Welcome to Douglas Elliman, Inc.’s Third Quarter 2022 Earnings Conference Call. This call is being recorded and simultaneously webcast. An archived version of the webcast will be available on the Investor Relations section of the company’s website located at investors.elliman.com for one year. 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 net 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. Before the call begins, I would like to read a safe harbor statement. The statements made during the 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 morning, and thank you for joining us. With me today 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 discuss trends in residential real estate, Douglas Elliman’s financial results for the three and nine months ended September 30, 2022, and performance in our luxury markets. We will then provide closing comments and open the call for questions. I would like to begin by discussing the current operating environment for residential real estate and why we believe Douglas Elliman is well positioned despite the challenging market. As we discussed in the second quarter earnings call, beginning in June, we saw a decline in commissions from existing home sales, and this trend continues to date. We believe this decline has been caused by a limited supply of new inventory significant increases in mortgage interest rates and volatility in the financial markets. As our industry enters a down cycle, Douglas Elliman is positioned to take advantage of significant opportunities due to our key strengths, which provide competitive advantages and include our global network, our best-in-class agents and the outstanding relationship we have with them. We have added 336 net agents in 2022. In addition to successfully recruiting agents, we are very proud of our 88% agent retention rate. Each year, we provide opportunities to bring Elliman agents together so they may establish referral relationships that help to retain important transactional business within Douglas Elliman. One reason agents joined and remain on the Elliman team is our world-class development marketing business, which has a hybrid platform that distinguishes us from our competitors. The platform combines our leading agents with an experienced team of 80 employees in development and…

[Operator Instructions] Your first question comes from the line of Daniel Fannon from Jefferies. Your line is open.

Thank you. Good morning. I wanted to just follow up and understand specifically maybe what you are doing differently in this type of backdrop. Clearly, as you said, the macro – some rates to kind of inventory are all kind of working against kind of what might be a more normalized activity and revenue environment. So as a management team and as in terms of how you’re thinking about managing the business, you said – can you kind of give some general terms, but I was hoping you get a little more specific in terms of what you guys are actually doing differently today and thinking about even into next year versus, say, six months ago?

We have been going in a process to evaluate costs related to leases, such as expenses related to travel, non-agent facing, administrative support and special events. The support and services we provide to our agents distinguishes us from our competitors. We do not intend to reduce anything that’s agent-facing. That, we want to leave a loan because that’s one of the reasons we are bringing in new agents, and agents are staying with us.

Okay. And so you mentioned a couple of new markets and expanding. Is that – I guess, you mentioned Las Vegas, Nantucket, New Canaan, are those new here in kind of third quarter? And as you think about prospectively, we should still kind of continue to think about more markets and kind of the historical level of growth maybe that you’ve been putting forth in recent periods.

Yes. Yes, we’re looking at those new markets. And basically, we’re opening in markets is slightly a different way than those that just go out and buy other companies. We generally try to find a few good brokers in those markets and bring them in with us and rent, in many cases, temporary space or small space to get started. We do not spend a lot of money in opening or buying offices. We really never have. We bought a company once in California. That was probably it. And then we made some very small purchases, money in the hundreds of thousands just to get some people to come over to us. So we’re really not big spenders as it relates to opening new businesses and new markets. We’re not going to just go there, hire space or buy another company and hope that it works. So we’re very careful in opening new offices. So we’re going to continue, if we find the right situation and the right people.

Understood. And as you think about the inventory challenges for the industry within the markets where you have strong market share, is there any differences? Are some a little bit better, Florida versus New York? Or just trying to get a sense of – I know it’s kind of what those are broad trends of higher rates and everything that’s happening across the U.S. But are you just hoping to have a little more delineation between the markets?

Yes. I mean, when you look at New York, New York is actually performing pretty well compared to some of the other markets. But then again, if you look back to last year, everyone likes to compare to 2021. And 2021 was something that I don’t think anyone really understands how it would happen and what happened so quickly. And to make comparisons compared to 2021 is really to me, doesn’t seem to make much sense because the real fact is, who said that 2021 is the base year? Yet 2014, 2015, 2016, 2017, 2018 and 2019 to look at also. And we are still, I believe, better than we were. 2019 was the last year before the pandemic. So I think we’re in pretty good shape. And I think that the luxury markets generally hold up pretty good as we’re talking about it now, it’s just a matter of the inventory. We still see lots of buyers at that level, but there’s very little inventory because the price has moved up a lot. People are just holding on from last year. So – but that’s going to soften at some point.

Okay. And then just lastly, if you could provide an update on kind of the new development, marketing and how that would kind of – prospects that shows today or if that’s also – I would assume also showing some signs of slowdown, but any update around that would be helpful.

Yes. I mean, there is not a lot of new development in New York because nothing started during the pandemic. So we do have projects that were left over from before and a few new projects coming up. But the most robust new development market for us is Florida, where we have a very big schedule of new projects coming on the market over the next 18 months in the billions.

Thank you. And just to clarify the next 18 months, is that more back half of next year that we should start seeing it come on or...

No, they’re starting now. They’re starting now. We’ve opened a couple – in the last few months, projects. Usually in Florida, you’re not going to open them during the summer. So starting a couple of months ago, we’ve opened a couple. And we’re going to be opening more probably every month. We’re going to have things opening in Florida.

Great. Thank you for taking all my questions.

Ladies and gentlemen, those are all the questions that we have for today. Thank you for joining us on Douglas Elliman’s Third Quarter 2022 Earnings Conference Call. This will conclude our call. We hope you have a good day, and you may now disconnect.