What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 76 added, 66 removed, 339 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

June 30, 2021

September 30, 2021

December 31, 2020

37 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses

5 unchanged sentences

Other expense

Other (income) expense, net

Other expense, net

Equity in losses of unconsolidated affiliates

Total other (income) expense, net

Income before income tax (benefit) expense

Total other expense, net

Income before income tax expense

Income tax (benefit) expense

13 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Common stock:

14 unchanged sentences

Balance, beginning of period

Dividends declared and paid

Balance, end of period

Accumulated other comprehensive income (loss):

Accumulated other comprehensive income:

Balance, beginning of period

Foreign currency translation gain (loss)

Foreign currency translation loss

Balance, end of period

7 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES

16 unchanged sentences

Long-term payable

Other operating activities

NET CASH PROVIDED BY OPERATING ACTIVITIES

3 unchanged sentences

Intangible assets acquired

Other investing activities

Investments in unconsolidated affiliates

NET CASH (USED IN) INVESTING ACTIVITIES

3 unchanged sentences

Transactions with noncontrolling interests

Dividends declared and paid

NET CASH (USED IN) FINANCING ACTIVITIES

6 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Lease liabilities arising from obtaining right-of-use assets

Termination of lease liabilities

Lease liabilities arising from obtaining right-of-use assets

Property, plant and equipment purchases in accounts payable

Liabilities incurred associated with a business acquisition

Liabilities assumed in business acquisition

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

6 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, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain and Israel.

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

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.

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

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

7 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 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.

Operating results for the three and nine month periods ended September 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

13 unchanged sentences

The preparation of financial statements in conformity with U.S.

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.

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 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.

12 unchanged sentences

Balance, December 31, 2019

Balance, June 30, 2020

Balance, September 30, 2020

Balance, December 31, 2020

Balance, June 30, 2021

Balance, September 30, 2021

Recently Adopted Accounting Principles and Change in Accounting Principle

18 unchanged sentences

The three categories include agent non-commission based fees, agent short-term advances, and commissions receivable for real estate property settlements.

The Company analyzed uncollectable accounts for the three categories of receivables and concluded that only agent non-commission based fees receivables and agent short-term advances carry any risk of expected credit losses.

The Company analyzed uncollectible accounts for the three categories of receivables and concluded that only agent non-commission based fees receivables and agent short-term advances carry any risk of expected credit losses.

Current economic conditions and forecasts of future economic conditions do not affect expected credit losses of uncollectable real estate property settlements.

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 $ 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.

Receivables from real estate property settlements totaled $ 125,490 and $ 73,838 as of September 30, 2021 and December 31, 2020 respectively.

As of September 30, 2021 and December 31, 2020 agent non-commission based fees receivable and short-term advances totaled $ 6,254 and $ 4,992 , of which the Company recognized expected credit losses of $ 1,901 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 and six months ended June 30, 2021.

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

PLANT, PROPERTY AND EQUIPMENT, NET

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

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

Property, plant, and equipment, net

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.

For the three months ended September 30, 2021 and 2020, depreciation expense was $ 1,376 and $ 852 , respectively.

For the nine months ended September 30, 2021 and 2020, depreciation expense was $ 3,572 and $ 2,403 , respectively.

GOODWILL AND INTANGIBLE ASSETS

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

Goodwill was $ 12,945 and $ 12,945 as of September 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 and six months ended June 30, 2021, no events occurred that indicated it was more likely than not that goodwill was impaired.

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

Definite-lived intangible assets were as follows:

June 30, 2021

September 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 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.

Amortization expense for definite-lived intangible assets for the three months ended September 30, 2021 and 2020 was $ 318 and $ 152 , respectively.

Amortization expense for definite-lived intangible assets for the nine months ended September 30, 2021 and 2020 was $ 939 and $ 382 , 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 June 30, 2021, expirations of lease obligations by fiscal year were as follows:

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

Period Ending December 31,

8 unchanged sentences

The repayments totaled approximately $ 1.7 million representing the principal balance plus accrued interest and unpaid fees.

The repayments of the notes payable did not result in a gain or loss on early extinguishment.

The repayments of the notes payable did no t result in a gain or loss on early extinguishment.

STOCKHOLDERS’ EQUITY

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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

(Shares of Common Stock)

9 unchanged sentences

Agent Equity Program

The Company provides agents and brokers the opportunity to elect to receive 5 % of commissions earned from each completed residential real estate transaction in the form of common stock (the “Agent Equity Program” or “AEP”).

The Company provides agents and brokers the opportunity to elect to receive 5 % of commissions earned from each completed real estate transaction in the form of common stock (the “Agent Equity Program” or “AEP”).

If agents and brokers elect to receive portions of their commissions in common stock, they are entitled to receive the equivalent number of shares of common stock, based on the fixed monetary value of the commission payable.

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 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.

During the three months ended September 30, 2021 and 2020, the Company issued 1,075,500 and 1,241,594 shares of common stock, respectively, to agents and brokers with a value of $ 41,838 and $ 19,929 , respectively, inclusive of discount.

During the nine months ended September 30, 2021 and 2020, the Company issued 2,574,766 and 4,933,540 shares of common stock, respectively, to agents and brokers with a value of $ 101,691 and $ 39,226 , 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 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 .

For the three months ended September 30, 2021, the Company’s stock compensation attributable to the Agent Growth Incentive Program was $ 6,817 of which the total amount of stock compensation attributable to liability classified awards was $ 1,830 .

For the nine months ended September 30, 2021, the Company’s stock compensation attributable to the Agent Growth Incentive Program was $ 18,129 of which the total amount of stock compensation attributable to liability classified awards was $ 4,453 .

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).

3 unchanged sentences

Stock grant liability increase at June 30, 2021

Balance, June 30, 2021

Stock grants reclassified from liability to equity at September 30, 2021

Stock grant liability increase at September 30, 2021

Balance, September 30, 2021

Stock Option Awards

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.

During the three months ended September 30, 2021, and 2020, the Company granted 176,263 and 2,255,416 stock options, respectively, to employees with an estimated grant date fair value of $ 23.26 and $ 9.07 per share, respectively.

For the nine months ended September 30, 2021, and 2020, the Company granted 370,594 and 3,441,772 stock options, respectively, to employees with an estimated grant date fair value of $ 24.05 and $ 10.67 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Shares of Treasury Stock)

9 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income attributable to common stock

5 unchanged sentences

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.

For the three months ended September 30, 2021 and 2020 total outstanding shares of common stock excluded 132,704 and 154,870 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive.

For the nine months ended September 30, 2021 and 2020 total outstanding shares of common stock excluded 75,680 and 162,063 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.

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.

Our provision for (benefit from) income taxes amounted to ($ 12.9 ) million and $ 0.2 million for the three months ended September 30, 2021 and 2020, respectively, and ($ 33.3 ) million and $ 0.3 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase in income tax benefit was primarily attributable to the release of the valuation allowance and higher deductible stock-based compensation.

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 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.

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 was no longer needed and therefore we recorded a valuation allowance release of $ 13 million, as a discrete item.

As of September 30, 2021, the valuation allowance release discrete item amounted to $ 22 million due to the change in the annual forecast of the pre-tax income.

FAIR VALUE MEASUREMENT

10 unchanged sentences

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

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.

As of September 30, 2021 and December 31, 2020, the fair value of the Company’s money market funds was $ 43,385 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 99.5 % 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 real estate brokerage business represents 99.2 % and 99.6 % of the total revenue of the Company for the three months ended September 30, 2021 and 2020, respectively.

The real estate brokerage business represents 99.3 % and 99.7 % of the total revenue of the Company for the nine months ended September 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 September 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 or total assets as of June 30, 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, Israel, Panama and Hong Kong.

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

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

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.

For the three months ended September 30, 2021 and 2020, approximately 8 % and 6 %, respectively, of the Company’s total revenue was generated outside of the U.S.

For the nine months ended September 30, 2021 and 2020, approximately 8 % and 5 %, respectively, of the Company’s total revenue was generated outside of the U.S.

Assets held outside of the U.S.

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

were 9 % and 7 % as of September 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.

On October 26, 2021 , the Company’s Board of Directors declared a dividend of $ 0.04 per share which is expected to be payable on November 29, 2021 , to stockholders of record as of the close of business on November 15, 2021 .

The ex-dividend date is November 12, 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