Earnings fireside chat via live stream and EXPI Campus are metaverse. My name is Courtney Chakarun, I'm the CMO of eXp World Holdings. Today, we will begin our earnings fireside chat with opening comments and a conversation between Glenn Sanford, Founder, Chairman and CEO of eXp World Holdings and John Campbell, Managing Director with Stephens.

We are happy to welcome John back as our moderator.

Following this initial segment, we'll move into a presentation, which includes a review of the Q1 2022 financial highlights, there is a investment presented by Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings; followed by Jason Gesing, our CEO of eXp Realty, who will dive deeper into our differentiated model, agent growth and value proposition.

We will then return to John Campbell and our leadership team for a continuation of the Q&A and finally I’ll share details on our June 2022 eXp Shareholder Summit to bring our session to the conclusion. Let's review with the beginning of these 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 quarterly report on 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 is being recorded and a replay will also be made available on expworldholdings.com.

Now for those of you who are joining on the eXp Campus today, did you have any questions here around the screens, you’ll see three of the top, hit the stage zoom button to the right of your chat box to zoom to a specific screen, you can hit the plus icon above the screen.

If you happen to see no slides or a gray slide hit the refresh icon button at the top right hand corner of that screen to correct. While in eXp Campus, should you need any help or have any questions, please put that in a chat box that you see below on the left and a member of the team will contact you directly.

As mentioned, the last segment of our fireside chat is the continuation of the Q&A. And here is a way that we're able to be able to communicate and collaborate on some of these questions.

You want to ask a question during the presentation, you can enter your questions by scanning the QR code presented on the screen or you can go to the phone, and go to slideo.com and type in the event code, EXPI. From there, you can submit your question and you can even vote up an existing question by giving a thumbs up.

If you also like that question ask the screen will remain up on the left hand side of the stage. At this time, I would like to turn the fireside chat to Glenn, our Founder, to start the earnings conversation with opening remarks..

Thank you, Courtney, and thanks, everyone, for attending. This quarter was another strong quarter. Obviously, it finished just over a month ago, but 2022 is starting solid for us. It's really driven to a large extent by our growth and our rapid expansion now into multiple countries. And we've got really three different companies inside of eXp.

We've got eXp Realty, which is the primary driver, as most of you know of the growth engine of the company. But it is enabled by our Virbela enterprise metaverse platform.

We've been using this platform since 2016, bought the company in 2018, not knowing that the metaverse was going to become a big play starting in 2020, 2021 with the pandemic and inside of Virbela. We've got another what called Frame VR, which excited about that and certainly check it out at framevr.io.

The other company is SUCCESS Enterprises, which is SUCCESS Magazine, SUCCESS Coaching, which is something we've now added to the SUCCESS Enterprises platform SUCCESS-based, our co-working venture, which is continuing to gain speed, our speakers, bureau and some other aspects.

We're also starting to leverage the name into the real estate business with our SUCCESS landing platform. So, with that, we're going to talk a little bit, mainly about eXp Realty, since that's the big driver of the company. And the reality is that the eXp Realty business model was really built for any market, up, down, sideways, what have you.

Right now, we certainly are seeing a little bit of impact with higher interest rates. Inventory is actually lasting a little bit longer on the market than it was, say, the end of last year.

But we're really in a position to, whether anything that might come at us, whether it’d be a continued fast-growing market or a potential contraction maybe later on this year or early next year. So, we'll see obviously what happens, but we literally have built this with our enabling technology, VirBELA.

We've literally been able to grow to have 21-plus countries. Just added -- announced a couple of additional countries yesterday. I think that New Zealand is opening this week. So, it's pretty cool in terms of just the growth rate.

Even though I think even NAR numbers have shown a little bit of a drop in the beginning of the year, we continue to grow our agent count month-over-month. We've never had a month in the history of the company where we've actually had the same amount or fewer agents than we had the month before.

And so, we've continued to see continued growth in our agent count. Obviously, very growth-driven, we continue to iterate on the agent value proposition.

We use our Net Promoter Score as a guiding beacon for all the decisions that we make inside the company, and that really allows us to sort of not operate as much top down, but more as a team, understanding that NPS is a big driver to our agent growth, which then ultimately translates to their end customers having a great experience of listing and selling homes.

The global network, 21 countries and counting, we'll certainly announce some additional countries next quarter, but that network has been growing dramatically well in excess of 100% year-over-year growth in our global agent count, and we see a lot of opportunities as we continue to grow into multiple markets around the world.

This was an exciting quarter as well. You may have seen in the press release that we called out, the first $1 billion revenue first quarter. First quarter tends to be a slow quarter in real estate relative to the rest of the year. And with the company, basically, having been consistently profitable and cash flow positive.

Cash flow positive almost from inception, but profitable on an EBITDA basis over the last three years and continuing to increase that profitability over time.

We really have this core that has this variable cost model associated with it that allows us to continue to be positive, both on a cash flow and earnings basis, we feel for the foreseeable future.

So obviously, I don't know exactly what markets will bring to us, but we feel very confident in our ability to pivot and be agile as the markets go up or down. So fastest-growing.

One of the things we're -- today, actually, we just accepted an award at the T3 Summit in San Antonio for being the fastest-growing brokerage according to their stats, and we've certainly had a number of those.

Another stat that we recently learned about back at the same event, with -- in Houston, we're now the number one brokerage by agent count and number of listings in the Houston Association of REALTORS, is a pretty good indication that we're actually breaking into large markets and becoming the number one player in a lot of markets around the country.

So there's a lot of smaller markets that we were already number one in, but it was interesting to just have that call out by Bob Hale in the last 24 hours, just learning that particular stat.

And I think this just continues to translate to the idea that we will be a major player across the US, Canada and all the other countries, we're the fast-growing brokerage in countries like the UK and Mexico and India and a number of other countries as well. It's really just agent value proposition.

But the one that I'm really -- continue to be most proud of isn't as much the agent growth. I think, the agent growth is a result of being just -- taking care of both our agents and our staff and our Glassdoor scores were off the chain this last year. You may have noticed that we were actually in the top five large employers according to Glassdoor.

And that, I think, is another leading indicator to our continued growth and excitement for the company. So I could go over a lot more, but I'm going to maybe turn it over to John Campbell, just for any remarks and some initial Q&A before we turn it over to the rest of the team..

Yes. Thanks, Glenn. It's great to be back from the virtual world again and hearing firsthand about the degree of success you guys just continue to see in the marketplace. And I know, I say this every time, but it just feels like it's such early innings for you guys, I think, are at a fraction of the penetration of total US agents of NAR agents.

It seems like there's a lot of growth opportunity ahead for you guys. Obviously, you're performing well. The stock market is not treating you guys well. It's nothing EXPI is really specific. I think anything kind of housing-related has been hit pretty hard. I mean, stocks obviously go up and down, investors rotate in and out of sectors.

So it's not fun when you're on the flip side of it, but you guys obviously keep doing your thing, and it's not going to last forever. But, obviously, on the investor side of the world, we tend to look at multiples when we make stock calls.

And for those who are not in the leads on the investor side, I mean, that multiple is nothing more than a gauge of sentiment. You guys are -- we're basically finding the spread between the market value of the kind of enterprise, as what's implied by the market price today. We divide that by the earnings expectation.

So just sizing up, basically, what investors are willing to pay for your earnings. As it sits today, based on our projections for you guys, I think the stock is at about 9 times forward EBITDA. That multiple reached about 60 times early last year. And even since 2018, you've averaged 24 times.

So you put that historical average multiple of 24 times on the stock today, it's a $40 EXPI price. So that's well over double in value.

Bigger picture, I think you'd be hard-pressed to find many companies out in the entire market today trading at this type of multiple, with the disruptive characteristics that you guys have, kind of, coupled with the top line and earnings growth.

So all that to say, I think we see a lot of upside still in the EXPI price from here, just kind of need the investors to move away from the chicken little, kind of, sky-is-falling mindset..

But enough on all that, Glenn, I just wanted to maybe start off with one question. Clearly, it's another good quarter for you guys.

So let's just start off kind of with your high-level thoughts? How things shook out? How that kind of fared relative to your expectations of what you point to as kind of the key fundamental drivers in the quarter?.

Yes. Well, one thing, and we called this out in our press releases consistently, and we really do focus on our Net Promoter Score as being the future or the leading indicator to how we're doing. And that KPI is still -- internally, it's our reality. It's an NPS goes down in different areas.

I think this last quarter or two, a lot of it was around Canada. So we focused a lot of work on improving our NPS around a lot of Canadian activities.

And this -- in terms of -- and so when we think about it, we think about it more as a what is our model going to produce if we continue to create a great experience for agents? And then we have to do factor in a little bit of what the macroeconomics of the market are. So I think macro-wise, we're seeing a little bit of slowdown.

And so that -- and from our perspective, meant we grew a little bit slower than maybe we expected because I don't think anybody expected interest rates to jump as dramatic as they did in a shorter period of time.

But we're starting to see that actually play out in our numbers a bit, and we're starting to see a little bit of that sort of internal sort of slowdown. But obviously, our growth rate in terms of agent count continues to sort of propel us higher. And so that's kind of our mix around Q1.

The other piece is that in the U.S., we're -- our growth rate is probably a little slower than we were expecting. And I think part of it is that NAR numbers actually go off in the first quarter or so in terms of number of agents who are active real tours. And so we grew with -- even though the number of agents who are real tours actually reduced.

And so from our perspective, we feel really good about the numbers. But again, there's some macroeconomic factors that we're starting to see it actually play and we can sort of measurably see it against maybe some of our internal projections..

Yes. That's good rundown. And kind of sticking on the bigger pick. I mean, obviously, there's a big fear factor around U.S. housing. Like I was mentioning earlier, a multiple is essentially kind of a gauge of sentiment. The multiples are employing in a lot of these stocks that were going back to 1990 existing home sale levels.

So I don't think it's very surprising to hear a bit of a slowdown, obviously, with rates moving as they have.

But Glenn, I ask you this every time, but like kind of just throw your crystal ball out us and give us your sense for where the market heads over the next several quarters?.

Yes. So I've talked about this a little bit a couple of weeks ago, I was asked the same question by Brad Inman.

And with the Fed projecting additional increases in interest rates and the desire to cool down the housing market at the Fed level, I think that does play into -- if they're serious, we're definitely going to see a slowdown in the market in Q3, Q4. That's my sort of prediction and then that going into next year.

I think it's actually healthy for the market to slow down a bit. There's -- certainly, from a homebuyer perspective, there is a lot of inventory. There's still -- we're still hearing reports of many consumers that are in multi offer situations and can't buy the home that they're looking for because there might be 30 offers on that home.

And that number reduced a little bit, so now it might be 10 or 12 offers on a home, but it's not enough yet we're in a balanced market. So I – my guess is that, the Fed is going to continue to raise interest rates a bit, we could go 6% plus in interest rates. We're not that far away from that now.

And with that, certainly, we've got the other macro factors, even things going on in Ukraine does create a lot of fear and uncertainty around what's going to happen and maybe that does sort of slow down the market as well when people maybe want to preserve their cash or maybe not make a move at this point in time.

So that kind of plays on both sides of the equation..

Yeah, makes sense. And just assuming – I mean, just as a hype of that, if the market kind of rolls over pretty hard later this year, you guys have seen plenty of market swings. Obviously, there hasn't been a dramatic down market that you've seen, the market swinging around in 2014, late 2018. And you performed well regardless of all that.

So I just want to get your sense for how you think the eXp model kind of flex.

And then also from an agent value proposition standpoint, what kind of stands out from the EXPI standpoint, if the market worsen little bit?.

One of the things that, I point to is the second quarter of 2020. It wasn't a pleasant quarter. It was a time when COVID had really fundamentally changed everything for a short period of time. The transaction volume was down across real estate industry. And yet, we turned out our most profitable quarter to date in that Q2.

And the reason why was because we made the tough call, it wasn't a popular call. It was something that, we didn't know relative to residential real estate, if it's going to be essential service, what was happening, all of that, but we reduced the cost to operate such that we turned out our best quarter ever.

We were able to do it, again, wasn't pleasant, not something I would look forward to doing again, but we are actually able to adjust our cost to operate very, very quickly in a down market.

So that was one where there was a real shock to the system and yet we were able to turn out a very profitable quarter, which was really in our mind at the time, a self-preservation decision because, again, we didn't know what was going to happen in Q3, Q4, and we thought this market could be going off a little bit of a clip for a period of time.

So – so that gives us that flexibility in a good market. We should do well in a bad market, we should capture markets there and still do well is the way that I look at it..

Yeah, makes sense. So that's all the kind of high-level questions I've got for right now. I think Jeff is going to do the financial rundown, and I'll come back later with some more kind of in-quarter and financial questions later..

Awesome. And so yes, so welcome my good business partner, Jeff Whiteside. We've been working together since late 2018, I think. Anyway, it's been a while --.

It's been actually above four years so..

Good partner –.

operating metrics and financial metrics. So looking at our operating metrics for Q1. As a reminder, we run our businesses, as Glenn just mentioned, on agent and employee Net Promoter Score.

And our goal as a company is to keep that number above 70, which is really world-class, and we find it predicts our agent growth and retention and satisfied employees. So we're down slightly in the quarter, but we're above 70, we're 71, 78. So we're in the range that we want to be.

And our real model, adding productive agents to our platform drives unit sales volume, revenue and gross margin dollars. So if you look at our agent count, we ended the quarter at $78,196 at first $50,333. So we're up 5%. So agent count was up 55%, a major growth in Florida, Texas, California as well as an expansion globally.

We recently announced 80,000 agents and to give you a split, we're approximately 88% in the US and 12% globally. Going down to the units. Our units was $114,305 versus $73,870, that's up 55%. Our price per unit was 362, up 9% year-over-year, and our volume in Q1 was $41.4 billion versus $24.5 billion, and that was up 69% year-over-year.

Now going to revenue. The revenue, as I mentioned before, was up 73%, primarily driven by increased agents and transactions in North America. We look at our gross margin dollars, our gross margin dollars of $83.5 versus $53.5, up 56%. And our gross margin grew $30 million based on increase on our transaction volume.

Our gross margin percentage declined due primarily to higher priced units and accelerated capping. If we look at our SG&A, our SG&A was 79.05 versus 48.6. So it was up 63%. SG&A costs increased due to higher investments in FTE and growth support international portfolio, technology and affiliated services.

As we look towards the next few lines here, are -- we've got, kind of, gone through the operating income and the net income. So I'll just take you down to the bottom, which is our operating cash flow.

You can see the operating cash flow increased 53% from $62.2 million to $40.6 million, and our cash and cash equivalents of the money we have in the bank after all our expenses and investment was at $130 million versus $108.2 million. So that's great results from a key metric standpoint in the quarter.

Now if we look at some other Q1 investor highlights and milestones on the last page. So in 2022, we chased -- so this was the 10th quarter in a row that we achieved positive GAAP net income, positive accumulated earnings and shareholder equity.

So we mentioned in the press release that we are paying our third -- we paid our third cash dividend in Q1 of 2022. And we announced another dividend for this quarter, which is expected to be paid on May 31, 2022. Share buybacks. We repurchased about $30 million of common stock in Q1.

The Board approved an amendment to increase our stock repurchase program to $400 million -- from $400 million to $500 million and increased our monthly repurchase from $10 million of its common stock month up to $20 million. So we have incredible confidence in the company going forward.

eXp real estate platform has now expanded to 21 global markets, as Glenn mentioned. Dominican Republic, Greece in the first quarter of 2022, have announced the plan to open three additional locations, including New Zealand, Chile and Dubai in the near-term future. So fantastic strong quarter from our standpoint.

We've delivered quarter-after-quarter and continuing -- and we are really in a situation where we are in a position to take on whatever happens in the upcoming -- the headwinds. So now I'd like to go over to our CEO of eXp Realty, Jason Gesing. He'll cover our innovative model, agent growth and value proposition. Good morning, Jason..

Good morning, Jeff. Good morning, everybody. Good morning Glenn. Thank you, Courtney. Thank you, John. It’s always feel privilege to be up here. And I'll just say, first, if I say nothing else congratulations once again to our agents, brokers and staff who really have made -- today possible and have been doing it all along.

As Glenn mentioned in his remarks, eXp was built to thrive in all market conditions. And in fact, Glenn founded the company really during it in response to the great recession and designed the operating model to be flexible, to be adaptable and to thrive in downturns in strong markets.

And so where the growth opportunity exists in part is that we believe for some time that when the next time market arrives, we're in a very unique and strong position to grow as a company, but also to help brokerage owners who -- strong position remain in the business, and then they can eliminate fixed costs, grow into markets that would otherwise be unattainable to them without great risk and expense.

And they can really leverage their network and credibility to grow their own organizations, while also providing new opportunities for the agents and the brokerage and others in the industry.

And what's really exciting to me, at least about this long held belief is that now today, we've got countless examples of brokerage owners who have joined us, they've migrated their agent base over completely. They’ve free calls from arduous supervisory obligations.

They've grown into new countries and states and all the while, they're achieving greater levels of profitability and satisfaction. And that's a good market. So we really believe that we are a logical and very appealing destination for brokerage owners going forward when the market bid does turn.

As you've also heard today, ESP continues to have a strong financial core with consistent positive cash flow and no long-term debt, which positions us well in these uncertain markets and which stands in concur as to many of our competitors who have mountains of debt and which are yet to reach profitability due -- despite the strength of the mark-to-market in 2020 and 2021.

And we believe this potentially limits our opportunity to invest in growth. And in contrast, ours is a flexible cost model. Centered as Glenn said, around the metaverse community, which now has more than 80,000 agents spread across the globe, and it eliminates operating burden based on brick-and-mortar occupancy.

Additionally, our positive cash flow -- excuse me, means that we can continue to make smart investments that accelerate our specifically a couple of examples, not limited to these, but as [indiscernible] workers to expand, we've launched the ESP relocation services by expertise in US and international employee relocation.

Since the inception last year, the program has thus far generated more than $425 million in pending and closed volume and has brought in more than 2,200 referrals. And what's notable about that is more than 900 of those 2,200 were made just this year, which we believe indicates the programs appeal as well as its momentum.

Our iBuyer program, which we covered in previous sessions ExpressOffers has a strong base with thousands of agents certified and we believe that as mortgage rates increase, there will be sellers in distress or under pressure and looking for options.

And we believe that ExpressOffers provides a cash option for this clientele with better third-party investors, while keeping the agent at the center of the transaction without us acquiring a single piece of property or taking any balance sheet risk.

Additionally, we've launched a single global financial system that will improve our operational efficiency, increase internal controls and support our quick scaling global footprint, which is helpful and important as you see on this slide coming up. We are one brand -- brokerage that's expanding globally.

And our continued growth in part could be attributed to the compensation model in these countries made possible our utilization of the metaverse -- really allows us to build a strong, collaborative, environmentally, friendly and interpersonal community.

Despite headwinds affecting the broader housing market, we're well-positioned to capture increased market share. In a slower market, our model is highly attractive to agents due to the competitive commission structure and additional earning opportunities provided to equity, revenue share and partner programs.

And we saw this play-out through COVID and post-COVID, including during the early stages of pandemic activity into a halt. Domestically, we are the 2021 growth leader for agent count, sales, volume and transaction size, and we continue to capture that momentum specifically, Glenn mentioned the T3 Sixty award this morning.

The Real Estate Almanac has recently identified eXp Realty as the number one growth leader year-over-year in volume transactions in agent count. In addition, RealTrends 500 recently identified us as the number one -- the brokerage in the country.

It's number one top brokerage transactions and its number -- top five year [indiscernible] in sales volume percentage. Globally, we continue to expand, as folks I mentioned, we've got regional hubs in the EMEA region, the Caribbean and Latin America region and Asia Pacific with coverage and operations now in all time.

Also, with respect to our global efforts, we are today 42% above forecast for revenue and have increased agent growth 314% year-over-year as momentum continues to build in our new markets. And as Jeff mentioned, international agent count now makes up about 12% of our total agents, up from 7% year ago.

Our ESP commercial business continues to focus on attracting top productive agents, both in the US and abroad. Their focus on productivity is resulting in strong increases in revenue, four-digit percentage increases year-over-year. Triple-digit increases in transaction volume.

And looking ahead, we're really excited the commercial teams worked to diversify their service offerings by strengthening their expertise to deliver great client service in a variety of commercial disciplines.

And then lastly, I know you've heard it in the prior calls, you heard it twice this morning, you're going to hear it again because it's that important to us, but we really do focus on value for the agent.

We utilize Net Promoter Scores is the critical measure of our efforts to build and continuously iterate on the most agent-centric platform on the planet. Our NPS score of 71 ranks us among some of the best brands in the world and as far as we can tell, well exceeds the industry average, which we believe is somewhere in the neighborhood of 30.

As the first cloud or meta-verse brokerage in the world, we provide location and time freedom. We enable our agents to do their best work when and where they need to, while still providing great opportunities for collaboration, education, community, and connection in our vibrant campus, which we call the eXp World.

We offer robust compensation opportunities, not just in terms of cats and splits and both these equity and revenue share, but also with other offerings that are important to our, such as health care, true health care operations.

Today, we've got over 4,100 agents enrolled in our health care offering, total enrollment, which includes partners, spouses, and children, it's up around 12,000.

Health care for agents has been a chronic challenge for the industry and we're pleased to have arrived at a solution because as an agent, if you're worried about your health, then you can't focus on your business.

And finally, we foster our culture and community through various initiatives, including our ever-growing one eXp Diversity and Inclusion Initiative and our ICON Achiever program. On the staff side, our employee NPS scores continue to be very strong.

It's our fifth right consecutive year being listed on the Glassdoor Best Places to Work rankings for large companies. Today, we're at number four and ahead of many well-known household brands and names. John, to back over to you, but thank you once again for letting me participate. Thank you..

Yes. Thanks, Jason. So, getting back into the Q&A here. Let's start back off with one of the positive developments that kind of jumped out from the press release. Glenn, you guys upped your buyback authorization that you -- as you just mentioned, you've doubled the -- you're doubling the pace of monthly buybacks.

So, talk to us about what drove the decision from the Board level..

So, a couple of things. One, our stock buyback was limited to $10 million a month, which is actually why we accumulated more cash on the balance sheet than so that -- so we bought back $30 million.

And so the -- what we have with the Board is an agreement to maintain $100 million in cash on the books because we feel that, that, for us, is an adequate amount of cash in order to run the brokerage. So, for us, it really was around creating an opportunity to buy back more.

Obviously, it's not going to be a one-month situation and given our growth rate and continued cash flow, we may need to increase that at some point in the future again in order to get us back to that $100 million cash balance. So that's kind of where -- what we're kind of focused on is what's the appropriate speed.

And then we just wanted to also show that our commitment has been to, one, offset any dilution in the stock relative to our equity programs. And in some respects, be able to actually reduce that and bring it back to prior period levels in terms of just number of shares issued outstanding and fully diluted basis, et cetera..

Yes, it makes sense. I mean, I think you saw -- yes, you saw a 20% increase in the cash balance sequentially. So, you are sitting with a really good balance sheet. Obviously, it's not fun to have your multiple under pressure in the public markets.

But on the flip side of that, on the M&A side of things, I mean, you can typically get some stuff that, I think, pretty attractive multiples. I don't know how much this has trickled into the private markets. We're probably holding up better than what the public markets are.

But give us your thoughts about M&A, that hasn't been a huge focus of your story, but just give us your latest thoughts on that..

Yes, we -- so Kyle Kittleson heads up our M&A opportunities inside the company, and he heads multiple opportunities, certainly on a monthly in sometimes we'll see different opportunities even on a weekly basis. We really look at a couple of things.

One, synergy and culture, 80% of the time that M&A is done, it doesn't work because there's a cultural component that maybe doesn't fit. And so we really are looking at both of those from an M&A perspective. And so we've got various different things we're looking at.

We expect that we'll have some announcements around M&A in the next few months, not any huge M&A that's currently in the works, but certainly some small projects that we'll pull in.

But we really are -- as, I will say, housing stocks in general are under pressure, we think there's going to be some opportunities to pick up some things at some reasonable valuations. They're a little crazy in the last couple of years, and so we'll look opportunistically to see what we can fold in, if it makes sense both financially and culturally..

Yes, makes sense. And then maybe one for Jeff, here. On gross margins, obviously, that's been a pretty big focus for investors over the last two or three years, but still a little bit of pressure year-over-year. I think almost all of that's just cap, but you've grown it sequentially for the second straight quarter.

Before we kind of get the moving parts there, just thinking about the full year gross margins. Just help us out on this, if you can.

If we were to assume that the average commission per agent kind of stayed the same with greater revenue growth, would you be able to see some gross margin expansion? Would it kind of be flattish year-over-year? Just latest out there?.

Yes, John. One of the biggest things that we found, and it's kind of obvious, but it's the price of the units as the housing prices have increased, we've seen our return on gross margins. I mean, if you look historically, we're around an average somewhere around the 8.5-ish, 8.4-ish across since 2018.

So I mean, if we see the business, as Glenn kind of pointed out, coming down and the volume coming down towards the end of the year, we think that will actually support the percentage. But as I mentioned before, I mean, what we really focus on is we focus on the gross margin dollars that are coming into the business.

And that's where we make our best from. So I'd say historically, they're in the low 8s. And we were at 8.3% in the quarter. So depending on what happens to the housing market, the prices, if the prices kind of do stabilize come down and the volume comes down, the gross margin percentage will go up.

But we still have a pretty healthy -- very healthy actually gross margin dollar return on the business..

Yes, makes sense. I think on the investor side, we tend to focus too much on percentages and....

Yes, I think so. I mean, you can see, I mean, the percentage is obviously, we get to same market share, right? So that's a big deal for us and investing in the future is a huge deal for us. So we're really looking at that dollar figure and that dollar figure is growing substantially every quarter..

Yes. percentages do not pay the bills. That's for sure. Okay.

Longer term, do you see a pathway back to the kind of low double-digit margins or gross margins? You guys have done that in the past, but I don't know how much of an impact from ancillary services, that's actually one of the questions from Slideo here, but just talk about kind of the impact of ancillary services and what they can do for gross margins?.

Yes. I personally, I mean, as I said before, our gross margin historically percentages has been in kind of the lower – and I do believe that we all believe that there's a big opportunity for us in affiliate services in things like other related businesses like transaction coordination, high-quality lead generation, healthcare, mortgage, title escrow.

So, from what I've seen, there's a point or two over the long term that we can add to this business. Once we get – you can see the numbers that finished last year with a very high revenue number and that continues to grow. So, we think the opportunity there is a percentage -- the two percentage in the long term to add to the operating margin..

Yes. Makes sense. And then shifting gears to the OpEx operating expense side of the business.

I guess just first, can you give us an update on what the variable kind of versus fixed mix looks like today?.

Yes. I think most of our expenses are in supporting the brokerage, right? So that's -- those are kind of variable expenses. We have a lot of variable expenses. A huge piece of our expense is the growth of the business and that comes in the form of revenue share. So, as the business goes down, obviously, that goes down too.

So that's an automatic buffer on cost. And then we do have the ability as Lynn mentioned before, when we had to react in 2020, not something we need to do, but from a percentage of – I'd say the majority of our costs are variable costs in our business that we can take action on if we have to.

But at the same time, we're working extremely high across the business to increase our revenue in areas like international, areas like commercial, areas like affiliate services.

So that's our main focus right now is investing for growth – and when we get to the other side of this, we think we're going to make great shape, both in the real estate business and also along the affiliated services launch..

Yes, it's a good run done. One of the things we do, just to try to give a sense because as you mentioned, I think the fixed cost side of the model is a low, low percent of the kind of cost base, but there is a little bit of a leverage potential there, right? And you guys – we've looked at it typically on a fixed cost basis per agent.

So how much fixed cost is it required to support on a per agent basis that you're getting leverage on that for several years and then over the last probably 1.5 years, it's kind of going the other way a little bit.

It seems like that a lot of this investment, you kind of called some of this out, but maybe walk through some of those investment areas and why the spin there has been a little bit lesser than the revenue growth?.

Yes. I mean one thing I would say is that, the technology investment that we're taking on now when we've been taking on over the last couple of years is, all about getting more productivity across our business. So that, that SG&A, direct SG&A costs to support the broker go down.

So, Glenn maybe a couple of comments from your side in terms of the productivity and technology that we're working on across the business..

Yes. So, we're definitely doing a fair bit of what we refer to as R&D to improve the transaction workflow process. So, we've been making some investments around how to make the transaction workflow easier for the agent and also for our internal staff -- so that's been some investments. We're also investing heavily in the portal.

Showcase IDX building out exprealty.com, .ca.

And then, international, we want to get to as many countries as we can, as quickly as we can and recognizing that it takes a little bit of time before they get to positive cash flow, but we've already got to positive cash flow in a number of countries that we expand to because of our low-cost operate, but we still want to continue to keep our foot on the gas to get to those countries, learn what we're going to learn, entering those new countries as we can, so we can make the pivots and adjustments so we can become major players.

And we think that those are the investments and the -- that will pay dividends in future years, especially, like we're really not focused so much on our -- we call our short-run results. We're really focused on, how do, we actually achieve the aspirational goals of reaching 500,000 agents in five years.

And that just takes continued investment, because we think long-term, five years, 10 years, how do we truly become the largest, most agent-centric real estate brokers on the planet. And that's really our big driver.

Short-term, we'll maybe get the stuff to do something in the quarter, but the long-term stuff, is the stuff that really creates the generational growth engine that will propel eXp into well into the future. And that's really where we continue to focus. So, I know that you in your role may look a little bit at the short-term as a predictor.

We really focus on sort of that long run view, and what are the things that we need to put in place, and how do we make those investments so that five years, 10 years from now, we're a super dominant player..

Yeah, makes sense. I mean, that's like that's the delicate balance with Wall Street, obviously, investing for the long-term, while showing near-term results. It's just a balancing act for sure. I want to hit you with one question. Don't need for this at all to be a zinger, but this is a question we get quite often from investors.

I've seen it in the chat box here, someone was asking about it. But Glenn, I believe you've got a standard kind of 10b5-1 plan is driving out some of the shares.

So how do you respond to the question, why sell here?.

Yeah. So I prefer actually not to really be selling, but I have options that were set in 2012 that expire this year. And so ironically, I made the mistake, because I was very optimistic around the stock last year. So I took down about half of those options at a higher price, a big taxable event for me.

And so a big portion of that sale -- those sales were literally to pay the taxes, which were something akin to $16-something million that was -- that came from just an exercise and then trying to rebuild a little bit of just my own personal cash reserves for me personally, but that's been -- and I did it has a, I think, 9,000 shares a day, because it was a really small amount, as opposed to just doing one big whack of options exercised in sales.

So that was really kind of the idea. I'm not sure I would do it exactly the same way in the future, but that 10b5-1 plan is in place through, I think, September. Technically, the current one has a floor price of $15 a share. So it's below 15%. I'm not selling. So that may create a different scenario.

For some reason, stock continues to be under pressure later on in the year, but that was really the whole idea. I still obviously control and own a big whack of stock beyond that. That's really my core holdings, but this is all around just the stock options that expire later this year..

Yes, makes sense. There was a question on the slido and also myself curious about this. So talk to us about set-lending.

The number of loan officers, kind of, how far off the ground you've gotten that thus far and when you really expect it to start contributing?.

Yes. It's actually got some green shoots. It's our third move into mortgage and we've got 31-plus loan officers in a few different states. Started in Illinois, I think we've got some in Denver, got some in Arizona. We're really building out the network of loan officers.

There's approximately 30 transactions were done, each of the last couple of months, kind of working out the kinks in the system, the Kind Lending and -- which a lot of the Stearns Lending team is now part of Kind Lending and then also part of the JV.

They've been really working diligently to create a really good process for our consumers and our agents. And so, it's getting some momentum. It's not huge yet, but one of the neat parts of our model versus other lenders is that, ours is almost exclusively purchase-based business.

We're not relying on any refinance, which there is virtually no refinance going on in mortgage right now. So we are in a really good position to start to build that and then also eventually have our own more retail-oriented success lending branches.

So we're really approaching it as a kind of a unique joint venture in that, it's not exclusively eXp Realty generated business. These loan officers are bringing in their own book of business. Glenn Stearns has made the statement that he'd like to see 50% of the loan volume actually come from non-eXp related sources.

And so, he's been really following that path and building up the pipeline of business from those loan officers. And that he's done this before. And this, I think, is the one that the Kind Lending team and Glenn Stearns especially has his heart really into, I feel like it's going in the right direction.

And I would say later on this year, third quarter, fourth quarter, I think you'll start -- we'll actually start to have measurable results start to show up in our financials..

Okay. Great to hear. I've got one last kind of two-part question here. Big picture and this is my last question on my side. But first, you crossed $1 billion of quarterly revenue last year. That was a pretty big event for you guys. You've now shown together three straight quarters of over $1 billion, including 1Q that is seasonally weaker.

So, you guys are on a really good path, but medium term, near term, whatever you think. When is the next milestone, the $2 billion of revenue? When do you think you could cross that? And then, the second part of that is, you guys have talked to the 500,000 agents in five years. Let just get your latest view on that kind of divisional net front..

Yes. Well, my best guess at the moment is that 2023, we'll have our first $2 billion quarter. I mean it's possible that it could happen this year, but certainly, we've got some macro headwinds and other things. So 2023 is kind of my first, where I see a reasonable shot at that $2 billion in revenue in a quarter.

The 500,000 agents in five years, the -- again, I call it aspirational. I do believe, there's a little bit of aspiration to it in terms of the time frame. But I think the number is an achievable number over time. So I think that we will eventually be 0.5 million agents.

International is going to again be a great part of our market, but we love to have internal rallying cries. And we love to have these internal sort of like where could we be, if we continue to really focus on the agent value proposition and being sort of the most agent-centric real estate brokerage on the planet.

And we just think that, if we do a great job, it's almost the field of dreams, if we build it, they will come. And so, we just continue to work on building the best real estate brokers on the planet being super, super focused on Net Promoter Score.

And as a result, that translates into all the other benefits of a well-run organization, which eventually, I think, translates into some really solid agent count over time..

Yes, absolutely. I lied, I've got one more. I'm going to squeeze in here. It's actually came in the chat box, and it's a question I was meaning you asked you earlier, and this is actually for -- probably for Jeff here. But on the tax benefits, you've released valuation allowances a couple of times.

Just touch on us -- just touch on the sustainability of that is coming directly from the share issuance, and that should be expected over time?.

Yeah. I mean, it's hard -- as you probably know, John, it's hard to predict. We saw it in our numbers last year. And really what it is, it's the fact that we've sustainably generated net income over a long period of time. We're now able to take a benefit on the compensation tax deduction.

So, it's a function of that cost, and it's a function of the stock price. So, I've had this question come up.

I mean it should repeat over the foreseeable future, but we really can't even calculate them until we get to the end of the quarter and find out where the stock price goes, what that cost is, but it's been consistently hitting our books for probably like the last three, four quarters. And we see it continuing.

At what level? We're not sure based on those two variables I just mentioned. But that -- it's a positive thing for our company that we mean positive net income for so long, we can now take benefits like this compensation tax deduction. So that's all, I can say right now.

It's not something we can calculate or predict, but it is something that should continue to some extent going forward in the near term..

Absolutely. Well, that's a great rundown. And I appreciate you guys giving me the opportunity to join you again in the virtual world, especially on the hills of such a great quarter. Thanks for your time..

John, appreciate it..

End of Q&A:.

Awesome and Courtney Chakarun, our Chief Marketing Officer, is going to wrap up this earnings call..

Thank you, Glenn. A reminder, we have our annual eXp shareholder Summit next month. This event is hosted in Orlando, Florida on June 19 through 21. You can actually look if you were an eXp campus on either side through the agenda. You could also see in this presentation a QR code as well as going to our expshareholdersummit.com.

This year's event is going to showcase the company highlights, official business for our shareholders, our leadership, industry-leading agents, which I see here today, sharing successes in special guest features. So with that, we also have a virtual opportunity to view the general session in eXp campus.

That's where we are today and a live stream length that will be made available on our homepage, expworldholdings.com. Thank you for joining us today. This concludes the eXp World Holdings 2022, Q1 Earnings fireside chat..