What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-04 compared with 2021-05-06 · 150 added, 93 removed, 182 unchanged (57% of the section changed)

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Through our brokerage, eXp Realty, we operate one of the world’s fastest growing real estate brokerages.

We are focused on being the most agent-centric company on the planet and offer our agents a generous commission, and a thriving community built on our proprietary and unique cloud-based brokerage and collaboration suite.

We are focused on being the most agent-centric company on the planet and offer our agents a generous commission model, and a thriving community built on our proprietary and unique cloud-based brokerage and collaboration suite.

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions.

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

Additionally, we intend to continue our advancement into more international markets.

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 into attractive verticals and markets.

Throughout 2020 and the first quarter of 2021, we made progress towards achieving our strategic goals, including an increase in our agent count of 77% from 28,449 agents as of March 31, 2020 to 50,333 agents as of March 31, 2021.

By building partnerships and strategically deploying capital, we seek to grow the business and enter into attractive verticals and associated businesses.

Throughout 2020 and the first half of 2021, we made progress in achieving our strategic goals, including an 87% increase in our agent count, going from 31,091 agents as of June 30, 2020 to 58,263 agents as of June 30, 2021.

The expected outcome of these activities will be to better position us to deliver on our full potential, to provide a platform for future growth opportunities, and to achieve our long-term financial goals.

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The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand.

In periods of economic growth, demand typically increases resulting in increasing home sales transactions and home sales prices.

In periods of economic growth, demand typically increases resulting in accelerated home sales transactions and rising home sales prices.

Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand.

Additionally, regulations imposed by local, state, and federal government agencies, and geopolitical instability, can also negatively impact the housing markets for which we operate.

For the period ended March 31, 2021, the COVID-19 pandemic continued to materially and adversely affect businesses worldwide.

The magnitude and duration of the impact from COVID-19 are not fully known and cannot be reasonably estimated.

While the pandemic has been ongoing, there is still significant volatility and uncertainty surrounding the outlook of the global economy due to continued

restrictions on gatherings and travel, inconsistencies in lifting of those restrictions across geographic markets, new variants to the virus, and the rate of inoculations and efficacy of vaccines.

We believe that, once COVID-19 is further contained, the economy will continue to rebound depending on the continued pace, rate, and effectiveness of lifting public health restrictions on businesses and individuals and how quickly people become comfortable engaging in public activities.

According to the National Association of Realtors (“NAR”), the housing market is past the recovery phase from the initial downturn during the beginnings of the COVID-19 pandemic.

For the period ended June 30, 2021, the COVID-19 pandemic has continued to be contained due to the rate of inoculation and efficacy of vaccines.

However, there is still volatility and uncertainty surrounding the outlook of the global economy due to inconsistencies in

lifting restriction across geographic markets and new variants to the virus.

We believe that the economy will continue to rebound depending on the continued pace, rate, and effectiveness of lifting public health restrictions on businesses and individuals and how quickly people become comfortable engaging in public activities.

According to National Association of Realtors (“NAR”), the housing market is past the recovery phase from the initial downturn during the beginnings of the COVID-19 pandemic.

Current home sales are now at a pre-pandemic level, which is due to a significant increase in demand.

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These low mortgage rates are also allowing more buyers to enter the market.

According to the NAR housing statistics, existing home sales decreased for the second consecutive month as of March 2021, while the existing-home median price reached a historic record high of $329.

The decline in sales is a result of both seasonal activity, with home sales slowing in winter months, and the continued inventory shortage of homes.

The demand for home buying remains at an all-time high.

The NAR reported that pending home sales also continued to decrease for the second consecutive month of declining contract activity, however this is attributable to low inventory.

Th NAR index measures housing contract activity and is based on signed real estate contracts for existing single-family homes and condos.

The Company continues to monitor the macro and micro economic environment but see the demand for housing continuing throughout the year due to continued low interest rates and overall promising economic outlook.

According to NAR housing statistics, existing home sales decreased for the fourth consecutive month as of May 2021, while the existing-home median price reached a historic record high of $350.3 as of May 2021 (preliminary).

We expect the decline in sales is due, in part, to the continued inventory shortage of homes.

The demand for homebuying remains high.

NAR reported that pending home sales rebounded in May by 8%, which is a positive indicator of continued housing demand.

This NAR index measures housing contract activity and is based on signed real estate contracts for existing single-family homes and condos.

The Company continues to monitor the macro and microeconomic environments but sees the demand for housing continuing throughout the year due to continued low interest rates and overall promising economic outlook.

The Company is positioned to continue to grow in light of a series of fluctuations in economic activity.

The Company continued its growth trajectory though the first quarter of 2021 with a year over year increase in revenue of 115% and an increase in agent count of 77%.

However, depending on the continued course of the COVID-19 pandemic, specifically in key areas of operations, it is too early to predict the full extent of the effects the COVID-19 pandemic will have on the Company as we progress through the remainder of 2021.

The Company continued its growth trajectory through the second quarter of 2021 with a year-over-year increase in revenue of 153% and an increase in agent count of 87%.

However, depending on the continued course of the COVID-19 pandemic, specifically in key areas of operations and the spread of new variants, it is too early to predict the full extent the effects the COVID-19 pandemic will have on the Company as we progress through the remainder of 2021.

Regardless of whether the housing market continues to grow or slows, we believe that we are positioned to leverage our low-cost, high-engagement model, affording agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners looking to survive and thrive in a series of fluctuations in economic activity.

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Throughout 2020 and into 2021, increased demand and low mortgage interest rates caused inventory levels to decline to record lows.

With government implemented actions in response to COVID-19 in 2020 and overall uncertainty, fewer individuals are listing their homes and construction of new homes has slowed.

Due to these factors, year over year inventory has decreased further.

According to the NAR, inventory of existing homes for sale in the U.S.

was 1.1 million as of March 2021 (preliminary) compared to 1.5 million at the end of March 2020.

The NAR indicated the need for new home construction is robust due to the high demand of homes and the record-low inventory levels.

With government-implemented actions in response to COVID-19 in 2020 and into 2021 and overall uncertainty, fewer individuals are listing their homes.

Additionally, construction of new homes has slowed for a significant period of time and supply is not keeping up with current demand.

Due to these factors, and others, year-over-year inventory has decreased further.

According to NAR, inventory of existing homes for sales in the U.S.

was 1.23 million as of May 2021 (preliminary) compared to 1.5 million at the end of May 2020.

NAR indicated the need for new home construction due to the high demand of homes and the record-low inventory levels.

Mortgage Interest Rates

According to the NAR, mortgage interest rates on commitments for 30-year, conventional, fixed-rate mortgages averaged 2.9% for the first quarter of 2021 compared to 3.5% for the first quarter of 2020.

Mortgage rates are forecasted to increase minimally to 3.0% throughout 2021.

Mortgage rates are expected to remain low throughout 2021.

Low mortgage rates are expected to continue to contribute to overall high demand for home-buying.

According to NAR, mortgage interest rates on commitments for 30-year, conventional, fixed-rate mortgages averaged 3.1% for the second quarter of 2021 compared to 3.2% for the second quarter of 2020.

Mortgage rates are forecasted to increase minimally to 3.2% throughout the second half of 2021.

Low mortgage rates are expected to continue to contribute to overall high demand for homebuying.

Housing Affordability Index

According to the NAR, the composite housing affordability index decreased to 173.1 for February 2021 (preliminary) from 175.6 for February 2020.

According to NAR, the composite housing affordability index decreased to 151.7 for May 2021 (preliminary) from 180.0 for May 2020.

The housing affordability index continues to be at historically favorable levels.

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 percent down payment and ability to qualify for a mortgage.

When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20% down payment and ability to qualify for a mortgage.

The favorable housing affordability index is due to favorable mortgage rate conditions.

However, as housing prices continue to climb due to low inventory and high demand and in light of the higher unemployment rate and the ongoing COVID-19 pandemic, it is still too early to predict the extent to which the effects of these factors will have on long-term unemployment and housing affordability.

However, the steady year-over- year decline is attributable to the increase in the average home price due to low inventory levels driving up demand.

Home Sales Transactions

According to the NAR, seasonally adjusted existing home sale transactions for the three months ended March 2021 (preliminary) increased to 6.0 million compared to 5.4 million for the same period in 2020.

The NAR anticipates transactions to continue with pace;

According to NAR, seasonally adjusted existing home sale transactions increased to 5.8 million for May 2021 (preliminary) compared to 4.0 million for May 2020.

NAR anticipates transactions to continue with current pace;

however, due to low inventory levels, recovery may not be sustainable.

According to the NAR, nationwide existing home sales average price for March 2021 (preliminary) was $329 compared to $281 in March 2020.

According to NAR, the nationwide existing home sales median price for May 2021 (preliminary) was $350.3 compared to $283.5 in May 2020.

Due to low supply and high demand, the average sale price is expected to continue to increase through the remainder of 2021.

However, it is still too early to predict the extent of the effects of the ongoing COVID-19 pandemic will have on long-term home sales prices.

KEY BUSINESS METRICS

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The following table outlines the key business metrics that we periodically review:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except transactions and agent count)

Adjusted EBITDA

(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 income, operating income, or any other measures derived in accordance with U.S.

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

and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-U.S.

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We continue to increase our agents and brokers significantly in the United States and Canada through the execution of our growth strategies.

Since 2019, we expanded operations to the U.K., Australia, South Africa, Portugal, France, India, Mexico, Puerto Rico, Brazil, Italy, and Hong Kong.

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.

Since 2019, we expanded operations to U.K., Australia, South Africa, Portugal, France, India, Mexico, Puerto Rico, Brazil, Italy, Spain, Colombia, Israel, Panama and Hong Kong.

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 macroeconomic factors affecting the real estate industry in general.

With the favorable economic outlook and our unique business model, we anticipate to continuously grow for the remainder of the year.

Settled home sales transactions and volume resulted from closed real estate transactions and typically change directionally with changes in the market’s existing home sales transactions as reported by the NAR, as disproportionate variances are representative of company-specific improvements or shortfalls to the norm.

Settled home sales transactions and volume resulted from closed real estate transactions and typically change directionally with changes in the market’s existing home sales transactions as reported by NAR, as disproportionate variances are representative of company-specific improvements or shortfalls to the norm.

Our home sale transactions growth was directly related to the growth of our agent base over the prior comparative period.

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Gross margin is based on the information provided in our results of operations or our consolidated statements of comprehensive income (loss), and is an important measure of our potential profitability and brokerage performance.

For the three months ended March 31, 2021 and 2020, gross margin was 9.2% and 10.3%, respectively.

Gross margin decreased year-over-year which is mostly attributable increase in agent commission costs.

For the three months ended June 30, 2021 and 2020, gross margin was 8.0% and 9.7%, respectively.

For the six months ended June 30, 2021 and 2020, gross margin was 8.4% and 10.0%, respectively.

Gross margin decreased year-over-year which is mostly attributable to an increase in agent commission costs associated with increase productivity and home sale price.

Rising home prices and increased demand also contributed to agents reaching their commission capping requirements sooner, entitling them to a higher percentage of the home sale commission.

We continue to monitor our gross margin through efforts to improve our cost structure.

Management also reviews Adjusted EBTIDA, which is a non-U.S.

Management also reviews Adjusted EBITDA, which is a non-U.S.

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

Adjusted EBITDA has grown significantly for the three months ended March 31, 2021 and 2020 due to our revenue growth and improved leverage of our cost structure.

Adjusted EBITDA has grown significantly for the three and six months ended June 30, 2021 and 2020 due to our revenue growth and improved leverage of our cost structure.

RECENT BUSINESS DEVELOPMENTS

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Global Expansion of Our Real Estate Cloud Brokerage

During the fourth quarter of 2020, the Company initiated operations in France, India, Mexico, Portugal, and South Africa.

In addition, operations commenced in Puerto Rico, Brazil, Italy, and Hong Kong in the first quarter of 2021.

The Company continues to pursue growth opportunities into new global markets.

In addition to the international expansion, the Company also continues to focus on growth in the United States and in Canada.

During the fourth quarter of 2020, the Company initiated operations in South Africa, India, Mexico, Portugal and France.

In addition, operations commenced in Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, and Israel in the first half of 2021.

continues to pursue growth opportunities into new global markets.

In addition to the international expansion, the Company also continues to focus on growth in the United States and existing international markets.

Agent and Employee Experience

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NPS is a measure of customer satisfaction and is measured on a scale between -100 and 100.

A NPS above 50 is considered excellent.

The Company’s agent NPS was 73 in the first quarter of 2021.

Whether it be the overall question "How likely are you to recommend eXp to your colleagues, friends, or family?"

An NPS above 50 is considered excellent.

The Company’s cumulative agent NPS was 70 in the second quarter of 2021.

Whether the overall question is "How likely are you to recommend eXp to your colleagues, friends, or family?"

or more granular inquiries as to specific workflows or service offerings, we believe this will ensure we are delivering on the most important values to our agents and employees.

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This also ties into one of our core values of transparency.

While we strive for high satisfaction, it is equally important to investigate a low or unfavorable trending of NPS.

While we strive for high satisfaction, it is equally important to investigate a low or unfavorable trending of NPS scores.

As NPS scores are often leading indicators to agents and employees’ future actions, we are able to learn quickly what may be a “pain point” or product that is not meeting its desired objective.

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The Company maintains an equity incentive program whereby agents and brokers of eXp Realty can become eligible to receive awards of the Company’s common stock through the achievement of production and agent attraction benchmarks.

The equity incentive program it continues to be key element in creating a culture of agent-ownership.

The equity incentive program continues to be a key element in creating a culture of agent-ownership.

Our agent compensation plans represent a key lever in our strategy to attract and retain independent agents and brokers.

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Our operational strategy and the importance of the agent compensation plans to our strategy have not changed.

however, the financial impact of the change in the discount has had a meaningful effect on our results of operations.

Our stock repurchase program and agent growth incentive program are more fully disclosed in Note 8 – Stockholders’ Equity to the condensed consolidated financial statements.

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Given the current environment due to the COVID-19 pandemic, there is an acute need for virtual workplace collaboration.

For the period ended March 31, 2021, Virbela has seen an increase in demand for virtual events and collaborative spaces for remote teams and as a result has introduced new products and features including, an expo hall, a concert stage for virtual entertainment, VR support for Oculus Rift and HTC VIVE, and screen sharing and video chat capabilities.

For the period ended June 30, 2021, Virbela continues to see growing demand from organizations exploring remote and hybrid operating models and as a result continues to introduce new products and features including the imminent commercial release of FRAME, a browser-based instant virtual collaboration tool.

FRAME, currently in beta, is built to give users frictionless avatar-based virtual collaboration across multiple devices.

Lastly, we expect to continue to service existing and new business-to-business enterprise-level contracts in the coming year.

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however, actual performance will depend directly on utilization by eXp Realty agents and brokers and the on-going and fluctuating government implemented restrictions due to the COVID-19 pandemic.

Overall, these services are de minimis to our overall operations.

Results of Operations

Three Months Ended March 31, 2021 compared to the Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 compared to the Three Months Ended June 30, 2020

Three Months Ended

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

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

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Other (income) expense, net

Income before income tax expense

Income tax expense

Equity in losses of unconsolidated affiliates

Other expense, net

Total other expense, net

Income tax (benefit) expense

Net loss attributable to noncontrolling interest

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GAAP Financial Measures.”

Our total revenues were $583.8 million for the three months ended March 31, 2021 compared to $271.4 million for the same period in 2020, an increase of $312.4 million, or 115%.

Total revenues increased for the first quarter of 2021 primarily as a result of an increase in real estate brokerage commissions, which is directly attributable to increases in our agent count and closed transactions compared to the same period in 2020.

Additionally, the average home sale price for eXp closed transactions increased 15% to $332 during the three months ended March 31, 2021 from $290 for the same period in 2020.

Our total revenues were $999.9 million for the three months ended June 30, 2021 compared to $353.5 million for the same period in 2020, an increase of $646.4 million, or 183%.

Total revenues increased for the second quarter of 2021 primarily as a result of an increase in real estate brokerage commissions, which is directly attributable to increases in our agent count and closed transactions compared to the same period in 2020.

Additionally, the average home sale price for eXp closed transactions increased 17% to $348 during the three months ended June 30, 2021 from $297 for the same period in 2020.

Commission and Other Agent Related Costs

Commission and other agent-related costs were $530.3 million for the three months ended March 31, 2021 compared to $243.4 million for the same period in 2020, an increase of $286.9 million, or 118%.

Commission and other agent related costs increased primarily as a result of a higher volume of settled real estate transactions related to the increase in our agent base.

Commission and other agent-related costs were $920.0 million for the three months ended June 30, 2021 compared to $319.2 million for the same period in 2020, an increase of $600.8 million, or 188%.

Commissions and other agent related costs increased as a result of a higher volume of settled real estate transactions due to a growing agent base.

Rising home prices and increased demand also contributed to agents reaching their commission capping requirements sooner, entitling them to a higher percentage of the home sale commission.

General and Administrative Expense

General and administrative expenses were $46.3 million for the three months ended March 31, 2021 compared to $26.9 million for the same period in 2020, an increase of $19.4 million or 72%.

General and administrative expenses were $60.7 million for the three months ended June 30, 2021 compared to $25.2 million for the same period in 2020, an increase of $35.6 million or 141%.

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

General and administrative expenses increased primarily as a result of an increase of $11.8 million in compensation related expenses including salaries, employee benefits, and payroll taxes and processing, an increase of $2.2 million in computer and software expenses, and an increase of $4.0 million in stock compensation expense.

These increases are a result of the Company’s increase in employee and agent count and an increase in our stock price compared to the prior period in 2020.

General and administrative expenses increased primarily as a result of an increase of $20.2 million in compensation and personnel related expenses including salaries, employee benefits, and payroll taxes and processing, an increase of $3.6 million in computer and software expenses, and an increase of $4.5 million in stock compensation

These increased costs are a result of the Company’s growth in agent count and real estate transaction volumes, and the investment of employee and technology in supporting the growth in 2021.

Sales and Marketing

Sales and marketing expenses increased at $2.3 million and $0.9 million for the three months ended March 31, 2021 compared to the same period in 2020 due to initiatives to continue growth, expand brand awareness, and additional marketing costs associated with new business lines.

Sales and marketing expenses increased to $2.7 million from $0.9 million for the three months ended June 30, 2021 compared to the same period in 2020.

This is due to an increase of $1.6 million in advertising and lead capture costs as we continue to expand our real estate operations and software services.

Other Expense

There were no significant changes in other expense for the three months ended June 30, 2021 compared to the same period in 2020.

Income Tax Benefit (Expense)

The Company’s provision for (benefit from) income taxes amounted to ($20.6) million and less than $0.1 million for the three months ended June 30, 2021 and 2020, respectively, which represented effective tax rates of negative 125.8% and 0.7%, respectively.

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

Six Months Ended June 30, 2021 compared to the Six Months Ended June 30, 2020

Six Months Ended

June 30, 2021

June 30, 2020

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

Statement of Operations Data:

Operating expenses

Commissions and other agent-related costs

General and administrative expenses

Sales and marketing expenses

Total operating expenses

Operating income

Other expense

Other expense, net

Equity in losses of unconsolidated affiliates

Total other expense, net

Income before income tax (benefit) expense

Income tax (benefit) expense

Net loss attributable to noncontrolling interest

Net income attributable to eXp World Holdings, Inc.

Adjusted EBITDA (1)

Earnings per share

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 income, operating income or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-U.S.

GAAP Financial Measures.”

Our total revenues were $1,583.7 million for the six months ended June 30, 2021 compared to $624.9 million for the same period in 2020, an increase of $958.8 million, or 153%.

Total revenues increased for the first half of 2021 primarily as a result of an increase in real estate brokerage commissions, which is directly attributable to increases in our agent count and closed transactions compared to the same period in 2020.

Additionally, the average home sale price for eXp closed transactions increased 16% to $341 during the six months ended June 30, 2021 from $294 for the same period in 2020.

Commission and Other Agent Related Costs

Commission and other agent-related costs were $1,450.3 million for the six months ended June 30, 2021 compared to $562.6 million for the same period in 2020, an increase of $887.7 million, or 158%.

Commissions and other agent related costs increased as a result of a higher volume of settled real estate transactions due to a growing agent base.

Rising home prices and increased demand also contributed to agents reaching their commission capping requirements sooner, entitling them to a higher percentage of the home sale commission.

General and Administrative Expense

General and administrative expenses were $107.0 million for the six months ended June 30, 2021 compared to $52.0 million for the same period in 2020, an increase of $55.0 million or 106%.

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

General and administrative expenses increased primarily as a result of an increase of $32.0 million in personnel related expenses including salaries, employee benefits, and payroll taxes and processing, an increase of $5.8 million in computer and software expenses, and an increase of $8.5 million in stock compensation expense.

These increased costs are a result of the Company’s growth in agent count and real estate transaction volumes, and the investment of employee and technology in supporting the growth in 2021.

Sales and Marketing

Sales and marketing expenses increased to $4.9 million from $1.8 million for the six months ended June 30, 2021 compared to the same period in 2020, an increase of $3.1 million or 170%.

This is due to an increase of $2.6 million in advertising and lead capture costs as we continue to expand our real estate operations and software services.

Other Income (Expense)

There were no significant changes in other income (expense) for the three months ended March 31, 2021 compared to the same period in 2020.

Income Tax Expense

The Company’s provision for income tax expense amounted to $0.2 million and less than $0.1 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.

There were no significant changes in other income (expense) for the six months ended June 30, 2021 compared to the same period in 2020.

Income Tax Benefit (Expense)

The Company’s provision for (benefit from) income taxes amounted to ($20.38) million and less than $0.1 million for the six months ended June 30, 2021 and 2020, respectively, which represented an effective tax rate of negative 95.1% and 0.8%, respectively.

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

GAAP FINANCIAL MEASURES

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GAAP financial measure, for each of the periods presented:

Three Months Ended March 31,

Net income (loss)

Other expense (income), net

Income tax expense

Depreciation, amortization, and impairment expenses (1)

Three Months Ended June 30,

Six Months Ended June 30,

Other (income) expense, net

Income tax (benefit) expense

Depreciation and amortization (1)

Stock compensation expense (2)

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Our current capital deployment strategy for 2021 is to utilize excess cash on hand to support our growth initiatives into select markets and enhance our technology platforms and for repurchases of our common stock.

As of March 31, 2021, the Company is not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

In addition, the Company has no known material cash requirements as of March 31, 2021 relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions).

The cash requirements for the upcoming fiscal year relate to our leases and our debt associated with acquisitions.

As of June 30, 2021, the Company is not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

In addition, the Company has no known material cash requirements as of June 30, 2021 relating to capital expenditures, commitments, or human capital (except commissions to agents and brokers concurrent with settled real estate transactions).

The cash requirements for the upcoming fiscal year relating to our leases and our debt associated with acquisitions is insignificant.

For information regarding the Company’s expected cash requirement related to leases, see Note 6 – Leases to the condensed consolidated financial statements.

Cash requirements associated with our acquisitions include a $1.0 million payment of cash or common stock of the Company to the previous owners of Virbela, LLC due in November 2021.

During the first quarter of 2021, the Company paid $1.5 million of principal amount outstanding for the full settlement of the promissory notes issued to the previous owners of Showcase, which were due in installments payments during 2021 and 2022.

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.

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Our capital requirements may be affected by factors which we cannot control such as the changes in the residential real estate market, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate.

In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing.

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.

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If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would likely suffer.

As of March 31, 2021, our cash and cash equivalents totaled $104.4 million.

Cash equivalents are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase, primarily money market funds.

As of June 30, 2021, our cash and cash equivalents totaled $107.4 million.

Cash equivalents are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase;

primarily money market funds.

We currently do not possess any marketable securities.

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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 March 31, 2021 and December 31, 2020:

March 31, 2021

The following table presents our net working capital as of June 30, 2021 and December 31, 2020:

June 30, 2021

December 31, 2020

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Net working capital

For the three months ended March 31, 2021, net working capital remained relatively consistent at $115, with a decrease of $ 0.7 million, or 1%, compared to December 31, 2020 primarily due to the early payment of the Showcase acquisition promissory note of $1.5 million, most of which was classified as noncurrent liabilities.

The following table presents our cash flows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

For the six months ended June 30, 2021, net working capital increased to $126.2 million, or 9%, compared to December 31, 2020 primarily due to an increase in agent and commission receivables directly related to the increase in revenue.

The following table presents our cash flows for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

Cash provided by operating activities

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Net change in cash, cash equivalents and restricted cash

For the three months ended March 31, 2021, cash provided by operating activities increased $61.4 million compared to the same period in 2020.

For the six months ended June 30, 2021, cash provided by operating activities increased $121.4 million compared to the same period in 2020.

The change resulted primarily from the increased real estate transactions volume, increase in customer deposits, and higher participation by our agents and brokers in our agent stock compensation programs.

For the three months ended March 31, 2021, cash used in our investing activities increased due to higher capital expenditures and acquisition-related payments.

For the three months ended March 31, 2021, the increase in cash flows used in financing activities primarily were related to repurchases of our common stock, partially offset by proceeds received from the exercise of stock options.

For the six months ended June 30, 2021, cash used in our investing activities increased due to higher capital expenditures and acquisition-related payments.

For the six months ended June 30, 2021, the increase in cash flows used in financing activities primarily were related to repurchases of our common stock, partially offset by proceeds received from the exercise of stock options.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

7 unchanged sentences

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