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EXp World Holdings weathered a stormy first quarter, as dampened real estate sales drove the cloud-based brokerage’s revenue down 16 percent year over year to $850.6 million, according to a quarterly earnings call Tuesday.
Despite the decline in revenue, the holdings company recovered profitability with a net income of $1.5 million — a reversal from a Q4 performance that included a net loss of $7.2 million.
Glenn Sanford | eXp Realty
The company’s adjusted operating earnings before interest taxes depreciation and amortization (EBITDA) declined 24.8 percent from $17.7 million in Q1 2022 to $13.3 million in Q1 2023, according to earnings data released prior to the call on Tuesday afternoon.
The losses were primarily attributed to a volatile housing market that saw closed transactions decline 10 percent to 102,305. Sales volume also declined 20 percent year over year to $33.2 billion.
EXp World Holdings Chief Financial Officer Jeff Whiteside said that despite the declines in revenue, sales and transactions, the company and its subsidiaries — which include eXp Realty, SUCCESS Enterprises, Virbela and other affiliated services — are in solid financial shape as leaders maintain a strong cash flow.
“During the first quarter, the financial benefits of our variable cost model were apparent as we generated positive net income and over $39 million of operating cash flow despite the global residential real estate market downturn,” Whiteside in a prepared statement. “Our International Realty segment had a record revenue quarter with 52 percent year-over-year growth, and we remain focused on driving durable, profitable growth across the eXp World Holdings portfolio.”
In a company earnings call, Whiteside and eXp World Holdings founder Glenn Sanford said the real estate market will continue to mirror the past several quarters, which saw inflation, rising mortgage rates, and slowing buyer and seller activity suppress the company’s Q4 performance, which saw revenue decline 13 percent year over year to $933 million and the EBITDA decrease 72.5 percent year over year to $3.6 million.
“Interest rates really started to go up late Q1, early Q2 last year and that has put a drag on the housing market and a significant drag on real estate sales in the quarter,” Sanford said, quoting National Association of Realtors’ data. “Transaction sites were down about 25 percent year over year, and agents in the industry are down about 0.3 percent.”
However, Sanford and Whiteside are bullish about what eXp World Holdings can achieve, considering the fact that the holdings company and its subsidiaries ended 2022 on the upswing with fiscal year results yielding a 22 percent increase in revenue to $4.6 billion and a net income of 15.4 million.
Sanford also touted eXp Realty’s growing value proposition among agents with a 12 percent increase in agent count (87,327), a steady global Net Promoter Score of 70, and the launch of several initiatives in Q1, including a partnership with Realty.com to strengthen eXp’s leads funnel with qualified sellers and buyers, exclusive enhanced services and pricing as examples of the brand’s strength.
“We continue to grow our agent-centric culture by amplifying our agents’ voices across the organization through our Agent Advisory Councils, masterminds and our strong usage of the Net Promoter System (NPS), which captures ongoing agent and employee feedback,” Sanford said in a statement prior to Tuesday’s earnings call. “We’re excited to meet in person at our 9th Annual Shareholder Summit in Orlando from May 17-20, where eXp Realty agents and SUCCESS coaches will be the main speakers for the event.”
The CEO went on to tease the launch of eXp Ventures, a fund that will enable the company to invest in “strategic and synergistic products” that will raise the value proposition of the brokerage and affiliated companies.
“Our team has been evaluating many different products and services over time,” he said. “But we’re actually turning that into its own division where it’s going to be seeking out those products and services we think are going to bode well for the future. There’s an amount of change that’s going on right now in terms of technology and technology enhancements, such as artificial intelligence.”
Whiteside didn’t offer a forward-looking statement; however, he and Sanford said they expect the market will begin to lift by Q4 2023 as agent sentiment slowly improves.
“I’m hearing not as much negative in the marketplace from an agent perspective relative to sales volumes,” Sanford said. “It’s probably seasonal because March is historically the beginning of the selling season.”
“So those who were taking it on the chin last year through the mid-year, they’ve adjusted the new normal,” he added. “So I believe that we’re now fully into the new normal in terms of sales volumes and those types of things. For now, it will be more of a steady growth. I think once we get into especially Q3 and Q4 we’ll actually start to see year-over-year growth rates — that’s my guess. And I think agents are starting to pick that up as well.”
The company’s stock (NASDAQ: EXPI) experienced a small lift after its earnings release, with the price per share rising from the $11.30 range to $11.66 — the highest price per share of the day. Despite the bump, eXp’s stock is still trading down from the 52-week high of $18.70.
Its market cap stands at $1.703 billion.
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