Good afternoon, and welcome to the eXp World Holdings Fourth Quarter and Full Year 2022 Earnings fireside chat via live stream and EXPI Campus, our Metaverse. My name is Denise Garcia and I manage Investor Relations at eXp World Holdings.

Today, we will begin our earnings fireside chat with prepared remarks from Glenn Sanford, Founder, Chairman, and CEO of eXp World Holdings and CEO, eXp Realty, followed by a review of the fourth quarter and full year 2022 financial highlights presented by Jeff Whiteside, CFO and Chief Collaboration Officer at eXp World Holdings.

Following our prepared remarks, we will open the call to a Q&A session with eXp World Holdings covering analysts and questions submitted to eXp. Let's begin with a review of the forward-looking statements.

There'll 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.

Forward-looking statements are based on assumptions as of today, February 28, 2023, and the company undertakes no obligation to revise or update them. Please see our filings with the SEC including our most recently filed Annual Report on Form 10-K for a discussion of specific risks that may affect our business performance and financial condition.

As a reminder, today's call is being recorded and a replay will also be made available on expworldholdings. Now for a few logistics and we'll get started. For those of you joining on the eXp campus today, to see all three screens, hit the stage Zoom button to the right of your chat box.

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On slide, should you wish to ask a question during our presentation, you can enter your questions by scanning the QR code presented on the screen with your phone or go to slider.com and type in the event code EXPI. From there you can submit a question or vote up an existing question by giving a thumbs up if you like that question to be asked.

This screen will remain on the left hand side of the stage. Now, I will turn the fireside chat over to Glenn and Jeff, before I open the call to questions..

Hi, thank you, Denise. And thank you everyone for attending here as well. First and foremost, as many of you know, eXp World Holdings is primarily a residential real estate brokerage which I founded a little over 13 years ago, close to 13.5 years ago.

On behalf of our agents, who also are our shareholders, and in a little bit, I'll be sharing a bit on how we're driving -- continuing to drive this mentality through our organization through the use of NPS, a new term that we referred to as earned growth rate.

I think it's important to understand that in the context of being a long-term shareholder, even though obviously today we're going to be talking a little bit about our past results, but our continued focus on the agent value proposition, I think, is what's most important when you think about future results.

Obviously, despite the challenging market in 2022, the eXp value prop continued to track agents. And a result, we grew revenues while maintaining a strong balance sheet with zero debt. We also paid dividends to our shareholders as part of our differentiated value proposition and our equity offering to agents, which is unique in the marketplace.

This year, in as of this 10-K, we're actually increasing our financial transparency into the organization.

We're doing that through what we're referring -- what's referred to as segmenting, and one of the reasons why I did that is because of the challenging market, we wanted to show to our agents, staff shareholders, and others that at scale eXp Realty is, as we've said for a long time, we believed it would be profitable in good times and bad times.

And what you'll be able to see is when you actually look through our segmented filings, you'll actually see that eXp Realty North America, even in a tough market, continues to be profitable, and you're also able to see how we're actually investing into other markets, international others, which you'll be able to certainly see as well.

So, when we started eXp Realty, we introduced to the marketplace an agent-centric cloud-based model which had significantly lower costs as well as high agent engagement and support. What's interesting is the industry really has been fairly slow to respond to the new normal; even with the pandemic, the industry hasn't shifted that much.

And, as I like to say, at least relative to many of the legacy franchise players, it really feels like at least from a competitive standpoint that there is a lot of brokerages that are basically dinosaurs teaching other dinosaurs how to be better dinosaurs.

Because of that backdrop, we've been able to scale to really tens of thousands of agents and hundreds of millions of dollars, actually billions of dollars in revenue, in North America within really a fairly short period of time without much in the way of competition.

However, as we've continued to scale, we're actually now starting to see some new entrants in the marketplace, although the vast majority of the industry remains wedded to the legacy high-cost infrastructure models.

To drive the next phase of eXp's growth, we're actually really and one of the reasons why I came back as CEO of eXp Realty was to really continue our focus on the agent-centric nature of the real estate brokerage, leveraging our scale with the ultimate goal being the number one worldwide real estate brokerage and brand, and we've done a great job so far.

So, in 2023 and beyond, we will continue to make investments into our -- as you can see, our segments -- our core segments. Primarily, eXp Realty North America International is a big growth area for us, a lot of investment going into that.

However, we also have a strong balance sheet with over $100 million in cash and zero debt, which enables us to continue to be agile and innovative in the various different business segments that we compete in. We continue to make investments in the market downturn.

In fact, we've made a shift, which Jeff will talk to in a little bit, in terms of how we're thinking about it in terms of the financial management side because we believe that now is the time to actually grow in a down market, now that we've actually broken out these segments, and you can see that we actually have a scalable profitable model at scale in North America.

Our goal is to actually make that a reality in many, many international markets around the world.

One of the things that we've talked -- even at the beginning of the call, talked a little bit about Net Promoter Score or [technical difficulty] our agent Net Promoter Score and that's really our North Star and is really a great predictor of our long-term success.

We have an all-time high globally of 73, and we continue to sort of double down on how we're using NPS as a tool to actually drive a founder's mentality into an organization in a way that creates key metrics for our team to iterate around.

We're investing in products to drive greater agent productivity, which ultimately means that they are getting high-quality opportunities. [Revonos] is a newly stood up organization underneath Leo Pareja which aggregates national opportunities for agents.

We've stood up a luxury division at EXPCON which has been well received and we continue to expand our eXp Realty division, as well. We also have been growing our national search portals. Some of the things you may, remember me talked about in years past, is a concept called the alt portal, which in this case we've been scaling Zoocasa.

We announced a few weeks ago, our partnership with Realty.com.

And then we've also continued to build out eXp Realty's website and web presence and we've got some cool innovations that we're going to be talking about not today, but very shortly, which is going to give agents a significant advantage in relation to the company-owned website for leads and for agents.

So we're excited about a lot of the things that are coming down the pipe. We also continue to invest in personal and professional development services.

We've got a number of things that we've done there including SUCCESS Health, SUCCESS Coaching, and then we've got an announcement that we're going to be talking about on March 6th, Monday next week, which we're really excited about in terms of expanding out the success ecosystem.

And then, we continue to really focus on, and this really falls under Patrick O'Neill, who recently joined us, really improving the overall experience across the entire agent lifecycle. We've been improving the onboarding, training mentorship processes. We've enhanced payment processing.

And, in fact, in some markets, we've literally got to the point where we can pay agents within 24 hours of us recognizing that the transaction is closed, even before, in some cases, we've actually collected the money because closings are a highly collectible transaction from a closing perspective.

So, we're really excited about some of the innovations we have around agent pay. We've also revamped our support and collaboration services for existing agents. We've launched an express care desk and next generation squads in local markets. So, we're actually driving more and more into the local markets.

We've also focused on new global capabilities with teams focused on around-the-world 24/7 support, and so those are other things that we're focused on.

VirBELA, one thing we continue to do is invest there because that's the single enabling technology that's allowed us to grow, and in fact you're here in one of the many VirBELA campuses that we maintain for various purposes for the shareholder meeting today.

And we continue to invest in another Metaverse platform, Frame VR, which is a web-based Metaverse which is super accessible from desktop, mobile, Oculus headsets, et cetera. So, excited about that. I've talked a little bit about this earlier, but one of the things that we have been using since 2016 is we've focused on Net Promoter Score.

It came about from a number of books that I personally had read that I've shared with the management team back then, and it really matched up with what I call the founder's mentality. And the founder's mentality is that, it's about creating a differentiated value prop for your customer and then delivering on that every single day.

And that ultimately turns into something called the Net Promoter Score or Net Promoter System that was developed by Fred Reichheld at Bain & Company a number of years ago, which was written about in the Ultimate Question 2.0.

In his most recent book, which I've also shared with the entire management team and the Board, Winning on Purpose, he introduced a concept called earned revenue growth or earned growth rate, and that's a really important concept because what it does is it breaks down for long-term shareholders why the most important metric that you want to be measuring is what is -- what do customers feel about the differentiated product or service offering that a company provides.

And by understanding that, then you can make some predictions on the health and growth of a company.

And so, we've really focused on it, and what I believe that it really does, from my perspective, is it helps us teach the organization at scale to actually think like a small company founder who's focused really closely on the customer and getting close to, in our case, the agent, and understanding that they are the ones that ultimately we're building it for.

But if we do it right long term, the shareholders win as well, and of course we've shared equity with our agents and brokers. So, this concept runs way deeper than just thinking about it from an external perspective.

This actually becomes very much of a virtuous circle of how we operate the business and ultimately retain revenue at a much lower, if no marketing cost type of business.

So, the bottom line is highly satisfied agents stay with us longer, grow their businesses by attracting new agents for the company and that allows us to invest money that we would have normally spent on marketing, into actually building things that our agents actually want and need, and that's the virtuous circle that ultimately yields for long-term growth.

And with that, I'm going to turn it over to Jeff Whiteside..

All right. Well, thank you very much Glenn. And thank you, Denise. Good afternoon all, and good evening, I know some people from Europe. So, thank you for showing up to the presentation. I'll start the financials by highlighting our full year 2022 results, beginning with eXp World Holdings.

Consolidated revenues increased by 22% year-over-year to $4.6 billion, while gross margins, percentages, and dollars increased in versus 2021. We maintain adjusted EBITDA profitability throughout the year despite a challenging second half of '22 that we'll get into. And we ended the year with a stronger cash position of no debt on our balance sheet.

As Glenn mentioned earlier, beginning this quarter, we will be reporting four operating segments, eXp North American Realty, eXp International Realty, VirBELA, and other affiliates services. On this first page, I'd just like to highlight a couple of our segments being North America and International Realty.

2022, the North American business grew by 22% revenue and solidly EBITDA profitable throughout the entire year, even as we expanded our business and acquired to Zoocasa. eXp International Realty remains an investment mode as we scale the business.

Our full year revenue grew at 102% as we increased our agent count, productivity in previously launched markets. During 2022, we entered six new markets Dominican Republic, Greece, New Zealand, Chile, Poland, and Dubai. 2023 international Realty will be focused on growing --driving growth and production in our existing markets.

And as Glenn mentioned in his opening statements, our operating plan in 2023 and beyond is to continue to invest in segments that provide value to our agents in the long term. In terms of capital allocation, we'll continue to fund investments in each segment that we believe will generate an attractive long-term financial return.

So, I'm going to get into some of those numbers on the next slide, if we could move there. I'll provide some more information on our segments. So, if you look at Slide 13, you're going to see a full year 2022 segment revenue and adjusted EBITDA numbers for all four of our segments.

In 2022, as comparable to previous years, our North American Realty segment is prime -- is our primary driver of revenue, at $4.544 billion and adjusted EBITDA of $103.3 million. So, we've talked about this.

We have -- this is the first time we're actually breaking it out, but I've talked about it several times throughout the year is that we're very, very fortunate in our business, to have the North American business really driving growth and profitability that allows us to invest not only in North America but international and in our technologies.

That's what you're going to see in this presentation. International Realty, VirBELA, and other affiliate service segments contribute modest amounts of revenue today. But we believe the investments we're making in these segments have potential to help drive our growth into the next phase of growth.

So, if we look at our international Realty segment, as I mentioned before, we've entered 22 international markets. Each market is different and it takes time to optimize the model in each country, based on local market dynamics.

Continue to tune the models in each country and drive top line and margin expansion and that's kind of what our focus is going to be in 2023. In VirBELA, as Glenn mentioned, we're making investments to support our foundation, centric cloud business model. I mean, I've talked about this since I got here.

I'm just -- it blows me away how productive and how well this platform works to help us grow and service our agents and our employees. The other part of the VirBELA product is Frame, and so that's -- that is -- that's a web-based software solution that we're generating as we speak. And I think that's going to be on the commercial side.

We also generated revenue in VirBELA from third-party enterprises. We license our technology and operate their businesses on our platforms.

Lastly, our Other Affiliated Services segments, we house -- in that segment, our investment is in SUCCESS Health and Coaching that help brokers and agents develop personally and professionally, while growing the business. eXp agents represent one of our largest pool of brokers and agents in the industry.

We are focused on leveraging that scale to build high-margin ancillary revenue streams. With that, I'll move to the next slide, review some key metrics on a consolidated basis. So, this is at the consolidated level of EXPI for 2022, the entire year comparing the 2021. Our key operating metrics, and we talk about this every time, ANPS is huge for us.

We ended at 71 for the entire year, which is the same number that we ended at last year. It's -- our goal is to shoot above 70, 70 and above, which is world class, and we've done that this year. Agent count, we ended at 86,203 agents, up 21% year-over-year. Our units were 511,089, up 15% year-over-year.

And our volume, we ended 2022 volume at $187.3 billion, which is up 20% year-over-year. 2022 revenue grew at 22%, as I mentioned, which reflects growth in the first half, some in the third quarter, and a more challenging market environment in the second half of the year that I will get into in the fourth quarter.

Our full year gross profit increased by 24%, and our gross margin percentage increased slightly [8.5%]. On a full-year adjusted EBITDA of $61 million, we are down from $78 million in 2021 as we made investments to support the international market expansion and drive agent-centric innovation.

Full-year 2022 operating cash flow was $242 million, up 17% year-over-year. This also shows, as Glenn was mentioning our ability to generate this level of cash flow in a challenging year speaks of the resilience of our business model. It also provides us with major competitive advantage in a down market.

Due to our strong cash flow generation, we ended the year with $122 million of cash and equivalents, up 12% year-over-year, even as we distributed -- after we distributed $205 million to our shareholders in the form of share repurchases and dividends. On the next slide, we'll take a look now at the fourth quarter.

So, the fourth quarter of 2022, especially in the U.S. market, was a challenging environment. Home sales declined more than 30% from the fourth quarter of last year. Interest rates, as we're all very well aware, dramatically increased throughout 2022, reaching a high for the year in Q4 and inventory remained constrained.

On this slide, you can see our Q4 segment revenue, adjusted EBITDA for each of our four business segments, and a breakout of our corporate allocations. At a consolidated level, eXp World Holdings ended Q4 with $933.4 million in revenue and $3.6 million in EBITDA.

Our North American Realty segment is again the primary driver of revenue at $920.7 million and adjusted EBITDA of 12.1. So, to Glenn's point before, in one of the toughest quarters we've had as an industry, the North American Realty business generated $12.1 million in adjusted EBITDA.

And despite a very challenging environment in the fourth quarter, the North American revenue decline was 14% versus industry-wide sales decline in the 30 plus range, and we remain profitable. International Realty increased revenue by 49% in the quarter to $9.8 million.

As you can see, we continue to invest in our international expansion strategy, and VirBELA and other Affiliated Service segments contributed modest amounts of revenue while reflecting our ongoing investment. Now, we will move to our consolidated key metrics for Q4. We ended Q4 with a global agent Net Promoter Score at 73, up from 69 in Q4 2020.

Previously mentioned by Glenn, we believe a high NPS score is the best indicator of underlying health of the business and the most important driver of shareholder value over the long term.

At the consolidated level, Q4 and comparing to Q4 2021, our key operating metrics include agent count 86,203, up 21%; units sold 109,168, down 15%; and volume at $37.6 billion, down 16%. Agent growth in Q4 was offset by lower volume per agent as elevated mortgage rates resulted in fewer transactions and price declines year-over-year.

On a consolidated basis, Q4 revenues were $933, down 13% year-over-year, reflecting the challenging conditions in our core North American Realty market where we continue to gain share. I'd like to take -- we get a lot of questions over the years about margin. So, this is actually from a margin percentage standpoint.

Our margin has actually increased year-over-year, both for 2022 and for Q4. When a down market, revenue share cushion -- revenue share model cushions the impact of our lower revenue on a bottom line as fewer agents hit their caps. And this was most evident in Q4 when gross margin percentages increased 120 basis points year-over-year to 8.9%.

This resulted in roughly a flat gross profit dollar relative to Q4 2021 EBITDA $144 million lower in revenue. So that's kind of how -- we've talked about this before, and that is how the model works. So we -- so with the lower revenue, we actually maintain the same amount of gross profit dollars that we did this time last year.

SG&A increased at 15% year-over-year in Q4, driven by higher personnel costs relating to supporting our 21% increase in agent count, which as -- it was partially offset by a reduction in SG&A that we went after in Q3 and Q4, about $4 million per quarter, quarter-over-quarter.

Quarter four GAAP net loss was $7.2 million and adjusted EBITDA was a positive 3.6. Despite a down market, we remain adjusted EBITDA profitable in Q4 and generated $38 million of operating cash flow, bringing our full operating cash flow for the entire year to $240 million.

Before opening up the call to Q&A questions-and-answers from our analysts, I just want to take a step back and look at our growth over the longer-term frame, which is shown on the last slide. So, on this chart, what we're showing is our agent count and our total revenue on a quarterly basis over the past six years.

Our growth over this period has been extraordinary, with our agent count and revenue increasing from 6,000 agents and $156 million in revenue in 2017 to over 86,000 agents and $4.6 billion in revenue at the end of 2022.

Our focus on agent satisfaction has clearly paid off over the long term, and that is why we're doubling down on agent-centric innovation to drive our next phase of growth at eXp. With that, I will turn it back to Denise and begin the Q&A portion of the call. Thank you, Denise..

Great. Thanks, Jeff. I'll kick off with a few questions to you and to Glenn before we open the call to our covering analysts. First, I'll start with you, Glenn. You've broken out international from North America Realty for the first time.

Can you just talk a little bit about the international opportunity?.

Yes. So, international is -- really what we found, having now been growing internationally outside of North America, specifically the U.S. and Canada since 2018, 2019 when we opened up to U.K. and Australia, is that the value prop that we developed here translates very well when we go to international markets.

We've added 22 different international markets to eXp and internally that we don't break it out yet, I think, a couple of those markets are actually profitable internally and we expect that more will be profitable over time. Each country is a little bit different.

There are almost like -- and some countries are smaller than small states in the United States, so each country is going to have a little bit different mix. But, as we continue to grow out the marketplace, we think that international is going to be again at scale.

When we get to scale internationally, we'll be as big or bigger than North American Realty just because there technically is more agents on lower good financial terms with their brokerages internationally than there is domestically. So, there's a bigger opportunity to help agents create businesses inside of the business as we expand.

We're seeing that on calls earlier today, the U.K., last week Australia, and we're always talking with agents in markets around the world and the business model translates..

Great. Okay. Just one more for you.

What do you see for the industry this year in 2023?.

My crystal ball broke years ago. So just -- but we think that the industry is going to be challenged for the balance of 2023 for the most part. We think that there is probability that Q4 will be better than Q4 last year, partially because Q4 this last year was a really tough quarter.

But we're expecting that Q1, as an industry, will be lower than Q1 last year, and same thing with Q2. And Q3 is a little bit of a toss out. Our internal numbers suggest that it will actually be a little bit more challenged than Q3 last year, but it could go either way, the way we're looking at Q3..

Okay. Great. And Jeff, just one for you before I open it up to the analysts.

How are you thinking about allocating costs and investments as you move forward into 2023?.

Yes. Denise, I did touch on that from a capital allocation standpoint. I think, what kind of happened in the -- if we think back a little bit back to the COVID days, when COVID hit and everything was -- everything went -- everybody was crazy, we didn't know what to do. We did a lot of actions right away.

It was -- it's not the same situation with COVID, I'm not saying that all. What I'm saying is that we're going to be very thoughtful, all right? So we -- so that's why we broke out the segmentation. And we're focused on growing our North American business. We're focused on investing in our other investments.

So, we talked last year -- I talked last year and we talked about getting back to that $80 million per quarter target on SG&A. And as the team has got together, and as Glenn has come back into our business, I mean, we're thinking more strategically.

We're absolutely going to be good stewards of our capital, as you can see from the numbers, and we got quite a number of years of history now of doing that.

But at the same time, with the cash that we generate in the business and the opportunities we believe we have in the future, the big opportunities, we're not going to try to say pass in the quarter due to sacrifice some big opportunities we have in the future.

So, having said that, we're going to be good stewards of our capital, but we're going to invest in that we pointed out today and make sure that we drive results from those areas..

Got it. Thanks. So now, I'll open the call up to questions from our analysts. John, I'll take your question first..

Okay. Great.

Can you guys hear me okay?.

Yes.

Yes, John..

Thank you, guys. So on the gross margin, that was a lot better than we anticipated, I think 120 bps year-over-year. That's the best kind of annual movement you guys are seeing since the heart of COVID back in 2Q '20. But, Jeff, to your point, which I think is a really good one, that help keep the gross profit roughly flat on the revenue decline.

I think that's an important kind of under-appreciated angle of the model. But I wanted to get your take on how that might shake out this year, if we assume that average agent production kind of continues to drop a bit here, maybe even stays at the current levels.

How should we be thinking about gross margin all in for '23?.

So, I think that if -- as we kind of went through it, when we get challenged on the revenue side, and as long as we continue to do the right thing for the agents, we think that the gross margin percentage stay up in the levels that we're kind of seeing in the fourth quarter range, all right? As the market picks back up again, we expect that to come down.

So, you've seen this over the last few years, John. So, as we predicted, as the market will start to come down, the gross margin percentage will go up.

So we can -- so, I guess, to answer the question, if we continue to see challenges in the first half of the year, we'll probably have a stronger percentage gross margin, and as the business picks up again, which it will over time, that percentage will lower as the volume comes through the system..

Okay. That's helpful. And then I think that's probably upside, a lot of investors models as far as the gross margin, but on the OpEx side, it sounds like you will continue to invest pretty heavily here, I guess consistently about $93 million to $96 million is what you've seen on each quarter last three quarters of total G&A and marketing spend.

How should we think about that going forward? Is that a pretty good quarterly run rate?.

It is in that range. So we don't have a plan to blow out expenses at all on the SG&A side. What we're going to be doing is, we're working on productivity in a big way. So, the same kind of range that we saw this year is kind of the -- at this point in time, that kind of range that we're looking at for 2023..

Okay. That's helpful. I appreciate the time, guys. Sorry, Glenn..

The one thing that I'm coaching the team on, and also I guess investors on, is that we don't want to be boxed into a number, we see opportunities. So, for us, when we are looking at improving the agent experience, say in the U.K.

or Australia or France or wherever, we're going to be making more strategic investments, more rapidly than maybe we have in the past. But we also -- we're just more, we're not -- I don't want the team to feel boxed into numbers that they may have provided you in a Q&A in a public setting. So, I -- just leaving that out there as well..

Yes. That's good clarification. I appreciate that. Thank you, Glenn..

All right. We'll move to Tom. Tom, if you're ready..

Great. Thanks guys. Nice to be back in the eXp campus here. A couple if I could. Maybe Glenn, first off, or for Jeff. I was hoping you guys could just parse out the net agent addition trends kind of in the U.S. versus international a bit, both in the fourth quarter and kind of maybe so far this year.

Are you confident that you're maintaining or gaining agent share in the U.S.?.

Percentage agent share for sure, actual agent count is pretty flat the last -- the end of Q4 and the beginning of Q1 in North America. I haven't verified the numbers yet. But I've heard that they are roster-dropped quite considerably since the beginning of the year.

And -- but we -- so, we feel that our percentage share of the market continues to increase even if our numbers are flattish, slightly up, slightly down from flat at the moment.

So, we've got, I think December, we were down a few agents; January, maybe the same; February, I think we might be up, but we haven't got into the numbers super detail, but it's very flat for the most part.

And the churn, as we've talked about in the past, four times the zero to two agent transaction range agents, four times as many of those agents are churning out as the agents who are icon top producers. So -- and it's pretty linear, the more productive they are, the more they're staying with us.

And so, the majority of the agents that we are losing are agents who are fundamentally looking for other employment outside the real estate industry..

That's great. That's really helpful. Thanks. Maybe, then just one on international. Can you -- what we should expect in terms of like the overall [technical difficulty] consolidated EBITDA in 2023 as it relates to internationally.

Should we expect you guys are going to kind of invest at a similar kind of clip relative to last year? And then, also sort of the same question on corporate expenses. That's a pretty big drag obviously on EBITDA that we can see now, too.

Curious whether you can kind of meaningfully slow that or maybe even reduce that industry volumes are worse than you expect?.

Yes. So, the eXp World Holdings portion is to some extent fairly fixed, it's a lot of its compliance infrastructure for being a public company. So that's fairly early, and Jeff can certainly comment more to that. On the international front, we did slow down our new country growth launches. We did that sort of second half of 2022.

That being said, now that we've broken it out, we actually broke out, segmented out the numbers for a reason. One was so that we could actually invest more in international growth by showing that the model does work at scale.

But there are 50 to 80 more countries we want to grow into in the next few years, but the key is to make sure that we're able to manage a cash balance such that we're able to make the moves that we need to make in order to grow.

So, I wouldn't say we're going to accelerate growth, but we're not going to slow down growth too much more than we did last year and probably will start to approach the four to five new countries a year range towards the end of the year..

I would add some more things on the World Holdings. A large -- two big pieces of that is professional services and the stock comp. So, these are -- so relatively, there's not a lot of variability in those numbers.

Secondly, I'm with Glenn on the investment side of it, but I think the other thing that's going to happen that we're going to see over the short period of time or relatively short period of time, some of our company -- our countries that are meeting business for a while. The U.K.

[technical difficulty] we're going to start getting -- we're going to get more productivity. We're going to get more sales. So, there's going to be more margin coming back off some of our moves. That's going to be a big focus for us in 2023..

Great. Thanks. I'll get back in the queue here..

Great. Thanks, Tom. Now, take a question from [Matt Filyk] from William Blair.

Matt, if you're ready?.

Hi, everyone. This is [Matt Filyk on for Stephen Sheldon]. Thank you for taking my questions and great to be in the campus.

To start had one on commercial, I was wondering if you can provide an update on your efforts to expand into commercial real estate, and more specifically, roughly how many agents are focused on commercial and how do you see that business evolving over the coming years..

Yes. So I believe we've got similar number of agents as we had towards the end of Q3 around 1,000 agents on the commercial side.

What we expect is the commercial -- the commercial universe of agents is substantially smaller than the residential agents and we still have fairly low competitive caps in that space, meaning that we're 20,000 caps versus 16,000 caps but in comparison to a lot of firms that are still 50/50 and no cap we represent a really great place to -- for commercial agents to move their license.

So we do expect that over time, we'll become a larger and larger commercial firm. But I think that in the context of a larger enterprise, it will still be a fairly small number relative to potential or for net income and revenue growth.

What we have done is we built out the entire commercial infrastructure, meaning that we have commercial brokerage in most the U.S. States presently.

We've actually started a referral brokerage, where agents can -- if they're not in active production, they can actually move their license to the referral brokerage, which is actually housed underneath the commercial brokerage and there's some technical MLS and NAR reasons.

They're not members of NAR, so they don't have the $1,000 plus you could need to stand there. They're not typically members of the MLSs per se, so there's no MLS 2. So it's less expensive for an agent to hang their license there, but they can still refer out real estate transactions. So we're building out this extra layer.

And we're looking at other things that, that layer can be supportive of the overall brokerage..

Got it. That's a helpful update. Thank you for that. And just had a quick one on international.

Any markets in particular or the initial traction has been stronger than expected and you're most optimistic about over the near term?.

Jeff mentioned previously South Africa. That's a fairly new country for us. We're over 1,000 agents now in South Africa.

And these are a much more professional agent base than is in other countries like, I'll use India and Mexico, where we have a similar number of agents, but real estate is not well organized there from a professional standards perspective. So we're pretty optimistic about South Africa.

So we've got -- the three countries that are at or near profitable would be U.K., Australia and South Africa. And then we're continuing to work on the other countries. We're getting more mature in India. We're getting more mature in Mexico.

And I say that because in both of those markets, there wasn't -- there isn't a lot of infrastructure for organized real estate. And so we're having to bring kind of infrastructure to an industry that in a lot of the country doesn't have much in the way of standards of practice..

Got it. Thank you, Glenn and Jeff, I'll jump back in the queue. That's it for me..

Great. Thanks, Matt. Now I'll move over to Slido, and we'll take some questions from the audience for you, Glenn and Jeff. I'll take the first one.

Of the $13.7 million international segment EBITDA loss, how much is the result of new country opening costs versus subscale operations?.

Good question..

I mean, it is a good question. I'd say most of the $13.7 million is investment in opening up the new countries. And actually, I think one of the learnings we've had is that it has taken a little more time than we originally anticipated.

And because we go into a country, we play around with models to some extent when they make sure that they're the proper models for agent value proposition in those countries. So it's taken a little bit longer, and we try different things and we're -- so we're doing a lot of work in each country.

So most of that money is investment and growing and getting the name landed in the country, getting the right people in place, getting the right operations in place and building the teams and the agent groups..

Got it. I'll take a couple more.

It seems that the agent count growth is slowing in North America, is the 500,000 agents goal primarily focused on international expansion? And what's the target for agents in North America?.

Yes. So our $500,000 agent number, as I've stated in the past, is an aspirational number that we believe that we will get to eventually at some point. We've talked about the idea of maybe 500,000 agents in five years. We think there's some reasons for that.

But it was also based on when we made those statements a couple of years ago for the first time, it was based on a much different housing market than we have today. So that really has -- if I was looking at it, I'd look at it from the perspective of the slowing housing market.

We believe there's 200,000 to 300,000, maybe 400,000 agents in North America that will cease being real estate professionals in the next 12 to 24 months. And so that's a big chunk of the industry. It could be 25% of the industry that won't be here.

And if we use that as a factor, then you can almost take 100,000 agents off of that 500,000 agents sort of for that sort of we call it the aspirational five-year outlook.

But I think the idea is that we are -- as long as we're focused on building a really great agent value proposition, we don't take our eye off that ball, and we continue to work on what do we need to do to do better by our agents then eventually we'll get there.

It's really a matter of what the timing of that number is, which is very similar to the earlier question, it's aspirational and the crystal ball broke years ago..

Got it. All right. I think we have time for one more one for an agent here.

Is the plan to eventually move away from the eXp campus over to Frame? And if so, what's the expected time line?.

So if you're asking me, yes, we're asking the overall team then it's a little bit more mixed in terms of moving away and win. And that's just because a lot of people really develop great habits and the way to use VirBELA and how it works relative to Frame.

The things that I really like about Frame is that it is a -- it doesn't need the same type of infrastructure from a client perspective because it's fully web-based and browser-based. And it doesn't need a lot of client-based updates.

So when you came into eXp campus, if you've been here before for previous calls, you will have noticed that it had to patch and do some other things at New York on your client side, on whether you're on a Windows machine or a Mac, et cetera.

On a web-based version, you don't have to update client-side software, there's stuff that's updated in the browser. And so for me, that feels a lot more modern in terms of the infrastructure and tool set where Frame is already in the Microsoft Teams app store, I believe.

It's got a lot of -- it's getting some of the same commercial clients that are using VirBELA are coming up with use cases on the Frame side, and we continue to see Frame as being something that's used more and more inside of eXp as an alternative to going into VirBELA.

And I know the road map for Frame is such that over time, it will be able to support hundreds of thousands of simultaneous users similar to VirBELA. And so as it scales, I think it's a natural that will move over to Frame.

But timing don't have an expected time line, but I wouldn't be surprised if next year, during this earnings call, we do it in Frame as opposed to VirBELA..

Great. Got it. So before we close the call, I just want to remind everyone in the audience here that eXp's Shareholder Summit will take place in May 17 through 20 in Orlando, Florida this year. We'd like to invite all the analysts, investors and agents to join us for shareholder specific sessions of the event.

So please register at expshareholderssummit.com. And as always, please stay connected by visiting expworldholdings.com for the latest updates on eXp news results and events. Additionally, you'll find a recording of this call and our latest investor presentation on the Investors section of the site. Thank you for joining us today.

This concludes the eXp World Holdings fourth quarter and full year 2022 earnings fireside chat..