eXp(EXPI) - 2024 Q3 - Quarterly Report

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This section highlights that forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially - Forward-looking statements in this report are not historical facts but represent current expectations and assumptions, subject to known and unknown risks and uncertainties that may cause actual results to differ materially[4] - Key risk factors include macroeconomic conditions (residential real estate market, monetary policies, consumer attitudes, home inventory), ability to attract/retain personnel, changes in tax laws, intellectual property protection, security breaches, demand for new products, agent growth rate, litigation outcomes, and inflation/interest rates[5] PART I – FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the periods ended September 30, 2024, including balance sheets, income statements, equity statements, and cash flows Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity as of September 30, 2024, and December 31, 2023 Condensed Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total Current Assets | $309,585 | $266,475 | $43,110 | 16.18% | | Total Assets | $432,629 | $385,668 | $46,961 | 12.18% | | Total Current Liabilities | $221,532 | $141,640 | $79,892 | 56.41% | | Total Liabilities | $221,532 | $141,660 | $79,872 | 56.39% | | Total Equity | $211,097 | $244,008 | ($32,911) | (13.49)% | - Total current liabilities significantly increased by 56.41% from December 31, 2023, to September 30, 2024, primarily due to a $34 million litigation contingency accrual[8] Condensed Consolidated Statements of Comprehensive Income (Loss) This section details the company's revenues, expenses, and net income or loss for the three and nine months ended September 30, 2024 and 2023 Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (Amounts in thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $1,231,187 | $1,212,793 | $18,394 | 1.52% | $3,469,485 | $3,292,362 | $177,123 | 5.38% | | Total Operating Expenses | $1,239,521 | $1,209,088 | $30,433 | 2.52% | $3,477,456 | $3,275,818 | $201,638 | 6.16% | | Operating (Loss) Income | ($8,334) | $3,705 | ($12,039) | (324.93)% | ($7,971) | $16,544 | ($24,515) | (148.18)% | | Net (Loss) Income | ($8,506) | $1,349 | ($9,855) | (730.54)% | ($11,762) | $12,224 | ($23,986) | (196.22)% | | Basic EPS (Net Loss) Income | ($0.06) | $0.01 | ($0.07) | (700.00)% | ($0.08) | $0.08 | ($0.16) | (200.00)% | | Diluted EPS (Net Loss) Income | ($0.06) | $0.01 | ($0.07) | (700.00)% | ($0.08) | $0.08 | ($0.16) | (200.00)% | - The company reported a significant shift from net income to net loss for both the three and nine months ended September 30, 2024, primarily driven by a litigation contingency accrual of $18 million for the quarter and $34 million for the nine months[10] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including treasury stock and accumulated deficit, for the nine months ended September 30, 2024 and 2023 Condensed Consolidated Statements of Stockholders' Equity Highlights (Amounts in thousands) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Treasury stock, end of period | ($661,840) | ($519,635) | ($142,205) | 27.37% | | Additional paid-in capital, end of period | $924,570 | $757,006 | $167,564 | 22.14% | | Accumulated (deficit) earnings, end of period | ($51,095) | $11,968 | ($63,063) | (526.96)% | | Total equity, end of period | $211,097 | $250,926 | ($39,829) | (15.87)% | - Total equity decreased by 15.87% year-over-year, primarily due to a significant increase in accumulated deficit from net losses and higher treasury stock repurchases[13] Condensed Consolidated Statements of Cash Flows This section summarizes cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023 Condensed Consolidated Statements of Cash Flows Highlights (Amounts in thousands) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $177,800 | $176,516 | $1,284 | 0.73% | | Net cash used in investing activities | ($12,959) | ($11,318) | ($1,641) | 14.50% | | Net cash used in financing activities | ($138,370) | ($150,843) | $12,473 | (8.27)% | | Net change in cash, cash equivalents and restricted cash | $25,847 | $14,758 | $11,089 | 75.14% | - Net cash provided by operating activities increased slightly by $1.3 million, driven by improved operating results and favorable working capital changes[124] - Net cash used in financing activities decreased by $12.5 million, primarily due to lower stock repurchases[124] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION This note describes the company's business operations and the accounting 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, with a strategic focus on strengthening its agent value proposition[16] - The Virbela business was reclassified as discontinued operations in Q1 2024 due to a decline in demand for its application-based platform and a shift to the web-accessible Virbela Frame® technology, which will be primarily utilized internally[16] Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting policies applied in the preparation of the condensed consolidated financial statements - The company consolidates entities where it is the primary beneficiary of a variable interest entity (VIE) or exercises control, using the equity method for joint ventures and the cost method for minor investments[20][21][22] - Restricted cash, primarily held in escrow for real estate buyers, increased from $44 million at December 31, 2023, to $65.3 million at September 30, 2024[25][27] Note 3. DISCONTINUED OPERATIONS This note details the reclassification and financial impact of the Virbela business as discontinued operations - The Virbela business is presented as discontinued operations, with its assets and liabilities reclassified on the condensed consolidated balance sheets[28] Virbela Discontinued Operations Income Statement (Amounts in thousands) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $0 | $1,720 | ($1,720) | (100.00)% | $653 | $5,694 | ($5,041) | (88.53)% | | Total Operating Expenses | $1,093 | $3,562 | ($2,469) | (69.31)% | $4,957 | $10,951 | ($5,994) | (54.73)% | | Net Loss from Discontinued Operations | ($2,025) | ($916) | ($1,109) | 121.07% | ($3,217) | ($3,390) | $173 | (5.10)% | - Revenues from discontinued operations dropped to zero in Q3 2024, reflecting the winding down process, leading to a higher net loss for the quarter compared to the prior year[30] Note 4. EXPECTED CREDIT LOSSES This note explains the methodology and amounts related to the company's expected credit losses on various receivable categories - The company estimates current expected credit losses (CECL) using an aging schedule method, categorizing receivables into agent non-commission based fees, agent short-term advances, and commissions receivable[31] Expected Credit Losses on Receivables (Amounts in thousands) | Receivable Category | Sep 30, 2024 | Dec 31, 2023 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Receivables from real estate property settlements (expected credit losses) | $30 | $0 | $30 | N/A | | Agent non-commission based fees and short-term advances (expected credit losses) | $1,304 | $2,204 | ($900) | (40.83)% | Note 5. PLANT, PROPERTY AND EQUIPMENT, NET This note provides a breakdown of the company's plant, property, and equipment, net of accumulated depreciation Plant, Property and Equipment, Net (Amounts in thousands) | Category | Sep 30, 2024 | Dec 31, 2023 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total depreciable property and equipment | $43,960 | $39,698 | $4,262 | 10.74% | | Less: accumulated depreciation | ($33,398) | ($27,733) | ($5,665) | 20.43% | | Depreciable property, net | $10,562 | $11,965 | ($1,403) | (11.73)% | | Property, plant, and equipment, net | $11,488 | $12,967 | ($1,479) | (11.41)% | - Depreciation expense for the nine months ended September 30, 2024, was $5.887 million, a decrease from $6.299 million in the prior year[32] Note 6. GOODWILL AND INTANGIBLE ASSETS This note details the company's goodwill and intangible assets, including changes from acquisitions and amortization expenses Goodwill and Intangible Assets (Amounts in thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Goodwill | $19,866 | $16,982 | $2,884 | 16.98% | | Total intangible assets (Gross Amount) | $10,894 | $10,734 | $160 | 1.49% | | Total intangible assets (Net Carrying Amount) | $6,322 | $7,012 | ($690) | (9.84)% | - Goodwill increased by $2.884 million, including $3.150 million from the acquisition of a small real estate business in the second quarter of 2024[33] - Amortization expense for definite-lived intangible assets for the nine months ended September 30, 2024, was $1.855 million, consistent with $1.849 million in the prior year[36] Note 7. STOCKHOLDERS' EQUITY This note provides information on common stock issuances, agent equity compensation, and the company's stock repurchase program Common Stock Issued (Shares) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change (Shares) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------- | :--------- | | Shares issued for stock options exercised | 320,481 | 802,939 | (482,458) | (60.09)% | | Agent growth incentive stock compensation | 1,341,303 | 1,774,438 | (433,135) | (24.41)% | | Agent equity stock compensation | 7,290,796 | 6,649,976 | 640,820 | 9.64% | - The company issued 7,290,796 shares of common stock for agent equity compensation in the nine months ended September 30, 2024, an increase of 9.64% year-over-year[37][40] - The stock repurchase program was increased to $1.0 billion in June 2023, with 10,070,231 shares repurchased for the nine months ended September 30, 2024[47][49] Note 8. SEGMENT INFORMATION This note presents financial data for the company's reportable segments: North American Realty, International Realty, and Other Affiliated Services - The company's three reportable segments are North American Realty, International Realty, and Other Affiliated Services, with Virbela Frame® technology now included in Other Affiliated Services[52] Segment Revenues (Amounts in thousands) | Segment | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | North American Realty | $1,206,660 | $1,198,207 | $8,453 | 0.71% | $3,408,418 | $3,254,666 | $153,752 | 4.72% | | International Realty | $24,230 | $14,896 | $9,334 | 62.66% | $60,142 | $37,644 | $22,498 | 59.76% | | Other Affiliated Services | $1,426 | $980 | $446 | 45.51% | $4,681 | $3,729 | $952 | 25.53% | Segment Adjusted EBITDA (Amounts in thousands) | Segment | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | North American Realty | $28,899 | $27,169 | $1,730 | 6.37% | $85,208 | $82,495 | $2,713 | 3.29% | | International Realty | ($1,670) | ($2,647) | $977 | (36.91)% | ($7,401) | ($10,105) | $2,704 | (26.76)% | | Other Affiliated Services | ($1,282) | ($918) | ($364) | 39.65% | ($3,037) | ($2,767) | ($270) | 9.76% | - International Realty revenues increased by 63% for Q3 and 60% for 9M, driven by improved agent production in previously launched markets, leading to a 37% and 27% improvement in Adjusted EBITDA, respectively[114][116] Note 9. EARNINGS PER SHARE This note details the calculation of basic and diluted earnings per share from continuing operations Earnings Per Share (EPS) (Per Share Data) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Basic, net (loss) income from continuing operations | ($0.04) | $0.01 | ($0.05) | (500.00)% | ($0.06) | $0.10 | ($0.16) | (160.00)% | | Diluted, net (loss) income from continuing operations | ($0.04) | $0.01 | ($0.05) | (500.00)% | ($0.06) | $0.10 | ($0.16) | (160.00)% | - For the three and nine months ended September 30, 2024, 4,153,812 and 3,309,505 shares, respectively, were excluded from diluted EPS computation as their effect would have been anti-dilutive[56] Note 10. INCOME TAXES This note provides information on the company's income tax benefit or expense and effective tax rates Income Tax (Benefit) Expense (Amounts in thousands) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Income tax (benefit) expense | ($1,333) | $1,788 | ($3,121) | (174.55)% | $3,508 | $2,962 | $546 | 18.43% | - The effective tax rate for continuing operations for the nine months ended September 30, 2024, was negative (69.6%), compared to positive 15.9% in the prior year, influenced by stock-based compensation, R&D tax credit, and non-deductible executive compensation[56][111] Note 11. FAIR VALUE MEASUREMENT This note explains the fair value hierarchy and provides fair value measurements for financial assets - The fair value hierarchy categorizes inputs into Level 1 (quoted market prices), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[59] Fair Value of Money Market Funds (Amounts in thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Money market funds (Level 1 assets) | $42,967 | $46,268 | ($3,301) | (7.13)% | Note 12. COMMITMENTS AND CONTINGENCIES This note discloses significant commitments and contingencies, including litigation settlements and capital maintenance agreements - The company entered a Settlement Term Sheet on October 1, 2024, to resolve U.S. antitrust litigation (Hooper Action and Nationwide Claims) for $34 million, with 50% payable within thirty business days after preliminary court approval and the final 50% on or before the one-year anniversary of the initial payment[61] - An $18 million additional litigation contingency accrual was recorded in Q3 2024, bringing the total accrual to $34 million for the U.S. antitrust settlement[61] - Derivative litigation alleges fiduciary duty breaches by current and former directors/officers related to alleged sexual misconduct and improper compensation arrangements[63] - Capital maintenance agreements for SUCCESS Lending were modified, reducing a warehouse credit line from $25 million to $10 million and assigning another $25 million line to JPMorgan, with the company's capital commitment limited to $2 million[64] Note 13. SUBSEQUENT EVENTS This note reports significant events that occurred after the balance sheet date, such as dividend declarations and settlement agreements - A quarterly cash dividend of $0.05 per share was declared on November 4, 2024, expected to be payable on December 2, 2024[66] - The company formally entered into the Settlement Term Sheet for the U.S. antitrust litigation on October 1, 2024, as discussed in Note 12[67] 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 and results of operations for the three and nine months ended September 30, 2024, discussing operational highlights, market trends, key business metrics, segment performance, non-GAAP measures, liquidity, and critical accounting policies Operational Highlights This section presents key operational metrics and performance indicators for the company's business activities Operational Highlights (Q3 2024 vs. Q3 2023) | Metric | Q3 2024 | Q3 2023 | Change | Change (%) | | :----------------------------------- | :------ | :------ | :----- | :--------- | | Global agent Net Promoter Score (aNPS) | 76 | N/A | N/A | N/A | | Agents and brokers on eXp Realty platform | 85,249 | 89,156 | (3,907) | (4)% | | Transaction volume | $50.8 billion | N/A | N/A | 5% | Operational Highlights (9 Months Ended Sep 30, 2024 vs. 2023) | Metric | 9M 2024 | 9M 2023 | Change | Change (%) | | :----------------------------------- | :------ | :------ | :----- | :--------- | | Global aNPS | 75 | N/A | N/A | N/A | | Transactions | 395,074 | N/A | N/A | 4% | | Transaction volume | $139.9 billion | N/A | N/A | 7% | 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[74][76] - The Virbela business was discontinued in Q1 2024, with its technology being replaced by Virbela Frame® for internal use, and its operations reclassified as discontinued[78] - The company's strategy emphasizes organic growth in North America and international markets, increasing its independent agent and broker network through a cloud-based platform and customer-focused efficiencies[79] Market Conditions and Industry Trends This section discusses the macroeconomic environment and specific industry trends impacting the company's real estate business - Macroeconomic conditions, including rising inflation and higher mortgage interest rates, are contributing to a slowdown in the U.S. residential real estate market[80] - The company entered a settlement for U.S. antitrust litigation for $34.0 million and is proactively empowering agents with training and resources to adapt to NAR settlement changes regarding cooperative compensation and buyer agreements[81] U.S. Housing Market Trends | Metric | Sep 2024 (Preliminary) | Sep 2023 | Change | Change (%) | | :----------------------------------- | :--------------------- | :--------------------- | :----- | :--------- | | Existing homes for sale (million) | 1.39 | 1.13 | 0.26 | 23.01% | | Months of inventory | 4.3 | 3.4 | 0.9 | 26.47% | | Average 30-year fixed mortgage rate | 6.08% | 7.3% | (1.22)% | (16.71)% | | Existing home sale transactions (annual rate, million) | 3.84 | 3.98 | (0.14) | (3.52)% | | Nationwide existing home sales average price | $404,500 | $392,700 | $11,800 | 3.01% | Key Business Metrics This section presents a summary of critical financial and operational metrics used to evaluate the company's performance Key Business Metrics (Amounts in thousands, except transactions and agent count) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Agent NPS | 76 | 74 | 2.70% | 75 | 72 | 4.17% | | Agent count | 85,249 | 89,156 | (4.38)% | 85,249 | 89,156 | (4.38)% | | Real estate sales transactions | 117,830 | 118,626 | (0.67)% | 330,223 | 325,004 | 1.61% | | Real estate sales volume | $50,798,695 | $48,526,164 | 4.68% | $139,869,084 | $130,337,913 | 7.31% | | Revenues | $1,231,187 | $1,212,793 | 1.52% | $3,469,485 | $3,292,362 | 5.38% | | Operating (loss) profit | ($8,334) | $3,705 | (324.93)% | ($7,971) | $16,544 | (148.18)% | | Adjusted EBITDA | $23,942 | $20,792 | 15.15% | $67,797 | $62,263 | 8.89% | - Operating profit shifted to a loss for both the three and nine months ended September 30, 2024, primarily due to the $18.0 million (Q3) and $34.0 million (9M) litigation contingency accrual[92] - Adjusted EBITDA increased by 15% for Q3 and 9% for the nine months, reflecting increased revenues (net of agent commissions) and lower operating costs, despite legal expenses[93] Results of Operations This section analyzes the company's revenues, expenses, and profitability for the reported periods Statement of Operations Data (3 Months Ended Sep 30, 2024 vs. 2023) (Amounts in thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Revenues | $1,231,187 | $1,212,793 | $18,394 | 2% | | Commissions and other agent-related costs | $1,143,535 | $1,130,070 | $13,465 | 1% | | General and administrative expenses | $61,390 | $60,363 | $1,027 | 2% | | Technology and development expenses | $13,804 | $15,480 | ($1,676) | (11)% | | Sales and marketing expenses | $2,792 | $3,175 | ($383) | (12)% | | Litigation contingency | $18,000 | $0 | $18,000 | N/A | | Operating (loss) income | ($8,334) | $3,705 | ($12,039) | (325)% | Statement of Operations Data (9 Months Ended Sep 30, 2024 vs. 2023) (Amounts in thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Revenues | $3,469,485 | $3,292,362 | $177,123 | 5% | | Commissions and other agent-related costs | $3,205,949 | $3,042,523 | $163,426 | 5% | | General and administrative expenses | $185,132 | $179,905 | $5,227 | 3% | | Technology and development expenses | $43,413 | $44,428 | ($1,015) | (2)% | | Sales and marketing expenses | $8,962 | $8,962 | $0 | 0% | | Litigation contingency | $34,000 | $0 | $34,000 | N/A | | Operating (loss) income | ($7,971) | $16,544 | ($24,515) | (148)% | - Technology and development expenses decreased by 11% for Q3 and 2% for 9M, primarily due to higher capitalized technology investments[101][111] Business Segment Disclosures This section provides a detailed breakdown of financial performance by the company's operating segments Segment Revenues (3 Months Ended Sep 30, 2024 vs. 2023) (Amounts in thousands) | Segment | 2024 | 2023 | Change ($) | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | North American Realty | $1,206,660 | $1,198,207 | $8,453 | 1% | | International Realty | $24,230 | $14,896 | $9,334 | 63% | | Other Affiliated Services | $1,426 | $980 | $446 | 46% | Segment Adjusted EBITDA (3 Months Ended Sep 30, 2024 vs. 2023) (Amounts in thousands) | Segment | 2024 | 2023 | Change ($) | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | North American Realty | $28,899 | $27,169 | $1,730 | 6% | | International Realty | ($1,670) | ($2,647) | $977 | 37% | | Other Affiliated Services | ($1,282) | ($918) | ($364) | (40)% | - International Realty revenues increased by 63% for Q3 and 60% for 9M, driven by improved agent production in previously launched markets, leading to a 37% and 27% improvement in Adjusted EBITDA, respectively[114][116] Non-U.S. GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, such as Adjusted EBITDA, to their most directly comparable GAAP measures - Adjusted EBITDA is defined as net (loss) income from continuing operations, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, litigation contingency expenses, stock-based compensation expense, and stock option expense[118] Adjusted EBITDA Reconciliation (Amounts in thousands) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net (loss) income from continuing operations | ($6,481) | $2,265 | ($8,746) | (386.14)% | ($8,545) | $15,614 | ($24,159) | (154.73)% | | Litigation contingency | $18,000 | $0 | $18,000 | N/A | $34,000 | $0 | $34,000 | N/A | | Stock compensation expense | $9,910 | $11,764 | ($1,854) | (15.76)% | $28,067 | $29,912 | ($1,845) | (6.17)% | | Adjusted EBITDA | $23,942 | $20,792 | $3,150 | 15.15% | $67,797 | $62,263 | $5,534 | 8.89% | Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash flows to meet its financial obligations and fund operations - The company's primary liquidity sources are cash and cash equivalents on hand and cash flows generated from operations, which are expected to be sufficient to satisfy operating requirements for at least the next twelve months[121][122] - The $34 million litigation contingency accrual is a known material cash requirement, which the company intends to pay using available cash[121] Net Working Capital (Amounts in thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | :--------- | | Current assets | $309,585 | $266,475 | $43,110 | 16.18% | | Current liabilities | ($221,532) | ($141,640) | ($79,892) | 56.41% | | Net working capital | $88,053 | $124,835 | ($36,782) | (29.46)% | - Net cash provided by operating activities increased by $1.3 million for the nine months ended September 30, 2024, driven by improved operating results, increased customer deposits, and favorable working capital changes[124] Critical Accounting Policies and Estimates This section highlights the accounting policies and estimates that require significant judgment and are crucial to understanding the financial statements - There were no material changes to the company's critical accounting policies or estimates as reflected in its 2023 Annual Report[126] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's exposure to market risks, including interest rate, foreign currency, and commodity price risks - No material changes in the company's exposures to market risk have occurred since December 31, 2023[127] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting - The company's disclosure controls and procedures were concluded to be effective at the reasonable assurance level as of September 30, 2024[128] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2024[129] PART II – OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity security sales, and other relevant information Item 1. Legal Proceedings This section refers to notes detailing ongoing legal actions and their potential financial impact on the company - Legal proceedings are inherently unpredictable and subject to substantial uncertainties, with adverse resolutions potentially leading to judgments, penalties, or settlements materially in excess of accrued amounts, which could have a material adverse effect on the company's financial condition, results of operations, or cash flows[130] Item 1A. Risk Factors This section updates the company's risk factors, focusing on legal, regulatory, and industry-specific challenges that could affect its business - Adverse outcomes in legal and regulatory actions against other companies and agents in the residential and commercial real estate industry, particularly antitrust and anticompetition claims, may adversely impact the company's financial condition[132][133] - The company's $34.0 million settlement for U.S. antitrust litigation and the NAR settlement terms (prohibiting mandatory buyer broker compensation on MLS, requiring written buyer agreements) may materially impact industry business practices and the company's financial condition and results of operations[134][138][139] - The resumption of the DOJ's antitrust investigation into NAR adds further uncertainty to the real estate industry, potentially leading to additional rule changes that could adversely affect the company[140] - Future issuance of additional shares of common stock under equity incentive plans (including the new 2024 Equity Incentive Plan) could lead to dilution for current stockholders[141][142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the company's common stock repurchases and the remaining authorization under its program Issuer Purchases of Equity Securities (Q3 2024) | Period | Total shares purchased | Average price paid per share | Approximate dollar value remaining under program | | :----------------- | :--------------------- | :--------------------------- | :----------------------------------------------- | | 7/1/2024-7/31/2024 | 984,278 | $12.87 | $337,380,927 | | 8/1/2024-8/31/2024 | 941,746 | $12.40 | $325,683,880 | | 9/1/2024-9/30/2024 | 868,016 | $13.46 | $313,984,244 | | Total | 2,794,040 | $12.91 | | - The Board approved an increase to the stock repurchase program to $1.0 billion in June 2023[144] Item 3. Defaults Upon Senior Securities This section confirms whether the company has experienced any defaults on its senior securities - No defaults upon senior securities were reported[145] Item 4. Mine Safety Disclosures This section states the applicability of mine safety disclosures to the company's operations - This disclosure item is not applicable to the company[146] Item 5. Other Information This section provides additional disclosures not covered elsewhere, such as insider trading arrangements - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the three months ended September 30, 2024[147] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including certifications and XBRL documents - The report includes certifications from the Chief Executive Officer and Chief Accounting Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[149]