10-Q 1 doug-20230930.htm 10-Q doug-20230930
000187889712/312023Q3FALSEGOODWILL AND OTHER INTANGIBLE ASSETS
The components of Goodwill and other intangible assets, net were as follows:
December 31,
2022
AmortizationSeptember 30,
2023
Goodwill
$32,230 $— $32,230 
Indefinite-life intangibles:
Trademark - Douglas Elliman68,000 — 68,000 
Intangibles with a finite life, net5,666 (527)5,139 
Total other intangible assets, net$73,666 $(527)$73,139 
December 31,
2021
AdjustmentsAmortizationSeptember 30,
2022
Goodwill
$32,571 $(341)$— $32,230 
Indefinite-life intangibles:
Trademark - Douglas Elliman68,000 — — 68,000 
Intangibles with a finite life, net6,421 — (577)5,844 
  Total other intangible assets, net$74,421 $(341)$(577)$73,844 
Goodwill is evaluated for impairment annually on October 1 or whenever the Company identifies certain triggering events or circumstances that would more likely than not reduce the fair value of the Company below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors (for example, interest rate and foreign exchange rate fluctuations, and loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.
All the goodwill and other intangibles are recorded at Douglas Elliman Realty. During the quarter ended September 30, 2023, the Company performed a quantitative analysis on goodwill and other intangibles to determine whether an impairment had occurred related to goodwill and other intangibles. The Company utilized third-party valuation specialists to prepare a quantitative assessment as of September 30, 2023 of goodwill and trademark intangible asset related to Douglas Elliman Realty.
For the goodwill testing, the Company utilized an income approach (a discounted cash flows method) to estimate the fair value of Douglas Elliman Realty. The estimated fair value of the trademark indefinite-life intangible asset related to the Douglas Elliman brand name was determined using an approach that values the Company’s cash savings from having a royalty-free license compared to the market rate it would pay for access to use the trade name.
The third-party quantitative assessments of the goodwill and trademark intangible asset reflected management’s assumptions regarding revenue growth rates, economic and market trends including current expectations, changes to the Company’s operations as well as other expectations about the anticipated short-term and long-term operating results of the Company.
The Company performed a quantitative test assessment as of September 30, 2023, which did not result in impairment charges related to its goodwill or trademark for the three or nine months ended September 30, 2023. If the Company fails to achieve the financial projections used in the quantitative assessments of fair value, additional impairment charges could result in future periods, and such impairment charges could be material.
The components of Goodwill and other intangible assets, net were as follows:
December 31,
2022
AmortizationSeptember 30,
2023
Goodwill
$32,230 $— $32,230 
Indefinite-life intangibles:
Trademark - Douglas Elliman68,000 — 68,000 
Intangibles with a finite life, net5,666 (527)5,139 
Total other intangible assets, net$73,666 $(527)$73,139 
December 31,
2021
AdjustmentsAmortizationSeptember 30,
2022
Goodwill
$32,571 $(341)$— $32,230 
Indefinite-life intangibles:
Trademark - Douglas Elliman68,000 — — 68,000 
Intangibles with a finite life, net6,421 — (577)5,844 
  Total other intangible assets, net$74,421 $(341)$(577)$73,844 
32,23032,23068,00068,0005,6665275,13973,66652773,13932,57134132,23068,00068,0006,4215775,84474,42134157773,844
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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 September 30, 2023

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)
Delaware1-4105487-2176850
(State or other jurisdiction of incorporationCommission 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:TradingName of each exchange
Symbol(s)on which registered:
Common stock, par value $0.01 per shareDOUGNew 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 filerxAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 November 3, 2023, Douglas Elliman Inc. had 88,707,320 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 September 30, 2023 and December 31, 2022
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022
Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2023 and 2022
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022
Notes to Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
SIGNATURE

1

DOUGLAS ELLIMAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
September 30,
2023
December 31,
2022
ASSETS:
Current assets:
Cash and cash equivalents$126,340 $163,859 
Receivables26,824 22,162 
Agent receivables, net13,978 12,826 
Income taxes receivable, net6,154 7,547 
Restricted cash and cash equivalents5,011 4,985 
Other current assets18,732 13,680 
Total current assets197,039 225,059 
Property, plant and equipment, net40,724 41,717 
Operating lease right-of-use assets112,067 117,773 
Long-term investments (includes $4,195 and $6,219 at fair value)
13,129 12,932 
Contract assets, net34,099 38,913 
Goodwill32,230 32,230 
Other intangible assets, net73,139 73,666 
Equity-method investments1,984 1,629 
Other assets6,695 6,483 
Total assets$511,106 $550,402 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current operating lease liability$22,153 $22,328 
Accounts payable4,753 5,456 
Commissions payable25,215 22,117 
Accrued salaries and benefits9,981 18,228 
Contract liabilities10,500 8,222 
Other current liabilities20,380 13,607 
Total current liabilities92,982 89,958 
Deferred income taxes, net5,756 14,467 
Non-current operating lease liabilities114,371 120,508 
Contract liabilities50,178 54,706 
Other liabilities77 306 
Total liabilities263,364 279,945 
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, 88,682,319 and 80,881,022 shares issued and outstanding
887 809 
Additional paid-in capital278,466 273,111 
Accumulated deficit(32,709)(5,000)
Total Douglas Elliman Inc. stockholders' equity246,644 268,920 
Non-controlling interest1,098 1,537 
Total stockholders' equity247,742 270,457 
Total liabilities and stockholders' equity$511,106 $550,402 

The accompanying notes are an integral part of the condensed consolidated financial statements.
2


DOUGLAS ELLIMAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Revenues:
Commissions and other brokerage income$239,255 $259,977 $703,780 $903,917 
Property management8,697 8,541 26,849 27,786 
Other ancillary services3,596 4,070 10,813 14,144 
       Total revenues251,548 272,588 741,442 945,847 
Expenses:
Real estate agent commissions185,845 195,836 546,749 686,440 
Sales and marketing20,770 22,703 64,170 64,145 
Operations and support17,121 18,218 53,338 55,872 
General and administrative28,817 33,522 92,371 99,227 
Technology5,602 5,527 17,777 16,809 
Depreciation and amortization1,999 1,968 6,031 6,033 
Restructuring215  1,932  
Operating (loss) income(8,821)(5,186)(40,926)17,321 
Other income (expenses):
Interest income, net1,785 493 4,260 564 
Equity in earnings (losses) from equity-method investments10 (895)(143)(477)
Investment and other income27 1,055 109 3,026 
(Loss) income before provision for income taxes(6,999)(4,533)(36,700)20,434 
Income tax (benefit) expense(1,869)(290)(8,552)8,173 
Net (loss) income(5,130)(4,243)(28,148)12,261 
Net loss attributed to non-controlling interest264 280 439 532 
Net (loss) income attributed to Douglas Elliman Inc.$(4,866)$(3,963)$(27,709)$12,793 
Per basic common share:
Net (loss) income applicable to common shares attributed to Douglas Elliman Inc.$(0.06)$(0.05)$(0.34)$0.15 
Per diluted common share:
Net (loss) income applicable to common shares attributed to Douglas Elliman Inc.$(0.06)$(0.05)$(0.34)$0.15 

The accompanying notes are an integral part of the condensed consolidated financial statements.
3


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-InNon-controlling
Common StockRetained
SharesAmountCapitalEarningsInterestTotal
Balance as of July 1, 202388,632,319 $886 $275,025 $(27,843)$1,362 $249,430 
Net loss— — — (4,866)(264)(5,130)
Restricted stock grants50,000 1 (1)— —  
Stock-based compensation— — 3,442 — — 3,442 
Balance as of September 30, 202388,682,319 $887 $278,466 $(32,709)$1,098 $247,742 


Douglas Elliman Inc. Stockholders' Equity
Additional Paid-InNon-controlling
Common StockRetained
SharesAmountCapitalEarningsInterestTotal
Balance as of July 1, 202281,275,626 $813 $283,810 $9,252 $2,062 $295,937 
Net income (loss)— — — (3,963)(280)(4,243)
Distributions and dividends on common stock ($0.05 per share)
— — — (4,062)— (4,062)
Withholding of shares as payment of tax liabilities in connection with restricted stock vesting(27,463)— (163)— — (163)
Stock-based compensation— — 3,165 — — 3,165 
Balance as of September 30, 202281,248,163 $813 $286,812 $1,227 $1,782 $290,634 

The accompanying notes are an integral part of the condensed consolidated financial statements.
4


Douglas Elliman Inc. Stockholders' Equity
Additional Paid-InNon-
controlling
Common StockAccumulated
SharesAmountCapitalDeficitInterestTotal
Balance as of January 1, 202380,881,022 $809 $273,111 $(5,000)$1,537 $270,457 
Net loss— — — (27,709)(439)(28,148)
Distributions and dividends on common stock ($0.05 per share)
(372)— (4,222)— — (4,222)
Restricted stock grants3,585,000 36 (36)— —  
Withholding of shares as payment of tax liabilities in connection with restricted stock vesting(3,935)— (11)— — (11)
Effect of stock dividend4,220,604 42 (42)— —  
Stock-based compensation— — 9,666 — — 9,666 
Balance as of September 30, 202388,682,319 $887 $278,466 $(32,709)$1,098 $247,742 


Douglas Elliman Inc. Stockholders' Equity
Additional Paid-InNon-
controlling
Common StockRetained
SharesAmountCapitalEarningsInterestTotal
Balance as of January 1, 202281,210,626 $812 $278,500 $622 $1,939 $281,873 
Net income (loss)— — — 12,793 (532)12,261 
Dividends on common stock ($0.15 per share)
— — — (12,188)— (12,188)
Restricted stock grants65,000 1 (1)— —  
Withholding of shares as payment of tax liabilities in connection with restricted stock vesting(27,463)— (163)— — (163)
Stock-based compensation— — 8,476 — — 8,476 
Contributions from non-controlling interest— — — — 375 375 
Balance as of September 30, 202281,248,163 $813 $286,812 $1,227 $1,782 $290,634 
The accompanying notes are an integral part of the condensed consolidated financial statements.
5


DOUGLAS ELLIMAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Unaudited
Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net (loss) income$(28,148)$12,261 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization6,031 6,033 
Non-cash stock-based compensation expense9,666 8,476 
Loss on sale of assets37 11 
Deferred income taxes(8,552)193 
Net gains on investment securities(109)(2,445)
Equity in losses from equity-method investments143 477 
Distributions from equity-method investments 653 
Non-cash lease expense16,587 15,227 
Provision for credit losses3,645 2,692 
Changes in assets and liabilities:
Receivables(9,459)(1,446)
Income taxes receivables, net1,393 (2,481)
Accounts payable and accrued liabilities9,168 (11,212)
Operating right-of-use assets and operating lease liabilities, net(17,193)(18,045)
Accrued salary and benefits(8,247)(7,954)
Other(2,735)2,768 
Net cash (used in) provided by operating activities(27,773)5,208 
Cash flows from investing activities:
Investments in equity-method investments (300)
Distributions from equity-method investments 75 
Purchase of debt securities(25)(701)
Proceeds from sale or liquidation of long-term investments408  
Purchase of equity securities(300)(1,575)
Purchase of long-term investments(190)(959)
Capital expenditures(5,380)(6,207)
Net cash used in investing activities(5,487)(9,667)
Cash flows from financing activities:
Repayment of debt (9,396)
Dividends on common stock(4,222)(12,120)
Contributions from non-controlling interest 375 
Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting(11) 
Earn out payments (1,600)
Net cash used in financing activities(4,233)(22,741)
Net decrease in cash, cash equivalents and restricted cash(37,493)(27,200)
Cash, cash equivalents and restricted cash, beginning of period171,382 228,866 
Cash, cash equivalents and restricted cash, end of period$133,889 $201,666 

The accompanying notes are an integral part of the condensed consolidated financial statements.
6

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. DER Holdings LLC owns Douglas Elliman Realty, LLC and Douglas Elliman of California, Inc., which are engaged in the residential real estate brokerage business with their subsidiaries. The operations of New Valley Ventures consist of minority investments in innovative and cutting-edge PropTech companies.
Certain references to “Douglas Elliman Realty” refer to the Company’s residential real estate brokerage business, including the operations of Douglas Elliman Realty, LLC and Douglas Elliman of California Inc., unless otherwise specified.
The unaudited, interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and, in management’s opinion, contain all adjustments, consisting only of normal recurring items, necessary for a fair statement of the results for the periods presented. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. References to U.S. GAAP issued by the Financial Accounting Standards Board (“FASB”) are to the FASB Accounting Standards Codification, also referred to as the “Codification” or “ASC.” These condensed consolidated financial statements should be read in conjunction with the combined consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”). The condensed consolidated results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the entire year.
In presenting the condensed consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates.
(b) Principles of Consolidation:
The condensed consolidated financial statements include the assets, liabilities, revenues, expenses and cash flows of DER Holdings LLC and New Valley Ventures as well as all other entities in which Douglas Elliman has a controlling financial interest. All intercompany balances and transactions have been eliminated in the condensed consolidated financial statements.
When evaluating an entity for consolidation, Douglas Elliman first determines whether an entity is within the scope of the guidance for consolidation of variable interest entities (“VIE”) and if it is deemed to be a VIE. If the entity is considered to be a VIE, Douglas Elliman determines whether it would be considered the entity’s primary beneficiary. Douglas Elliman consolidates those VIEs for which it has determined that it is the primary beneficiary. Douglas Elliman will consolidate an entity that is not deemed a VIE upon a determination that it has a controlling financial interest. For entities where Douglas Elliman does not have a controlling financial interest, the investments in such entities are classified as available-for-sale securities or accounted for using the equity or cost method, as appropriate.
7

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

(c) Estimates and Assumptions:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Significant estimates subject to material changes in the near term include impairment charges and valuation of intangible assets. Actual results could differ from those estimates.
(d) (Loss) Earnings Per Share (“EPS”):
The Company has restricted stock awards which will provide dividends at the same rate as paid on the common stock with respect to the shares underlying the restricted stock awards. These outstanding restricted stock awards represent participating securities under authoritative guidance. The participating securities holders do not participate in the Company’s net losses. The Company paid a cash dividend during each of the quarters beginning with the quarter ended March 31, 2022 through March 31, 2023. As a result, in its calculation of basic EPS and diluted EPS for the three and nine months ended September 30, 2022, the Company adjusted its net income for the effect of these participating securities. There were no outstanding non-participating securities during the three and nine months ended September 30, 2023.

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Net (loss) income attributed to Douglas Elliman Inc.$(4,866)$(3,963)$(27,709)$12,793 
Income attributable to participating securities (175)(307)(555)
Net (loss) income available to common stockholders attributed to Douglas Elliman Inc.$(4,866)$(4,138)$(28,016)$12,238 
Basic EPS is computed by dividing net (loss) income available to common stockholders attributed to Douglas Elliman Inc. by the weighted-average number of shares outstanding, which will include vested restricted stock.
Information concerning the Company’s common stock has been adjusted to give retroactive effect to the 5% stock dividend distributed to Company stockholders on June 30, 2023. All per share amounts and references to share amounts have been updated to reflect the retrospective effect of the stock dividend.
Basic and diluted EPS were calculated using the following shares of common stock for the periods presented below:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Weighted-average shares for basic EPS82,199,757 81,622,347 82,196,583 81,574,063 
Incremental shares related to non-vested restricted stock   37,882 
Weighted-average shares for diluted EPS82,199,757 81,622,347 82,196,583 81,611,945 
(e) Reconciliation of Cash, Cash Equivalents and Restricted Cash:
Restricted cash amounts included in current assets and other assets represent cash and cash equivalents required to be deposited into escrow for amounts required for letters of credit related to office leases, and certain deposit requirements for banking arrangements. The restrictions related to the letters of credit will remain in place for the duration of the respective lease. The restrictions related to the banking arrangements will remain in place for the duration of the arrangement. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables.
8

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:
September 30,
2023
December 31,
2022
Cash and cash equivalents$126,340 $163,859 
Restricted cash and cash equivalents included in current assets5,011 4,985 
Restricted cash and cash equivalents included in other assets2,538 2,538 
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$133,889 $171,382 
(f) Goodwill and Other Intangible Assets:
Goodwill is evaluated for impairment annually on October 1 or whenever the Company identifies certain triggering events or circumstances that would more likely than not reduce the fair value of the Company below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors (for example, interest rate and foreign exchange rate fluctuations, and loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.
In the three months ended September 30, 2023, the Company utilized third-party valuation specialists to prepare a quantitative assessment of its goodwill and trademark intangible assets, based on the current market conditions in the residential real estate brokerage industry. While the quantitative assessments did not result in impairment charges to goodwill or to the trademark intangible assets as of September 30, 2023, the Company could experience an impairment of goodwill and other intangible assets if current market conditions continue to deteriorate. Such situation could then result in an impairment loss.
(g) Related Party Transactions:
Agreements with Vector Group Ltd. (“Vector Group”) The Company paid Vector Group $1,050 and $3,150 under the Transition Services Agreement during the three and nine months ended September 30, 2023 and 2022, respectively, and $452 and $1,748 under the Aircraft Lease Agreements during the three and nine months ended September 30, 2023 and $352 and $1,529 for the three and nine months ended September 30, 2022, respectively.
Vector Group has agreed to indemnify the Company for certain tax matters under the Tax Disaffiliation Agreement. The Company received $581 as of September 30, 2022 and recorded $28 and $581 as a component of “Investment and other income” in its condensed combined consolidated statements of operations for three and nine months ended September 30, 2022 related to the tax indemnification and did not record any income for the three and nine months ended September 30, 2023 related to the tax indemnification.
Real estate commissions. Real estate commissions include commissions of approximately $104 and $946 for the three and nine months ended September 30, 2023 and $115 and $1,216 for the three and nine months ended September 30, 2022, respectively, from projects where the Company has been engaged by certain developers as the sole broker or the co-broker for real estate development projects that Vector Group owns an interest in through its real estate venture investments.
9

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

(h) Investment and Other Income:
Investment and other income consists of the following:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Net gains recognized on PropTech convertible trading debt securities$ $1,110 $187 $1,785 
Net gains (losses) recognized on long-term investments at fair value27 (83)(78)660 
Income related to Tax Disaffiliation indemnification 28  581 
Investment and other income$27 $1,055 $109 $3,026 
(i) Restructuring:
Employee severance and benefits expensed for the three and nine months ended September 30, 2023 relate entirely to the reduction in staff and are cash charges. All of the amounts expensed for the three and nine months ended September 30, 2023 are included in Restructuring expense in the Company’s condensed consolidated statements of operations. The following table presents the changes in the employee severance and benefits liability under the Real Estate Brokerage segment restructuring plan for the nine months ended September 30, 2023:
Employee Severance and Benefits
Severance liability balance at January 1, 2023$ 
Severance expense1,932 
Severance payments(1,037)
Severance liability at September 30, 2023
$895 
(j) Other Comprehensive Income:
The Company does not have any activity that results in Other Comprehensive Income; therefore, no statement of Comprehensive Income is included in the condensed consolidated financial statements.
(k) Subsequent Events:
The Company has evaluated subsequent events through November 9, 2023, the date the financial statements were issued. See Note 7. “Contingencies” for additional information.
(l) New Accounting Pronouncements:
Accounting Standards Updates (“ASUs”) adopted in 2023:
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
10

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The standard also requires certain disclosures for equity securities that are subject to contractual restrictions. The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
SEC Proposed Rule Changes
On March 21, 2022, the SEC proposed rule changes that would require registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rules would require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant's greenhouse gas emissions, which have become a commonly used metric to assess a registrant's exposure to such risks. In addition, under the proposed rules, certain climate-related financial metrics would be required in a registrant's audited financial statements. The Company is currently evaluating the impact of the proposed rule changes.

11

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

2.    REVENUE RECOGNITION
Disaggregation of Revenue
In the following tables, revenue is disaggregated by major services line and primary geographical market:
Three Months Ended September 30, 2023
New York CityNortheastSoutheastWestTotal
Revenues:
Commission and other brokerage income - existing home sales$70,997 $52,138 $57,261 $45,010 $225,406 
Commission and other brokerage income - development marketing7,453 50 5,616 730 13,849 
Property management revenue8,509 188   8,697 
Escrow and title fees258 158  3,180 3,596 
Total revenue$87,217 $52,534 $62,877 $48,920 $251,548 
Three Months Ended September 30, 2022
New York CityNortheastSoutheastWestTotal
Revenues:
Commission and other brokerage income - existing home sales$95,854 $50,811 $50,426 $43,624 $240,715 
Commission and other brokerage income - development marketing17,060  1,820 382 19,262 
Property management revenue8,394 147   8,541 
Escrow and title fees792 322  2,956 4,070 
Total revenue$122,100 $51,280 $52,246 $46,962 $272,588 
Nine Months Ended September 30, 2023
New York CityNortheastSoutheastWestTotal
Revenues:
Commission and other brokerage income - existing home sales$211,243 $134,191 $178,604 $133,004 $657,042 
Commission and other brokerage income - development marketing22,116 911 21,893 1,818 46,738 
Property management revenue26,284 565   26,849 
Escrow and title fees1,183 595  9,035 10,813 
Total revenue$260,826 $136,262 $200,497 $143,857 $741,442 
Nine Months Ended September 30, 2022
New York CityNortheastSoutheastWestTotal
Revenues:
Commission and other brokerage income - existing home sales$295,898 $163,602 $223,135 $158,088 $840,723 
Commission and other brokerage income - development marketing46,237  14,004 2,953 63,194 
Property management revenue27,328 458   27,786 
Escrow and title fees2,699 1,029  10,416 14,144 
Total revenue$372,162 $165,089 $237,139 $171,457 $945,847 

12

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Contract Balances
The following table provides information about contract assets and contract liabilities from development marketing and commercial leasing contracts with customers:
September 30,
2023
December 31, 2022
Receivables, which are included in receivables$1,979 $3,063 
Contract assets, net, which are included in other current assets5,584 4,453 
Contract assets, net, which are in other assets34,099 38,913 
Payables, which are included in other current liabilities1,448 2,291 
Contract liabilities, which are in current liabilities10,500 8,222 
Contract liabilities, which are in other liabilities50,178 54,706 
The Company recognized revenue of $7,688 and $14,085 for the three and nine months ended September 30, 2023, respectively, that were included in the contract liabilities balances at December 31, 2022. The Company recognized revenue of $623 and $5,978 for the three and nine months ended September 30, 2022, respectively, that were included in the contract liabilities balances at December 31, 2021.

3.    CURRENT EXPECTED CREDIT LOSSES
Real estate broker agent receivables: Douglas Elliman Realty is exposed to credit losses for various amounts due from real estate agents, which are included in Other current assets on the condensed consolidated balance sheets, net of an allowance for credit losses. The Company estimates its allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, historical experience of collections from the individual agents, and current and expected future market trends. The Company estimated that the credit losses for these receivables were $12,666 and $10,916 at September 30, 2023 and December 31, 2022, respectively.
The following table summarizes changes in the allowance for credit losses for the nine months ended September 30, 2023:
January 1,
2023
Current Period ProvisionWrite-offsRecoveriesSeptember 30,
2023
Allowance for credit losses:
Real estate broker agent receivables$10,916 $3,645 (1)$1,895 $ $12,666 
_____________________________
(1) The current period provision for the real estate broker agent receivables is included in “General and administrative expenses” in the Company’s condensed consolidated statements of operations.
The following table summarizes changes in the allowance for credit losses for the nine months ended September 30, 2022:
January 1,
2022
Current Period ProvisionWrite-offsRecoveriesSeptember 30,
2022
Allowance for credit losses:
Real estate broker agent receivables$8,607 $2,692 (1)$736 $ $10,563 
_____________________________
(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.
13

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 were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Operating lease cost$8,539 $8,365 $25,184 $24,834 
Short-term lease cost296 269 948 807 
Variable lease cost1,161 1,106 3,291 3,034 
Less: Sublease income(189)(147)(498)(420)
Total lease cost$9,807 $9,593 $28,925 $28,255 
Supplemental cash flow information related to leases was as follows:
Nine Months Ended
September 30,
20232022
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases$25,861 $27,766 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases10,881 12,065 
Supplemental balance sheet information related to leases was as follows:
September 30,December 31,
20232022
Weighted average remaining lease term:
Operating leases6.537.03
Weighted average discount rate:
Operating leases8.62 %8.73 %
As of September 30, 2023, maturities of lease liabilities were as follows:
Operating Leases
Period Ending December 31: 
Remainder of 2023$8,874 
202432,456 
202527,914 
202625,482 
202722,461 
202819,403 
Thereafter46,053 
Total lease payments182,643 
 Less imputed interest(46,119)
Total$136,524 
14

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

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

5.    LONG-TERM INVESTMENTS
Long-term investments consisted of the following:
September 30,
2023
December 31, 2022
PropTech convertible trading debt securities$1,321 $2,957 
Long-term investment securities at fair value (1)
2,874 3,262 
PropTech investments at cost9,164 8,588 
PropTech investments at equity method588  
Total investments13,947 14,807 
Less PropTech current convertible trading debt securities (2)
230 1,875 
Less PropTech investments accounted for under the equity method588  
Total long-term investments$13,129 $12,932 
_____________________________
(1) These assets are measured at net asset value (“NAV”) as a practical expedient under ASC 820.
(2) These amounts are included in Other current assets on the condensed consolidated balance sheets.
Net realized and unrealized gains recognized on long-term investment securities were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Net realized gains recognized on PropTech convertible trading debt securities$ $1,110 $187 $1,785 
Net unrealized gains (losses) recognized on long-term investments at fair value27 (83)(78)660 
Net realized and unrealized gains recognized on long-term investment securities$27 $1,027 $109 $2,445 
(a) PropTech Convertible Trading Debt Securities:
These securities are classified as trading debt securities and are accounted for at fair value. The maturities of all convertible notes range from December 2023 to February 2025.
(b) Long-Term Investment Securities at Fair Value:
The following is a summary of unrealized gains (losses) recognized in net income on long-term investment securities at fair value during the three and nine months ended September 30, 2023 and 2022, respectively:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Net unrealized gains (losses) recognized on long-term investment securities$27 $(83)$(78)$660 
The Company has unfunded commitments of $895 related to long-term investment securities at fair value as of September 30, 2023.
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DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

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

6. EQUITY METHOD INVESTMENTS
Equity method investments consisted of the following:
September 30, 2023December 31, 2022
Ancillary services ventures$1,984 $1,629 
At September 30, 2023, the Company’s ownership percentages in these investments ranged from 10.9% to 50.0%; therefore, the Company accounts for these investments under the equity method of accounting.

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

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 $1,984 as of September 30, 2023.

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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. Some claims are not covered by the Company’s insurance policies. The Company believes that the resolution of ordinary course matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
On October 31, 2023, individual plaintiffs filed an action on behalf of a putative national class of home sellers from October 2019 through the present in the Western District of Missouri against the National Association of Realtors (“NAR”) and certain real estate brokerage firms, including the Company, alleging anticompetitive behavior in violation of federal antitrust laws arising from the NAR’s requirement that sellers’ agents for Multiple Listing Service (“MLS”) listed properties offer to pay a portion of commissions received on the sale of such properties to buyers’ agents (the Gibson case). Also, on November 2, 2023, additional individual plaintiffs filed an action on behalf of a putative national class of home buyers from December 1996 through the present in the Northern District of Illinois against certain real estate brokerage firms, including the Company, alleging anticompetitive behavior, similar to the Gibson case, in violation of federal antitrust laws, state antitrust and consumer protection laws, as well as asserting an unjust enrichment claim (the Batton case).
On November 8, 2023, additional individual plaintiffs filed an action on behalf of a putative class of home sellers in Manhattan from November 2019 through the present in the Southern District of New York against certain real estate brokerage firms, including the Company, alleging anticompetitive behavior, similar to the Gibson case, in violation of federal antitrust and state antitrust laws, as well as asserting an unjust enrichment claim (the March case). The Company may become involved in additional litigation or other legal proceedings concerning the same or similar claims.
Litigation is subject to uncertainty and it is possible that there could be adverse developments in pending cases. With the commencement of any new case, the defense costs and the risks relating to the unpredictability of litigation increase. Management reviews on a quarterly basis with counsel all pending litigation and evaluates the probability of a loss being incurred and whether an estimate can be made of the possible loss or range of loss that could result from an unfavorable outcome. An unfavorable outcome or settlement of pending litigation could encourage the commencement of additional litigation. The Company is unable to reasonably estimate the financial impact of these litigations. The Company’s consolidated financial position, results of operations or cash flows could be materially adversely affected from an unfavorable outcome in, or settlement of, any of these matters.
Accounting Policy. The Company and its subsidiaries record provisions in their consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur: (i) management has concluded that it is not probable that a loss has been incurred in any of pending cases; or (ii) management is unable to reasonably estimate the possible loss or range of loss that could result from an unfavorable outcome of any pending cases and, therefore, management has not provided any amounts in the condensed consolidated financial statements for unfavorable outcomes, if any.

8.    INCOME TAXES
The Company’s income tax (benefit) expense consisted of the following:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
(Loss) income before provision for income taxes$(6,999)$(4,533)$(36,700)$20,434 
Income tax (benefit) expense using estimated annual effective income tax rate(1,631)(1,814)(8,552)8,173 
Changes in effective tax rates(238)1,524   
Income tax (benefit) expense$(1,869)$(290)$(8,552)$8,173 

17

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

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 September 30, 2023
DescriptionTotalQuoted 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)
$66,079 $66,079 $ $ 
U.S. treasury bills (2)
50,525 50,525   
Certificates of deposit (3)
507  507  
PropTech convertible trading debt securities230   230 
Long-term investments
PropTech convertible trading debt securities1,091   1,091 
Long-term investment securities at fair value (4)
2,874    
Total long-term investments3,965   1,091 
    Total assets$121,306 $116,604 $507 $1,321 
_____________________________
(1)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets, except for $5,011 that is included in current restricted cash and cash equivalents and $2,538 that is included in non-current restricted assets.
(2)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets.
(3)Amounts included in current restricted assets on the condensed consolidated balance sheets.
(4)In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.
Fair Value Measurements as of December 31, 2022
DescriptionTotalQuoted 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)
$153,941 $153,941 $ $ 
Certificates of deposit (2)
569  569  
PropTech convertible trading debt securities1,875   1,875 
Long-term investments
PropTech convertible trading debt securities1,082   1,082 
Long-term investment securities at fair value (3)
3,262    
Total long-term investments4,344   1,082 
Total assets$160,729 $153,941 $569 $2,957 
_____________________________
(1)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets, except for $4,985 that is included in current restricted assets and $2,538 that is included in non-current restricted assets.
(2)Amounts included in current restricted assets and non-current restricted assets on the condensed consolidated balance sheets.
(3)In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.
18

DOUGLAS ELLIMAN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

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 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 at September 30, 2023:
Quantitative Information about Level 3 Fair Value Measurements
Fair Value at
September 30,
2023
Valuation
Technique
Unobservable
Input
Range
(Actual)
PropTech convertible trading debt securities$1,321 Discounted cash flowInterest rate
4% and 5%
Maturity
Dec 2023 - Feb 2025
Volatility
56.9% - 76.2%
Discount rate
33.62% - 52.51%
The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at December 31, 2022:
Quantitative Information about Level 3 Fair Value Measurements
Fair Value at
December 31,
2022
Valuation TechniqueUnobservable
Input
Range
(Actual)
PropTech convertible trading debt securities$2,957 Discounted cash flowInterest rate
4% and 8%
Maturity
Mar 2023 - Feb 2025
Volatility
60.7% - 103.3%
Discount rate
29.39% - 186.15%
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 as a result of impairment charges. The Company had no nonrecurring nonfinancial assets subject to fair value measurements as of September 30, 2023 and December 31, 2022, respectively.



19

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.