DOUGLAS ELLIMAN INC. MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

(in thousands of dollars, except per share amounts)


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 financial statements as of and for the year ended
December 31, 2021 and Notes thereto, included in our 2021 Annual Report on Form
10-K, and our Condensed Combined Consolidated Financial Statements and related
Notes as of and for the quarterly period ended March 31, 2022.

Insight

We are a holding company and we are engaged in two lines of business:


Real Estate Brokerage: the residential real estate brokerage services through
our subsidiary Douglas Elliman Realty, which operates the largest residential
brokerage company in the New York metropolitan area and conducts residential
real estate brokerage operations in Florida, California, Connecticut,
Massachusetts, Colorado, New Jersey and Texas.

Corporates and Others: the operations of our holding company as well as the PropTech investment activity investing in certain PropTech opportunities through our New businesses in the valley subsidiary company.

Distribution and basis of presentation


On December 29, 2021, Vector Group distributed all of our common stock to its
stockholders. Prior to the Distribution, we were a subsidiary of Vector Group
and incurred indirect general and administrative costs allocated to us by Vector
Group for certain functions and services including, but not limited to,
executive office, finance and other administrative support. These expenses were
allocated to us based on direct usage, when identifiable. After the
Distribution, we are incurring expenses necessary to operate a standalone public
company, including pursuant to a Transition Services Agreement entered into with
Vector Group in connection with the Distribution.

Therefore, for periods prior to the Distribution, our condensed combined
consolidated results of operations, financial position and cash flows may not be
indicative of our future performance and do not necessarily reflect what our
combined consolidated results of operations, financial position and cash flows
would have been had we operated as a separate, standalone entity during the
periods presented, including changes in our operations and capitalization as a
result of our separation and distribution from Vector Group.

Key Business Parameters and Non-GAAP Financial Measures


In addition to our financial results, 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 and Adjusted EBITDA attributed to Douglas Elliman Margin and financial
measures for the last twelve months ended March 31, 2022 ("Non-GAAP Financial
Measures"), which are financial measures not prepared in accordance with GAAP.

Key Business Metrics

                                             Last twelve                                                         Year ended
                                            months ended              Three months ended March 31,              December 31,
                                           March 31, 2022                2022                  2021                 2021
Key Business Metrics
Total transactions (absolute) (1)                32,518                    7,212               7,094               32,400
Gross transaction value (in billions) (2)  $       52.8           $         11.7           $    10.1          $      51.2
Average transaction value per transaction
(in thousands) (3)                         $    1,622.3           $      1,620.4           $ 1,427.8          $   1,580.0
Number of Principal Agents (4)                    5,174       (5)          5,174       (5)     4,954                5,189        (5)
Annual Retention (6)                                 94  %               N/A                   N/A                     94    %
Net income attributed to Douglas Elliman
Inc.                                       $     91,383           $        6,510           $  13,965          $    98,838
Net income margin                                  6.58  %                  2.11   %            5.12  %              7.30    %
Adjusted EBITDA attributed to Douglas
Elliman                                    $    107,075           $       12,727           $  16,351          $   110,699
Adjusted EBITDA attributed to Douglas
Elliman margin                                     7.71  %                  4.12   %            5.99  %              8.18    %


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(1)We calculate total transactions by taking the sum of all transactions closed
in which 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 trade value per trade is the quotient of (x) gross trade value divided by (y) total trades.

(4) The number of main agents is determined on the last day of the specified period. We use the number of primary agents, in combination with our other key business metrics such as total transactions and gross transaction value, as a measure of agent productivity.

(5) Includes master agents acquired as part of the increase in the stake from 1% to 50% in Douglas Elliman Texas in August 2021.


(6)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 is a non-GAAP financial measure
that represents our net income adjusted for depreciation and amortization,
investment income, net, stock-based compensation expense, benefit from income
taxes, and other items. Adjusted EBITDA attributed to Douglas Elliman Margin is
the quotient of (x) Adjusted EBITDA attributed to Douglas Elliman divided by (y)
revenue. Last twelve months ("LTM") 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 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 Non-GAAP Financial Measures as measures to
review and assess operating performance of our business, and management and
investors should review both the overall performance (GAAP net income) and the
operating performance (Non-GAAP Financial Measures) of our business. While
management considers 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 GAAP, such as
operating income, and net income. In addition, Non-GAAP Financial Measures are
susceptible to varying calculations and our measurement of Non-GAAP Financial
Measures may not be comparable to those of other companies.

Reconciliations of these non-GAAP measures are provided in the table below.




























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Calculation of Adjusted EBITDA attributed to Douglas Elliman


                                                  Last twelve                                                Year ended
                                                 months ended          Three months ended March 31,         December 31,
                                                March 31, 2022            2022              2021                2021
Net income attributed to Douglas Elliman Inc.   $     91,383          $   6,510          $ 13,965          $     98,838
Interest income, net                                     (75)               (39)              (47)                  (83)
Income tax expense                                     4,769              2,917               281                 2,133
Net loss attributed to non-controlling interest         (411)              (225)                -                  (186)
Depreciation and amortization                          8,517              2,079             2,123                 8,561
Stock-based compensation(a)                            2,652              2,652                 -                     -
Equity in (earnings) losses from equity method
investments(b)                                          (254)              (532)                -                   278

Change in fair value of contingent liability           1,720                  -               (73)                1,647
Other, net                                            (1,383)              (752)              102                  (529)
Adjusted EBITDA                                      106,918             12,610            16,351               110,659
Adjusted EBITDA attributed to non-controlling
interest                                                 157                117                 -                    40

Adjusted EBITDA attributed to Douglas Elliman $107,075 $12,727 $16,351 $110,699


Adjusted EBITDA attributed to Douglas Elliman
by segment:
Real estate brokerage segment                   $    112,010          $  17,662          $ 16,351          $    110,699
Corporate and other segment                           (4,935)            (4,935)                -                     -
Total adjusted EBITDA attributed to Douglas
Elliman                                         $    107,075          $  

12,727 $16,351 $110,699

_____________________________


(a)Represents amortization of stock-based compensation. $925 is attributable to
the Real estate brokerage segment and $1,727 is attributable to the Corporate
and other segment.

(b) Represents equity in losses (gains) recognized from the Company’s investment in an equity-accounted investment which is accounted for using the equity method and which is not consolidated in profit or loss financials of the Company.

Operating results


The following discussion provides an assessment of our results of operations,
capital resources and liquidity and should be read in conjunction with our
combined consolidated financial statements and related notes included elsewhere
in this report.

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Three months completed March 31, 2022 Compared to Three months ended March 31, 2021


The following table sets forth our revenue and operating income (loss) by
segment for the three months ended March 31, 2022 compared to the three months
ended March 31, 2021:

                                                                     Three Months Ended March 31,
                                                                       2022                  2021
                                                                        (Dollars in thousands)
Revenues by segment:
Real estate brokerage segment                                   $       308,900          $  272,776

Operating income (loss) by segment:
Real estate brokerage segment                                   $        14,541          $   14,228
Corporate and other segment                                              (6,662)                  -
Total operating income                                          $         7,879          $   14,228

EBITDA attributed to Douglas Elliman by segment:
Real estate brokerage EBITDA attributed to Douglas Elliman      $        17,662          $   16,351
Corporate and other EBITDA attributed to Douglas Elliman                 (4,935)                  -
EBITDA attributed to Douglas Elliman                            $        

12,727 $16,351

Three months completed March 31, 2022 Compared to Three months ended March 31, 2021


Revenues. Our revenues were $308,900 for the three months ended March 31, 2022
compared to $272,776 for the three months ended March 31, 2021. The $36,124
(13.2%) increase in revenues was primarily due to a $36,124 increase in the Real
Estate Brokerage segment's revenues, which was primarily related to increased
revenues from existing home sales caused by home-buying trends in our markets
that began in the fourth quarter of 2020 as markets began reopening from
lockdowns associated with the COVID-19 pandemic and vaccinations became
available.

Operating expenses. Our operating expenses were $301,021 for the three months
ended March 31, 2022 compared to $258,548 for the three months ended March 31,
2021. The increase of $42,473 was due to increases in real estate brokerage
commissions of $26,405, expenses associated with Douglas Elliman operating as a
standalone public company after the Distribution, which occurred on December 29,
2021, as well as increased expenses associated with our expansion into new
markets and enhancements to our technology platform.

Operating income. Operating income was $7,879 for the three months ended March
31, 2022 compared to $14,228 for the same period in 2021. The $6,349 decline in
operating income was due to Douglas Elliman operating as a standalone public
company after the distribution as well as non-cash stock compensation expense.

Other income. Other income was $1,323 for the three months ended March 31, 2022
compared to $18 for the three months ended March 31, 2021. For the three months
ended March 31, 2022, other income primarily consisted of investment income,
primarily associated with our PropTech investments of $752 and equity earnings
from equity method investments of $532.

Earnings before provision for income taxes. Earnings before income taxes were $9,202
and $14,246 for the three months ended March 31, 2022 and 2021, respectively.


Income tax expense. Income tax expense was $2,917 and $281 for the three months
ended March 31, 2022 and 2021, respectively. Our provision for income taxes in
interim periods is based on expected income, statutory rates, permanent
differences, valuation allowances against deferred tax assets, and any tax
planning opportunities available to us. After the Distribution and for interim
financial reporting for the three months ended March 31, 2022, we now estimate
the annual effective income tax rate based on full year projections and apply
the annual effective income tax rate against year-to-date pretax income to
record income tax expense, adjusted for discrete items, if any. We will refine
annual estimates as current information becomes available.

Prior to the Distribution, we calculated our provision for income taxes based on the taxable income attributable to its business and the business of its subsidiaries during that period. or the periods presented before the distribution, we have calculated our

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provision for income taxes by using a separate-return method and elected not to
allocate tax expense to single-member limited liability companies or
partnerships that did not incur income tax liability because they were not
severally liable for the taxes of their owners. Before the distribution, Douglas
Elliman of California, Inc., and DER Holdings II LLC were the only two entities
taxed as corporations for U.S. Income Tax purposes while the remaining entities
were pass through entities for federal income tax purposes. Therefore, no income
tax expense was allocated to entities other than DER Holdings II LLC, Douglas
Elliman of California, Inc. and, for purposes of New York City UBT only, Douglas
Elliman Realty, LLC.

Real Estate Brokerage.

The following table sets forth our condensed combined consolidated statements of
operations data for the Real Estate Brokerage segment for the three months ended
March 31, 2022 compared to the three months ended March 31, 2021:

                                                                                  Three Months Ended March 31,
                                                                              2022                               2021
                                                                                     (Dollars in thousands)
Revenues:
Commissions and other brokerage income                           $       295,109       95.5%           $ 259,100       95.0%
Property management                                                        9,199        3.0%               9,268        3.4%
Other                                                                      4,592        1.5%               4,408        1.6%
 Total revenues                                                  $       308,900        100%           $ 272,776        100%

Operating expenses:
Real estate agent commissions                                            223,422       72.3%             197,017       72.2%
Sales and marketing                                                       19,306        6.2%              19,354        7.1%
Operations and support                                                    18,091        5.9%              17,250        6.3%
General and administrative                                                26,168        8.5%              19,307        7.1%
Technology                                                                 5,293        1.7%               3,497        1.3%
Depreciation and amortization                                              2,079        0.7%               2,123        0.8%

Operating income                                                 $        14,541        4.7%           $  14,228        5.2%


Revenues. Our revenues were $308,900 for the three months ended March 31, 2022
compared to $272,776 for the three months ended March 31, 2021. The increase of
$36,124 (13.2%) was primarily related to an increase of $36,009 in our
commission and other brokerage income, which increased as a result of increased
revenues from existing home sales caused by home-buying trends in our markets
that began in the fourth quarter of 2020 as markets began reopening from
lockdowns associated with the COVID-19 pandemic and vaccinations became
available.

Our revenues from commission and other brokerage income were $295,109 for the
three months ended March 31, 2022 compared to $259,100 for the three months
ended March 31, 2021, an increase of $36,009 because of continuing home buying
trends in our New York City, Florida and Colorado regions as well as our
expansion into the Texas region. In 2022, our commission and other brokerage
income generated from the sales of existing homes increased by $22,253 in New
York City, $10,806 in the West region, which includes Texas and Colorado, $5,271
in the Southeast region and declined by $6,171 in the Northeast region, which
excludes New York City, in each case compared to the 2021 period. In addition,
our revenues from Development Marketing increased by $3,850 in 2022 compared to
2021.

Operating Expenses. Our operating expenses were $294,359 for the three months
ended March 31, 2022 compared to $258,548 for the three months ended March 31,
2021, an increase of $35,811, due to increases in real estate brokerage
commissions, general and administrative expenses associated with additional
expenses from the Texas region, which we began consolidating in August 2021, and
expenses associated with technology. The primary components of operating
expenses are described below.

Real Estate Agent Commissions. As a result of our growth in commissions and
other brokerage income, our real estate agent commissions expense was $223,422
for the three months ended March 31, 2022 compared to $197,017 for the three
months ended March 31, 2021, an increase of $26,405 (13.4%). Real estate agent
commissions expense, as a percentage of revenues, were flat (72.3% for the three
months ended March 31, 2022 compared to 72.2% for the three months ended March
31, 2021).

Sales and Marketing. Sales and marketing expenses were $19,306 for the three
months ended March 31, 2022 compared to $19,354 for the three months ended March
31, 2021.

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Operations and support. Operations and support expenses were $18,091 for the
three months ended March 31, 2022 compared to $17,250 for the three months ended
March 31, 2021. The increase related to our sales offices gradually reopening
during 2021.

General and administrative. General and administrative expenses were $26,168 for
the three months ended March 31, 2022 compared to $19,307 for the three months
ended March 31, 2021. The increase in expenses was the result of the expansion
into the Texas region, incremental expenses to support business growth, the
gradual reopening of administrative offices during 2021 and non-cash stock
compensation.

Technology. Technology expenses were $5,293 for the three months ended March 31,
2022 compared to $3,497 for the three months ended March 31, 2021. The increase
related to refinements of our cloud-based "MyDouglas" agent portal and our
StudioPro agent concierge service in 2022, as well as the introduction two new
packaged applications to automate our payment processing and streamlined escrow
services in 2022.

Operating income. Operating income was $14,541 for the three months ended March
31, 2022 compared to $14,228 for the three months ended March 31, 2021. The
increase in operating income is primarily associated with the net impact of
increased commission and other brokerage revenues offset by expenses associated
with non-cash stock compensation, expansion into new markets and technology.

Businesses and others.


Corporate and Other loss. The operating loss at the Corporate and Other segment
was $6,662 for the three months ended March 31, 2022 due to expenses, including
non-cash stock compensation, associated with Douglas Elliman operating as a
standalone publicly traded company after the Distribution.

Summary of PropTech Investments


As of March 31, 2022, New Valley Ventures had investments (at a carrying value)
of approximately $7,396 in PropTech companies. This amounts to approximately 1%
of the value of Douglas Elliman's total assets, which totaled approximately $588
million, as of March 31, 2022. During the three months ended March 31, 2022 we
made the following new PropTech investments:

?Envoy: a shared mobility company that sets up fleets of electric vehicles that can be shared by residents of a condominium, hotel or shared space.

?Audience: A subscription-based platform built around proprietary robotic arms that generate handwritten notes on behalf of sales-oriented professionals.

Cash and capital resources


Cash and cash equivalents declined by $15,429 and increased by $13,375 for the
three months ended March 31, 2022 and 2021, respectively. Restricted Cash, which
is included in cash and cash equivalents, was $9,768, and $12,697 as of
March 31, 2022 and 2021, respectively.

Cash used in operations was $6,780 for the three months ended March 31, 2022
while cash provided from operations was $13,993 for the three months ended March
31, 2021. The decline in the 2022 period related to lower operating income
associated with an increase in payments of discretionary compensation in 2022
compared to 2021, because of higher compensation accruals at December 31, 2021
compared to the previous year, and the inclusion of expenses associated with
operating as a standalone public company in 2022.

Cash used in investing activities was $1,815 and $597 for the three months ended
March 31, 2022 and 2021, respectively. For the three months ended March 31,
2022, cash used in investing activities was comprised of the purchase of
investments of $926 in the Company's PropTech business, capital expenditures of
$849, and investments of $100 in equity-method investments. This was offset by
$60 of distributions from equity-method investments. For the three months ended
March 31, 2021, cash used in investing activities was comprised of capital
expenditures of $597.

Our investment philosophy is to maximize return on investment using a reasonable expectation of return when investing in equity method investments and PropTech investments, as well as when making capital expenditures.

Cash used in financing activities was $6,834 and $21 for the three months ended
March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022cash flows used in financing activities consisted of dividends and distributions on the common shares of $4,062repayment of the debt of $3,129and price supplements, related to the acquisitions, $18. these

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amounts were offset by contributions from non-controlling interest associated
with Douglas Elliman Texas of $375. For the three months ended March 31, 2021,
cash used in financing activities was comprised of earn-out payments of $21.

In March 2022, we paid a cash dividend of $0.05 per share. We contemplate
continuing to pay a quarterly cash dividend of $0.05 per share, subject to
approval of our Board of Directors, which would result in annual dividends of
approximately $16,200. We had cash and cash equivalents of approximately
$203,669 as of March 31, 2022 and, in addition to 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. We may
acquire or seek to acquire additional operating businesses through merger,
purchase of assets, stock acquisition or other means, or to make or seek to make
other investments, which may limit our liquidity otherwise available.

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 all market risk sensitive financial
instruments.

New accounting statements

Refer to Note 1, Summary of Significant Accounting Policies, to our financial statements for additional information on new accounting pronouncements.

Legislation and regulations


There are no material changes from the Legislation and Regulation section set
forth in Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," of our Annual Report on Form 10-K for the year ended
December 31, 2021.


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this report 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 to ‘, ‘may be’, ‘goal’, ‘opportunistic’, ‘plan’, ‘potential’, ‘predict’, ‘project’, ‘prospects’, ‘seek’ or ‘will’ 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 thereto, whether due to acts of war and terrorism or otherwise,

• government regulations and policies,

• adverse changes in global, national, regional and local economic and market conditions, including those related to pandemics and health crises,

• our ability to effectively manage the impacts of any government mandated or encouraged suspension of our business operations,

• the impacts of the Tax Cuts and Jobs Act of 2017, including the impact on the markets of our activity,

• effects of industrial competition,

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•severe weather events or natural or man-made disasters, including increasing
the severity or frequency of such events due to climate change or otherwise, or
other catastrophic events may disrupt our business and have an unfavorable
impact on home sale activity,

•the level of our expenses, including our business expenses as a publicly traded stand-alone company,

• tax exemption for Distribution,

• our lack of operating history as a public company and the costs associated with being an independent public company,


•potential dilution to holders of our common stock as a result of issuances of
additional shares of common stock to fund our financial obligations and other
financing activities,

• failure by us or the Vector Group to perform our obligations under the Transition Services Agreement or other agreements entered into in connection with the Distribution; and

•the additional factors described under “Risk Factors” in our Annual Report on Form 10-K for the December 31, 2021 filed with the Security and Exchange Commission as updated in this report.


Further information on the risks and uncertainties to our business include the
risk factors discussed above in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and under Item 1A, "Risk Factors"
in our Annual Report on Form 10-K for the year ended December 31, 2021 filed
with the Securities and Exchange Commission.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there is a risk that these expectations will not be achieved and that any deviations could be material. Forward-looking statements speak only as of the date they are made.

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