What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 70 added, 80 removed, 350 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

June 30, 2023

September 30, 2023

December 31, 2022

21 unchanged sentences

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

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

180,883,383 issued and 153,798,815 outstanding at September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses

8 unchanged sentences

Total other (income) expense, net

Income before income tax expense

Income (loss) 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:

5 unchanged sentences

Repurchases of common stock

Issuance of treasury stock, for acquisition

Balance, end of period

8 unchanged sentences

Balance, beginning of period

Net income attributable to eXp World Holdings, Inc.

Dividends declared and paid

12 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES

2 unchanged sentences

Amortization expense - intangible assets

Loss on dissolution of consolidated affiliates

Loss on disposition of business

Allowance for credit losses on receivables/bad debt on receivables

15 unchanged sentences

Purchases of property, plant, equipment

Proceeds from sale of business

Acquisition of business, net of cash acquired

Investments in unconsolidated affiliates

15 unchanged sentences

Termination of lease obligation - operating lease

Issuance of treasury stock, for acquisition

Contingent consideration for disposition of business

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

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

Operating results for the nine months ended September 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.

5 unchanged sentences

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.

The accompanying interim unaudited 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.

6 unchanged sentences

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 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.

17 unchanged sentences

Balance, December 31, 2021

Balance, June 30, 2022

Balance, September 30, 2022

Balance, December 31, 2022

Balance, June 30, 2023

Balance, September 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 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.

Receivables from real estate property settlements totaled $ 107,133 and $ 79,135 of which the Company recognized expected credit losses of $ 25 and $ 3,127 , respectively as of September 30, 2023 and December 31, 2022.

As of September 30, 2023 and December 31, 2022 agent non-commission based fees receivable and short-term advances totaled $ 8,014 and $ 12,141 , of which the Company recognized expected credit losses of $ 1,778 and $ 887 , respectively.

PLANT, PROPERTY AND EQUIPMENT, NET

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

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

Property, plant, and equipment, net

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.

For the three months ended September 30, 2023 and 2022 depreciation expense was $ 2,136 and $ 2,129 , respectively.

For the nine months ended September 30, 2023 and 2022, depreciation expense was $ 6,299 and $ 5,699 , respectively.

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.

Goodwill was $ 24,879 as of September 30, 2023 and $ 27,212 as of December 31, 2022.

As of September 30, 2023, the Company recorded cumulative translation adjustment of $ 23 related to Canadian goodwill.

During the third quarter of 2023, the Company disposed of its Showcase Web Sites LLC business, which resulted in a reduction of goodwill of $ 2,310 , this business was included in the North American Realty segment.

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.

For the three and nine months ended September 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

September 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 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.

Amortization expense for definite-lived intangible assets for the three months ended September 30, 2023 and 2022 was $ 654 and $ 638 , respectively.

Amortization expense for definite-lived intangible assets for the nine months ended September 30, 2023 and 2022 was $ 1,849 and $ 1,455 , 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Common stock:

10 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 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.

During the three months ended September 30, 2023 and 2022, the Company issued 1,985,169 and 3,410,310 shares of common stock, respectively, to agents and brokers with a value of $ 38,897 and $ 44,395 , respectively, inclusive of discount.

During the nine months ended September 30, 2023 and 2022, the Company issued 6,649,976 and 8,903,217 shares of common stock, respectively, to agents and brokers with a value of $ 104,548 and $ 131,230 , 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, 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.

For the three months ended September 30, 2023 and 2022 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 11,764 and $ 5,800 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 1,458 and ($ 985 ), respectively.

For the nine months ended September 30, 2023 and 2022 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 29,912 and $ 22,828 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 2,796 and $ 3,466 , respectively.

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

2 unchanged sentences

Stock grants reclassified from liability to equity year to date

Balance, June 30, 2023

Balance, September 30, 2023

Stock Option Awards

1 unchanged sentence

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.

During the three months ended September 30, 2023 and 2022 the Company granted 445,380 and 394,657 stock options, respectively, to employees with an estimated grant date fair value of $ 10.71 and $ 8.50 per share, respectively.

During the nine months ended September 30, 2023 and 2022, the Company granted 1,973,943 and 1,167,042 stock options, respectively, to employees with an estimated grant date fair value of $ 8.87 and $ 11.21 per share, respectively.

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

4 unchanged sentences

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.

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 Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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

17 unchanged sentences

The following table shows the share 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,

Treasury stock:

1 unchanged sentence

Repurchases of common stock

Forfeiture to treasury stock for acquisition

Issuance of treasury stock for acquisition

Balance, end of quarter

4 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,

Net income attributable to common stock

Three Months Ended September 30,

Nine Months Ended September 30,

Net income attributable to eXp World Holdings, Inc.

Weighted average shares - basic

4 unchanged sentences

Earnings per share attributable to common stock- diluted

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 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.

For three months ended September 30, 2023 and 2022 total outstanding shares of common stock excluded 192,684 and 1,315,861 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive.

For nine months ended September 30, 2023 and 2022 total outstanding shares of common stock excluded 679,425 and 845,162 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive.

Our quarterly tax 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 $ 1,111 and ($ 8,115 ) for the nine months ended September 30, 2023 and 2022, which represent effective tax rates of positive 8.31 % and negative 56.22 %, respectively.

The increase in the provision for income tax expense is primarily attributable to 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 June 30, 2023 and December 31, 2022, the fair value of the Company’s money market funds was $ 45,080 and $ 44,062 , respectively.

As of September 30, 2023 and December 31, 2022, the fair value of the Company’s money market funds was $ 45,666 and $ 44,062 , respectively.

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

2 unchanged sentences

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.

Such litigation includes, but is not limited to, actions or claims relating to cyber-attacks, data breaches, the Real Estate Settlement Procedures Act (“RESPA”), the Telephone Consumer Protection Act of 1991 and state consumer protection laws, antitrust and anticompetition, worker classification, timely filing required SEC filings and non-compliance with contractual or other legal obligations.

As of September 30, 2023, there were no matters pending or, to the Company’s knowledge, threatened that the Company believed could 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.

18 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

North American Realty

5 unchanged sentences

Adjusted EBITDA

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

North American Realty

8 unchanged sentences

Consolidated operating profit

June 30, 2023

September 30, 2023

December 31, 2022

8 unchanged sentences

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.

On October 25, 2023 , the Company’s Board of Directors declared a dividend of $ 0.05 per share which is expected to be payable on November 30, 2023 , to stockholders of record as of the close of business on November 16, 2023 .

The ex-dividend date is expected to be on or around November 15, 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.

Antitrust Litigation

National Association of Realtors was filed on October 31, 2023 in the United States District Court for the Western District of Missouri, Western Division, naming the National Association of Realtors, the Company, Compass, Inc., Redfin Corporation, Weichert Realtors, United Real Estate, Howard Hann Real Estate Services, and Douglas Elliman, Inc.

as defendants.

The Company disputes the allegations against it, and intends to vigorously defend the action.

An estimate of the possible loss or range of loss cannot be made at this time.

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