What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2023-11-02 · 217 added, 155 removed, 265 unchanged (58% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Prepaids and other assets

Current assets of discontinued operations

TOTAL CURRENT ASSETS

4 unchanged sentences

Deferred tax assets

Noncurrent assets of discontinued operations

LIABILITIES AND EQUITY

3 unchanged sentences

Accrued expenses

Litigation contingency

Current portion of lease obligation - operating lease

Current liabilities of discontinued operations

TOTAL CURRENT LIABILITIES

Long-term payable

Long-term lease obligation - operating lease, net of current portion

TOTAL LIABILITIES

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

180,883,383 issued and 153,798,815 outstanding at September 30, 2023;

186,361,476 issued and 154,846,563 outstanding at March 31, 2024;

183,606,708 issued and 154,669,037 outstanding at December 31, 2023

2 unchanged sentences

31,514,913 and 28,937,671 shares held, respectively

Accumulated earnings

Accumulated other comprehensive income

Accumulated deficit

Accumulated other comprehensive (loss) income

Total eXp World Holdings, Inc.

4 unchanged sentences

EXP WORLD HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses

1 unchanged sentence

General and administrative expenses

Technology and development expenses

Sales and marketing expenses

Litigation contingency

Total operating expenses

Operating income

Operating (loss) income

Other (income) expense

1 unchanged sentence

Equity in losses of unconsolidated affiliates

Total other (income) expense, net

Total (income) expense, net

Income (loss) before income tax expense

Income tax (benefit) expense

Net income attributable to noncontrolling interest

Net income attributable to eXp World Holdings, Inc.

Earnings per share

Income tax benefit

Net (loss) income from continuing operations

Net loss from discontinued operations

Net (loss) income

(Loss) earnings per share

Basic, net (loss) income from continuing operations

Basic, net loss from discontinued operations

Basic, net (loss) income

Diluted, net (loss) income from continuing operations

Diluted, net loss from discontinued operations

Diluted, net (loss) income

Weighted average shares outstanding

Comprehensive income:

Comprehensive loss attributable to noncontrolling interests

Net income attributable to eXp World Holdings, Inc.

Other comprehensive income:

Comprehensive (loss) income:

Net (loss) income

Other comprehensive (loss) income:

Foreign currency translation gain (loss), net of tax

Comprehensive income attributable to eXp World Holdings, Inc.

Comprehensive (loss) income attributable to eXp World Holdings, Inc.

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

2 unchanged sentences

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Common stock:

Balance, beginning of period

Agent equity stock compensation

Balance, end of period

2 unchanged sentences

Repurchases of common stock

Issuance of treasury stock, for acquisition

Balance, end of period

6 unchanged sentences

Balance, end of period

Accumulated earnings:

Accumulated (deficit) earnings:

Balance, beginning of period

Net income attributable to eXp World Holdings, Inc.

Dividends declared and paid

Net (loss) income

Dividends declared and paid ( $ 0.05 and $ 0.045 per share of common stock in Q1 2024 and Q1 2023, respectively)

Balance, end of period

11 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

OPERATING ACTIVITIES

Reconciliation of net income to net cash provided by operating activities:

Net (loss) income

Reconciliation of net income (loss) to net cash provided by operating activities:

Depreciation expense

Amortization expense - intangible assets

Loss on disposition of business

Allowance for credit losses on receivables/bad debt on receivables

11 unchanged sentences

Long term payable

Litigation contingency

Other operating activities

2 unchanged sentences

Purchases of property, plant, equipment

Proceeds from sale of business

Acquisition of business, net of cash acquired

Investments in unconsolidated affiliates

13 unchanged sentences

Cash paid for income taxes

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

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

Property, plant and equipment purchases in accounts payable

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

10 unchanged sentences

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.

Accordingly, they do not include all of the information and footnotes required by U.S.

GAAP 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, 2023, filed with the SEC on February 22, 2024 (“2023 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 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.

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 .

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

In the first quarter of 2024, the Company determined that there has been a significant change to the Virbela business model.

As our customers evolve post-COVID, including a return-to-work-offices, and in light of ongoing internal and external demand for web-accessible platforms and artificial intelligence solutions, we have experienced a decline in demand for our application-based platform, Virbela, and a rising interest in our web-accessible platform, Frame ® .

Accordingly, the Company has begun the process of winding down the Virbela business, which includes closing out current contracts, and reducing its external customers and internal employee support.

Further, the technology is being replaced with Virbela Frame ® technology that will be primarily utilized internally within the Company.

The Company expects the process to wind down the Virbela business to be completed by the fourth quarter of 2024.

As a result of this change, the Company has determined that Virbela qualifies for reporting as discontinued operations and will be reported as discontinued operations in the Company’s quarterly report on Form 10-Q for the period ended March 31, 2024 (the “Form 10-Q”).

In accordance with Accounting Standards Codification (“ASC”) 205 – Presentation of Financial Statements, we will present the assets and liabilities of Virbela within discontinued operations in the Company’s condensed consolidated balance sheet and Virbela’s results of operations will be included in discontinued operations in the Company’s condensed consolidated statements of comprehensive income (loss).

In prior years, Virbela represented an operating and reporting segment under ASC 280.

Going forward, the remaining operations of Virbela will not meet the operating or reporting segment criteria, therefore, any operating results related to Virbela and Frame ® technologies will be included in the Other Affiliated Services segment.

Prior year segment and financial statement information has been reclassified to reflect Virbela as discontinued operations .

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 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.

Joint ventures are typically included in the Other Affiliated Services unless the joint venture specifically supports one of the reportable segments.

The Company has several joint venture investments.

The operations of these joint ventures are not material to the Company’s financial position or results of operations.

Use of Estimate s

7 unchanged sentences

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.

Prior year segment and financial statement information has been reclassified to reflect Virbela as discontinued operations.

Restricted cash

2 unchanged sentences

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.

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 amounts shown on the condensed consolidated statements of cash flows.

Cash and cash equivalents

Restricted cash

Balance, December 31, 2021

Balance, September 30, 2022

Balance, March 31, 2023

Balance, December 31, 2023

Balance, September 30, 2023

Balance, March 31, 2024

DISCONTINUED OPERATIONS

In accordance with ASC 205-20 , the results of the Virbela business are presented as discontinued operations in the condensed consolidated statements of comprehensive income and, as such, have been excluded from continuing operations.

Further, the Company reclassified the assets and liabilities of the Virbela segment as assets and liabilities of discontinued operations in the consolidated balance sheets.

The following tables present the information for Virbela’s operations for the three months ended March 31, 2024 and 2023, and the balance sheet information as of March 31, 2024 and December 31, 2023 (in thousands).

ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS

March 31, 2024

December 31, 2023

CURRENT ASSETS

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses of $ 16 and $ 99 , respectively

Prepaids and other assets

TOTAL CURRENT ASSETS

Property, plant, and equipment, net

Intangible assets, net

Deferred tax assets

CURRENT LIABILITIES

Accounts payable

Accrued expenses

TOTAL CURRENT LIABILITIES

TOTAL LIABILITIES

INCOME STATEMENT OF DISCONTINUED OPERATIONS

Three Months Ended March 31,

Operating expenses

Commissions and other agent-related costs

General and administrative expenses

Technology and development expenses

Sales and marketing expenses

Total operating expenses

Operating (loss)

Other income, net

Total other income, net

(Loss) before income tax expense

Income tax benefit

Net loss from discontinued operations

EXPECTED CREDIT LOSSES

6 unchanged sentences

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

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.

Receivables from real estate property settlements totaled $ 100,529 and $ 81,004 of which the Company recognized expected credit losses of $ 2 and $- , respectively as of March 31, 2024 and December 31, 2023.

As of March 31, 2024 and December 31, 2023 agent non-commission based fees receivable and short-term advances totaled $ 7,487 and $ 7,268 , of which the Company recognized expected credit losses of $ 2,363 and $ 2,204 , respectively.

PLANT, PROPERTY AND EQUIPMENT, NET

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

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Depreciable property, net

Discontinued operations

Assets under development

Property, plant, and equipment, net

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.

For the three months ended March 31, 2024 and 2023 depreciation expense was $ 2,059 and $ 2,067 , respectively.

GOODWILL AND INTANGIBLE ASSETS

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.

Goodwill was $ 16,682 as of March 31, 2024 and $ 16,982 as of December 31, 2023.

As of March 31, 2024, the Company recorded cumulative translation adjustment of ($ 300 ) related to Canadian goodwill.

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 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:

September 30, 2023

For the three months ended March 31, 2024, no events occurred that indicated it was more likely than not that goodwill was impaired.

The following tables present definite-lived intangible assets as of March 31, 2024 and December 31, 2023, in thousands:

March 31, 2024

Existing technology

Non-competition agreements

Customer relationships

Licensing agreement

Intellectual property

Total intangible assets

December 31, 2023

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 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.

Amortization expense for definite-lived intangible assets for the three months ended March 31, 2024 and 2023 was $ 340 and $ 512 , respectively.

STOCKHOLDERS’ EQUITY

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,

Three Months Ended March 31,

Common stock:

8 unchanged sentences

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 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.

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 for the period beginning January 1, 2024 through February 29, 2024, and a 5 % discount on these issuances beginning as of March 1, 2024, as an additional cost of sales charge during the periods presented.

During the three months ended March 31, 2024 and 2023, the Company issued 2,189,922 and 2,106,369 shares of common stock, respectively, to agents and brokers with a value of $ 25,868 and $ 26,775 , respectively, inclusive of discount.

Agent Growth Incentive Program

2 unchanged sentences

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.

Share-based performance awards are granted 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 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.

For the three months ended March 31, 2024 and 2023 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 8,827 and $ 9,660 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 650 and $ 993 , respectively.

Agent Thrive Program

Announced in October 2023, the Thrive program provides a stock incentive to the individual teams of leaders of culturally aligned teams that join the Company as part of the program.

After affiliating with the Company, the team leader becomes eligible to receive an award of the Company’s common stock through team performance benchmarks.

Awards typically vest after production 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 production metrics.

As such, the awards are classified as liabilities until the number of share awards becomes fixed once the production metric is achieved.

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

Stock grant liability balance at December 31, 2022

Stock grant liability increase year to date

Stock grants reclassified from liability to equity year to date

Balance, December 31, 2023

1 unchanged sentence

Stock grants reclassified from liability to equity year to date

Balance, September 30, 2023

Balance, March 31, 2024

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 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.

During the three months ended March 31, 2024 and 2023 the Company granted 353,656 and 88,553 stock options, respectively, to employees with an estimated grant date fair value of $ 6.93 and $ 8.18 per share, respectively.

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

2 unchanged sentences

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.

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.

4 unchanged sentences

10b5-1 Repurchase Plan

The Company maintains an internal stock repurchase program with program changes subject to Board consent.

The Company maintains a stock repurchase program with program changes subject to Board consent.

In June 2023, the Board approved increasing the stock repurchase program to $ 1.0 billion.

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.

entered into a form of Issuer Repurchase Plan (“Issuer Repurchase Plan”) which authorized Stephens to repurchase common stock of the Company, which is amended from time to time to adjust the monthly repurchase amount.

Most recently, on March 6, 2024, the Board approved, and the Company entered into a seventh amendment to the Issuer Repurchase Plan to increase the monthly repurchase to (i) $ 20.0 million during the calendar months commencing March 1, 2024 through and including April 30, 2024, and (ii) $ 15.0 million during the calendar months commencing May 1, 2024 through and including December 31, 2024.

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

2 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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

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 September 30,

Nine Months Ended September 30,

Net income attributable to eXp World Holdings, Inc.

Weighted average shares - basic

Dilutive effect of common stock equivalents

Weighted average shares - diluted

Earnings per share:

Earnings per share attributable to common stock- basic

Earnings per share attributable to common stock- diluted

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.

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 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.

The Company did not have any Level 2 or Level 3 financial assets or liabilities in the period presented.

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 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.

SEGMENT INFORMATION

1 unchanged sentence

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.

Management evaluates the operating results of each of its reportable segments based upon revenue and Adjusted Segment EBITDA.

Adjusted Segment EBITDA is defined by us as a segment’s operating profit (loss) from continuing operations plus depreciation and amortization, litigation contingency 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:

Historically, the Company has reported results for four reportable segments.

In the first quarter of 2024, the Company determined that the Virbela segment qualified for reporting as discontinued operations.

In prior years, Virbela represented an operating and reporting segment under ASC 280.

Going forward, the remaining operations of Virbela will not meet the operating or reporting segment criteria, therefore, any operating results related to Virbela technology will be included in the

Other Affiliated Services segment.

Prior year segment information has been reclassified to remove Virbela from the segment disclosure, in accordance with discontinued operations treatment.

The Company’s three reportable segments are as follows:

● North American Realty:

2 unchanged sentences

includes real estate brokerage operations in all other international locations.

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.

includes our SUCCESS ® Magazine, Frame ® technology, and other smaller ventures.

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.

All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Condensed 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.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

North American Realty

5 unchanged sentences

Adjusted EBITDA

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

North American Realty

3 unchanged sentences

Consolidated Adjusted EBITDA

Operating Profit Reconciliation:

Operating (Loss) Profit Reconciliation:

Depreciation and amortization expense

Litigation contingency

Stock compensation expense

Stock option expense

Consolidated operating profit

September 30, 2023

Consolidated operating (loss) profit

March 31, 2024

December 31, 2023

2 unchanged sentences

Other Affiliated Services

Segment total

Corporate and other

Consolidated total

Segment and 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.

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.

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 March 31,

Net (loss) income from continuing operations

Net loss from discontinued operations

Weighted average shares - basic

Dilutive effect of common stock equivalents

Weighted average shares - diluted

Earnings per share:

Net (loss) income from continuing operations per share - basic

Net (loss) income from discontinued operations per share - basic

Net (loss) income from continuing operations per share - diluted

Net (loss) income from discontinued operations per share - diluted

For three months ended March 31, 2024 and 2023 total outstanding shares of common stock excluded 3,212,244 and 635,343 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 ($ 3.4 ) million and ($ 2.6 ) million for the three months ended March 31, 2024 and 2023, which represent effective tax rates of positive 18 % and 238 % , respectively.

The provision for income tax benefit was primarily attributable to income(loss) from continuing and discontinuing operations, deductible stock-based compensation shortfalls and research and development credit.

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.

The Company is subject to a wide variety of tax laws and regulations across the jurisdictions where it operates.

Regulatory developments from the U.S.

or international tax reform legislation could result in an impact to the Company's effective tax rate.

The Company continues to monitor the Base Erosion and Profit Shifting (BEPS) Integrated Framework provided by the Organization for Economic Co-operation and Development (OECD) including the legislative adoption of Pillar II by countries, and all other tax regulatory changes, to evaluate the potential impact on future periods.

The Company does not expect adoption of Pillar Two rules to have a significant impact on its consolidated financial statements during fiscal year 2024.

FAIR VALUE MEASUREMENT

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 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 March 31, 2024 and December 31, 2023, the fair value of the Company’s money market funds was $ 46,665 and $ 46,268 , 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.

COMMITMENTS AND CONTINGENCIES

The Company and its affiliated brokerage entities are among several defendants in eight U.S.

and one Canadian putative class action lawsuits alleging that the Company participated in a system that resulted in sellers of residential property paying inflated buyer broker commissions in violation of U.S.

federal and state antitrust laws and federal Canadian antitrust laws, as applicable, as discussed further in our 2023 Annual Report and Note 13 – Subsequent Events to these unaudited consolidated financial statements (“antitrust litigation”).

As of March 31, 2024, the Company has determined that it is probable that a loss associated with the antitrust litigation has occurred and that the lower boundary of potential loss is reasonably estimable.

Based on an analysis of settlements negotiated by co-defendants companies in similar legal matters and ongoing developments in the antitrust litigation, the Company has recorded a provision for loss of $16.0 million which represents the lower boundary of a reasonably possible range of loss.

The high-end range of loss cannot be reasonably estimated at this time due to the dynamic nature of the lawsuit and the contingent nature of possible outcomes.

We have determined that it is at least reasonably possible that the loss estimate provision could change in the near term and that such change could be material.

This contingent uncertainty highlights the provisional nature of the current loss estimate.

Additionally, we cannot provide any assurances that results of such litigation will not have a material adverse effect on our business, results of operations, cash flows or financial condition.

The Company continues to vigorously defend against these claims.

However, due to the complexities inherent in such litigation, including the uncertainty of legal processes and potential developments in the cases, the ultimate liability may differ from the current provision.

The Company will reassess this estimate as additional information becomes available or as circumstances change.

SUBSEQUENT EVENTS

Quarterly Cash Dividend

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.

On April 24, 2024 , the Company’s Board of Directors declared a dividend of $ 0.05 per share which is expected to be payable on May 27, 2024 , to stockholders of record as of the close of business on May 13, 2024 .

The ex-dividend date is expected to be on or around May 10, 2024.

The dividend will be paid in cash.

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.

On April 11, 2024, the Company was named in Shauntell Burton et al.

Bluefield Realty Group, LLC, et al., Case No.

7:24-cv-01800-JDA (filed in the United States District Court for the District of South Carolina) (the “Burton Litigation”), brought by a putative class of residential property sellers, alleging that defendants participated in a system that resulted in sellers of residential property purportedly paying inflated buyer broker commissions in violation of federal antitrust law.

As with the other antitrust litigation, the plaintiffs seek a permanent injunction enjoining the defendants from requiring home sellers to pay buyer-broker commissions or from otherwise restricting competition among brokers, an award of declaratory relief and damages or restitution on behalf of certain home sellers as well as attorneys’ fees and costs of suit.

Plaintiffs allege joint and several liability and seek treble or other multiple damages.

The Burton Litigation is in the pleadings phase and the Company intends to vigorously defend against all claims.

The Company may become involved in additional litigation or other legal proceedings concerning the same or similar claims.

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