Item 1. Financial Statements
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
EXP WORLD HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(UNAUDITED)
September 30, 2024
December 31, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$ 130,432
$ 125,873
Restricted cash
65,308
44,020
Accounts receivable, net of allowance for credit losses of $ 1,334 and $ 2,204 , respectively
105,148
85,343
Prepaids and other assets
7,709
9,275
Current assets of discontinued operations
988
1,964
TOTAL CURRENT ASSETS
309,585
266,475
Property, plant, and equipment, net
11,488
12,967
Other noncurrent assets
10,832
7,410
Intangible assets, net
6,322
7,012
Deferred tax assets
69,937
69,253
Goodwill
19,866
16,982
Noncurrent assets of discontinued operations
4,599
5,569
TOTAL ASSETS
$ 432,629
$ 385,668
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$ 10,647
$ 8,788
Customer deposits
67,060
44,550
Accrued expenses
109,531
86,483
Litigation contingency
34,000
-
Other liabilities
20
10
Current liabilities of discontinued operations
274
1,809
TOTAL CURRENT LIABILITIES
221,532
141,640
Long-term payable
-
20
TOTAL LIABILITIES
221,532
141,660
EQUITY
Common Stock, $ 0.00001 par value 900,000,000 shares authorized; 192,559,288 issued and 153,551,386 outstanding at September 30, 2024; 183,606,708 issued and 154,669,037 outstanding at December 31, 2023
2
2
Additional paid-in capital
924,570
804,833
Treasury stock, at cost: 39,007,902 and 28,937,671 shares held, respectively
( 661,840 )
( 545,559 )
Accumulated deficit
( 51,095 )
( 16,769 )
Accumulated other comprehensive (loss) income
( 540 )
332
Total eXp World Holdings, Inc. stockholders' equity
211,097
242,839
Equity attributable to noncontrolling interest
-
1,169
TOTAL EQUITY
211,097
244,008
TOTAL LIABILITIES AND EQUITY
$ 432,629
$ 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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Revenues
$ 1,231,187
$ 1,212,793
$ 3,469,485
$ 3,292,362
Operating expenses
Commissions and other agent-related costs
1,143,535
1,130,070
3,205,949
3,042,523
General and administrative expenses
61,390
60,363
185,132
179,905
Technology and development expenses
13,804
15,480
43,413
44,428
Sales and marketing expenses
2,792
3,175
8,962
8,962
Litigation contingency
18,000
-
34,000
-
Total operating expenses
1,239,521
1,209,088
3,477,456
3,275,818
Operating (loss) income
( 8,334 )
3,705
( 7,971 )
16,544
Other (income) expense
Other (income) expense, net
( 801 )
( 702 )
( 3,738 )
( 2,871 )
Equity in losses of unconsolidated affiliates
281
354
804
839
Total other (income) expense, net
( 520 )
( 348 )
( 2,934 )
( 2,032 )
(Loss) income before income tax expense
( 7,814 )
4,053
( 5,037 )
18,576
Income tax (benefit) expense
( 1,333 )
1,788
3,508
2,962
Net (loss) income from continuing operations
( 6,481 )
2,265
( 8,545 )
15,614
Net loss from discontinued operations
( 2,025 )
( 916 )
( 3,217 )
( 3,390 )
Net (loss) income
($ 8,506 )
$ 1,349
($ 11,762 )
$ 12,224
Earnings (loss) per share
Basic, net (loss) income from continuing operations
($ 0.04 )
$ 0.01
($ 0.06 )
$ 0.10
Basic, net (loss) income from discontinued operations
($ 0.01 )
($ 0.01 )
($ 0.02 )
($ 0.02 )
Basic, net (loss) income
($ 0.06 )
$ 0.01
($ 0.08 )
$ 0.08
Diluted, net (loss) income from continuing operations
($ 0.04 )
$ 0.01
($ 0.06 )
$ 0.10
Diluted, net (loss) income from discontinued operations
($ 0.01 )
($ 0.01 )
($ 0.02 )
($ 0.02 )
Diluted, net (loss) income
($ 0.06 )
$ 0.01
($ 0.08 )
$ 0.08
Weighted average shares outstanding
Basic
153,259,842
153,392,005
153,858,160
153,065,727
Diluted
153,259,842
158,183,888
153,858,160
156,834,985
Comprehensive (loss) income:
Net (loss) income
($ 8,506 )
$ 1,349
($ 11,762 )
$ 12,224
Other comprehensive income (loss):
Foreign currency translation gain (loss), net of tax
915
( 527 )
( 872 )
180
Comprehensive (loss) income attributable to eXp World Holdings, Inc.
($ 7,591 )
$ 822
($ 12,634 )
$ 12,404
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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Common stock:
Balance, beginning of period
$ 2
$ 2
$ 2
$ 2
Balance, end of period
2
2
2
2
Treasury stock:
Balance, beginning of period
( 626,825 )
( 463,738 )
( 545,559 )
( 385,010 )
Repurchases of common stock
( 35,015 )
( 55,897 )
( 116,281 )
( 134,625 )
Balance, end of period
( 661,840 )
( 519,635 )
( 661,840 )
( 519,635 )
Additional paid-in capital:
Balance, beginning of period
883,704
701,806
804,833
611,872
Shares issued for stock options exercised
592
3,507
1,644
4,761
Agent growth incentive stock compensation
8,747
10,238
26,150
28,142
Agent equity stock compensation
29,541
38,897
85,997
104,548
Stock option compensation
1,986
2,558
5,946
7,683
Balance, end of period
924,570
757,006
924,570
757,006
Accumulated (deficit) earnings:
Balance, beginning of period
( 35,100 )
18,138
( 16,769 )
20,723
Net (loss) income
( 8,506 )
1,349
( 11,762 )
12,224
Dividends declared and paid ( $ 0.05 per share of common stock in each of Q3 2024 and Q3 2023)
( 7,489 )
( 7,519 )
( 22,564 )
( 20,979 )
Balance, end of period
( 51,095 )
11,968
( 51,095 )
11,968
Accumulated other comprehensive income (loss):
Balance, beginning of period
( 1,455 )
943
332
236
Foreign currency translation gain (loss)
915
( 527 )
( 872 )
180
Balance, end of period
( 540 )
416
( 540 )
416
Noncontrolling interest:
Balance, beginning of period
-
1,169
1,169
1,169
Transactions with noncontrolling interests
-
-
( 1,169 )
-
Balance, end of period
-
1,169
-
1,169
Total equity
$ 211,097
$ 250,926
$ 211,097
$ 250,926
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)
Nine Months Ended September 30,
2024
2023
OPERATING ACTIVITIES
Net income (loss)
($ 11,762 )
$ 12,224
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation expense
5,887
6,299
Amortization expense - intangible assets
1,855
1,849
Loss on disposition of business
-
472
Allowance for credit losses on receivables/bad debt on receivables
( 870 )
( 2,211 )
Equity in loss of unconsolidated affiliates
804
839
Agent growth incentive stock compensation expense
28,067
29,912
Stock option compensation
5,961
7,659
Agent equity stock compensation expense
85,997
104,548
Deferred income taxes, net
( 684 )
3,435
Changes in operating assets and liabilities:
Accounts receivable
( 18,935 )
( 23,401 )
Prepaids and other assets
1,978
( 3,966 )
Customer deposits
22,510
16,421
Accounts payable
1,858
( 1,069 )
Accrued expenses
21,114
28,039
Long term payable
-
( 4,692 )
Litigation contingency
34,000
-
Other operating activities
20
158
NET CASH PROVIDED BY OPERATING ACTIVITIES
177,800
176,516
INVESTING ACTIVITIES
Purchases of property, plant, and equipment
( 4,408 )
( 4,193 )
Purchase of business
( 3,150 )
-
Proceeds from sale of business
-
330
Investments in unconsolidated affiliates
( 4,236 )
( 5,525 )
Capitalized software development costs in intangible assets
( 1,165 )
( 1,930 )
NET CASH USED IN INVESTING ACTIVITIES
( 12,959 )
( 11,318 )
FINANCING ACTIVITIES
Repurchase of common stock
( 116,281 )
( 134,625 )
Proceeds from exercise of options
1,644
4,761
Transactions with noncontrolling interests
( 1,169 )
-
Dividends declared and paid
( 22,564 )
( 20,979 )
NET CASH USED IN FINANCING ACTIVITIES
( 138,370 )
( 150,843 )
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
( 624 )
403
Net change in cash, cash equivalents and restricted cash
25,847
14,758
Cash, cash equivalents and restricted cash, beginning balance
169,893
159,383
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE
$ 195,740
$ 174,141
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes
$ 2,198
$ 2,382
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Termination of lease obligation - operating lease
-
855
Contingent consideration for disposition of business
-
1,209
Property, plant and equipment increase due to transfer of right-of-use lease asset
-
1,100
Property, plant and equipment purchases in accounts payable
-
27
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 as 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.
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 and nine months ended September 30, 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 had been a significant change to the Virbela business model. As our customers evolve post-COVID, including return-to-work-offices, and in light of ongoing internal and external demand for web-accessible platforms and artificial intelligence solutions, we experienced a decline in demand for our application-based platform, Virbela, and a rising interest in our web-accessible platform, Virbela 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 determined that winding down of the Virbela business qualifies for reporting as discontinued operations in the Company’s condensed consolidated balance sheet and the Company’s condensed consolidated statements of comprehensive income (loss).
Prior period financial statement information has been reclassified to reflect Virbela as discontinued operations. For more information See Note 3 – Discontinued Operations .
In prior years, Virbela represented an operating and reporting segment under ASC 280. As a result of the Company’s decision to wind down the Virbela business in the first quarter of 2024, the Company determined that the remaining operations of Virbela do not meet the operating or reporting segment criteria; therefore, any operating results related to Virbela Frame® technologies are included in the Other Affiliated Services segment beginning in the first quarter of 2024. All prior period segment disclosure information has been reclassified to conform to the current reporting structure in this Form 10-Q.
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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 does not exercise 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 segment 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 Estimates
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.
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.
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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, September 30, 2023
$ 120,141
$ 54,000
$ 174,141
Balance, December 31, 2023
$ 125,873
$ 44,020
$ 169,893
Balance, September 30, 2024
$ 130,432
$ 65,308
$ 195,740
3.
DISCONTINUED OPERATIONS
In accordance with ASC 205-20 Discontinued operations , the results of the Virbela business are presented as discontinued operations in the condensed consolidated statements of comprehensive loss 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 condensed consolidated balance sheets. The following tables present the information for Virbela’s operations for the three and nine months ended September 30, 2024 and 2023, and the balance sheet information as of September 30, 2024 and December 31, 2023.
ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS
(Unaudited)
September 30, 2024
December 31, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$ 806
$ 991
Accounts receivable, net of allowance for credit losses of $ 189 and $ 99 , respectively
108
626
Prepaids and other assets
74
347
TOTAL CURRENT ASSETS OF DISCONTINUED OPERATIONS
988
1,964
Property, plant, and equipment, net
5
11
Intangible assets, net
1,553
3,469
Deferred tax assets
3,041
2,089
TOTAL ASSETS OF DISCONTINUED OPERATIONS
$ 5,587
$ 7,533
LIABILITIES
CURRENT LIABILITIES
Accounts payable
$ 16
$ 110
Accrued expenses
258
1,699
TOTAL CURRENT LIABILITIES OF DISCONTINUED OPERATIONS
274
1,809
TOTAL LIABILITIES OF DISCONTINUED OPERATIONS
$ 274
$ 1,809
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INCOME STATEMENT OF DISCONTINUED OPERATIONS
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Revenues
$ -
$ 1,720
$ 653
$ 5,694
Operating expenses
Cost of revenue
911
818
2,500
2,335
General and administrative expenses
102
2,469
2,165
7,778
Technology and development expenses
80
256
294
765
Sales and marketing expenses
0
19
( 2 )
73
Total operating expenses
1,093
3,562
4,957
10,951
Operating (loss)
( 1,093 )
( 1,842 )
( 4,304 )
( 5,257 )
Other income
Other income, net
( 6 )
( 6 )
( 17 )
( 16 )
Total other income, net
( 6 )
( 6 )
( 17 )
( 16 )
(Loss) before income tax expense
( 1,087 )
( 1,836 )
( 4,287 )
( 5,241 )
Income tax benefit (expense)
( 938 )
920
1,070
1,851
Net loss from discontinued operations
($ 2,025 )
($ 916 )
($ 3,217 )
($ 3,390 )
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 estimates 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 $ 99,988 and $ 81,004 of which the Company recognized expected credit losses of $ 30 and $- , respectively as of September 30, 2024 and December 31, 2023. As of September 30, 2024 and December 31, 2023, agent non-commission based fees receivable and short-term advances totaled $ 6,791 and $ 7,268 , of which the Company recognized expected credit losses of $ 1,304 and $ 2,204 , respectively.
5 .
PLANT, PROPERTY AND EQUIPMENT, NET
Plant, property and equipment, net consisted of the following:
September 30, 2024
December 31, 2023
Computer hardware and software
$ 41,740
$ 37,444
Furniture, fixture, and equipment
2,220
2,254
Total depreciable property and equipment
43,960
39,698
Less: accumulated depreciation
( 33,398 )
( 27,733 )
Depreciable property, net
10,562
11,965
Discontinued operations
( 5 )
( 11 )
Assets under development
931
1,013
Property, plant, and equipment, net
$ 11,488
$ 12,967
For the three months ended September 30, 2024 and 2023, depreciation expense was $ 1,937 and $ 2,136 , respectively. For the nine months ended September 30, 2024 and 2023 depreciation expense was $ 5,887 and $ 6,299 , respectively.
6.
GOODWILL AND INTANGIBLE ASSETS
Goodwill was $ 19,866 as of September 30, 2024 and $ 16,982 as of December 31, 2023. During the second quarter of 2024, the Company acquired a small real estate business, resulting in recording goodwill of $ 3,150 . As of September 30, 2024,
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the Company recorded cumulative translation adjustment of ( $ 266 ) 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 nine months ended September 30, 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 September 30, 2024 and December 31, 2023:
September 30, 2024
Gross
Accumulated
Net Carrying
Amount
Amortization
Amount
Trade name
$ 2,663
($ 1,473 )
$ 1,190
Existing technology
3,439
( 1,065 )
2,374
Non-competition agreements
462
( 378 )
84
Customer relationships
1,284
( 721 )
563
Licensing agreement
210
( 210 )
-
Intellectual property
2,836
( 725 )
2,111
Total intangible assets
$ 10,894
($ 4,572 )
$ 6,322
December 31, 2023
Gross
Accumulated
Net Carrying
Amount
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 September 30, 2024 and 2023 was $ 442 and $ 654 , respectively. Amortization expense for definite-lived intangible assets for the nine months ended September 30, 2024 and 2023 was $ 1,855 and $ 1,849 , 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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Common stock:
Balance, beginning of quarter
189,947,235
177,900,083
183,606,708
171,656,030
Shares issued for stock options exercised
95,037
610,132
320,481
802,939
Agent growth incentive stock compensation
308,790
387,999
1,341,303
1,774,438
Agent equity stock compensation
2,208,226
1,985,169
7,290,796
6,649,976
Balance, end of quarter
192,559,288
180,883,383
192,559,288
180,883,383
The Company’s equity programs described below were administered under the stockholder approved 2015 Equity Incentive Plan, as amended, for issuances prior to September 1, 2024, and under the stockholder approved 2024 Equity Incentive Plan for issuances on or after September 1, 2024. The purpose of the equity plan is to retain the services of valued employees, directors, officers, agents, and consultants and to incentivize such persons to make contributions to the Company and motivate excellent performance.
Agent Equity Program
The Company provides agents and brokers the opportunity to elect to receive 5 % of commissions earned from each completed real estate transaction in the form of common stock (the “Agent Equity Program” or “AEP”). If agents and brokers elect to receive portions of their commissions in common stock, they are entitled to receive the equivalent number of shares
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of common stock, based on the fixed monetary value of the commission payable. The Company recognized a 10 % discount on these issuances prior to 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 September 30, 2024 and 2023, the Company issued 2,208,226 and 1,985,169 shares of common stock, respectively, to agents and brokers with a value of $ 29,541 and $ 38,897 , respectively, inclusive of discount. During the nine months ended September 30, 2024 and 2023, the Company issued 7,290,796 and 6,649,976 shares of common stock, respectively, to agents and brokers with a value of $ 85,997 and $ 104,548 , 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 September 30, 2024 and 2023 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 9,910 and $ 11,764 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 891 and $ 1,458 , respectively. For the nine months ended September 30, 2024 and 2023 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $ 28,067 and $ 29,912 , respectively, of which the total amount of stock compensation attributable to liability classified awards was $ 2,179 and $ 2,796 , 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
2,179
Stock grants reclassified from liability to equity year to date
( 806 )
Balance, September 30, 2024
$ 6,373
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 September 30, 2024 and 2023, the Company granted 62,735 and 445,380 stock options, respectively, to employees with an estimated grant date fair value of $ 6.21 and $ 10.71 per share, respectively. The fair value was calculated using a Black Scholes-Merton option pricing model. During the nine months ended September 30, 2024 and 2023 the Company granted 738,473 and 1,973,943 stock options, respectively, to employees with an estimated
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grant date fair value of $ 6.57 and $ 8.87 per share, respectively. The fair value was calculated using a Black Scholes-Merton option pricing model.
Stock Repurchase Plan
In December 2018, the Company’s board of directors (the “Board”) approved a stock repurchase program authorizing the Company to purchase up to $ 25.0 million of its common stock, which was later amended in November 2019 increasing the authorized repurchase amount to $ 75.0 million. In December 2020, the Board approved another amendment to the repurchase plan, increasing the total amount authorized to be purchased from $ 75.0 million to $ 400.0 million. In May 2022, the Board approved an increase to the total amount of its buyback program from $ 400.0 million to $ 500.0 million. In June 2023, the Board approved an increase to the total amount of its buyback program from $ 500.0 million to $ 1.0 billion. Purchases under the repurchase program may be made in the open market or through a 10b5-1 plan and are expected to comply with Rule 10b-18 under the 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. (“Stephens”), a financial services firm that acts as an agent authorized to purchase shares on behalf of the Company, entered into a form of Issuer Repurchase Plan (“Issuer Repurchase Plan”) which authorized Stephens to repurchase shares of common stock of the Company, which is amended from time to time to adjust the monthly repurchase amount. Most recently, on June 19, 2024, the Board approved, and the Company entered into an eighth amendment to the Issuer Repurchase Plan which provides for the repurchase of up to (i) $ 15.0 million during the calendar month commencing June 1, 2024 through and including June 30, 2024, (ii) $ 11.7 million during the calendar months commencing July 1, 2024 through and including September 30, 2024, and (iii) $ 8.3 million during the calendar months commencing October 1, 2024 through and including December 31, 2024.
For accounting purposes, common stock repurchased under the stock repurchase programs is recorded based upon the applicable trade date. 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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Treasury stock:
Balance, beginning of quarter
36,213,862
24,311,897
28,937,671
18,816,791
Repurchases of common stock
2,794,040
2,761,943
10,070,231
8,257,049
Forfeiture to treasury stock for acquisition
-
10,728
-
10,728
Balance, end of quarter
39,007,902
27,084,568
39,007,902
27,084,568
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, Virbela 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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
North American Realty
$ 1,206,660
$ 1,198,207
$ 3,408,418
$ 3,254,666
International Realty
24,230
14,896
60,142
37,644
Other Affiliated Services
1,426
980
4,681
3,729
Revenues reconciliation:
Segment eliminations
( 1,129 )
( 1,290 )
( 3,756 )
( 3,677 )
Consolidated revenues
$ 1,231,187
$ 1,212,793
$ 3,469,485
$ 3,292,362
Adjusted EBITDA
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
North American Realty
$ 28,899
$ 27,169
$ 85,208
$ 82,495
International Realty
( 1,670 )
( 2,647 )
( 7,401 )
( 10,105 )
Other Affiliated Services
( 1,282 )
( 918 )
( 3,037 )
( 2,767 )
Corporate expenses and other
( 2,005 )
( 2,812 )
( 6,973 )
( 7,360 )
Consolidated Adjusted EBITDA
$ 23,942
$ 20,792
$ 67,797
$ 62,263
Operating Profit Reconciliation:
Depreciation and amortization expense
2,379
2,790
7,742
8,148
Litigation contingency
18,000
-
34,000
-
Stock compensation expense
9,910
11,764
28,067
29,912
Stock option expense
1,987
2,533
5,959
7,659
Consolidated operating (loss) profit
($ 8,334 )
$ 3,705
($ 7,971 )
$ 16,544
Goodwill
September 30, 2024
December 31, 2023
North American Realty
$ 17,479
$ 14,595
International Realty
-
-
Other Affiliated Services
2,387
2,387
Segment and consolidated total
19,866
16,982
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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.
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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Numerator:
Net (loss) income from continuing operations
($ 6,481 )
$ 2,265
($ 8,545 )
$ 15,614
Net loss from discontinued operations
($ 2,025 )
($ 916 )
($ 3,217 )
($ 3,390 )
Denominator:
Weighted average shares - basic
153,259,842
153,392,005
153,858,160
153,065,727
Dilutive effect of common stock equivalents
-
4,791,883
-
3,769,258
Weighted average shares - diluted
153,259,842
158,183,888
153,858,160
156,834,985
Earnings per share:
Net income (loss) from continuing operations per share - basic
($ 0.04 )
$ 0.01
($ 0.06 )
$ 0.10
Net income (loss) from discontinued operations per share - basic
($ 0.01 )
($ 0.01 )
($ 0.02 )
($ 0.02 )
Net income (loss) from continuing operations per share - diluted
($ 0.04 )
$ 0.01
($ 0.06 )
$ 0.10
Net income (loss) from discontinued operations per share - diluted
$ ( 0.01 )
$ ( 0.01 )
($ 0.02 )
($ 0.02 )
For three months ended September 30, 2024 and 2023 total outstanding shares of common stock excluded 4,153,812 and 192,684 shares, respectively, from the computation of diluted earnings per share because their effect would have been anti-dilutive. For nine months ended September 30, 2024 and 2023 total outstanding shares of common stock excluded 3,309,505 and 679,425 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 from continuing operations amounted to $ 3.5 million and $ 3.0 million for the nine months ended September 30, 2024 and 2023, which represent effective tax rates of negative ( 69.6 % ) and positive 15.9 % respectively. The effective tax rate differs from our statutory rates in both periods primarily due to the impact of the stock-based compensation, research and development tax credit and non-deductible executive compensation.
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 condensed consolidated financial statements during fiscal year 2024.
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
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the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
● Level 1 – Inputs are quoted market prices in active markets for identical assets or liabilities (these are observable market inputs).
● Level 2 – Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or prices that vary substantially).
● Level 3 – Inputs are unobservable inputs that reflect the entity's own assumptions in pricing the asset or liability (used when little or no market data is available).
The Company holds funds in a money market account, which are considered Level 1 assets. The Company values its money market funds at fair value on a recurring basis.
As of September 30, 2024 and December 31, 2023, the fair value of the Company’s money market funds was $ 42,967 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, stockholder derivative actions and non-compliance with contractual or other legal obligations.
Antitrust Litigation
The Company and its affiliated brokerage entities were 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, and one U.S. putative class action lawsuit alleging that the Company participated in a system that resulted in buyers of residential property paying inflated home prices as a result of sellers paying inflated buyer broker commissions in violation of federal and Illinois antitrust laws (collectively, the “antitrust litigation”). On October 1, 2024, the Company entered into a Settlement Term Sheet (the “Settlement”) with plaintiffs in the U.S. antitrust litigation filed by plaintiffs 1925 Hooper LLC and others in the Northern District of Georgia (the “Hooper Action”). The Company expects that the proposed Settlement would resolve all U.S. claims set forth in the Hooper Action, as well as all similar claims on a nationwide basis against the Company (collectively, the “Nationwide Claims”) and would release the Company, its subsidiaries and affiliates, and their independent contractor real estate agents in the United States from the Nationwide Claims. By the terms of the Settlement, the Company agreed to make certain changes to its business practices and to pay a total settlement amount of $ 34,000 (the “Settlement Amount”) into a qualified settlement escrow fund (the “Settlement Fund”). The Settlement Amount is expected to be deposited into the Settlement Fund in installments, of which 50 % of the settlement (or $ 17,000 ) will be deposited into the Settlement Fund within thirty business days after preliminary court approval of the Settlement and the final 50 % (for $ 17,000 ) being deposited on or before the one-year anniversary of initial settlement payment. The Company intends to use available cash to pay the Settlement Amount. Management has determined that a $ 34.0 million loss is probable and have included an $ 18.0 million additional litigation contingency accrual recorded in the third quarter of 2024. While management has determined that loss in excess of the accrual is reasonably possible, it is currently unable to reasonably estimate the possible additional loss or range of possible additional loss because, among other reasons, (i) the settlement is subject to court approval and appeals processes, (ii) further developments in the legal proceedings, including but not limited to motions, or rulings, could impact the Company's exposure, and/or (iii) potential changes in law or precedent could affect the final determination of liability.
The Settlement remains subject to preliminary and final court approval and will become effective following any appeals process, if applicable. The Settlement and any actions taken to carry out the Settlement are not an admission or concession of liability, or of the validity of any claim, defense, or point of fact or law on the part of any party. The Company continues to deny the material allegations of the complaints in the antitrust litigation. The Company entered into the Settlement after considering the risks and costs of continuing the litigation.
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The Company continues to vigorously defend against the claims in the Canadian antitrust litigation. Management is currently unable to reasonably estimate the possible loss or range of possible loss for the Canadian antitrust litigation because, among other reasons, (i) the proceeding is in preliminary stages, (ii) specific damage amounts have not been sought, (iii) damages sought are, in our opinion, unsupported and/or exaggerated, (iv) there are significant factual issues to be resolved; and/or (v) there are novel legal issues or unsettled legal theories presented. For the Canadian antitrust litigation, we have not recorded any accruals as of September 30, 2024.While the Company does not expect such litigation to have a material adverse effect on our business, results of operations, cash flows or financial condition, 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.
Derivative Litigation
Certain current and former directors and officers of the Company were named as defendants, and the Company was named as a nominal defendant, in a derivative lawsuit in the Court of Chancery of the State of Delaware, first filed on September 25, 2024, entitled Los Angeles City Employees’ Retirement System, on behalf of eXp World Holdings, Inc. v. Glenn Sanford, et. al. (C.A. No. 2024-0998-KSJM). The lawsuit alleges that certain current and former directors and officers breached fiduciary duties related to the Company’s response to reports of alleged sexual misconduct involving independent contractor real estate agents affiliated with the Company’s subsidiaries and that certain defendants had improper compensation arrangements allowing them to profit from the Company’s revenue share program in connection therewith. The complaint seeks a court declaration of fiduciary duty breaches, disgorgement of profits, damages with interest, injunctive relief for improved oversight of sexual misconduct allegations, and reimbursement of plaintiffs' costs, including expert and attorney fees. Although the Company does not anticipate that the outcome of such litigation will have a material adverse effect on its business, results of operations, cash flows, or financial condition, the inherent complexities and uncertainties of legal proceedings may result in a liability that differs from current expectations. Management is currently unable to reasonably estimate the possible loss or range of possible loss for this matter because, among other reasons, (i) the proceeding is in preliminary stages, (ii) specific damage amounts have not been sought, (iii) there are significant factual issues to be resolved; and/or (iv) there are novel legal issues or unsettled legal theories presented.
Capital Maintenance Agreements
On May 22, 2024, Texas Capital Bank (“TCB”) entered into a Change in Terms Agreement (the “Change Agreement”) with SUCCESS Lending, LLC (“SUCCESS Lending”), an indirect subsidiary and unconsolidated joint venture of the Company, to modify certain terms of that certain Mortgage Warehouse Agreement entered into by and between TCB and SUCCESS Lending in April 2022. The Change Agreement reduces the size of the warehouse credit line provided by TCB to SUCCESS Lending under the Mortgage Warehouse Agreement from $ 25 million to $ 10 million.
On July 22, 2024, Flagstar Bank FSB (“Flagstar”) assigned that certain Mortgage Warehouse Agreement entered into in March 2022 (the “SUCCESS Credit Agreement”) with SUCCESS Lending to JPMorgan Chase Bank, National Association (“JPMorgan”). The SUCCESS Credit Agreement provided SUCCESS Lending with a revolving warehouse credit line of up to $ 25 million. In connection with the assignment of the SUCCESS Credit Agreement to JPMorgan, Flagstar also assigned to JPMorgan the related Capital Maintenance Agreement (the “Capital Maintenance Agreement”), pursuant to which the Company agreed to provide certain funds necessary to ensure that SUCCESS Lending is at all times in compliance with its financial covenants under the SUCCESS Credit Agreement. The material terms of the Capital Maintenance Agreement remain unchanged and the Company’s capital commitment liability under the Capital Maintenance Agreement is limited to $ 2,000,000 . In the event SUCCESS Lending fails to comply with its financial covenants, the Company may have to contribute additional capital up to the limit.
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13. SUBSEQUENT EVENTS
Quarterly Cash Dividend
On November 4, 2024 , the Company’s Board of Directors declared a dividend of $ 0.05 per share which is expected to be payable on December 2, 2024 , to stockholders of record as of the close of business on November 18, 2024 . The ex-dividend date is expected to be on or around November 15, 2024. The dividend will be paid in cash.
Antitrust Litigation
On October 1, 2024, the Company entered into the Settlement in the Hooper Action to resolve the Nationwide Claims, as discussed further in Note 12 – Commitments and Contingencies to these unaudited consolidated financial statements.
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.