What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-07-31 · 161 added, 156 removed, 276 unchanged (53% of the section changed)

7 unchanged sentences

This MD&A is divided into the following sections:

● Operational Highlights for the Three and Six Months Ended June 30, 2024

● Operational Highlights for the Three and Nine Months Ended September 30, 2024

● Market Conditions and Industry Trends

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All dollar amounts are in USD thousands except share amounts and per share data and as otherwise noted.

OPERATIONAL HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2024

● eXp ended the second quarter of 2024 with a global agent Net Promoter Score (“aNPS”) of 76.

OPERATIONAL HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024

● eXp ended the third quarter of 2024 with a global agent Net Promoter Score (“aNPS”) of 76.

● Agents and brokers on the eXp Realty platform decreased (4)% year-over-year to 85,249.

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● Transaction volume increased 5% year-over-year to $50.8 billion.

OPERATIONAL HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2024

● eXp ended the six months ended June 30, 2024 with a global aNPS of 75.

OPERATIONAL HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024

● eXp ended the nine months ended September 30, 2024 with a global aNPS of 75.

● Agents and brokers on the eXp Realty platform decreased (4)% year-over-year to 85,249.

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Today, the Company operates a diversified portfolio of service-based businesses whose operations benefit substantially from utilizing our enabling technology platform.

A substantial portion of our revenue is derived from commissions received by our residential real estate brokerages which provide a full suite of brokerage and adjacent services (such as mortgage, title, and content creation) to our real estate agents and brokers.

A substantial portion of our revenue is derived from

commissions received by our residential real estate brokerages which provide a full suite of brokerage and adjacent services (such as mortgage, title, and content creation) to our real estate agents and brokers.

Our residential real estate agents and brokers affiliate their real estate licenses with us and operate their businesses utilizing our cloud-based technology platform to enhance their real estate business and optimize efficiencies.

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Discontinued Operations

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

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

We have begun the process of winding down the Virbela business, which includes closing out current contracts and reducing our external customers.

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We remain focused on optimizing our operating costs to match our revenue trends.

One critical area of capital deployment during the first quarter of 2024 remained our Sustainable Revenue Share Plan (the “Revenue Share Plan”), whereby we pay real estate professionals affiliated with the Company a portion of eXp Realty’s commission for their contribution to Company growth.

One critical area of capital deployment during the third quarter of 2024 remained our Sustainable Revenue Share Plan (the “Revenue Share Plan”), whereby we pay real estate professionals affiliated with the Company a portion of eXp Realty’s commission for their contribution to Company growth.

Regular evaluations are conducted to ensure the plan’s continued alignment with the Company's overarching objectives and for regulatory compliance.

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residential real estate market, which directly impacts our business and financial results.

These conditions include, but are not limited to rising inflation, rising mortgage interest rates driven by the Federal Reserve Board increasing federal funds rate, volatility in the U.S.

These conditions include, but are not limited to rising inflation, continued higher than average mortgage interest rates, volatility in the U.S.

equity markets and continued unrest around the world.

In April 2019, the National Association of REALTORS® (“NAR”) and certain brokerages and franchisors were named as defendants in a class action complaint alleging a conspiracy to violate federal antitrust laws by, among other things, requiring residential property sellers in Missouri to pay inflated commission fees to buyer brokers (the “NAR Class Action”).

The Company has been named as one of several defendants in similar class action suits, as discussed further in Note 12 – Commitments and Contingencies to these unaudited consolidated financial statements.

residential property sellers in Missouri to pay inflated commission fees to buyer brokers (the “NAR Class Action”).

The Company was named as one of several defendants in similar class action suits, and has since entered into a settlement term sheet with plaintiffs in the Hooper Action, as discussed further in Note 12 – Commitments and Contingencies to these unaudited consolidated financial statements.

In March 2024, NAR entered a settlement agreement to resolve on a class wide basis the claims against NAR in the NAR Class Action (the “NAR Settlement”).

In addition to a monetary payment, NAR agreed to change certain business practices, including changes to cooperative compensation and buyer agreements, which business practice changes go into effect on August 17, 2024.

eXp is proactively preparing its agents for the effective date of the NAR Settlement by offering comprehensive training sessions focused on compliance and best practices, addressing the clarifications in commission transparency and buyer representation agreements, providing resources such as buyer-representation agreement forms, and providing trainings to agents so that they understand the new guidelines and can integrate them into their operations.

eXp is empowering its agents in light of the NAR Settlement by offering comprehensive training sessions focused on compliance and best practices, addressing the clarifications in commission transparency and buyer representation agreements, providing resources such as buyer-representation agreement forms, and providing trainings to agents so that they understand the new guidelines and can integrate them into their operations.

The Company believes it is well positioned to grow its market share in the current market conditions.

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National Housing Inventory

During the second quarter of 2024, the continued increase of mortgage rates and higher home prices have contributed to a rise in inventory levels, as measured in months of supply.

During the third quarter of 2024, the continued higher mortgage rates and higher home prices have contributed to a rise in inventory levels, as measured in months of supply.

According to NAR, inventory of existing homes for sale in the U.S.

was 1,320,000 as of June 2024 (preliminary) compared to 1,070,000 at the end of June 2023.

was 1.39 million as of September 2024 (preliminary) compared to 1.13 million at the end of September 2023.

This represents 4.3 months of inventory in 2024 compared to 3.4 months of inventory in the prior year.

Mortgage Interest Rates

Persistently high mortgage rates during the first quarter of 2024 continue to negatively impact the demand for homebuying.

Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.86% in June 2024 compared to 6.71% in June 2023.

While mortgage rates continue to be higher than historic averages and negatively impact the demand for homebuying, mortgage rates during the third quarter of 2024 declined from the prior year.

Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.08% in September 2024 compared to 7.3% in September 2023.

Housing Affordability Index

According to NAR, the composite housing affordability index decreased to 93.1 for May 2024 (preliminary) from 99.6 for May 2023.

According to NAR, the composite housing affordability index increased to 98.6 for August 2024 (preliminary) from 91.1 for August 2023.

When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20% down payment and ability to qualify for a mortgage.

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Existing Home Sales Transactions and Prices

According to NAR, existing home sale transactions decreased to an annual rate of 3.89 million in June 2024 (preliminary) compared to 4.11 million in June 2023, a decrease of 5.4%.

According to NAR, the nationwide existing home sales average price for June 2024 (preliminary) was $426,900 compared to $410,100 in June 2023, an increase of 4.1%.

The declining home sales transactions and increased prices in the U.S.

have negatively impacted our transaction and volume metrics.

According to NAR, existing home sale transactions decreased to an annual rate of 3.84 million in September 2024 (preliminary) compared to 3.98 million in September 2023, a decrease of 3.5%.

According to NAR, the nationwide existing home sales average price for September 2024 (preliminary) was $404,500 compared to $392,700 in September 2023, an increase of 3.0%.

The declining home sales transactions in the U.S.

have negatively impacted our transaction metrics, and increased home sales prices have positively impacted our sales volume metrics.

Legal & Regulatory Environment

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The following table outlines the key business metrics that we periodically review to track the Company’s performance:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except transactions and agent count)

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Real estate sales volume

$ 139,869,084

$ 130,337,913

Other real estate transactions

Real estate per transaction cost

Operating profit (loss)

Operating (loss) profit

Adjusted EBITDA (1)

(1) Adjusted EBITDA is not a measurement of our financial performance under generally accepted accounting principles in the U.S.

and should not be considered as an alternative to net income (loss) from continuing operations, operating income, or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss) from continuing operations, see “Non-U.S.

and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income, or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, see “Non-U.S.

GAAP Financial Measures”.

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aNPS plays a crucial role in attracting and retaining agents and teams, especially during a period marked by market contraction, due to lower transaction volumes and higher mortgage rates.

Despite the challenging market conditions, the Company’s aNPS was 76 and 75 for the three and six months ended June 30, 2024, respectively compared to 72 and 71 for the same periods of 2023, respectively, due to our continuous investment in agent onboarding, expert care, transaction processing process and technology.

Despite the challenging market conditions, the Company’s aNPS was 76 and 75 for the three and nine months ended September 30, 2024, respectively compared to 74 and 72 for the same periods of 2023, respectively, due to our continuous investment in agent onboarding, expert care, transaction processing and technology.

One of our key strengths is attracting real estate agent and broker professionals that contribute to our growth.

The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general including rising interest rates and declining transaction volume in the U.S.

The number of agents declined (1)% in the first six months of 2024, compared to the same period of 2023, as we continue to off board less productive agents.

The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general including interest rates, declining transaction volume in the U.S., and industry practice changes in light of the NAR Settlement.

The number of agents declined (4)% in the first nine months of 2024, compared to the same period of 2023, as we continue to off board less productive agents.

However, we are committed to retaining our most productive agents in the United States and Canada through the execution of our growth strategies and the end-to-end suite of services we offer our agents.

Real estate sales transactions and volume

Real estate sales transactions are based on the side (buyer or seller) of each real estate transaction and are recorded when our agents and brokers represent buyers and/or sellers in the purchase or sale, respectively, of a home.

Real estate sales transactions are based on the side (buyer or seller) of each real estate transaction and are recorded when our agents and brokers represent buyers or sellers in the purchase or sale, respectively, of a home.

The number of real estate transactions is a key driver of our revenue and profitability.

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however, company-specific initiatives influence the transaction volume and productivity of our agents.

For the three months and six months ended June 30, 2024, compared to the same periods of 2023, our real estate sales transactions increased 1% and 3%, respectively, due to our agents’ productivity, which more than offset the decline in existing home sales in the U.S.

For the three and nine months ended September 30, 2024, compared to the same periods of 2023, our real estate sales transactions decreased (1)% and increased 2%, respectively, due to our agents’ improved productivity, and international growth, which more than offset the decline in existing home sales in the U.S.

as reported by the NAR.

For the three months and six months ended June 30, 2024, compared to the same periods of 2023, transaction volume increased 7% and 9%, respectively, due to increased transactions and home sale prices.

For the three and nine months ended September 30, 2024, compared to the same periods of 2023, transaction volume increased

5% and 7%, respectively, due to increased transactions for the nine-month period and increased home sale prices for both periods in 2024.

Other real estate transactions

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Real estate per transaction cost is measured as selling, general and administrative, sales and marketing and technology and development expenses resulting from our services that directly support our agents and brokers, divided by total transactions (real estate and other).

Real estate per transaction cost decreased (8)% and (1)% for the three months and six months ended June 30, 2024, respectively, primarily due to increased transactions and lower costs due to cost containment initiatives, partially offset by legal expenses related to the antitrust lawsuits.

Real estate per transaction cost decreased (1)% for both the three and nine months ended September 30, 2024, primarily due to lower costs attributable to cost containment initiatives, partially offset by legal expenses related to the antitrust lawsuits.

Revenues represent the commission revenue earned by the Company for closed brokerage real estate transactions.

For the three months and six months ended June 30, 2024, compared to same periods of 2023, the Company’s revenue increased due to increased real estate transactions driven by increased agent productivity and higher home sales prices, which more than offset declines in the U.S.

real estate markets.

Our revenues also increased due to increased international production in previously launched markets.

Operating Profit

The operating profit in the second quarter of 2024 of $18.5 million compared to operating profit of $12.8 million in the second quarter of 2023, reflects increased revenues, net of agent commissions and other agent-related costs, and lower operating costs in 2024, partially offset by increased legal expenses related to the antitrust lawsuits.

The operating profit for the six

months ended June 30, 2024 of $0.4 million compared to operating profit of $12.8 million in the same period of 2023 reflects the litigation contingency accrual of $16 million, and increased legal expenses related to the antitrust lawsuits, and increased severance and employee-related expenses, partially offset by increased revenues, net of agent commissions and other agent-related costs.

For the three and nine months ended September 30, 2024, compared to same periods of 2023, the Company’s revenue increased primarily due to higher home sales prices in both periods and in the nine-month period, increased real estate transactions driven by improved agent productivity and increased international production in previously launched markets.

Operating (Loss) Profit

The operating (loss) in the third quarter of 2024 of ($8.3) million includes $18.0 million additional litigation contingency accrual recorded in the third quarter of 2024, compared to operating profit of $3.7 million in the third quarter of 2023.

The third quarter of 2024 reflects increased revenues, net of agent commissions and other agent-related costs, and lower operating costs in 2024, offset by increased legal expenses related to the antitrust lawsuits.

The operating (loss) for the nine months ended September 30, 2024 of ($8.0) million includes $34.0 million litigation contingency accrual, compared to operating profit of $16.5 million in the same period of 2023, reflecting increased legal expenses related to the antitrust lawsuits, and increased severance and employee-related expenses, partially offset by increased revenues, net of agent commissions and other agent-related costs.

Adjusted EBITDA

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GAAP financial measure, to understand and evaluate our core operating performance.

Adjusted EBITDA, for the three months ended June 30, 2024 was $32.8 million compared to $26.8 million for the three months ended June 30, 2023.

Adjusted EBITDA, for the three months ended September 30, 2024 was $23.9 million compared to $20.8 million for the three months ended September 30, 2023.

The increase in adjusted EBITDA reflects increased revenues, net of agent commissions and other agent-related costs, and lower operating costs, partially offset by legal expenses related to the antitrust lawsuits.

Adjusted EBITDA for the six months ended June 30, 2024 was $43.9 million compared to $41.5 million for the same period of 2023.

Adjusted EBITDA for the nine months ended September 30, 2024 was $67.8 million compared to $62.3 million for the same period of 2023.

The increase in adjusted EBITDA reflects increased revenues, net of agent commissions and other agent-related costs, partially offset by legal expenses related to the antitrust lawsuits, as well as increased severance and employee-related expenses.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2024 compared to the Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023

Three Months Ended

June 30, 2024

June 30, 2023

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

September 30, 2024

September 30, 2023

(In thousands)

Statement of Operations Data:

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Sales and marketing expenses

Litigation contingency

Total operating expenses

Operating income

Operating (loss) income

Other (income) expense

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Total other (income) expense, net

Income before income tax expense

Income tax expense

Net income (loss) from continuing operations

(Loss) income before income tax expense

Income tax (benefit) expense

Net (loss) income from continuing operations

Adjusted EBITDA (1)

(1) Adjusted EBITDA is not a measurement of our financial performance under U.S.

GAAP and should not be considered as an alternative to net income (loss) from continuing operations, operating income or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to net income (loss) from continuing operations and a discussion of why we believe Adjusted EBITDA provides useful information to investors, see “Non-U.S.

GAAP and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income or any other measures derived in accordance with U.S.

For a definition of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations and a discussion of why we believe Adjusted EBITDA provides useful information to investors, see “Non-U.S.

GAAP Financial Measures.”

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Total revenues increased 5% as a result of an increase in real estate transactions compared to the same period in 2023, because of the superior productivity of our agents, which more than offset declines in the U.S.

real estate market in the second quarter of 2024.

Our revenue also increased due to increased home sales prices.

June 30, 2024

June 30, 2023

Total revenues increased 2% as a result of increased home sales prices, which more than offset a slight decline in real estate transactions compared to the same period in 2023.

Despite declines in the U.S.

real estate market in the third quarter of 2024 real estate transactions declined only slightly due to the superior productivity of our agents.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Commissions and other agent-related costs

Commissions and other agent-related costs increased 5% primarily because of the increase in real estate transactions and increased home sales prices.

Commissions and other agent-related costs increased 1% primarily due to increased home sales prices.

Commissions and other agent-related costs include sales commissions, revenue share and stock-based compensation paid to our agents.

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

General and administrative expenses

General and administrative expenses decreased (6%) due to cost containment initiatives, reflected in lower expenses related to the shareholders summit in 2024, since it was conducted virtually, partially offset by increased legal expenses related to the antitrust lawsuit.

General and administrative expenses increased 2% due to increased employee-related expenses and legal expenses related to the antitrust lawsuit.

General and administrative expenses include costs related to wages, employee stock compensation, and other general overhead expenses.

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Technology and development expenses

Technology and development expenses were relatively flat with prior year and include employee and other costs related to the maintenance and development of the technology used by our agents and our employees.

June 30, 2024

June 30, 2023

Technology and development expenses decreased (11%), primarily due to higher capitalized technology investments.

These expenses include employee-related costs and other expenses for the maintenance and development of the technology used by both our agents and our employees.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Sales and marketing expenses

Sales and marketing expenses increased 6% due to increased advertising in the U.S.

Sales and marketing expenses decreased (12%) due to decreased advertising in the U.S.

and Canada residential real estate market.

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Total other (income) expense, net

Other (income) increased (19%) primarily due to increased interest income when compared to the second quarter of 2023.

Other (income) expense includes interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

June 30, 2024

June 30, 2023

Other (income) expense, net increased (49%) primarily due to increased interest income when compared to the third quarter of 2023.

Other (income) expense, net includes interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Income tax expense

The Company’s provision for income tax expense from continuing operations amounted to $8.1 million and $2.6 million for the three months ended June 30, 2024 and 2023, respectively, which represented effective tax rates of positive 40.9% and 18.8%, respectively.

The provision for income tax expense was primarily attributable to deductible stock-based compensation shortfalls, research and development credit and non-deductible executive compensation.

Six Months Ended June 30, 2024 compared to the Six Months Ended June 30, 2023

Six Months Ended

June 30, 2024

June 30, 2023

Income tax (benefit) expense

The Company’s provision for income tax (benefit) expense from continuing operations amounted to ($1.3) million and $1.8 million for the three months ended September 30, 2024 and 2023, respectively, which represented effective tax rates of positive 17.1% and 44.1%, respectively.

The provision for income tax expense was primarily attributable to stock-based compensation shortfalls, research and development credit and non-deductible executive compensation.

Nine Months Ended September 30, 2024 compared to the Nine Months Ended September 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

(In thousands)

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Total operating expenses

Operating income

Operating (loss) income

Other (income) expense

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Total other (income) expense, net

Income before income tax expense

Income tax expense

Net income (loss) from continuing operations

(Loss) income before income tax expense

Income tax (benefit) expense

Net (loss) income from continuing operations

Adjusted EBITDA (1)

(2) Adjusted EBITDA is not a measurement of our financial performance under U.S.

GAAP and should not be considered as an alternative to net income (loss) from continuing operations, operating income or any other measures derived in accordance with U.S.

GAAP and should not be considered as an alternative to net (loss) income from continuing operations, operating (loss) income or any other measures derived in accordance with U.S.

GAAP Financial Measures.”

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Total revenues increased 8% as a result of an increase in real estate transactions compared to the same period in 2023, because of the superior productivity of our agents, which more than offset declines in the U.S.

real estate market in the first half of 2024.

Our revenue also increased due to increased home sales prices.

June 30, 2024

June 30, 2023

Total revenues increased 5% due to higher home sales prices and an increase in real estate transactions compared to the same period in 2023, driven by improved agent productivity and increased international production in previously launched markets.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

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Commissions and other agent-related costs include sales commissions, revenue share and stock-based compensation paid to our agents.

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

2 unchanged sentences

General and administrative expenses include costs related to wages, employee stock compensation, and other general overhead expenses.

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Technology and development expenses

Technology and development expenses increased 2% and include employee and other costs related to the maintenance and development of the technology used by our agents and our employees.

June 30, 2024

June 30, 2023

Technology and development expenses decreased (2%), primarily due to higher capitalized technology investments.

These expenses include employee-related costs and other expenses related to the maintenance and development of the technology used by both our agents and our employees.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Sales and marketing expenses

Sales and marketing expenses increased 7% due to increased advertising in the U.S.

Sales and marketing expenses were flat in 2024 compared to 2023 due to increased advertising in the U.S.

and Canada residential real estate market.

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Total other (income) expense, net

Other (income) increased (43%) primarily due to increased interest income when compared to the first quarter of 2023.

Other (income) expense include interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

June 30, 2024

June 30, 2023

Other (income) expense, net increased (44%) primarily due to increased interest income when compared to the first nine months of 2023.

Other (income) expense, net includes interest income earned on cash and cash equivalents, and (earnings) losses related to equity investments.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Income tax expense

The Company’s provision for income tax expense from continuing operations amounted to $4.8 million and $1.2 million for the six months ended June 30, 2024 and 2023, respectively, which represented effective tax rates of positive 174.3% and 8.1%, respectively.

The provision for income tax expense was primarily attributable to deductible stock-based compensation shortfalls, research and development credit and non-deductible executive compensation.

Income tax (benefit) expense

The Company’s provision for income tax expense from continuing operations amounted to $3.5 million and $3.0 million for the nine months ended September 30, 2024 and 2023, respectively, which represented effective tax rates of negative (69.6%) and positive 15.9%, respectively.

The provision for income tax expense was primarily attributable to stock-based compensation shortfalls, research and development credit and non-deductible executive compensation.

BUSINESS SEGMENT DISCLOSURES

See Note 8 – Segment Information to the unaudited condensed consolidated financial statements for additional information regarding our business segments.

The following table reflects the results of each of our reportable segments during the three months ended June 30, 2024 and 2023:

The following table reflects the results of each of our reportable segments during the three months ended September 30, 2024 and 2023:

Three Months Ended

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

(In thousands)

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(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S.

GAAP and should not be considered as alternatives to net income (loss) from continuing operations, operating income, or any other measures derived in accordance with U.S.

For a definition of Adjusted Segment EBITDA and Adjusted EBITDA and a reconciliation of such measures to operating profit and net income (loss) from continuing operations, respectively, see “Non-U.S.

GAAP and should not be considered as alternatives to net (loss) income from continuing operations, operating income, or any other measures derived in accordance with U.S.

For a definition of Adjusted Segment EBITDA and Adjusted EBITDA and a reconciliation of such measures to operating (loss) profit from continuing operations and net (loss) income from continuing operations, respectively, see “Non-U.S.

GAAP Financial Measures”.

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 operating profit (loss) from continuing operations plus depreciation and amortization and stock-based compensation expenses.

Adjusted EBITDA is defined by us as net income (loss) from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, and stock option expense and other items that are not core to the operating activities of the Company.

Adjusted Segment EBITDA is defined by us as operating (loss) profit from continuing operations plus depreciation and amortization and stock-based compensation expenses.

Adjusted EBITDA is defined by us as net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, and stock option expense and other items that are not core to the operating activities of the Company.

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

North American Realty revenues increased 5% in the second quarter of 2024 compared to the same period in 2023 primarily due to increased real estate transactions and increased home sales prices, despite the challenging market in the U.S.

North American Realty revenues increased 1% in the third quarter of 2024 compared to the same period in 2023 primarily due to increased home sales prices, despite the challenging market in the U.S.

residential real estate markets.

Adjusted EBITDA increased 6% due to improved business efficiencies and reduced costs.

International Realty revenues increased 69% in the second quarter of 2024 compared to the same period in 2023 primarily due to increased real estate transactions driven by improved agent production in previously launched markets.

Adjusted EBITDA improved 37% in the second quarter of 2024 compared to the same period in 2023 due to increased revenue and improved business efficiencies and reduced costs.

International Realty revenues increased 63% in the third quarter of 2024 compared to the same period in 2023 primarily due to increased real estate transactions driven by improved agent production in previously launched markets.

Adjusted EBITDA improved 37% in the third quarter of 2024 compared to the same period in 2023 due to increased revenue and improved business efficiencies and reduced costs.

Other Affiliated Services revenues increased 46% due to Virbela Frame ® revenue, which more than offset lower SUCCESS® revenues.

Adjusted EBITDA improved 15% due to increased revenues and cost containment initiatives.

Adjusted EBITDA decreased (40)% due to increased costs partially offset by increased revenues.

Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty.

The following table reflects the results of each of our reportable segments during the six months ended June 30, 2024 and 2023:

Six Months Ended

June 30, 2024

June 30, 2023

The following table reflects the results of each of our reportable segments during the nine months ended September 30, 2024 and 2023:

Nine Months Ended

September 30, 2024

September 30, 2023

(In thousands)

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(1) Adjusted Segment EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S.

GAAP and should not be considered as alternatives to net income (loss) from continuing operations, operating income, or any other measures derived in accordance with U.S.

GAAP and should not be considered as alternatives to net (loss) income from continuing operations, operating income, or any other measures derived in accordance with U.S.

For a definition of Adjusted Segment EBITDA and Adjusted EBITDA and a reconciliation of such measures to operating profit and net (loss) income from continuing operations, respectively, see “Non-U.S.

GAAP Financial Measures”.

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 operating profit (loss) from continuing operations plus depreciation and amortization and stock-based compensation expenses.

Adjusted Segment EBITDA is defined by us as operating (loss) profit from continuing operations plus depreciation and amortization and stock-based compensation expenses.

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

North American Realty revenues increased 7% for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to increased real estate transactions and increased home sales prices, despite the challenging market in the U.S.

North American Realty revenues increased 5% for the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to increased real estate transactions and increased home sales prices, despite the challenging market in the U.S.

residential real estate markets.

Adjusted EBITDA increased 3% due to increased revenues, net of agent commissions and other agent-related costs, partially offset by increased legal expenses, increased severance and employee-related expenses.

International Realty revenues increased 58% for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to increased real estate transactions driven by improved agent production in previously launched markets.

Adjusted EBITDA improved 23% for the six months ended June 30, 2024 compared to the same period in 2023 due to increased revenue and improved business efficiencies and reduced costs.

International Realty revenues increased 60% for the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to increased real estate transactions driven by improved agent production in previously launched markets.

Adjusted EBITDA improved 27% for the nine months ended September 30, 2024 compared to the same period in 2023 due to increased revenue and improved business efficiencies and reduced costs.

Other Affiliated Services revenues increased 26% due to Virbela Frame ® revenue, which more than offset lower SUCCESS® revenues.

Adjusted EBITDA improved 5% due to increased revenues, partially offset by increases in selling, general and administrative expenses related to investing in business initiatives.

Adjusted EBITDA decreased (10)% due to increases in selling, general and administrative expenses related to investing in business initiatives, partially offset by increased revenues.

Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty.

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We define the non-U.S.

GAAP financial measure of Consolidated Adjusted EBITDA to mean net income (loss) from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense and stock option expense.

GAAP financial measure of Consolidated Adjusted EBITDA to mean net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense and stock option expense.

Adjusted Segment EBITDA is defined as operating profit (loss) from continuing operations plus depreciation and

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Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S.

There are a number of limitations related to the use of Adjusted EBITDA compared to net income (loss) from continuing operations, the closest comparable U.S.

There are a number of limitations related to the use of Adjusted EBITDA compared to net (loss) income from continuing operations, the closest comparable U.S.

GAAP measure.

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GAAP financial measure, for each of the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net (loss) income from continuing operations

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Currently, our primary use of cash on hand is to sustain and grow our business operations, including, but not limited to, commission and revenue share payments to agents and brokers and cash outflows for operating expenses and dividend payments.

In addition, the Company has no known material cash requirements as of June 30, 2024, relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions).

In addition, except for the $34 million litigation contingency accrual, the Company has no known material cash requirements as of September 30, 2024, relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions).

The Company intends to use available cash to pay the $34 million antitrust litigation Settlement amount.

We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months.

Our future capital requirements will depend on many factors, including our level of investment in technology, our rate of growth into new markets, and cash used to repurchase shares of the Company’s common stock.

Our capital requirements may be affected by factors which we cannot control such as the changes in the residential real estate market, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate.

In order to support and achieve our future

growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing.

Our capital requirements may be affected

by factors which we cannot control such as the changes in the residential real estate market, interest rates, industry practice changes in light of the NAR Settlement, and other monetary and fiscal policy changes to the manner in which we currently operate.

In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing.

We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next twelve months.

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Net working capital is calculated as the Company’s total current assets less its total current liabilities.

The following table presents our net working capital as of June 30, 2024 and December 31, 2023:

June 30, 2024

The following table presents our net working capital as of September 30, 2024 and December 31, 2023:

September 30, 2024

December 31, 2023

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Net working capital

For the six months ended June 30, 2024, net working capital decreased ($26.4) million, or (21)%, compared to December 31, 2023, primarily due to increased accrued liabilities and accounts receivable, due to the increased revenues in the first half of 2024, compared to the last half of 2023.

The following table presents our cash flows for the three months ended June 30, 2024 and 2023:

Six Months Ended June 30,

For the three months ended September 30, 2024, net working capital decreased ($36.8) million, or (29)%, compared to December 31, 2023, primarily due to increased accrued liabilities and accounts receivable, due to the increased revenues in the third quarter of 2024, compared to the fourth quarter of 2023.

The following table presents our cash flows for the three months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

Net cash provided by operating activities

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Net change in cash, cash equivalents and restricted cash

For the six months ended June 30, 2024, net cash provided by operating activities decreased ($22.4) million compared to the same period in 2023.

The decrease in operating activities was primarily driven by decreased net income, agent equity stock compensation expense, and customer deposits, partially offset by favorable working capital changes.

For the six months ended June 30, 2024, net cash used in investing activities relates to cash used for purchases of property and equipment, acquisition of new business, and investments in affiliates and increased modestly compared to the same period of 2023.

For the six months ended June 30, 2024 and 2023 net cash flows used in financing activities increased $5.5 million compared to the same period in 2023, primarily driven by increased stock repurchases and the payment of cash dividends.

For the nine months ended September 30, 2024, net cash provided by operating activities increased $1.3 million compared to the same period in 2023.

The increase in operating activities was primarily driven by improved operating results, increased customer deposits, lower agent equity stock compensation expense and favorable working capital changes.

For the nine months ended September 30, 2024, net cash used in investing activities relates to cash used for purchases of property and equipment, acquisition of new business, and investments in affiliates and increased modestly compared to the same period of 2023.

For the nine months ended September 30, 2024 and 2023 net cash flows used in financing activities decreased $12.5 million compared to the same period in 2023, primarily driven by lower stock repurchases.

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions, access new revenue streams, or otherwise complement or accelerate the growth of our existing operations .

We may fund acquisitions or investments in complementary businesses with various sources of capital including existing cash balances and cash flow from operations.

Acquisitions during the first six months of 2024 have not had a material impact on cash flow.

Acquisitions during the first nine months of 2024 have not had a material impact on cash flow.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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 2. Management’s Discussion and Analysis