Business Overview

eXp World Holdings, Inc. (NASDAQ:EXPI) is a diversified portfolio of service-based businesses that have leveraged innovative cloud-based technology to disrupt the traditional real estate industry. Founded in 2008 and headquartered in Bellingham, Washington, the company has steadily risen to become one of the largest independent global real estate brokerages, operating in 27 countries and serving over 87,000 agents and brokers worldwide as of June 2024.

eXp World Holdings' origins trace back to 2009 when it launched the first cloud-based real estate brokerage model, offering an agent-centric commission structure, revenue sharing, and equity opportunities. This visionary approach has been a key driver of the company's remarkable growth over the past 15 years. In 2023, eXp World Holdings reported total revenue of $4.28 billion, a testament to its ability to adapt and thrive in an evolving real estate landscape.

The company has been named as a defendant in several class action lawsuits alleging a conspiracy to violate federal antitrust laws by requiring residential property sellers to pay inflated commission fees to buyer brokers. In March 2024, the National Association of REALTORS (NAR) entered a settlement agreement to resolve the claims against NAR, which will result in changes to cooperative compensation and buyer agreements effective August 17, 2024. The company is preparing its agents for these changes by offering training and resources.

The company continues to focus on improving its agent value proposition, which has resulted in an increase in its agent Net Promoter Score from 72 in Q2 2023 to 76 in Q2 2024, which is considered "world-class". The company has also launched initiatives like the REVenue Share 2.0 program and the Thrive program to attract and retain high-performing agents.

Core Business

The company's flagship subsidiary, eXp Realty, has been the centerpiece of its success. eXp Realty's unique agent-centric model, which provides attractive commission splits, revenue sharing, and equity incentives, has proven highly appealing to real estate professionals seeking to grow their businesses. As a result, eXp Realty has consistently outpaced industry growth, boasting a global agent count of 87,111 as of June 2024, a 1% decline year-over-year amid challenging market conditions.

Diversification and Technology

Beyond its core real estate brokerage operations, eXp World Holdings has strategically diversified its business, leveraging its technological capabilities to develop complementary service offerings. These include mortgage, title, and content creation services, which not only enhance the value proposition for its agents but also contribute to the company's overall financial performance. The company's enabling and innovative technology platform comprises a robust suite of cloud-based applications and software services tailored for its real estate agents and brokers, targeting business operations such as customer relationship management, marketing, client services, and brokerage functionalities.

Financials

In the second quarter of 2024, eXp World Holdings reported revenue of $1.30 billion, a 5% increase year-over-year, driven by a 1% increase in real estate transactions and higher home sales prices. The company's adjusted EBITDA for the quarter reached $32.81 million, a 22% improvement compared to the same period in 2023. These results demonstrate eXp World Holdings' ability to navigate the headwinds facing the real estate industry, including rising interest rates and declining home sales.

For the full fiscal year 2023, eXp World Holdings reported total revenue of $4.28 billion, with a net loss of $8.97 million. The company generated $209.13 million in operating cash flow and $201.17 million in free cash flow.

The company operates in three reportable business segments: North American Realty, International Realty, and Other Affiliated Services. In Q2 2024, the North American Realty segment, which includes operations in the United States and Canada, saw revenues increase by 5% year-over-year to $1.27 billion. The International Realty segment, covering all operations outside North America, experienced a significant 69% increase in revenues compared to the same period in 2023, primarily due to increased real estate transactions driven by improved agent production in previously launched international markets. The Other Affiliated Services segment, which includes SUCCESS Magazine and Virbela Frame technology, saw a 37% increase in revenues.

eXp World Holdings' performance has been strong across geographic markets. In Q2 2024, the North American Realty segment revenue increased 5% year-over-year to $1.275 billion, while the International Realty segment revenue surged by 69% year-over-year to $20.32 million. This growth in international markets was driven by improved agent production in previously launched locations.

Operational Efficiency

One of the key factors contributing to eXp World Holdings' resilience is its efficient operating model. The company's cloud-based infrastructure and virtual workforce enable it to maintain a lower fixed-cost structure compared to traditional brick-and-mortar brokerages. This agility has allowed eXp World Holdings to adapt quickly to evolving market conditions and invest in strategies to support its agent network, such as the recently launched REVenue Share 2.0 program and the global referral platform.

Challenges and Risks

However, the company is not without its challenges. The residential real estate industry has faced significant disruption in recent years, with class-action lawsuits and regulatory changes, such as the National Association of Realtors (NAR) settlement agreement, posing potential risks to eXp World Holdings' business model. The company has been proactive in addressing these issues, providing comprehensive training and resources to its agents to ensure compliance with the new industry guidelines.

Additionally, eXp World Holdings' ambitious international expansion strategy, which aims to capitalize on the vast global real estate market, carries inherent risks and requires careful execution. The company's ability to effectively localize its agent value proposition and navigate diverse regulatory landscapes will be crucial to its long-term success in international markets.

Liquidity

As of June 30, 2024, eXp World Holdings had $108.39 million in cash and cash equivalents and $85.13 million in restricted cash. The company's debt-to-equity ratio stands at 0.0001, indicating a very low level of debt. eXp World Holdings maintains a $25 million mortgage warehouse credit line with JPMorgan Chase Bank, National Association. The company's current ratio and quick ratio are both 1.42, suggesting a healthy short-term liquidity position.

Despite these challenges, eXp World Holdings' management team has demonstrated a strong track record of identifying and capitalizing on emerging opportunities. The company's strategic investments in innovative technologies, such as the integration of AI-powered tools and the development of its metaverse platform, Frame, position it well to continue disrupting the real estate industry.

Looking ahead, eXp World Holdings expects the downward trend in U.S. existing home sales to persist in the next quarter, based on the latest NAR data. To counteract this, the company plans to continue investing in its international markets and agent growth to boost production in the U.S. The company anticipates that its gross margin percentage for the second half of 2024 will be generally consistent with the typical seasonal pattern and last year's performance.

Conclusion

In conclusion, eXp World Holdings has established itself as a resilient and forward-thinking real estate technology company. With its agent-centric model, diversified service offerings, and commitment to innovation, the company is well-positioned to navigate the evolving industry landscape and deliver long-term value for its shareholders. As eXp World Holdings continues to expand its global footprint and leverage its technological advantages, it remains a compelling investment opportunity for those seeking exposure to the dynamic real estate technology sector.