What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-07 · 125 added, 265 removed, 172 unchanged (69% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere in this report.

Management’s Discussion and Analysis of Financial Conditions and Results of Operations contain forward-looking statements.

The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025 (the “Quarterly Report”) and consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”).

Management’s Discussion and Analysis of Financial Conditions and Results of Operations (“MD&A”) contain forward-looking statements.

Our actual results could differ materially from those anticipated in these forward-looking statements.

See “Item 1 A.

– Risk Factors” in our 2023 Annual Report and “Item 1 A.

– Risk Factors” in this Quarterly Report for a discussion of certain risks, uncertainties and assumptions associated with these statements.

See “Cautionary Note Regarding Forward Looking Statements” in this Quarterly Report, Part I, Item 1A Risk Factors of the 2024 Annual Report, and Part II, Item 1A Risk Factors in this Quarterly Report for a discussion of certain risks, uncertainties and assumptions associated with these statements.

This MD&A is divided into the following sections:

● 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 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.

● Transactions increased 1% year-over-year to 140,780.

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

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.

● Transactions increased 4% year-over-year to 395,074.

● Transaction volume increased 7% year-over-year to $139.9 billion.

eXp World Holdings, Inc.

(the “Company”) was incorporated in Delaware on July 30, 2008 and launched the first cloud-based real estate brokerage offering agent-centric commission structure, revenue sharing, and agent equity opportunities in 2009.

(the “Company,” “eXp” or “we”) was incorporated in Delaware on July 30, 2008 and launched the first cloud-based real estate brokerage offering agent-centric commission structure, revenue sharing, and agent equity opportunities in 2009.

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.

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.

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.

Our enabling and innovative technology platform is a robust suite of cloud-based applications and software services tailored for our real estate agents and brokers and targets business operations such as customer relationship management, marketing, client services, and brokerage functionalities.

We succeed when our real estate professionals succeed, and we remain focused on being the most agent-centric business on the planet.

Beginning in the first quarter of 2024, following the discontinuation of Virbela, eXp manages its operations in three operating business segments:

North American Realty;

International Realty;

and Other Affiliated Services.

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions and believe we are well-positioned to capture additional revenue from such solutions.

Discontinued Operations

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.

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

We expect the process to wind down the Virbela business to be completed by the fourth quarter of 2024.

As a result of this change, the Company has determined that Virbela qualifies for reporting as discontinued operations and will be reported as discontinued operations in our consolidated balance sheet and condensed consolidated statements of comprehensive income.

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

See Note 3 – Discontinued Operations to the condensed consolidated financial statements for additional information regarding the discontinuation of Virbela.

Our strategy is to grow organically in North America and certain international markets by increasing our independent agent and broker network.

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The Company’s primary emphasis is on achieving operational excellence for our real estate agents, which we monitor using the aNPS.

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

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.

We remain focused on investing in technology and people who are key to the continued growth of the Company.

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 continues to be critical to attracting and retaining our most productive agents.

The supplementary income distributed to the sponsor under the Revenue Share Plan is exclusively derived from the Company's portion of the transaction commission and is not earned on transactions for which the Company does not receive a commission (e.g., when an Front-Line Qualifying Agent has capped and earns 100% of commission on its closed transactions).

The Revenue Share Plan does not impact or reduce the commission earned by the agent on the transaction.

The Company’s costs incurred under the Revenue Share Plan are included as commissions and other agent-related costs in the consolidated statements of comprehensive income.

The Revenue Share Plan is integral to our growth strategy, fostering a collaborative brokerage that aligns with our core values of sustainability and collaborative success.

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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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 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 went into effect on August 17, 2024.

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.

We have a strong base of agent support, which should drive organic market share growth, retention and productivity.

Additionally, we offer agents a low-cost, high-engagement model, which affords agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners who want to survive and thrive during market fluctuations.

equity markets, changes in trade policy, including the imposition of new tariffs, and any retaliatory responses to such tariffs, and continued unrest around the world.

While the current environment is challenging, the Company continues to believe it is well positioned to strengthen its competitive position, over the long term.

Our robust agent support infrastructure continues to drive engagement, retention and productivity.

Additionally, we continue to offer agents a low-cost, high-engagement model, which affords agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners who want to survive and thrive during market fluctuations.

We have an efficient operating model with lower fixed costs driven by our cloud-based model, with no brick-and-mortar locations.

National Housing Inventory

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.

During the first quarter of 2025, 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 1.39 million as of September 2024 (preliminary) compared to 1.13 million at the end of September 2023.

was 1.3 million as of March 2025 (preliminary) compared to 1.1 million at the end of March 2024.

This represents 4.0 months of inventory in 2025 compared to 3.2 months of inventory in the prior year.

Mortgage Interest Rates

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.

While mortgage rates continue to be higher than historic averages and negatively impact the demand for homebuying, mortgage rates during the first quarter of 2025 declined slightly from the prior year.

Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.7% in March 2025 compared to 6.8% in March 2024.

Housing Affordability Index

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

According to NAR, the composite housing affordability index increased slightly to 102.2 for February 2025 (preliminary) from 102.1 for February 2024.

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.

The housing affordability index has been declining year over year due to mortgage rate conditions and higher average home prices driven by constrained inventory levels.

Existing Home Sales Transactions and Prices

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%.

According to NAR, existing home sale transactions decreased to an annual rate of 4.0 million in March 2025 (preliminary) compared to 4.1 million in March 2024, a decrease of 2.4%.

According to NAR, the nationwide existing home sales average price for March 2025 (preliminary) was $403,700 compared to $392,900 in March 2024, an increase of 2.7%.

The declining home sales transactions in the U.S.

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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 September 30,

Nine Months Ended September 30,

(in thousands, except transactions and agent count)

Three Months Ended March 31,

Real estate sales transactions

Real estate sales volume

$ 139,869,084

$ 130,337,913

Other real estate transactions

Real estate per transaction cost

Operating (loss) profit

Operating (loss)

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 (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”) 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”.

Revenue and adjusted EBITDA are key financial measures, and we review these measures to evaluate and drive our core operating performance.

Revenues and Adjusted EBITDA are key financial measures, and we review these measures to evaluate and drive our core operating performance.

Agent net promoter score (aNPS)

aNPS is a scale-based measure of customer satisfaction and an aNPS above 50 is considered excellent.

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 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 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.

aNPS plays a crucial role in attracting and retaining agents and teams, especially during a period marked by continued market challenges and higher mortgage rates.

Despite the challenging market conditions, the Company’s aNPS was 78 for the three months ended March 31, 2025, compared to 73 for the same period of 2024.

We remain focused on empowering our agents, increasing their productivity, and maintaining strong engagement through our agent-centric initiatives.

Additionally, in response to industry changes in response to U.S.

antitrust lawsuits, the Company led the industry by introducing new listing agreements and buyer representation forms for its agents and the industry.

These programs and efforts underscore our commitment to fostering agent success by lowering barriers, increasing earning opportunities, and creating a collaborative, growth-oriented environment.

By continually evolving to meet the needs of our agents and employees, the Company remains well-positioned to continue to drive growth.

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

The number of agents declined (5)% in the first three months of 2025, compared to the same period of 2024, as we continue to off board less productive agents.

However, we are committed to retaining our most productive agents in the U.S.

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

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

Transaction volume represents the total sales value for all transactions and is influenced by several market factors, including, but not limited to, the pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, economic growth, local inventory levels, mortgage interest rates, and seasonality.

Transaction volume represents the total sales value for all transactions and is influenced by several market factors, including, but not limited to, the pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, economic growth, or contraction, local inventory levels, mortgage interest rates, and seasonality.

Our real estate sales transactions and volume typically fluctuate with changes in the market’s existing home sales transactions as reported by NAR;

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

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.

For the three months ended March 31, 2025, compared to the same period of 2024, our real estate sales transactions decreased (2)%, due to our agents’ improved productivity and international growth, which partially offset the decline in existing home sales in the U.S.

as reported by the NAR.

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.

For the three months ended March 31, 2025, compared to the same period of 2024, transaction volume increased 4%, due to increased home sale prices in the first quarter of 2025.

Other real estate transactions

Other real estate transactions are recorded for leases, rentals and referrals that are undertaken by our agents and brokers.

The increase in other real estate transactions reflects the productivity of our agents and brokers.

The decrease in other real estate transactions reflects the challenging market conditions.

Real estate per transaction cost

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 (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.

Real estate per transaction cost increased 13% for the three months ended March 31, 2025, primarily due to increased personnel, litigation and technology costs, as well as lower transactions in the first quarter of 2025.

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

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

For the three months ended March 31, 2025, compared to same period of 2024, the Company’s revenues increased 1% primarily due to higher home sales prices in North America and increased international production, which more than offset decreased real estate transactions in North American Realty.

Operating (Loss)

Operating loss in the first quarter of 2025 of ($10.4) million compared to operating (loss) of ($18.2) million in the first quarter of 2024.

Operating loss in the first quarter of 2024 included the litigation contingency accrual of $16 million.

The first quarter of 2025 reflects increased revenues, increased agent commissions and other agent-related costs due to sales commissions capping and lower fees from lower number of agents, and higher operating costs related to personnel, litigation and technology costs.

Adjusted EBITA

Management reviews Adjusted EBITDA, which is a non-U.S.

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

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 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.

Adjusted EBITDA, for the three months ended March 31, 2025 was $2.2 million compared to $11.0 million for the three months ended March 31, 2024.

The decrease in Adjusted EBITDA reflects increased revenues, more than offset by increased agent commissions and other agent-related costs, and higher operating costs.

RESULTS OF OPERATIONS

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

Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

(In thousands)

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Total other (income) expense, net

Equity in losses of unconsolidated affiliates

Equity in (income) losses of unconsolidated affiliates

Total other (income) expense, net

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Net (loss) income from continuing operations

Net (loss) income from discontinued operations

Net (loss) income

Adjusted EBITDA (1)

Earnings per share

Weighted average shares outstanding

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

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GAAP Financial Measures.”

September 30, 2024

September 30, 2023

(In thousands, except percentages)

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)

March 31, 2025

March 31, 2024

Total revenues increased 1% as a result of increased home sales prices and increased international transactions, which more than offset a slight decline in real estate transactions compared to the same period in 2024.

March 31, 2025

March 31, 2024

Commissions and other agent-related costs

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

Commissions and other agent-related costs increased 2% primarily due to increased sales commissions capping as well as lower agent fees from the lower number of agents.

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

September 30, 2024

September 30, 2023

(In thousands, except percentages)

March 31, 2025

March 31, 2024

General and administrative expenses

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.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

General and administrative expenses increased 7% due to increased employee-related and litigation expenses.

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

March 31, 2025

March 31, 2024

Technology and development expenses

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

Technology and development expenses increased 14%, primarily due to increased technology expenses related to agent support.

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)

March 31, 2025

March 31, 2024

Sales and marketing expenses

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and Canada residential real estate market.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Total other (income) expense, net

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 (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)

Statement of Operations Data:

Operating expenses

Commissions and other agent-related costs

General and administrative expenses

Technology and development expenses

Sales and marketing expenses

Litigation contingency

Total operating expenses

Operating (loss) income

Other (income) expense

Total other (income) expense, net

Equity in losses of unconsolidated affiliates

Total other (income) expense, net

(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 (loss) income from continuing operations, operating (loss) income or any other measures derived in accordance with U.S.

GAAP Financial Measures.”

September 30, 2024

September 30, 2023

(In thousands, except percentages)

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)

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 include sales commissions, revenue share and stock-based compensation paid to our agents.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

General and administrative expenses

General and administrative expenses increased 3% due to increased severance and employee-related expenses and increased legal expenses related to the antitrust lawsuits, such increases were partially offset by lower costs related to the shareholders summit in 2024, since it was conducted virtually.

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

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Technology and development expenses

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 were flat in 2024 compared to 2023 due to increased advertising in the U.S.

and Canada residential real estate market.

September 30, 2024

September 30, 2023

(In thousands, except percentages)

March 31, 2025

March 31, 2024

Total other (income) expense, net

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)

Total other (income) expense, net decreased (2)% primarily due to decreased interest income when compared to the first quarter of 2024.

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

March 31, 2025

March 31, 2024

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.

The Company’s provision for income tax expense (benefit) represented effective tax rates of (17.9%) and 18.0%, respectively for the three months ended March 31, 2025 and 2024, 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.

BUSINESS SEGMENT DISCLOSURES

See Note 7 – 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 September 30, 2024 and 2023:

The following table reflects the results of each of our reportable segments during the three months ended March 31, 2025 and 2024:

Three Months Ended

September 30, 2024

September 30, 2023

(In thousands)

Statement of Operations Data:

North American Realty

International Realty

Other Affiliated Services

Segment eliminations

Total Consolidated Revenues

Adjusted Segment EBITDA (1)

North American Realty

International Realty

Other Affiliated Services

Total Segment Adjusted EBITDA

Corporate expenses and other

Total Reported Adjusted EBITDA (1)

(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 (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 (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 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 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 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 nine months ended September 30, 2024 and 2023:

Nine Months Ended

September 30, 2024

September 30, 2023

(In thousands)

March 31, 2025

March 31, 2024

Statement of Operations Data:

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Other Affiliated Services

Total Segment Adjusted EBITDA

Total Adjusted Segment EBITDA

Corporate expenses and other

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

For and a reconciliation of Adjusted Segment EBITDA and Adjusted EBITDA to consolidated (loss) income before income taxes 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 revenues and Adjusted Segment EBITDA.

Adjusted Segment EBITDA is defined by us as consolidated (loss) income before income taxes plus depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, stock option expense, and other (income) expense, net.

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, 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% 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.

North American Realty revenues decreased slightly in the first quarter of 2025 compared to the same period in 2024 primarily due to lower sales volumes in the United States, partially offset by increased sales volume in Canada 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 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 decreased (10)% due to increases in selling, general and administrative expenses related to investing in business initiatives, partially offset by increased revenues.

Adjusted North American Realty EBITDA decreased (57)% due to lower revenues, increased commissions and other agent-related costs and increased operating costs.

International Realty revenues increased 103% in the first quarter of 2025 compared to the same period in 2024 primarily due to increased real estate transactions driven by improved agent production in previously launched markets.

Adjusted International EBITDA improved 52% in the first quarter of 2025 compared to the same period in 2024 due to increased revenues and improved business efficiencies and reduced costs.

Other Affiliated Services revenues decreased (54)% due to lower SUCCESS® Magazine revenues.

Adjusted Other Affiliated Services EBITDA decreased (90)% due to increased costs.

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

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

This non-GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S.GAAP.

This non-U.S.

GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S.

We define the non-U.S.

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

amortization and stock-based compensation expenses.

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, stock option expense and other items not core to the operating activities of the Company.

Adjusted Segment EBITDA is defined as consolidated (loss) income before income taxes plus depreciation, amortization and stock-based compensation expense, stock option expense, and other (income) expense, net.

We believe that consolidated Adjusted EBITDA and Adjusted Segment EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making.

We believe that Adjusted Segment EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted Segment EBITDA.

In particular, we believe the exclusion of stock and stock option expenses, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations.

In particular, we believe the exclusion of stock-based compensation, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations.

We are presenting the non-U.S.

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● Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets, amortization of intangible assets, and impairment charges related to these long-lived assets, and, although these are non-cash charges, the assets being depreciated, amortized, or impaired may have to be replaced in the future.

The following tables present a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, the most comparable U.S.

The following table presents a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, the most comparable U.S.

GAAP financial measure, for each of the periods presented:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Net (loss) income from continuing operations

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Litigation contingency

Stock compensation expense (1)

Stock-based compensation expense (1)

Stock option expense

Adjusted EBITDA

(1) This includes agent growth incentive stock compensation expense and stock compensation expense related to business acquisitions.

(1) This includes agent growth incentive stock-based compensation expense.

LIQUIDITY AND CAPITAL RESOURCES

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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, 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).

In addition, except for the $34 million antitrust litigation contingency accrual recorded for the year ended December 31, 2024 (see Note 11 – Commitments and Contingencies to the unaudited condensed consolidated financial statements for additional information regarding the antitrust litigation), the Company has no known material cash requirements as of March 31, 2025, 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.

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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, industry practice changes in light of the NAR Settlement, and other monetary and fiscal policy changes to the manner in which we currently operate.

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, 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.

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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 September 30, 2024 and December 31, 2023:

September 30, 2024

The following table presents our net working capital as of March 31, 2025 and December 31, 2024:

March 31, 2025

December 31, 2024

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Net working capital

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,

For the three months ended March 31, 2025, net working capital decreased ($5.0) million, or (6)%, compared to December 31, 2024, primarily due to increased accrued liabilities and accounts receivable, due to the increased revenues in the first quarter of 2025, compared to the fourth quarter of 2024.

The following table presents our cash flows for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Net cash provided by operating activities

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Net change in cash, cash equivalents and restricted cash

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.

For the three months ended March 31, 2025, net cash provided by operating activities decreased ($20.8) million compared to the same period in 2024.

The decrease in cash provided by operating activities was primarily driven by lower operating results, lower agent stock-based compensation, and a decrease in customer deposits.

For the three months ended March 31, 2025, net cash used in investing activities increased due to cash used for investments in affiliates and other assets and purchases of property and equipment compared to the same period of 2024.

For the three months ended March 31, 2025 and 2024 net cash flows used in financing activities decreased $28.5 million compared to the same period in 2024, 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 nine months of 2024 have not had a material impact on cash flow.

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 three months of 2025 have not had a material impact on cash flow.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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There were no changes to critical accounting policies or estimates as reflected in our 2024 Annual Report.

For additional information regarding our critical accounting policies and estimates, see the Critical Accounting Policies and Estimates section of MD&A included in our 2023 Annual Report.

For additional information regarding our critical accounting policies and estimates, see the Critical Accounting Policies and Estimates section of Part II, Item 7 Management’s Discussion and Analysis of Financial Conditions and Results of Operations included in our 2024 Annual Report.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposures to market risk since December 31, 2024.

For details on the Company's interest rate and foreign currency exchange, see “Item 7A.

Quantitative and Qualitative Information About Market Risks” in our 2023 Annual Report.

For details on the Company’s market risks relating to interest rates and foreign currency exchange rates, see Part II, Item 7A Quantitative and Qualitative Information About Market Risks in our 2024 Annual Report.

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