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EXp World Holdings‘ sails remained strong in the face of worsening market headwinds, with the cloud-based brokerage’s revenue declining two percent year over year to $1.2 billion, according to a quarterly earnings call Thursday.
Despite the decline in revenue, the holding company maintained profitability with a net income of $1.3 million — a 70 percent change from Q3 2022 when the company’s net income clocked in at $4.4 million.
The company’s adjusted operating earnings before interest, taxes, depreciation and amortization (EBITDA) increased 53 percent year over year to $19 million, and gross profits declined 10 percent annually to $83.6 million, according to earnings data released prior to the call on Thursday afternoon.
The declines in revenue and net income were primarily attributed to a “slower market environment” with 139,480 transactions — just 1 percent above Q3 2022. Meanwhile, transaction volume tumbled 4 percent to $48.5 billion.
Jeff Whiteside
EXp Chief Financial Officer and Chief Collaboration Officer Jeff Whiteside said eXp’s third-quarter performance reflects the company’s financial stewardship and ability to help its agents and brokers gain market share, despite elevated mortgage rates and weakening affordability.
“We delivered solid financial performance during the third quarter, with year-over-year Adjusted EBITDA growth of 53 percent despite challenging market conditions as we continued to improve the efficiency of our operations,” he said in a prepared statement. “We once again gained market share, despite lower market activity due to elevated mortgage rates, which resulted in decreased transaction value compared to the prior-year quarter.
“While we continue to prudently manage expenses, our strong cash flow profile enables us to simultaneously pursue an ambitious and innovative agent-centric agenda while allocating capital to our shareholders through share repurchases and cash dividends,” he added. “By continuing to invest in our agents through the current market cycle, we are building a strong foundation for accelerated growth and continued share gains despite fluctuations in the market.”
The company said its rising Net Promoter Score (74) is evidence of its solid value proposition, as the total agent and broker count increased 5 percent year over year to 89,156. EXp also highlighted the success of its Boost incentive program for brokerages, the September launch of EXPCON and eXp Luxury in Canada, and reaching 1,000 agents in South Africa.
Glenn Sanford
“During the third quarter, we continued to focus on agent-centric innovation that drove meaningful results, as we once again increased eXp’s agent Net Promoter Score (NPS) while extending our market share gains,” eXp World Holdings founder, Chairman and CEO Glenn Sanford said in a written statement. “In a slower market environment where every transaction counts, eXp’s agents in the U.S. significantly outperformed the market during the third quarter.”
“This outstanding performance speaks to the differentiated nature of eXp’s platform and the power of our unique, success-oriented culture,” he added. “Moving forward, we see many opportunities to further iterate on our agent-centric value proposition with programs like Boost, Accelerate, Thrive and eXp exclusives and partnerships with Opendoor and the HomeRiver Group.”
EXp’s stock closed at $13.91 per share on Thursday, with share values declining to $13.75 in after-hours trading. The company is far from its 52-week high of $25.39 per share; however, its market cap is still strong at $2.03 billion.
Several major real estate companies’ stocks took a tumble after a Missouri jury awarded $5 billion to homesellers in the landmark Sitzer|Burnett case. EXp wasn’t a defendant in the Sitzer|Burnett trial; however, they have been included in a follow-up suit filed on Tuesday that includes Compass, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate and Douglas Elliman.
Sanford addressed the impact of Sitzer|Burnett in the company’s earnings call, saying he was “concerned” about what might happen to buyers if they become responsible for handling their agents’ commissions alongside rising down payments, mortgage rates, home prices and other transaction-related costs.
“I actually started out as a buyer’s agent, my first five years in the business, which is kind of interesting because I see buyer agency as being a very valuable tool for buyers,” he said. “I’m concerned, quite frankly, about what this might mean to buyers who may not be able to afford representation if things change up too much.”
Sanford said eXp will continue to operate with “high integrity” as they figure out how to navigate an uncertain future.
“At the end of the day, we’re about really two things — real estate agents being able to build rewarding careers in this industry and [making] sure that we continue to provide the relevant tools, systems, training, coaching, what have you… That’s really where our focus is,” he said. “Obviously, it’s too soon to sort of comment on how we’re going to navigate. I feel like we’ve been operating with high integrity in this industry, and we will continue to do so.”
“It’s just a matter of seeing what [the] next steps are in this business of real estate.”
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