What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-07-31 · 125 added, 139 removed, 196 unchanged (57% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025 (the “Quarterly Report”) and consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”).

The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025 (the “Quarterly Report”) and consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”).

Management’s Discussion and Analysis of Financial Conditions and Results of Operations (“MD&A”) contain forward-looking statements.

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We succeed when our real estate professionals succeed, and we remain focused on being the most agent-centric business on the planet.

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions and believe we are well-positioned to capture additional revenues from such solutions.

Acquisitions have not been a material element of our ongoing business, but we continue to seek opportunities to expand and enhance our portfolio of solutions and believe we are well-positioned to capture additional revenues from such solutions.

Our strategy is to grow organically in North America and certain international markets by increasing our independent agent and broker network.

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residential real estate market, which directly impacts our business and financial results.

These conditions include, but are not limited to rising inflation, continued higher than average mortgage interest rates, volatility in the U.S.

equity markets,

changes in trade policy, including the imposition of new tariffs, and responses to such tariffs, and continued political unrest around the world.

These conditions include, but are not limited to rising inflation, continued higher mortgage interest rates, volatility in the U.S.

equity markets, changes in trade policy, including the imposition of new tariffs, and responses to such tariffs, and continued political unrest around the world.

While the current environment is challenging, the Company continues to believe it is well positioned to strengthen its competitive position over the long term.

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National Housing Inventory

During the second quarter of 2025, the continued higher mortgage rates and higher home prices have contributed to a rise in inventory levels, as measured in months of supply.

During the third quarter of 2025, the continued higher mortgage rates and higher home prices have contributed to a rise in inventory levels, as measured in months of supply.

According to National Association of Realtors (“NAR”), inventory of existing homes for sale in the U.S.

was 1.5 million as of June 2025 (preliminary) compared to 1.3 million at the end of June 2024.

was 1.55 million as of September 2025 (preliminary) compared to 1.36 million at the end of September 2024.

This represents 4.6 months of inventory in 2025 compared to 4.2 months of inventory in the prior year period.

Mortgage Interest Rates

While mortgage rates continue to be higher than historic averages and negatively impact the demand for homebuying, mortgage rates during the second quarter of 2025 declined slightly from the prior year period.

Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.77% in June 2025 compared to 6.86% in June 2024.

The current mortgage rates continue to negatively impact the demand for homebuying, however mortgage rates during the third quarter of 2025 declined from the second quarter of 2025.

Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.30% in September 2025 compared to 6.77% in June 2025.

The 30-year fixed rate mortgage was 6.08% in September 2024.

Housing Affordability Index

According to NAR, the composite housing affordability index increased slightly to 97.2 for May 2025 (preliminary) from 92.3 for May 2024.

According to NAR, the composite housing affordability index increased slightly to 100.5 for August 2025 (preliminary) from 99.1 for August 2024.

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.

Existing Home Sales Transactions and Prices

According to NAR, existing home sale transactions were flat at an annual rate of 3.93 million in June 2025 (preliminary) consistent with 3.93 million in June 2024.

According to NAR, the nationwide existing home median sales price for June 2025 (preliminary) was $435,300 compared to $426,900 in June 2024, an increase of 2.0%.

According to NAR, existing home sale transactions were at an annual rate of 4.06 million in September 2025 (preliminary) compared with 3.90 million in September 2024, an increase of 4.1%.

According to NAR, the nationwide existing home median sales price for September 2025 (preliminary) was $415,200 compared to $406,700 in September 2024, an increase of 2.1%.

Legal & Regulatory Environment

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The following table outlines the key business metrics that we periodically review to track the Company’s performance:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Real estate sales transactions

Real estate sales volume

$ 145,231,091

$ 139,869,084

Other real estate transactions

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(1) Adjusted EBITDA is not a measurement of our financial performance under generally accepted accounting principles in the U.S.

GAAP”) and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income, or any other measures derived

in accordance with U.S.

GAAP”) and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income, or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations and a discussion of why we believe Adjusted EBITDA provides useful information to investors, see “Non-U.S.

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aNPS plays a crucial role in attracting and retaining agents and teams, especially during a period marked by continued market challenges and higher mortgage rates.

Despite the challenging market conditions, the Company’s aNPS was 77 and 78 for the three months and six months ended June 30, 2025, respectively, compared to 76 and 75 for the same periods of 2024, respectively.

Despite the challenging market conditions, the Company’s aNPS was 75 and 76 for the three and nine months ended September 30, 2025, respectively, compared to 76 and 75 for the same periods of 2024, respectively.

We remain focused on empowering our agents, increasing their productivity, and maintaining strong engagement through our agent-centric initiatives.

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One of our key strengths is attracting real estate agents and broker professionals that contribute to our growth.

The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general including interest rates, declining transaction volume in the U.S., and industry practice changes.

The number of agents declined (5)% in the first six months of 2025, compared to the same period of 2024, as we continue to off board less productive agents.

However, we are committed to retaining our most productive agents in the U.S.

The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general including interest rates, transaction volume trends in the U.S., and industry practice changes.

The number of agents declined (2)% in the first nine months of 2025, compared to the same period of 2024, however, the decline in agents has continued to slow over the last few quarters.

We remain committed to retaining our most productive agents in the U.S.

and Canada through the execution of our growth strategies and the end-to-end suite of services we offer our agents.

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however, company-specific initiatives influence the transaction volume and productivity of our agents.

For the three months and six months ended June 30, 2025, compared to the same periods of 2024, our real estate sales transactions decreased (1.7)% and (1.9%), respectively.

For the three months and six months ended June 30, 2025, compared to the same periods of 2024, transaction volume increased 1% and 2%, respectively, due to increased home sale prices, which offset our decline in transaction volumes.

For the three and nine months ended September 30, 2025, compared to the same periods of 2024, our real estate sales transactions increased 3.1% and decreased (0.1%), respectively.

For the three and nine months ended September 30, 2025, compared to the same periods of 2024, transaction volume increased 6.5% and 3.8%, respectively.

The improvements in transactions and volume are due to increased home sale prices, and increased agent productivity.

Other real estate transactions

Other real estate transactions are recorded for leases, rentals and referrals that are undertaken by our agents and brokers.

The decrease in other real estate transactions for the three months and six months ended June 30, 2025 compared to the same periods of 2024 reflects the challenging market conditions.

The decrease in other real estate transactions for the three and nine months ended September 30, 2025 compared to the same periods of 2024 reflects the challenging market conditions.

Real estate per transaction cost

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 sales and other).

Real estate per transaction cost increased 27% and 20% for the three and six months ended June 30, 2025, respectively, compared to the same periods of 2024, primarily due to increased personnel and technology costs, as well as the lower number of real estate transactions in 2025.

Real estate per transaction cost increased 5.9% and 14.9% for the three and nine months ended September 30, 2025, respectively, compared to the same periods of 2024, primarily due to increased personnel and technology costs, such costs have been moderating in the third quarter of 2025.

Revenues represent the commission revenue earned by the Company for closed brokerage real estate transactions.

The Company’s revenues increased 1% for both the three and six months ended June 30, 2025, compared to same periods of 2024, primarily due to higher home sales prices in North America and increased international production, which more than offset decreased real estate transactions in North American Realty.

Operating (Loss) Income

Operating loss in the second quarter of 2025 was ($2.4) million compared to operating income of $18.5 million in the second quarter of 2024.

Operating loss for the six months ended June 30, 2025 was ($12.8) million compared to operating income of $0.4 million in the first six months of 2024.

Operating income in the first six months of 2024 included the litigation contingency accrual of $16 million.

The operating loss in the first six months of 2025 reflects increased agent commissions and other agent-related costs due to sales commissions capping and lower fees from lower number of agents, and higher operating costs related to personnel, litigation and technology costs.

The Company’s revenues increased 6.9% and 3.2% for the three and nine months ended September 30, 2025, respectively, compared to same periods of 2024, primarily due to higher home sales prices in North America and increased international production, and improved productivity in North America for the third quarter of 2025.

Gross profit in the third quarter of 2025 was $86.2 million compared to $87.7 million in the third quarter of 2024.

Gross profit for the nine months ended September 30, 2025 was $255.0 million compared to $263.5 million in the first nine months of 2024.

Gross profit decreased in 2025 due to increased agent commissions and other agent-related costs due to sales commission capping and lower fees from the lower number of agents.

Operating Income (Loss)

Operating income in the third quarter of 2025 was $4.0 million compared to ($8.3) million in the third quarter of 2024.

Operating (loss) for the nine months ended September 30, 2025 was ($8.7) million compared to ($8.0) million in the first nine months of 2024.

Operating (loss) in the three and nine months of 2024 included the litigation contingency accrual of $18.0 million and $34 million, respectively.

The operating loss in the first nine months of 2025 reflects increased agent commissions and other agent-related costs due to sales commissions capping and lower fees from lower number of agents, and higher operating costs related to personnel, litigation and technology costs.

Adjusted EBITDA

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GAAP financial measure, to understand and evaluate our core operating performance.

Adjusted EBITDA, for the three months ended June 30, 2025 was $11.2 million compared to $32.8 million for the three months ended June 30, 2024.

Adjusted EBITDA, for the six months ended June 30, 2025 was $13.4 million compared to $43.9 million for the same period of 2024.

Adjusted EBITDA, for the three months ended September 30, 2025 was $17.7 million compared to $23.9 million for the three months ended September 30, 2024.

Adjusted EBITDA, for the nine months ended September 30, 2025 was $31.1 million compared to $67.8 million for the same period of 2024.

The decrease in Adjusted EBITDA in 2025 reflects increased agent commissions and other agent-related costs, and higher operating costs.

RESULTS OF OPERATIONS

The following table reflects the results of each of our operations during the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

The following table reflects the results of each of our operations during the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except share amounts and per share data)

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Total operating expenses

Operating (loss) income

Operating income (loss)

Other (income) expense

Total other (income) expense, net

Equity in (income) losses of unconsolidated affiliates

Total other (income) expense, net

(Loss) income before income tax expense

Income tax (benefit) expense

Net (loss) income from continuing operations

Net (loss) income from discontinued operations

Net (loss) income

Other (income), net

Equity in losses of unconsolidated affiliates

Other (income), net

Income (loss) before income tax expense

Income tax expense (benefit)

Net income (loss) from continuing operations

Net income (loss) from discontinued operations

Net income (loss)

Adjusted EBITDA (1)

Earnings per share

Basic, net (loss) income

Diluted, net (loss) income

Weighted average shares outstanding

(1) Adjusted EBITDA is not a measurement of our financial performance under U.S.

GAAP and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income or any other measures derived in accordance with U.S.

GAAP and should not be considered as an alternative to net income (loss) from continuing operations, operating income (loss) or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to net income (loss) from continuing operations and a discussion of why we believe Adjusted EBITDA provides useful information to investors, see “Non-U.S.

GAAP Financial Measures.”

The following tables and discussion reflect the changes in the results of each of our income statement line items between the three months and six months ended June 30, 2025 and 2024:

Three Months Ended June 30

Six Months Ended June 30

For both the three months and six months ended June 30, 2025 and 2024 total revenues increased 1% as a result of increased home sales prices and increased Canadian and international transactions, which more than offset a decline in real estate transactions in the U.S.

during such periods.

Three Months Ended June 30

Six Months Ended June 30

The following tables and discussion reflect the changes in the results of each of our income statement line items between the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30

Nine Months Ended September 30

For both the three and nine months ended September 30, 2025 total revenues increased, primarily as a result of U.S.

increased home sales prices, and increased productivity in the third quarter of 2025, and increased Canadian and international transactions.

Three Months Ended September 30

Nine Months Ended September 30

Commissions and other agent-related costs

For both the three months and six months ended June 30, 2025 and 2024 commissions and other agent-related costs increased 2% primarily due to increased sales commissions capping as well as lower agent fees from the lower number of agents.

For the three and nine months ended September 30, 2025 and 2024 commissions and other agent-related costs increased primarily due to increased sales commissions capping and lower agent fees from the lower number of agents.

Commissions and other agent-related costs include sales commissions, revenue share and stock-based compensation paid to our agents.

Three Months Ended June 30

Six Months Ended June 30

Three Months Ended September 30

Nine Months Ended September 30

General and administrative expenses

For the three months and six months ended June 30, 2025, general and administrative expenses increased 21% and 14%, respectively, compared to the same periods of 2024, due to increased employee-related and litigation expenses.

For the three and nine months ended September 30, 2025, general and administrative expenses increased compared to the same periods of 2024, due to increased employee-related and litigation expenses;

such expenses have been moderating in 2025.

General and administrative expenses include costs related to wages, employee stock-based compensation, and other general overhead expenses.

Costs Associated with Organizational Changes

During the quarter, the Company incurred approximately $6.0 million in expenses related to strategic investments and severance to streamline operations.

These actions are part of broader efforts to align the Company's cost structure with current revenue trends.

In parallel, we continue to encourage employees to drive efficiency by integrating artificial intelligence (“AI”) tools to enhance workforce productivity.

Three Months Ended June 30

Six Months Ended June 30

Three Months Ended September 30

Nine Months Ended September 30

Technology and development expenses

For the three months and six months ended June 30, 2025, technology and development expenses increased 22% and 18%, respectively, compared to the same periods of 2024, primarily due to increased technology expenses related to agent support.

For the three and nine months ended September 30, 2025, technology and development expenses increased compared to the same periods of 2024, primarily due to increased technology expenses related to agent support.

These expenses include employee-related costs and other expenses for the maintenance and development of the technology used by both our agents and our employees.

Three Months Ended June 30

Six Months Ended June 30

Three Months Ended September 30

Nine Months Ended September 30

Sales and marketing expenses

For the three months and six months ended June 30, 2025, sales and marketing expenses decreased (6)% and (8)%, respectively, compared to the same periods of 2024 due to decreased advertising in the U.S.

For the three and nine months ended September 30, 2025, sales and marketing expenses decreased compared to the same periods of 2024 due to decreased advertising in the U.S.

and Canada residential real estate market.

Three Months Ended June 30

Six Months Ended June 30

Total other (income) expense, net

For the three months and six months ended June 30, 2025, total other (income) expense, net decreased (60)% and (35)%, respectively, primarily due to decreased interest income when compared to 2024.

Three Months Ended September 30

Nine Months Ended September 30

Other (income), net

For the three and nine months ended September 30, 2025, total other (income) expense, net decreased primarily due to decreased interest income when compared to 2024.

Total other (income) expense, net includes interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

Three Months Ended June 30

Six Months Ended June 30

Income tax (benefit) expense

The Company’s provision for income tax expense (benefit) amounted to $0.5 million and 8.1 million for the three months ended June 30, 2025 and 2024, respectively, which represented effective tax rates of (25.7%) and 40.9%, 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.

The Company’s provision for income tax expense (benefit) amounted to $2.1 million and $4.8 million for the six months ended June 30, 2025 and 2024, which represent effective tax rates of (19.1%) and 174.3%, respectively.

Three Months Ended September 30

Nine Months Ended September 30

Income tax expense (benefit)

The Company’s provision for income tax expense (benefit) amounted to $0.9 million and $(1.3) million for the three months ended September 30, 2025 and 2024, respectively, which represented effective tax rates of 21.0% and 17.1%, respectively.

The provision for income tax expense was primarily attributable to stock-based compensation shortfalls, research and development credit and non-deductible executive compensation.

The Company’s provision for income tax expense (benefit) amounted to $3.1 million and $3.5 million for the nine months ended September 30, 2025 and 2024, which represent effective tax rates of (45.5%) and (69.6%), respectively.

The effective tax rate differs from our statutory rates in both periods primarily due to foreign and domestic mix of earnings, and stock-based compensation.

On July 4, 2025, after quarter-end, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S.

The Company is evaluating its impact, including potential changes to deferred tax assets and liabilities and the effective tax rate.

The financial effect of OBBBA cannot be made at this time.

In accordance with ASC 740, any potential impact resulting from the evaluation, will be reflected in the third quarter of 2025.

BUSINESS SEGMENT DISCLOSURES

See Note 7 – Segment Information to the unaudited condensed consolidated financial statements for additional information regarding our business segments.

The following table reflects the results of each of our reportable segments during the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

The following table reflects the results of each of our reportable segments during the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Nine Months Ended September 30,

Statement of Operations Data:

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Total Reported Adjusted EBITDA (1)

(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S.

GAAP and should not be considered as alternatives to net (loss) income from continuing operations, operating (loss) income, or any other measures derived in accordance with U.S.

For a reconciliation of Adjusted Segment EBITDA and Adjusted EBITDA to (loss) income before income taxes and net (loss) income from continuing operations, respectively, see “Non-U.S.

GAAP Financial Measures.” Management evaluates the operating results of each of its reportable segments based upon revenues and Adjusted Segment EBITDA.

Adjusted Segment EBITDA is defined by us as consolidated (loss) income before income taxes plus depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense, and other (income) expense, net.

Adjusted EBITDA is defined by us as net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense and other items that are not core to the operating activities of the Company.

The Company’s presentation of Adjusted Segment EBITDA and Adjusted EBITDA may not be comparable to similar measures used by other companies.

The following table reflects the changes in the revenues and adjusted EBITDA for each of our reportable segments during the three months and six months ended June 30, 2025 and 2024:

Three Months Ended June 30

Six Months Ended June 30

(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of the Company’s financial performance under U.S.

GAAP and should not be considered as alternatives to financial information prepared derived in accordance with U.S.

For a reconciliation of Adjusted Segment EBITDA and Adjusted EBITDA to (loss) income before income taxes and net (loss) income from continuing operations, the most directly comparable U.S.

GAAP measure, and a discussion of why management believes Adjusted Segment EBITDA and Adjusted EBITDA are useful, see “Non-U.S.

GAAP Financial Measures.”.

The following table reflects the changes in the revenues and adjusted EBITDA for each of our reportable segments during the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30

Nine Months Ended September 30

Statement of Operations Data:

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Total Reported Adjusted EBITDA (1)

(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S.

GAAP and should not be considered as alternatives to net (loss) income from continuing operations, operating (loss) income, or any other measures derived in accordance with U.S.

For a reconciliation of Adjusted Segment EBITDA and Adjusted EBITDA to (loss) income before income taxes and net (loss) income from continuing operations, respectively, see “Non-U.S.

GAAP Financial Measures.” Management evaluates the operating results of each of its reportable segments based upon revenues and Adjusted Segment EBITDA.

The Company’s presentation of Adjusted Segment EBITDA and Adjusted EBITDA may not be comparable to similar measures used by other companies.

North American Realty revenues were flat in the second quarter and first six months of 2025 compared to the same periods in 2024 primarily due to slightly lower sales volumes in the United States, partially offset by increased sales volume in Canada and increased home sales prices in the U.S., despite the challenging market in the U.S.

residential real estate markets.

Adjusted North American Realty EBITDA decreased (49)% and (51)% in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024, due to increased commissions and other agent-related costs and increased operating costs.

International Realty revenues increased 59% and 78% in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024 primarily due to increased real estate transactions driven by improved agent production in previously launched markets.

Adjusted International EBITDA loss increased by (62)% and improved 4% in the second quarter and first six months of 2025, respectively, compared to the same periods in 2024.

The increased loss in the second quarter of 2025 is due to increased start-up costs related to entering new markets.

The improvement in Adjusted EBITDA in the first six months of 2025 is due to increased revenues and improved business efficiencies in markets already entered.

Other Affiliated Services revenues decreased (52)% and (53)% in the second quarter and the first six months of 2025, compared to the same periods of 2024, due to lower SUCCESS® Magazine revenues.

Adjusted Other Affiliated Services EBITDA decreased (132)% and (113)% due to increased costs.

Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty.

(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of the Company’s financial performance under U.S.

GAAP and should not be considered as alternatives to financial information prepared derived in accordance with U.S.

For a reconciliation of Adjusted Segment EBITDA and Adjusted EBITDA to (loss) income before income taxes and net (loss) income from continuing operations, the most directly comparable U.S.

GAAP measure, and a discussion of why management believes Adjusted Segment EBITDA and Adjusted EBITDA are useful, see “Non-U.S.

GAAP Financial Measures.”.

North American Realty revenues increased in the third quarter and first nine months of 2025 compared to the same periods in 2024 primarily due to increased home sale prices and increased sales volume in the US and Canada.

Adjusted North American Realty EBITDA decreased in the third quarter and first nine months of 2025 compared to the same periods in 2024, due to increased commissions and other agent-related costs and increased operating costs.

International Realty revenues increased in the third quarter and first nine months of 2025 compared to the same periods in 2024 primarily due to increased real estate transactions driven by improved agent production and opening new markets.

Adjusted International EBITDA loss improved in the third quarter and first nine months of 2025, respectively, compared to the same periods in 2024.

The decreased loss in 2025 is due to increased revenues and improved business efficiencies in markets already entered.

Other Affiliated Services revenues decreased in the third quarter and the first nine months of 2025, compared to the same periods of 2024, due to lower SUCCESS® Magazine revenues.

Other Affiliated Services adjusted EBITDA decreased due to lower revenues and increased costs.

Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty, LLC, a wholly owned subsidiary of the Company.

GAAP FINANCIAL MEASURES

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with U.S.

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We define the non-U.S.

GAAP financial measure of consolidated Adjusted EBITDA to mean net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense and other items not core to the operating activities of the Company.

Adjusted Segment EBITDA is defined as consolidated (loss) income before income taxes plus depreciation, amortization and stock-based compensation expense, stock option expense, and other (income) expense, net.

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, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense and other items not core to the operating activities of the Company.

Adjusted Segment EBITDA is defined as consolidated income (loss) before income taxes plus depreciation, amortization and stock-based compensation expense, stock option expense, and other (income) expense, net.

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.

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Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S.

There are a number of limitations related to the use of Adjusted EBITDA compared to net (loss) income from continuing operations, the closest comparable U.S.

There are a number of limitations related to the use of Adjusted EBITDA compared to net income (loss) from continuing operations, the closest comparable U.S.

GAAP measure.

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● Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets, amortization of intangible assets, and impairment charges related to these long-lived assets, and, although these are non-cash charges, the assets being depreciated, amortized, or impaired may have to be replaced in the future.

The following table presents a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, the most comparable U.S.

The following table presents a reconciliation of Adjusted EBITDA to net income (loss) from continuing operations, the most comparable U.S.

GAAP financial measure, for each of the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income from continuing operations

Total other (income) expense, net

Income tax (benefit) expense

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss) from continuing operations

Other (income), net

Income tax expense (benefit)

Depreciation and amortization

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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.

Currently, our primary use of cash on hand is to sustain and grow our business operations, including, but not limited to, commission and revenue share payments to agents and brokers and cash outflows for operating expenses and dividend payments.

In addition, except for the $34 million antitrust litigation contingency accrual recorded for the year ended December 31, 2024 (of which $17 million was paid during the quarter ended June 30, 2025;

see Note 11 – Commitments and Contingencies to the unaudited condensed consolidated financial statements for additional information regarding the antitrust litigation), the Company has no known material cash requirements as of June 30, 2025 relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions).

In addition, except for the $34 million antitrust litigation contingency accrual recorded for the year ended December 31, 2024 (of which $17 million was paid during the second quarter of 2025;

see Note 11 – Commitments and Contingencies to the unaudited condensed consolidated financial statements for additional information regarding the antitrust litigation), the Company has no known material cash requirements as of September 30, 2025 relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions).

The Company intends to use available cash to pay the remaining $17 million antitrust litigation settlement amount.

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Net working capital is calculated as the Company’s total current assets less its total current liabilities.

The following table presents our net working capital as of June 30, 2025 and December 31, 2024:

June 30, 2025

The following table presents our net working capital as of September 30, 2025 and December 31, 2024:

September 30, 2025

December 31, 2024

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Net working capital

For the six months ended June 30, 2025, net working capital remained flat, compared to December 31, 2024.

The following table presents our cash flows for the six months ended June 30, 2025 and 2024:

Six Months Ended June 30,

For the nine months ended September 30, 2025, net working capital increased by $17.6 million, compared to December 31, 2024 due to an increase in net accounts receivable and accrued expenses, due to increased revenue and related activity in the third quarter compared to 2024.

The following table presents our cash flows for the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30,

Net cash provided by operating activities

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Net change in cash, cash equivalents and restricted cash

For the six months ended June 30, 2025, net cash provided by operating activities decreased ($55.9) million compared to the same period in 2024.

The decrease in cash provided by operating activities was primarily driven by the payment of the previously accrued litigation contingency of $17 million, lower operating results, lower agent stock-based compensation, and a decrease in customer deposits activity.

For the six months ended June 30, 2025, net cash used in investing activities increased due to cash used for investments in affiliates and other assets and purchases of property and equipment compared to the same period of 2024.

For the six months ended June 30, 2025 and 2024 net cash flows used in financing activities decreased $51.7 million compared to the same period in 2024, primarily driven by lower stock repurchases.

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 .

For the nine months ended September 30, 2025, net cash provided by operating activities decreased ($73.0) million compared to the same period in 2024.

The decrease in cash provided by operating activities was primarily driven by the payment of the previously accrued litigation contingency of $17 million, lower agent equity compensation and changes in working capital.

For the nine months ended September 30, 2025, net cash used in investing activities increased due to cash used for investments in affiliates and other assets and purchases of property and equipment compared to the same period of 2024.

For the nine months ended September 30, 2025 and 2024 net cash flows used in financing activities decreased $69.6 million compared to the same period in 2024, due to lower stock repurchases.

Acquisitions have not been a material element of our ongoing business, but we continue to 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 2025 have not had a material impact on cash flow.

Acquisitions during the first nine months of 2025 have not had a material impact on cash flow.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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