Douglas Elliman Inc.

11/09/2026 | Press release | Distributed by Public on 11/09/2026 16:05

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts or Stated Otherwise)
The following discussion should be read in conjunction with our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and Audited Consolidated Financial Statements as of and for the year ended December 31, 2025 and Notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report"), and our Condensed Consolidated Financial Statements and related Notes as of and for the three and nine months ended September 30, 2026. Any forward-looking statements are not historical facts, but rather they are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Any forward-looking statements are subject to several important factors, including those factors discussed under "Risk Factors" in our 2025 Annual Report and this Quarterly Report and "Special Note Regarding Forward-Looking Statements," that could cause our actual results to differ materially from those indicated in such forward-looking statements. References to "Douglas Elliman" or "Company" refer to Douglas Elliman Inc. Certain references to "Douglas Elliman Realty" refer to the Company's residential real estate brokerage business, including the operations of Douglas Elliman Realty, LLC and Douglas Elliman of California Inc., unless otherwise specified.
Overview
Douglas Elliman Inc. is a holding company that, through its subsidiaries, is engaged in the real estate services business, and invests in additional real estate services businesses.
We conduct residential real estate brokerage services through our subsidiary, Douglas Elliman Realty, which operates one of the largest residential brokerage companies in the New York metropolitan area and also conducts residential real estate brokerage operations in Florida, California, Texas, Colorado, Nevada, Massachusetts, Connecticut, Maryland, Virginia, New Jersey, New Hampshire and Washington D.C. We also offer, including through our subsidiaries and ventures, development marketing services ("Development Marketing") and ancillary services, such as mortgage, title and escrow services. In addition, we have also invested in PropTech opportunities through our DOUG Ventures subsidiary.
Key Business Metrics and Non-GAAP Financial Measures
In addition to our financial results, prepared in accordance with U.S. GAAP, we use the following business metrics to evaluate our business and identify trends affecting our business. To evaluate our operating performance, we also use Adjusted EBITDA attributed to Douglas Elliman Inc. and financial measures for the last twelve months ended September 30, 2026 ("Non-GAAP Financial Measures"), which are financial measures not prepared in accordance with U.S. GAAP.
Last twelve months ended Nine months ended September 30,
Year ended December 31, 2025
September 30, 2026 2026 2025
Total transactions (1)
20,912 15,673 16,099 21,338
Gross Transaction Value (in billions) (2)
$ 39.1 $ 29.4 $ 30.1 $ 39.8
Average transaction value per transaction (in thousands) (3)
$ 1,867.7 $ 1,876.7 $ 1,870.9 $ 1,863.4
Number of Principal Agents (4)
4,127 4,127 4,655 4,492
Annual Retention (5)
84 % N/A N/A 84 %
Certain GAAP Financial Information
Net income (loss) attributed to Douglas Elliman Inc.
$ 56,992 $ (11,576) $ (53,349) $ 15,219
Non-GAAP Financial Measures
Adjusted EBITDA attributed to Douglas Elliman Inc.
$ (27,306) $ (16,734) $ (3,418) $ (13,990)
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(1)We calculate total transactions by taking the sum of all transactions closed that our agent represented the buyer or seller in the purchase or sale of a home (excluding rental transactions). We include a single transaction twice when one or more of our agents represent both the buyer and seller in any given transaction.
(2)Gross Transaction Value is the sum of all closing sale prices for homes transacted by our agents (excluding rental transactions). We include the value of a single transaction twice when our agents serve both the home buyer and home seller in the transaction.
(3)Average transaction value per transaction is the quotient of (x) Gross Transaction Value divided by (y) total transactions.
(4)The number of Principal Agents is determined as of the last day of the specified period. We use the number of Principal Agents, in combination with our other key business metrics such as total transactions and Gross Transaction Value, as a measure of agent productivity.
(5)Annual Retention is the quotient of (x) the prior year revenue generated by agents retained divided by (y) the prior year revenue generated by all agents. We use Annual Retention as a measure of agent stability.
Non-GAAP Financial Measures
Adjusted EBITDA attributed to Douglas Elliman Inc. is a non-GAAP financial measure that represents net income (loss) attributed to Douglas Elliman Inc. adjusted for income tax (benefit) expense, depreciation and amortization expense, stock-based compensation expense, gain on disposal of the Douglas Elliman Property Management ("DEPM") business (including the operations of DEPM and related corporate overhead prior to its disposal), impairment of fixed assets, litigation, settlement and related (benefit) expenses, net, executive severance and separation (benefit) expenses, net, restructuring and other items (interest expense, interest income, equity in earnings (losses) from equity-method investments, change in fair value of the derivative embedded within convertible debt, loss on extinguishment of liability and investment and other (losses) gains). Last twelve months financial measures are non-GAAP financial measures that are calculated by reference to the trailing four-quarter performance for the relevant metric.
We believe that the Non-GAAP Financial Measures are important measures that supplement analysis of our results of operations and enhance an understanding of our operating performance. We believe Non-GAAP Financial Measures provide a useful measure of operating results unaffected by non-recurring items, differences in capital structures and ages of related assets among otherwise comparable companies. Management uses the Non-GAAP Financial Measures as measures to review and assess the operating performance of our business, and management and investors should review both the overall performance (GAAP net income (loss)) and the operating performance (the Non-GAAP Financial Measures) of our business. While management considers the Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with U.S. GAAP, such as operating income (loss), and net income (loss). In addition, the Non-GAAP Financial Measures are susceptible to varying calculations and our measurement of the Non-GAAP Financial Measures may not be comparable to those of other companies.
Reconciliations of these non-GAAP measures have been provided in the table below (in thousands).
Computation of Adjusted EBITDA attributed to Douglas Elliman Inc.
Last twelve months ended Nine months ended September 30,
Year ended December 31, 2025
September 30, 2026 2026 2025
Net income (loss) attributed to Douglas Elliman Inc.
$ 56,992 $ (11,576) $ (53,349) $ 15,219
Interest expense
428 7 4,648 5,069
Interest income
(3,476) (2,562) (3,986) (4,900)
Income tax expense (benefit) 2,871 (678) 11 3,560
Net loss attributed to non-controlling interest
(407) - (502) (909)
Depreciation and amortization 8,037 5,962 6,302 8,377
EBITDA
64,445 (8,847) (46,876) 26,416
Results from operations of disposed business (a)
(254) - (6,367) (6,621)
Gain on disposal of business (82,055) (400) - (81,655)
Stock-based compensation (b)
6,891 4,635 6,321 8,577
Equity in earnings from equity-method investments (c)
(395) (386) (178) (187)
Change in fair value of the derivative embedded within convertible debt
(4,678) - 33,160 28,482
Loss on extinguishment of liability
466 - - 466
Litigation, settlement and related (benefit) expenses, net (d)
(13,603) (12,527) 8,713 7,637
Executive severance and separation expense (benefit), net (e)
194 - (493) (299)
Impairment of fixed assets
- - 2,275 2,275
Restructuring 754 210 1,092 1,636
Investment and other losses (gains) 603 581 (1,340) (1,318)
Adjusted EBITDA (27,632) (16,734) (3,693) (14,591)
Adjusted EBITDA attributed to non-controlling interest 326 - 275 601
Adjusted EBITDA attributed to Douglas Elliman Inc. $ (27,306) $ (16,734) $ (3,418) $ (13,990)
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(a)Includes results from operations of Residential Management Group, LLC, which conducts business as DEPM, which was disposed on October 24, 2025. This adjustment also includes the corporate allocation to Douglas Elliman Realty, LLC ("DER") from DEPM. The expenses associated with the corporate allocation to DEPM have continued at DER after the disposal. For all periods presented, our presentation and calculation of Adjusted EBITDA attributed to Douglas Elliman Inc. reflects the disposal of DEPM; $2,949 was previously reported as Adjusted EBITDA attributed to Douglas Elliman Inc. for the nine months ended September 30, 2025.
(b)Represents amortization of stock-based compensation. For the last twelve months ended September 30, 2026, $6,444 of stock-based compensation is included within General and administrative expenses and $447 is included within Operations and support expenses on the condensed consolidated statements of operations. For the nine months ended September 30, 2026, $4,423 of stock-based compensation is included within General and administrative expenses and $212 is included within Operations and support expenses on the condensed consolidated statements of operations. For the nine months ended September 30, 2025, $5,517 of stock-based compensation is included within General and administrative expenses and $804 is included within Operations and support expenses on the condensed consolidated statements of operations. For the year ended December 31, 2025, $7,538 of stock-based compensation is included within General and administrative expenses and $1,039 is included within Operations and support expenses on the consolidated statements of operations.
(c)Represents equity in earnings recognized from equity-method investments that are accounted for under the equity method and are not consolidated in our financial results.
(d)Represents unusual litigation, settlement and related (benefit) expenses, net, incurred in connection with industry-wide antitrust class action lawsuits; stockholder derivative litigation; and other matters related to employees and agents and not classified elsewhere in our condensed consolidated statements of operations. For the last twelve months ended September 30, 2026, we incurred a benefit, net of expenses, of $(13,603) of which a benefit of $(15,644) was included within General and administrative expenses and $2,041 was included as Antitrust litigation settlement expense on the condensed consolidated statements of operations. For the nine months ended September 30, 2026, we incurred a benefit, net of expenses, of $(12,527), net of amounts recovered from insurance, of which a benefit of $(14,568) was included within General and administrative expenses and $2,041 was included as Antitrust litigation settlement expense on the condensed consolidated statements of operations. For the nine months ended September 30, 2025, we incurred such expenses of $8,713, net of amounts recovered from insurance, which were included within General and administrative expenses on the condensed consolidated statements of operations. For the year ended December 31, 2025, we incurred such expenses of $7,637, which were included within General and administrative expenses on the consolidated statements of operations.
(e) For the last twelve months ended September 30, 2026, expense of $194 is included within General and administrative expenses on the condensed consolidated statement of operations. For the nine months ended September 30, 2025, benefit of $493, net of amounts recovered from insurance, is included within General and administrative expenses on the condensed consolidated statements of operations. For the year ended December 31, 2025, the benefit of $299 includes insurance proceeds received and is included within General and administrative expenses on the consolidated statement of operations.
Recent Developments
Derivative litigation settlement. On November 14, 2025, a stockholder derivative complaint was filed in the Court of Chancery of the State of Delaware on behalf of us, as nominal defendant, against certain of our current and former directors and officers. We reached a settlement agreement with the parties to the litigation on February 19, 2026 in exchange for (i) a settlement payment of $17,500 to us, subject to reductions for attorneys' fees and expenses, and (ii) implementation of certain corporate governance enhancements and reforms. Certain of our insurers agreed to fund the settlement. In July 2026, the Chancery Court awarded plaintiff's counsel attorneys' fees and expenses in the amount of $1,870, to be deducted from the $17,500 settlement payment to us. We recorded the net settlement payment of $15,630 as a reduction of "General and administrative expenses" for the three and nine months ended September 30, 2026. For more information, see Note 8, "Commitments and Contingencies," to our condensed consolidated financial statements.
Stock repurchase program. On November 9, 2026, our board of directors authorized the repurchase of up to $10,000 of our common stock from time to time, on the open market, through privately negotiated transactions, or through other methods, at the discretion of our management and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other applicable securities laws and legal requirements.
Results of Operations
The following discussion provides an assessment of our results of operations, capital resources and liquidity and should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q.
The primary components of our operating expenses are summarized below:
•Sales and marketing. Sales and marketing expenses consist primarily of marketing and advertising expenses, compensation and other personnel-related costs for employees supporting sales, marketing, expansion and related functions, occupancy-related costs and agent acquisition incentives.
•Operations and support. Operations and support expenses consist primarily of compensation and other personnel-related costs for employees supporting agents, third-party consulting and professional services costs (not included in general and administrative or technology), commissions related to escrow transactions, fair value adjustments to contingent consideration for our acquisitions and other related expenses.
•General and administrative. General and administrative expenses consist primarily of compensation, stock-based compensation expense and other personnel-related costs for administrative employees, including executives, finance and accounting, legal, human resources and communications, property management (prior to October 25, 2025) and escrow services as well as the occupancy costs for our headquarters and other offices supporting our administrative functions.
•Technology. Technology expenses consist primarily of compensation and other personnel-related costs for employees in the product, engineering and technology functions, website hosting expenses, software licenses and equipment, third-party consulting costs, technology data licenses and other related expenses associated with the implementation of our technology initiatives.
The presentation of our business's financial information for the three and nine months ended September 30, 2026 and 2025 is reported as one segment. For more information, see Note 11, "Segment Information" to our condensed consolidated financial statements.
Three months ended September 30, 2026 Compared to the Three months ended September 30, 2025
The following table sets forth our revenues and operating income (loss) for the three months ended September 30, 2026 compared to the three months ended September 30, 2025:
% of Total Revenue
Three Months Ended September 30, 2025 to 2026 Three Months Ended September 30,
2026 2025 $ Change % Change 2026 2025
(Dollars in thousands)
Revenues $ 252,091 $ 262,838 $ (10,747) (4) % 100 % 100 %
Operating expenses:
Real estate agent commissions $ 200,047 $ 192,771 $ 7,276 4 % 79 % 73 %
Sales and marketing 19,983 19,711 272 1 % 8 % 7 %
Operations and support 16,743 17,575 (832) (5) % 7 % 7 %
General and administrative 1,465 32,220 (30,755) (95) % 1 % 12 %
Technology
5,532 5,964 (432) (7) % 2 % 2 %
Depreciation and amortization
1,974 2,183 (209) (10) % 1 % 1 %
Impairment of fixed assets
- 2,275 (2,275) (100) % - % 1 %
Restructuring
17 794 (777) (98) % - % - %
Gain on disposal of business 8 - 8 - % - % - %
Operating income (loss) 6,322 (10,655) 16,977 (159) % 3 % (4) %
Other income (expenses), net
434 (14,276) 14,710 (103) % - % (5) %
Income (loss) before provision for income taxes 6,756 (24,931) 31,687 (127) % 3 % (9) %
Income tax (benefit) expense (678) 11 (689) (6264) % - % - %
Net income (loss) 7,434 (24,942) 32,376 (130) % 3 % (9) %
Net loss attributed to non-controlling interest - 251 (251) (100) % - % - %
Net income (loss) attributed to Douglas Elliman Inc. $ 7,434 $ (24,691) $ 32,125 (130) % 3 % (9) %
Revenues. Our revenues for the three months ended September 30, 2026 and 2025, respectively, were as follows:
Three Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Revenues $ 252,091 $ 262,838 $ (10,747) (4.1) %
Revenues from property management business - 9,438 (9,438)
Revenues excluding revenues from property management business $ 252,091 $ 253,400 $ (1,309) (0.5) %
The decline in revenues for the 2026 period compared to the 2025 period, excluding revenues from the property management business, was primarily due to a decline in revenues from Development Marketing of $15,088. Additionally, revenues from sales of existing homes in the West region declined by $6,725, which were primarily associated with California and Colorado, and revenues from sales of existing homes in New York City declined by $3,861. These decreases were partially offset by increases in revenues from existing home sales in Florida of $24,162 for the 2026 period compared to the 2025 period.
Operating expenses. Our operating expenses for the three months ended September 30, 2026 and 2025, respectively, were as follows:
Three Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Operating expenses $ 245,769 $ 273,493 $ (27,724) (10.1) %
Gain on disposal of property management business 8 - 8
Operating expenses from property management business - 7,930 (7,930)
Operating expenses excluding property management business $ 245,761 $ 265,563 $ (19,802) (7.5) %
The decline in operating expenses was primarily due to the absence of expenses of our property management business, the gain of $15,630 from the Strougo litigation settlement, which was recorded as a reduction to general and administrative expenses, and a decline in professional fee expenses as well as settlement and related expenses of $8,402 in the 2026 period, offset by an increase of $7,276 in real estate agent commissions expense.
Real Estate Agent Commissions. Our real estate agent commissions expense was $200,047 for the three months ended September 30, 2026 compared to $192,771 for the three months ended September 30, 2025, representing an increase of $7,276. Real estate agent commissions expense, as a percentage of revenues, increased to 79.4% for the three months ended September 30, 2026 compared to 73.3% (76.1% excluding property management revenues) for the three months ended September 30, 2025. The increase in real estate agent commissions expense as a percentage of revenues in the 2026 period was primarily driven by a higher percentage of our revenues from existing home sales generated from markets (primarily Florida) which customarily pay higher commission rates and a decline in revenues from our Development Marketing business, which customarily pays lower commission rates. For the three months ended September 30, 2026, revenues from existing home sales in Florida increased to 28.8% of our revenues compared to 19.1% (adjusting for property management) for the three months ended September 30, 2025. Further, revenues from Development Marketing declined to 3.6% of our revenues compared to 9.5% (adjusting for property management), respectively.
Gross profit. We define gross profit as the remaining portion after real estate agent commissions are subtracted from our revenues. Our gross profit for the three months ended September 30, 2026 and 2025, respectively, was as follows:
Three Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Revenues $ 252,091 $ 262,838 $ (10,747)
Real estate agent commission expense 200,047 192,771 7,276
Gross profit 52,044 70,067 (18,023) (25.7) %
Gross profit from property management business - 9,438 (9,438)
Gross profit excluding property management business $ 52,044 $ 60,629 $ (8,585) (14.2) %
Gross profit as a percentage of revenues 20.6 % 26.7 % (6.1) %
Gross profit, excluding property management business, as a percentage of revenues 20.6 % 23.9 % (3.3) %
Our gross profit, as a percentage of revenues, for the three months ended September 30, 2026 declined due to the absence of property management revenues as well as the sales mix trends discussed above in Real Estate Agent Commissions.
Operating expenses, excluding real estate agent commissions expense. Our operating expenses, excluding real estate agent commissions expense, for the three months ended September 30, 2026 and 2025, respectively, were as follows:
Three Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Operating expenses $ 245,769 $ 273,493 $ (27,724) (10.1) %
Real estate agent commission expense 200,047 192,771 7,276 3.8 %
Operating expenses, excluding real estate agent commissions expense 45,722 80,722 (35,000) (43.4) %
Gain on disposal of property management business 8 - 8
Operating expenses from property management business - 7,930 (7,930)
Operating expenses, excluding agent commission expense and property management business $ 45,714 $ 72,792 $ (27,078) (37.2) %
Sales and Marketing. Sales and marketing expenses were $19,983 for the three months ended September 30, 2026 compared to $19,711, which included $270 associated with our property management business, for the three months ended September 30, 2025.
Operations and support. Operations and support expenses were $16,743 for the three months ended September 30, 2026 compared to $17,575, which included $859 associated with our property management business, for the three months ended September 30, 2025.
General and administrative. General and administrative expenses were $1,465 for the three months ended September 30, 2026 compared to $32,220 for the three months ended September 30, 2025, representing a decline of $30,755, which was primarily the result of (i) a gain of $15,630 from the Strougo litigation settlement, which was recorded as a reduction to general and administrative expenses for the three months ended September 30, 2026, (ii) a decline in professional fee expenses as well as settlement and related expenses of $8,402 in the 2026 period, (iii) the absence of $6,162 in 2026 of expenses associated with our property management business in 2025 and (iv) lower personnel expenses of $1,565 in the 2026 period. These amounts were offset by increased insurance expenses of $817 in the 2026 period.
Technology. Technology expenses were $5,532 for the three months ended September 30, 2026 compared to $5,964, which included $568 associated with our property management business, for the three months ended September 30, 2025.
Operating income (loss). Our operating income (loss) for the three months ended September 30, 2026 and 2025, respectively, was as follows:
Three Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Operating income (loss) $ 6,322 $ (10,655) $ 16,977
Gain on disposal of property management business 8 - 8
Operating income from property management business - 1,508 (1,508)
Operating income (loss) excluding property management business $ 6,330 $ (12,163) $ 18,493 (152.0) %
The positive change in operating income was primarily due to the declines in "general and administrative" expenses discussed above, partially offset by lower gross profit in the 2026 period and the absence of operating income from our property management business in the 2026 period.
Other income (expenses). Other income was $434 for the three months ended September 30, 2026 compared to other expense of $14,276 for the three months ended September 30, 2025. For the three months ended September 30, 2026, other income consisted primarily of interest income of $953 and investments loss of $524, primarily due to an impairment of a PropTech investment of $500. For the three months ended September 30, 2025, other expense primarily consisted of a $15,445 loss from the change in fair value of the derivative embedded within convertible debt and interest expense of $1,573, partially offset by interest income of $1,366 and the $1,225 gain from the monetization of our remaining interest of a PropTech investment in July 2025.
Income (loss) before provision for income taxes. Income before income taxes was $6,756 for the three months ended September 30, 2026. Loss before income taxes was $24,931 for the three months ended September 30, 2025.
Income tax (benefit) expense. There was income tax benefit of $678 for the three months ended September 30, 2026. Income tax expense was $11 for the three months ended September 30, 2025. We calculate our provision for income taxes for interim reporting periods based upon our estimate of the annual effective income tax rate based on full year projections, which does not include the impact of discrete items. We then apply the annual effective income tax rate against year-to-date pretax income to record income tax (benefit) expense and then adjust our provision for income tax expense for any discrete items. The income tax benefit for the three months ended September 30, 2026 related to discrete items associated with the true-up of income tax expense associated with the filing of our income tax returns in September 2026. We did not record a provision for income taxes during the three months ended September 30, 2025 because we had established a valuation allowance for the full amount of our deferred tax assets and there were no discrete items.
Nine months ended September 30, 2026 Compared to Nine months ended September 30, 2025
The following table sets forth our revenues and operating loss for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025:
% of Total Revenue
Nine Months Ended September 30, 2025 to 2026 Nine Months Ended September 30,
2026 2025 $ Change % Change 2026 2025
(Dollars in thousands)
Revenues $ 749,873 $ 787,607 $ (37,734) (5) % 100 % 100 %
Operating expenses:
Real estate agent commissions $ 591,697 $ 583,890 $ 7,807 1 % 79 % 74 %
Sales and marketing 57,451 59,519 (2,068) (3) % 8 % 8 %
Operations and support 50,754 53,078 (2,324) (4) % 7 % 7 %
General and administrative 40,411 85,722 (45,311) (53) % 5 % 11 %
Technology 16,361 17,265 (904) (5) % 2 % 2 %
Depreciation and amortization 5,962 6,302 (340) (5) % 1 % 1 %
Impairment of fixed assets
- 2,275 (2,275) (100) % - % - %
Antitrust litigation settlement expense 2,041 - 2,041 - % - % - %
Restructuring 210 1,092 (882) (81) % - % - %
Gain on disposal of business (400) - (400) - % - % - %
Operating loss (14,614) (21,536) 6,922 (32) % (2) % (3) %
Other income (expenses), net 2,360 (32,304) 34,664 (107) % - % (4) %
Loss before provision for income taxes
(12,254) (53,840) 41,586 (77) % (2) % (7) %
Income tax (benefit) expense (678) 11 (689) (6264) % - % - %
Net loss
(11,576) (53,851) 42,275 (79) % (2) % (7) %
Net loss attributed to non-controlling interest
- 502 (502) (100) % - % - %
Net loss attributed to Douglas Elliman Inc.
$ (11,576) $ (53,349) $ 41,773 (78) % (2) % (7) %
Revenues. Our revenues for the nine months ended September 30, 2026 and 2025, respectively, were as follows:
Nine Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Revenues $ 749,873 $ 787,607 $ (37,734) (4.8) %
Revenues from property management business - 29,395 (29,395)
Revenues excluding revenues from property management business $ 749,873 $ 758,212 $ (8,339) (1.1) %
The decline in revenues for the 2026 period compared to the 2025 period, excluding revenues from our property management business, was primarily due to a decline of revenues from Development Marketing of $18,030. Additionally, for the nine months ended September 30, 2026, our commissions and other brokerage income from existing homes sales decreased by $25,109 in New York City and $21,507 in the West region, which were primarily associated with California and Colorado.
However, these declines were partially offset by an increase in commissions and other brokerage income from existing home sales in the Florida market of $56,249 during the nine months ended September 30, 2026 compared to the 2025 period.
Operating expenses. Our operating expenses for the nine months ended September 30, 2026 and 2025, respectively, were as follows:
Nine Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Operating expenses $ 764,487 $ 809,143 $ (44,656) (5.5) %
Gain on disposal of property management business (400) - (400)
Operating expenses from property management business - 23,430 (23,430)
Operating expenses excluding property management business $ 764,887 $ 785,713 $ (20,826) (2.7) %
The decline was primarily due to the absence of expenses of our property management business, the gain of $15,630 from the Strougo litigation settlement, which was recorded as a reduction to general and administrative expenses, and a decline in 2026 of professional fee expenses as well as settlement and related expenses of $10,805, offset by an increase of $7,807 in real estate agent commissions expense.
Real Estate Agent Commissions. Our real estate agent commissions expense was $591,697 for the nine months ended September 30, 2026, compared to $583,890 for the nine months ended September 30, 2025, representing an increase of $7,807. Real estate agent commissions expense, as a percentage of revenues, increased to 78.9% for the nine months ended September 30, 2026, compared to 74.1% (77.0% excluding property management revenues) for the nine months ended September 30, 2025. This increase in real estate agent commissions expense as a percentage of revenues in the 2026 period was primarily driven by a higher percentage of our revenues from existing home sales generated from markets (primarily Florida) which customarily pay higher commission rates. For the nine months ended September 30, 2026, revenues from existing home sales in Florida increased to 32.9% of our revenues compared to 25.2% (adjusting for property management) for the nine months ended September 30, 2025.
Gross profit. We define gross profit as the remaining portion after real estate agent commissions are subtracted from our revenues. Our gross profit for the nine months ended September 30, 2026 and 2025, respectively, was as follows:
Nine Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Revenues $ 749,873 $ 787,607 $ (37,734)
Real estate agent commission expense 591,697 583,890 7,807
Gross profit 158,176 203,717 (45,541) (22.4) %
Gross profit from property management business - 29,395 (29,395)
Gross profit excluding property management business $ 158,176 $ 174,322 $ (16,146) (9.3) %
Gross profit as a percentage of revenues 21.1 % 25.9 % (4.8) %
Gross profit, excluding property management business, as a percentage of revenues 21.1 % 23.0 % (1.9) %
Our gross profit, as a percentage of revenues, declined due to the absence of property management revenues and was also attributable to a shift in the revenue mix, driven by a higher percentage of our revenues from existing home sales generated from markets (primarily Florida) which had a lower gross margin during the period.
Operating expenses, excluding real estate agent commissions expense. Our operating expenses, excluding real estate agent commissions expense, for the nine months ended September 30, 2026 and 2025, respectively, were as follows:
Nine Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Operating expenses $ 764,487 $ 809,143 $ (44,656) (5.5) %
Real estate agent commission expense 591,697 583,890 7,807 1.3 %
Operating expenses, excluding real estate agent commissions expense 172,790 225,253 (52,463) (23.3) %
Gain on disposal of property management business (400) - (400)
Operating expenses from property management business - 23,430 (23,430)
Operating expenses, excluding agent commission expense and property management business $ 173,190 $ 201,823 $ (28,633) (14.2) %
Sales and Marketing. Sales and marketing expenses were $57,451 for the nine months ended September 30, 2026, compared to $59,519, which included $825 associated with our property management business, for the nine months ended September 30, 2025. The decline in expenses is attributable to expense rationalization efforts to streamline our sales and marketing process.
Operations and support. Operations and support expenses were $50,754 for the nine months ended September 30, 2026, compared to $53,078, which included $2,596 associated with our property management business, for the nine months ended September 30, 2025.
General and administrative. General and administrative expenses were $40,411 for the nine months ended September 30, 2026, compared to $85,722 for the nine months ended September 30, 2025, representing a decline of $45,311, of which $18,107 was associated with our property management business, for the nine months ended September 30, 2025. The remainder of the decline was primarily the result of (i) a gain of $15,630 from the Strougo litigation settlement, which was recorded as a reduction to general and administrative expenses in the 2026 period, (ii) a decline in professional fee expenses as well as settlement and related expenses of $10,805 in the 2026 period, (iii) lower non-cash stock compensation expenses of $904, (iv) lower personnel expenses of $775 in the 2026 period and (v) lower occupancy expenses of $773. These amounts were offset by increased insurance expenses of $1,944 in the 2026 period.
Technology. Technology expenses were $16,361 for the nine months ended September 30, 2026, compared to $17,265, which included $1,692 associated with our property management business, for the nine months ended September 30, 2025.
Operating loss. Our operating loss for the nine months ended September 30, 2026 and 2025, respectively, was as follows:
Nine Months Ended September 30, 2025 to 2026
2026 2025 $ Change % Change
Operating loss $ (14,614) $ (21,536) $ 6,922
Gain on disposal of property management business (400) - (400)
Operating income from property management business - 5,965 (5,965)
Operating loss excluding property management business $ (15,014) $ (27,501) $ 12,487 (45.4) %
The positive change in operating loss, after excluding our property management business, was primarily due to the other declines in "general and administrative" expenses discussed above and was offset by the decline in gross profit.
Other income (expenses). Other income was $2,360 for the nine months ended September 30, 2026, compared to other expense of $32,304 for the nine months ended September 30, 2025. For the nine months ended September 30, 2026, other income primarily consisted of interest income of $2,562 and investments loss of $581, primarily due to an impairment of a PropTech investment of $500. For the nine months ended September 30, 2025, other expense primarily consisted of the $33,160 loss from the change in fair value of the derivative embedded within convertible debt and interest expense of $4,648, partially offset by interest income of $3,986 and a $1,225 gain from the monetization of a PropTech investment.
Loss before provision for income taxes. Loss before income taxes was $12,254 and $53,840 for the nine months ended September 30, 2026 and 2025, respectively.
Income tax (benefit) expense. There was income tax benefit of $678 for the nine months ended September 30, 2026. Income tax expense was $11 for the nine months ended September 30, 2025. We calculate our provision for income taxes for interim reporting periods based upon our estimate of the annual effective income tax rate based on full year projections, which does not include the impact of discrete items. We then apply the annual effective income tax rate against year-to-date pretax income to record income tax (benefit) expense and then adjust our provision for income tax expense for any discrete items. The
income tax benefit for the nine months ended September 30, 2026 related to discrete items associated with the true-up of income tax expense associated with the filing of our income tax returns in September 2026. We did not record a provision for income taxes during the nine months ended September 30, 2025 because we had established a valuation allowance for the full amount of our deferred tax assets and there were no discrete items.
Liquidity and Capital Resources
Cash, cash equivalents and restricted cash declined by $13,148 to $109,561, which included $6,883 of restricted cash, during the nine months ended September 30, 2026. This compares to an increase of $8,686, to $150,907, which included restricted cash of $7,904, during the nine months ended September 30, 2025. The decline in the nine months ended September 30, 2026 was primarily the result of the purchase of $19,935 of a U.S. Treasury Bill, which matures in March 2027.
Cash provided from operations was $8,960 and $505 for the nine months ended September 30, 2026 and 2025, respectively. The increase in the cash provided by operations in the 2026 period was attributable to the decline in operating loss as well as an increase to the net changes in contract liabilities and related contract assets of $12,595, which was primarily associated with increased progress payments from our development marketing business. These amounts were partially offset by increased payments in 2026 of income tax liabilities, which were attributable to the gain on the October 2025 disposal of our property management business, and accrued compensation.
Cash used in investing activities was $22,029 for the nine months ended September 30, 2026, compared to cash provided by investing activities of $8,266 for the nine months ended September 30, 2025. For the nine months ended September 30, 2026, cash used in investing activities was comprised primarily of the purchase of U.S. Treasury Bills maturing in March 2027 of $19,935, payments related to the disposal of the property management business of $709, capital expenditures of $1,319 and the purchase of subsidiaries of $100 due to the acquisition of the non-controlling interest of Real Estate Associates of Houston LLC. For the nine months ended September 30, 2025, cash provided by investing activities was comprised of proceeds from the sale of short-term investments of $97,677 and proceeds from the sale of investments of $1,611 in our PropTech business. These inflows were partially offset by the purchase of short-term investments of $87,873 and capital expenditures of $3,041.
Cash used in financing activities was $79 for the nine months ended September 30, 2026, compared to $85 for the nine months ended September 30, 2025, which was comprised of withholding of shares as payment of payroll tax liabilities.
We continue to evaluate our capital structure and current market conditions related to our capital structure. We regularly review and evaluate potential acquisitions, joint ventures, divestitures and other strategic transactions. For example, we may acquire, or seek to acquire, additional operating businesses through a merger, purchase of assets, stock acquisition or other means, or to make other revisions to our capital structure, including, if authorized by our Board of Directors, the repurchase of our common stock in open market transactions. These initiatives may limit liquidity otherwise available to us.
We had cash and cash equivalents of approximately $102,678 and $19,935 in a U.S. Treasury Bill maturing in March 2027, which is classified as "Short-term investment" on our condensed consolidated balance sheet as of September 30, 2026. In addition to any cash provided from operations, such cash is available to be used to fund such liquidity requirements as well as other anticipated liquidity needs in the normal course of business. Management currently anticipates that these amounts, as well as expected cash flows from our operations and proceeds from any financings to the extent available, should be sufficient to meet our liquidity needs over the next twelve months.
Real Estate Brokerage Antitrust Litigation Settlements. On April 26, 2024, we entered into a settlement agreement to resolve all claims on a nationwide basis in the pending seller class action litigations, Gibson v. NAR, No. 4:23-cv-00788-SRB (W.D. Mo.) and Umpa v. NAR, 4:23-cv-00945-SRB (W.D. Mo.) alleging claims on behalf of sellers against Douglas Elliman Inc. and our subsidiaries. On September 1, 2026, the U.S. Court of Appeals for the Eighth Circuit affirmed the final approval of the Gibson Settlement Agreement, rejecting all objections raised on appeal, finding the settlements to be fair, reasonable, and adequate. On October 7, 2026, the Eighth Circuit denied a request for en banc reconsideration of its decision by the full court. Under the settlement agreement, we paid $7,750 and $5,000 into an escrow fund on June 12, 2024 and December 29, 2025, respectively, and have also agreed to pay a $5,000 contingent payment subject to certain financial contingencies on or before December 31, 2027. The remaining contingent payment may be accelerated under certain circumstances.
In April 2026, the Company opted into a settlement agreement with the purported class of home buyers in Tuccori v. At World Properties, LLC, et al. (N.D. Ill.), a case that consolidated certain purported class actions lawsuits filed by home buyers. This settlement is structured to resolve the claims asserted against us in, or arising from the same factual predicates as, the Lutz vs. HomeServices of America, Inc. et al lawsuit, pending in the U.S. District Court for the Southern District of Florida, No. 4:24-cv-10040 (KMM). Although we were not a defendant in Tuccori, the opt-in settlement releases us, our subsidiaries and affiliated agents from the claims against us in Lutz. Under the Tuccori settlement agreement, we paid $100 into an escrow fund on June 23, 2026 and agreed to make three additional $647 payments within one, two and three years of the effective date of the settlement, respectively. The amount payable by us under the Tuccori settlement agreement was recorded as a noncurrent liability at September 30, 2026. The Tuccori settlement agreement is subject to court approval, and a final approval hearing occurred on November 2, 2026. The court's decision remains pending.
Derivative Litigation Settlement. On November 14, 2025, a Verified Stockholder Derivative Complaint, Barbara Strougo derivatively on behalf of Douglas Elliman, Inc. vs. Howard M. Lorber, et al., also known as the Strougo Litigation, was filed in the Court of Chancery of the State of Delaware on behalf of Douglas Elliman Inc., as nominal defendant, against certain of its current and former directors and officers. The parties to the Strougo Litigation reached an agreement to settle it on the terms and conditions set forth in a Stipulation and Agreement of Compromise, Settlement, and Release that was filed with the Chancery Court on February 19, 2026. The Strougo settlement agreement provides for the final dismissal of the Strougo Litigation in exchange for (i) a settlement payment to us of $17,500, subject to reductions for attorneys' fees and expenses, and (ii) the implementation by us of certain corporate governance enhancements and reforms. Certain of our insurers agreed to fund the settlement. The Chancery Court held a settlement fairness hearing related to the Strougo settlement agreement on June 29, 2026 and, on July 7, 2026, entered a Final Order and Judgment approving the Strougo settlement agreement and awarding plaintiff's counsel attorneys' fees and expenses in the amount of $1,870, to be deducted from the $17,500 settlement payment. We recorded the net proceeds of the litigation settlement of $15,630 as a reduction to the "General and administrative expenses" for the three and nine months ended September 30, 2026.
Other litigation. Litigation is subject to uncertainties and it is possible that there could be adverse developments in the Gibson/Umpa appeals, the buyer-side class action Lutz lawsuit, the Strougo lawsuit and other pending cases. These cases include cases related to two real estate sales persons formerly associated with us, who have been accused of sexual assault and related wrongdoing, where Douglas Elliman Inc., DER and our former Chief Executive Officer have been named as defendants (Koste et al vs. Alexander et al in the Supreme Court of the State of New York and Rodriguez vs. Alexander et al in the U.S. District Court for the Southern District of Florida). We deny liability and are vigorously defending claims made against us in the Koste and Rodriguez cases. For more information, see Note 8, "Commitments and Contingencies," to our condensed consolidated financial statements.
Management cannot predict the cash requirements related to any future settlements or judgments, including cash required to bond any appeals, and there is a risk that those requirements will not be able to be met. Except as otherwise discussed above, management is unable to make a reasonable estimate of the amount or range of loss that could result from an unfavorable outcome of the cases pending against us or our subsidiaries as well as the costs of defending such cases. It is possible that our consolidated financial position, results of operations or cash flows in any future period could be materially adversely affected by an unfavorable outcome in any such brokerage-related litigation. For more information, see Note 8, "Commitments and Contingencies" to our condensed consolidated financial statements.
Technology Adoption and Implementation. In June 2026, we executed an agreement to purchase technology licenses, products related to our workspace platform and certain cloud computing services. As part of the agreement, we have received various credits, which may offset or reduce the commitment, as well as other discounts. We may elect to cancel the remaining commitment in return for a cancellation fee of 35% of the total remaining commitment amount and loss of any discounts, remaining credits or other incentives provided under the agreement. For additional information regarding our purchase obligations, see Note 8 "Commitments and Contingencies" to our condensed consolidated financial statements.
Off-Balance Sheet Arrangements
We have various agreements in which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations related to such matters as title to assets sold and licensed or certain intellectual property rights and, in connection with the sale of our property management division, certain known liabilities as of October 24, 2025. Payment by us under such indemnification clauses is generally conditioned on the other party making a claim that is subject to challenge by us and dispute resolution procedures specified in the particular contract. Further, our obligations under these arrangements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential number of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, payments made by us under these agreements have not been material. As of September 30, 2026, we were not aware of any indemnification agreements that would or are reasonably expected to have a current or future material adverse impact on our financial position, results of operations or cash flows.
As of September 30, 2026 and December 31, 2025, we had outstanding approximately $2,649 and $2,645, respectively, of letters of credit, collateralized by certificates of deposit. The letters of credit have been issued as security deposits for leases of office space.
As a service to its customers, Portfolio Escrow Inc., a subsidiary of Douglas Elliman, administers escrow and trust deposits which represent undisbursed amounts received for the settlement of real estate transactions. Deposits at FDIC-insured institutions are insured up to $250. Portfolio Escrow Inc. had escrow funds on deposit of $34,069 and $36,283 as of September 30, 2026 and December 31, 2025, respectively, and corresponding escrow funds in holding of the same amount. While these deposits are not assets of Portfolio Escrow Inc., the subsidiary of Douglas Elliman (and, therefore, are excluded from the accompanying condensed consolidated balance sheets), the subsidiary of ours remains contingently liable for the disposition of these deposits.
Critical Accounting Estimates and Policies
Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates and therefore, if material, our future financial statements will be affected.
There have been no material changes to our critical accounting policies and estimates disclosed in our 2025 Form 10-K. For additional information about our critical accounting policies and estimates, see the disclosure included in our 2025 Form 10-K, as well as Note 1 to our condensed consolidated financial statements included in this Quarterly Report.
Market Risk
We are exposed to market risks principally from fluctuations in interest rates and could be exposed to market risks from foreign currency exchange rates and equity prices in the future. We seek to minimize these risks through our regular operating and financing activities and our long-term investment strategy. Our market risk management procedures cover material market risks for our market risk sensitive financial instruments.
New Accounting Pronouncements
Refer to Note 1, "Summary of Significant Accounting Policies" to our condensed consolidated financial statements for further information on New Accounting Pronouncements.
Legislation, Regulation, Taxation and Litigation
There are no material changes from the Legislation, Regulation, Taxation and Litigation section set forth in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our 2025 Annual Report.
See Item 1A. "Risk Factors," which describes risks associated with litigation and Note 8, "Commitments and Contingencies," to our condensed consolidated financial statements, which contain a description of litigation.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Form 10-Q contains "forward-looking statements" within the meaning of the federal securities law. Forward-looking statements include information relating to our intent, belief or current expectations, primarily with respect to, but not limited to, economic outlook, capital expenditures, cost reduction, cash flows, operating performance, growth expectations, competition, legislation and regulations, litigation, and related industry developments (including trends affecting our business, financial condition and results of operations).
We identify forward-looking statements in this report by using words or phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may be," "objective," "opportunistically," "plan," "potential," "predict," "project," "prospects," "seek," and "will be" and similar words or phrases or their negatives.
Forward-looking statements involve important risks and uncertainties that could cause our actual results, performance or achievements to differ materially from our anticipated results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, without limitation, the following:
•general economic and market conditions and any changes therein, including due to macroeconomic conditions, interest rate fluctuations, inflation, geopolitical instability, acts of war and terrorism or otherwise;
•governmental regulations and policies, including with respect to regulation of the real estate market or monetary and fiscal policy and its effect on overall economic activity, in particular, mortgage interest rates;
•the impact of enacted and proposed tariffs and other trade policies, and related uncertainties in the global economy resulting from such policies;
•the ability of the Company to effectively develop and integrate artificial intelligence ("AI") technologies into our business and expectations regarding the timing, cost and productivity improvements to be obtained by such initiatives;
•the impacts of banks not honoring the escrow and trust deposits held by our subsidiaries;
•litigation risks, the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in, conduct business with or acquire;
•adverse changes in global, national, regional and local economic and market conditions,
•the impacts of the One Big Beautiful Bill Act of 2025 and the Inflation Reduction Act of 2022, including the continued impact on the markets of our business;
•effects of industry competition and consolidation;
•severe weather events or natural or man-made disasters, including the increasing severity or frequency of such events due to climate change or otherwise, or other catastrophic events that may disrupt our business and have an unfavorable impact on home sale activity; and
•the additional factors described under Item 1A, "Risk Factors," in our 2025 Annual Report as updated in our quarterly reports.
Further information on the risks and uncertainties to our business includes the risk factors discussed above in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and under Item 1A, "Risk Factors" of our 2025 Annual Report, as updated in our quarterly reports.
Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, there is a risk that these expectations will not be attained and that any deviations will be material. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update any of these statements to reflect events or circumstances occurring after the date of this quarterly report. New factors may emerge, and it is not possible to predict all factors that may affect our business and operations.
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