Douglas Elliman down in Q1 but betting on luxury turnaround
The brokerage reported a net loss of $15.1 million in the first quarter but says it has plenty of cash on-hand to carry it through the down cycle.
Douglas Elliman joins many other major real estate companies to announce a tough earnings report for the first three months of this year. During this week's earnings call with investors, which lasted only seven minutes, CEO Howard Lorber signaled that the company was prepared for a choppy quarter based on the last few months of last year, but has taken steps to finish the year strong.
In terms of overall financial health, the luxury-focused company posted $214 million in revenue for the quarter, but witnessed a net loss of $15.1 million. The net loss was significant compared to the net gain of $6.5 million the company had during the same period a year ago.
Key numbers
Revenue: $214 million, down from $308.9 million in Q1 2022, but a slight improvement over the previous quarter's $207 million.
Cash and cash equivalents: $123.7 million
Net income/loss: Net loss of $15.1 million versus a net gain $6.5 million in Q1 2022. Losses decreased about $3 million from the prior quarter.
EBITDA (earnings before interest, taxes, depreciation and amortization): $14.4 million loss, compared to income of $12.7 million during the same period last year.
Transactions: Gross transaction volume of $7.3 billion on 4,627 transactions, down significantly from $11.7 billion in Q1 2022. Transactions were nearly flat quarter-over-quarter.
Agent count: 6,900
What Douglas Elliman had to say
While Lorber didn't mince words during the call, he kept his comments brief and focused on the market conditions that the industry has been dealing with over the last several months, primarily high mortgage interest rates and a shortage of inventory.
Lorber said he expects to see the challenging climate continue, but believes the luxury markets that his firm focuses on "are usually the first markets to emerge from a down cycle" as high-end buyers are more likely to purchase a home in cash instead of being dependent on a mortgage.
And there's also been a recent uptick in listings, which Lorber said was encouraging to see.
"Following two quarters of significant declines in listings, the first quarter of 2023 saw a 40% increase in listings from the fourth quarter of 2022," he said to investors. "Given that the conversion of listings to revenue generally takes three to nine months, this is an encouraging sign for the second half of 2023."
Notable moves
While the near-term outlook for the U.S. housing market remains unknown, Lorber said that the company still has a lot of cash on-hand to carry the brokerage through this tough down cycle. However, despite the $123 million of cash reserves the company reported, Douglas Elliman did cut 35 jobs, reduced its marketing budget, and "cut costly sponsorships," Lorber said.
"We maintained ample liquidity and no debt," he said during the call. "This liquidity gives us the competitive advantage to continue to scale core brokerage business in a down cycle."
Another big move to keep an eye on is Douglas Elliman's relationships with new construction developers, who could provide a steady pipeline of business for the next several quarters. Lorber said that the company signed deals to market and list $3.6 billion worth of new development listings, which "will provide long term value as these transactions close over the next several years," he said.