Item 2. Management’s Discussion and Analysis
Item 2.
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 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. Our actual results could differ materially from those anticipated in these forward-looking statements. See “Cautionary Note Regarding Forward Looking Statements” in this Quarterly Report, Part I, Item 1A Risk Factors of the 2024 Annual Report, and Part II, Item 1A Risk Factors in this Quarterly Report for a discussion of certain risks, uncertainties and assumptions associated with these statements.
This MD&A is divided into the following sections:
● Overview
● Market Conditions and Industry Trends
● Key Business Metrics
● Results of Operations
● Business Segment Disclosures
● Non-U.S. GAAP Financial Measures
● Liquidity and Capital Resources
● Critical Accounting Policies and Estimates
All dollar amounts are in USD thousands except share amounts and per share data and as otherwise noted.
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OVERVIEW
eXp World Holdings, Inc. (the “Company,” “eXp” or “we”) was incorporated in Delaware on July 30, 2008 and launched the first cloud-based real estate brokerage offering agent-centric commission structure, revenue sharing, and agent equity opportunities in 2009. Today, the Company operates a diversified portfolio of service-based businesses whose operations benefit substantially from utilizing our enabling technology platform. A substantial portion of our revenue is derived from commissions received by our residential real estate brokerages which provide a full suite of brokerage and adjacent services (such as mortgage, title, and content creation) to our real estate agents and brokers. Our real estate agents and brokers affiliate their real estate licenses with us and operate their businesses utilizing our cloud-based technology platform to enhance their real estate businesses and optimize efficiencies. Our enabling and innovative technology platform is a robust suite of cloud-based applications and software services tailored for our real estate agents and brokers and targets business operations such as customer relationship management, marketing, client services, and brokerage functionalities. We succeed when our real estate professionals succeed, and we remain focused on being the most agent-centric business on the planet.
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.
Strategy
Our strategy is to grow organically in North America and certain international markets by increasing our independent agent and broker network. Through our cloud-based operations and technology platform, we strive to achieve customer-focused efficiencies that allow us to increase market share and attain strong returns as we scale our business within the markets in which we operate. By building partnerships and strategically deploying capital, we seek to grow the business and enter attractive verticals and adjacent markets.
The Company’s primary emphasis is on achieving operational excellence for our real estate agents, which we monitor using the agent net promoter score (“aNPS”). We remain focused on investing in technology and people who are key to the continued growth of the Company. Our sustainable revenue share plan (the “Revenue Share Plan”), whereby we pay real estate professionals affiliated with the Company a portion of the Company’s brokerages’ commission for their contribution to Company growth continues to be critical to attracting and retaining our most productive agents. The supplementary income distributed to the sponsor under the Revenue Share Plan is exclusively derived from the Company's portion of the transaction commission and is not earned on transactions for which the Company does not receive a commission (e.g., when a Front-Line Qualifying Agent has capped and earns 100% of commission on its closed transactions). The Revenue Share Plan does not impact or reduce the commission earned by the agent on the transaction. The Company’s costs incurred under the Revenue Share Plan are included as commissions and other agent-related costs in the consolidated statements of comprehensive income.
The Revenue Share Plan is integral to our growth strategy, fostering a collaborative brokerage that aligns with our core values of sustainability and collaborative success. Regular evaluations are conducted to ensure the plan’s continued alignment with the Company’s overarching objectives and for regulatory compliance.
MARKET CONDITIONS AND INDUSTRY TRENDS
Our business is dependent on the levels of home sales transactions and prices, which can vary based on economic conditions within the markets in which we operate. Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand.
In periods of economic growth, rising consumer confidence and lower interest rates, demand typically increases resulting in higher home sales transactions and home sales prices. Conversely, in periods of economic recession, declining consumer confidence and higher interest rates, demand typically decreases, resulting in lower home sales transactions and home sale prices. Additionally, regulations imposed by local, state and federal government agencies and geopolitical instability can also negatively impact the housing markets in which we operate.
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, 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.
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While the current environment is challenging, the Company continues to believe it is well positioned to strengthen its competitive position over the long term. Our robust agent support infrastructure continues to drive engagement, retention and productivity. Additionally, we continue to offer agents a low-cost, high-engagement model, which affords agents and brokers increased income and equity ownership opportunities while offering a scalable solution to brokerage owners who want to survive and thrive during market fluctuations. We have an efficient operating model with lower fixed costs driven by our cloud-based model, with no brick-and-mortar locations.
National Housing Inventory
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 1.55 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
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 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 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
See Part II, Item 1 of this Quarterly Report for a discussion of the current legal environment and how such environment could potentially impact our business, results of operations, cash flows or financial condition.
KEY BUSINESS METRICS
Management uses our results of operations, financial condition, cash flows, and key business metrics related to our business and industry to evaluate our performance and make strategic decisions.
The following table outlines the key business metrics that we periodically review to track the Company’s performance:
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Performance:
Agent NPS
75
76
76
75
Agent count
83,446
85,249
83,446
85,249
Real estate sales transactions
121,516
117,830
329,771
330,223
Real estate sales volume
$ 54,112,209
$ 50,798,695
$ 145,231,091
$ 139,869,084
Other real estate transactions
22,185
22,950
61,155
64,851
Real estate per transaction cost
$ 523
$ 494
$ 616
$ 536
Revenues
$ 1,316,683
$ 1,231,187
$ 3,580,466
$ 3,469,485
Operating (loss)
$ 4,016
($ 8,334)
($ 8,736)
($ 7,971)
Adjusted EBITDA (1)
$ 17,712
$ 23,942
$ 31,068
$ 67,797
(1) Adjusted EBITDA is not a measurement of our financial performance under generally accepted accounting principles in the U.S. (“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. 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. GAAP Financial Measures”.
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Revenues and Adjusted EBITDA are key financial measures, and we review these measures to evaluate and drive our core operating performance.
Agent net promoter score (aNPS)
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 continued market challenges and higher mortgage rates. 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.
Additionally, in response to industry changes as a result of U.S. antitrust lawsuits, the Company led the industry by introducing new listing agreements and buyer representation forms for its agents and the industry. These programs and efforts underscore our commitment to fostering agent success by lowering barriers, increasing earning opportunities, and creating a collaborative, growth-oriented environment. By continually evolving to meet the needs of our agents and employees, the Company remains well-positioned to continue to drive growth.
Agent count
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, 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.
Real estate sales transactions and volume
Real estate sales transactions are based on the side (buyer or seller) of each real estate transaction and are recorded when our agents and brokers represent buyers or sellers in the purchase or sale, respectively, of a home. The number of real estate transactions is a key driver of our revenue and profitability. Transaction volume represents the total sales value for all transactions and is influenced by several market factors, including, but not limited to, the pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, economic growth, or contraction, local inventory levels, mortgage interest rates, and seasonality.
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 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 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 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
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Revenues represent the commission revenue earned by the Company for closed brokerage real estate transactions. 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
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
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 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.
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RESULTS OF OPERATIONS
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,
2025
2024
2025
2024
(In thousands, except share amounts and per share data)
Statement of Operations Data:
Revenues
$ 1,316,683
$ 1,231,187
$ 3,580,466
$ 3,469,485
Operating expenses
Commissions and other agent-related costs
1,230,479
1,143,535
3,325,473
3,205,949
General and administrative expenses
62,341
61,390
203,288
185,132
Technology and development expenses
17,312
13,804
52,210
43,413
Sales and marketing expenses
2,535
2,792
8,231
8,962
Litigation contingency
-
18,000
-
34,000
Total operating expenses
1,312,667
1,239,521
3,589,202
3,477,456
Operating income (loss)
4,016
(8,334)
(8,736)
(7,971)
Other (income) expense
Other (income), net
(608)
(801)
(2,311)
(3,738)
Equity in losses of unconsolidated affiliates
195
281
322
804
Other (income), net
(413)
(520)
(1,989)
(2,934)
Income (loss) before income tax expense
4,429
(7,814)
(6,747)
(5,037)
Income tax expense (benefit)
932
(1,333)
3,071
3,508
Net income (loss) from continuing operations
3,497
(6,481)
(9,818)
(8,545)
Net income (loss) from discontinued operations
-
(2,025)
-
(3,217)
Net income (loss)
3,497
(8,506)
(9,818)
(11,762)
Adjusted EBITDA (1)
$ 17,712
$ 23,942
$ 31,068
$ 67,797
(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 income (loss) from continuing operations, operating income (loss) or any other measures derived in accordance with U.S. GAAP. 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 and nine months ended September 30, 2025 and 2024:
Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
Revenues
$ 85,496
7%
$ 110,981
3%
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.
Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
Commissions and other agent-related costs
$ 86,944
8%
$ 119,524
4%
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.
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Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
General and administrative expenses
$ 951
2%
$ 18,156
10%
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.
Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
Technology and development expenses
$ 3,508
25%
$ 8,797
20%
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.
Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
Sales and marketing expenses
($ 257)
(9)%
($ 731)
(8)%
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.
Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
Other (income), net
($ 107)
(21)%
($ 945)
(32)%
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.
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Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
Income tax expense (benefit)
($ 2,265)
(170)%
$ 437
12%
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.
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 nine months ended September 30, 2025 and 2024:
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Statement of Operations Data:
Revenues
North American Realty
$ 1,275,865
$ 1,206,660
$ 3,475,400
$ 3,408,418
International Realty
40,743
24,230
104,693
60,142
Other Affiliated Services
675
1,426
2,210
4,681
Segment eliminations
(600)
(1,129)
(1,837)
(3,756)
Total Consolidated Revenues
$ 1,316,683
$ 1,231,187
$ 3,580,466
$ 3,469,485
Adjusted Segment EBITDA (1)
North American Realty
23,100
28,899
50,620
85,208
International Realty
(1,591)
(1,670)
(7,065)
(7,401)
Other Affiliated Services
(1,298)
(1,282)
(5,044)
(3,037)
Total Adjusted Segment EBITDA
20,211
25,947
38,511
74,770
Corporate expenses and other
(2,499)
(2,005)
(7,443)
(6,973)
Total Reported Adjusted EBITDA (1)
$ 17,712
$ 23,942
$ 31,068
$ 67,797
(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. GAAP. 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.”.
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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:
Change
2025 vs. 2024
Three Months Ended September 30
Nine Months Ended September 30
$
%
$
%
Statement of Operations Data:
Revenues
North American Realty
$ 69,205
6%
$ 66,982
2%
International Realty
16,513
68%
44,551
74%
Other Affiliated Services
(751)
(53)%
(2,471)
(53)%
Segment eliminations
529
47%
1,919
51%
Total Consolidated Revenues
$ 85,496
7%
$ 110,981
3%
Adjusted Segment EBITDA (1)
North American Realty
($ 5,799)
(20)%
($ 34,588)
(41)%
International Realty
79
5%
336
5%
Other Affiliated Services
(16)
(1)%
(2,007)
(66)%
Total Adjusted Segment EBITDA
(5,736)
(22)%
(36,259)
(48)%
Corporate expenses and other
(494)
(25)%
(470)
(7)%
Total Reported Adjusted EBITDA (1)
($ 6,230)
(26)%
($ 36,729)
(54)%
(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. GAAP. 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.
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NON-U.S. GAAP FINANCIAL MEASURES
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. This non-U.S. GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP.
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, 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. 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-based compensation, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations.
We are presenting the non-U.S. GAAP measure of Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe this measure provides an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. 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. Some of these limitations are that:
● Adjusted EBITDA excludes stock-based compensation expense related to our agent growth incentive program and stock option expense, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and
● 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 income (loss) from continuing operations, the most comparable U.S. GAAP financial measure, for each of the periods presented:
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
Net income (loss) from continuing operations
$ 3,497
($ 6,481)
($ 9,818)
($ 8,545)
Other (income), net
(413)
(520)
(1,989)
(2,934)
Income tax expense (benefit)
932
(1,333)
3,071
3,508
Depreciation and amortization
2,424
2,379
7,257
7,742
Litigation contingency
-
18,000
-
34,000
Stock-based compensation expense (1)
9,694
9,910
27,515
28,067
Stock option expense
1,578
1,987
5,032
5,959
Adjusted EBITDA
$ 17,712
$ 23,942
$ 31,068
$ 67,797
(1) This includes agent growth incentive stock-based compensation expense.
LIQUIDITY AND CAPITAL RESOURCES
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.
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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 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.
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, industry practice changes in light of the NAR Settlement relating to the antitrust litigation, 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.
Net Working Capital
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 September 30, 2025 and December 31, 2024:
September 30, 2025
December 31, 2024
Current assets
$ 323,148
$ 267,972
Current liabilities
(223,478)
(185,853)
Net working capital
$ 99,670
$ 82,119
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.
Cash Flows
The following table presents our cash flows for the nine months ended September 30, 2025 and 2024:
Nine Months Ended September 30,
2025
2024
Net cash provided by operating activities
$ 104,817
$ 177,800
Net cash used in investment activities
(20,492)
(12,959)
Net cash used in financing activities
(68,773)
(138,370)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
2,241
(624)
Net change in cash, cash equivalents and restricted cash
$ 17,793
$ 25,847
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.
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Acquisitions
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 nine months of 2025 have not had a material impact on cash flow.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the 2024 Annual Report, which provides a description of our critical accounting policies. There were no changes to critical accounting policies or estimates as reflected in our 2024 Annual Report. For additional information regarding our critical accounting policies and estimates, see the Critical Accounting Policies and Estimates section of Part II, Item 7 Management’s Discussion and Analysis of Financial Conditions and Results of Operations included in our 2024 Annual Report.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposures to market risk since December 31, 2024. For details on the Company’s market risks relating to interest rates and foreign currency exchange rates, see Part II, Item 7A Quantitative and Qualitative Disclosures About Market Risks in our 2024 Annual Report.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.