Welcome to Douglas Elements Inc.'s Fourth Quarter 2022 Earnings Conference Call. The 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 An archived version of the webcast will be available on the Investor Relations section of the company's website located at investors.element.com for one year. During the call, the terms adjusted EBITDA and adjusted net income 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 EBITDA and adjusted net income are contained in the company's earnings release, which have been posted to the Investor Relations section of the company's website. Before the call begins, I would like to read the 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 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'd like to turn the call over to Chairman, President and Chief Executive Officer of Douglas Elliman, Howard 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 months and year ended December 31, 2022, and performance in our luxury markets. All numbers presented this morning will be as of December 31, 2022, unless otherwise stated. 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. After reaching a generational peak in 2021, the residential real estate industry faced significant headwinds in 2022, with transaction volume and the value of existing home sales each declining by more than 30% according to the National Association of Realtors. Despite these trends, we are proud to report that Douglas Elliman outperformed the industry in 2022, with transaction volume and gross transaction volume declining by approximately 18% and 16%, respectively. These declines were driven by significant increases in mortgage interest rates, volatility in the financial markets and listing inventory shortages in luxury markets in which we are active. However, because of the limited inventory available in luxury markets, prices remain stable. Sudden increases in borrowing costs, constrained supply from entering the housing market as homeowners remain reluctant to part with their lower mortgage rates obtained over the past several years. Looking ahead, we continue to believe tight supply will gradually ease as time passes and consumers adjust to higher interest rates and the sellers adjust price expectations accordingly. Importantly, in residential real estate, luxury markets are usually the…

[Operator Instructions] Our first question comes from the line of Daniel Fannon from Jefferies LLC. Please proceed.

Wanted to follow up on the comments of just around the current environment. I think you said in your prepared remarks that 1Q would be similar to 4Q. So hoping you could maybe expand upon maybe regions or areas where there is some change or things that might be looking a little better or worse, more inventory, more activity? I guess if there's any delineation across the geographies, that would be helpful.

Sure. I think that when you look to New York, especially in Manhattan, has probably performed the best, but that's because it has years of subpar performance even before the pandemic. So the comparison to 2021 realistically is not a really good comparison. Probably better comparisons are towards the years right before the camping, as I said, 2016, '17, '18, '19. So when you do a comparison there, Manhattan, New York City is looking pretty strong. The other markets which are markets such as Aspen, Aspen went up tremendously in 2021, has come down to a small degree. The real issue that I said is the fact that there is very little inventory. The only place we as inventory or new inventory is new development. That's why we're very strong and have signed up many new development projects. And the new development projects we are in the market with now are doing well. Again, I think there's a number of reasons for that. First of all, when you start selling a new development project, it's generally around 3 years until the project is finished and the closings are happening. And that gives people also about that period of time to hope that interest rates, mortgage rates will be lower during that 3-year period of time. So that's why the -- that’s why market is producing the most new inventory. As we said, people are worried about selling what they have today because they may not be able to find something else to buy. And then, at the same time, even if they do, they're going to be giving up a low mortgage rate and going into a much higher mortgage rate environment.

I wanted to follow up just on the balance sheet. You mentioned the dividend, but obviously, you have a lot of cash. Thinking, given where the stock is, if there's any thoughts on a buyback potentially? And then also just looking at the change in cash, if I heard you correct, I think you said $164 million. So that's around $29 million change quarter-over-quarter, didn't lose that much. I don't know, is there a lot of CapEx in the quarter. Just curious as the uses of cash and how we should think about that going forward?

B.K., do you want to go through that?

Well, in addition to the the EBITDA loss, we also pay a dividend every quarter, which is about $4 million. So I think if you do that, along with working capital, that reconciles the cash change.

It was our internal buyback.

Yes. there was a debt repayment of $3 million in October.

Okay. And the buyback, or other uses of cash perspective.

As far as the perspective of internal buyback and -- because we were spun off from Vector Group at the end of 2021, our ability to buy back stock is somewhat limited until we get 2 years past that spinoff. And after that, the company, we'll always be opportunistic. You've seen the insiders have bought the stock over the last year. And we always view this as a very good value because you're buying one of the best names in real estate and Douglas Elliman.

And then the -- all the initiatives that you announced proactively around expenses, the frozen hiring, reduced sponsor, consolidated office space. And I know it's going to come through later in the year, but is there a way to put a dollar amount around some of those initiatives?

Well, look, I mean, yes, we have eliminated certain expenses on the marketing and on the event side. I don't think we could give you really an exact amount at this particular moment. What we do know is we do know when leases expire, okay? And that's why we believe, for instance, that this year and next year will be the first couple of years that really show reductions in expenses with consolidation of some of our offices. And they're somewhat large leases that we've been stuck with for many years and that we really don't need that space anymore. And so when those consolidations start happening, which they will over this year and next year, I think that will really be a big help to getting our numbers more in line with where we want to be.

And then just lastly, the -- I think another number you threw out was an 87% retention rate. Was that for the fourth quarter? Or is that for the full year?

Full year.

And did that change much in 4Q?

No, that was stable. I believe it was 88% in the -- at September 30 -- for the 12 months trailing September 30, 2022, Dan.

Ladies and gentlemen, those are all the questions that we have today. Thank you for joining us on Douglas Element's fourth quarter 2022 earnings conference call. This will conclude our call. We hope you have a good day, and you may now disconnect.