Douglas Elliman (DOUG) - 2021 Q4 - Annual Report

PART I Item 1. Business Douglas Elliman Inc. operates in luxury residential brokerage and PropTech investment, achieving significant revenue and EBITDA growth in 2021 after its spin-off - Douglas Elliman Inc. became an independent, publicly-traded company (NYSE: DOUG) on December 30, 2021, following its spin-off from Vector Group Ltd[12] Key Financial and Operational Metrics (2020 vs. 2021) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $1.35 billion | $774.0 million | +75% | | Net Income (Loss) | $98.8 million | ($46.4 million) | N/A | | Adjusted EBITDA | $110.7 million | $22.1 million | +401% | | Gross Transaction Value | $51.2 billion | $29.1 billion | +76% | | Average Transaction Value | $1.58 million | N/A | N/A | - The company's strategy involves expanding its footprint in key luxury markets, growing its new development marketing (DEDM) division, providing ancillary services, and investing in PropTech opportunities through its New Valley Ventures arm[55][56][57] - As of December 31, 2021, the company had approximately 6,500 real estate agents and 930 employees. New Valley Ventures held PropTech investments with a carrying value of approximately $8.1 million[52][39][67] Item 1A. Risk Factors The company faces significant risks from real estate market cyclicality, spin-off dependencies, operational challenges, and evolving regulatory and competitive landscapes - Real Estate Risks: The business is highly sensitive to economic conditions, interest rates, consumer confidence, and the attractiveness of its key markets, particularly the New York metropolitan area, which generated 34% of revenues in 2021[73][75][116] - Spin-off Risks: The company is dependent on Vector Group for transition services, faces potential tax liabilities if the spin-off is deemed taxable, and has a limited operating history as a stand-alone public company. Overlapping key executives with Vector Group could create conflicts of interest[162][171][187] - Operational & Financial Risks: The company recorded significant impairment charges in Q1 2020 due to the COVID-19 pandemic, including $46.3 million for goodwill and $12.0 million for its trademark intangible asset[146] - Regulatory & Competitive Risks: Increased regulatory scrutiny of the real estate industry, particularly regarding agent commissions, and competition from alternative models like iBuyers, pose potential threats to the traditional agent-based business model[114][85] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[190] Item 2. Properties The company leases 116 offices across its operating markets, with principal executive offices in Miami and largest footprints in New York City and Long Island Leased Office Properties as of December 31, 2021 | Location | Number of Offices | Approx. Total Square Footage | | :--- | :--- | :--- | | New York City, NY | 26 | 255,000 | | Long Island, NY | 37 | 121,000 | | Florida | 21 | 52,000 | | Westchester County, NY | 4 | 7,000 | | California | 14 | 81,000 | | Other | 14 | 34,400 | Item 3. Legal Proceedings Information on legal proceedings is incorporated by reference from Note 13 to the combined consolidated financial statements - Details on legal proceedings are available in Note 13 of the financial statements[193] Item 4. Mine Safety Disclosures This item is not applicable to the company's business operations - Not applicable[194] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock began trading on the NYSE in December 2021, with no equity repurchases in Q4 2021 - Common stock is listed on the NYSE under the symbol "DOUG" since December 30, 2021[197] - No company repurchases of its equity securities occurred in the fourth quarter of 2021[199] Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant 2021 revenue growth to $1.35 billion and positive operating income, driven by real estate market recovery and improved liquidity Results of Operations (2021 vs. 2020) (In thousands) | (In thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Total revenues | $1,353,138 | $773,987 | | Real estate agent commissions | $985,523 | $546,948 | | Impairments of goodwill/intangibles | $0 | $58,252 | | Operating income (loss) | $102,098 | ($49,285) | | Net income (loss) | $98,838 | ($46,372) | Key Business Metrics (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total transactions | 32,400 | 22,686 | | Gross transaction value | $51.2 billion | $29.1 billion | | Number of Principal Agents | 5,189 | 4,996 | Adjusted EBITDA Reconciliation (in thousands) | Line Item | 2021 | 2020 | | :--- | :--- | :--- | | Net income(loss) | $98,838 | ($46,372) | | Impairments of goodwill/intangibles | $0 | $58,252 | | Restructuring | $0 | $3,382 | | Adjusted EBITDA | $110,659 | $22,055 | - The percentage of brokerage revenues from the New York City market recovered to 34.1% in 2021, up from 28.7% in 2020, but still below the pre-pandemic level of approximately 46% in 2019[217][251] - Cash and cash equivalents increased by $122.2 million in 2021, primarily driven by $127.8 million in cash provided from operations. The company declared a quarterly cash dividend of $0.05 per share in March 2022[265][268] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section incorporates market risk disclosures by reference from Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - The company is principally exposed to market risks from fluctuations in interest rates[270] Item 8. Financial Statements and Supplementary Data The company's combined consolidated financial statements, notes, and auditor's report are presented starting on page F-1 - The audited financial statements and supplementary data begin on page F-1 of the report[277] Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting principles or financial disclosure - None reported[279] Item 9A. Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2021, utilizing the transition period for internal control reporting - Disclosure controls and procedures were deemed effective as of December 31, 2021[280] - The report does not include management's assessment of internal control over financial reporting, utilizing the transition period for newly public companies[281] Item 9B. Other Information The company reports no other information for this item - None[282] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement[285] Item 11. Executive Compensation Information on executive compensation is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement[286] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement[287] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement[288] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement[289] PART IV Item 15. Exhibits and Financial Statement Schedules This section provides an index to the combined consolidated financial statements, schedules, and all exhibits filed with the Form 10-K - This section lists all exhibits filed with the report, including the Distribution Agreement, corporate bylaws, employment agreements, and various certifications[295][297] Item 16. Form 10-K Summary This item is not applicable - Not applicable[298]