Good afternoon, and welcome to eXp World Holdings' Second Quarter 2024 Earnings Fireside Chat via live stream and our metaverse on the web, Frame. My name is Denise Garcia, and I manage Investor Relations for eXp World Holdings. Today, we will begin with our earnings fireside chat with prepared remarks from Glenn Sanford, Founder, Chairman and CEO of eXp World Holdings; and Leo Pareja, CEO of eXp Realty; followed by a review of the second quarter 2024 financial highlights presented by Kent Cheng, Principal Financial Officer and Chief Accounting Officer of eXp World Holdings. Following our prepared remarks, we will open the call to a Q&A session with eXp World Holdings covering analysts and questions submitted to eXp in advance. Let's begin with a review of the forward-looking statements. There will be 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. Please see our filings with the SEC, including our most recent filed annual report on Form 10-K and quarterly reports on Form 10-Q, for a description of specific risks that may affect our business performance and financial condition. We assume no obligation to update or revise any forward-looking information. As a reminder today’s call is being recorded and a reply will also be made available on expworldholdings.com. Now for a few logistics and then we'll get started. For those of you joining in frame today, welcome to our Metaverse on the web. To zoom into a specific screen, you can click on that screen and then click zoom in. If the content on that screen disappears or if you lose audio, simply refresh your page. While in frame, if you need help, just use the help button on the bottom right to link with tech support. If you wish to ask a question during our presentation, you can enter your questions by scanning the QR code presented on this screen with your mobile phone or go to slido.com and type in the event EXPI. From there, you can submit a question or vote up an existing question by giving a thumbs up. If you'd also like another question asked. This screen will remain up on the right-hand side of the stage throughout our presentation. Now I'll turn the fireside chat over to our speakers before opening the call to questions. Glenn, you may begin.

Thanks, Denise, and thanks, everyone, for attending this Q2 earnings call. Obviously, what we're doing here is really iterating on the agent value proposition. That's what we talk about all the time at eXp. And really, we've got a unique overall platform that focuses on personal development, helping agents sell more property. Obviously, we have Success Magazine, which is tied into that personal development side of the business. And then we've got companies like Frame, which is obviously the Metaverse that we're in now. But all of this is really designed to help us as a brokerage scale around the world. You'll notice like in the next slide, in Q2, our NPS, our agent Net Promoter Score actually increased from 72 to 76, which is world-class to say the least, and this really reflects our investments in services, faster payments. We've got platforms like revenues, our global referral network that's actually starting to take shape, how we're approaching international, which I'm actually more involved in now for obvious reasons. Some of you may know about some of the changes there. But we're really focused on what -- how do we improve the agent value proposition because we do know that NPS is a leading indicator for both our future growth retention and retention, which ultimately translates to sort of long-term financial viability of the company. Real estate sales transaction increased by 1%. Revenue grew by 5%. And really, that was driven by a 6% increase in our overall agent productivity, which is pretty amazing to see our agents producing more in a difficult market. We have productivity gains from providing more tools and incentives to highly productive agents. I know Leo is going to talk a little bit about -- I think he's going to talk a little bit about…

Thanks, Glenn, and thanks for everyone for joining us today. I'll start off with our Q2 performance compared to the industry. Last week, we saw June home existing sales at a low point for 2024, down more than 5% year-over-year, month-over-month. This downward pressure for Q2 home sale transactions in the U.S. which were down nearly 3.5% year-over-year. Despite the industry being down nearly 3.5% eXp Realty is only down 3%. Year-to-date, the industry is down slightly more than 3% and over last year, while eXp is basically flat by being down less than 1%. I truly believe that our market share gains are a reflection on the quality of agents and talent we're attracting to our company. Kendall Bonner joined eXp Realty as a VP of Industry Relations, who has recently named 2024 Housing Woman of influence Tonami TV host and real estate expert has joined eXp during that quarter. And 44% of our agents made the list for the 2024 Real Trends and – thousand awards which has the 5 top -- 500 top agents and 500 top teams in the U.S. by transaction and volume count. We recognize that in order to maintain the highest quality agent base in the industry, we constantly have to iterate on our agent value proposition to remain the most agent-centric brokerage on the planet. During last earnings call, we announced REVenue Share 2.0 in the first 60 days of the program. We paid out nearly $7 million in real-time revshare. During Q2, we also launched our global referral program, which extends the reach of all of our agents to our additional 22 international markets, so agents can find partners across the globe and across the ocean to expand their business. And more recently, we launched Fast Start attraction bonus program, July…

Thank you, Leo. As we review our performance for the second quarter of 2024, I'm pleased to highlight several key metrics that underscore our progress and strategic initiatives, thus far with our aged Net Promoter Score or aNPS. This quarter, we achieved an aNPS of 76, which is a 4-point improvement compared to the second quarter of last year. This increase is a direct result of our continued investment in operational support for our agents and the enhancement to our technology platform, the Leo and Glenn discover discussed earlier. Moving on to our agent network. Our agent income increased 2% sequentially from the first quarter to the second quarter. On a year-over-year basis, our Q2 agent count declined 1%. This reflects both the challenging market condition and our strategic decision to over a significant number of unproductive agents in the U.S. during the last few quarters. This move is aligned with our focus on enhancing overall productivity and efficiency. Turning to our other operating metrics. Real estate sales transaction unit grew 1% year-over-year. This growth is not only a testament to our teams hardware, but also indicate that we are outperforming the industry and continue to gain market share in the U.S. Realty cost per transaction decreased 8% as we began to leverage the knowledge to eliminate time consuming manual processes. We believe we are among the most efficient company in our industry and we remain focused on reducing our cost per transaction moving forward. Now let me discuss our financial metrics. I'm happy to report that our revenue for the second quarter was $1.295 billion, a 5% increase year-over-year. Our Q2 revenue growth was due to higher real estate sales volume and an increase in agent productivity, which I will detail in my next slide. Second quarter adjusted EBITDA…

Thanks, Kent. I'll kick off with the question for everyone on the team before we open the call to our covering analysts. First, Glenn, I'll start with you. Where are you spending most of your time? Where are you most focused?

So thanks. So for the last couple of weeks, especially, and it's actually something I've been focused more and more time on. I mean actually focused on the international side. We actually had our first international EXPCON in Lisbon, Portugal last month so that we -- which was well attended from agents, especially in Europe, when we had some agents come over from other parts of the world as well and had a lot of good meetings. I know that we ended up bringing over one or two good-sized real estate teams for meetings at Leo and I were part of Felix and others. So that was really positive. And here in the last two weeks, I've actually been working directly with the international team, building a bunch of new systems out to help us grow and then refreshing the agent value proposition in a number of countries, which I think is being super well received by both our country leaders and our agents on the ground. So pretty exciting to work on that. And so I'm also going to be heading back in September attending a large international MLS meeting actually in Milan. I believe, in October. And then we'll have a number of meetings in different parts of Europe. So that's leading up towards EXPCON. So that's a little bit of what I've been up to. And that's why actually my focus is. Many of you have heard me talk a ton about the future of international. I think we're couldn't be more excited about it. And just rolling up my sleeves personally every single day on that has been good for me, but I think also good for the team at large.

All right. Next question for you, Leo. Can you discuss what drove the quarter-to-quarter increase in agent count?

Yes. So we did a very strategic acquisition of Realty Connect, which is a limited function referral company. So we did it for multiple reasons. It's going to be a great tool for retention as a very real number of agents at large in the industry are contemplating or choosing to get out of the industry, especially with the changes coming from NAR. So we wanted to have a vehicle for -- to retain these licenses. And the company has a really interesting model where it actively drips on these agents databases to get them. I think their per-person productivity is like 0.5, which is actually higher than most referral companies through a proprietary CRM and generate very good high-margin referrals for our active agents. And then hopefully, we can boomer them back if they choose to get back into production actively. And the great thing is that they're also -- it's a brand-agnostic brokerage that attracts referral agents from all diversity of brokerages. And also, this is a very high-margin business, right? There's very low operational cost to it as it's all of the transaction and processing of the transactions would happen at eXp Realty at the core. So it's a nice little business that makes very good sense tucked into our core business.

All right. Thanks, Leo. And one for you, Kent. Can you discuss the second quarter gross margin and your thoughts on gross margin for the remainder of the year?

Sure. As you know, we are primarily focused on revenue and adjusted EBITDA as key financial measures. But it's worth noting that in the second quarter, we have more agent reached their cap. We're also investing in our agent and gross profit, including stock-based compensation and revenue share expenses as our under Slide 27 in the fireside chat presentation. Excluding these expenses our non-GAAP gross margin was 12.8% in the second quarter. Year-to-date, non-GAAP gross margin percentage is 13.3%. Given our current team of highly productive agents. We expect additional agent to reach the cap in the second half. We will continue to invest in agent in the third and fourth quarter. We anticipate gross margin in the second half. You follow -- we follow a typical seasonal pattern and be approximately similar to the back half of 2023.

All right. Thanks, Leo. So now I'll open the call up to our analysts on the left-hand side of the stage. I'll take the first question from Tom at D.A. Davidson & Company. Tom, I think you have a question. You want to go ahead.

Yes, great. Thank you Denise. And thanks for taking my questions guys. A couple, if I could. I guess I just maybe on the following up on the Realty Connect. Can you just -- was there a specific number of agents that kind of came over? Are they all domestic agents? That's sort of my first question. And then just maybe like stepping back on kind of the domestic business, I don't know, maybe just it'd be interesting to hear your latest view on how you're feeling about the competitiveness of your value prop and the overall kind of appeal of the platform versus some of the kind of smaller guys that have copied your model in recent years. Like why does an agent today, do you think -- what are the main reasons that they choose eXp over one of the other guys? And then I had a quick follow-up.

Yes. So great question. So the first is the sizing, I think it was roughly 2,900 agents just to answer your first question. And secondly, overall, I think I've talked to on other calls. There's endemic churn that's inherent with the industry. So agnostic of brands, there's churn component that hits everyone at scale. So the denominator is bigger. Obviously, adding at the top of the funnel has pressured because of there's just kind of a natural attrition that exists, whether agents get completely out of the business or they or they go to a competitor. So overall, based on the downward pressure at scale, I think we're actually doing great with the teams that we're attracting. And I'm not sure who saw the press release on that team out of Missouri that just joined us, 100 transaction team. They'll probably be our number one agent for 2024. Our number one team in production wise, and this is the type of team that was able to interview and I know they did all of our other competitors. And some with the Metfedic [ph] team that joined last week, and we have another announcement coming next week, where tough producers, folks that do this at a very high level, are actually asking very detailed questions about profitability, sustainability, operations and we're continuing to see the highest level of operators, join the company that they feel has longevity, sustainability and it's not a startup. We are in turbulent times in our industry. There is a lot of ships coming. And I think having a scaled platform that has already gone through all its pivots and terms, makes a big difference. And to Tom to think that it's a slightly cheaper version, the only decision tree, I think, is not how most professionals and consumers shop and make decisions agnostic of industry but we continue to see the strongest performers and as well as the stand-alone agents choose our company just because of the total value proposition. And I would say that especially with the changes happening in the industry right now, I think a lot of them and again, I'm just quoting what I'm seeing anecdotally on social media, feel a very strong comfort known that we're fully scaled. We're fully operational all these markets. We have the staff and the brokers and the systems to support their business. Because at the end of the day, the company they're choosing to hang their license with is that platform that allows them to operate their business and I think sustainability and operational excellence is a very important part of that decision tree.

Got it. That makes a lot of sense and is very helpful. Maybe just on that topic of kind of the industry change. I'm sitting here in Las Vegas right now at the Inman conference, I saw Kendall Bonner on stage earlier. She's super impressive the first time I'd heard her. But the August 17 kind of is a hot button topic as you can imagine. Leo, I know you've been like super kind of close to this and creating -- generating a bunch of content and stuff like that. Can you just -- like at a super high level, you don't need to go two in the weeds, I guess, but unless you want to, but talk about like what are like the best practices or specific like protocols that you guys are encouraging with your agents that maybe do they differ in any kind of meaningful way from what everyone else is doing? Because that's one of the main things that I struck me today that I don't know, it doesn't seem like everyone is following everyone's got different terms on their buyers rep agreement, paperwork and exclusive versus nonexclusive visual and sounds a bit messy, as you mentioned. Thank you very much.

Yes, the messy [ph] is the best way to describe it. And I've been saying that since March, and then subsequently on that live I did in May, where I've been trying to brace the industry because this kind of collective pulling of their head out of the sand didn't have this no moment that we're kind of witnessing specifically this week, I would say. And by the way, I was at in yesterday and I just moved back so I could be home and in front of my computer to do this with peace and quiet. So we've made a stance about no more broker commission share as exactly as stated in the settlement agreement on Paragraph 19 and again, if the seller wants to offer compensation to a stellar directed to buyer broker, that's perfectly okay. I actually spoke about the subject yesterday, and Kendall is a phenomenal addition to the team that I was happy to have as we're going through this transition. But I would just -- I did an interview for time this morning, associated press and doing one for CN next week. The material changes that people need to be hyper aware of is buyers are being required to sign a buyer brokered agreement prior to touring and executing a purchase contract and the touring part is even the harder part of the conversation because like this is not an eXp policy. This is squarely out of the NAR settlement agreement. And what I was saying very clearly at Inman and I said it today on a live I did is that it all comes down to your forcibility and the MLSs are the ones targeted to enforce this and the earlier signs that they're going to do it through punitive penalties. So agents…

Great. Very helpful. I’ll get back in the queue. Thanks.

Thanks, Tom. We'll take our next question from Matt Filek at William Blair. Matt, if you had a question, you can go ahead.

Hey everyone. You have Matt Filek on for Stephen Sheldon. Thank you for the questions. No agent churn continues to largely stem from lower producing agents, but curious if you're starting to see some churn among the top producing agents as well? And just related to that, can you remind us on some of the incentives you have in place to help retain those top producing agents.

That's a great question. I don't know that we had it in the presentation deck, but the numbers are maintaining where the disproportionate amount of churn is focused around our non-productive agents, at the top side of the industry, there's always the outliers who move with incentives, and we are no different in attracting them. But to reference your exact question, the Boost program, which we developed, I think, last October with Michael B. that we brought over is the incentive that we're using for small to midsized independents. Again, I think a perfect example of that was the press release we made today. And again, our sweet spot is that small to midsize independent who runs a similar model, right? So we are not -- we have not traditionally have historically been a perfect fit for a flat fee brokerage, for example, because that creates quite a bit of breakage since we do have a split. But we're constantly evaluating, making sure that we're being competitive in the market and reacting to the landscape that's...

Got it. That’s helpful. And…

I don't want to add. We have a slide on the fireside chat depth in the appendix, right? In Q2, 75% agent that left ESP have 0 to 2 sell transaction. So a majority of the departure agents are a very low producing engine.

Perfect, thank you Kent. And then I just wanted to follow up on a question, Tom had on the competitive landscape. Just curious, would you ever consider tweaking the agent compensation structure to further enhance the attractiveness of the platform from the agent's perspective? And if you were to consider such changes, what could they possibly look like?

Yes. So I can't comment on a specific material change. I will tell you that we're constantly looking at it. And I think a good example of that is what we did with REV Share 2.0, which has received massive positive reception from agents with us and the ones that joined since there were folks that literally said that was why they got off the fence in the last quarter. So we're always looking at that. But I would caution that making sure that you're not giving away the farm and then creating a not sustainable business model, which is what I think a lot of the competitors who are trying to be us have done in the sense that their core business, especially once you take out REV Share and stock-based competition, which I don't think they disclosed as clearly as we do, but we actually do an analysis of our competitors and do that there's a lot of our competitors who their gross margin is sub 4%, 5% in their core business mathematically just can't ever get to profitability. And so they're banking on ancillary services are yet to be proven economic models to be their growth engine. And I just think it's very dangerous to create a model that never gets to profitability as we've seen so many examples in the last decade of well-funded disruptors who are no longer around or struggling to be around because of that.

Got it. Leo, that makes sense. I’ll jump back in the queue.

Great, thanks. I'd like to invite anyone in the audience who would like to ask a question to go to slido.com and enter EXPI if you want to submit a question or just scan the QR code that's on the right-hand side of the stage and the screen behind us. So we haven't gotten any questions yet. So I'll go to Jonathan Bass from Stephens. Jon, I think you might have a question. You can open your line and go ahead.

Yes, thank you Denise. This is Jonathan on for John. So looking at the OpEx line and stripping out a one timer from last quarter, it looks like OpEx decreased modestly from 1Q despite a much higher REV base, so that's great. Can you guys help us frame out frame up how we should think about OpEx for the rest of the year? And then I think you touched on this on the call, but are you guys still on track to deliver that $6.8 million of profit improvement each quarter for the rest of the year?

Maybe let me address that question. So we don't guide to the quarterly OpEx, but I will call your attention to a few items right. Given the success of the international business, we expect to continue to invest in December in second half. Now we also expect mid-single-digit increase in SG&A in second half versus first half of 2024 due to annual adjustment of employee salary coming of the eXp current expense and ongoing legal costs related to antitrust loss. Given the June's low point of system home sales, right, we are not the election of the U.S. and interest rate certainty, we expect some pressure on the revenue side. So this is more as a general guideline, we see in second half, particularly in the SG&A side. What's your second question? Jonathan?

Are you guys still on track to deliver the $6.8 per quarter of the profit improvement?

Yes, we are on track. The overall the full year is $20 million cost improvement. Yes.

Perfect. And as a follow-up, maybe for you, Glenn, given your focus on the international business of late. Could you maybe highlight what markets performed well in 2Q 2024? And what markets you're most excited about?

Yes. So the -- we've got a lot of countries really picking up some good steam. South Africa is probably one of our really significant growth parts of the company, I think we were just voted, I believe the most agent-friendly brokerage in South Africa by some independent agent agency. I don't remember the exact turn, but it was kind of -- it was a cool accolade. We're getting a lot -- we're now -- we're the fastest-growing brokerage in the history of real estate there, similar to what we've done, obviously, in the U.S. Canada and some other countries as well. But South Africa, U.K., France, Spain, we should have another pretty significant high-volume team in Portugal joining here in the short run. But what we are doing and which is we're actually going back to -- there was a question about agent value proposition. Earlier which I think was more geared toward domestic, but we're actually going back to each country and reevaluating do we have the right value prop mix for that country because every country is different. Some of the tools and technologies that we've rolled out initially, while good for the brokerage, meaning that it helped us sort of streamline some operations type elements, weren't as agent friendly as we need them to be. And as a result, it created a challenge to grow in those countries. And what we found is the countries who have adopted more localized systems and tooling. And some of that has to do, quite frankly, about the real really amazing leaders that we have in some of these countries but they've been very consistent that here's the platforms that we need to use, and we've adopted those. And in a lot of cases, that actually resulted in a change in our trajectory in those countries. So we're going through evaluating the agent value proposition, evaluating country leaders. We're also evaluating how we're actually comping in-country leaders. We're actually moving more to an incentive-based model rather than a salary-based model. So that should lower our cost to operate in country in the early stages or given that scale. So pretty excited about that. And so those are some highlights on the international front. We'll have some other ways to -- for those who are interested in international, we get more visibility as to how we're doing there. But that's -- it feels like the early days of EXP internationally.

Got it. Thanks for taking my questions.

Sure. And we do have one question from the audience on Slido. The person asked. Over the past year, it looks like many of the executives in eXp have sold stock, none have bought any, and I had a couple of agents ask, is that a red flag.

I'll just comment on -- for me personally, I have a 10b5-1 plan in place that has historically targeted between 3% and 5% of my holdings being sold in a given year. So obviously, take me a lot of years to sell. So that's probably and I'm still by far, the single largest shareholder. So it's not like I'm done paying shares but it is creating a little bit of cash flow for me personally. I think most of the other folks, I think we had a couple execs on last year did sell all of his position and then left actually about the company. So that would be another one. But I think for the most part, it's very modest in terms of the selling that's taking place.

Thanks, Glenn. That concludes our question-and-answer session. Thank you, everyone, for joining. As always, please stay connected by visiting eXp World Holdings for the latest updates on eXp News results and events. Additionally, you'll find a recording of this call and our latest investor presentation on the Investors section of the site. This concludes eXp World Holdings Second Quarter 2024 Earnings Fireside chat. Thanks for joining.