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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-14 · 62 added, 29 removed, 142 unchanged (39% of the section changed)

1 unchanged sentence

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto and Management’s Discussion and Analysis included in our 2023 Annual Report on Form 10-K and our Condensed Consolidated Financial Statements and the notes thereto included elsewhere in this document.

Unless otherwise indicated, references to “2024” refer to the three months ended March 31, 2024 and references to “2023” refer to the three months ended March 31, 2023.

Unless otherwise indicated, references to “2024” refer to the three and six months ended June 30, 2024 and references to “2023” refer to the three and six months ended June 30, 2023.

The following discussion may contain forward-looking statements that reflect our plans and expectations.

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ParkX - Security & Other 19 ~1,500 hrs/week

% leased reflects Q124 delivery new office tower located in The Row at Reston Station.

Excluding this newly delivered property, the % leased for the Commercial portfolio is 93%.

% leased reflects Q124 delivery of a new office tower located in The Row at Reston Station.

Excluding this recently delivered property, the % leased for the Commercial portfolio is 93%.

In addition, we manage the following assets that are under construction and scheduled for delivery in the next 12 to 24 months:

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• 1 JW Marriott-branded hotel/condominium with 243 keys and 94 residential units representing a total of approximately 520,000 square feet;

• 1 commercial parking garages with approximately 1,300 spaces.

• 1 commercial parking garage with approximately 1,300 spaces.

Our development pipeline currently includes 5 commercial assets that represent approximately 1.5 million square feet, 6 residential assets with 2,599 units that represent approximately 2.8 million square feet, and 1 hotel that will include 140 keys.

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Anchor Portfolio

Name Status Description

Name Asset Status Description

Reston Station Operating +

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Other Portfolio Assets

Name Status Description

Name Asset Status Description

The Hartford Operating Acquired in 2019, this 211,000 square foot mixed-use building is located adjacent to the Clarendon Station on Metro's Orange Line and is the subject of a joint venture with DivcoWest and Comstock Partners, LC.

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provides an excellent opportunity for significant value enhancement through by-right entitlements for approximately 117 residential units

Investors X Operating Investment in Comstock Investors X, LC that owns legacy homebuilding assets that are currently being monetized through market-rate sales expected to be completed in 2024

Investors X Operating Investment in Comstock Investors X, LC that owns legacy homebuilding assets that are currently being monetized through market-rate sales that were completed in March 2024

Parking Operating Commercial parking garages & spaces managed by ParkX Management, LC located at affiliated properties and third-party locations

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The following tables set forth consolidated statement of operations data for the periods presented (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Revenue $ 10,753 $ 8,967 $ 21,391 $ 19,242

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Net income (loss) $ 946 $ 475 $ 1,856 $ 1,229

Comparison of the Three Months Ended March 31, 2024 and 2023

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes revenue by line of business (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

2024 2023 Change

5 unchanged sentences

Revenue increased 19.9% in 2024.

The $0.4 million comparative increase was primarily driven by the continued expansion of our managed portfolio that included 20 additional assets in 2024, driving a $0.5 million, or 44.5%, increase in recurring property management fee-based revenue and a corresponding $0.2 million increase in reimbursable staffing charges.

Partially offsetting the revenue increase was a $0.3 million net decrease in supplemental revenue driven by significant finders' fees associated with 2023 leasing activity.

The $1.8 million comparative increase was primarily driven by a $1.2 million, or 103.3%, increase in recurring fee-based revenue from our property and parking management subsidiaries that stemmed from the continued expansion of our managed portfolio.

Also contributing to the increase was a $0.3 million net increase in supplemental leasing and development fees due to increased activity compared to 2023.

Operating costs and expenses

The following table summarizes operating costs and expenses (in thousands):

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2024 2023 $ %

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Operating costs and expenses increased 14.4% in 2024.

The $0.5 million increase was primarily due to a $0.3 million net increase in personnel expenses stemming from increased headcount and employee compensation, as well as other minor increases in billable costs that stem from our overall managed portfolio growth.

The $1.2 million comparative increase was primarily due to a $0.9 million net increase in personnel expenses stemming from increased headcount and employee compensation and a $0.2 million increase in reimbursable expenses.

Other income (expense)

The following table summarizes other income (expense) (in thousands):

Three Months Ended March 31, Change

Three Months Ended June 30, Change

2024 2023 $ %

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Gain (loss) on real estate ventures (101) (68) (33) 48.5 %

Other income (expense), net 22 — 22 N/M

Other income (expense), net 11 47 (36) (76.6) %

Total other income (expense) $ 76 $ (21) $ 97 (461.9) %

Other income (expense) changed by $0.1 million in 2024, primarily driven by a $0.2 million net increase in interest income stemming from interest earned on money market sweep accounts that were not active in 2023, partially offset by a combined $0.1 million increase in expense stemming from a net mark-to-market valuation decrease from equity method investments in real estate ventures and a comparative decrease in other income.

Provision for income tax was $0.4 million in 2024, compared to $0.1 million in 2023.

The $0.3 million increase primarily stems from a $0.7 million increase in pre-tax income as well as a slightly higher annualized estimated tax rate in the current period.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes revenue by line of business (in thousands):

Six Months Ended June 30,

2024 2023 Change

Amount % Amount % $ %

Asset management $ 12,246 57.2 % $ 11,896 61.8 % $ 350 2.9 %

Property management 5,448 25.5 % 5,126 26.6 % 322 6.3 %

Parking management 3,697 17.3 % 2,220 11.6 % 1,477 66.5 %

Total revenue $ 21,391 100.0 % $ 19,242 100.0 % $ 2,149 11.2 %

Revenue increased 11.2% in 2024.

The $2.1 million comparative increase was primarily driven by a $1.7 million, or 73.5%, increase in recurring fee-based revenue from our property and parking management subsidiaries that stemmed primarily from the continued expansion of our managed portfolio.

Operating costs and expenses

The following table summarizes operating costs and expenses (in thousands):

Six Months Ended June 30, Change

2024 2023 $ %

Cost of revenue $ 17,792 $ 16,004 $ 1,788 11.2 %

Selling, general, and administrative 1,081 1,136 (55) (4.8) %

Depreciation and amortization 141 138 3 2.2 %

Total operating costs and expenses $ 19,014 $ 17,278 $ 1,736 10.0 %

Operating costs and expenses increased 10.0% in 2024.

The $1.7 million increase was primarily due to a $1.2 million net increase in personnel expenses stemming from increased headcount and employee compensation and a $0.3 million increase in reimbursable expenses.

Other income (expense)

The following table summarizes other income (expense) (in thousands):

Six Months Ended June 30, Change

2024 2023 $ %

Interest income $ 307 $ — $ 307 N/M

Gain (loss) on real estate ventures (294) (479) 185 (38.6) %

Other income (expense), net 33 47 (14) (29.8)%

Total other income (expense) $ 46 $ (432) $ 478 N/M

Other income (expense) changed by $0.4 million in 2024, primarily due to a $0.2 million improvement in mark-to-market valuation impacts from equity method investments in real estate ventures and a $0.1 million increase in interest income stemming from interest earned on money market sweep accounts that were not active in 2023.

Provision for income tax was $0.2 million in both 2024 and 2023.

The effective tax rates for the three months ended March 31, 2024 and 2023 differ from the U.S.

federal statutory tax rate of 21% primarily due to state income taxes and the impact of stock compensation shortfall/windfall adjustments.

Other income (expense) changed by $0.5 million in 2024, primarily due to a $0.3 million increase in interest income stemming from interest earned on money market sweep accounts that were not active in 2023 and a $0.2 million improvement in mark-to-market valuation impacts from equity method investments in real estate ventures.

Provision for income tax was $0.6 million in 2024, compared to $0.3 million in 2023.

The $0.3 million increase primarily stems from a $0.9 million increase in pre-tax income as well as a slightly higher annualized estimated tax rate in the current period.

Non-GAAP Financial Measures

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The following table presents a reconciliation of net income (loss), the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted EBITDA (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ 946 $ 475 $ 1,856 $ 1,229

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Adjusted EBITDA $ 1,601 $ 1,027 $ 3,087 $ 2,653

The $0.1 million decrease in Adjusted EBITDA is primarily driven by higher supplemental revenue from leasing finders' fees in 2023, partially offset by an increase in recurring fee-based property management revenue in the current period.

The increases in Adjusted EBITDA for the three and six months ended June 30, 2024 are primarily driven by the significant increases in recurring fee-based property and parking management revenue in 2024.

Liquidity and Capital Resources

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We assess our liquidity in terms of our cash and cash equivalents on hand and the ability to generate cash to fund our operating activities.

Our principal sources of liquidity as of March 31, 2024 were our cash and cash equivalents of $16.2 million and our $10.0 million of available borrowings on our credit facility.

Our principal sources of liquidity as of June 30, 2024 were our cash and cash equivalents of $17.4 million and our $10.0 million of available borrowings on our credit facility.

Significant factors which could affect future liquidity include the adequacy of available lines of credit, cash flows generated from operating activities, working capital management and investments.

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The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

2024 2023 Change ($)

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Operating Activities

The $0.3 million decrease in net cash used in operating activities was primarily driven by a $0.4 million incremental cash inflow stemming from changes to our net working capital, partially offset by an immaterial decrease in net income from continuing operations after adjustments for non-cash items.

The net working capital increase was primarily influenced by increased accounts receivable collections and non-qualified deferred compensation accruals, partially offset by a comparative decrease in accounts payable and accrued liabilities in the current period.

Our first quarter operating cash activity in both periods presented resulted in a net use of cash due to the scheduled payout of year-end bonus accruals.

The $1.4 million decrease in net cash used in operating activities was primarily driven by a $0.7 million increase in net income after adjustments for non-cash items and a $0.7 million incremental cash inflow stemming from changes to our net working capital.

The net working capital increase was primarily influenced by increased accounts receivable collections and non-qualified deferred compensation accruals.

Our operating cash activity in both periods presented resulted in a net use of cash due primarily to the scheduled first quarter payout of year-end bonus accruals.

Investing Activities

The $0.1 million decrease in net cash provided investing activities was primarily driven by a $0.3 million increase in purchases of securities to fund non-qualified deferred compensation plan liabilities and a $0.1 million increase in purchases of fixed assets, partially offset by a $0.3 million increase in distributions received from investments in real estate ventures.

Net cash provided by investing activities was relatively flat in 2024 due to a $0.3 million increase in purchases of securities to fund non-qualified deferred compensation plan liabilities that was offset by a $0.3 million increase in distributions received from investments in real estate ventures.

Financing Activities

The $0.2 million increase in n et cash used in financing activities was primarily driven by a $0.2 million increase in cash paid for taxes related to the net share settlement of equity awards.

The $0.1 million increase in n et cash used in financing activities was due to a $0.1 million increase in cash paid for taxes related to the net share settlement of equity awards.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis