating expenses.

Corporate and Other.

Corporate and Other loss. The operating loss at the Corporate and Other segment was $12,798 for the six months ended June 30, 2024 compared to $13,748 for the six months ended June 30, 2023.

Summary of PropTech Investments

As of June 30, 2024, New Valley Ventures had investments (at a carrying value) of approximately $12,919 in PropTech companies. This amounts to approximately 3% of the value of Douglas Elliman’s total assets, which totaled approximately $464 million, as of June 30, 2024.

Liquidity and Capital Resources

Cash, cash equivalents and restricted cash declined by $26,613 to $102,904, which included $10,040 of restricted cash, during the six months ended June 30, 2024 and by $32,084, which included restricted cash of $8,880, during the six months ended June 30, 2023.

Cash used in operations was $25,973 and $23,140 for the six months ended June 30, 2024 and 2023, respectively. The decline in the cash used in the 2024 period was related to the receipt of income tax refunds and lower uses of working capital. This was partially offset by lower operating income in the six months ended June 30, 2024.

Cash used in investing activities was $629 and $4,711 for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, cash used in investing activities was comprised of capital expenditures of $2,967 and the purchase of investments of $185 in our PropTech business. This was offset by $2,523 of distributions from our investments in equity securities. For the six months ended June 30, 2023, cash used in investing activities was comprised of capital expenditures of $4,614, and purchase of investments of $505 in our PropTech business. This was offset by $408 of distributions from our investments in equity securities.

Our investment philosophy is to maximize return on investments using a reasonable expectation for return when investing in equity-method investments and PropTech investments as well as making capital expenditures.

Cash used in financing activities was $11 and $4,233 for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, cash used in financing activities was comprised of tax benefit of options exercised of $11. For the six months ended June 30, 2023, cash used in financing activities was comprised of dividends and distributions on common stock of $4,222 and $11 for payroll tax liabilities associated with restricted stock withheld upon the vesting of restricted stock.

We paid a quarterly cash dividend of $0.05 per share from March 2022 to March 2023. On June 12, 2023, we announced that our Board had suspended the quarterly cash dividend, effective immediately. On June 12, 2023, our Board also declared a stock dividend on our common stock of 5%, which was paid on June 30, 2023 to stockholders of record as of the close of business on June 22, 2023. As part of the evaluation of our dividend policy, our Board determined that making a stock dividend and suspending the quarterly cash dividend was in the best interest of us and our stockholders. The amount and payment of any stock or cash dividend is subject to the Board’s regular evaluation of our dividend policy and capital allocation strategy.

Real Estate Brokerage Litigation. On April 26, 2024, we entered into a settlement agreement to resolve all claims on a nationwide basis in the pending class action litigations, Gibson v. NAR, No. 4:23-cv-00788-SRB (W.D. Mo.) and Umpa v. NAR, 4:23-cv-00945-SRB (W.D. Mo.) alleging claims on behalf of sellers against Douglas Elliman Inc. and our subsidiaries. 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 six months ended June 30, 2024. Litigation is subject to uncertainty and it is possible that there could be adverse developments in other pending cases or that more cases, including antitrust lawsuits, could be concerned.

Management cannot predict the cash requirements related to any future settlements or judgments, including cash required to bond any appeals, and there is a risk that those requirements will not be able to be met. Management is unable to make a reasonable estimate of the amount or range of loss that could result from an unfavorable outcome of the cases pending against the real estate brokerage segment or the costs of defending such cases. It is possible that our consolidated financial position, results of operations or cash flows in any future period could be materially adversely affected by an unfavorable outcome in any such brokerage-related litigation.

We had cash and cash equivalents of approximately $92,864 as of June 30, 2024 and, in addition to any cash provided from operations, such cash is available to be used to fund such liquidity requirements as well as other anticipated liquidity needs in the normal course of business. Management currently anticipates that these amounts, as well as expected cash flows from our operations and proceeds from any financings to the extent available, should be sufficient to meet our liquidity needs over the next twelve months. We may acquire or seek to acquire additional operating businesses through a merger, purchase of assets, stock acquisition or other means, or to make or seek to make other investments, which may limit our liquidity otherwise available.

On July 2, 2024, we issued $50,000 in aggregate principal amount of Convertible Notes. The Convertible Notes bear interest at a rate of 7.0% per annum, payable in cash, or, at our election, 8.0% per annum paid in kind, due semi-annually. See “-- Recent Developments” and “Item 1A. Risk Factors -- Our debt obligations under our Convertible Notes could impair our financial condition, limit our operational flexibility and result in significant dilution” for more information concerning our Convertible Notes.

Off-Balance Sheet Arrangements

We have various agreements in which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations related to such matters as title to assets sold and licensed or certain intellectual property rights. Payment by us under such indemnification clauses is generally conditioned on the other party making a claim that is subject to challenge by us and dispute resolution procedures specified in the particular contract. Further, our obligations under these arrangements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential number of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, payments made by us under these agreements have not been material. As of June 30, 2024, we were not aware of any indemnification agreements that would or are reasonably expected to have a current or future material adverse impact on our financial position, results of operations or cash flows.

As of June 30, 2024, we had outstanding approximately $3,000 of letters of credit, collateralized by certificates of deposit. The letters of credit have been issued as security deposits for leases of office space, to secure the performance of our

subsidiaries under various insurance programs and to provide collateral for various subsidiary borrowing and capital lease arrangements.

As a service to its customers, Portfolio Escrow Inc., a subsidiary of the Company, administers escrow and trust deposits which represent undisbursed amounts received for the settlement of real estate transactions. Deposits at FDIC-insured institutions are insured up to $250. The escrow funds on deposit at the subsidiary were $34,314 and $41,338 as of June 30, 2024 and December 31, 2023, respectively, and corresponding escrow funds in holding of the same amount. While these deposits are not assets of the Company (and, therefore, are excluded from the accompanying condensed consolidated balance sheets), the subsidiary of the Company remains contingently liable for the disposition of these deposits.

Market Risk

We are exposed to market risks principally from fluctuations in interest rates and could be exposed to market risks from foreign currency exchange rates and equity prices in the future. We seek to minimize these risks through our regular operating and financing activities and our long-term investment strategy. Our market risk management procedures cover material market risks for our market risk sensitive financial instruments.

New Accounting Pronouncements

Refer to Note 1, Summary of Significant Accounting Policies, to our financial statements for further information on New Accounting Pronouncements.

Legislation and Regulation

There are no material changes from the Legislation and Regulation section set forth in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2023.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this report contains “forward-looking statements” within the meaning of the federal securities law. Forward-looking statements include information relating to our intent, belief or current expectations, primarily with respect to, but not limited to, economic outlook, capital expenditures, cost reduction, cash flows, operating performance, growth expectations, competition, legislation and regulations, litigation, and related industry developments (including trends affecting our business, financial condition and results of operations).

We identify forward-looking statements in this report by using words or phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may be,” “objective,” “opportunistically,” “plan,” “potential,” “predict,” “project,” “prospects,” “seek,” and “will be” and similar words or phrases or their negatives.

Forward-looking statements involve important risks and uncertainties that could cause our actual results, performance or achievements to differ materially from our anticipated results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, without limitation, the following:

•general economic and market conditions and any changes therein, including due to macroeconomic conditions, interest rate fluctuations, inflation, acts of war and terrorism or otherwise,

•governmental regulations and policies, including with respect to regulation of the real estate market or monetary and fiscal policy and its effect on overall economic activity, in particular, mortgage interest rates,

•the impacts of banks not honoring the escrow and trust deposits held by our subsidiaries,

•litigation risks, the costs associated with, and the outcome of, litigation and other proceedings to the exten uninsured, including litigation or other claims against companies we invest in or acquire,

•adverse changes in global, national, regional and local economic and market conditions, including those related to pandemics and health crises (and responses to them),

•the impacts of the Inflation Reduction Act of 2022 and the Tax Cuts and Jobs Act of 2017, including the continued impact on the markets of our business,

•effects of industry competition,

•severe weather events or natural or man-made disasters, including the increasing severity or frequency of such events due to climate change or otherwise, or other catastrophic events that may disrupt our business and have an unfavorable impact on home sale activity,

•the level of our expenses, including our corporate expenses as a standalone public company,

•the tax-free treatment of the Distribution,

•our lack of operating history as a public company and costs associated with being a standalone public company,

•the failure of Vector Group to satisfy its respective obligations under the Transition Services Agreement or other agreements entered into in connection with the Distribution, and

•the additional factors described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission as updated in this report.

Further information on the risks and uncertainties to our business includes the risk factors discussed above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC and in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, there is a risk that these expectations will not be attained and that any deviations will be material. The forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any of these statements to reflect events or circumstances occurring after the date of this report. New factors may emerge, and it is not possible to predict all factors that may affect our business and operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk” is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on their evaluation, our principal executive officer and principal financial officer have concluded that these controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to Note 7 to our condensed consolidated financial statements, incorporated herein by reference, which contains a general description of certain legal proceedings to which our company or its subsidiaries are a party.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2023, except as set forth below:

Industry structure changes that disrupt the functioning of the residential real estate market could materially adversely affect our operations and financial results.

Through our brokerages, we participate in MLS and are a member of the NAR and state real estate associations and, accordingly, are subject to each group’s rules, policies, data licenses, and terms of service. The rules of each MLS and real estate association to which we belong can vary widely and are complex.

From time to time, certain industry practices, including NAR and MLS rules, have come under regulatory scrutiny. There can be no assurances as to whether the Department of Justice (the “DOJ”) or Federal Trade Commission (the “FTC”), their state counterparts, or other governmental body will determine that any industry practices or developments have an anti-competitive effect on the industry. Any such determination could result in industry investigations, legislative or regulatory action, private litigation or other actions, any of which could have the potential to disrupt our business.

On July 1, 2021, the DOJ announced its withdrawal from a settlement agreement reached during the prior administration with the NAR in relation to claims of anticompetitive behavior with respect to commissions received by buyers’ agents from sellers’ agents. The settlement previously required the NAR to adopt certain rule changes, such as increased disclosure of commission offers from sellers’ agents to buyers’ agents. In January 2023, a federal district court ruled that the DOJ must uphold the settlement agreement. The DOJ appealed the district court’s January 2023 ruling, which has been fully briefed and is scheduled for oral argument on December 1, 2023. The withdrawal of the DOJ from this settlement and the executive order signed by President Biden on July 9, 2021, which, among other things, directs the FTC to consider additional rule making pertaining to the real estate industry, indicates increased regulatory scrutiny of the real estate industry.

In addition, private litigants have filed several antitrust suits against the NAR and certain real estate brokerage firms, some of which the DOJ has intervened in, that allege certain NAR and MLS rules are anti-competitive under federal and state antitrust laws and result in increased costs to consumers. Certain of these antitrust suits have resulted in settlement agreements, pursuant to which the settling real estate brokerage companies have agreed to injunctive relief that requires those companies to implement practice changes in their brokerage operations. On October 31, 2023, a federal jury in the Western District of Missouri found in favor of a class of plaintiffs of home sellers from April 2015 to June 2022 in three states, and awarded damages of approximately $1.78 billion (which is subject to statutory treble damages) for anticompetitive behavior in violation of federal antitrust laws arising from the NAR’s requirement that sellers’ agents for MLS-listed properties offer to pay a portion of commissions received on the sale of such properties to buyers’ agents (the Sitzer/Burnett case). NAR and certain brokerage defendants have settled the Sitzer/Burnett case. These settlements, which remain subject to final court approval, include both monetary and non-monetary settlement terms, which may impact business practices within the industry. Douglas Elliman is not a defendant in the Sitzer/Burnett case.

Following the federal jury decision in the Sitzer/Burnett case on October 31, 2023, several additional putative class action lawsuits were filed against the NAR and additional real estate brokerage firms, including Douglas Elliman, alleging anticompetitive conduct similar to that in the Sitzer/Burnett case in violation of federal and state antitrust laws, consumer protection claims and allegations of unjust enrichment. Douglas Elliman is presently aware that it is a named defendant in eight such matters in Missouri, Illinois and New York. Douglas Elliman may become involved in additional legal proceedings concerning the same or similar claims. On April 26, 2024, we entered into a settlement agreement (the “Settlement Agreement”) to resolve, on a nationwide basis, the Gibson and Umpa cases (the “Lawsuits”). 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 us and our subsidiaries (collectively, the “Claims”), and releases us, our subsidiaries, and affiliated agents from all Claims. 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”). We are unable to reasonably estimate the financial impact of any remaining matters.

Any of the foregoing litigation (including any related settlement agreement) or subsequent regulatory action, if successful, could result in significant changes or disruptions to industry practices of the residential real estate market, including changes or disruptions to buyers’ agent’s commissions, and could negatively affect our financial condition and results of operations. Such consequences may reduce our revenues, require additional expenditure, or distract our management’s attention from pursuing our growth strategy.

We could experience meaningful changes in industry operations or structure, as a result of governmental pressures, the result of litigation, changes to NAR or MLS rules, the actions of certain competitors or the introduction or growth of certain competitive models.

Contractual obligations related to confidentiality and noncompetition may be ineffective or unenforceable against departing employees.

Our operations are dependent on the efforts, abilities and experience of our employees, and we compete for their services. We have contracts with certain employees that include provisions preventing them from competing with us both during and after the term of our employment contracts with them. Enforceability of the non-compete agreements that we have in place is not guaranteed, and contractual restrictions could be breached without discovery or adequate remedies. On July 9, 2021, President Biden signed an executive order encouraging the Federal Trade Commission (“FTC”) to curtail unfair use of non-compete agreements and other agreements that may unfairly limit worker mobility. While we cannot predict how the initiatives set forth in the executive order will be implemented or, as a result, the impact that the executive order will have on our operations, there is now increased uncertainty regarding the long-term enforceability of our non-compete agreements. In April 2024, the FTC issued a final rule that prohibits employers from entering into non-compete agreements with workers and requires employers to rescind existing non-compete agreements (other than with respect to senior executives). If the final rule becomes effective, our business may be negatively affected. In addition, the New York state legislature passed legislation in 2023 that would have prohibited most non-compete agreements between employers and workers in New York State, although it was not ultimately enacted. It is possible that additional similar legislation may be introduced in the future. We are monitoring developments related to these proposed laws for any potential impact on the arrangements we enter into with third parties, including our real estate agents.

Our debt obligations under our Convertible Notes could impair our financial condition, limit our operational flexibility and result in significant dilution.

On July 2, 2024, we issued Senior Secured Convertible Promissory Notes due July 2, 2029 (the “Convertible Notes”), pursuant to a Securities Purchase Agreement, dated as of July 2, 2024 (the “Purchase Agreement”), by and among the Company, Alter Domus (US) LLC, as collateral agent for the purchasers, and the purchasers named therein (such purchasers being funds affiliated with or managed by Kennedy Lewis Investment Management LLC (“KLIM”), in an aggregate principal amount of $50.0 million. The Convertible Notes mature on the fifth anniversary of the issuance date and are convertible into shares of the Company’s common stock, par value $0.01 (the “Common Stock”). The Convertible Notes were issued in a private placement pursuant to an exemption for transactions by an issuer not involving a public offering under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

In connection with the Purchase Agreement and the Convertible Notes, certain of the Company’s subsidiaries (each a “Guarantor” and, collectively, the “Guarantors”) entered into a Security Agreement, dated as of July 2, 2024 (the “Security Agreement”), whereby the Guarantors agreed to guarantee the obligations and liabilities of the Company under the Convertible Notes. As a result, our obligations under the Convertible Notes are secured by a perfected security interest in substantially all of our tangible and intangible assets (including our intellectual property assets).

Our indebtedness under the Convertible Notes could:

•impair our ability to obtain financing or additional debt in the future for working capital, capital expenditures, acquisitions or general corporate purposes;

•impair our ability to access capital and credit markets on terms that are favorable to us or at all;

•require us to dedicate a substantial portion of our cash flow for interest payments on our indebtedness and other financial obligations, thereby reducing the availability of our cash flow to fund working capital and general corporate purposes; and

•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.

The Purchase Agreement contains certain affirmative and negative covenants (including restrictions on the Company’s ability to incur indebtedness, create liens, pay dividends or distributions, make investments and enter into certain affiliate transactions). In addition, pursuant to the Purchase Agreement, if the Company has negative Consolidated Adjusted EBITDA (as defined in the Purchase Agreement) for any two consecutive fiscal quarters from and after the fiscal quarter commencing July 1, 2024, then the Company will be required to maintain Liquidity (as defined in the Purchase Agreement) of at least $20.0 million as of the end of each calendar month until the Company has positive Consolidated Adjusted EBITDA at the end of any subsequent fiscal quarter. There is no guarantee that we will be able to pay the principal and interest under the Convertible Notes or that future working capital, borrowings or equity financing will be available to repay or refinance any amounts outstanding under the Convertible Notes.

The Convertible Notes are convertible at any time at the option of KLIM, at an initial conversion price of $1.50 per share of Common Stock, provided that KLIM is prohibited from converting the Convertible Notes into shares of Common Stock if, upon such conversion, so long as the aggregate number of shares of Common Stock beneficially owned by KLIM would not exceed 4.99% (the “Beneficial Ownership Limitation”) of the number of shares of Common Stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the Note, and which may be increased up to 24.99% at the election of KLIM. Assuming the Convertible Notes are converted in full (without issuance of any make-whole shares), and without giving effect to the Beneficial Ownership Limitation, the Convertible Notes would convert into 33,333,334 shares of Common Stock, or 40,854,085 shares of Common Stock upon issuance of all make-whole shares, which would result in significant dilution to our stockholders.

We may not have the ability to raise the funds necessary to settle conversions of our Convertible Notes in cash or to repurchase the Convertible Notes in connection with a Major Transaction, and any other indebtedness we may incur in the future may contain limitations on our ability to pay cash upon conversion or repurchase of the Convertible Notes.

In the event of certain Major Transactions (as defined in the Purchase Agreement), the Company will be required to repay the Convertible Notes on the date on which such transaction occurs at a price equal to the greater of (i) the outstanding principal and capitalized interest on the Convertible Note plus a make-whole premium and (ii) the sum of (a) the fair market value of the as-converted amount of the Convertible Note for Common Stock plus (b) the fair market value of additional make-whole shares calculated pursuant to a customary make-whole table. The noteholders may elect to convert the Convertible Notes prior to such repayment, receive shares of Common Stock in respect of such repayment amount in certain circumstances or require such payment in cash. Our ability to repurchase the notes or to pay cash upon conversion of the Convertible Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase notes at a time when the repurchase is required by the Convertible Notes or to pay any cash payable on future conversions of the Convertible Notes may constitute an Event of Default under the Purchase Agreement. An Event of Default under the Purchase Agreement or the occurrence of the Major Transaction itself could also lead to a default under any agreements governing other future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and to repay or repurchase our Convertible Notes.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

No equity securities of ours which were not registered under the Securities Act of 1933, as amended, have been issued or sold by us during the three months ended June 30, 2024. In addition, we did not repurchase any of our equity securities during the three months ended June 30, 2024.

Issuer Purchases of Equity Securities

Our purchases of our common stock during the three months ended June 30, 2024 were as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to April 30, 2024	—	$	—		—	—
May 1 to May 31, 2024	—	—			—	—
June 1 to June 30, 2024	9,921	1.13		(1)	—	—
Total	9,921	$	1.13		—	—

(1) Represents withholdings of shares as payment of payroll tax liabilities incident to the vesting of an employee’s shares of restricted stock. The shares purchased were immediately canceled.

ITEM 5. OTHER INFORMATION

Securities Trading Plans of Directors and Executive Officers

In the quarter ended June 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement for the purchase or sale of our securities, within the meaning of Item 408 of Regulation S-K. However, certain of our officers or directors have made, and may from time to time make elections to have shares withheld to cover withholding taxes or pay the exercise price of options, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements.

ITEM 6. EXHIBITS:


* 10.1			Settlement Agreement, dated April 26, 2024, by and among Douglas Elliman Inc., Douglas Elliman Realty, LLC, the Umpa plaintiffs and the Gibson plaintiffs (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated April 26, 2024).

* 10.2			Purchase Agreement, dated July 2, 2024, by and among the Company, Alter Domus (US) LLC, as collateral agent, and the Purchases named therein (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated July 2, 2024).

* 10.3			Form of Convertible Promissory Note (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated July 2, 2024).

* 10.4			Registration Rights Agreement, dated July 2, 2024, by and among the Company and the Purchasers named therein (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K dated July 2, 2024).

31.1			Certification of Chief Executive Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

** 32.1			Certifications of Chief Executive Officer and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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_____________________________

* Incorporated by reference.

** Furnished herewith. These exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


		DOUGLAS ELLIMAN INC.
		(Registrant)

		By: /s/ J. Bryant Kirkland III
		J. Bryant Kirkland III
		Senior Vice President and Chief Financial Officer
Date:	August 9, 2024

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Date	Price Target	Rating	Analyst
7/18/2023		Neutral	BTIG Research
2/24/2022	$8.50	Buy	Jefferies

SEC Form 10-Q filed by Douglas Elliman Inc.

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BTIG Research initiated coverage on Douglas Elliman

Jefferies initiated coverage on Douglas Elliman with a new price target

$DOUG Leadership Updates

Live Leadership Updates

Douglas Elliman Inc. Announces Leadership Transition

Salvatore Troia Joins NNN Pro as Chief Financial Officer as Company Continues to Bolster Brokerage Platform

Bilt Rewards and Douglas Elliman Property Management Announce New Landmark Partnership

$DOUG SEC Filings

SEC Form 8-K filed by Douglas Elliman Inc.

SEC Form 8-K filed by Douglas Elliman Inc.

Douglas Elliman Inc. filed SEC Form 8-K: Leadership Update, Regulation FD Disclosure

$DOUG Insider Purchases

Insider purchases reveal critical bullish sentiment about the company from key stakeholders. See them live in this feed.

Director Zeitchick Mark bought $47,196 worth of shares (40,000 units at $1.18), increasing direct ownership by 16% to 297,310 units (SEC Form 4)

Executive Vice President & COO Lampen Richard bought $89,648 worth of shares (75,000 units at $1.20), increasing direct ownership by 3% to 2,272,804 units (SEC Form 4)

Director Liebowitz Michael bought $232,930 worth of shares (197,398 units at $1.18) (SEC Form 4)

$DOUG Insider Trading

Insider transactions reveal critical sentiment about the company from key stakeholders. See them live in this feed.

Officer Kirkland J Bryant Iii was granted 300,000 shares, increasing direct ownership by 41% to 1,028,899 units (SEC Form 4)

Amendment: SEC Form 3 filed by new insider Kennedy Lewis Gp Iii Llc

Director Kennedy Lewis Gp Iii Llc was granted 117,950 shares (SEC Form 4)

$DOUG Large Ownership Changes

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$DOUG Press Releases

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Amendment: SEC Form SC 13D/A filed by Douglas Elliman Inc.

Amendment: SEC Form SC 13G/A filed by Douglas Elliman Inc.

SEC Form SC 13D/A filed by Douglas Elliman Inc. (Amendment)

Douglas Elliman Inc. to Host Third Quarter 2024 Results Conference Call

Douglas Elliman Inc. Announces Leadership Transition

Empire Development Announces New Ultra-Luxury Real Estate Inventory in Boca Raton

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