Item 1. Financial Statements
Item 1.
FINANCIAL STATEMENTS (UNAUDITED)
EXP WORLD HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(UNAUDITED)
June 30, 2023
December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$ 124,714
$ 121,594
Restricted cash
88,560
37,789
Accounts receivable, net of allowance for credit losses of $ 1,544 and $ 4,014 , respectively
134,998
87,262
Prepaids and other assets
8,101
8,468
TOTAL CURRENT ASSETS
356,373
255,113
Property, plant, and equipment, net
15,224
18,151
Operating lease right-of-use assets
32
2,127
Other noncurrent assets
6,567
1,703
Intangible assets, net
11,728
8,700
Deferred tax assets
65,306
68,676
Goodwill
27,552
27,212
TOTAL ASSETS
$ 482,782
$ 381,682
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$ 7,321
$ 10,391
Customer deposits
88,643
37,789
Accrued expenses
128,461
78,944
Current portion of lease obligation - operating lease
29
175
TOTAL CURRENT LIABILITIES
224,454
127,299
Long-term payable
5
4,697
Long-term lease obligation - operating lease, net of current portion
3
694
TOTAL LIABILITIES
224,462
132,690
EQUITY
Common Stock, $ 0.00001 par value 900,000,000 shares authorized; 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
2
2
Additional paid-in capital
701,806
611,872
Treasury stock, at cost: 24,311,897 and 18,816,791 shares held, respectively
( 463,738 )
( 385,010 )
Accumulated earnings
18,138
20,723
Accumulated other comprehensive income
943
236
Total eXp World Holdings, Inc. stockholders' equity
257,151
247,823
Equity attributable to noncontrolling interest
1,169
1,169
TOTAL EQUITY
258,320
248,992
TOTAL LIABILITIES AND EQUITY
$ 482,782
$ 381,682
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EXP WORLD HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except share amounts and per share data)
(UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Revenues
$ 1,232,927
$ 1,415,060
$ 2,083,543
$ 2,425,791
Operating expenses
Commissions and other agent-related costs
1,136,411
1,307,810
1,913,970
2,235,077
General and administrative expenses
82,541
91,391
154,308
166,713
Sales and marketing expenses
2,878
4,210
5,841
7,910
Total operating expenses
1,221,830
1,403,411
2,074,119
2,409,700
Operating income
11,097
11,649
9,424
16,091
Other (income) expense
Other (income) expense, net
( 1,299 )
62
( 2,179 )
472
Equity in losses of unconsolidated affiliates
143
567
485
884
Total other (income) expense, net
( 1,156 )
629
( 1,694 )
1,356
Income before income tax expense
12,253
11,020
11,118
14,735
Income tax (benefit) expense
2,831
1,661
243
( 3,488 )
Net income
9,422
9,359
10,875
18,223
Net income attributable to noncontrolling interest
-
-
-
18
Net income attributable to eXp World Holdings, Inc.
$ 9,422
$ 9,359
$ 10,875
$ 18,241
Earnings per share
Basic
$ 0.06
$ 0.06
$ 0.07
$ 0.12
Diluted
$ 0.06
$ 0.06
$ 0.07
$ 0.12
Weighted average shares outstanding
Basic
153,249,120
150,783,418
152,899,883
150,049,170
Diluted
156,693,959
155,816,038
156,119,627
156,579,590
Comprehensive income:
Net income
$ 9,422
$ 9,359
$ 10,875
$ 18,223
Comprehensive loss attributable to noncontrolling interests
-
-
-
18
Net income attributable to eXp World Holdings, Inc.
9,422
9,359
10,875
18,241
Other comprehensive income:
Foreign currency translation gain (loss), net of tax
64
( 1,182 )
707
( 1,141 )
Comprehensive income attributable to eXp World Holdings, Inc.
$ 9,486
$ 8,177
$ 11,582
$ 17,100
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EXP WORLD HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Common stock:
Balance, beginning of period
$ 2
$ 2
$ 2
$ 1
Agent equity stock compensation
-
-
-
1
Balance, end of period
2
2
2
2
Treasury stock:
Balance, beginning of period
( 414,926 )
( 239,965 )
( 385,010 )
( 210,009 )
Repurchases of common stock
( 48,812 )
( 49,864 )
( 78,728 )
( 79,820 )
Balance, end of period
( 463,738 )
( 289,829 )
( 463,738 )
( 289,829 )
Additional paid-in capital:
Balance, beginning of period
650,383
450,570
611,872
401,479
Shares issued for stock options exercised
946
280
1,253
778
Agent growth incentive stock compensation
9,236
6,685
17,903
13,268
Agent equity stock compensation
38,876
48,335
65,652
86,835
Stock option compensation
2,365
3,606
5,126
7,116
Balance, end of period
701,806
509,476
701,806
509,476
Accumulated earnings:
Balance, beginning of period
15,580
33,533
20,723
30,510
Net income
9,422
9,359
10,875
18,241
Dividends declared and paid
( 6,864 )
( 5,885 )
( 13,460 )
( 11,744 )
Balance, end of period
18,138
37,007
18,138
37,007
Accumulated other comprehensive income (loss):
Balance, beginning of period
879
229
236
188
Foreign currency translation gain (loss)
64
( 1,182 )
707
( 1,141 )
Balance, end of period
943
( 953 )
943
( 953 )
Noncontrolling interest:
Balance, beginning of period
1,169
1,169
1,169
1,364
Net loss
-
-
-
( 18 )
Transactions with noncontrolling interests
-
-
-
( 177 )
Balance, end of period
1,169
1,169
1,169
1,169
Total equity
$ 258,320
$ 256,872
$ 258,320
$ 256,872
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EXP WORLD HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
Six Months Ended June 30,
2023
2022
OPERATING ACTIVITIES
Net income
$ 10,875
$ 18,223
Reconciliation of net income to net cash provided by operating activities:
Depreciation expense
4,163
3,570
Amortization expense - intangible assets
1,195
817
Loss on dissolution of consolidated affiliates
-
361
Allowance for credit losses on receivables/bad debt on receivables
( 2,470 )
608
Equity in loss of unconsolidated affiliates
485
884
Agent growth incentive stock compensation expense
18,148
17,028
Stock option compensation
5,126
7,121
Agent equity stock compensation expense
65,652
86,835
Deferred income taxes, net
3,370
( 6,892 )
Changes in operating assets and liabilities:
Accounts receivable
( 45,266 )
( 22,269 )
Prepaids and other assets
367
2,236
Customer deposits
50,854
25,893
Accounts payable
( 3,069 )
( 1,152 )
Accrued expenses
49,273
31,961
Long term payable
( 4,692 )
-
Other operating activities
157
74
NET CASH PROVIDED BY OPERATING ACTIVITIES
154,168
165,298
INVESTING ACTIVITIES
Purchases of property, plant, equipment
( 3,433 )
( 8,077 )
Investments in unconsolidated affiliates
( 5,350 )
-
Capitalized software development costs in intangible assets
( 1,179 )
-
NET CASH USED IN INVESTING ACTIVITIES
( 9,962 )
( 8,077 )
FINANCING ACTIVITIES
Repurchase of common stock
( 78,728 )
( 79,820 )
Proceeds from exercise of options
1,253
780
Transactions with noncontrolling interests
-
( 425 )
Dividends declared and paid
( 13,460 )
( 11,744 )
NET CASH USED IN FINANCING ACTIVITIES
( 90,935 )
( 91,209 )
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
620
( 1,141 )
Net change in cash, cash equivalents and restricted cash
53,891
64,871
Cash, cash equivalents and restricted cash, beginning balance
159,383
175,910
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE
$ 213,274
$ 240,781
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes
$ 1,833
$ 2,444
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Termination of lease obligation - operating lease
$ 837
$ -
Property, plant and equipment increase due to transfer of right-of-use lease asset
1,100
-
Property, plant and equipment purchases in accounts payable
-
246
The accompanying notes are an integral part of these condensed consolidated financial statements.
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eXp World Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements
(UNAUDITED)
(Amounts in thousands, except share amounts and per share data or noted otherwise)
1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
eXp World Holdings, Inc. (“eXp,” or, collectively with its subsidiaries, the “Company,” “we,” “us,” or “our”) owns and operates a diversified portfolio of service-based businesses whose operations benefit substantially from utilizing our technology platform. We strategically prioritize our efforts to grow our real estate brokerage by strengthening our agent value proposition, developing immersive and cloud-based technology to enable our model and providing affiliate and media services supporting those efforts. Our real estate brokerage is now one of the largest and fastest-growing real estate brokerage companies in the United States and Canada and is rapidly expanding internationally.
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
These interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023 (“2022 Annual Report”).
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 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. As such, we now report operating results through four reportable segments: North American Realty, International Realty, Virbela and Other Affiliated Services, as further discussed in Note 11 – Segment Information . Accordingly, certain amounts in the prior years’ consolidated financial statements have been revised to conform to the current year presentation. See additional information in Note 11 –Segment Information .
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of eXp and its consolidated subsidiaries, including those entities in which we have a variable interest of which we are the primary beneficiary. If the Company has a variable interest in an entity but it is not the primary beneficiary of the entity or exercises control over the operations and has less than 50% ownership, it will use the equity method or the cost method of accounting for investments. Entities in which the Company has less than a 20% investment and where the Company does not exercise significant influence are accounted for under the cost method. Intercompany transactions and balances are eliminated upon consolidation.
Variable interest entities and noncontrolling interests
A company is deemed to be the primary beneficiary of a variable interest entity (“VIE”) and must consolidate the entity if the company has both: (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Joint ventures
A joint venture is a contractual arrangement whereby the Company and other parties undertake an economic activity through a jointly controlled entity. Joint control exists when strategic, financial, and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. Joint ventures are accounted for using the equity method and are recognized initially at cost.
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Use of Estimate s
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. 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. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Reclassifications
When necessary, the Company will reclassify certain amounts in prior-period financial statements to conform to the current period’s presentation. No reclassifications occurred during the current period.
Restricted cash
Restricted cash consists of cash held in escrow by the Company on behalf of real estate buyers. The Company recognizes a corresponding customer deposit liability until the funds are released. Once the cash transfers from escrow, the Company reduces the respective customers’ deposit liability.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown on the condensed consolidated statements of cash flows.
Cash and cash equivalents
Restricted cash
Total
Balance, December 31, 2021
$ 108,237
$ 67,673
$ 175,910
Balance, June 30, 2022
$ 134,898
$ 105,883
$ 240,781
Balance, December 31, 2022
$ 121,594
$ 37,789
$ 159,383
Balance, June 30, 2023
$ 124,714
$ 88,560
$ 213,274
3.
EXPECTED CREDIT LOSSES
The Company is exposed to credit losses primarily through trade and other financing receivables arising from revenue transactions. The Company uses the aging schedule method to estimate current expected credit losses (“CECL”) based on days of delinquency, including information about past events and current economic conditions. The Company’s accounts receivable is separated into three categories to evaluate allowance under the CECL impairment model. The receivables in each category share similar risk characteristics. The three categories include agent non-commission based fees, agent short-term advances, and commissions receivable for real estate property settlements.
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.
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.
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4.
PLANT, PROPERTY AND EQUIPMENT, NET
Plant, property and equipment, net consisted of the following:
June 30, 2023
December 31, 2022
Computer hardware and software
$ 36,467
$ 34,206
Furniture, fixture, and equipment
2,253
20
Total depreciable property and equipment
38,720
34,226
Less: accumulated depreciation
( 23,552 )
( 19,282 )
Depreciable property, net
15,168
14,944
Assets under development
56
3,207
Property, plant, and equipment, net
$ 15,224
$ 18,151
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.
5.
GOODWILL AND INTANGIBLE ASSETS
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 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:
June 30, 2023
December 31, 2022
Gross
Accumulated
Net Carrying
Gross
Accumulated
Net Carrying
Amount
Amortization
Amount
Amount
Amortization
Amount
Trade name
$ 3,472
($ 984 )
$ 2,488
$ 3,459
($ 841 )
$ 2,618
Existing technology
8,188
( 2,889 )
5,299
3,995
( 2,458 )
1,537
Non-competition agreements
469
( 125 )
344
461
( 125 )
336
Customer relationships
1,895
( 646 )
1,249
1,895
( 551 )
1,344
Licensing agreement
210
( 210 )
-
210
( 181 )
29
Intellectual property
2,836
( 488 )
2,348
2,836
-
2,836
Total intangible assets
$ 17,070
($ 5,342 )
$ 11,728
$ 12,856
($ 4,156 )
$ 8,700
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, 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.
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6. STOCKHOLDERS’ EQUITY
The following table represents a share reconciliation of the Company’s common stock issued for the periods presented:
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Common stock:
Balance, beginning of quarter
174,532,043
158,300,605
171,656,030
155,516,284
Shares issued for stock options exercised
79,599
639,861
192,807
1,363,055
Agent growth incentive stock compensation
730,003
403,652
1,386,439
914,324
Agent equity stock compensation
2,558,438
3,942,452
4,664,807
5,492,907
Balance, end of quarter
177,900,083
163,286,570
177,900,083
163,286,570
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
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, 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
The Company administers an equity incentive program whereby agents and brokers become eligible to receive awards of the Company’s common stock through agent attraction and performance benchmarks (the “Agent Growth Incentive Program” or “AGIP”). The incentive program encourages greater performance and awards agents with common stock based on achievement of performance milestones. Awards typically vest after performance benchmarks are reached and three years of subsequent service is provided to the Company. Share-based performance awards are based on a fixed-dollar amount of shares based on the achievement of performance metrics. 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, 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.
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The following table illustrates changes in the Company’s stock compensation liability for the periods presented:
Amount
Balance, December 31, 2022
$ 3,885
Stock grant liability increase year to date
1,338
Stock grants reclassified from liability to equity year to date
( 1,094 )
Balance, June 30, 2023
$ 4,129
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 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.
Stock Repurchase Plan
In December 2018, the Company’s board of directors (the “Board”) approved a stock repurchase program authorizing the Company to purchase up to $ 25.0 million of its common stock, which was later amended in November 2019 increasing the authorized repurchase amount to $ 75.0 million. In December 2020, the Board approved another amendment to the repurchase plan, increasing the total amount authorized to be purchased from $ 75.0 million to $ 400.0 million. In May 2022, the Board approved an increase to the total amount of its buyback program from $ 400.0 million to $ 500.0 million. 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. The repurchase program does not require the Company to acquire a specific number of shares. The cost of the shares that are repurchased is funded from cash and cash equivalents on hand.
10b5-1 Repurchase Plan
The Company maintains an internal stock repurchase program with program changes subject to Board consent. From time to time, the Company adopts written trading plans pursuant to Rule 10b5-1 of the Exchange Act to conduct repurchases on the open market.
On January 10, 2022, the Company and Stephens Inc. 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 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.
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For accounting purposes, common stock repurchased under the stock repurchase programs is recorded based upon the settlement date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method. These shares are considered issued but not outstanding.
The following table shows the share changes in treasury stock for the periods presented:
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Treasury stock:
Balance, beginning of quarter
21,089,622
7,883,740
18,816,791
6,751,692
Repurchases of common stock
3,222,275
3,603,951
5,495,106
4,735,999
Balance, end of quarter
24,311,897
11,487,691
24,311,897
11,487,691
7. EARNINGS PER SHARE
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. The Company uses the treasury stock method to reflect the potential dilutive effect of unvested stock awards and unexercised options.
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,
2023
2022
2023
2022
Numerator:
Net income attributable to common stock
$ 9,422
$ 9,359
$ 10,875
$ 18,241
Denominator:
Weighted average shares - basic
153,249,120
150,783,418
152,899,883
150,049,170
Dilutive effect of common stock equivalents
3,444,839
5,032,620
3,219,744
6,530,420
Weighted average shares - diluted
156,693,959
155,816,038
156,119,627
156,579,590
Earnings per share:
Earnings per share attributable to common stock- basic
$ 0.06
$ 0.06
$ 0.07
$ 0.12
Earnings per share attributable to common stock- diluted
$ 0.06
$ 0.06
$ 0.07
$ 0.12
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.
8. INCOME TAXES
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 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.
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9. FAIR VALUE MEASUREMENT
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. 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. The fair value hierarchy is defined into the following three categories:
● Level 1 – Inputs are quoted market prices in active markets for identical assets or liabilities (these are observable market inputs).
● Level 2 – Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or prices that vary substantially).
● Level 3 – Inputs are unobservable inputs that reflect the entity's own assumptions in pricing the asset or liability (used when little or no market data is available).
The Company holds funds in a money market account, which are considered Level 1 assets. The Company values its money market funds at fair value on a recurring basis.
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. The Company did not have any Level 2 or Level 3 financial assets or liabilities in the period presented.
10. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is subject to potential liability under laws and government regulations and various claims and legal actions that may be asserted against us that could have a material adverse effect on the business, reputation, results of operations or financial condition. Such litigation may include, but is not limited to, actions or claims relating to sensitive data, including proprietary business information and intellectual property and that of clients and personally identifiable information of employees and contractors, cyber-attacks, data breaches and non-compliance with contractual or other legal obligations.
There are no matters pending or, to the Company’s knowledge, threatened that are expected to have a material adverse impact on the business, reputation, results of operations, or financial condition.
There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial stockholder is an adverse party or has a material interest adverse to the Company’s interest.
11. SEGMENT INFORMATION
The reportable segments presented below represent the Company’s segments for which separate financial information is available and which is utilized on a regular basis by its chief operating decision maker to assess performance and to allocate resources. In identifying its reportable segments, the Company also considers the nature of services provided by its segments.
Management evaluates the operating results of each of its reportable segments based upon revenue and Adjusted EBITDA. Adjusted Segment EBITDA is defined by us as operating profit plus depreciation and amortization and stock-based compensation expenses. 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 are as follows:
● North American Realty: includes real estate brokerage operations in the United States and Canada, as well as lead-generation and other real estate support services provided in North America.
● International Realty: includes real estate brokerage operations in all other international locations.
● Virbela: includes Virbela enterprise metaverse technology and the support services offered by eXp World Technologies.
● Other Affiliated Services: includes our SUCCESS ® Magazine and other smaller ventures.
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The Company also reports corporate expenses, as further detailed below, as “Corporate and other” which include expenses incurred in connection with business development support provided to the agents as well as resources, including administrative, brokerage operations and legal functions.
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 Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. 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 profit and Goodwill (in thousands). Financial information for the comparable prior periods presented have been revised to conform with the current year presentation .
Revenues
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
North American Realty
$ 1,219,345
$ 1,404,028
$ 2,056,459
$ 2,405,908
International Realty
11,991
8,908
22,748
16,002
Virbela
1,811
2,040
3,974
3,853
Other Affiliated Services
1,072
1,043
2,749
1,881
Revenues reconciliation:
Segment eliminations
( 1,292 )
( 959 )
( 2,387 )
( 1,853 )
Consolidated revenues
$ 1,232,927
$ 1,415,060
$ 2,083,543
$ 2,425,791
Adjusted EBITDA
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
North American Realty
$ 34,122
$ 39,899
$ 55,325
$ 68,670
International Realty
( 3,782 )
( 3,014 )
( 7,458 )
( 4,970 )
Virbela
( 1,196 )
( 2,715 )
( 2,492 )
( 5,487 )
Other Affiliated Services
( 1,168 )
( 747 )
( 1,849 )
( 1,576 )
Corporate expenses and other
( 3,247 )
( 6,509 )
( 5,470 )
( 12,010 )
Consolidated Adjusted EBITDA
$ 24,729
$ 26,914
$ 38,056
$ 44,627
Operating Profit Reconciliation:
Depreciation and amortization expense
2,779
2,429
5,358
4,387
Stock compensation expense
8,488
9,230
18,148
17,028
Stock option expense
2,365
3,606
5,126
7,121
Consolidated operating profit
$ 11,097
$ 11,649
$ 9,424
$ 16,091
Goodwill
June 30, 2023
December 31, 2022
North American Realty
$ 16,917
$ 16,577
International Realty
-
-
Virbela
8,248
8,248
Other Affiliated Services
2,387
2,387
Segment total
27,552
27,212
Corporate and other
-
-
Consolidated total
$ 27,552
$ 27,212
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.
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12. SUBSEQUENT EVENTS
Quarterly Cash Dividend
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, Ms. Sanford, Jason Gesing and Eugene Frederick entered into an oral agreement to amend the Stockholder Agreement, pursuant to which Mr. Sanford, Ms. Sanford, 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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.