Excellent. Good morning, and welcome to the eXp World Holdings Second Quarter 2021 Earnings Fireside Chat via live stream in eXp World. My name is Courtney Chakarun and I am the CMO of eXp World Holdings..

Today, we will begin our Q2 earnings fireside with a conversation between Glenn Sanford, Founder and CEO of eXp World Holdings; and John Campbell, Managing Director of Stephens Inc. John joins from Stephens Inc. where he has built and currently leads the firm's real estate services practice.

Welcome back, John, as you hosted the 2020 Q2 earnings about a year ago, so it's good to have you..

After that conversation, we will move into a review of the Q2 financial highlights presented by Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings, who will be followed by me, Courtney Chakarun, and I will share eXp agent and consumer insights.

We will then move on to Seth Siegler, our VP of Innovation, pardon me, Technology Innovation, who will cover our innovative approach in areas of opportunity. And finally, we'll return to John Campbell for a continuation of the Q&A..

Let's begin with the earnings fireside 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 annual report, Form 10-Q for a discussion of specific risks that may affect our business, performance and financial condition.

We assume no obligation to update or revise any forward-looking statements or information..

As a reminder, today's call will be recorded, and a replay will also be made available on expworldholdings.com. A few logistics before we get started. To see all 3 screens hit the stage zoom button to the right of your chatbox, Zoom into a specific screen, you can hit the plus icon above that screen.

If you happen to see no sides or a gray side, hit the refreshed button icon at the top right-hand corner of the screen to correct. While in eXp virtual campus, should you need any help or have questions, please enter your comments into the chat box at the bottom left, and a member of the team will contact you..

This time, I would like to turn the fireside chat over to Glenn Sanford and John Campbell to start the earnings conversation. .

Hey, Courtney, thank you very much for the intro. And again, welcome John Campbell. First and foremost, I just want to say thank you to all of our agents, brokers and staff for another amazing quarter. It was -- we really did continue to grow exponentially during the quarter and obviously continue to grow very quickly.

So John, I'm going to just kind of turn it over to you for a few of the questions, and I'll jump into answering from my perspective, and then we'll continue on. So thanks again, Courtney. And John, over to you. .

Yes. Thanks, Glenn. It's a thrill to be here with you guys, especially in the hills of such an impressive quarter. It's good to host this again. We picked up coverage of you guys back in 2018. And I think we saw something kind of special underway for you guys.

But I will say, I never imagine you guys get to the point you've gotten as quickly as you got and it's been pretty remarkable to see.

But just going back to that launch of coverage, I mean, if you go back and look, backwards looking, I think it took you guys nearly a decade to get to 15,000 agents, and you just put the net adds of 17,000 over the last 2 quarters. So I mean clearly, you've got the flywheel spinning.

And if you look at the overall agents as a percent of kind of NAR or U.S. agents, it's 3% or 4%, if you look at it internationally, obviously, you're just brushing the surface. So it feels like you guys are still kind of bottom of the first inning. So there's a lot of opportunity there..

And last time I helped moderate this call, I talked about the valuation for your stock and whether investors have given you credit for it and you kind of compare that to what Redfin is at right now. If you look at Redfin's revenue multiple, if you take out the eye buying revenue, which is a big, big chunk of that revenue base.

And you put that on the EXPI stock, it's about $131 stock today. Last time I moderated this call, I said $125 stock. But the difference here is you guys obviously had the 2-for-1 stock split. So that's on an apples-to-apples basis, that's more like a $262 stock for you guys relative to what it would have in the past..

So needless to say, a lot of opportunity, it feels like to continue to build up the agent base and obviously, a lot of opportunity on the stock as well. So that's my tidbits that I wanted to kind of pass along. But Glenn as far as a question to start off here, obviously, a lot of good things to talk about in the quarter and the fundamentals.

But let's start off with the dividend. When I was up this morning, and I saw that, I scratched my head a little bit. It didn't seem like a move that you make as a growth company early on, but the more I thought about it, the more it seems to be a kind of a brilliant move for you guys.

So talk to us about what that means for agents and the overall EXPI value prop. .

Yes. So thanks, John.

The -- yes, so the dividend, and I think a lot of people weren't expecting it for the same reasons you talked about is high-growth companies typically aren't dividend companies, but we're being an agent oriented real estate brokerage, and we've been -- obviously, we've got our equity programs that we've been building out on behalf of our agents and brokers since really 2014.

And we really just look at the fact that over time, we want this additional potential stream of income to be able to go to our agents, brokers and obviously, our shareholders as well..

But the real key for us is to continue to iterate on the agent value proposition. So whether we think about how we develop a rev share, how we develop our equity, how we think about health care options for agents, how we think about all the different things that are there.

The dividend was a natural next step for us because we've been now profitable, I think, since late 2019 quarter after quarter consistently. And now we're -- we've got like -- and Jeff will talk about the financials, but we're now solidly over $100 million in cash on the books. It just makes sense to start to look at paying out a dividend..

And then obviously, the Board would look at this quarterly, but it would be my goal to ultimately make this a relatively permanent part of the infrastructure of eXp going forward because it then makes this not just be something that you have to sell as an agent to sort of get returns from, you'll be able to get income just as an agent as an additional stream..

So for us, it really was a really cool differentiator. And I think it also just highlights the fact that we are running a profitable real estate brokerage. And that is really key.

And I think when we see the housing market turn a bit, we should be able to, as we saw last year in Q2, especially we're able to moderate our expense level such that even in a down market, we plan to operate it in such a way that we can continue to be profitable and by extension, hopefully pay the dividend. .

Yes, makes sense. And looking at this relative to, I mean, you've got a lot of copycats out there. There's going to be more that come because you guys continue to experience a lot of success. But I think you kind of hit on this.

What are your views relative to competition as far as their ability to pay a dividend? It just seems like this is -- as you think about the scale, like one of the major advantages you guys face right now is your ability to scale to create consistent free cash flow to be profitable. But just talk about how that looks kind of relative to competition. .

Yes. So obviously, we developed a really unique agent-centric real estate brokerage model starting in 2009. And for a long time, people sort of said it wouldn't work and then eventually, obviously, in the last few years, it's become obvious that it did work.

We've had companies that are literally almost copying exactly what we're doing, but they're going cheaper, like maybe they're not charging monthly fees and maybe they're paying out more money there whatever. But at the end of the day, companies do have to eventually actually build themselves to be profitable.

And if they don't, then eventually the equity sort of may not be worth that much at the end of the day..

And for us, we thought this was another way to sort of draw attention to the fact that our model is scalable and has really got to a point where it feels like it's going to be consistently profitable in the long term. And that has to do with the various ways that we've really, really built out the model.

We recast a little bit of the rev share model about 1.5 years ago or so, where we committed to the 50% of company dollar payouts. And so that helped us sort of moderate some things. And we just moderated everything so that we can, in fact, be profitable and be able to show apples-to-apples.

We put the financial statements, the income statements and the balance sheets against any company in the industry now, and I think that we're going to look great on -- for basically every metric you can think of. .

Yes, absolutely. And I know Jeff is going to go through the details on the quarter.

But from where you sit kind of at the CEO level, what did you see in this quarter that was kind of stood out as the most impressive thing to you?.

No. Well, it probably is a little less from a financial perspective, but more just the way our agents and brokers are stepping up to actually do whether it be in-real-life events and last year was really interesting. We didn't have shareholders at EXPCON in person because of COVID this year. Shareholders was done in online.

In November, we're planning on, and we're scheduled to have EXPCON in Las Vegas, so our first in-real-life event but our agents and brokers really stepped up to fill the gap in terms of collaboration, community, coaching, training, so many agent-led events around the country around the world.

And then we've supplemented that with sponsorship of our Sprint initiatives where we would help sort of the smaller, more intimate groups actually connect and help level up..

The other thing I think we saw was how one of the tweaks that we made a year or so ago was the way that we count what we refer to as frontline qualifying agents. And we initially gave people sort of credit for anybody they recruited for 6 months.

And what we realized is that, that wasn't really in the best interest of the people being attractive to the company and to some extent, that hurt the company, hurt other agents..

By making that change, I think one of the things that you saw was this increased productivity what I hear consistently from the field is agents want agents to be more successful. And they're willing to help in any way they can.

I heard about an initiative in a lot more detail here this last weekend, called the eXp family tree, which is where a number of our top agents have come together to help any agent anywhere in -- really in the world, level up. So the company has -- I don't know what the number is now, but it's 60, 70 hours a week of in-world training.

We've got some in-real-life stuff going on at local levels, sponsored primarily by the brokers and that sort of thing. But then the agent-led stuff is just amazing. And I think that's really translating into something very special. .

Yes, makes sense. I've got one more for you, and then we'll let Jeff run through his piece. But clearly, what you guys are offering to agents is attractive. I think that's pretty evident in the rate of agent growth. You've seen a pretty positive trend, it feels like the last couple of quarters of larger kind of agent teams joining the platform.

Are you still seeing that? Is that still kind of playing all full force? And kind of what's driving that?.

It is. Yes. No, for sure. We continue to track. And I think the longer we are we proved that we can provide that infrastructure that platform for agents and brokers to build unique style organizations that is not possible in a franchise model.

The more that these top teams that are thinking about how do I break out of my -- just my local geography and how do I actually monetize this in multiple markets, eXp really is the only platform that they can tap into that provides so many benefits for them to expand. And not just expand nationally into all 50 U.S.

states and Canada, but we've got another on top of that, another 15 countries or 2 more coming on board before the end of the quarter. And you just look at the ability to leverage your talents that you've honed over 10, 15, 20 years in the business and now you got a platform that you can really monetize your business even better. .

Yes, absolutely. Courtney, I think that's all we got for now. We can go back to Q&A later. .

Absolutely. Yes. .

All right. All right. Thank you, Glenn. Thank you, John, for being here. Appreciate it. Just a quick story before I start. In 2018, the company did $500 million in revenue for the entire year. And I started talking about -- it's not $500 million, it's half a billion, right? We got to start thinking bigger.

And so now a couple of years later, believing is seeing. So our Q1 revenue, if we just go to the summary page, Courtney, please..

Q2 revenue was $1 billion, so we're up 183% year-over-year. Our gross profit in Q2 was $79.9 million, up 133% year-over-year. And our Q2 net income was $37 million. It's up 350%. And our Q2, this is pretty extraordinary for this quarter, and it includes a $20.6 million tax provision benefit by releasing our valuation allowance.

So we've incurred previous operating losses and built up a net operating loss benefit on our balance sheet over the years. Since we have shown sustained profitability over our recent quarters, we are required by GAAP to release the benefit from our balance sheet to our income statement, and that's how we get to the $37 million of net income in Q2..

Our Q2 diluted earnings per share is $0.24, up 300%, which includes that tax benefit. Our adjusted EBITDA, which is a non-GAAP metric, is $27 million. And basically, that's a major metric that we look at internally, taking up primarily stock compensation expense to see how we're doing.

Our operating cash flow in Q2 was $60.8 million, and that's up 185% year-over-year..

So now to take a look at some of our key metrics. I'm going to focus first on our Q2 metrics. And we're starting here, which is -- we talk about it a lot, but we really need to highlight it and express how important it is what our agent NPS score is our top metric.

And basically, we have a 70 in 2021 in Q2, and that's a critical measurement on how we run our business. And to put some of this in perspective, Bain came up with the NPS score and plus 0 is good, plus 20 is favorable, plus 50 is excellent and plus 80 is world-class. So we're hitting a 70. And we look at that score.

And as it goes down in certain areas, we really focus on our business and make sure that we fix whatever we need to fix to make our agents have the best possible experience from any brokerage. So we're at 70, which we're very proud of. Our -- the agent count ended at 58,263, which is up 87% versus last year.

Our units is 115,431, up 164% versus last year. And our price per unit as we're all experiencing in housing market is up 17% at $349,000. I mentioned the blend. I think when I came here, I think our average was like $245,000. So way up..

Our volume is $40 billion versus $13 billion in the second quarter of last year, up 210%. And so looking now at the financial metrics, I mentioned the revenue being $1 billion versus $354 million, up 183%. Our gross margin was $80 million versus $34 million, up 133%. Our gross margin percentage was 8% versus 9.7%.

And this is kind of a -- it's kind of the result of our model between the number of agents capping because we're doing so much volume and the price per unit going up, that margin kind of goes down a little bit. There's pressure on that. But the volume makes up for it, as you can see in the operating income..

So we are getting leverage on the next line from SG&A. So at SG&A, we're at 6.3% of our revenue versus 7.4%. Operating income, $17 million versus $8 million; net income, $37 million versus $8 million and our adjusted EBITDA, as I mentioned before, is 27% -- $27 million versus $14 million, up 98%..

Operating cash flow, $61 million versus $21 million and our cash equivalents, our cash in the bank after all our investments, our buyback is $107 million versus $64 million in the second quarter of last year. So we're up 69%. So really, really quick on a year-to-date basis. You can see that most of the operating metrics stay close other than the units.

So we've done 189,309 units, up 102% on a year-to-date basis and our volume is at $65 billion versus $24 billion. So we're up 170% on a year-to-date basis..

A couple of other metrics, $1.584 billion in revenue year-to-date, up 153%. Our gross margin is 133% versus 62%, 114%. And then I'll just kind of skip down to the bottom. The net income on a year-to-date basis is $42 million versus $8 million. And our operating cash flow $101 million versus $36 million. And our bank balance is the same at $107 million.

So very, very healthy condition, both from a growth standpoint, from an investment standpoint and from a profitability standpoint..

So as we look at the next page, and we look at our agent and our revenue growth over time. You can see this chart, and we've had phenomenal agent and revenue growth over time, especially since 2016. And it really exploded in 2018. We've elevated growth in both agent count revenues. As a result, as Glenn mentioned, our commitment to our agents.

This -- the chart in front of us shows eXp Realty ending agent count and revenue by quarter. So to give you some perspective, it's a bit of an eye chart. But in 2018, we had -- we ended the year with 15,500 agents, $500 million in revenue. In 2019, it was 25,423 agents and $980 million in revenue.

And last year, it was 41,313, $1.8 billion of revenue last year. So overall, our agent growth year-over-year is 87%. We're now at 60,000 agents and our total Q2 revenue is $1 billion..

So now for some recent highlights and our focused investment areas. As we mentioned, we've declared our first cash dividend and a driver of that is that the company has achieved positive accumulated earnings and shareholder equity. So if you look at our balance sheet, we've gone from a loss to a positive accumulated earnings.

So the $0.04 per share is expected to be paid on August 30 to shareholders on record as of August 16..

You've seen a recent press release where we've established SUCCESS Lending. This is a new joint venture for us with Kind Lending, and we're spending a ton of time on this. We want to make it the best possible value proposition for our agents and then our share buyback. So we repurchased approximately 54.9 million of common stock in Q2.

And our purpose to remind people again is that we have a goal to offset the dilution from our agent equity plans. And we're really happy to say that on a quarterly basis and on a year-to-date basis, we have done that with the buyback..

So on the right-hand side, our major investment areas for growth include marketing, real estate technology innovations that Courtney herself will get into that in some detail, our realty expansion. So you see what's happening in our domestic market in the U.S. What we're seeing really is a network effect.

So back in the day, we had few large influencers and now we have lots. We've had some great meetings just recently. It was some great leaders in our business, we're starting to see the network effect in the U.S. International, you've heard a lot about that. We're in 17 countries right now and growing.

And then our commercial business, we're building awareness. And at the same time, we're adding benefits and training tools for our residential agents that do both residential and commercial. So it's going well..

Affiliate services. Mortgage is a great example of this. And then finally, we continue to invest in VirBELA and frame our virtual platforms. And our virtual platform of VirBELA for work has powered eXp growth. The productivity, the growth take international, nobody's got on a plane so far. We're in 17 countries. It's just phenomenal.

And as time goes on, it is the best product in the marketplace, and I think a lot more outside companies going to experience that..

So thank you very much. I thank all our staff and our agents for a great quarter. I'd like to now pass it over to Courtney, our CMO, who is responsible for applying the eXp World Holdings brands and leading all areas of marketing, including driving digital strategy and growth for enhancing eXp's value proposition for our agents and our staff..

Welcome, Courtney. Please join us. .

Excellent. Thank you, Jeff. Glad to be here. So today, I'm going to be focusing on the agent and consumer insights that then form our marketing strategy, right, and innovation strategy as well. A bit of background here. eXp insights are based on proprietary research and generated for both -- from both internal and external sources.

The strategy that underpins our findings is really around uncovering a deeper understanding of the agent value proposition and brand perceptions as well as a better understanding of consumer sentiment towards homeownership, preferences and expectations related to the pandemic..

These findings provide key insights that help our team build out the eXp brand in collaboration with agents, enrich the overall value proposition. They also guide the prioritization of our investments in marketing and innovation.

They help us co-create services and capabilities that ultimately empower our agent technology to better serve their customers..

So let's dive into a little bit more detail here in terms of what agent values. What is -- what our agents value? So from these surveys and social listing research, we know the top benefits most valued by our agents, range from more tangible to more emotional.

Our agents value, if you look here on the left-hand side, ownership and compensation, their development and this more motive benefit of freedom..

With regard to ownership, the equity component is highly valued. It's a key component there. It's something that agents talk to us about a lot in addition to this quantitative research I'm talking to, we also have a lot of qualitative research.

In leadership areas of leadership and development, training and education is really important and that's something we do really well at. You can see here in the middle, we have eXp University. Our agents are all enrolled.

They have access to 80-plus hours of training in the world just like we're standing today, right? So it's live from the sense of it's happening real time. Big course topics are building a real estate business, working with buyers and sellers..

And then now for the attribute of freedom, which is more subjective. Talking to agents, it stems from being able to build their personal brand, we really do believe that the agent brand is hero, right? And that's built in tandem with the eXp brand.

Last year, we built the eXp brand, the visual elements with the agents, right? We were with them for about 90 days where we created and voted on the new logo, which is something that is historically important to us because it's the same thing we did when Glenn started the company.

Freedom also means this idea of being able to operate across borders and boundaries, right? So teams can operate across several states and in the 17 country -- at 17 countries or markets that we operate in, right?.

So now let's move on to the brand. So how agents perceive our brand. With last year's refresh of the brand, I just mentioned, we found that agents year-over-year look for having stronger associations with the brand attributes. So on the left-hand side chart, you can see what resonates most with the agents. It's the attribute of innovation.

So how you read this is, 81% of our agents would be selecting the attribute of innovation is something that resonates with them, right, which is a 10-point lift over the previous year. This is really interesting because the second valued attribute that's associated is the virtual world that we're operating in, right? So these are very correlated.

In terms of being collaborative and successful, those come right behind it. So this is the real perception that the agents have of our brand.

Why that's important is these brand scores have all increased year-over-year, that's a positive indicator of brand clarity, right?.

So let's talk more about consumer insights. We've been talking so far about what our agents perceptions and brand are and value prop. We did a study this year. It was in field in April, and it's going to be released in the next couple of weeks.

And the 2021 emerging real estate trend study, it focuses on achieving a deeper understanding of new home buyers and owners and those interested in selling a home.

The research provides timely insights that consumers, they're recognizing the importance of agents and technology, and they're reporting a shift in the perspective of homeowners of large, which is related to the pandemic, right? It's comparing before the pandemic to now..

So the key findings that we'll find here and this is top level, right, is over 70% of new homeowners and buyers, they're reporting owning a home is more important now because of the pandemic, right? This is especially true if you look at the millennial segment, they actually report that it's 80% in terms of the pandemic has changed their view on the importance of owning a home.

It's driven a lot by the understanding that it's a smart financial decision and savings. If you take a look at on the left as well, 86% of new and soon to be homeowners, say, real estate agents are important or very important to the home buying process..

The value of agents remains high. It will remain high. If we think about what's happening right now and as we take a look it's reasonable to think in the future that, that will continue. 61% of new homeowners and buyers are also more likely to ask about the real estate agents technology and resource tools compared to before the pandemic.

So the takeaway here is that there's a customer expectation that the real estate agent be tech savvy, right? So as we move into the innovation update, there's an emphasis on technology to empower agents and new ways to connect with them and the consumers during these times and into the future..

So with that, I'm going to transition over to Seth, our VP of Innovation Technology. Seth joined us in mid-2019. He's been in the real estate industry for over 2 decades operating in numerous roles, broker, start-up founder, CTO.

In a short time here already, he has built several software products and elements, including ExpressOffers our iBuying platform. Seth will continue this presentation with a review of our innovation approach and areas of opportunity. Welcome, Seth. .

Thanks a lot, Courtney. Fun to be here, everyone. I joined eXp about 2 years ago, and it was kind of an easy decision. Looking at the landscape, it's just super easy to see that this is the most innovative company with the biggest appetite to change things for the better, while keeping agents at the center of things.

And that's a belief that I share as well that agents are indispensable. And it's our job and my job here to build upon that and continue to build on it..

But today, I am super pumped to tell you about a new initiative that we've launched that's called the Innovation Hub. Obviously, innovation is nothing too new here at eXp. I am talking to you as an Avatar in a pink blazer, for instance, that's already pretty innovative.

But through the new Innovation Hub initiative, we're positioning to take the commitment to innovating for agents really to that next level. And I'm going to start by telling you a little bit about our approach, which is on the slide here..

The Innovation Hub is new. This is a new concept, but the approach is something that we've actually honed and refined for years here. It allows us to target our resources for development and innovating really efficiently and learn and then develop right after that.

To summarize it, we gather information about pain points, needs, opportunities, ID it and then validate before we type a single line of code, rapid prototype, which is something that I think we've got down to a science here and then controlled beta test from there where we can kind of learn and refine on this typical agile cycle.

And from there, we can make a decision and decide if it's something that we want to launch wide..

To me, though, the most important steps in this thing are the first 2, and this speaks a lot to what Courtney was just showing you guys that we want to know what to build before we build it essentially. We've all heard about companies adding an innovation department before, right? Let's be honest.

But what you normally end up getting is innovation for the sake of innovation. You get buzzy headlines, the trendy tech, that kind of stuff that we've all sort of heard about. But at the end of the day, the other part that we've heard about is that users end up not really caring about any of that stuff.

They don't end up using it and it doesn't make a difference day to day..

Here, we have an unwavering commitment to building things that actually will make a difference day to day to an agent's business. We want them to want to use it whatever we build and actually go ahead and do so. Let's call it data-driven ideation. So let's dig into the Innovation Hub a bit further on the next slide..

We're going to start with a project that I started with on my first day here at eXp which is called ExpressOffers. That's our take on the iBuyer program. Because it's a good example of our innovation approach in action, a nice mix of innovation and tech and innovation and business as well.

For those that don't know, iBuying is an alternative approach to selling a home for cash as opposed to traditional listing process.

It sort of allows the seller to sell on their own terms and schedule without dealing with some of the other things that come with the traditional listing like preemptive repairs and showings and financing contingencies and all that kind of stuff..

In 2019, when I joined iBuying was just picking up steam, and we heard through our channels from the agents that they needed a way to get a tool like that into their pockets to sort of remain competitive. And our approach to it differs from the competition in a number of ways. The eXp flavor of this is that agents remain a key part of the process.

And they guide sellers through the iBuying process end-to-end through the ExpressOffers start to finish. We actually maintain a network of third-party cash buyers in all 50 states. So whereas other iBuyer companies typically, they themselves do the buying. eXp doesn't buy any houses in this, we work with this network of a huge number of buyers.

And we're in all 50 states, which is another key differentiator. Because of the way that, that is all structured, sellers can end up receiving multiple cash offers, and the results have been good. We've had thousands of properties submitted thousands of offers in response to that.

And all of this is enabled by the proprietary tech that we ended up building to run this here at eXp..

In fact, I myself was lucky enough to actually write the code and build the initial version of this software. Thankfully, today, this program is and it always has been run by a killer team on the business side.

And thankfully for me, it's now pushed forward into the future by some of our best software engineers who have taken it over and continue to ideate and iterate and bring it forward..

So what's next? What opportunities are we focused on now on the right side of the slide. Number one, enhanced agent tech capabilities with so much innovation in the real estate space seeking to disintermediate the agent from the transaction. We're following the research that Courtney mentioned earlier, that the public wants to work with agents.

And we want our innovation, everything that we're doing to enhance the value of the agent, the capability of the agent, the scalability of the agent and everything that's associated with that on our side of the business as well..

Consumer portal features, as Glenn has mentioned before, our consumer portal initiative, that's really our consumer touch point and could be a great lead-gen opportunity one day for eXp as well.

We've secured most of the MLS feeds in the U.S., and we see a really big opportunity potentially for our Showcase IDX team to build a really unique tool for consumers that could end up being a great source of leads for the eXp agents here if we really nail that just right.

SUCCESS experts continuing the lead-gen theme is a pilot in-house lead-gen program that is leveraging some intelligent lead routing software that we built here as well. That route leads to agents that are geographically close to the lead opportunities.

Again, lead-gen is just showing to be one of the most important things that we can provide for agents. We hear about it survey after survey and through all agent contact channels. So we're happy to keep providing solutions for that..

SUCCESS Lending, as you've also heard, that's our recently announced mortgage JV, got a big opportunity there. Our opportunity to create our own native mortgage experience from the ground up. We can really make this work for agents and consumers alike. And there's a lot to chew on here from an innovation standpoint.

So it's a big area of interest for me personally as well..

And then an eye towards the future, what comes after that? What else are we doing on the side. To be honest, we're watching the trends. We're interested in things like machine learning and AI and thinking about how that can improve our business.

Looking at ways that it can scale our operations as well by automating things that are time consuming, but still complex. We're looking at things like cross reality and the opportunities that, that can provide for real estate. But at the end of the day, we're going to do what moves the needle for our agents and our business.

We're not going to innovate for the sake of saying that we innovate. We're always going to focus our resources and remain committed to that data-driven ideation approach that I talked about before..

So as I said, eXp has always been an innovative company, but we're just taking that next step now.

We're really interested in leading the industry with new ideas, novel innovation and things that will actually move the needle that will actually make a difference day-to-day for the agents out there in the field in our eXp family and the operations side to support them..

So with that, now I'm going to hand it back to Glenn, Jeff and John. Thanks, everyone. This was fun. .

Thanks, Seth. Thanks, Courtney. And of course, thanks, Jeff. It's -- this is -- we've got 1,200, I believe, the staff that make the eXp work from a back office, leadership perspective, and that's in addition to the 60,000 agents. And this is just obviously such a small subsection of the amazing people that are behind the scenes. Gluing it all together.

There are parts of the organization that are well designed and then there's others that is a lot more on the innovation, and let's see if this might work. So it's great to get those updates.

So with that, why don't we jump in? John, I know you've probably got a few -- even a few more questions after hearing from the team here, but turn it over to you for some Q&A with Jeff and I. .

Yes. Thanks and congrats again, you guys, it just feels like you're professionalizing the business more and more, creating structure and formality so that it's fantastic. I want to start off maybe just on the housing market in general. I don't feel like we can get one of these calls out of the way without doing that.

So I mean, market still kind of feels crazy. You've got a lot of price growth. You've got a lot of competition bidding, more still happening. It seems like that they could be loosening up a little bit, maybe a little bit more inventory coming in the market and maybe buyers are starting to wind back a little bit.

But just curious about your thoughts on kind of where you are in the market today, if there's a turning point? And maybe also if there's any kind of thoughts around the pandemic and if there's effect later this year?.

Yes. So you're asking about my crystal ball. So yes, we are definitely seeing a little bit more inventory showing up. We've got a little less. And so we're seeing some moderation of the housing market, but not to the extent that it's slowing to any extent. But maybe just not going as fast as the hyper speed it was going.

So I think from that perspective, it's actually good for the market to see a little moderation. As we -- obviously, we've got this delta variant that's kicked in, which is creating mask man and vaccine mandates and a whole bunch of stuff.

So I think it's still a little bit, well, very much of an unknown as to what are going to be the various responses. But what I think we're seeing is that that COVID is not going away. Just the fact that people have got vaccinated and isn't fundamentally stopping COVID from being a backdrop to what's going on..

And so I think what we're going to see is we're going to see more we call it home office agents, agents working remote relative to their brokerage, that's going to become more and more of a norm.

So the question will ultimately come back to why do offices even exist? And of course, we've really pioneered this whole bricks-and-mortar light or non-bricks-and-mortar based operations. Of course, we did that with the entire executive team as well from day 1.

So I think from a COVID perspective, I think we're continue to be well positioned to adapt but then that plays into the further housing cycle, which is where do people want to live if they don't have to go to an office.

And I think that's just going to continue to drive a fair bit of continued transition in the housing market that will keep that portion going, of course, the low interest rates..

I don't think they're going up anytime soon. That's me personally, but I think that we're -- we've seen these historical low interest rates. I think there's a lot of cash out there. And as a result, that's going to keep interest rates down as well as in all the Fed decisions.

So that's going to keep some positive outlook for housing because most buyers are, in fact, payment buyers. So that's kind of my thoughts, Jeff. Or I probably took everything. .

Yes, you -- I think you got it covered, Glenn. That's great answer. .

Yes. So Glenn, we talked about the -- looking at the positive trends around the agent additions and the kind of team-based approach kind of playing out for you guys. But if we look at the other side of it, like the retention side of things, I know this industry can be a game of musical chairs sometimes.

I personally don't see why you would leave the eXp platform, especially now with the dividend. But talk to us about what you're seeing on the retention side. I don't know if you guys break it out by like quadrants of agents, but how it's kind of looked under the surface as well. .

Yes. So we don't really break it out too much. What we have seen and Jeff, you actually dive into these numbers more than I do, but I believe that since last year, since COVID became part of our backdrop, our retention figures have went up pretty substantially.

So Jeff, what are your seeing?.

Yes, we don't break it out, but our retention has gone up at least 30% since this time last year. So we saw a lot more movement. But now I think, I mean, that the value proposition just keeps getting stronger and stronger.

And I think the other thing, too, is that we -- I was talking earlier about this network effect, we just got some really strong leadership across our agent base, across the country and now across the world. So I think the awareness of the company and the benefits and once they see it, they can't not see it anymore.

And I think the retention, the numbers I'm seeing, we're up about 30% year-over-year on retention. .

Okay. That's great to hear. And then in Courtney sections, she talked about the importance of the equity compensation for agents.

We've clearly had a lot of questions in the past from investors around, does the stock price, whether it'd be up or down, does that -- does it have an influence on your recruiting and your retention? I think from my angle, obviously, looking at this from an investor, I would be more likely to join you guys if the stock is low, right? I think there's a lot of upside because I want to get that equity issuance and then be able to benefit from it.

But just curious, I mean, have you seen kind of any kind of notable conclusions you've been able to come to just based off the stock price and whether that influences retention or recruiting?.

Yes. I think it does influence a little bit on the recruiting side in that our agents are -- they use a lot of social media and they like to create awareness for the business on multiple fronts. So when we saw the stock hit new highs early this year, there's a lot of social media that was playing around that.

So I think that does play a little bit into it, but I don't know that it hurts us when the stock is down. It just -- I think it just helps us when we have different things going on that's a positive in the marketplace.

So like today, if you go into social media, you'll see a lot of social shares from our agents because, obviously, the dividend is something that's unique that makes us stand out from any other company that is trying to do stuff like us. And so that's going to play out well and just getting attention on the company.

So anytime there's good things going on and stock price can be considered a good thing when it's going up, it just helps us on the agent attraction side. .

And I would add, John, that I mean, as we see the company grow like it is, the agents are just -- they're really excited. And I think what the equity piece and the stock does is it makes them feel like they're owners, which they are, right? So to do the right thing, they're kind of seeing the long game.

And we've consistently delivered quarter after quarter up until Q2. And I think people get excited as they see the growth, they see the profitability, they see the shape of the company, and they feel like owners. So I think it's as important of a feeling as owners as opposed to whether it goes up or down, we know it goes up or down.

But on the long haul, I think it's just that the feeling of ownership is a big deal for us. .

Yes. I think that's fair. And then your owners now with a $0.04 dividend increase -- that equates to a pay raise for you. So that's nice as well. Yes, let's talk about the commercial -- excuse me, the international side.

I don't know if you can give us a snapshot now kind of what roughly -- what percent of your agent base is international? And how that's kind of grown if there's any key markets you might want to call out?.

Yes. So internationally, about 10% of our agents are international, and that includes Canada. So sort of look at 60,000 agents, 6,000. And I think we're probably around half of that is actually in Canada.

It's -- we -- one of the things we've been doing is kind of looking at as we're in markets for some period of time, a year, 2 years, 3 years, we're looking at what we need to do to tweak the model to become even more competitive.

And so just being aware that we have the ability to be more agile, I believe, in a lot of these markets around the world than most of the incumbents because we have such a low cost to operate as a brokerage, it does give us certain advantages. So we're definitely making some moves there. You can also checkout eXp.

I believe it's expglobal.partners if you're from a website perspective. And that really talks to a bunch of the sort of international expansion, where we're at, where we're getting ready to launch, and so give you a little bit more detail. So expglobal.partners -- no, .com, just expglobal.partners. .

Yes. John, that the markets that we've entered so far, some of the -- we're getting solid traction in countries like India, Mexico, United Kingdom, South Africa, Brazil, Portugal. And there's -- and in certain countries, like I mentioned at a day right now.

So this is a completely different way of selling real estate in that country, and they're doing such a fantastic job and really showing the benefits of this model in that country. So we are getting traction. The team is up to 17. We're up to 17 foreign countries right now.

And as Glenn mentioned, as we go and we learn, we adapt and we want to be the most competitive and also add the benefits that we have for those agents globally. And what we're also seeing is we're seeing our U.S. agents getting really excited about growth globally. And that's also a huge benefit of us being one brokerage as opposed to a franchise. .

Yes, absolutely. And I think that's something that some of us might overlook sometimes is that I hate to keep using the cliche of a flywheel, but it's absolutely what it is. It's what you did in the U.S. You start off with a handful of thousand agents and that kind of builds upon itself.

So it's encouraging that you're laying those seeds, I guess, in those international markets. But Glenn, I think you and I have talked about this before, but talk about the split structure relative -- from the U.S. relative to some of the international markets.

And how that could maybe impact gross margins over time?.

Yes. So in the U.S. and Canada, we're in 80-20 model. We cap out at 16,000. We have some transaction fees post capping. So that we're at least breaking even, if not making a small amount on a per transaction basis post cap. But internationally, the backdrop in a lot of countries is closer to a 50-50 model.

So in the U.S., it's 70-30 and a franchise fee is a pretty typical backdrop. But internationally, it's closer to 50-50, 60-40 and maybe a franchise fee on top of that. So for us to be able to go into a market, we can typically go in at a 75-25 and still be the best model or one of the best models in the marketplace.

And then you add the revenue-sharing component, which is typically not something that's available to agents to help expand the brokerage and then you add the potential for equity. And we've got to jump through a bunch of hoops internationally on the equity side..

So there may be some countries where it's just too small to sort of think about, but practices and stuff like that. But for the most part, we want to be able to be the most robust value prop in each market we go into.

And we should be able to pick up an extra 50% or so margin effectively on the transactions while agents are capping just because of the way we're structured. So in theory, we should be more profitable internationally. But then the flip side, of course, is that in a lot of countries, the effective dollar cost of a property is 50% of what the U.S.

dollar price would be. So adjusting for those dynamics. But we should have a higher margin percentage internationally. .

Yes, makes sense. And then speaking of margins. So gross margin is something some investors point to. You got some compression there, obviously, but it's -- there's a clear explanation. Obviously, your agents are outperforming or capping more. So it's not necessarily a bad thing.

And I always like to say you don't pay your bills with percentages, right? From an absolute dollar level, the level of your revenue growth is giving you so much more where you're able to kind of track ahead of expectations.

So with all that said, just talk to us about the gross margin, the trends around gross margins? What's kind of driving that lower? And then when do you feel like there's an inflection point and other maybe drivers longer term or what can get that higher?.

Yes. I mean, as you mentioned, John, I mean, the capping is the major driver for the margin to go down. And then I'd say the other major driver was the price per unit. So we're doing less -- you can do less units and still cap with that price per unit.

Over time, as you can see, the revenue -- the growth and the volume is making up from a profit standpoint for the lower margins. But over time, we see opportunity in affiliated services, and we've talked about this quite a few times. And it's just going to take -- it's going to take some time. And we're working hard on it.

But over time, we see that, and we see some of the other technologies that Seth and, lead generation things, Courtney were talking about to help on that margin of the business..

So I'm talking more operating margin. But I think that a lot of people talk about when times go bad, when it's not COVID, I mean, ironically, our margin -- last year, as you can see, it was close to 10%, right? So in a lower growth, we did 33% growth rate last year this time, and our margin was almost 10%.

So yes, as you said, the revenue growth makes up for it. The pressure is really coming from capping in the price per unit, but it does balance out at the end because the volume makes up for the operating margin. .

Yes. Makes sense. And then I went deep down as far as I could go in my notes on you guys for over all these years, and it seems like you've had the cap at 16,000 for several years. Obviously, the housing market has done exceptional since that time frame. But any sense for like what percent of agents are capping.

I don't know if that's something you guys can share?.

So Jeff, have you broken that out? I believe our capping agents has historically been around 25% of our agents are capping agents?.

Yes, that is a historical level. But it's -- as you know, John, I mean, the growth is going so well. We don't have averages that we can look at right now. But 25% is kind of what we've seen historically. It could be up a little more recently because of the price, but that's around the level that we've seen. .

Okay. That's helpful. I want to touch on maybe 1 or 2 of the newer developments. I know we're running out of time here. But I thought the announcement of the mortgage JV was pretty interesting.

So just talk to us about Kind Lending, what drove that decision to pair up with them? And what you see as an opportunity over time?.

Yes. So if you get a chance to just kind of do the back story, Glenn Stearns, Stearns Lending, 1 of the top 5 lenders in the country sold to Blackstone, I think, in 2012 or 2013, and that was for some personal reasons at the time. And then here about a year or 2 years ago, got back into the mortgage industry.

He was on the first season of Undercover Billionaire, which was how I sort of learned about him. And of course, we put together a relationship with Grant Cardone, who is in the second season of Undercover Billionaire. And so I got a chance to meet him, learn about his background. We're very, very aligned on core values.

His core values and our core values and the way that they approach things and the way that they do things really matched up well with the way we -- with the type of partner that we would love to have in that business..

The other part that I think was really key for us was -- is that -- this is a team that really wants to roll up their sleeves and help make a JV work. So it's not like you just announced a deal with Guaranteed Rate like everybody's got to deal with Guaranteed Rate kind of thing.

This was actually something much more strategic where we were actually going to work hard together to build a mortgage company, and we're combining efforts to actually do something very unique in the marketplace. And so for us, we think that, one, huge experience in mortgage.

A lot of the team who was with Stearns is now part of Kind Lending and by extension, is helping launch the SUCCESS Lending JV..

And with that, I think by October, we should have our licensing in place to start to actually do the first loans. But this is someone that has some celebrity status, which I think is going to be really key.

Because we're talking about our agents, brokers and their customers wanting to do business with this entity as opposed to just being another generic joint venture.

So for us, I think it's real -- again, another -- I hope will prove out to be a very strategic move on our part, but we think this is going to be something that Glenn Stearns and myself, we're going to actually get on planes, work on recruiting loan officers in local markets, the top loan officers to join a really great brand underneath SUCCESS Lending that is able to then leverage that 125-year history of personal development and all of that.

We're going to be -- we want to create something, again, pretty unique, pretty special and then being able to then combine that with some of the other offerings that we have. .

Yes. I mean that's really exciting. Even if you look at Realogy, one of your competitors, they're doing over $100 million a year in their JV earnings. So lots of potential there. So it's encouraging you guys to get that in place. I can't wait to see what you do with that. But Courtney, that's all I've got.

Glenn, if you want to, I guess, leave with closing comments. I appreciate you guys giving me time to host today, and look forward to talking to you guys again soon. .

Awesome. Well, thank you, John. Thank you, Jeff and Courtney and Seth for joining us on stage here. Today, obviously, I can tell you that eXp, in my opinion, changed so much in -- especially in the third quarter of 2018, what Jeff joined us. He's been such a partner in helping grow the business. So thanks again for joining today..

One, we're going to continue to work on the various business aspects of the company, and we're going to -- our goal is to grow to worldwide. We want to be able to launch 5, 10-plus countries a year and to really grow internationally to a large size changing lives of agents and brokers.

And by extension, all of us as shareholders benefit from this amazing organization that we're growing together. So again, thanks for joining us today. Thanks for being part of this. I think it's -- the fact that Jeff Whiteside gets to talk about the fact that we did $1 billion in revenue in the quarter makes it a pretty special day.

And again, thanks, everyone, for being part of this. .

All right. Thanks, Glenn. Thanks, John. Courtney, Seth, thank you very much. .

Excellent. And with that, we conclude our Q2 [Audio Gap].