eXp(EXPI) - 2024 Q2 - Quarterly Report

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This section highlights that the Quarterly Report contains forward-looking statements subject to known and unknown risks and uncertainties that may cause actual results to differ materially - This Quarterly Report contains forward-looking statements that are not historical facts and involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially[4] - Key risks include macroeconomic conditions (residential real estate market strength, monetary policies, consumer attitudes, home inventory), business management (rapid growth, personnel retention, tax law changes, intellectual property protection, security breaches, new product demand, agent growth rate), litigation and regulatory actions, and the effect of inflation and high interest rates[5] PART I – FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements, with accompanying notes on accounting policies and other financial details CONDENSED CONSOLIDATED BALANCE SHEETS This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $ 108,395 | $ 125,873 | | Restricted cash | 85,126 | 44,020 | | Accounts receivable, net | 133,896 | 85,343 | | TOTAL CURRENT ASSETS | 335,567 | 266,475 | | TOTAL ASSETS | $ 457,431 | $ 385,668 | | LIABILITIES AND EQUITY | | | | Accounts payable | $ 11,529 | $ 8,788 | | Customer deposits | 86,496 | 44,550 | | Accrued expenses | 122,497 | 86,483 | | Litigation contingency | 16,000 | - | | TOTAL CURRENT LIABILITIES | 237,105 | 141,640 | | TOTAL LIABILITIES | 237,105 | 141,660 | | TOTAL EQUITY | 220,326 | 244,008 | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) This section presents the company's revenues, expenses, and net income (loss) for the reported periods, including comprehensive income Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $ 1,295,244 | $ 1,231,116 | $ 2,238,298 | $ 2,079,569 | | Total operating expenses | 1,276,707 | 1,218,280 | 2,237,935 | 2,066,731 | | Operating income | 18,537 | 12,836 | 363 | 12,838 | | Income before income tax expense | 19,912 | 13,987 | 2,777 | 14,521 | | Income tax expense | 8,146 | 2,632 | 4,841 | 1,174 | | Net income (loss) from continuing operations | 11,766 | 11,355 | (2,064) | 13,347 | | Net income (loss) from discontinued operations | 617 | (1,933) | (1,192) | (2,472) | | Net income (loss) | $ 12,383 | $ 9,422 | ($ 3,256) | $ 10,875 | | Basic EPS, net income (loss) | $ 0.08 | $ 0.06 | ($ 0.02) | $ 0.07 | | Diluted EPS, net income (loss) | $ 0.08 | $ 0.06 | ($ 0.02) | $ 0.07 | | Comprehensive income (loss) attributable to eXp World Holdings, Inc. | $ 11,485 | $ 9,486 | ($ 5,043) | $ 11,582 | CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY This section details changes in stockholders' equity, including treasury stock repurchases, stock compensation, and dividends Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :----------------------------- | | Treasury stock repurchases | ($ 48,234) | ($ 81,266) | | Agent growth incentive stock compensation | 9,495 | 17,403 | | Agent equity stock compensation | 30,588 | 56,456 | | Stock option compensation | 1,970 | 3,960 | | Dividends declared and paid | (7,490) | (15,075) | | Total equity, end of period | $ 220,326 | $ 220,326 | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS This section outlines the cash inflows and outflows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $ 131,801 | $ 154,168 | | Net cash used in investing activities | (10,369) | (9,962) | | Net cash used in financing activities | (96,458) | (90,935) | | Net change in cash, cash equivalents and restricted cash | $ 23,628 | $ 53,891 | | Cash, cash equivalents and restricted cash, ending balance | $ 193,521 | $ 213,274 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION This note describes the company's business operations and the foundational principles used in preparing the financial statements - eXp World Holdings, Inc. operates a diversified portfolio of service-based businesses, primarily a real estate brokerage, leveraging a technology platform and an agent-centric commission structure[15][58] - The Virbela business has been reclassified as discontinued operations in Q1 2024 due to a significant change in its business model, with its technology being replaced by Virbela Frame® for internal use[15][16][59] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles, methods, and estimates applied in the preparation of the financial statements - The financial statements are prepared in accordance with U.S. GAAP, consolidating eXp and its subsidiaries, and eliminating intercompany transactions[18] - The Company uses estimates for various items including credit losses, legal contingencies, income taxes, revenue recognition, stock-based compensation, goodwill, and deferred income tax asset valuation allowances[21] - Prior period financial information has been reclassified to reflect Virbela as discontinued operations[22] Restricted cash This note details the nature and amounts of cash held in escrow, which is not immediately available for general corporate use - Restricted cash consists of cash held in escrow for real estate buyers, with a corresponding customer deposit liability until funds are released[24] Restricted Cash (in thousands) | Metric (in thousands) | June 30, 2024 | December 31, 2023 | June 30, 2023 | | :-------------------- | :------------ | :---------------- | :------------ | | Cash and cash equivalents | $ 108,395 | $ 125,873 | $ 124,714 | | Restricted cash | 85,126 | 44,020 | 88,560 | | Total | $ 193,521 | $ 169,893 | $ 213,274 | 3. DISCONTINUED OPERATIONS This note provides financial information and details regarding business segments that have been reclassified as discontinued operations - The Virbela business results are presented as discontinued operations, with assets and liabilities reclassified accordingly[26] Total Assets and Liabilities of Discontinued Operations (in thousands) | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | TOTAL ASSETS OF DISCONTINUED OPERATIONS | $ 7,774 | $ 7,533 | | TOTAL LIABILITIES OF DISCONTINUED OPERATIONS | $ 560 | $ 1,809 | Discontinued Operations Financial Performance (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $ 4 | $ 1,811 | $ 653 | $ 3,974 | | Operating (loss) | (1,315) | (1,739) | (3,223) | (3,414) | | Net income (loss) from discontinued operations | $ 617 | ($ 1,933) | ($ 1,192) | ($ 2,472) | 4. EXPECTED CREDIT LOSSES This note explains the methodology and amounts related to the company's estimation of current expected credit losses on receivables - The Company estimates current expected credit losses (CECL) using an aging schedule method, categorizing receivables into agent non-commission based fees, agent short-term advances, and commissions receivable for real estate property settlements[29] Expected Credit Losses by Category (in thousands) | Receivable Category (in thousands) | June 30, 2024 | December 31, 2023 | | :--------------------------------- | :------------ | :---------------- | | Receivables from real estate property settlements | $ 128,814 | $ 81,004 | | Expected credit losses (real estate) | $ 88 | $ - | | Agent non-commission based fees and short-term advances | $ 7,092 | $ 7,268 | | Expected credit losses (agent fees/advances) | $ 1,439 | $ 2,204 | 5. PLANT, PROPERTY AND EQUIPMENT, NET This note presents the carrying amounts of the company's tangible long-lived assets and related depreciation expenses Plant, Property and Equipment, Net (in thousands) | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Computer hardware and software | $ 38,830 | $ 37,444 | | Furniture, fixture, and equipment | 2,221 | 2,254 | | Assets under development | 2,196 | 1,013 | | Property, plant, and equipment, net | $ 11,789 | $ 12,967 | - Depreciation expense for the three months ended June 30, 2024, was $1,891 thousand, down from $2,096 thousand in 2023. For the six months, it was $3,950 thousand, down from $4,163 thousand in 2023[30] 6. GOODWILL AND INTANGIBLE ASSETS This note details the company's goodwill and other intangible assets, including their carrying amounts and amortization expenses - Goodwill increased to $19,673 thousand as of June 30, 2024, from $16,982 thousand at December 31, 2023, primarily due to a $3,150 thousand acquisition of a small real estate business[31] Intangible Assets (in thousands) | Intangible Asset (in thousands) | Gross Amount (June 30, 2024) | Accumulated Amortization (June 30, 2024) | Net Carrying Amount (June 30, 2024) | | :------------------------------ | :--------------------------- | :--------------------------------------- | :---------------------------------- | | Trade name | $ 2,655 | ($ 1,393) | $ 1,262 | | Existing technology | 3,345 | (1,498) | 1,847 | | Intellectual property | 2,836 | (677) | 2,159 | | Total intangible assets | $ 10,788 | ($ 4,823) | $ 5,965 | - Amortization expense for definite-lived intangible assets was $1,073 thousand for Q2 2024 (up from $683 thousand in Q2 2023) and $1,413 thousand for H1 2024 (up from $1,195 thousand in H1 2023)[33] 7. STOCKHOLDERS' EQUITY This note provides a breakdown of changes in stockholders' equity, including common stock, stock compensation, and share repurchases Stockholders' Equity Metrics (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :----------------------------- | | Treasury stock repurchases | ($ 48,234) | ($ 81,266) | | Agent growth incentive stock compensation | 9,495 | 17,403 | | Agent equity stock compensation | 30,588 | 56,456 | | Stock option compensation | 1,970 | 3,960 | | Dividends declared and paid | (7,490) | (15,075) | | Total equity, end of period | $ 220,326 | $ 220,326 | - Under the Agent Equity Program, the Company issued 2,892,648 shares (valued at $30,588 thousand) in Q2 2024 and 5,082,570 shares (valued at $56,456 thousand) in H1 2024 to agents, inclusive of a 5% discount starting March 1, 2024[35][36] - Stock compensation expense for the Agent Growth Incentive Program was $9,329 thousand in Q2 2024 and $18,157 thousand in H1 2024[38] - The Board approved an increase to the stock repurchase program to $1.0 billion in June 2023. Repurchases for Q2 2024 totaled 4,698,949 shares at an average price of $10.98, with approximately $349.1 million remaining authorized[42][43][123] 8. SEGMENT INFORMATION This note presents financial data for the company's reportable segments, including revenues and Adjusted EBITDA performance - The Company operates in three reportable segments: North American Realty, International Realty, and Other Affiliated Services. Virbela operations are now included in Other Affiliated Services[46] Segment Revenues (in thousands) | Segment Revenues (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North American Realty | $ 1,274,621 | $ 1,219,345 | $ 2,201,758 | $ 2,056,459 | | International Realty | 20,316 | 11,991 | 35,912 | 22,748 | | Other Affiliated Services | 1,467 | 1,072 | 3,255 | 2,749 | | Consolidated revenues | $ 1,295,244 | $ 1,231,116 | $ 2,238,298 | $ 2,079,569 | Adjusted Segment EBITDA (in thousands) | Adjusted Segment EBITDA (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North American Realty | $ 38,503 | $ 34,122 | $ 56,312 | $ 55,325 | | International Realty | (2,376) | (3,782) | (5,731) | (7,458) | | Other Affiliated Services | (988) | (1,168) | (1,755) | (1,849) | | Consolidated Adjusted EBITDA | $ 32,814 | $ 26,847 | $ 43,858 | $ 41,470 | 9. EARNINGS PER SHARE This note details the calculation of basic and diluted earnings per share from continuing and discontinued operations Earnings Per Share | EPS Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic, net income (loss) from continuing operations | $ 0.08 | $ 0.07 | ($ 0.01) | $ 0.09 | | Diluted, net income (loss) from continuing operations | $ 0.08 | $ 0.07 | ($ 0.01) | $ 0.09 | | Basic, net income (loss) from discontinued operations | $ 0.00 | ($ 0.01) | ($ 0.01) | ($ 0.02) | | Diluted, net income (loss) from discontinued operations | $ 0.00 | ($ 0.01) | ($ 0.01) | ($ 0.02) | - For Q2 2024, 447,005 shares were excluded from diluted EPS computation as anti-dilutive, and for H1 2024, 3,037,309 shares were excluded[48] 10. INCOME TAXES This note provides information on income tax expense, effective tax rates, and factors causing differences from statutory rates - Income tax expense from continuing operations was $8.1 million for Q2 2024 (effective tax rate 40.9%) and $4.8 million for H1 2024 (effective tax rate 174.3%)[85][92] - The effective tax rate differs from statutory rates primarily due to deductible stock-based compensation shortfalls, research and development credit, and non-deductible executive compensation[48][85][92] 11. FAIR VALUE MEASUREMENT This note describes the fair value hierarchy and measurement of financial instruments, specifically money market funds - The Company holds money market funds valued at fair value on a recurring basis, classified as Level 1 assets[50] Fair Value of Money Market Funds (in thousands) | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Fair value of money market funds | $ 42,455 | $ 46,268 | 12. COMMITMENTS AND CONTINGENCIES This note discloses the company's legal proceedings, litigation contingencies, and other significant financial commitments - The Company is a defendant in multiple antitrust class action lawsuits alleging inflated buyer broker commissions[52] - A provision for loss of $16.0 million was recorded in Q1 2024 for antitrust litigation, representing the lower boundary of a reasonably possible range of loss[52] - Texas Capital Bank reduced SUCCESS Lending, LLC's mortgage warehouse credit line from $25 million to $10 million on May 22, 2024[53] 13. SUBSEQUENT EVENTS This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - On July 26, 2024, the Board declared a quarterly cash dividend of $0.05 per share, payable on August 30, 2024[53] - Flagstar Bank assigned SUCCESS Lending's $25 million revolving warehouse credit line and the related Capital Maintenance Agreement (with a $2.0 million capital commitment liability for the Company) to JPMorgan Chase Bank on July 22, 2024[54] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition, results of operations, and key business metrics, including an overview, market conditions, segment performance, and liquidity Operational Highlights for the Three and Six Months Ended June 30, 2024 This section summarizes key operational achievements and performance metrics for the reported three and six-month periods Operational Highlights | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :----- | :------ | :------ | :------ | :------ | | Global agent Net Promoter Score (aNPS) | 76 | 72 | 75 | 71 | | Agents and brokers on eXp Realty platform | 87,111 | 88,248 | 87,111 | 88,248 | | Transactions | 143,318 | 137,199 | 254,294 | 239,504 | | Transaction volume | $51.9 billion | $48.6 billion | $89.1 billion | $81.8 billion | - Agent count decreased (1)% year-over-year for both the three and six months ended June 30, 2024[57] - Transactions increased 4% year-over-year for Q2 2024 and 6% for H1 2024[57] - Transaction volume increased 7% year-over-year for Q2 2024 and 9% for H1 2024[57] Overview This section provides a general description of the company's business model, strategic focus, and recent operational changes - eXp World Holdings, Inc. operates a cloud-based real estate brokerage with an agent-centric model, offering commission structures, revenue sharing, and agent equity opportunities[58] - The company's strategy focuses on organic growth in North America and international markets by expanding its independent agent and broker network, optimizing operating costs, and strategically deploying capital[60][61] - Virbela business winding down is expected to be completed by Q4 2024, with its technology being replaced by Virbela Frame® for internal use[59] Market Conditions and Industry Trends This section discusses the impact of macroeconomic factors and significant industry developments on the company's operations - Macroeconomic conditions, including rising inflation and mortgage interest rates, have contributed to a slowdown in the U.S. residential real estate market[62] - The NAR settlement in March 2024, which prohibits listing brokers from offering compensation to buyer brokers on the MLS and requires written buyer agreements, will go into effect on August 17, 2024, potentially impacting business practices and agent compensation models[62][118][119] Housing Market Indicators | Housing Market Indicator | June 2024 (Preliminary) | June 2023 | | :----------------------- | :---------------------- | :-------- | | Inventory of existing homes (months of supply) | 4.1 months | 3.1 months | | Average 30-year fixed mortgage rate | 6.86% | 6.71% | | Existing home sales transactions (annual rate) | 3.89 million | 4.11 million | | Nationwide existing home sales average price | $426,900 | $410,100 | - The housing affordability index decreased to 93.1 for May 2024 from 99.6 for May 2023, indicating declining affordability[66] Key Business Metrics This section presents crucial performance indicators used to evaluate the company's operational and financial health Key Business Metrics | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Agent NPS | 76 | 72 | 75 | 71 | | Agent count | 87,111 | 88,248 | 87,111 | 88,248 | | Real estate sales transactions | 120,613 | 119,277 | 212,393 | 206,378 | | Real estate sales volume | $ 51,915,639 | $ 48,570,132 | $ 89,070,389 | $ 81,811,749 | | Other real estate transactions | 22,705 | 17,922 | 41,901 | 33,126 | | Real estate per transaction cost | $ 488 | $ 533 | $ 559 | $ 567 | | Revenues | $ 1,295,244 | $ 1,231,116 | $ 2,238,298 | $ 2,079,569 | | Operating profit (loss) | $ 18,537 | $ 12,836 | $ 363 | $ 12,838 | | Adjusted EBITDA | $ 32,814 | $ 26,847 | $ 43,858 | $ 41,470 | - Agent NPS improved to 76 in Q2 2024 (from 72 in Q2 2023) and 75 in H1 2024 (from 71 in H1 2023) due to continuous investment in agent support and technology[70] - Real estate sales transactions increased 1% in Q2 2024 and 3% in H1 2024, driven by agent productivity despite U.S. market declines[72] - Real estate per transaction cost decreased (8)% in Q2 2024 and (1)% in H1 2024, primarily due to increased transactions and cost containment, partially offset by legal expenses[74] Results of Operations This section analyzes the company's financial performance, comparing revenues, expenses, and profitability across periods Three Months Ended June 30, 2024 compared to the Three Months Ended June 30, 2023 This section provides a detailed comparative analysis of the company's financial results for the second quarter Results of Operations (in thousands) | Metric (in thousands) | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Revenues | $ 1,295,244 | $ 1,231,116 | $ 64,128 | 5% | | Commissions and other agent-related costs | 1,197,668 | 1,135,615 | 62,053 | 5% | | General and administrative expenses | 61,160 | 64,917 | (3,757) | (6)% | | Technology and development expenses | 14,848 | 14,888 | (40) | 0% | | Sales and marketing expenses | 3,031 | 2,860 | 171 | 6% | | Operating income | 18,537 | 12,836 | 5,701 | 44% | | Income tax expense | 8,146 | 2,632 | 5,514 | 209% | | Net income (loss) from continuing operations | 11,766 | 11,355 | 411 | 4% | | Adjusted EBITDA | $ 32,814 | $ 26,847 | $ 5,967 | 22% | - Revenues increased 5% due to increased real estate transactions and higher home sales prices, offsetting U.S. market declines[78] - General and administrative expenses decreased (6)% due to cost containment initiatives, partially offset by increased legal expenses related to antitrust lawsuits[83] Six Months Ended June 30, 2024 compared to the Six Months Ended June 30, 2023 This section provides a detailed comparative analysis of the company's financial results for the first half of the year Results of Operations (in thousands) | Metric (in thousands) | H1 2024 | H1 2023 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Revenues | $ 2,238,298 | $ 2,079,569 | $ 158,729 | 8% | | Commissions and other agent-related costs | 2,062,414 | 1,912,453 | 149,961 | 8% | | General and administrative expenses | 123,742 | 119,543 | 4,199 | 4% | | Technology and development expenses | 29,609 | 28,948 | 661 | 2% | | Sales and marketing expenses | 6,170 | 5,787 | 383 | 7% | | Litigation contingency | 16,000 | - | 16,000 | -% | | Operating income | 363 | 12,838 | (12,475) | (97)% | | Income tax expense | 4,841 | 1,174 | 3,667 | 312% | | Net income (loss) from continuing operations | (2,064) | 13,347 | (15,411) | (115)% | | Adjusted EBITDA | $ 43,858 | $ 41,470 | $ 2,388 | 6% | - Operating income decreased (97)% due to the $16.0 million litigation contingency accrual and increased legal and employee-related expenses, partially offset by revenue growth[76][86] - Net income (loss) from continuing operations decreased (115)% to ($2,064) thousand[86] Business Segment Disclosures This section provides a detailed breakdown of financial performance by the company's distinct operating segments Segment Performance Q2 (in thousands) | Segment (in thousands) | Q2 2024 Revenues | Q2 2023 Revenues | Q2 2024 Adj. EBITDA | Q2 2023 Adj. EBITDA | | :--------------------- | :--------------- | :--------------- | :------------------ | :------------------ | | North American Realty | $ 1,274,621 | $ 1,219,345 | $ 38,503 | $ 34,122 | | International Realty | 20,316 | 11,991 | (2,376) | (3,782) | | Other Affiliated Services | 1,467 | 1,072 | (988) | (1,168) | - North American Realty revenues increased 5% in Q2 2024, with Adjusted EBITDA up 13% due to improved efficiencies[94] - International Realty revenues surged 69% in Q2 2024, and Adjusted EBITDA improved 37% due to increased agent production and efficiencies[95] Segment Performance H1 (in thousands) | Segment (in thousands) | H1 2024 Revenues | H1 2023 Revenues | H1 2024 Adj. EBITDA | H1 2023 Adj. EBITDA | | :--------------------- | :--------------- | :--------------- | :------------------ | :------------------ | | North American Realty | $ 2,201,758 | $ 2,056,459 | $ 56,312 | $ 55,325 | | International Realty | 35,912 | 22,748 | (5,731) | (7,458) | | Other Affiliated Services | 3,255 | 2,749 | (1,755) | (1,849) | - North American Realty revenues increased 7% in H1 2024, with Adjusted EBITDA up 2%[97] - International Realty revenues increased 58% in H1 2024, and Adjusted EBITDA improved 23%[98] Non-U.S. GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, such as Adjusted EBITDA, to their most comparable GAAP equivalents - Adjusted EBITDA is a non-U.S. GAAP measure used to evaluate core operating performance, defined as net income (loss) from continuing operations excluding other income/expense, income tax, depreciation, amortization, impairment, litigation contingency, and stock-based compensation expenses[100][101] Adjusted EBITDA Reconciliation (in thousands) | Metric (in thousands) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 |\ | :-------------------- | :----------- | :----------- | :----------- | :----------- |\ | Net (loss) income from continuing operations | $ 11,766 | $ 11,355 | ($ 2,064) | $ 13,347 |\ | Total other (income) expense, net | (1,375) | (1,151) | (2,414) | (1,683) |\ | Income tax (benefit) expense | 8,146 | 2,632 | 4,841 | 1,174 |\ | Depreciation and amortization | 2,963 | 3,143 | 5,363 | 5,358 |\ | Litigation contingency | - | - | 16,000 | - |\ | Stock compensation expense | 9,329 | 8,488 | 18,157 | 18,148 |\ | Stock option expense | 1,985 | 2,380 | 3,975 | 5,126 |\ | Adjusted EBITDA | $ 32,814 | $ 26,847 | $ 43,858 | $ 41,470 | Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations and fund operations - Primary liquidity sources are cash and cash equivalents and cash flows from operations, which have strengthened due to transaction volume growth and improved cost leverage[103] - Primary uses of cash include commission and revenue share payments, operating expenses, and dividend payments[103] Net Working Capital (in thousands) | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Current assets | $ 335,567 | $ 266,475 | | Current liabilities | (237,105) | (141,640) | | Net working capital | $ 98,462 | $ 124,835 | - Net working capital decreased ($26.4) million, or (21)%, for the six months ended June 30, 2024, primarily due to increased accrued liabilities and accounts receivable[105] - Net cash used in financing activities increased $5.5 million in H1 2024, primarily due to increased stock repurchases and dividend payments[106] Critical Accounting Policies and Estimates This section highlights the accounting policies and estimates that require significant judgment and can materially impact financial results - There were no material changes to the critical accounting policies or estimates as reflected in the 2023 Annual Report[108] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section addresses the company's exposure to market risks, including interest rate and foreign currency fluctuations - No material changes in exposure to market risk (interest rate and foreign currency exchange) since December 31, 2023[109] Item 4. CONTROLS AND PROCEDURES This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024[110] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2024, that materially affected or are reasonably believed to be likely to materially affect internal control over financial reporting[110] PART II – OTHER INFORMATION Item 1. LEGAL PROCEEDINGS This section details ongoing legal actions and their potential financial and operational impact on the company - Legal proceedings are inherently unpredictable and adverse resolutions could have a material adverse effect on the Company's business, results of operations, cash flows, or financial condition[111] - Litigation, including class action lawsuits and regulatory proceedings, can be costly to defend and settle, potentially resulting in judgments, penalties, or fines in excess of accrued amounts[111] Item 1A. RISK FACTORS This section outlines significant risks that could materially affect the company's business, financial condition, and operating results Risks Related to Legal and Regulatory Matters This section highlights risks stemming from litigation, regulatory changes, and industry settlements impacting business practices - Adverse outcomes in industry litigation (e.g., NAR Class Action) and regulatory actions could significantly impact the Company's financial condition and business practices[114][115] - The NAR settlement, effective August 17, 2024, prohibits offers of compensation to buyer brokers on the MLS and requires written buyer agreements, potentially leading to changes in agent compensation models and buyer engagement[118][119] - The resumption of the DOJ's antitrust investigation into NAR could further impact the real estate industry and the Company's operations[120] Risks Related to Our Stock This section addresses potential risks associated with the company's common stock, including dilution from equity issuances - Stockholders may experience dilution due to the Company's authorization to issue up to 900,000,000 shares of common stock and its equity incentive plans (2015 and 2024 Equity Incentive Plans)[121][122] - As of June 30, 2024, 20,760,284 shares were available for future issuance under the 2015 Equity Incentive Plan, and 150,000,000 shares were authorized and available under the 2024 Equity Incentive Plan[122] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports on common stock repurchases under the publicly announced program and the remaining authorization Common Stock Repurchases | Period | Total shares purchased | Average price paid per share | | :----------------- | :--------------------- | :--------------------------- | | 4/1/2024-4/30/2024 | 2,002,515 | $ 10.12 | | 5/1/2024-5/31/2024 | 1,327,188 | 11.91 | | 6/1/2024-6/30/2024 | 1,369,246 | 10.90 | | Total | 4,698,949 | $ 10.98 | - As of June 30, 2024, approximately $349,080,915 remained available for repurchase under the $1.0 billion stock repurchase program[123][124] Item 3. DEFAULTS UPON SENIOR SECURITIES This section confirms the absence of any defaults on senior securities during the reporting period - No defaults upon senior securities[125] Item 4. MINE SAFETY DISCLOSURES This section indicates that the disclosure requirements for mine safety are not applicable to the company's operations - Not applicable[125] Item 5. OTHER INFORMATION This section reports that no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024[126] Item 6. EXHIBITS This section lists all supplementary documents and certifications filed as exhibits to the Form 10-Q report - Exhibits include Restated Certificate of Incorporation, Restated Bylaws, Eighth Amendment to eXp World Holdings, Inc. Stock Repurchase Plan, eXp World Holdings, Inc. 2024 Equity Incentive Plan, Certifications of CEO and CFO, and Inline XBRL documents[128]