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 Elman 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 meetings. 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 named 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 into CoreLogic, US homeowner equity has grown 31.1% year over year as of quarter three 2021. As we expect this trend will 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…

[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 spin out. 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 and between 2019 and 2021 and looking at what we call the non-activity based costs, which are all cost, except for bonus discretionary compensation or bonuses or advertising expense, we're roughly down about $21 million since 2019. And 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 into 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 -- or 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, seems to be going up pretty substantial. We do have other in mind and as we strategize is that we really are making a push just on the low cost states. low cost states as it relates to state taxes or no cost states like Florida, no taxes. So we are looking at Arizona, looking at Nevada. We're 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, like Florida's a big state. And I think we can really build a much bigger in Florida, Texan also

Understood. And if I could sneak one last one in here, just taking a look at cash levels especially, relative to the current market cap, do you do all 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 we believe based on the way the market is that we should, then we would consider it. It's nice to have over $200 million in cash and so 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 kind of current markets, their current kind of market spread versus what we were seeing would say pre pandemic?

Well, let me say this, pre-pandemic is really not the whole story. New York City suffered starting in around '16. It trended down '16, '17, '18, '19. Part of it was because taxes, there was a mansion tax and a change in transfer taxes and mortgage recording taxes and then they floated what they called the Peter [ph] tax that didn't happen. Thank God. 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, but it help the marketplace, different type of living that people were looking for. But I think that people have a renewed good feeling about the city and probably a big part of that is the change in government. And that is yet to be seen yet how far that's going to go. But I think surely a fresh face that is saying the right things was much better than 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 the way 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 kind of create further diversity. But if you look at the portfolio or the kind of markets you're in, as it is today, what would you kind of expect a more normalized mix of New York City transactions in terms of like a rough percentage?

You mean how much of the total business would be coming from New York?

Correct.

Well, the $16 billion. Yeah. We did $16 billion out of $50 billion. So that was 30% some out of $50 billion. So yeah, look, the other markets have been completely matured. We've been in New York, the company was started in New York in 1911. So it's been in New York City for a very long time. So it's hard to say, but, we, because New York could stay stable, but the percentage could go down because we expect big growth in Texas, big growth in California and big growth in the Boston area. So I don't know how you could sort of figure the percentages or quite honestly how important it is. I believe that we're going to do more business. I can't tell you exactly what percentage is going to come from go to or come from what state. But I think that right now, things are strong and people are worried. A lot of, who isn't worried about what's going on or reason worried, but how they react buyers. So everyone was worried about interest rates going up and that's going to spook the buyers. But the fact is what we've seen in history that as interest rates start going up, buyers come to the market right away because they don't want to lose their opportunity. They're afraid they'll be priced out of the market. And then when you add inflation on top of that, that's an added reason for them to make a decision of buy now. So 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's only, there's only a time -- there's only four -- there's only four things we could do pretty much right. We could someone asked about stock buyback. We could do that. We could increase the dividend, we could make acquisitions. We could increase our spending to get more agents where it's necessary grow the business and open new regions. So that's really the only place to spend the money. There really isn't. Like I said, we're in an enviable position of not having any debt. So it's 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'll have a lot more than $200 million. It's pretty simple and then we'll decide. At some point -- at some point we'll do something for the stockholders and again, you could argue whether that besides our regular business acquisitions or expansion, but there's always a trade-off, like half the people think stock buybacks better. Half the people think raising dividend is better. So we'll 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. Okay.

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.