Good afternoon, and welcome to the eXp World Holdings Second Quarter 2023 Earnings Fireside chat via live stream and the EXPI campus, or Metaverse. My name is Denise Garcia, and I manage Investor Relations for eXp World Holdings. Today, we will begin our earnings fire side chat with prepared remarks from Glenn Sanford, Founder, Chairman and CEO of eXp World Holdings; and CEO, eXp Realty; and Michael Valdes, Chief Growth Officer, eXp Realty, followed by a review of the second quarter 2023 financial highlights presented by Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings. Following our prepared remarks, we'll open the call to a Q&A session with eXp World Holdings covering analysts and questions submitted to eXp. Let's begin with a review of the forward-looking statements. There a number of forward-looking statements made today that should be considered in conjunction with the cautionary statements contained in the company's SEC filings. Forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Forward-looking statements are based on assumptions as of today, August 3, 2023, and the company undertakes no obligation to revise or update them. They say our filings with the SEC, including our most recently filed quarterly report on Form 10-Q for a discussion of specific risks that may affect our business performance and financial conditions. As a reminder, today's call is being recorded, and a replay will also be made available on expworldholdings.com. Now for a few logistics, and we'll get started. For just of you joining in the eXp campus today to see all 3 screens hit the stage zoom button to the right of your chat box to zoom into a specific screen, you can hit the plus icon above that screen. And if you happen to see no slides or a gray slide, hit the refreshed icon on the top right-hand corner of that screen to correct. While an eXp campus, should you need any help or have questions, please enter your comments in the chat box at the bottom on the left and a member of the team will contact you. For Slido, should you wish to ask a question during our presentation, you could enter your questions by scanning the QR code that's presented on the slide of screen. With your phone or go to slido.com and Type event code EXPI. From there, you can submit a question or vote up an existing question by giving a thumbs up. We'd also like that question to be asked. Gran will remain up on the left-hand side of the stage. Now I'll turn the fireside chat over to our speakers before opening the call to questions. Glenn, please go ahead.

Can you hear us? I apologize. That was my bad. Everyone, thank you so much for coming today. Just as a quick review, eXp Realty is our cloud-based brokerage, and we have now 88,000 agents in 24 countries. We also have success enterprises, which we invested in, in 2020, I believe, and which is continuing to build out our coaching and training ecosystem. And Porbella is our Metaverse platform, along with a number of metaverse related entities inside of that company, which supports all of the things that we do as a company. We run with no physical offices, and we've been unable to grow all of our businesses without having to be dependent on bricks-and-mortar since inception, and Babel has been a big part of that story since we started using their platform in 2016. -- to actually look at a little bit of the highlights of the company. I'll take you through some of those before turning the call over to Michael Males to speak about growth in ancillary services and then Jeff Whiteside for a more detailed review of the financials. But the second quarter of 2023, we continued to grow a number of different parts of the business. But most importantly, we always work on the agent value proposition. That is eXp Realty being our largest business and the business that started almost 14 years ago with 24 agents, we've now grown to 88,000 agents worldwide. Our net income and adjusted EBITDA were both positive, and we continue to have solid financial profile with strong cash flow generation and a significant cash balance and 0 debt. And in international, also posted another record quarter, increasing 35% over Q2 last year and 42% year-to-date. Our core North American Realty business continues to be strong and profitable with…

Glen, thank you so much. It's amazing. I'm sitting here and hearing our story of starting this 14 years ago with 24 agents, and it's extraordinary to think about that and where we've gone in such a short period of time. And really, it's my pleasure to talk about our last quarter with ancillary services and growth. So in the terms of ancillary services, our team is really focused on solutions that help our agents increase their value proposition and create amazing customer experiences for their end customers with products like home warranty, utility services, signed and home renovation pre-listing services. We're also in the process of a cost-conscious build-out of our mortgage business, and we're well positioned for growth. We're now licensed and operating in 42 states and success lending has actually tripled funded units and loan volume Q2 of 2023 over the same period last year. And we've launched our first local level EXP-endorsed title partnership with our top producing agents and already have 2 to 3 other JVs in near-term pipeline. So stay tuned for those announcements. And on our growth team, they're really focused on growing across all segments of our business. And we launched a couple of programs in Q2 to further drive the agent value proposition. The first thing that we launched was the BOOST program, which provides financial incentives to qualifying independent teams and brokerages that join EXP Realty. Now the program just launched on June 29. So it's still very early. But current applicants represent over 1,500 potential agents and over $3 billion of potential production. These candidates are moving through our approval process very quickly, and we have over 50 other candidates that are in various stages of our due diligence pipeline. And secondly, we reduced revenue share criteria to accelerate…

All right. Well, thank you very much, Michael, and good afternoon all, and thank you for joining us today for our second quarter 2023 earnings call. Before I take you through the financials, I want to share a couple of data points regarding the current operating environment in residential real estate, continues to be under pressure as we all are aware. In terms of unit sales, Fannie May forecasted that Q2 2023, total home sales declined 17% year-over-year. This forecast compares to our business where we were minus 9% year-over-year decline in our ESP North American Realty business. And then in terms of agent count, so the unit sales and now we talked about agent, as account growth and our reported U.S. residential real estate agent declined in numbers by 1.1% from June year-over-year 2022 to 2023. And for us, North if our U.S. agents actually increased by 4% within our ESP North American Realty Group. ESP total agent count grew at 7% to $88,248, and we're now operating in 24 global markets year-over-year. So just at a higher level at the World Holdings level, highlight though as follows. Net income of $9.4 million, which was an increase of 1% year-over-year compared to the second quarter of 2022, while our revenue declined 13%. Operating income of $11.1 million reflect 8 basis points of year-over-year operating margin expansion. We also generated significant adjusted to $24.7 million, and that was driven primarily by North America Realty, which generated an adjusted EBITDA of $34.1 million, showcasing the resiliency of SB model well in a down market. And adjusted operating cash flow, which excludes customer deposits, was $64.6 million at the end of the second quarter in 2023. Now I'll review our Q2 financial feet segment on the next slide. On this slide, you…

Great. Thanks, Jeff. So let me kick it off with a question for Glenn before we open the call to our covering analysts. First one, regarding NPS, we had just a big increase this quarter. What do you think has the biggest impact on driving NPS?

I think there's been a number of things. One, we've been making an investment in growth since the beginning of Q1. And as I alluded to comments, that's been really helpful. But I think more important is the way our entire brokerage operation and organization has really rolled around supporting agents in real time. And with the rapid growth that we have had for many sequentially we were throwing bodies at the challenge and not being a systematic in how we solve for agent challenges. And I think one of the things that the slowdown of the housing market has given us is also given us the opportunity to retool and to really think particularly on what are the best ways to support agents that are out there listening and selling homes and providing them with the services that they need in real time. And so that, I think, has really worked well. And then also getting this down to the individual brokerage units for individual states, regions, cities, et cetera. I think there's been a really a buy in to understanding what that really means and how they are empowered to actually solve challenges even better than maybe they were before. Some of it has also required us to turn over some of our staff so that we have staff that's both confident, but then also staff that is truly engaged with the agent in a constructive way. And sometimes those 2 people don't live in the same body. So we've had to make different changes from time to time to make sure that we have the right people on the right seats on the bus.

Great. That makes sense. All right. Let's present up. Why don't we take our first question from John Campbell from CVS. John, go ahead.

Good afternoon. Thanks for having us. I want to touch on the lower revenue share criteria. I know you guys are obviously pretty hell bent on enhancing that agent value prop, we can see that pretty directly to the positive effects on the Asian NPS. So I get why you did it. But my question here is what led up to the change or maybe why now? And then Beth, just kind of separately, I'm thinking this is probably not going to have a huge influence on gross margin, but just kind of want to get your latest thoughts on what that impact might be.

Yes. So we're continuing to listen to the agents and one of the -- and they are also -- our agents are in it to win long term with us as a brokerage platform. So we -- some of the feedback came from our agents as to things we could do to make the model a bit better from their perspective as they're out there growing their organizations inside of EXP. Jeff can certainly comment to the financial impact. But one of the things that hasn't changed at all is what we put in place in late 2019, which is our 50% of whole company dollar is paid out in the form of rev share. And so we adjust the rev share payout such that every month, we pay out exactly $0.50 a company dollar in the form of revshare regardless of any of the little inside minor tweaks that we might make. So -- that's kind of the initial commentary. And so John, so there is -- so there won't be any impact on the financials for the change. It's basically -- it's a reallocation of the 50%.

Got you. That makes sense. Okay. And then...

To add one other thing. It also allows our leaders to focus within their own organizations to put more time into making them more productive as well, which will also increase the agent PPP.

Okay. Well, that makes sense. I appreciate that. And then on the AI work that you started, that sounds pretty interesting. It sounds like at least for now, that Luna is going to be geared more towards kind of that internal agent support. And Glenn, I know you guys have spent a lot of time and effort on kind of improving that onboarding process. I imagine that's going to be hugely helpful there. But I'm curious, Glenn, I mean, you do tend to think big, you've got pretty grand aspirations. So I'm curious what you think Luna might be able to become one day, if you ever really envision agents using that directly or if it's sitting one day in between agents and consumers. Yes. I mean there's elements of AI that's sitting between agents and consumers right now who are inside real estate, KB COR. We've got innovation work being done inside of Zucasausing AI. So there will be some AI components for sure between our web experience and the consumer experience, where I think there's a lot of really interesting stuff is with regard to transaction processing and brokerage review of contracts and sort of what does that look like -- in the future, we'll still have the same individuals that are required by law to be in place, but their roles are going to be significantly enhanced by AI. We heard even before we went down this road, but even a couple of years ago, where legal AIs were catching things legally at a higher rate than humans were in terms of just understanding of contracts and what's in there and all that. So AI is going to be hugely beneficial in the transaction process workflow over time. And then I do think that, that, again, simplifies both improve the engine experience. simplifies the brokerage management piece where it's more managed based on actual real estate law and based on what one person's maybe leaning to being conservative or liberal interpretation of what real estate law is. And so I think there's just a lot of good stuff that's going to come out of that from a brokerage throughput perspective. So I think there's a lot of good stuff that's going to come from AI. What it's going to be, I think it's very experimental at this point. We don't have enough data to say that it's when that's going to become a reality. But we are playing with it, and we've got a number of different teams working on various AI initiatives. Sure. Thanks, John. So why don't we take the next question from Matt Cilik from William Blair.

Glenn and Jeff. [indiscernible] I was wondering if you could provide some more color on your recent initiative to attract larger broker teams, thinking of things like the types of teams you're looking to attract, what the offer terms look like and what it could mean for agent growth over the near and long term?

Yes. So we talked a little bit about -- Michael talked about the Boost program. And what we've done with the Boost program is we've actually memorialized a lot of the things that we were already doing when brokerages were looking to convert meaning that oftentimes, they would come in, but we'd have to sort of negotiate to some numbers. And sometimes they wouldn't even start the discussion because they didn't know if there was any flexibility around our model to really invite them in. So we've done a couple of things. One is, in order to get to the numbers stage, we actually have a cultural questionnaire that a broker owner needs to actually go through and answer. And it really has to do with the fact that we want them -- we know that there is a continuity of leadership need necessary for transitions from agents being underneath one broker or independent brokerage over to EXP. And that is that the leader they bought into needs to be bought into what we're doing here, and they need to be part of the growth story of EXP going forward. And if they're not committed to being part of the growth story of EXP, they're not culturally aligned. And we've done -- we have enough experience around this to have seen when people are culturally aligned and those that are culturally not and they're just dropping their agents off and hoping they make money off of revshare, et cetera. And so the whole idea is to really attract the right type of brokerage to EXP that wants to actually help grow EXP that understands our mission, vision and values around our agents and then are wanting to actually take a go on the journey with us growing EXP. And so…

So to answer that question, Tom. So there's 2 things that happened from Q1 to Q2. The biggest drivers of the G&A going up was the the investors event that we had to our shareholders' event. So that was it was an increase in cost. And then the second one is the merit increases that hit in the second quarter. So if you look at what we have -- we did $85.4 million in SG&A. And that's around -- that's kind of around what we're seeing for the rest of the year. And again, we say this every time we talk about SG&A. If we have an opportunity to invest the cash to grow, we're going to do that. But that 85.4%is kind of in the range of what we're seeing... Great. All right. And I also had a follow-up question to that, which were -- what are the biggest sources of incremental operating expenses, investments since Q1? Are you mostly invested in the core U.S. brokerage? Is it international mortgage?

Yes. So biggest investment that we have going right now is international kind of all the investments we have. So that would be above and beyond what we're doing in the core business. So look, we kind of look at the core business that we're going to fund that, and we're going to make sure we have the right NPS and the right support network in place to do that, both from a broker-dop standpoint, technology standpoint, but are above and beyond investment. The largest one is still going to international time. And that's kind of -- that hasn't changed from the last, I'd say, 4 quarters. All right. Great. Also, Alliance as a reminder, if you want to ask a question via Slido. There is the code up on the left-hand screen if you want to download that or go to slido.com, ESP and submit a question. We do have another question from one of our newest covering analyst, Soham Bosley at BTIG. He e-mailed in his questions as well, and he asked a question on agent productivity. He was asking about this metric that he continues to decline in line with some market transactions. So what steps are you taking to improve the agent productivity metric going forward? Yes. Well, we're definitely investing in technology and tools. The success side of the house, we've now partnered with with a number of top coaches and trainers, bringing them into our ecosystem. We've been doing touched on the master mines that we've been doing with our agents to help them be more productive. Our regional rallies are around production lotmost of our events are around production. And then we've got literally 80 hours of available training in world and online every single week for agents in various different parts of…

Yes. Well, I think -- so 1/3 of our agents historically have joined our brand-new agents and about 80% of those agents historically haven't made it to their first renewal. So you can just think about that's a big amount of churn that comes from that group just automatically because -- and so that will continue to be the case. But because we are stickier, the more productive you are on the platform, there is a bit of a -- it will just improve over time just based on us continuing to support agents as long as we continue to be the best place for top producing agents to hang their license. So we think that, that will be the case. The other thing that happened is that over the last years or so, let's say, since Q1 of 2022, the 0 to 2 cohort has increased in terms of the size of people in that group from agents who previously maybe were selling 3 to 4 homes. And now they're having trouble finding doing even the 0 2. So down. And so when the housing market picks up, there's some of those gets who would be marginal in that 0 to 2 category are going to find it easier to do their third and fourth transaction and fifth transaction, et cetera. So right now, we're still in this market that's generally pretty tough. We haven't seen the attrition in the industry overall that would be reflective of the real estate transactions going on. So I certainly expect there to be a fair bit more attrition. And for a number of reasons, including having a pretty robust economy even considering the -- what's going on in the housing market. I think that just that as well supports the notion that…