EXP World Holdings Inc

Previous wording

Beginning in the second quarter of 2022, several macroeconomic conditions have been contributing to the slowdown in the U.S. residential real estate market, which directly impacts our business and financial results. These conditions include, but are not limited to rising inflation, rising mortgage interest rates driven by the Federal Reserve Board increasing federal funds rate, volatility in the U.S. equity markets and continued unrest around the world.

Current wording

Over the last several quarters, several macroeconomic conditions have been contributing to the slowdown in the U.S. residential real estate market, which directly impacts our business and financial results. These conditions include, but are not limited to rising inflation, rising mortgage interest rates driven by the Federal Reserve Board increasing federal funds rate, volatility in the U.S. equity markets and continued unrest around the world.

Previous wording

In the first quarter of 2024, the continued increase of mortgage rates and higher home prices have contributed to a rise in inventory levels, as measured in months of supply. According to NAR, inventory of existing homes for sale in the U.S. was 1.1 million as of March 2024 (preliminary) compared to 970,000 at the end of March 2023. This represents 3.2 months of inventory in 2024 compared to 2.7 months of inventory in the prior year.

Current wording

During the second quarter of 2024, the continued increase of mortgage rates and higher home prices have contributed to a rise in inventory levels, as measured in months of supply. According to NAR, inventory of existing homes for sale in the U.S. was 1,320,000 as of June 2024 (preliminary) compared to 1,070,000 at the end of June 2023. This represents 4.1 months of inventory in 2024 compared to 3.1 months of inventory in the prior year.

Previous wording

Persistently high mortgage rates during the first quarter of 2024 continue to negatively impact the demand for homebuying. Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.8% in March 2024 compared to 6.3% in March 2023.

Current wording

Persistently high mortgage rates during the first quarter of 2024 continue to negatively impact the demand for homebuying. Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.86% in June 2024 compared to 6.71% in June 2023.

Previous wording

According to NAR, the composite housing affordability index decreased to 103.0 for February 2024 (preliminary) from 109.3 for February 2023. When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20% down payment and ability to qualify for a mortgage. The housing affordability index has been declining year over year due to mortgage rate conditions and higher average home prices driven by constrained inventory levels.

Current wording

According to NAR, the composite housing affordability index decreased to 93.1 for May 2024 (preliminary) from 99.6 for May 2023. When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20% down payment and ability to qualify for a mortgage. The housing affordability index has been declining year over year due to mortgage rate conditions and higher average home prices driven by constrained inventory levels.

Previous wording

According to NAR, existing home sale transactions decreased to an annual rate of 4.2 million in March 2024 (preliminary) compared to 4.4 million in March 2023, a decrease of 3.7%.

Current wording

According to NAR, existing home sale transactions decreased to an annual rate of 3.89 million in June 2024 (preliminary) compared to 4.11 million in June 2023, a decrease of 5.4%.

Previous wording

According to NAR, the nationwide existing home sales average price for March of 2024 (preliminary) was $393,500 compared to $375,300 in March 2023, an increase of 4.8%.

Current wording

According to NAR, the nationwide existing home sales average price for June 2024 (preliminary) was $426,900 compared to $410,100 in June 2023, an increase of 4.1%.

Previous wording

aNPS is a scale-based measure of customer satisfaction and an aNPS above 50 is considered excellent. aNPS plays a crucial role in attracting and retaining agents and teams, especially during a period marked by market contraction, due to lower transaction volumes and higher mortgage rates. Despite the challenging market conditions, the Company’s aNPS was 73 in the first quarter of 2024 compared to 70 in the first quarter of 2023, due toour continuous investment in agent onboarding, expert care, transaction processing process and technology.

Current wording

aNPS is a scale-based measure of customer satisfaction and an aNPS above 50 is considered excellent. aNPS plays a crucial role in attracting and retaining agents and teams, especially during a period marked by market contraction, due to lower transaction volumes and higher mortgage rates. Despite the challenging market conditions, the Company’s aNPS was 76 and 75 for the three and six months ended June 30, 2024, respectively compared to 72 and 71 for the same periods of 2023, respectively, due to our continuous investment in agent onboarding, expert care, transaction processing process and technology.

Previous wording

The number of agents declined 2% in the first quarter of 2024, compared to the first quarter of 2023, as we continue to off board less productive agents. However, we are committed to retaining our most productive agents in the United States and Canada through the execution of our growth strategies and the end-to-end suite of services we offer our agents.

Current wording

The number of agents declined (1)% in the first six months of 2024, compared to the same period of 2023, as we continue to off board less productive agents. However, we are committed to retaining our most productive agents in the United States and Canada through the execution of our growth strategies and the end-to-end suite of services we offer our agents.

Previous wording

Our real estate sales transactions and volume typically fluctuate with changes in the market’s existing home sales transactions as reported by NAR; however, company-specific initiatives influence the transaction volume and productivity of our agents. In the first quarter of 2024, compared to the first quarter of 2023, our real estate sales transactions increased 5% due to our agents’ productivity, which more than offset the decline in existing home sales in the U.S. as reported by the NAR. Transaction volume increased 12% due to increased transactions and increased home sales prices.

Current wording

Our real estate sales transactions and volume typically fluctuate with changes in the market’s existing home sales transactions as reported by NAR; however, company-specific initiatives influence the transaction volume and productivity of our agents. For the three months and six months ended June 30, 2024, compared to the same periods of 2023, our real estate sales transactions increased 1% and 3%, respectively, due to our agents’ productivity, which more than offset the decline in existing home sales in the U.S. as reported by the NAR. For the three months and six months ended June 30, 2024, compared to the same periods of 2023, transaction volume increased 7% and 9%, respectively, due to increased transactions and home sale prices.

Previous wording

Real estate per transaction cost is measured as selling, general and administrative, sales and marketing and technology and development expenses resulting from our services that directly support our agents and brokers, divided by total transactions (real estate and other). Real estate per transaction cost increased 6% in the first quarter of 2024 compared to the first quarter of 2023, primarily due to strategic investments in personnel to support increased transaction volumes and agent NPS, and increased severance and employee-related expenses and legal expenses related to the antitrust lawsuits.

Current wording

Real estate per transaction cost is measured as selling, general and administrative, sales and marketing and technology and development expenses resulting from our services that directly support our agents and brokers, divided by total transactions (real estate and other). Real estate per transaction cost decreased (8)% and (1)% for the three months and six months ended June 30, 2024, respectively, primarily due to increased transactions and lower costs due to cost containment initiatives, partially offset by legal expenses related to the antitrust lawsuits.

Previous wording

Revenues represent the commission revenue earned by the Company for closed brokerage real estate transactions. In the first quarter of 2024, compared to the first quarter of 2023, the Company’s revenue increased due to increased real estate transactions driven by increased agent productivity and higher home sales prices, which more than offset declines in the U.S. real estate markets. Our revenues also increased due to increased international production in previously launched markets.

Current wording

Revenues represent the commission revenue earned by the Company for closed brokerage real estate transactions. For the three months and six months ended June 30, 2024, compared to same periods of 2023, the Company’s revenue increased due to increased real estate transactions driven by increased agent productivity and higher home sales prices, which more than offset declines in the U.S. real estate markets. Our revenues also increased due to increased international production in previously launched markets.

Previous wording

The operating loss in the first quarter of 2024 of $18.2 million compared to operating profit of $0.2 million in the first quarter of 2023, reflects the litigation contingency accrual of $16 million, and increased legal expenses related to the antitrust lawsuits, as well as increased severance and employee-related expenses, partially offset by increased revenues, net of agent commissions and other agent-related costs.

Current wording

months ended June 30, 2024 of $0.4 million compared to operating profit of $12.8 million in the same period of 2023 reflects the litigation contingency accrual of $16 million, and increased legal expenses related to the antitrust lawsuits, and increased severance and employee-related expenses, partially offset by increased revenues, net of agent commissions and other agent-related costs.

Previous wording

Management reviews Adjusted EBITDA, which is a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. Adjusted EBITDA, for the three months ended March 31, 2024 was $11.0 million compared to $14.6 million at March 31, 2023. The decrease in adjusted EBITDA reflects increased legal expenses related to the antitrust lawsuits, as well as increased severance and employee-related expenses, partially offset by increased revenues, net of agent commissions and other agent-related costs.

Current wording

Management reviews Adjusted EBITDA, which is a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. Adjusted EBITDA, for the three months ended June 30, 2024 was $32.8 million compared to $26.8 million for the three months ended June 30, 2023. The increase in adjusted EBITDA reflects increased revenues, net of agent commissions and other agent-related costs, and lower operating costs, partially offset by legal expenses related to the antitrust lawsuits. Adjusted EBITDA for the six months ended June 30, 2024 was $43.9 million compared to $41.5 million for the same period of 2023. The increase in adjusted EBITDA reflects increased revenues, net of agent commissions and other agent-related costs, partially offset by legal expenses related to the antitrust lawsuits, as well as increased severance and employee-related expenses.

Previous wording

Total revenues increased 11% as a result of an increase in real estate transactions compared to the same period in 2023, because of the unique productivity of our agents, which more than offset declines in the U.S. real estate market in the first quarter of 2024. Our revenue also increased due to increased home sales prices.

Current wording

Total revenues increased 5% as a result of an increase in real estate transactions compared to the same period in 2023, because of the superior productivity of our agents, which more than offset declines in the U.S. real estate market in the second quarter of 2024. Our revenue also increased due to increased home sales prices.

Previous wording

Commissions and other agent-related costs increased 11% primarily because of the increase in real estate transactions and increased home sales prices. Commissions and other agent-related costs include sales commissions, revenue share and stock-based compensation paid to our agents.

Current wording

Commissions and other agent-related costs increased 5% primarily because of the increase in real estate transactions and increased home sales prices. Commissions and other agent-related costs include sales commissions, revenue share and stock-based compensation paid to our agents.

Previous wording

The Company’s provision for income tax (benefit) amounted to ($3.4) million and ($2.6) million for the three months ended March 31, 2024 and 2023, respectively, which represented effective tax rates of positive 18% and 238%, respectively. The provision for income tax (benefit) expense was primarily attributable to income (loss) from continuing and discontinuing operations, deductible stock-based compensation shortfalls and research and development credit.

Current wording

The Company’s provision for income tax expense from continuing operations amounted to $8.1 million and $2.6 million for the three months ended June 30, 2024 and 2023, respectively, which represented effective tax rates of positive 40.9% and 18.8%, respectively. The provision for income tax expense was primarily attributable to deductible stock-based compensation shortfalls, research and development credit and non-deductible executive compensation.

Previous wording

General and administrative expenses increased 15% due to increased severance and employee-related expenses and increased legal expenses related to the antitrust lawsuits. General and administrative expenses include costs related to wages, employee stock compensation, and other general overhead expenses.

Current wording

General and administrative expenses increased 4% due to increased severance and employee-related expenses and increased legal expenses related to the antitrust lawsuits, such increases were partially offset by lower costs related to the shareholders summit in 2024, since it was conducted virtually. General and administrative expenses include costs related to wages, employee stock compensation, and other general overhead expenses.

Previous wording

Technology and development expenses increased 5% and include employee and other costs related to the maintenance and development of the technology used by our agents and our employees.

Current wording

Technology and development expenses increased 2% and include employee and other costs related to the maintenance and development of the technology used by our agents and our employees.

Previous wording

Sales and marketing expenses increased 7% due to advertising in the U.S. and Canada residential real estate market.

Current wording

Sales and marketing expenses increased 7% due to increased advertising in the U.S. and Canada residential real estate market.

Previous wording

Other (income) increased 95% primarily due to increased interest income when compared to the first quarter of 2023. Other (income) expense include interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

Current wording

Other (income) increased (43%) primarily due to increased interest income when compared to the first quarter of 2023. Other (income) expense include interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

Previous wording

International Realty revenues increased 45% in the first quarter of 2024 compared to the same period in 2023 primarily due to increased real estate transactions driven by increased production in previously launched markets. Adjusted EBITDA improved 9% in the first quarter of 2024 compared to the same period in 2023 due to increased revenue which was partially offset by increased selling, general and administrative expenses to support the incremental production in existing operations.

Current wording

International Realty revenues increased 69% in the second quarter of 2024 compared to the same period in 2023 primarily due to increased real estate transactions driven by improved agent production in previously launched markets. Adjusted EBITDA improved 37% in the second quarter of 2024 compared to the same period in 2023 due to increased revenue and improved business efficiencies and reduced costs.

Previous wording

North American Realty revenues increased 11% in the first quarter of 2024 compared to the same period in 2023 primarily due to increased real estate transactions and increased home sales prices, despite the challenging market in the U.S. residential real estate markets. Adjusted EBITDA decreased (16)% due to increased legal expenses, increased severance and employee-related expenses, partially offset by increased revenues, net of agent commissions and other agent-related costs.

Current wording

North American Realty revenues increased 7% for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to increased real estate transactions and increased home sales prices, despite the challenging market in the U.S. residential real estate markets. Adjusted EBITDA increased 2% due to increased revenues, net of agent commissions and other agent-related costs, partially offset by increased legal expenses, increased severance and employee-related expenses.

Previous wording

Other Affiliated Services revenues increased 7% due to Virbela Frame® revenue, which more than offset lower SUCCESS® revenues. Adjusted EBITDA decreased (13)% due to increases in selling, general and administrative expenses related to investing in business initiatives.

Current wording

Other Affiliated Services revenues increased 18% due to Virbela Frame® revenue, which more than offset lower SUCCESS® revenues. Adjusted EBITDA improved 5% due to increased revenues, partially offset by increases in selling, general and administrative expenses related to investing in business initiatives.

Previous wording

We define the non-U.S. GAAP financial measure of Consolidated Adjusted EBITDA to mean net income (loss) from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, litigation contingency, impairment charges, litigation contingency expenses, stock-based compensation expense and stock option expense. Adjusted Segment EBITDA is defined as operating profit (loss) from continuing operations plus depreciation and amortization and stock-based compensation expenses. We believe that Consolidated Adjusted EBITDA and Adjusted Segment EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted Segment EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted Segment EBITDA. In particular, we believe the exclusion of stock and stock option expenses, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations.

Current wording

amortization and stock-based compensation expenses. We believe that Consolidated Adjusted EBITDA and Adjusted Segment EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted Segment EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted Segment EBITDA. In particular, we believe the exclusion of stock and stock option expenses, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations.

Previous wording

Our primary sources of liquidity are our cash and cash equivalents on hand and cash flows generated from our business operations. Our ability to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to fund our operations and capital expenditures, repurchase our common stock, and meet obligations as they become due. Our cash and cash equivalents balances and cash flows from operations have strengthened primarily due to

Current wording

Our primary sources of liquidity are our cash and cash equivalents on hand and cash flows generated from our business operations. Our ability to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to fund our operations and capital expenditures, repurchase our common stock, and meet obligations as they become due. Our cash and cash equivalents balances and cash flows from operations have strengthened primarily due to transaction volume growth and improved cost leverage over the prior five years, attributable to the expansion of our independent agent and broker network and, to a lesser extent, increased average prices of home sales.

Previous wording

We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including our level of investment in technology, our rate of growth into new markets, and cash used to repurchase shares of the Company’s common stock. Our capital requirements may be affected by factors which we cannot control such as the changes in the residential real estate market, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next twelve months.

Current wording

We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including our level of investment in technology, our rate of growth into new markets, and cash used to repurchase shares of the Company’s common stock. Our capital requirements may be affected by factors which we cannot control such as the changes in the residential real estate market, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate. In order to support and achieve our future

Previous wording

For the three months ended March 31, 2024, net cash provided by operating activities increased $4.5 million compared to the same period in 2023. The increase in operating activities was primarily driven by increased customer deposits, partially offset by the decrease in working capital.

Current wording

For the six months ended June 30, 2024, net cash provided by operating activities decreased ($22.4) million compared to the same period in 2023. The decrease in operating activities was primarily driven by decreased net income, agent equity stock compensation expense, and customer deposits, partially offset by favorable working capital changes.

Previous wording

For the three months ended March 31, 2024, net cash used in our investing increased primarily due to cash used for investments in our affiliates compared to 2023.

Current wording

For the six months ended June 30, 2024, net cash used in investing activities relates to cash used for purchases of property and equipment, acquisition of new business, and investments in affiliates and increased modestly compared to the same period of 2023.

Previous wording

For the three months ended March 31, 2024 and 2023 net cash flows used in financing activities primarily were related to stock repurchases and the payment of cash dividends.

Current wording

For the six months ended June 30, 2024 and 2023 net cash flows used in financing activities increased $5.5 million compared to the same period in 2023, primarily driven by increased stock repurchases and the payment of cash dividends.

Previous wording

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions, access new revenue streams, or otherwise complement or accelerate the growth of our existing operations. We may fund acquisitions or investments in complementary businesses with various sources of capital including existing cash balances and cash flow from operations.

Current wording

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions, access new revenue streams, or otherwise complement or accelerate the growth of our existing operations. We may fund acquisitions or investments in complementary businesses with various sources of capital including existing cash balances and cash flow from operations. Acquisitions during the first six months of 2024 have not had a material impact on cash flow.