eXp(EXPI) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the period ended June 30, 2025, reporting Q2 revenues of $1.31 billion (1% increase) but a net loss of $2.3 million (vs. $12.4 million net income in Q2 2024), driven by increased operating expenses, with total assets growing to $481.2 million and cash from operations decreasing to $75.9 million due to a $17 million litigation payment Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $481.2 million from $390.7 million at year-end 2024, primarily driven by accounts receivable and restricted cash, while total liabilities grew to $262.9 million from $185.9 million, and total equity saw a modest increase to $218.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $344,957 | $267,972 | | Total Assets | $481,246 | $390,722 | | Total Current Liabilities | $262,880 | $185,853 | | Total Liabilities | $262,880 | $185,853 | | Total Equity | $218,366 | $204,869 | Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a net loss of $2.3 million for Q2 2025, a significant downturn from $12.4 million net income in Q2 2024, with the six-month net loss widening to $13.3 million from $3.3 million year-over-year, driven by higher operating expenses outpacing slight 1% revenue growth Statement of Comprehensive Income (Loss) Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,308,877 | $1,295,244 | $2,263,783 | $2,238,298 | | Operating (Loss) Income | ($2,376) | $18,537 | ($12,752) | $363 | | Net (Loss) Income | ($2,291) | $12,383 | ($13,315) | ($3,256) | | Diluted EPS | ($0.01) | $0.08 | ($0.09) | ($0.02) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities significantly decreased to $75.9 million from $131.8 million in the prior year, primarily due to a $17.0 million litigation payment, lower net income, and working capital changes, while cash used in financing activities decreased to $44.8 million from $96.5 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $75,926 | $131,801 | | Net Cash Used in Investing Activities | ($17,207) | ($10,369) | | Net Cash Used in Financing Activities | ($44,766) | ($96,458) | | Net Change in Cash | $16,346 | $23,628 | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, segment structure (North American Realty, International Realty, Other Affiliated Services), agent programs, and significant legal matters, including a $34.0 million antitrust litigation settlement with a $17.0 million installment paid, and a $0.05 per share quarterly cash dividend declared - The company operates and manages three reportable segments: North American Realty, International Realty, and Other Affiliated Services[30] - The company entered into a settlement for antitrust litigation for a total of $34.0 million. The first installment of $17.0 million was paid during the quarter ended June 30, 2025, with the remaining $17.0 million recorded as a litigation contingency accrual[77] - On July 24, 2025, the Board declared a quarterly cash dividend of $0.05 per share, payable on August 29, 2025[82] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q2 2025 performance, noting 1% revenue growth despite a challenging real estate market, but profitability declined with an operating loss of $2.4 million and Adjusted EBITDA falling to $11.2 million from $32.8 million due to higher operating costs and agent-related expenses - The company's strategy is to grow organically by increasing its independent agent and broker network, supported by its cloud-based technology platform and Revenue Share Plan[89][90] - Macroeconomic conditions, including high inflation and mortgage rates, have contributed to a slowdown in the U.S. residential real estate market, impacting the company's business[92][94] Key Business Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Agent Count | 82,704 | 87,111 | -5% | | Real Estate Sales Transactions | 118,612 | 120,613 | -1.7% | | Real Estate Sales Volume | $52.5B | $51.9B | +1% | | Adjusted EBITDA | $11.2M | $32.8M | -66% | Results of Operations For Q2 2025, revenues increased 1% to $1.31 billion due to higher home prices and international growth, but rising costs, including a 2% increase in commissions, 21% in general and administrative expenses (with $6.0 million in severance), and 22% in technology expenses, led to an operating loss of $2.4 million Change in Operating Expenses (Q2 2025 vs. Q2 2024) | Expense Category | Change ($ in thousands) | Change (%) | | :--- | :--- | :--- | | Commissions and other agent-related costs | $18,555 | 2% | | General and administrative expenses | $12,916 | 21% | | Technology and development expenses | $3,245 | 22% | | Sales and marketing expenses | ($170) | -6% | - The company incurred approximately $6.0 million in expenses during the quarter for strategic investments and severance to streamline operations and align costs with revenue trends[121] Business Segment Disclosures In Q2 2025, North American Realty revenues were flat but Adjusted EBITDA fell 49% to $19.8 million, International Realty revenues grew 59% to $32.3 million but its Adjusted EBITDA loss widened to $3.9 million, and Other Affiliated Services saw a 52% revenue decline and a larger Adjusted EBITDA loss Segment Performance (Q2 2025 vs Q2 2024, in thousands) | Segment | Revenue (Q2 2025) | Revenue Change | Adjusted EBITDA (Q2 2025) | Adjusted EBITDA Change | | :--- | :--- | :--- | :--- | :--- | | North American Realty | $1,276,487 | 0% | $19,784 | -49% | | International Realty | $32,293 | +59% | ($3,859) | -62% | | Other Affiliated Services | $708 | -52% | ($2,291) | -132% | Liquidity and Capital Resources The company's primary liquidity sources are cash on hand and operations, with net working capital stable at $82.1 million as of June 30, 2025, though cash from operations decreased to $75.9 million from $131.8 million due to a $17 million litigation payment, but existing cash is deemed sufficient for the next twelve months - Net cash provided by operating activities decreased by $55.9 million in the first six months of 2025 compared to 2024, primarily driven by a $17 million litigation payment, lower operating results, and a decrease in customer deposits[143] - Net cash used in financing activities decreased by $51.7 million, primarily due to lower stock repurchases in the first half of 2025 compared to the same period in 2024[144] - The company believes existing cash balances and expected cash flows from operations will be sufficient to satisfy operating requirements for at least the next twelve months[141] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports that there have been no material changes in its market risk exposures, which primarily relate to interest rates and foreign currency exchange rates, since the end of the fiscal year 2024 - There have been no material changes in the Company's exposures to market risk, including interest rate and foreign currency exchange rate risks, since December 31, 2024[149] Item 4. Controls and Procedures Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were concluded to be effective as of June 30, 2025. Additionally, no material changes to the company's internal control over financial reporting were identified during the quarter - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[151] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[152] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 11 of the financial statements for details on legal matters, primarily the $34 million antitrust litigation settlement that received preliminary court approval, with the company warning that litigation is inherently unpredictable and adverse outcomes could materially impact its financial condition - The company incorporates by reference the information on legal proceedings from Note 11 of the financial statements[153] - The company warns that litigation is unpredictable and could result in judgments, penalties, or settlements with liability materially in excess of accrued amounts, potentially having a material adverse effect on financial condition[154] Item 1A. Risk Factors The company outlines key risk factors, including dependency on the cyclical residential real estate market facing high interest rates, significant industry-wide changes from antitrust lawsuits and the NAR settlement impacting agent compensation, and substantial stock ownership concentration by the CEO and another major stockholder, contributing to potential stock price volatility - Profitability is tied to the residential real estate market, which is subject to macroeconomic conditions like interest rates, inflation, and consumer confidence. The market has been adversely affected by high interest rates and declining affordability in 2024 and 2025[156][157] - Antitrust lawsuits and the NAR settlement are forcing changes to industry business practices, particularly regarding commission sharing, which could significantly impact the brokerage landscape and the company's financial results[160][162][163] - The Chairman/CEO, Glenn Sanford, and a significant stockholder, Penny Sanford, beneficially own approximately 27.19% and 17.35% of the company's stock, respectively, giving them significant influence over corporate matters[167] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 2,850,130 shares of common stock at an average price of $8.74 per share, totaling approximately $24.9 million, with approximately $259.5 million remaining available under its authorized $1.0 billion stock repurchase program as of June 30, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 815,487 | $9.12 | | May 2025 | 926,787 | $8.09 | | June 2025 | 1,107,856 | $9.00 | | Total | 2,850,130 | $8.74 | Item 5. Other Information The company discloses that on June 9, 2025, Randall Miles, the Vice Chair of the Board, adopted a Rule 10b5-1 trading arrangement. The plan allows for the sale of up to 240,000 shares of the company's common stock and was set to run through June 30, 2025 - On June 9, 2025, Randall Miles, Vice Chair of the Board, adopted a Rule 10b5-1 trading plan to sell up to 240,000 shares of common stock through June 30, 2025[175] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q. These include the CEO and CFO certifications required by the Sarbanes-Oxley Act, a description of compensation terms for the CFO, and the Inline XBRL interactive data files - The exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files (101 series)[178]