Item 1. Financial Statements
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
EXP WORLD HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(UNAUDITED)
March 31, 2024
December 31, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$ 109,169
$ 125,873
Restricted cash
74,735
44,020
Accounts receivable, net of allowance for credit losses of $ 2,363 and $ 2,204 , respectively
105,325
85,343
Prepaids and other assets
9,517
9,275
Current assets of discontinued operations
1,631
1,964
TOTAL CURRENT ASSETS
300,377
266,475
Property, plant, and equipment, net
12,231
12,967
Operating lease right-of-use assets
7
10
Other noncurrent assets
11,058
7,400
Intangible assets, net
6,644
7,012
Deferred tax assets
73,955
69,034
Goodwill
16,682
16,982
Noncurrent assets of discontinued operations
5,795
5,788
TOTAL ASSETS
$ 426,749
$ 385,668
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$ 8,986
$ 8,788
Customer deposits
75,789
44,550
Accrued expenses
102,104
86,483
Litigation contingency
16,000
-
Current portion of lease obligation - operating lease
7
10
Current liabilities of discontinued operations
1,406
1,809
TOTAL CURRENT LIABILITIES
204,292
141,640
Long-term payable
20
20
TOTAL LIABILITIES
204,312
141,660
EQUITY
Common Stock, $ 0.00001 par value 900,000,000 shares authorized; 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
2
Additional paid-in capital
841,576
804,833
Treasury stock, at cost: 31,514,913 and 28,937,671 shares held, respectively
( 578,591 )
( 545,559 )
Accumulated deficit
( 39,993 )
( 16,769 )
Accumulated other comprehensive (loss) income
( 557 )
332
Total eXp World Holdings, Inc. stockholders' equity
222,437
242,839
Equity attributable to noncontrolling interest
-
1,169
TOTAL EQUITY
222,437
244,008
TOTAL LIABILITIES AND EQUITY
$ 426,749
$ 385,668
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 (LOSS)
(In thousands, except share amounts and per share data)
(UNAUDITED)
Three Months Ended March 31,
2024
2023
Revenues
$ 943,054
$ 848,453
Operating expenses
Commissions and other agent-related costs
864,746
776,838
General and administrative expenses
62,582
54,626
Technology and development expenses
14,761
14,060
Sales and marketing expenses
3,139
2,927
Litigation contingency
16,000
-
Total operating expenses
961,228
848,451
Operating (loss) income
( 18,174 )
2
Other (income) expense
Other (income) expense, net
( 1,188 )
( 874 )
Equity in losses of unconsolidated affiliates
149
342
Total (income) expense, net
( 1,039 )
( 532 )
Income (loss) before income tax expense
( 17,135 )
534
Income tax benefit
( 3,305 )
( 1,458 )
Net (loss) income from continuing operations
( 13,830 )
1,992
Net loss from discontinued operations
( 1,809 )
( 539 )
Net (loss) income
($ 15,639 )
$ 1,453
(Loss) earnings per share
Basic, net (loss) income from continuing operations
($ 0.09 )
$ 0.01
Basic, net loss from discontinued operations
($ 0.01 )
($ 0.00 )
Basic, net (loss) income
($ 0.10 )
$ 0.01
Diluted, net (loss) income from continuing operations
($ 0.09 )
$ 0.01
Diluted, net loss from discontinued operations
($ 0.01 )
($ 0.00 )
Diluted, net (loss) income
($ 0.10 )
$ 0.01
Weighted average shares outstanding
Basic
154,740,334
152,546,766
Diluted
154,740,334
155,668,712
Comprehensive (loss) income:
Net (loss) income
($ 15,639 )
$ 1,453
Other comprehensive (loss) income:
Foreign currency translation gain (loss), net of tax
( 889 )
643
Comprehensive (loss) income attributable to eXp World Holdings, Inc.
($ 16,528 )
$ 2,096
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 March 31,
2024
2023
Common stock:
Balance, beginning of period
$ 2
$ 2
Balance, end of period
2
2
Treasury stock:
Balance, beginning of period
( 545,559 )
( 385,010 )
Repurchases of common stock
( 33,032 )
( 29,916 )
Balance, end of period
( 578,591 )
( 414,926 )
Additional paid-in capital:
Balance, beginning of period
804,833
611,872
Shares issued for stock options exercised
977
307
Agent growth incentive stock compensation
7,908
8,668
Agent equity stock compensation
25,868
26,775
Stock option compensation
1,990
2,761
Balance, end of period
841,576
650,383
Accumulated (deficit) earnings:
Balance, beginning of period
( 16,769 )
20,723
Net (loss) income
( 15,639 )
1,453
Dividends declared and paid ( $ 0.05 and $ 0.045 per share of common stock in Q1 2024 and Q1 2023, respectively)
( 7,585 )
( 6,596 )
Balance, end of period
( 39,993 )
15,580
Accumulated other comprehensive income (loss):
Balance, beginning of period
332
236
Foreign currency translation gain (loss)
( 889 )
643
Balance, end of period
( 557 )
879
Noncontrolling interest:
Balance, beginning of period
1,169
1,169
Transactions with noncontrolling interests
( 1,169 )
-
Balance, end of period
( 0 )
1,169
Total equity
$ 222,437
$ 253,087
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)
Three Months Ended March 31,
2024
2023
OPERATING ACTIVITIES
Net (loss) income
($ 15,639 )
$ 1,453
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation expense
2,059
2,067
Amortization expense - intangible assets
340
512
Allowance for credit losses on receivables/bad debt on receivables
159
( 1,790 )
Equity in loss of unconsolidated affiliates
149
342
Agent growth incentive stock compensation expense
8,827
9,660
Stock option compensation
1,990
2,761
Agent equity stock compensation expense
25,868
26,775
Deferred income taxes, net
( 4,786 )
277
Changes in operating assets and liabilities:
Accounts receivable
( 20,141 )
( 10,808 )
Prepaids and other assets
( 311 )
( 3,722 )
Customer deposits
31,239
17,382
Accounts payable
197
( 1,310 )
Accrued expenses
14,703
17,200
Long term payable
-
( 4,692 )
Litigation contingency
16,000
-
Other operating activities
-
37
NET CASH PROVIDED BY OPERATING ACTIVITIES
60,654
56,144
INVESTING ACTIVITIES
Purchases of property, plant, equipment
( 1,323 )
( 1,432 )
Investments in unconsolidated affiliates
( 3,807 )
( 350 )
Capitalized software development costs in intangible assets
( 115 )
-
NET CASH USED IN INVESTING ACTIVITIES
( 5,245 )
( 1,782 )
FINANCING ACTIVITIES
Repurchase of common stock
( 33,032 )
( 29,916 )
Proceeds from exercise of options
977
307
Transactions with noncontrolling interests
( 1,169 )
-
Dividends declared and paid
( 7,585 )
( 6,596 )
NET CASH USED IN FINANCING ACTIVITIES
( 40,809 )
( 36,205 )
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
( 589 )
594
Net change in cash, cash equivalents and restricted cash
14,011
18,751
Cash, cash equivalents and restricted cash, beginning balance
169,893
159,383
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE
$ 183,904
$ 178,134
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes
$ 1,109
$ 1,089
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 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 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 .
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2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
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. 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. 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
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. Prior year segment and financial statement information has been reclassified to reflect Virbela as discontinued operations.
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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 amounts shown on the condensed consolidated statements of cash flows.
Cash and cash equivalents
Restricted cash
Total
Balance, March 31, 2023
$ 122,769
$ 55,365
$ 178,134
Balance, December 31, 2023
$ 125,873
$ 44,020
$ 169,893
Balance, March 31, 2024
$ 109,169
$ 74,735
$ 183,904
3 .
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
(Unaudited)
March 31, 2024
December 31, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$ 1,064
$ 991
Accounts receivable, net of allowance for credit losses of $ 16 and $ 99 , respectively
310
626
Prepaids and other assets
257
347
TOTAL CURRENT ASSETS
1,631
1,964
Property, plant, and equipment, net
9
11
Intangible assets, net
3,396
3,469
Deferred tax assets
2,390
2,308
TOTAL ASSETS
$ 7,426
$ 7,752
LIABILITIES
CURRENT LIABILITIES
Accounts payable
$ 26
$ 110
Accrued expenses
1,380
1,699
TOTAL CURRENT LIABILITIES
1,406
1,809
TOTAL LIABILITIES
$ 1,406
$ 1,809
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INCOME STATEMENT OF DISCONTINUED OPERATIONS
(Unaudited)
Three Months Ended March 31,
2024
2023
Revenues
$ 649
$ 2,163
Operating expenses
Commissions and other agent-related costs
679
721
General and administrative expenses
1,765
2,730
Technology and development expenses
116
351
Sales and marketing expenses
( 3 )
36
Total operating expenses
2,557
3,838
Operating (loss)
( 1,908 )
( 1,675 )
Other income
Other income, net
( 17 )
( 6 )
Total other income, net
( 17 )
( 6 )
(Loss) before income tax expense
( 1,891 )
( 1,669 )
Income tax benefit
( 82 )
( 1,130 )
Net loss from discontinued operations
($ 1,809 )
($ 539 )
4.
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.
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.
5 .
PLANT, PROPERTY AND EQUIPMENT, NET
Plant, property and equipment, net consisted of the following:
March 31, 2024
December 31, 2023
Computer hardware and software
$ 38,372
$ 37,444
Furniture, fixture, and equipment
2,253
2,254
Total depreciable property and equipment
40,625
39,698
Less: accumulated depreciation
( 29,778 )
( 27,733 )
Depreciable property, net
10,847
11,965
Discontinued operations
( 9 )
( 11 )
Assets under development
1,393
1,013
Property, plant, and equipment, net
$ 12,231
$ 12,967
For the three months ended March 31, 2024 and 2023 depreciation expense was $ 2,059 and $ 2,067 , respectively.
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6.
GOODWILL AND INTANGIBLE ASSETS
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 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
Gross
Accumulated
Net Carrying
Amount
Amortization
Amount
Trade name
$ 2,661
($ 1,071 )
$ 1,590
Existing technology
3,254
( 1,351 )
1,903
Non-competition agreements
461
( 125 )
336
Customer relationships
1,284
( 675 )
609
Licensing agreement
210
( 210 )
-
Intellectual property
2,836
( 630 )
2,206
Total intangible assets
$ 10,706
($ 4,062 )
$ 6,644
December 31, 2023
Gross
Accumulated
Net Carrying
Operations
Amortization
Amount
Trade name
$ 2,672
($ 1,030 )
$ 1,642
Existing technology
3,263
( 1,122 )
2,141
Non-competition agreements
468
( 125 )
343
Customer relationships
1,285
( 652 )
633
Licensing agreement
210
( 210 )
-
Intellectual property
2,836
( 583 )
2,253
Total intangible assets
$ 10,734
($ 3,722 )
$ 7,012
Definite-lived intangible assets are amortized using the straight-line method over an asset’s estimated useful life. Amortization expense for definite-lived intangible assets for the three months ended March 31, 2024 and 2023 was $ 340 and $ 512 , respectively.
7. STOCKHOLDERS’ EQUITY
The following table represents a share reconciliation of the Company’s common stock issued for the periods presented:
Three Months Ended March 31,
2024
2023
Common stock:
Balance, beginning of quarter
183,606,708
171,656,030
Shares issued for stock options exercised
211,158
113,208
Agent growth incentive stock compensation
353,688
656,436
Agent equity stock compensation
2,189,922
2,106,369
Balance, end of quarter
186,361,476
174,532,043
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
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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
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 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 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:
Amount
Stock grant liability balance at December 31, 2022
$ 3,885
Stock grant liability increase year to date
3,832
Stock grants reclassified from liability to equity year to date
( 2,717 )
Balance, December 31, 2023
$ 5,000
Stock grant liability increase year to date
650
Stock grants reclassified from liability to equity year to date
-
Balance, March 31, 2024
$ 5,650
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 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.
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,
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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 Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 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 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. 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 March 31,
2024
2023
Treasury stock:
Balance, beginning of quarter
28,937,671
18,816,791
Repurchases of common stock
2,577,242
2,272,831
Balance, end of quarter
31,514,913
21,089,622
8. 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 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. 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
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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: 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.
● Other Affiliated Services: 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 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 (loss) from continuing operations 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 March 31,
2024
2023
North American Realty
$ 927,137
$ 837,114
International Realty
15,596
10,758
Other Affiliated Services
1,788
1,677
Revenues reconciliation:
Segment eliminations
( 1,467 )
( 1,096 )
Consolidated revenues
$ 943,054
$ 848,453
Adjusted EBITDA
Three Months Ended March 31,
2024
2023
North American Realty
$ 17,807
$ 21,203
International Realty
( 3,355 )
( 3,676 )
Other Affiliated Services
( 767 )
( 681 )
Corporate expenses and other
( 2,643 )
( 2,223 )
Consolidated Adjusted EBITDA
$ 11,042
$ 14,623
Operating (Loss) Profit Reconciliation:
Depreciation and amortization expense
2,399
2,215
Litigation contingency
16,000
-
Stock compensation expense
8,827
9,660
Stock option expense
1,990
2,746
Consolidated operating (loss) profit
($ 18,174 )
$ 2
Goodwill
March 31, 2024
December 31, 2023
North American Realty
$ 14,295
$ 14,595
International Realty
-
-
Other Affiliated Services
2,387
2,387
Segment and consolidated total
$ 16,682
$ 16,982
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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9. 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 March 31,
2024
2023
Numerator:
Net (loss) income from continuing operations
($ 13,830 )
$ 1,992
Net loss from discontinued operations
($ 1,809 )
($ 539 )
Denominator:
Weighted average shares - basic
154,740,334
152,546,766
Dilutive effect of common stock equivalents
-
3,121,946
Weighted average shares - diluted
154,740,334
155,668,712
Earnings per share:
Net (loss) income from continuing operations per share - basic
($ 0.09 )
$ 0.01
Net (loss) income from discontinued operations per share - basic
($ 0.01 )
($ 0.00 )
Net (loss) income from continuing operations per share - diluted
($ 0.09 )
$ 0.01
Net (loss) income from discontinued operations per share - diluted
($ 0.01 )
($ 0.00 )
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.
10 . 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 ($ 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.
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11 . 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 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.
12. 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, cash flows 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.
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.
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13. SUBSEQUENT EVENTS
Quarterly Cash Dividend
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
On April 11, 2024, the Company was named in Shauntell Burton et al. v. 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.
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.