What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-02 · 103 added, 54 removed, 327 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

March 31, 2023

June 30, 2023

December 31, 2022

21 unchanged sentences

Common Stock, $ 0.00001 par value 900,000,000 shares authorized;

174,532,043 issued and 153,442,421 outstanding at March 31, 2023;

177,900,083 issued and 153,588,186 outstanding at June 30, 2023;

171,656,030 issued and 152,839,239 outstanding at December 31, 2022

12 unchanged sentences

(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

3 unchanged sentences

Total operating expenses

Operating (loss) income

Operating income

Other (income) expense

2 unchanged sentences

Total other (income) expense, net

(Loss) income before income tax expense

Income tax benefit

Income before income tax expense

Income tax (benefit) expense

Net income attributable to noncontrolling interest

12 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Common stock:

13 unchanged sentences

Balance, end of period

Accumulated earnings (deficit):

Accumulated earnings:

Balance, beginning of period

13 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

OPERATING ACTIVITIES

19 unchanged sentences

INVESTING ACTIVITIES

Purchases of property, plant, equipment & intangible assets

Purchases of property, plant, equipment

Investments in unconsolidated affiliates

Capitalized software development costs in intangible assets

NET CASH USED IN INVESTING ACTIVITIES

12 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Termination of lease obligation - operating lease

Property, plant and equipment increase due to transfer of right-of-use lease asset

Property, plant and equipment purchases in accounts payable

14 unchanged sentences

In our opinion, the accompanying interim unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Effective in December 2022, the Company revised the presentation of segment information to reflect changes in the way the Company manages and evaluates the business.

34 unchanged sentences

Balance, December 31, 2021

Balance, March 31, 2022

Balance, June 30, 2022

Balance, December 31, 2022

Balance, March 31, 2023

Balance, June 30, 2023

EXPECTED CREDIT LOSSES

6 unchanged sentences

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

As of the first quarter of 2022, the Company provided an allowance for potential credit losses of real estate transactions.

Receivables from real estate property settlements totaled $ 94,724 and $ 79,135 of which the Company recognized expected credit losses of $ 758 and $ 3,127 , respectively as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022 agent non-commission based fees receivable and short-term advances totaled $ 7,360 and $ 12,141 , of which the Company recognized expected credit losses of $ 1,466 and $ 887 , respectively.

As of the second quarter of 2022, the Company provided an allowance for potential credit losses of real estate transactions.

Receivables from real estate property settlements totaled $ 129,139 and $ 79,135 of which the Company recognized expected credit losses of $ 66 and $ 3,127 , respectively as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December 31, 2022 agent non-commission based fees receivable and short-term advances totaled $ 7,403 and $ 12,141 , of which the Company recognized expected credit losses of $ 1,478 and $ 887 , respectively.

PLANT, PROPERTY AND EQUIPMENT, NET

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

March 31, 2023

June 30, 2023

December 31, 2022

6 unchanged sentences

Property, plant, and equipment, net

For the three months ended March 31, 2023 and 2022 depreciation expense was $ 2,067 and $ 1,616 , respectively.

For the three months ended June 30, 2023 and 2022 depreciation expense was $ 2,096 and $ 1,954 , respectively.

For the six months ended June 30, 2023 and 2022, depreciation expense was $ 4,163 and $ 3,570 , respectively.

GOODWILL AND INTANGIBLE ASSETS

Goodwill was $ 27,261 as of March 31, 2023 and $ 27,212 as of December 31, 2022.

In the first quarter of 2023, the Company recorded cumulative translation adjustment of $ 73 related to Canadian goodwill.

Goodwill was $ 27,552 as of June 30, 2023 and $ 27,212 as of December 31, 2022.

As of June 30, 2023, the Company recorded cumulative translation adjustment of $ 340 related to Canadian goodwill.

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, 2023, no events occurred that indicated it was more likely than not that goodwill was impaired.

For the three and six months ended June 30, 2023, no events occurred that indicated it was more likely than not that goodwill was impaired.

Definite-lived intangible assets were as follows:

March 31, 2023

June 30, 2023

December 31, 2022

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, 2023 and 2022 was $ 512 and $ 342 , respectively.

Amortization expense for definite-lived intangible assets for the three months ended June 30, 2023 and 2022 was $ 683 and $ 475 , respectively.

Amortization expense for definite-lived intangible assets for the six months ended June 30, 2023 and 2022 was $ 1,195 and $ 817 , respectively.

The Company has no indefinite-lived assets.

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Common stock:

Balance, beginning of year

Balance, beginning of quarter

Shares issued for stock options exercised

2 unchanged sentences

Balance, end of quarter

The Company’s stockholder approved equity plans described below are administered under the 2013 Stock Option Plan and the 2015 Equity Incentive Plan.

Although a limited number of awards under the plan remain outstanding, no awards have been granted under the 2013 Stock Option Plan since 2015.

The purpose of the equity plans is to retain the services of valued employees, directors, officers, agents, and consultants and to incentivize such persons to make contributions to the Company and motivate excellent performance.

The Company’s equity programs described below are administered under the stockholder approved 2015 Equity Incentive Plan.

The purpose of the equity plan is to retain the services of valued employees, directors, officers, agents, and consultants and to incentivize such persons to make contributions to the Company and motivate excellent performance.

Agent Equity Program

2 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, 2023 and 2022, the Company issued 2,106,369 and 1,550,455 shares of common stock, respectively, to agents and brokers with a value of $ 26,775 and $ 38,500 , respectively, inclusive of discount.

During the three months ended June 30, 2023 and 2022, the Company issued 2,558,438 and 3,942,452 shares of common stock, respectively, to agents and brokers with a value of $ 38,876 and $ 48,335 , respectively, inclusive of discount.

During the six months ended June 30, 2023 and 2022, the Company issued 4,664,807 and 5,492,907 shares of common stock, respectively, to agents and brokers with a value of $ 65,652 and $ 86,835 , 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, 2023 and 2022 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 9,660 and $ 7,798 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 993 and $ 1,906 , respectively.

For the three months ended June 30, 2023 and 2022 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 8,488 and $ 9,230 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 345 and $ 2,545 , respectively.

For the six months ended June 30, 2023 and 2022 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 18,148 and $ 17,028 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 1,338 and $ 4,451 , respectively.

The following table illustrates changes in the Company’s stock compensation liability for the periods presented:

Stock grant liability balance at December 31, 2021

Stock grant liability increase year to date

Stock grants reclassified from liability to equity year to date

Balance, December 31, 2022

1 unchanged sentence

Stock grants reclassified from liability to equity year to date

Balance, March 31, 2023

Balance, June 30, 2023

Stock Option Awards

Stock options are granted to directors, officers, certain employees and consultants with an exercise price equal to the fair market value of common stock on the grant date and the stock options expire 10 years from the date of grant.

These options have time-based restrictions with equal and periodically graded vesting over a three-year period.

During the three months ended March 31, 2023, and 2022, the Company granted 88,553 and 484,378 stock options, respectively, to employees with an estimated grant date fair value of $ 8.18 and $ 26.04 per share, respectively.

These options typically have time-based restrictions with equal and periodically graded vesting over a three-year period.

During the three months ended June 30, 2023 and 2022, the Company granted 1,440,010 and 288,007 stock options, respectively, to employees with an estimated grant date fair value of $ 8.35 and $ 11.64 per share, respectively.

During the six months ended June 30, 2023 and 2022, the Company granted 1,528,563 and 772,385 stock options, respectively, to employees with an estimated grant date fair value of $ 8.34 and $ 13.24 per share, respectively.

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

3 unchanged sentences

In May 2022, the Board approved an increase to the total amount of its buyback program from $ 400.0 million to $ 500.0 million.

Purchases under the repurchase program may be made in the open market or through

a 10b5-1 plan and are expected to comply with Rule 10b-18 under the Exchange Act, as amended.

In June 2023, the Board approved an increase to the total amount of its buyback program from $ 500.0 million to $ 1.0 billion.

Purchases under the repurchase program may be made in the open market or through a 10b5-1 plan and are expected to comply with Rule 10b-18 under the Exchange Act, as amended.

The timing and number of shares repurchased depends upon market conditions.

6 unchanged sentences

entered into a form of Issuer Repurchase Plan (“Issuer Repurchase Plan”) which authorized Stephens to repurchase up to $ 10.0 million of its common stock per month.

On May 3, 2022, the Board approved a form of first amendment to the Issuer Repurchase Plan to increase monthly repurchases from $ 10.0 million of its common stock per month up to $ 20.0 million, which amendment was signed May 6, 2022.

On May 3, 2022, the Board approved and on May 6, 2022, the Company entered into a form of first amendment to the Issuer Repurchase Plan to increase monthly repurchases from $ 10.0 million of its common stock per month up to $ 20.0 million.

On September 27, 2022, the Board approved, and the Company entered into, a form of second amendment to the Issuer Repurchase Plan, to decrease the monthly repurchases from $ 20.0 million of its common stock per month to $ 13.3 million, in anticipation of volume decreases in connection with the contraction in the real estate market.

On December 27, 2022, the Board approved, and the Company entered into, a form of third amendment to the Issuer Repurchase Plan, to decrease the monthly repurchases from $ 13.3 million of its common stock per month to $ 10.0 million, in connection with ongoing contractions in the real estate market.

On May 10, 2023, the Board approved and, on May 11, 2023, the Company entered into, a form of fourth amendment to the Issuer Repurchase Plan, to increase the monthly repurchase amounts during 2023 due to actual and projected changes in the Company’s cash and cash equivalents;

specifically, to permit purchases of up to:

(i) $ 17.0 million during May 2023, (ii) $ 22.0 million during June 2023, (iii) $ 18.67 million during any calendar month commencing July 1, 2023 through and including September 30, 2023, and (iv) $ 12.0 million during any calendar month commencing October 1, 2023 through and including December 31, 2023.

On June 26, 2023, the Board approved, and the Company entered into, a form of fifth amendment to the Issuer Repurchase Plan to increase the maximum aggregate buyback from $ 500.0 million to $ 1.0 billion in accordance with the repurchase program limit.

For accounting purposes, common stock repurchased under the stock repurchase programs is recorded based upon the settlement date of the applicable trade.

1 unchanged sentence

These shares are considered issued but not outstanding.

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

Three Months Ended March 31,

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

Three Months Ended June 30,

Six Months Ended June 30,

Treasury stock:

Balance, beginning of year

Balance, beginning of quarter

Repurchases of common stock

5 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,

Three Months Ended June 30,

Six Months Ended June 30,

Net income attributable to common stock

5 unchanged sentences

Earnings per share attributable to common stock- diluted

For three months ended March 31, 2023 and 2022 total outstanding shares of common stock excluded 635,343 and 392,483 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive.

For three months ended June 30, 2023 and 2022 total outstanding shares of common stock excluded 656,776 and 1,485,139 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive.

For six months ended June 30, 2023 and 2022 total outstanding shares of common stock excluded 588,940 and 692,237 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 plus discrete tax items arising in the period.

Our provision for (benefit from) income taxes amounted to ($ 2.59 ) million and ($ 5.15 ) million for the three months ended March 31, 2023 and 2022, which represent effective tax rates of positive 237.56 % and negative 137.97 % , respectively.

The decrease in income tax benefit was primarily attributable to lower deductible stock-based compensation windfalls.

Our provision for income tax expense (benefit) amounted to $ 0.24 million and ($ 3.49 ) million for the six months ended June 30, 2023 and 2022, respectively, which represent effective tax rates of positive 2.20 % and negative 23.81 %, respectively.

The provision for income tax expense was primarily attributable to increase in income from operations, lower deductible stock-based compensation windfalls and return to provision true-ups in various jurisdictions.

The effective tax rate differs from our statutory rates in both periods primarily due to the impact of the stock-based compensation and R&D tax credit.

11 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the fair value of the Company’s money market funds was $ 44,539 and $ 44,062 , respectively.

As of June 30, 2023 and December 31, 2022, the fair value of the Company’s money market funds was $ 45,080 and $ 44,062 , respectively.

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

11 unchanged sentences

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

The Company’s four reportable segments as follows:

The Company’s four reportable segments are as follows:

● North American Realty:

7 unchanged sentences

All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Audited Consolidated Financial Statements included herein.

The following table provides information about the Company’s reportable segments and a reconciliation of the total segment Revenues to consolidated Revenues and Adjusted Segment EBITDA to the consolidated operating (loss) profit (in thousands).

The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.

Financial information for the comparable prior periods presented have been revised to conform with the current year presentation .

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

North American Realty

5 unchanged sentences

Adjusted EBITDA

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

North American Realty

7 unchanged sentences

Stock option expense

Consolidated operating (loss) profit

Consolidated operating profit

June 30, 2023

December 31, 2022

North American Realty

International Realty

Other Affiliated Services

Segment total

Corporate and other

Consolidated total

The Company does not use segment assets to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.

1 unchanged sentence

Quarterly Cash Dividend

On April 27, 2023 , the Company’s Board of Directors declared a dividend of $ 0.045 per share which is expected to be payable on May 31, 2023 , to stockholders of record as of the close of business on May 12, 2023 .

The ex-dividend date is expected to be May 30, 2023.

On July 28, 2023 , the Company’s Board of Directors declared a dividend of $ 0.05 per share which is expected to be payable on September 4, 2023 , to stockholders of record as of the close of business on August 18, 2023 .

The ex-dividend date is expected to be on or around August 16, 2023.

The dividend will be paid in cash.

Loss of “Controlled Company” Status

As reported on a Schedule 13D filed with the Securities and Exchange Commission on December 8, 2017, on or about June 6, 2017, Glenn D.

Sanford and Penny Sanford entered into an oral agreement (the “Stockholder Agreement”), pursuant to which Mr.

Sanford and Ms.

Sanford agreed to vote as a group with respect to the election of our directors and any other matter on which shares of eXp World Holdings, Inc.’s (the “Company”) common stock are entitled to vote.

A purpose of the Stockholder Agreement was to enable the Company to qualify as a “controlled company” within the meaning of the NASDAQ listing rules.

On May 14, 2018, the Company’s application to list its common stock on the NASDAQ Global Market was approved and, because Mr.

Sanford and Ms.

Sanford collectively held more than 50 % of the voting power for the election of our directors, the Company qualified as a “controlled company” within the meaning of the NASDAQ rules.

On or about December 17, 2020, Mr.

Sanford, Jason Gesing and Eugene Frederick entered into an oral agreement to amend the Stockholder Agreement, pursuant to which Mr.

Gesing and Mr.

Frederick (collectively, the “Voting Group”) agreed to vote their shares as a group with respect to the election of our directors and any other matter on which the Company’s shares of common stock are entitled to vote.

Based on the Voting Group’s most recently filed Schedule 13D/A, as of September 30, 2022, the Voting Group beneficially owned 78,997,394 shares of Common Stock, representing 51.73 % of our outstanding shares of Common Stock.

On July 31, 2023, Ms.

Sanford and Messrs.

Sanford and Gesing filed a Schedule 13D/A disclosing that Mr.

Frederick was no longer a member of the Voting Group.

Because no person or group holds more than 50% of the voting power for the election of our directors, the Company no longer qualifies as a “controlled company” under NASDAQ rules.

Accordingly, following permitted phase-in periods, the Company will be required to, among other things, have a majority of independent directors on its Board of Directors, a compensation committee consisting solely of independent directors and a director nominations process whereby directors are selected by a nominations committee consisting solely of independent directors or by a vote of the Board of Directors in which only independent directors participate.

Adoption of 2023 Equity Incentive Plan

Due to limited shares available for issuance and the upcoming expiration of the 2015 Equity Incentive Plan, the Compensation Committee of the Board approved, and recommended that the Board approve and adopt, a new equity incentive plan to serve as the successor to our 2015 Equity Incentive Plan.

The Board adopted the 2023 Equity Incentive Plan on July 28, 2023, and, stockholders holding a majority of the voting power of the Company adopted the Plan on July 29, 2023, by written consent in lieu of a meeting.

The 2023 Equity Incentive Plan and a summary of its principal terms and conditions will be set forth in an information statement to be filed with the Securities and Exchange Commission and provided to all of our stockholders.

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