What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-06 · 96 added, 82 removed, 309 unchanged (37% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

March 31, 2021

June 30, 2021

December 31, 2020

7 unchanged sentences

Operating lease right-of-use assets

Other noncurrent assets

Intangible assets, net

Deferred tax assets

LIABILITIES AND EQUITY

15 unchanged sentences

4,725,296 and 2,534,494 shares held, respectively

Accumulated deficit

Accumulated earnings (deficit)

Accumulated other comprehensive income

5 unchanged sentences

EXP WORLD HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating expenses

8 unchanged sentences

Total other (income) expense, net

Income before income tax expense

Income tax expense

Income before income tax (benefit) expense

Income tax (benefit) expense

Net loss attributable to noncontrolling interest

2 unchanged sentences

Weighted average shares outstanding

Comprehensive income (loss):

Comprehensive income:

Comprehensive loss attributable to noncontrolling interests

Net income attributable to eXp World Holdings, Inc.

Other comprehensive income (loss):

Other comprehensive income:

Foreign currency translation (loss) gain, net of tax

Comprehensive income (loss) attributable to eXp World Holdings, Inc.

Comprehensive income attributable to eXp World Holdings, Inc.

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Common stock:

Balance, beginning of quarter

Balance, end of quarter

Balance, beginning of period

Balance, end of period

Treasury stock:

Balance, beginning of quarter

Balance, beginning of period

Repurchases of common stock

Retirement of treasury stock

Balance, end of quarter

Balance, end of period

Additional paid-in capital:

Balance, beginning of quarter

Balance, beginning of period

Shares issued for stock options exercised

2 unchanged sentences

Stock option compensation

Balance, end of quarter

Accumulated deficit:

Balance, beginning of quarter

Net income (loss)

Balance, end of quarter

Balance, end of period

Accumulated earnings (deficit):

Balance, beginning of period

Balance, end of period

Accumulated other comprehensive income (loss):

Balance, beginning of quarter

Balance, beginning of period

Foreign currency translation gain (loss)

Balance, end of quarter

Balance, end of period

Noncontrolling interest:

Balance, beginning of quarter

Balance, beginning of period

Contributions by noncontrolling interests

Balance, end of quarter

Balance, end of period

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

OPERATING ACTIVITIES

Net income (loss)

Reconciliation of net income (loss) to net cash provided by operating activities:

Reconciliation of net income to net cash provided by operating activities:

Depreciation expense

1 unchanged sentence

Amortization expense - long-term payable

Allowance for credit losses on receivables/bad debt on receivables

Allowance for credit losses on receivables

Equity in loss of unconsolidated affiliates

2 unchanged sentences

Agent equity stock compensation expense

Deferred income taxes

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of property, plant and equipment

Acquisition of businesses, net of cash acquired

Acquisition of businesses

Intangible assets acquired

Other investing activities

NET CASH (USED IN) INVESTING ACTIVITIES

22 unchanged sentences

Through various operating subsidiaries, the Company primarily operates a cloud-based real estate brokerage operating throughout the United States and most of the Canadian provinces.

Since the fourth quarter of 2019, the Company commenced operations in the United Kingdom (U.K.), Australia, South Africa, Portugal, France, India, Mexico, Puerto Rico, Brazil, Italy, and Hong Kong.

Our real estate brokerage is now one of the largest and fastest growing real estate brokerage companies in the United States by agent count, and recently began to expand internationally.

Since the fourth quarter of 2019, the Company commenced operations in the United Kingdom (U.K.), Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain and Israel.

Our real estate brokerage is now one of the largest and fastest growing real estate brokerage companies in the United States by agent count, and is continuing to expand internationally.

The Company focuses on a number of cloud-based technologies in order to grow an international brokerage without the burden of physical bricks and mortar or redundant staffing costs.

8 unchanged sentences

All shares, restricted stock units (“RSU”), stock options, and per share information have been retroactively adjusted to reflect the stock split.

Operating results for the three-month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three and six month periods ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

14 unchanged sentences

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company regularly evaluates estimates and assumptions related to allowance for credit losses, legal contingencies, income taxes, revenue recognition, stock-based compensation,

goodwill, and deferred income tax asset valuation allowances.

The Company regularly evaluates estimates and

assumptions related to allowance for credit losses, legal contingencies, income taxes, revenue recognition, stock-based compensation, goodwill, and deferred income tax asset valuation allowances.

The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.

2 unchanged sentences

Reclassifications

The Company has reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.

When necessary, the Company will reclassify certain amounts in prior-period financial statements to conform to the current period’s presentation.

No material reclassifications occurred during the current period.

7 unchanged sentences

Balance, December 31, 2019

Balance, March 31, 2020

Balance, June 30, 2020

Balance, December 31, 2020

Balance, March 31, 2021

Balance, June 30, 2021

Recently Adopted Accounting Principles and Change in Accounting Principle

21 unchanged sentences

The collection of these payments is in-substance guaranteed because they represent commission payments on closed transactions, and the Company has no historical experience or expectation of losses related to these receivables.

Receivables from real estate property settlements totaled $ 85,412 and $ 73,838 as of March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021 and December 31, 2020, agent non-commission based fees receivable and short-term advances totaled $ 5,327 and $ 4,992 , of which the Company recognized expected credit losses of $ 2,264 and $ 1,879 , respectively.

Receivables from real estate property settlements totaled $ 130,158 and $ 73,838 as of June 30, 2021 and December 31, 2020 respectively.

As of June 30, 2021 and December 31, 2020 agent non-commission based fees receivable and short-term advances totaled $ 5,763 and $ 4,992 , of which the Company recognized expected credit losses of $ 1,671 and $ 1,879 , respectively.

The Company increases the allowance for expected credits losses when the Company determines all or a portion of a receivable is uncollectable.

The Company recognizes recoveries as a decrease to the allowance for expected credit losses.

Changes in the allowance were not material for the three months ended March 31, 2021.

Changes in the allowance were not material for the three and six months ended June 30, 2021.

PLANT, PROPERTY AND EQUIPMENT, NET

Fixed assets, net consisted of the following:

March 31, 2021

Plant, property and equipment, net consisted of the following:

June 30, 2021

December 31, 2020

6 unchanged sentences

Property, plant, and equipment, net

For the three months ended March 31, 2021 and 2020, depreciation expense was $ 1,007 and $ 757 , respectively.

For the three months ended June 30, 2021 and 2020, depreciation expense was $ 1,189 and $ 794 , respectively.

For the six months ended June 30, 2021 and 2020, depreciation expense was $ 2,196 and $ 1,551 , respectively.

GOODWILL AND INTANGIBLE ASSETS

Goodwill was $ 12,945 as of March 31, 2021 and December 31, 2020.

Goodwill was $ 12,945 as of June 30, 2021 and December 31, 2020.

The Company has a risk of future impairment to the extent that individual reporting unit performance does not meet projections.

Additionally, if current assumptions and estimates, including projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors, are not met, or if valuation factors outside of the Company’s control change unfavorably, the estimated fair value of goodwill could be adversely affected, leading to a potential impairment in the future.

For the three months ended March 31, 2021, no events occurred that indicated it was more likely than not that goodwill was impaired.

For the three and six months ended June 30, 2021, no events occurred that indicated it was more likely than not that goodwill was impaired.

Definite-lived intangible assets were as follows:

March 31, 2021

June 30, 2021

December 31, 2020

6 unchanged sentences

Definite-lived intangible assets are amortized using the straight-line method over an asset’s estimated useful life.

Amortization expense for definite-lived intangible assets for the three months ended March 31, 2021 and 2020 was $ 303 and $ 103 , respectively.

Amortization expense for definite-lived intangible assets for the three months ended June 30, 2021 and 2020 was $ 318 and $ 126 , respectively.

Amortization expense for definite-lived intangible assets for the six months ended June 30, 2021 and 2020 was $ 621 and $ 230 , respectively.

The Company has no indefinite-lived assets.

4 unchanged sentences

Included below is other information regarding leases for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other information

6 unchanged sentences

Additionally, the Company considered any historical and economic factors in determining if a lease renewal or termination option would be exercised.

As of March 31, 2021, expirations of lease obligations by fiscal year were as follows:

As of June 30, 2021, expirations of lease obligations by fiscal year were as follows:

Period Ending December 31,

10 unchanged sentences

STOCKHOLDERS’ EQUITY

The following table represents a reconciliation of the Company’s common stock for the periods presented:

Three Months Ended March 31,

The following table represents a share reconciliation of the Company’s common stock for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

(Shares of Common Stock)

Common stock:

11 unchanged sentences

The Company recognizes a 10 % discount on these issuances as an additional cost of sales charge during the periods presented.

During the three months ended March 31, 2021 and 2020, the Company issued 424,084 and 1,833,306 shares of common stock, respectively, to agents and brokers with a value of $ 21,402 and $ 8,794 , respectively, inclusive of discount.

During the three months ended June 30, 2021 and 2020, the Company issued 1,075,182 and 1,858,640 shares of common stock, respectively, to agents and brokers with a value of $ 38,451 and $ 10,503 , respectively, inclusive of discount.

During the six months ended June 30, 2021 and 2020, the Company issued 1,499,266 and 3,691,946 shares of common stock, respectively, to agents and brokers with a value of $ 59,853 and $ 19,297 , respectively, inclusive of discount.

Agent Growth Incentive Program

4 unchanged sentences

As such, the awards are classified as liabilities until the number of share awards becomes fixed once the performance metric is achieved.

For the three months ended March 31, 2021, the Company’s stock compensation attributable to the Agent Growth Incentive Program was $ 5,472 of which the total amount of stock compensation attributable to liability classified awards was $ 3,314 .

For the three months ended June 30, 2021, the Company’s stock compensation attributable to the Agent Growth Incentive Program was $ 5,840 of which the total amount of stock compensation attributable to liability classified awards was $ 1,402 .

For the six months ended June 30, 2021, the Company’s stock compensation attributable to the Agent Growth Incentive Program was $ 11,312 of which the total amount of stock compensation attributable to liability classified awards was $ 2,623 .

Stock compensation expense related to the Agent Growth Incentive Program is included in general and administrative expense in the condensed consolidated statements of comprehensive income (loss).

1 unchanged sentence

Balance, December 31, 2020

Stock grant liability increase year to date

Balance, March 31, 2021

Stock grant liability increase at March 31, 2021

Stock grant liability increase at June 30, 2021

Balance, June 30, 2021

Stock Option Awards

During the three months ended March 31, 2021, and 2020, the Company granted 127,265 and 303,164 stock options, respectively, to employees with an estimated grant date fair value of $ 26.01 and $ 4.41 per share, respectively.

During the three months ended June 30, 2021, and 2020, the Company granted 66,739 and 496,440 stock options, respectively, to employees with an estimated grant date fair value of $ 26.77 and $ 3.18 per share, respectively.

For the six months ended June 30, 2021, and 2020, the Company granted 194,004 and 798,086 stock options, respectively, to employees with an estimated grant date fair value of $ 24.80 and $ 3.45 per share, respectively.

The fair value was calculated using a Black Scholes-Merton option pricing model.

10 unchanged sentences

The following table shows the changes in treasury stock for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Shares of Treasury Stock)

Treasury stock:

3 unchanged sentences

EARNINGS PER SHARE

Basic earnings (loss) per share is computed based on net income (loss) attributable to eXp stockholders divided by the basic weighted-average shares outstanding during the period.

Basic earnings per share is computed based on net income attributable to eXp stockholders divided by the basic weighted-average shares outstanding during the period.

Dilutive earnings per share is computed consistently with the basic computation while giving effect to all dilutive potential common shares and common share equivalents that were outstanding during the period.

2 unchanged sentences

The following table sets forth the calculation of basic and diluted earnings per share attributable to common stock during the periods presented:

Three Months Ended March 31,

Net income (loss) attributable to common stock

Three Months Ended June 30,

Six Months Ended June 30,

Net income attributable to common stock

Weighted average shares - basic

2 unchanged sentences

Earnings (loss) per share:

Earnings (loss) per share attributable to common stock- basic

Earnings (loss) per share attributable to common stock- diluted

For the three months ended March 31, 2021, total outstanding shares of common stock excluded 6,506 shares from the computation of diluted earnings per share because their effect would have been anti-dilutive.

Earnings per share attributable to common stock- basic

Earnings per share attributable to common stock- diluted

For the three months ended June 30, 2021 and 2020 total outstanding shares of common stock excluded 152,950 and 821,985 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive.

For the six months ended June 30, 2021 and 2020 total outstanding shares of common stock excluded 62,889 and 803,513 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive.

Our quarterly tax provision is computed by applying the estimated annual effective tax rate to the year-to-date pre-tax income or loss and adjust for discrete tax items in the period.

The Company’s provision for income tax expense amounted to $ 0.2 million and $ 0.01 million for the three months ended March 31, 2021 and 2020, respectively, which represented an effective tax rate of 4.17 % and 7.61 %, respectively.

The increase in income tax expense was primarily attributable to increased profitability and changes to our geographic mix of earnings, partially offset by higher deductible share-based compensation expenses.

Our provision for (benefit from) income taxes amounted to ($ 20.4 ) million and less than $ 0.1 million for the six months ended June 30, 2021 and 2020, respectively, which represented effective tax rates of negative 95.1 % and 0.8 %, respectively.

The decrease in income tax expense was primarily attributable to the release of the valuation allowance.

We periodically evaluate the realizability of our deferred tax assets based on all available evidence, both positive and negative.

The realization of the net deferred tax assets is dependent on our ability to generate sufficient future taxable income during the periods prior to the expiration of tax attributes to fully utilize these assets.

As of March 31, 2021, based on our assessment of the realizability of our net deferred tax assets, we continued to maintain a full valuation allowance against all of our federal and state net deferred tax assets.

Management has evaluated our recent profitability trends and believes that, if current trends persist, there is a reasonable possibility that within the current fiscal year, sufficient positive evidence may become available to allow us to reach the conclusion that a significant portion of the valuation allowance will no longer be needed.

Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance to be released are subject to change based on the positive evidence, including, but not limited to, the level of expected profitability, that we are able to actually achieve in future periods.

On March 11, 2021, The American Rescue Plan Act of 2021 (“ARPA Act”) was signed into law.

We evaluated the applicable provisions of the ARPA Act and determined that there is no material impact expected to our financial results.

We will continue to monitor future guidance issued regarding the ARPA Act to determine any future impacts to our financial results.

As of June 30, 2021, based on our assessment of the realizability of our net deferred tax assets, we reached the conclusion that our valuation allowance on our US federal and state net deferred tax assets is no longer needed and therefore we recorded a valuation allowance release of $ 13 million, a discrete item, which results in the recognition of the deferred tax asset and a decrease to income tax expense.

FAIR VALUE MEASUREMENT

3 unchanged sentences

The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values.

Categorization within the fair value hierarchy is based on the

lowest level of input that is significant to the fair value measurement.

Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The fair value hierarchy is defined into the following three categories:

4 unchanged sentences

The Company values its money market funds at fair value on a recurring basis.

As of March 31, 2021 and December 31, 2020, the fair value of the Company’s money market funds was $ 53,382 and $ 53,380 , respectively.

As of June 30, 2021 and December 31, 2020, the fair value of the Company’s money market funds was $ 53,385 and $ 53,380 , respectively.

There have been no transfers between Level 1, Level 2 and Level 3 in the period presented.

6 unchanged sentences

The Company primarily operates as a cloud-based real estate brokerage.

The real estate brokerage business represents 99.3 % and 99.9 % of the total revenue of the Company for the three months ended March 31, 2021 and 2020, respectively.

The real estate brokerage business represents 99.0 % and 98.9 % of the total assets of the Company as of March 31, 2021 and December 31, 2020, respectively.

The real estate brokerage business represents 99.5 % and 99.8 % of the total revenue of the Company for the six months ended June 30, 2021 and 2020, respectively.

The real estate brokerage business represents 99.2 % and 98.9 % of the total assets of the Company as of June 30, 2021 and December 31, 2020, respectively.

The Company offers software subscriptions to customers to access its virtual reality software platform.

1 unchanged sentence

However, the operations and assets of the technology segment are not managed by the Company’s chief operating decision-maker as a separate reportable segment.

Services provided through First Cloud and Silverline are in the emerging stages of development as contributing segments and are not material to the Company’s total revenue, total net income (loss) or total assets as of March 31, 2021.

The Company aggregates the identified operating segments for reporting purposes and has one reportable segment.

1 unchanged sentence

The Company primarily operates within the real estate brokerage markets in the United States and Canada.

During the previous two years, the Company expanded operations into the U.K., Australia, South Africa, Portugal, France, India, Mexico, Puerto Rico, Brazil, Italy, and Hong Kong.

During the previous two years, the Company expanded operations into the U.K., Australia, South Africa, Portugal, France, India, Mexico, Puerto Rico, Brazil, Italy, Israel, Panama and Hong Kong.

The Company’s management analyzes geographical locations on a forward-looking basis to identify growth opportunities.

For the three months ended March 31, 2021 and 2020, approximately 7 % and 4 %, respectively, of the Company’s total revenue was generated outside of the U.S.

For the six months ended June 30, 2021 and 2020, approximately 9 % and 4 %, respectively, of the Company’s total revenue was generated outside of the U.S.

Assets held outside of the U.S.

were 12 % and 7 % as of March 31, 2021 and December 31, 2020, which primarily consist of cash and cash equivalents and restricted cash held in Canada.

were 14 % and 7 % as of June 30, 2021 and December 31, 2020

The Company’s technology services and affiliated services are currently provided primarily in the U.S.

SUBSEQUENT EVENTS

On August 4, 2021 , the Company’s Board of Directors declared a dividend of $ 0.04 per share payable on August 30, 2021 , to stockholders of record as of the close of business on August 16, 2021 .

The ex-dividend date is August 13, 2021.

The dividend will be paid in cash.

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 1. Financial Statements