Welcome to Douglas Elliman Inc.’s Fourth Quarter and Full Year 2021 Earnings Conference Call. During this call, the terms, adjusted net income and adjusted EBITDA will be used. These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for other measures of financial performance prepared in accordance with GAAP. Reconciliations to adjusted operating income and adjusted EBITDA are contained in the Company's earnings release, which has been posted to the Investor Relations section of the Company's website located at investors.elliman.com. Before the call begins, I would like to read a safe harbor statement. The statements made during this conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the Company's Securities and Exchange Commission filings. Now, I would like to turn the call over to the Chairman, President and Chief Executive Officer of Douglas Elliman Inc. Howard M. Lorber.

Good afternoon and thank you for joining us for our first earnings call as Douglas Elliman. This is a meaningful milestone for our company, our employees, and our agents nationwide. Joining me are Richard Lampen, our Chief Operating Officer, Bryant Kirkland, our Chief Financial Officer, and Scott Durkin, President and CEO of Douglas Elliman Realty, our residential real estate brokerage business. On today's call, we will recap the spinoff of Douglas Elliman from Vector Group, discuss why the US residential real estate market continues to demonstrate strength, and discuss our fourth-quarter financial performance. We will then answer your questions before concluding today's meeting. Let me begin by reiterating the key points of our strategy as an independent company. As a standalone publicly traded company, Douglas Elliman leverages its talented team of agents and employees, as well as a comprehensive suite of real estate technology, marketing, and public relations to unleash its growth potential. The company plans to create stockholder value through the expansion of its footprint, accelerating our adoption of cutting-edge PropTech solutions, continued recruitment of best-in-class talent acquisitions, aqua hires, and operational efficiencies. With a brand synonymous with luxury and our comprehensive suite of technology-enabled real estate services and investments, Douglas Elliman is positioned to capitalize on the highly attractive dynamics in the US residential real estate market. According to CoreLogic, US homeowner equity has grown 31.1% year over year as of the third quarter of 2021. We expect this trend to continue; in fact, new and existing home sales in the US are forecast to grow to approximately 7.5 million units in 2022, up from 7 million units in 2021 and 6.5 million units in 2020. The growth in our markets is further strengthened by increased mobility driven by the continued migration to low-tax states, as well as COVID-related remote work flexibility, leading to increased demand for greater space and multiple homes. This strong demand combined with low inventory has resulted in significant price appreciation in many regions, particularly across our luxury markets. Douglas Elliman's positions in markets have also recovered and remain strong, driven by the growth in millennials entering the housing market, who are generationally inclined to buy. These dynamics have propelled Douglas Elliman to a record of $51.2 billion in gross transaction value or closed sales in 2021, up from $29.1 billion in 2020. We believe this momentum can continue for the residential real estate industry, and in particular Douglas Elliman, because of our strong presence in leading luxury markets. The factors we believe will fuel future growth include the growing importance of millennial buyers and the return of international buyers. According to recent data from the National Association of Realtors, millennials represented 37% of purchases in 2020 and 53% of new mortgages. The National Association of Realtors also reported that the volume of international buyer purchases decreased from $74 billion in 2020 to $54.4 billion in 2021, a 27% drop, meaning the significant increase in overall transaction volume occurred even without one of the traditional underpinnings of the market. We are optimistic that international buyers, who are particularly attracted to our luxury markets, will return to the US residential real estate market in 2022 and drive increased transaction volumes. We can meet the current and predicted robust demand thanks to our Douglas Elliman agents, who are among the most successful and most visible agents in the United States. We pride ourselves on our decades-long history of recruiting high-profile, best-in-class agents who are attracted to the strength of our platform and our luxury brand. Our agents are consistently ranked among the best in the business and are supplemented by our exclusive relationship with Knight Frank and its international network. This is an invaluable referral and knowledge-sharing relationship that is truly singular in the US residential brokerage community and provides our agents with unprecedented global exposure to important luxury buyers and luxury markets around the world. The economics of these luxury markets are attractive, and commission rates are strong. With many of our closed sales in cash, we believe our revenues will be less impacted by a rising interest rate environment than our competitors. The results in Elliman include a 2021 average price per transaction of $1,580,000 per home, substantially higher than our leading competitors. It is important to note that our luxury brand resonates with higher average sales prices across all our markets. Our average price per transaction is $1.45 million per home outside of New York City, which is well above the national average. We believe this creates a large runway for us to continue to grow our business, not only in our existing markets but also in complementary markets as well. In addition to organic growth through recruiting in our major markets, we have significant opportunities to increase our market share in adjacent markets where the Elliman name is well known and trusted. While New York City remains our largest market with $16.2 billion in gross transaction value or closed sales in 2021, our South Florida market continues to show strength with $14.6 billion in gross transaction value or closed sales, and the average selling price was approximately $2 million per home in both New York City and South Florida. We also maintained a strong market share in both New York City and South Florida. Our market share in New York City for the quarter and year was 22%, and our market share in South Florida for the quarter and year was 20% and 21% respectively. In Florida, we are building on our strength from Miami to Palm Beach, and we are also increasing our presence on the West Coast of the state. Recently, for example, we have experienced significant growth in Naples and St. Petersburg and are looking to expand on the Gulf Coast into Sarasota and Tampa. On the East Coast, we recently opened in Vero Beach and Jacksonville. The presence of our Douglas Elliman development sales and marketing platform provides us with a competitive advantage in the New York, Florida, and California markets in particular. Douglas Elliman development marketing allows us to recruit star agents while also enhancing the client experience. Gross transaction value for DEDM was $3.2 billion in 2021, and our pipeline is strong. DEDM's business model is a core competency of ours, and it will continue to serve as one of our competitive advantages as we expand into new luxury markets. In particular, we are actively working to expand Douglas Elliman development marketing's presence in Texas. We have made a strategic decision to aggressively grow our current business in Texas. We are actively recruiting top agents and talent in Houston, Dallas, and Austin, and we believe Texas could be a major market for us in the future. Beyond our residential brokerage, Douglas Elliman is further differentiated by our ancillary services and approach to technology. We believe our differentiated approach to technology will also boost our growth. Unlike our peers whose build and buy models require spending large outlays on internal resources, Douglas Elliman selectively uses and invests in proven breed products and services that can be easily integrated into our technology foundation. This leading-edge technology provides us a competitive advantage, allowing us to be flexible and nimble while keeping our balance sheet asset light. Elliman's adoption of technology and investments in early-stage disruptive PropTech companies keep our subsidiary and our agents on the cutting edge of the industry with new solutions and services. With that backdrop, let us move on to Douglas Elliman's financial results. Douglas Elliman maintained a strong balance sheet with cash of $214.3 million at December 31, 2021. We believe this puts us in a position of strength in the market. For the three months ended December 31, 2021, Douglas Elliman reported $334.2 million in revenues compared to $267.5 million in the 2020 period. The increase in revenues was primarily from increased commission and other brokerage income due to the strong residential real estate market and the luxury markets we serve. Net income attributed to Douglas Elliman is $20.2 million, or $0.26 per diluted share for the three months ended December 31, 2021, compared to net income of $14 million, or $0.18 per diluted share in the prior year period. For the three months ended December 31, 2021, Douglas Elliman reported adjusted EBITDA of $21.3 million compared to $16.7 million in the fourth quarter of 2020. For the three months ended December 31, 2021, adjusted net income was $18.6 million, or $0.24 per share compared to adjusted net income of $15.2 million, or $0.18 per share in the fourth quarter of 2020. For the year ended December 31, 2021, Douglas Elliman reported $1.35 billion in revenues compared to $774 million in 2020. Net income was $98.8 million or $1.27 per diluted share for the year ended December 31, 2021 compared to a net loss of $46.4 million or $0.60 per diluted share in the 2020 period. For the year ended December 31, 2021, Douglas Elliman reported adjusted EBITDA of $110.7 million compared to $22.1 million in 2020. For the year ended December 31, 2021, our adjusted net income was $100.5 million, or $1.29 per share compared to adjusted net income of $14.1 million, or $0.17 per share in 2020. In summary, Douglas Elliman demonstrated strong fourth-quarter and full-year results in 2021, and we believe we have a strong platform for continued growth. We're excited to officially operate as a standalone company and to have access to the public markets, and we are committed to creating sustainable long-term value for shareholders. With that, we will be happy to answer questions.

[Operator instructions] The first question comes from Ritwik Roy with Jeffries. Please proceed.

Hi everyone. This is Rick Roy on for Dan Fannon at Jeffries. First congratulations on your first investor call plus spinout. Appreciate being a part of it. And yeah, with that, just going into the non-commission expenses, so clearly solid numbers right up that sales and marketing down and often support seeming down to fourth quarter of last year levels. Would you characterize this as kind of a return to seasonality or, I guess another way is, would you call this a reasonable run-rate going into 2022 or even the first quarter for that matter?

Well, we hope it would be a reasonable run rate, but I will say we still do have some positions open, and they've been hard to fill. So our payroll costs probably will go up sometime in the near future. We're hoping, because that means we're able to hire the people that we feel we need to continue our growth.

I think one of the real stories here is the cost reductions we made between 2019 and 2021, and looking at what we call the non-activity based costs, which are all costs, except for bonus discretionary compensation or bonuses or advertising expense, we're roughly down about $21 million since 2019. If you subtract out acquisitions we've made, that number is closer to $26 million to $27 million.

Got it. Thank you. And if I may ask a follow-up if that's all right. So you alluded to expanding into the Texas and South Florida markets. Going into 2022, is that kind of where you'd also characterize activity levels in terms of markets that you play in, or is that sort of, or I guess where are you -- where -- yeah.

We already opened in Texas. So we're just starting to build; we're hiring lots of people, lots of brokers, revenue is doing well, and on a month-to-month basis, it seems to be going up pretty substantially. We do have other locations in mind and as we strategize, we really are making a push just on the low-cost states. These low-cost states are related to state taxes or no-cost states like Florida with no taxes. So we are looking at Arizona, looking at Nevada. We are going to consider probably Tennessee at some point. And then we still have lots of places we could build that into the existing states we are in, but in slightly different markets. Florida is a big state, and I think we can really build a much bigger business in Florida as well as in Texas.

Understood. And if I could sneak one last question in here, just taking a look at cash levels especially, relative to the current market cap, do you have plans for a future share repurchase in the upcoming years?

We have no plan right now for any future share repurchase. If it becomes the right time based on the way the market is sensing, then we would consider it. It's nice to have over $200 million in cash, and it’s also nice not to have any debt like some of our competitors.

Yes, I was about to address that. We did announce in conjunction with the spinoff our plan to pay a $0.20 dividend per year and would expect that the announcement for the first one for the first quarter will be coming shortly.

Got it. Thank you for addressing all my questions.

Thank you, Mr. Roy. The next question comes from John Massocca with Ladenburg Thalmann. Please proceed.

Good evening. So I guess specifically with the New York market, what kind of trends are you seeing? How close are you at this point to kind of a more normalized mix of kind of New York transactions in your current markets, or current kind of market spread versus what we were seeing pre-pandemic?

Well, let me say this, pre-pandemic is really not the whole story. New York City suffered starting in around 2016. It trended down from '16 to '19. Part of it was because of taxes; there was a mansion tax and a change in transfer taxes and mortgage recording taxes. Thank God, they floated what they called the Peter tax; that didn't happen. But I think that this pickup was not just because of COVID, although COVID—sorry to say, when so many people passed away from it,—helped the marketplace. A different type of living that people were looking for has emerged. I think that people have a renewed good feeling about the city, and probably a big part of that is the change in government. That is yet to be seen how far that's going to go, but surely a fresh face that's saying the right things is much better than what we were living with before as the mayor. So we're pretty bullish on New York City. And then as I mentioned in my remarks, we're expecting the international buyers to be back, and that's always been a pretty good part of our business and a lot of that was high-end business. So, we're quite happy with how it's going in New York at this point.

I guess understanding it's a bit of a moving target because you're expanding into new markets, and that's going to create further diversity. But if you look at the portfolio or the markets you're in today, what would you expect a more normalized mix of New York City transactions in terms of a rough percentage?

You mean how much of the total business would be coming from New York? We did $16 billion out of $50 billion, so that was about 30% of the total. The other markets have matured completely. We've been in New York since 1911, so it's been in New York City for a very long time. So it's hard to say, but New York could stay stable, but the percentage could go down because we expect big growth in Texas, California, and the Boston area. I can't tell you exactly what percentage is going to come from going to or come from what state. But I think that right now, things are strong, and people are worried. A lot of people are worried about what's going on. Everyone is worried about interest rates going up. They think that's going to spook the buyers. But the fact is that historically, as interest rates start going up, buyers come to the market right away because they don't want to lose their opportunity. They are afraid they will be priced out of the market. So when you add inflation on top of that, that's an added reason for them to make a decision to buy now. I think we're in for a few years still of a very strong market.

Okay. And you mentioned the balance sheet position and cash position. How should we think about maybe deployment of that kind of dry powder and kind of balance sheet availability in terms of doing more kind of acquisitions and expansion through M&A?

Well, there are really only four main things we could do: We could issue stock buybacks, we could increase the dividend, we could make acquisitions, or we could increase our spending to get more agents where it’s necessary to grow the business and open new regions. So that's really the only place to spend the money. We are in an enviable position of not having any debt. So nothing like we're around the corner. We're going to have to pay our debt; we don’t have any debt. And as we continue, if we make the type of money that we made this year and next year, we will have a lot more than $200 million. And then at some point, we will decide. At some point, we will do something for the stockholders. You could argue whether that means stock buybacks or raising the dividend. So we will have to deal with it when the time comes, but we're surely not going to do any of those things very quickly. We want to give ourselves at least a full year as a public company and see where we are at the end of the year.

Okay. That's very helpful. I'll hop back in the queue. Thank you very much.

Thank you, Mr. Massocca. Ladies and gentlemen, those are all the questions that we have for today. Thank you for joining us on the Douglas Elliman fourth quarter 2021 earnings conference call. This will conclude our call. We hope you have a good evening and you may now disconnect.