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What changed in eXp World Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of eXp World Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+367 added−338 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-28)

Top changes in eXp World Holdings, Inc.'s 2023 10-K

367 paragraphs added · 338 removed · 238 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

46 edited+43 added−25 removed15 unchanged
Biggest changeIts portfolio of metaverse and virtual reality (VR) offerings includes Virbela ® and Frame™. eXp Realty created a virtual campus — called eXp World — using Virbela’s software which provides 24/7 access to collaboration tools, training and social communities for the company’s real estate agents and employees across our many locations. ● Other Affiliated Services : Includes key assets such as SUCCESS ® magazine, SUCCESS ® Coaching and SUCCESS ® Health, which provide training, classes, resources, and tools to empower our agents, brokers, staff, and customers to excel and empower their professional development.
Biggest changeAs our customers evolve post-COVID, including a return-to-work-offices, and in light of ongoing internal and external demand for web-accessible platforms and artificial intelligence solutions, we have experienced a decline in demand for our application-based platform, Virbela, and a rising interest our web-accessible platform, Frame. 2 Other Affiliated Services Includes key assets such as SUCCESS ® magazine and SUCCESS ® Coaching, which provide training, classes, resources, and tools to empower our agents, brokers, staff, and general customers to excel and empower their professional development.
Our management’s relationships with agents, brokers, technology providers and customers will provide the foundation through which we expect to grow our business in the future. We believe the skill set of our management team will be a primary asset in the development of our brands and trademarks.
Our management’s relationships with agents, brokers, technology providers and customers will provide the foundation with which we expect to grow our business in the future. We believe the skill set of our management team will be a primary asset in the development of our brands and trademarks.
In 2021 and 2022, we were named as one of the Top 100 Companies to Watch for Remote Jobs by FlexJobs. Health & Safety: Our employees operate in a fully remote environment and are located across the U.S. and internationally.
In 2021, 2022, and 2023, we were named as one of the Top 100 Companies to Watch for Remote Jobs by FlexJobs. Health & Safety: Our employees operate in a fully remote environment and are located across the U.S. and internationally.
Our operational model and growth strategies necessitate the proprietary technologies used to support our operations now and in the future, as well as requiring us to, at times, consider existing and emerging technology companies for acquisition, partnerships and other collaborative relationships.
Our operational model and growth strategies necessitate the proprietary technologies used to support our operations now and in the future, as 3 well as requiring us to, at times, consider existing and emerging technology companies for acquisition, partnerships and other collaborative relationships.
Under its ownership, the Company has built upon SUCCESS ® magazine and its related media properties to develop a robust SUCCESS ® brand of innovative personal and professional development tools, including SUCCESS ® Health, SUCCESS ® Coaching and SUCCESS ® Space.
Under its ownership, the Company has built upon SUCCESS ® magazine and its related media properties to develop a robust SUCCESS ® brand of innovative personal and professional development tools, including SUCCESS ® Coaching and SUCCESS ® Space.
We also value transparency and are committed to an open and accountable workplace where employees are empowered to raise issues. The Company provides multiple channels to speak up, ask for guidance and report concerns. eXp has been named one of the Best Places to Work on Glassdoor for each of the years 2019 through 2022.
We also value transparency and are committed to an open and accountable workplace where employees are empowered to raise issues. The Company provides multiple channels to speak up, ask for guidance and report concerns. eXp has been named one of the Best Places to Work on Glassdoor for each of the years 2019 through 2023.
Talent and Culture : Our business is driven by nine core values of community, sustainability, integrity, service, collaboration, innovation, transparency, agility and fun. At eXp, these core values are manifested throughout everything we do and support the Company’s overall vision and shape our culture.
Talent and Culture : Our business is driven by nine core values of community, sustainability, integrity, service, collaboration, innovation, transparency, agile and fun. At eXp, these core values are manifested throughout everything we do and support the Company’s overall vision and shape our culture.
Our Company also uses the following channels as a means of disclosing information about the Company on a broad, non-exclusionary basis, including information about our brokerage, upcoming investor and industry conferences, our planned financial and other announcements and other matters and for complying with our disclosure obligations under Regulation FD: eXp website ( www.expworldholdings.com ) eXp Realty Twitter Account ( https://twitter.com/eXpRealty ) eXp World Holdings Twitter Account ( https://twitter.com/eXpWorldIR ) eXp Realty Facebook Page ( https://www.facebook.com/eXpRealty ) eXp World Holdings Facebook Page ( https://www.facebook.com/eXpWorldHoldings ) eXp Realty Instagram Page ( https://www.instagram.com/eXpRealty_ ) eXp World Holdings Instagram Page ( https://www.instagram.com/eXpWorldHoldings ) Please note that this list may be updated from time to time.
Our Company also uses the following channels as a means of disclosing information about the Company on a broad, non-exclusionary basis, including information about our brokerage, upcoming investor and industry conferences, our planned financial and other announcements and other matters and for complying with our disclosure obligations under Regulation FD: eXp investors website ( www.expworldholdings.com/investors/ ) eXp Realty X Account ( https://x.com/eXpRealty ) eXp World Holdings X Account ( https://x.com/eXpWorldIR ) eXp Realty LinkedIn page ( https://www.linkedin.com/company/exp-realty/ ) eXp World Holdings LinkedIn page ( https://www.linkedin.com/company/expworldholdings/ ) eXp Realty Facebook Page ( https://www.facebook.com/eXpRealty ) eXp World Holdings Facebook Page ( https://www.facebook.com/eXpWorldHoldings ) eXp Realty Instagram Page ( https://www.instagram.com/eXpRealty_ ) eXp World Holdings Instagram Page ( https://www.instagram.com/eXpWorldHoldings ) Please note that this list may be updated from time to time.
Both the North American Realty and the International Realty segments generate revenue primarily by serving as a licensed broker for the purpose of processing residential and commercial real estate transactions, from which we earn commissions.
North American Realty and International Realty Both the North American Realty segment and the International Realty segment generate revenue primarily by serving as a licensed broker for the purpose of processing residential and commercial real estate transactions, from which we earn commissions.
Such reports and information for the previous twelve-months are available free of charge through our website at www.expworldholdings.com/investors/sec-filings/. Additionally, the SEC maintains an internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov .
Such reports and information for the previous 12 months are available free of charge through our website at www.expworldholdings.com/investors/sec-filings/. 8 Additionally, the SEC maintains an internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov .
Additionally, our agents and brokers have a unique choice to attain a greater vested interest in eXp through the acceptance of equity awards in eXp stock as part of their compensation packages.
Additionally, our agents and brokers have a unique choice to attain a greater vested interest in eXp through the acceptance of equity awards in eXp stock as part of their compensation offerings.
We have also engaged various third parties to extend enterprise licenses for critical transaction management, CRM and other proprietary software. While there can be no assurance that registered trademarks and other intellectual property rights will protect our proprietary information, we intend to assert our intellectual property rights against any infringement.
We have also engaged various third parties to extend enterprise licenses for critical transaction management, client relationship management and other proprietary software. While there can be no assurance that registered trademarks and other intellectual property rights will protect our proprietary information, we intend to assert our intellectual property rights against any infringement.
We compete primarily on the basis of our service, culture, collaboration, utilization of cloud-based systems and technologies that reduce costs, while providing relevant and substantial professional development opportunities for our agents and brokers with an opportunity to generate more business and participate in the growth of our company.
We compete primarily on the basis of our service, culture, collaboration, and utilization of cloud-based systems and technologies that reduce costs, while providing relevant and substantial professional development and opportunities for our agents and brokers to generate more business and participate in the growth of our Company.
Intellectual Property Our cloud-based real estate brokerage is highly dependent on the proprietary technology that we employ and the intellectual property that we create. “eXp Realty” is one of our registered trademarks in the United States.
Intellectual Property Our cloud-based real estate brokerage is highly dependent on the proprietary technology that we employ and the intellectual property that we create. “eXp Realty” is one of our registered trademarks in the United States, among other registered and nonregistered trademarks.
Government Regulation Real Estate Regulation We primarily serve the residential real estate industry, which is regulated by federal, international, state, provincial and local authorities as well as private associations or state sponsored associations or organizations.
Residential Real Estate We primarily serve the residential real estate industry, which is regulated by federal, international, state, provincial and local laws and authorities as well as private associations or state-sponsored associations or organizations.
Residential real estate brokerage companies typically realize revenues in the form of a commission based on a percentage of the price of each home purchased or sold, which can vary based on industry standards, geographical location and specific customer-agent negotiations, among other factors.
Residential real estate brokerage companies typically realize revenues in the form of a commission based on a percentage of the price of each home purchased or sold, which varies based on geographical location and specific customer-agent negotiations, among other factors.
As of December 31, 2022, the Company had approximately 2,016 full-time equivalent employees and 86,203 real estate agents. Our employees are not members of any labor union and we have never experienced business interruptions due to labor disputes.
As of December 31, 2023, the Company had approximately 2,114 full-time equivalent employees and 87,515 real estate agents. Our employees are not members of any labor union and we have never experienced business interruptions due to labor disputes.
Except for certain employees who have an active real estate license, virtually all real estate professionals in our brokerage operations have been retained as independent contractors, either directly or indirectly through third-party entities formed by these independent contractors for their business purposes.
Worker Classification Except for certain employees who have an active real estate license or in jurisdictions with unique local laws, our real estate professionals in our brokerage operations have been retained as independent contractors, either directly or indirectly through third-party entities formed by these independent contractors for their business purposes.
Many of our employees, agents and brokers are involved in their own communities to support the betterment of lives. The Company also sponsors many community initiatives which are well attended by our employees, agents and brokers.
Many of our employees, agents and brokers are involved in their own communities to support the betterment of lives. We contribute to building equitable communities through the sponsorship of many community initiatives which are well attended by our employees, agents and brokers.
Therefore, variability in the commissions earned in the real estate industry exists based on general economic and market factors, as well as price and volume of homes sold. When home prices and the volume of home sale transactions increase (decrease), commissions generally will also increase (decrease).
Therefore, variability in the commissions earned in the real estate industry exists based on general economic and market factors, as well as the price and volume of homes sold.
Through our network of independent agents and brokers, we have brokerages in all 50 states in the U.S. residential real estate market and residential real estate markets in most of the Canadian provinces.
Through our network of independent agents and brokers, we have brokerages in all 50 states in the U.S. residential real estate market and residential real estate markets in most of the Canadian provinces. Our North American Realty segment represented 98.6% of total consolidated revenues in 2023.
With respect to these independent contractors, like most brokerage firms, we are subject to the Internal Revenue Service regulations, foreign regulations and applicable state and provincial law guidelines regarding independent contractor classification. These regulations and guidelines are subject to judicial and agency interpretation.
With respect to these independent contractors, we are subject to the Internal Revenue Service regulations, foreign regulations and applicable state and provincial law guidelines regarding independent contractor classification. These regulations and guidelines are subject to judicial and agency interpretation. We continue to monitor these matters as well as related federal and state developments.
Our International Realty segment operates in the U.K., Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama and Germany, the Dominican Republic, Greece, New Zealand, Chile and Poland. In late 2022, we announced operations in Dubai, which is expected to be fully operational in 2023.
Our International Realty segment operates in the U.K., Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama, Germany, the Dominican Republic, Greece, New Zealand, Chile, Poland and Dubai. Our International Realty segment represented 1.3% of total consolidated revenues in 2023.
Item 1. BUSINESS General eXp World Holdings, Inc. (“eXp,” or, collectively with its subsidiaries, the “Company,” “we,” “us,” or “our”) owns and operates a diversified portfolio of service- based businesses whose operations benefit substantially from utilizing our enabling technology platform.
Item 1. BUSINESS General eXp World Holdings, Inc. (“eXp,” or, collectively with its subsidiaries, the “Company,” “we,” “us,” or “our”) owns and oversees a diversified portfolio of service-oriented businesses. These businesses significantly benefit from the integration of our advanced enabling technology platform. Our strategic focus is on expanding our real estate brokerage operations.
Environmental Regulation 4 The Company operates in a cloud-based model which, gives us an insignificant physical geographical footprint. Due to this, we are not materially impacted by any environmental regulation.
We are susceptible to class action claims suggesting we're responsible for contacts made by our real estate professionals. 5 Environmental Regulation The Company operates in a cloud-based model which gives us an insignificant physical geographical footprint. Due to this, we are not materially impacted by any environmental regulation.
Additionally, we own registered trademarks and the rights to domain names which are leveraged in our other business segments and in connection with services that complement our real estate brokerage, such as the “SUCCESS” registered trademark and https://success.com. Other proprietary brands key to our suite of services include Revenos, eXp Luxury, SUCCESS Coaching and SUCCESS Health.
We also own the rights to key domain names used by our domestic and international brokerages: including, for example, https://exprealty.com and https://exprealty.ca. Additionally, we own registered trademarks and the rights to domain names which are leveraged in our other business segments and in connection with services that complement our real estate brokerage, such as the “SUCCESS” registered trademark and https://success.com.
Environmental, Social and Governance Initiatives As a company dedicated to disrupting the traditional industry model, eXp understands the importance of ingraining environmental, social and governance (ESG) best practices across the organization.
As we expand into new businesses and markets, we assign and/or engage appropriate personnel to manage and comply with such requirements. Environmental, Social and Governance Initiatives As a company dedicated to disrupting the traditional industry model, eXp understands the importance of ingraining environmental, social and governance (ESG) best practices across the organization.
Our brokers and agents leverage our technology, services, data, lead generation and marketing tools to represent residential real estate buyers and sellers.
Virbela We operate over the internet and rely on cloud-based technologies to provide our residential real estate brokerage services. Our brokers and agents leverage our technology, services, data, lead generation and marketing tools to represent residential real estate buyers and sellers.
Our business segments bring together related eXp technologies and services to support the success and development of agents, entrepreneurs and businesses and provide them remote business solutions.
Business Segments The Company is operated and managed as four reportable segments which are North American Realty, International Realty, Virbela and Other Affiliated Services. Our business segments bring together related eXp technologies and services to support the success and development of agents, entrepreneurs and businesses and provide them remote business solutions.
The model features low entry fees, stock ownership opportunities for agents and brokers and a revenue sharing plan through which agents and brokers can earn commission from transactions conducted by agents and brokers they’ve attracted to eXp. ● North American Realty : Together with our other real estate brokerage subsidiaries, eXp Realty, LLC (“eXp Realty”) is a leading, rapidly growing, cloud-based real estate brokerage company in the United States and Canada.
The model features low entry fees, stock ownership opportunities for agents and brokers and a revenue-sharing plan through which agents and brokers can earn commission from transactions conducted by agents and brokers they have attracted to eXp. Our North American Realty segment also includes lead-generation and other real estate support services in North America and Canada.
However, we are positioned to earn commissions on either — or both — of the buy side or sell side of residential real estate transactions, as well as the ability to receive other fees for complementary services provided during the close process. 3 We believe that we are the only international real estate brokerage presently using a 3D immersive office environment in place of physical brick-and-mortar offices.
We are positioned to earn commissions on either — or both — of the buy side or sell side of residential real estate transactions, as well as the ability to receive other fees for complementary services provided during the closing process.
We believe it is critical to our success that agent voices are heard at every level of the Company, including management, whose mission is supported by our Agent Advisory Council. Refer to our Agent Advisory Council section of our website at https://expworldholdings.com/agent-advisory-council/ for information on agent participation in the management of eXp.
We believe it is critical to our success that agent voices are heard at every level of the Company, including management, whose mission is supported by our Agent Advisory Council and our Board of Directors, which includes a rotating agent director seat.
Additionally, this innovative operational structure coupled with our distribution model allows us to effectively enter new markets with speed and flexibility and without much of the investment and cost associated with establishing a traditional brokerage. We also believe our compensation and incentive programs to attract and retain highly productive agents is one of the most compelling in the industry.
We believe that we are the only international real estate brokerage presently using a 3D immersive office environment in place of physical brick-and-mortar offices. Additionally, this innovative operational structure coupled with our distribution model allows us to effectively enter new markets with speed and flexibility and without much of the investment and cost associated with establishing a traditional brokerage.
In 2022, we conducted an ESG materiality assessment with the assistance of an external consultant, GlobeScan, to identify the material ESG topics that have the greatest impact on the Company’s success. Our approach included extensive desk research to identify the range of potential environmental, social, governance and economic issues that eXp might face.
In 2022, we conducted a robust ESG materiality assessment with the assistance of an external consultant, GlobeScan, to identify the material ESG topics that have the greatest impact on the Company’s success, which was delivered in January 2023 to our leadership team, employees and agents.
ONE eXp is also an important vehicle by which we connect diverse agents and brokers with clients identifying as and/or seeking out diverse representation in their home purchase or selling journey.
Our Employee Experience team operates under the human resources department and supports this mission with diversity, equity and inclusion practices to support employee engagement and global collaboration, including the promotion of ONE eXp, an important vehicle by which we connect diverse agents and brokers with clients identifying as and/or seeking out diverse representation in their home purchase or selling journey.
Additionally, in 2021, eXp’s affiliated nonprofit, eXtend-a-Hand, was granted 501(c)(3) status by the Internal Revenue Service. eXtend-a-Hand’s mission is to provide financial assistance to independent agents of the Company who suffer catastrophic events, including, without limitation, natural disasters, illness and accidents and in the case of dependents or designated beneficiaries, the death of their independent agent family member.
We 7 have continued expanding initiatives driven by our 501(c)(3) affiliated nonprofit, eXtend-a-Hand, whose mission is to provide financial assistance to independent agents of the Company who suffer catastrophic events, including, without limitation, natural disasters, illness and accidents and in the case of dependents or designated beneficiaries, the death of their independent agent family member. ● Advancing Climate-Positive Solutions: We are paving a responsible path to a better planet through our cloud-based model and will continue to promote, scale, and innovate solutions for a low-carbon economy and more resilient communities.
As such, we believe that we are well-positioned in our competitive landscape. Resources Software Development Our Company continues to increase our investment in the development of our own cloud-based transaction processing platforms and further expand our products and service offerings.
Resources Software Development Our Company continues to increase our investment in the development of our own cloud-based transaction processing platforms and further expand our technological products and service offerings. We continue to create process efficiencies and provide our agents and brokers with technologies designed to facilitate transactions in an efficient and consumer-friendly way.
Our International Realty segment represented 0.8% of total consolidated revenues in 2022. Virbela: Our innovative technologies are used primarily by our brokerage real estate agents and their clients within our U.S., Canadian and international markets.
Virbela: Our innovative technologies are used primarily by our brokerage real estate agents and their clients within our U.S., Canadian and international markets. We continue to innovate the Virbela portfolio, expanding the product offering to include and enhance our Frame platform.
The Company is devoted to agent well-being and continued to expand the reach of eXtend-a-Hand during 2022. ● Diversity and Inclusiveness : We are committed to creating an equitable, diverse and inclusive culture for our employees, agents and brokers.
We are committed to creating an equitable, diverse and inclusive culture for our clients, agents, brokers and employees.
Among other technologies we use to operate our business, our proprietary 3D, fully-immersive, cloud office, has virtual conference rooms, training centers and individual offices in which our management, employees, agents and brokers all work on a daily basis learning from, sharing with, transacting business with and socializing with colleagues from different geographic regions by utilizing avatars in the Virbela platform.
These cloud offices include virtual conference rooms, training centers and individual offices in which our management, employees, agents and brokers all work on a daily basis and, in separate custom settings, in which our customers operate as well, collaborating, socializing and transacting business across geographic regions.
During 2022, our human resources department expanded on our existing health and safety benefit offerings to support the health and safety of our employees in their remote work environments. 6 Independent Agent and Broker Support : We provide entrepreneurial business opportunities and a competitive compensation structure to our agents and brokers.
During 2023, the Company offered self-defense training to real estate agents and brokers attending our annual fall convention and our human resources department expanded existing offerings to support the health and safety of our employees in their remote work environments.
By contrast, our technology and affiliate services segments experience generally consistent revenue during the year, with some increased adoption around the Company’s spring and fall events.
By contrast, our Virbela and Other Affiliated Services segments experience generally consistent revenue during the year, with some increased adoption around the Company’s spring and fall events. Government Regulation See Note 13 – Commitments and Contingencies to the consolidated financial statements included elsewhere within this Annual Report for additional information on the Company’s legal proceedings.
The United States and Canada operating segments are aggregated into one operating segment due to similarities in the markets, economics and management strategy. ● International Realty: We expanded our business into Australia and the United Kingdom in 2019, into South Africa, India, Mexico, Portugal and France, during 2020 and into Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama and Germany in 2021.
Our International Realty segment includes our foreign operations in the United Kingdom (the “U.K.”), Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama, Germany, the Dominican Republic, Greece, New Zealand, Chile, Poland, and Dubai.
Other Affiliated Services: We provide affiliated services to our agents, brokers and customers that support their professional efforts and personal betterment.
We have experienced a decline, among internal staff and agent users as well as among external unaffiliated customers, in demand for our application-based platform, Virbela, and an increased demand for our web-accessible platform, Frame. Other Affiliated Services: We provide affiliated services to our agents, brokers and customers that support their professional efforts and personal betterment.
Other Regulation Our technology and affiliate services businesses operate in multiple geographies and industries which subject them to various governmental and non-governmental rules and regulations, including without limitation, franchising, fair trade, health and data privacy rules. As we expand into new businesses and markets, we assign and/or engage appropriate personnel to manage and comply with such requirements.
Globally, the International Sustainability Standards Board and applicable sustainability disclosure standards impact how national regulators and governance bodies approach these and related topics. Other Regulation We operate in multiple geographies and industries which subject us to various governmental and non-governmental rules and regulations, including without limitation, franchising, fair trade, health and data privacy rules.
Information contained on our website is not incorporated by reference into this report. As the Company grows, management continually researches new directives and implementation efforts for the long-term success of the Company.
Refer to our Agent Advisory Council section of our website at https://expworldholdings.com/agent-advisory-council/ for information on agent participation in the management of eXp. Information contained on our website is not incorporated by reference into this Annual Report.
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We strategically prioritize our efforts to grow our real estate brokerage by strengthening our agent value proposition, developing immersive and cloud-based technology to enable our model and providing affiliate and media services supporting those efforts.
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To achieve this, we emphasize enhancing the value proposition for our agents, investing in the development of immersive, cloud-based technological solutions, and offering affiliate and media services that bolster these efforts.
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The following are changes in our business in the most recent fiscal year: Real Estate Brokerage Expansion – In addition to maintaining operations in all locations, in 2022 the Company continued its international growth with expansion into the Dominican Republic, Greece, New Zealand, Chile and Poland.
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The following are developments in our business since the beginning of the fiscal year ended December 31, 2023: ● During 2023, the Company announced various new agent incentive programs to enhance the agent experience and to attract culturally aligned agents, teams of agents and independent brokerages to the Company.
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In addition, in late 2022, we announced operations in Dubai, which is expected to be fully operational in 2023. Except for certain employees who hold active real estate licenses, virtually all our real estate professionals are independent contractors. Recent Acquisition – On July 1, 2022, the Company acquired Zoocasa Realty Inc. –, an Ontario, Canada company (“Zoocasa”).
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New incentive programs include Boost, Accelerate, and Thrive, which offer unique financial incentives. ● In 2023, the Company launched various new ancillary programs and services to support the development and success of its agents, brokers and customers, including the continued global expansion of eXp Luxury™, Military Rewards Program, Listing Kits, Bundle Select™, eXp Exclusives™, My Link My Lead™, and affiliate relationships like HomeHunter™. ● Additional talent joined the Company in 2023, including the appointment of Peggie Pelosi to our Board of Directors in January 2023 and the appointment of Fred Reichheld to our Board of Directors in September 2023.
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Zoocasa’s key product is a consumer real estate research portal that offers proprietary home search tools, market insights and a connection to local real estate experts. Zoocasa has been included in the North American Realty segment since its key asset, Zoocasa.com, provides quality real estate referrals for the North American real estate markets.
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Among other technologies we use to operate our business, our proprietary Virbela ® and Frame™ platforms offer metaverse solutions, including 3D, fully immersive, cloud offices.
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New Programs and Services – During 2022, the Company launched various new ancillary programs and services to support the development and success of its agents, brokers and customers, including eXp Luxury™, Revenos™, SUCCESS ® Health and SUCCESS ® Coaching.
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While most Company and customer operations have taken place on the Virbela platform since 2016, many operations have begun to shift to the Frame platform as its development has matured, including its unique capability to operate fully on the web without the requirement for a separate client application.
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Details regarding the development of our businesses prior to 2022 are incorporated by reference herein from Part I of our Annual Report on Form 10-K dated February 25, 2022 (Commission File No. 001-38493).
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This segment also includes SUCCESS ® Space, a new kind of coworking solution offering highly flexible, on-demand rental work spaces for individual and group use, access to professional development coaching, media production services, virtual-world communications technology and full-service cafes.
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Business Segments Due to growth in international operations and changes to the North American markets, the Company began operating and managing the Company as four operating and reportable business segments beginning in December 2022, in order to increase our management effectiveness. The reportable segments are North American Realty, International Realty, Virbela and Other Affiliated Services.
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We also believe our compensation and incentive programs to attract and retain highly productive agents are one of the most compelling in the industry. As such, we believe that we are well positioned in our competitive landscape.
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We disrupt the traditional real estate model within the markets in which we operate for the benefit of agents and brokers through innovation, use of cloud-based technology and development of world-class agent and broker attraction and retention practices.
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For additional information with respect to related risks facing our business, see Item “1A. – Risk Factors” included elsewhere within this Annual Report.
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In 2022, we devoted significant efforts to the ongoing expansion of eXp Solutions™ for our agents, including the launch of Revenos™ and the development and improvement of proprietary software to source quality leads for agents. Our North American Realty segment also includes lead-generation and other real estate support services in North America and Canada.
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Legal and Regulatory Environment All of our businesses, as well as our joint ventures (such as mortgage origination, title underwriting, and ancillary agent support services), operate in highly regulated industries and are subject to changes in government policy, variations in the interpretation and enforcement of laws by regulatory bodies and other government entities, and modifications to existing laws, regulatory frameworks, and guidelines.
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During 2022 we commenced operations in The Dominican Republic, Greece, New Zealand, Chile and Poland. In addition, in late 2022, we announced operations in Dubai, which are expected to be fully operational in 2023.
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Further, lawsuits, investigations, disputes and regulatory proceedings against us or other professionals or businesses in the residential real estate industry and tangential industries may impact the Company and its affiliated real estate professionals when the outcomes of those cases address practices common to the broader industry, business community, or the Company and may result in litigation or investigations for the Company.
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Throughout our international operations, we disrupt the traditional real estate model for the benefit of agents and brokers through innovation, use of cloud-based technology and development of world-class agent and broker attraction and retention practices. 2 ● Virbela : We operate over the internet and rely on cloud-based technologies to provide our residential real estate brokerage services.
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We are a participant in multiple listing services (“MLSs”) through our subsidiary entities, employees, and affiliated real estate professionals. Many of our affiliated real estate professionals are members of the National Association of Realtors (“NAR”) and state Realtor associations.
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Virbela is an immersive technology company that specializes in building virtual worlds and environments for work, education and events.
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The regulations, rules and policies of these organizations are subject to change, which changes can be influenced by regulatory developments, litigation, and other actions. From time to time, certain industry practices come under federal or state scrutiny or are the subject of litigation.
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The U.S. residential real estate market for existing homes, seasonally adjusted, accounted for approximately 4.02 million homes sold with a median existing home sales price of $0.4 million in 2022, based on data released by the National Association of Realtors.
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The industry is currently experiencing increased scrutiny by private parties, regulators and other government offices, both on a federal and state level, particularly in the areas of antitrust and competition, Real Estate Settlement Procedures Act (“RESPA”) compliance (and similar state statutes), Telephone Consumer Protection Act compliance (“TCPA”) (and similar state statutes) and worker classification.
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Additionally, eXp World Technologies, LLC ("World Tech") has continued to innovate the Virbela portfolio, expanding the product offering to agents, teams and other global companies and organizations who can benefit from having their own, always-on virtual environment for workplace collaboration.
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RESPA RESPA, along with various state and international real estate laws, governs the payments and referrals associated with residential sales and settlement services, such as mortgages, title insurance, and home insurance.
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We continue to create process efficiencies and provide our agents and brokers with mobile applications designed to facilitate transactions in an efficient and consumer friendly way. To further expand our products and service offerings, we offer an on-demand, home tour mobile application that enables home shoppers to request immediate access to properties exclusive to eXp Realty agents in certain markets.
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These laws may impose limitations on arrangements involving our real estate brokerage, affiliated real estate professionals, lead generation efforts, and the businesses of our joint ventures, in addition to mandating timely disclosure about such relationships.
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We have also placed the marks “3D MLS”, “3D Listing Service” and “RE Tech Campus” on the United States Patent and Trademark Office’s Supplemental Register, among others. We also own the rights to key domain names used by our domestic and international brokerages: (e.g., https://exprealty.com and https://exprealty.ca).
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While RESPA and similar statutes allow 4 for certain payments, fee splits, and affiliated business arrangements, compliance can be challenging due to varying interpretations by courts and regulators. Violations can result in significant penalties, including fines and legal fees, particularly where RESPA and similar statutes have been invoked by plaintiffs in private litigation for various purposes.
Removed
We are required to comply with federal, state, provincial and local laws, as well as private governing bodies’ regulations, which combined results in a highly-regulated industry. We are also subject to federal, international, state and provincial regulations relating to employment, contractor and compensation practices.
Added
Additionally, we're bound by state laws that restrict inducements and gifts to consumers, affecting our lead-generation efforts. Antitrust Our business is subject to various antitrust and competition laws, including the Sherman Antitrust Act, the Federal Trade Commission Act, the Clayton Act, and other related federal, state, and provincial laws in the jurisdictions in which we operate.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuch events can make it difficult or impossible for home owners and builders to sell their homes and result in slowdowns in home sale transaction volume. Because the real estate industry relies on home sale transactions, climate crises can exacerbate negative financial results for real estate companies operating in particularly affected areas.
Biggest changeBecause the real estate industry relies on home sale transactions, climate crises can exacerbate negative financial results for real estate companies operating in particularly affected areas. Risks Related to our General Business and Operations We may be unable to attract and retain additional qualified personnel. To execute our business strategy, we must attract and retain highly qualified personnel.
As we expand our business into new international markets, including our existing international markets, we are subject to additional foreign governmental regulation. Ensuring compliance with these newly applicable laws could substantially increase our operating expenses. In addition, entry into these new markets exposes us to increased risk and liability.
As we expand our business in international markets, including new and existing international markets, we are subject to additional foreign governmental regulation. Ensuring compliance with these newly applicable laws could substantially increase our operating expenses. In addition, entry into these new markets exposes us to increased risk and liability.
Any acquisitions and joint ventures we pursue would involve numerous risks, including the following: ● difficulties in integrating and managing the operations and technologies of the companies we acquire, including higher than expected integration costs and longer integration periods; ● diversion of our management’s attention from normal daily operations of our business; ● our inability to maintain the customers, key employees, key business relationships and reputations of the businesses we acquire; ● our inability to generate sufficient revenue or business efficiencies from acquisitions or joint ventures to offset our increased expenses associated with acquisitions or joint ventures; ● our responsibility for the liabilities of the businesses we acquire or gain ownership in through joint ventures, including, without limitation, liabilities arising out of their failure to maintain effective data security, data integrity, disaster recovery and privacy controls prior to the acquisition, their infringement or alleged infringement of third-party intellectual property, contract or data access rights prior to the acquisition, or failure to comply with regulatory standards applicable to new business lines; ● difficulties in complying with new markets or regulatory standards to which we were not previously subject; ● delays in our ability to implement internal standards, controls, procedures and policies in the businesses we acquire or gain ownership in through joint ventures and increased risk that our internal controls will be ineffective; ● operations in a nascent state depend directly on utilization by eXp Realty agents and brokers and new and existing customers; ● adverse effects of acquisition and joint venture activity on the key performance indicators we use to monitor our performance as a business; and ● inability to fully realize intangible assets recognized through acquisitions or joint ventures and related non-cash impairment charges that may result if we are required to revalue such intangible assets.
Any acquisitions and joint ventures we pursue would involve numerous risks, including the following: ● difficulties in integrating and managing the operations and technologies of the companies we acquire, including higher than expected integration costs and longer integration periods; ● diversion of our management’s attention from normal daily operations of our business; ● our inability to maintain the customers, key employees, key business relationships and reputations of the businesses we acquire; ● our inability to generate sufficient revenue or business efficiencies from acquisitions or joint ventures to offset our increased expenses associated with acquisitions or joint ventures; ● our responsibility for the liabilities of the businesses we acquire or gain ownership in through joint ventures, including, without limitation, liabilities arising out of their failure to maintain effective data security, data integrity, disaster recovery and privacy controls prior to the acquisition, their infringement or alleged infringement of third-party intellectual property, 13 contract or data access rights prior to the acquisition, or failure to comply with regulatory standards applicable to new business lines; ● difficulties in complying with new markets or regulatory standards to which we were not previously subject; ● delays in our ability to implement internal standards, controls, procedures and policies in the businesses we acquire or gain ownership in through joint ventures and increased risk that our internal controls will be ineffective; ● operations in a nascent state depend directly on utilization by eXp Realty agents and brokers and new and existing customers; ● adverse effects of acquisition and joint venture activity on the key performance indicators we use to monitor our performance as a business; and ● inability to fully realize intangible assets recognized through acquisitions or joint ventures and related non-cash impairment charges that may result if we are required to revalue such intangible assets.
The risks involved in our international operations and relationships that could result in losses against which we are not insured and, therefore, affect our profitability include: ● fluctuations in foreign currency exchange rates; ● exposure to local economic conditions and local laws and regulations; ● employment laws that are significantly different that U.S. laws; ● diminished ability to legally enforce our contractual rights and use of our trademarks in foreign countries; ● difficulties in registering, protecting or preserving trade names and trademarks in foreign countries; ● restrictions on the ability to obtain or retain licenses required for operations; 11 ● withholding and other taxes on third-party cross-border transactions as well as remittances and other payments by subsidiaries; ● onerous requirements, subject to broad interpretation, for indirect taxes and income taxes that can result in audits with potentially significant financial outcomes; ● changes in foreign taxation structures; ● compliance with the Foreign Corrupt Practices Act, the U.K.
The risks involved in our international operations and relationships that could result in losses against which we are not insured and, therefore, affect our profitability include: ● fluctuations in foreign currency exchange rates; ● exposure to local economic conditions and local laws and regulations; ● employment laws that are significantly different that U.S. laws; ● diminished ability to legally enforce our contractual rights and use of our trademarks in foreign countries; ● difficulties in registering, protecting or preserving trade names and trademarks in foreign countries; ● restrictions on the ability to obtain or retain licenses required for operations; ● withholding and other taxes on third-party cross-border transactions as well as remittances and other payments by subsidiaries; ● onerous requirements, subject to broad interpretation, for indirect taxes and income taxes that can result in audits with potentially significant financial outcomes; ● changes in foreign taxation structures; ● compliance with the Foreign Corrupt Practices Act, the U.K.
In general, the laws, rules and regulations that apply to our business practices include, without limitation, the Real Estate Settlement Procedures Act (“RESPA”), the federal Fair Housing Act, the Dodd-Frank Act, the Exchange Act and federal 15 advertising and other laws, as well as comparable state statutes; rules of trade organizations such as NAR, local MLSs and state and local AORs; licensing requirements and related obligations that could arise from our business practices relating to the provision of services other than real estate brokerage services, including without limitation, our mortgage lending services; privacy regulations relating to our use of personal information collected from the registered users of our websites; laws relating to the use and publication of information through the internet; and state real estate brokerage and mortgage lending licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations relating to these licenses.
In general, the laws, rules and regulations that apply to our business practices include, without limitation, the Real Estate Settlement Procedures Act (“RESPA”), the federal Fair Housing Act, the Dodd-Frank Act, the Exchange Act and federal advertising and other laws, as well as comparable state statutes; rules of trade organizations such as NAR, local MLSs and state and local AORs; licensing requirements and related obligations that could arise from our business practices relating to the provision of services other than real estate brokerage services, including without limitation, our mortgage lending services; privacy regulations relating to our use of personal information collected from the registered users of our websites; laws relating to the use and publication of information through the internet; and state real estate brokerage and mortgage lending licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations relating to these licenses.
The market price for our common stock could fluctuate significantly for various reasons, many of which are outside our control, including those described above and the following: ● our operating and financial performance and prospects; ● future sales of substantial amounts of our common stock in the public market, including but not limited to shares we may issue as consideration for acquisitions or investments; ● housing and mortgage finance markets; ● our quarterly or annual earnings or those of other companies in our industry; ● the public’s reaction to our press releases, other public announcements and filings with the SEC; ● changes in recommendations or analysis of our prospects by securities analysts who track our common stock; ● market and industry perception of our success, or lack thereof, in pursuing our growth strategy; ● strategic actions by us or our competitors, such as acquisitions or restructurings; ● actual or potential changes in laws, regulations and regulatory interpretations; ● changes in interest rates; 19 ● changes in demographics relating to housing such as household formation or other consumer preferences toward home ownership; ● changes in accounting standards, policies, guidance, interpretations or principles; ● arrival and departure of key personnel; ● adverse resolution of new or pending litigation or regulatory proceedings against us; and ● changes in general market, economic and political conditions in the United States and global economies.
The market price for our common stock could fluctuate significantly for various reasons, many of which are outside our control, including those described above and the following: ● our operating and financial performance and prospects; ● future sales of substantial amounts of our common stock in the public market, including but not limited to shares we may issue as consideration for acquisitions or investments; ● housing and mortgage finance markets; ● our quarterly or annual earnings or those of other companies in our industry; ● the public’s reaction to our press releases, other public announcements and filings with the SEC; ● changes in recommendations or analysis of our prospects by securities analysts who track our common stock; ● market and industry perception of our success, or lack thereof, in pursuing our growth strategy; ● strategic actions by us or our competitors, such as acquisitions or restructurings; ● actual or potential changes in laws, regulations and regulatory interpretations; ● changes in interest rates; ● changes in demographics relating to housing such as household formation or other consumer preferences toward home ownership; ● changes in accounting standards, policies, guidance, interpretations or principles; ● arrival and departure of key personnel; ● the filing of and/or adverse resolution of new or pending litigation or regulatory proceedings against us; and ● changes in general market, economic and political conditions in the United States and global economies.
Although we employ measures designed to prevent, detect, address and mitigate these threats (including access controls, data encryption, vulnerability assessments and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including potentially sensitive personal information of our clients and customers) and the disruption of business operations.
Although we employ measures designed to prevent, detect, 11 address and mitigate these threats (including access controls, data encryption, vulnerability assessments and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including potentially sensitive personal information of our clients and customers) and the disruption of business operations.
Program requirements include corporate governance, incident planning, data management, system testing, vendor oversight and regulator notification rules. Now, other state regulatory agencies are expected to enact similar requirements 17 following the adoption of the Insurance Data Security Model Law by the National Association of Insurance Commissioners that is consistent with the New York regulation.
Program requirements include corporate governance, incident planning, data management, system testing, vendor oversight and regulator notification rules. Now, other state regulatory agencies are expected to enact similar requirements following the adoption of the Insurance Data Security Model Law by the National Association of Insurance Commissioners that is consistent with the New York regulation.
We have historically experienced lower revenues during the fall and winter seasons, as well as during periods of unseasonable weather, which reduces our operating income, net income, operating margins and cash flow. 8 Real estate listings precede sales and a period of poor listings activity will negatively impact revenue.
We have historically experienced lower revenues during the fall and winter seasons, as well as during periods of unseasonable weather, which reduces our operating income, net income, operating margins and cash flow. Real estate listings precede sales and a period of poor listings activity will negatively impact revenue.
Further, if legal standards for classification of real estate professionals as independent contractors change or appear to be changing, it may be necessary to modify our compensation and benefits structure for our affiliated real estate professionals in some or all of our markets, including by paying additional compensation or reimbursing expenses.
Further, if legal standards for classification of real estate 18 professionals as independent contractors change or appear to be changing, it may be necessary to modify our compensation and benefits structure for our affiliated real estate professionals in some or all of our markets, including by paying additional compensation or reimbursing expenses.
A violation of any of these applicable laws could have a material adverse effect on our business. Maintaining legal compliance is challenging and increases our costs due to resources required to continually monitor business practices for compliance with applicable laws, rules and regulations and to monitor changes in the applicable laws themselves.
A violation of any of these applicable laws could have a material adverse effect on our business. 17 Maintaining legal compliance is challenging and increases our costs due to resources required to continually monitor business practices for compliance with applicable laws, rules and regulations and to monitor changes in the applicable laws themselves.
Our competitors may have access to greater financial resources than us, allowing them to undertake expensive local advertising or marketing efforts. In addition, our competitors may be able to leverage local relationships, referral sources and strong local brand and name recognition that we have not established.
Our competitors may have access to greater financial resources than us, allowing them to undertake expensive local advertising or marketing efforts. In addition, our 15 competitors may be able to leverage local relationships, referral sources and strong local brand and name recognition that we have not established.
The pre-fiscal 2018 federal, certain state and foreign net operating losses will carry forward for a limited number of years. Federal, as well as, some state and foreign net operating losses generated in and after fiscal 2018, do not expire and can be carried forward indefinitely.
Pre-fiscal 2018 certain state and foreign net operating losses will carry forward for a limited number of years. Federal, as well as some state and foreign net operating losses generated in and after fiscal 2018 do not expire and can be carried forward indefinitely.
Inflation and rising interest rates have and may continue to contribute to declining real estate transaction volumes, which have and may continue to materially impact operating results, profits and cash flows. 13 Inflation and rising interest rates have generally impacted real estate transaction volumes in the U.S., Canada and other international markets.
Inflation and rising interest rates have and may continue to contribute to declining real estate transaction volumes, which have and may continue to materially impact operating results, profits and cash flows. Inflation and rising interest rates have generally impacted real estate transaction volumes in the U.S., Canada and other international markets.
For example, we may allocate resources to acquiring lower margin brokerage models and have invested in the development of a mortgage servicing division, a commercial real estate division, a title and escrow company, a mortgage lending company, a personal development company and a continuing education division.
For example, we may allocate resources to acquiring lower margin brokerage models and have invested in the development of a mortgage servicing division, a commercial real estate division, a title and escrow company, a mortgage lending company, a personal development company or a continuing education division.
In the event we or the vendors with which we contract to provide services on behalf of our customers were to suffer a breach of personal information, our customers and independent agents could terminate their business with us.
In the event we 19 or the vendors with which we contract to provide services on behalf of our customers were to suffer a breach of personal information, our customers and independent agents could terminate their business with us.
In addition, provisions of our amended and restated certificate of incorporation and amended and restated bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our Board of Directors.
In addition, provisions of our amended and restated certificate of incorporation and amended and restated bylaws may make it more difficult 21 for, or prevent a third party from, acquiring control of us without the approval of our Board of Directors.
Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.
Additional risks not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations in future periods.
We are also subject to risk related to shareholder derivative actions, standard brokerage disputes like the failure to disclose hidden defects in a property such as mold, vicarious liability based upon conduct of individuals or entities outside of our control, including our agents, brokers, third-party service or product providers and purported class action lawsuits.
We are also subject to risk related to stockholder derivative actions, standard brokerage disputes like the failure to disclose hidden defects in a property such as mold, vicarious liability based upon conduct of individuals or entities outside of our control, including our agents, brokers, third-party service or product providers and purported class action lawsuits.
In both instances, homeowners are more likely to retain their homes for longer periods of time resulting in a negative impact on home sale volume growth. Insufficient home inventory levels can cause a reduction in housing affordability, which can result in potential home buyers deferring entry or reentry into the residential real estate market.
In both instances, homeowners are more likely to retain their homes for longer periods of time, resulting in a negative impact on home sale volume growth. Insufficient home inventory levels can cause a reduction in housing affordability, which can result in potential homebuyers deferring entry or reentry into the residential real estate market.
The group can significantly influence all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. In addition, due to his significant ownership stake and his service as our Principal Executive Officer and Chairman of the Board of Directors, Mr.
The group can significantly influence all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. In addition, due to his significant ownership stake and his service as our Chief Executive Officer and Chairman of our Board of Directors, Mr.
In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage and compensation to clients, customers and business partners. We may also be subject to legal claims, government investigation and additional state and federal statutory requirements.
In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage and compensation to clients, customers and business partners. We may also be subject to legal claims, government investigations and additional state and federal statutory requirements.
The Company then declared and paid subsequent dividends during each quarter of the fiscal year ended December 31, 2022. There is no assurance that future dividends will be paid and if dividends are paid, there is no assurance with respect to the amount of any such dividend.
The Company then declared and paid subsequent dividends during each quarter of the fiscal year ended December 31, 2023. There is no assurance that future dividends will be paid and if dividends are paid, there is no assurance with respect to the amount of any such dividend.
Any such events could also damage our reputation and impair our ability to attract and service home-buyers, home sellers, agents, clients and customers as well our ability to attract brokerages, brokers, teams of agents and agents to our company, without increasing our costs.
Any such events could also damage our reputation and impair our ability to attract and service homebuyers, home sellers, agents, clients and customers as well our ability to attract brokerages, brokers, teams of agents and agents to our company, without increasing our costs.
Our effective tax rate could increase due to several factors, including: changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; changes in tax laws, tax treaties and regulations or the interpretation of them, including the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) which requires research and experimental expenditures attributable to research conducted in the United States to be capitalized as of January 1, 2022 and amortized over a five-year period or expenditures attributable to research conducted outside the United States to be amortized over a 15 year period; the Inflation Reduction Act of 2022 which imposes a 1% non-deductible excise tax on repurchase of stock that are made by U.S. publicly traded corporations after December 31, 2022; changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies and the economic and political environments in which we do business; the outcome of current and future tax audits, examinations or administrative appeals; and limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our effective tax rate could increase due to several factors, including: changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) which requires research and experimental expenditures attributable to research conducted in the United States to be capitalized as of January 1, 2022 and amortized over a five-year period or expenditures attributable to research conducted outside the United States to be amortized over a fifteen-year period; the Inflation Reduction Act of 2022 which imposes a one-percent non-deductible excise tax on repurchases of stock that are made by U.S publicly traded corporation after December 31, 2022; changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; the outcome of current and future tax audits, examinations or administrative appeals; and limitations or adverse findings regarding our ability to do business in some jurisdictions.
Any or all of these consequences would result in a meaningful unfavorable impact on our brand, business model, revenue, expenses, income and margins. In addition, concern among potential home-buyers or sellers about our privacy practices could result in regulatory investigations, especially in the European Union as related to the GDPR.
Any or all of these consequences would result in a meaningful unfavorable impact on our brand, business model, revenue, expenses, income and margins. In addition, concern among potential homebuyers or sellers about our privacy practices could result in regulatory investigations, especially in the European Union as related to the GDPR.
Any significant violations of privacy and cybersecurity could result in the loss of new or existing business, litigation, regulatory investigations, the payment of fines, damages and penalties and damage to our reputation, which could have a material adverse effect on our business, financial condition and results of operations.
Any significant violations of privacy, including as a result of cybersecurity breaches, could result in the loss of new or existing business, litigation, regulatory investigations, the payment of fines, damages and penalties and damage to our reputation, which could have a material adverse effect on our business, financial condition and results of operations.
Additionally, concern among potential home-buyers or sellers could keep them from using our services or require us to incur significant expense to alter our business practices or educate them about how we use personal information. SUCCESS Lending and SUCCESS Franchising are new business initiatives with regulatory and compliance risks, many of which are beyond our control.
Additionally, concern among potential homebuyers or sellers could keep them from using our services or require us to incur significant expense to alter our business practices or educate them about how we use personal information. SUCCESS Lending and SUCCESS Franchising are relatively new business initiatives with regulatory and compliance risks, many of which are beyond our control.
We also have recorded federal research tax credits for the years 2019, 2020, 2021 and 2022 which will carry forward for 20 years and are expected to be fully utilized before expiration. A nominal portion of our net operating loss may expire, increasing future income tax liabilities which may adversely affect our profitability.
We also have recorded federal research tax credits for the years 2020-2023 which will carry forward for 20 years and are expected to be fully utilized before expiration. A nominal portion of our net operating loss may expire, increasing future income tax liabilities which may adversely affect our profitability.
These inventory trends are caused by many pressures outside of our control, including slow or accelerated new housing construction, macroeconomic conditions, real estate industry models that purchase homes for long-term rental or corporate use and other market conditions and behavioral trends discussed herein.
These inventory trends are caused by many pressures outside of our control, including slow or accelerated new housing construction, macroeconomic conditions, including rising interest rates and inflation, real estate industry models that purchase homes for long-term rental or corporate use and other market conditions and behavioral trends discussed herein.
Similarly, in higher interest rate environments, potential home-buyers may choose to rent rather than pay higher mortgage rates. Changes in the interest rate environment and mortgage market are beyond our control and are difficult to predict and, as such, could have a material adverse effect on our business and profitability.
Similarly, in higher interest rate environments, potential homebuyers may choose to rent rather than pay higher mortgage rates. Changes in the 9 interest rate environment and mortgage market are beyond our control and are difficult to predict and, as such, could have a material adverse effect on our business and profitability.
Additionally, following the issuance of these consent decrees, the FTC issued non-binding guidance to the network marketing industry, suggesting it was intending to reinforce the principles contained in the consent decrees and provide other operational guidance to the network marketing industry.
Additionally, following the issuance of these consent decrees, the FTC issued non-binding guidance to the network marketing industry, suggesting it intended to reinforce the principles contained in the consent decrees and provide other operational guidance to the network marketing industry.
The SUCCESS Lending and SUCCESS Franchising businesses, both launched in 2021, have limited operating histories and have encountered and will continue to encounter risks, uncertainties, difficulties and expenses, including, without limitation, ongoing compliance with a complex and evolving regulatory environment.
Both the SUCCESS Lending joint venture and SUCCESS Franchising business, both launched in 2021, have limited operating histories and have encountered and will continue to encounter risks, uncertainties, difficulties and expenses, including, without limitation, ongoing compliance with a complex and evolving regulatory environment.
As a result, the trading price for our shares may be depressed and they can take actions that may be adverse to the interests of our other stockholders .
As a result, the trading price for our shares may be depressed and they can significantly influence actions that may be adverse to the interests of our other stockholders .
This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company with a controlling stockholder group.
This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company with a stockholder group holding a significant number of our shares.
Macroeconomic conditions that could adversely impact the growth of the real estate market and have a material adverse effect on our business include, but are not limited to, economic slowdown or recession, increased unemployment, increased energy costs, reductions in the availability of credit or higher interest rates, increased costs of obtaining mortgages, an increase in foreclosure activity, 7 inflation, disruptions in capital markets, declines in the stock market, adverse tax policies or changes in other regulations, lower consumer confidence, lower wage and salary levels, war or terrorist attacks, natural disasters or adverse weather events, or the public perception that any of these events may occur.
Macroeconomic conditions that could adversely impact the growth of the real estate market and have a material adverse effect on our business include, but are not limited to, economic slowdown or recession, increased unemployment, increased energy costs, reductions in the availability of credit or higher interest rates, increased costs of obtaining mortgages, an increase in foreclosure activity, inflation, disruptions in capital markets, declines in the stock market, adverse tax policies or changes in other regulations, lower consumer confidence, lower wage and salary levels, war, terrorist attacks or other geopolitical and security issues, including Russia’s ongoing war with Ukraine, the conflict between Israel and Hamas and rising tensions between China and Taiwan, natural disasters or adverse weather events, or the public perception that any of these events may occur.
Certain statements in this Annual Report on Form 10-K are forward-looking statements. See the section of this Annual Report on Form 10-K titled “Forward-Looking Statements.” Risks Related to Our Industries Our profitability is tied to the strength of the residential real estate market, which is subject to a number of general business and macroeconomic conditions beyond our control.
See the section of this Annual Report titled “Forward-Looking Statements.” Risks Related to Our Industries Our profitability is tied to the strength of the residential real estate market, which is subject to a number of general business and macroeconomic conditions beyond our control.
This 18 concentration of ownership and control could have the effect of delaying, deferring, or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders.
Sanford significantly influences the management of our business and affairs. This concentration of ownership and influence could have the effect of delaying, deferring, or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders.
If our systems and technologies lack capacity or quality sufficient to service agents and their clients, then the number of agents who wish to use our products could decrease, the level of client service and transaction volume afforded by our systems could suffer and our costs could increase.
If we do not adopt and offer new in-demand technologies and/or if our systems and technologies lack capacity or quality sufficient to service agents and their clients, then the number of agents who wish to use our products could decrease, the level of client service and transaction volume afforded by our systems could suffer and our costs could increase.
We may suffer significant financial harm and loss of reputation if we do not comply, cannot comply, or are alleged to have not complied with applicable laws, rules and regulations concerning our classification and compensation practices for the agents in our owned-and-operated brokerage.
Failure by us, or our independent agents, to comply with these laws, could adversely affect our business. We may suffer significant financial harm and loss of reputation if we do not comply, cannot comply, or are alleged to have not complied with applicable laws, rules and regulations concerning our classification and compensation practices for the agents in our owned-and-operated brokerage.
You should carefully consider the risk factors described below, together with all of the other information in this Annual Report on Form 10-K, including our consolidated financial statements and notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K.
You should carefully consider the risk factors described below, together with all of the other information in this Annual Report, including our consolidated financial statements and notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report. Certain statements in this Annual Report are forward-looking statements.
On November 2, 2022, Glenn Sanford, Penny Sanford, Jason Gesing and Gene Frederick filed an amended Schedule 13D with the Securities and Exchange Commission, which disclosed that they beneficially owned approximately 51.73% of our outstanding common stock as of September 30, 2022 and that they had agreed to vote their shares as a group with respect to the election of directors and any other matter on which our shares of common stock are entitled to vote.
On January 12, 2024, Glenn Sanford and Penny Sanford filed an amended Schedule 13D with the Securities and Exchange Commission, which disclosed that they beneficially owned approximately 45.73% of our outstanding common stock as of November 30, 2023 and that they had agreed to vote their shares as a group with respect to the election of directors and any other matter on which our shares of common stock are entitled to vote.
Any security breach, interruption, delay or failure in our systems and operations could substantially reduce the transaction volume that can be processed with our systems, impair quality of service, increase costs, prompt litigation and other consumer claims and damage our reputation, any of which could substantially harm our financial condition. 12 Cybersecurity incidents could disrupt our business operations, result in the loss of critical and confidential information, adversely impact our reputation and harm our business.
Any security breach, interruption, delay or failure in our systems and operations could substantially reduce the transaction volume that can be processed with our systems, impair quality of service, increase costs, prompt litigation and other consumer claims and damage our reputation, any of which could substantially harm our financial condition.
We may not be able to utilize a portion of our net operating loss or research tax credit carryforwards, which may adversely affect our profitability. As of December 31, 2022, we had federal, state and foreign net operating losses carryforward due to prior years’ losses.
In addition, changes in executives and key personnel could be disruptive to our business. We may not be able to utilize a portion of our net operating loss or research tax credit carryforwards, which may adversely affect our profitability. As of December 31, 2023, we had federal, state and foreign net operating losses carryforward due to prior years’ losses.
As the number of agents and brokers in our company grows, our success will depend on our ability to expand, maintain and improve the technology that supports our business operations, including, but not limited to, our cloud office platform.
As the number of agents and brokers in our company grows, our success will depend on our ability to expand, maintain and improve the technology that supports our business operations, including, but not limited to, our cloud office platform, as well as our ability to adopt and integrate new technologies, including, but not limited to, machine learning and artificial intelligence solutions.
Risks Related to Our Stock Glenn Sanford, our Chairman and Chief Executive Officer, together with Penny Sanford, a significant shareholder, Jason Gesing, a director and our Chief Industry Relations Officer and Gene Frederick, a director and agent, own a significant percentage of our stock and have agreed to act as a group on any matter submitted to a vote of our stockholders.
Risks Related to Our Stock Glenn Sanford, our Chairman and Chief Executive Officer, together with Penny Sanford, a significant stockholder, own a significant percentage of our stock and have agreed to act as a group on any matter submitted to a vote of our stockholders.
In January 2022, the U.S. reported a record low for home inventory levels, which remained low through the remainder of 2022. Continuing constraints on home inventory levels may adversely impact the volume of home sale transactions closed by our brokers and agents and, as such, could have a material adverse effect on our business and profitability.
The U.S. home inventory levels have been low throughout 2023 and 2022. Continuing constraints on home inventory levels may adversely impact the volume of home sale transactions closed by our brokers and agents and, as such, could have a material adverse effect on our business and profitability.
If we are not able to organically grow our market share, to offset the declining transactions, our operating results, profits and cash flow may be materially impacted in the event interest rates stay level or continue to rise.
In 2022 and 2023, the Company has experienced declining transaction volume, which has had an impact on operating results. If we are not able to organically grow our market share, to offset the declining transactions, our operating results, profits and cash flow may be materially impacted in the event interest rates stay level or continue to rise.
From time to time, we have received requests to supply information regarding our revenue sharing plan to regulatory agencies. We could potentially in the future be required to modify our revenue sharing plan in certain jurisdictions in order to comply with the interpretation of the regulations by local authorities.
We could potentially in the future be required to modify our revenue sharing plan in certain jurisdictions in order to comply with the interpretation of the regulations by local authorities.
Cybersecurity threats and incidents directed at us could range from uncoordinated individual attempts to gain unauthorized access to information technology systems to sophisticated and targeted measures aimed at disrupting business or gathering personal data of customers.
Cybersecurity incidents could disrupt our business operations, result in the loss of critical and confidential information, adversely impact our reputation and harm our business. Cybersecurity threats and incidents directed at us could range from uncoordinated individual attempts to gain unauthorized access to information technology systems to sophisticated and targeted measures aimed at disrupting business or gathering personal data of customers.
Failure by us, or our independent agents, to comply with these laws, could adversely affect our business. We face significant risk to our brand and revenue if we fail to maintain compliance with the law and regulations of federal, state, county and foreign governmental authorities, or private associations and governing boards.
We face significant risk to our brand and revenue if we fail to maintain compliance with the law and regulations of federal, state, county and foreign governmental authorities, or private associations and governing boards.
The stock price of our common stock has been and likely will continue to be volatile and may decline in value regardless of our performance.
Consequently, current stockholders may experience more dilution in their ownership of our common stock in the future. The stock price of our common stock has been and likely will continue to be volatile and may decline in value regardless of our performance.
We will continue to look for opportunities to acquire technologies or operations that we believe will contribute to our growth and development, including our July 2022 acquisition of Zoocasa. The success of our future acquisition strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions.
Since 2019, we have acquired new technology and operations and entered into various joint venture arrangements. We will continue to look for opportunities to acquire technologies or operations that we believe will contribute to our growth and development. The success of our future acquisition strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions.
In the future we could incur substantial costs, penalties and damages, including back pay, unpaid benefits, taxes, expense reimbursement and attorneys’ fees, in defending future challenges by our affiliated real estate professionals to our employment classification or compensation practices. 16 We are subject to certain risks related to legal proceedings filed by or against us and adverse results may harm our business and financial condition.
In the future we could incur substantial costs, penalties and damages, including back pay, unpaid benefits, taxes, expense reimbursement and attorneys’ fees, in defending future challenges by our affiliated real estate professionals to our employment classification or compensation practices.
To execute our business strategy, we must attract and retain highly qualified personnel. In particular, we compete with many other real estate brokerages for qualified brokers who manage our operations in each state.
In particular, we compete with many other real estate brokerages for qualified brokers who manage our operations in each state.
Natural disasters are occurring more frequently and/or with more intense effects and may impact general population trends. Areas afflicted by natural disasters may experience a decline in home sale transaction volume due to home destruction and/or general population movement out of the afflicted area.
Areas afflicted by natural disasters may experience a decline in home sale transaction volume due to home destruction and/or general population movement out of the afflicted area, and the risk of non-insurability against such disasters.
Our revenue and operating margins each quarter will remain subject to seasonal fluctuations, poor weather and natural disasters and macroeconomic market changes that may make it difficult to compare or analyze our financial performance effectively across successive quarters. Homesale transaction volume can be impacted by natural disasters and other climate-related interruptions.
Our revenue and operating margins each quarter will remain subject to seasonal fluctuations, poor weather and natural disasters and macroeconomic market changes that may make it difficult to compare or analyze our financial performance effectively across successive quarters. 10 General changes in consumer attitudes and behaviors could negatively impact home sale transaction volume.
Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us and certain aspects of the Tax Act could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to the Tax Act or any newly enacted federal tax legislation.
Future guidance from 12 the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation.
These laws and regulations exist at many levels of government in many different forms, including statutes, rules, regulations, judicial decisions and administrative orders. Network marketing regulations are inherently fact-based and often do not include "bright line" rules. Additionally, we are subject to the risk that the regulations, or a regulator's interpretation and enforcement of the regulations, could change.
Various laws and regulations in the United States and other countries regulate network marketing. These laws and regulations exist at many levels of government in many different forms, including statutes, rules, regulations, judicial decisions and administrative orders. Network marketing regulations are inherently fact-based and often do not include "bright line" rules.
Our international operations are subject to risks not generally experienced by our U.S. operations. In addition to operating in Canada, we expanded our business into Australia and the United Kingdom in 2019 and into South Africa, India, Mexico, Portugal and France, during 2020 and into Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama and Germany in 2021.
Our international operations are subject to risks not generally experienced by our U.S. operations. We have operations in Canada, the U.K., Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama, Germany, the Dominican Republic, Greece, New Zealand, Chile, Poland, and Dubai.
The Company believes that it continues to be well positioned for growth in the current economic climate, due to our strong base of agent support, along with our efficient operating model, with lower fixed costs and no brick-and-mortar locations.
The Company believes that it continues to be well positioned for growth in the current economic climate, due to our strong base of agent support, and the superior agent value proposition enabled by our efficient operating model, with lower fixed costs and no brick-and-mortar locations, but we cannot provide assurances that our operating results or cash flows will not be materially impacted by the macroeconomic factors.
Factors that can contribute to a material decrease in brokerage commissions include regulation, a rise in discount brokers and agents, increased adoption of flat fees, commission models with more competitive rates, rebates or lower commission rates on transactions, as well as other competitive factors.
Factors that can contribute to a material decrease in brokerage commissions include regulation, litigation (including pending litigation described elsewhere in this Annual Report), the rise of certain competitive brokerage or non-traditional competitor modes, an increase in the popularity of discount brokers and agents, increased adoption of flat fees, commission models with more competitive rates, rebates or lower commission rates on transactions, adverse outcomes of pending antitrust litigation across our industry, as well as other competitive factors.
We intend to evaluate acquisitions, mergers, joint ventures or investments in third-party technologies and businesses, but we may not realize the anticipated benefits from and may have to pay substantial costs related to, any acquisitions, mergers, joint ventures, or investments that we undertake. 10 As part of our business and growth strategy, we evaluate acquisitions of, or investments in, a wide array of potential strategic opportunities, including third-party technologies and businesses, as well as other real estate brokerages.
We intend to evaluate acquisitions, mergers, joint ventures or investments in third-party technologies and businesses, but we may not realize the anticipated benefits from and may have to pay substantial costs related to, any acquisitions, mergers, joint ventures, or investments that we undertake.
Class action lawsuits can often be particularly burdensome given the breadth of claims, large potential damages and significant costs of defense.
Adverse results in such litigation and other proceedings may harm our business and financial condition. Class action lawsuits can often be particularly burdensome given the breadth of claims, large potential damages and significant costs of defense.
We cannot assure that we will be able to maintain our recent agent growth rate or that our agent and broker base will continue to expand in future periods. A slowdown in our agent growth rate would have a material adverse effect on revenue growth and could adversely affect our business, results of operations, financial condition and cash flows.
A slowdown in our agent growth rate would have a material adverse effect on revenue growth and could adversely affect our business, results of operations, financial condition and cash flows.
The secure processing, maintenance and transmission of information are critical to our operations, especially the processing and closing of real estate transactions.
Our business and particularly our cloud-based platform, is reliant on the uninterrupted functioning of our information technology systems. The secure processing, maintenance and transmission of information are critical to our operations, especially the processing and closing of real estate transactions.
We cannot predict with certainty the cost of defense, the cost of prosecution, insurance coverage or the ultimate outcome of litigation and other proceedings filed by or against us, including remedies or damage awards. Adverse results in such litigation and other proceedings may harm our business and financial condition.
A substantial unsatisfied judgment against us or one of our subsidiaries could result in bankruptcy, which would materially and adversely affect our business and operating results. We cannot predict with certainty the cost of defense, the cost of prosecution, insurance coverage or the ultimate outcome of litigation and other proceedings filed by or against us, including remedies or damage awards.
The average broker commission rate for a real estate transaction is a key determinant of our profitability and a material decrease in brokerage commission rates could have a material adverse effect on our business and profitability. Our operating results are subject to seasonality and vary significantly among quarters during each calendar year, making meaningful comparisons of successive quarters difficult.
The average broker commission rate for a real estate transaction is a key determinant of our profitability and a material decrease in brokerage commission rates could have a material adverse effect on our business and profitability.
In addition, changes in executives and key personnel could be disruptive to our business. Failure to protect intellectual property rights could adversely affect our business. Our intellectual property rights, including existing and future trademarks, trade secrets, patents and copyrights, are important assets of the business.
Failure to protect intellectual property rights could adversely affect our business. Our intellectual property rights, including existing and future trademarks, trade secrets, patents and copyrights, are important assets of the business. We have taken measures to protect our intellectual property, but these measures may not be sufficient or effective.
Risks Related to Legal and Regulatory Matters We offer our independent agents the opportunity to earn additional commissions through our revenue sharing plan, which pays under a multi-tiered compensation structure similar in some respects to network marketing.
We offer our independent agents the opportunity to earn additional commissions through our revenue sharing plan, which pays under a multi-tiered compensation structure similar in some respects to network marketing. Network marketing is subject to intense government scrutiny and regulation and changes in the law, or the interpretation and enforcement of the law, might adversely affect our business.
Seasons and weather traditionally impact the real estate industry. Continuous poor weather or natural disasters negatively impact listings and sales. Spring and summer seasons historically reflect greater sales periods in comparison to fall and winter seasons.
Our operating results are subject to seasonality and vary significantly among quarters during each calendar year, making meaningful comparisons of successive quarters difficult. Seasons and weather traditionally impact the real estate industry. Continuous poor weather or natural disasters negatively impact listings and sales. Spring and summer seasons historically reflect greater sales periods in comparison to fall and winter seasons.
Certain real estate markets have or may experience a decline in homeownership based on changing social behaviors, including as a result of declining marriage and birth rates. Because of these changing attitudes and behaviors, consumers may be more or less likely to prefer renting a home versus purchasing a home.
The real estate market is affected by changes in consumer attitudes and behaviors, including as a result of changing attitudes toward and behaviors related to home ownership. Certain real estate markets have or may experience a decline in homeownership based on changing social behaviors, including as a result of declining marriage and birth rates.
Our business, financial condition and reputation may be substantially harmed by security breaches, interruptions, delays and failures in our systems and operations. The performance and reliability of our systems and operations are critical to our reputation and ability to attract agents, teams of agents and brokers into our company as well as our ability to service home-buyers and sellers.
The performance and reliability of our systems and operations are critical to our reputation and ability to attract agents, teams of agents and brokers into our company as well as our ability to service homebuyers and sellers.
In addition, activities of agents and brokers outside of the U.S. are more difficult and more expensive to monitor and improper activities or mismanagement may be more difficult to detect.
Bribery Act, or similar laws of other countries; and ● regional and country specific data protection and privacy laws including the European Union’s General Data Protection Regulation (“GDPR”). In addition, activities of agents and brokers outside of the U.S. are more difficult and more expensive to monitor and improper activities or mismanagement may be more difficult to detect.
Additionally, the Company maintains a 2015 Equity Incentive Plan from which employees, agents, brokers and certain service providers of the Company and its affiliates can receive awards of the Company’s common stock. As of December 31, 2022, there were 84,011,043 shares registered and authorized under the 2015 Equity Incentive Plan, of which 28,125,785 are available for future issuance.
We are authorized to issue up to 900,000,000 shares of common stock, of which 183,606,708 shares were issued and 154,669,037 shares were outstanding as of December 31, 2023. Additionally, the Company maintains a 2015 Equity Incentive Plan from which employees, agents, brokers and certain service providers of the Company and its affiliates can receive awards of the Company’s common stock.
We have taken measures to protect our intellectual property, but these measures may not be sufficient or effective. We may bring lawsuits to protect against the potential infringement of our intellectual property rights and other companies, including our competitors, could make claims against us alleging our infringement of their intellectual property rights.
We may bring lawsuits to protect against the potential infringement of our intellectual property rights and other companies, including our competitors, could make claims against us alleging our infringement of their intellectual property rights. 14 There can be no assurance that we would prevail in such lawsuits. Any significant impairment of our intellectual property rights could harm our business.
If we are not able to timely and effectively respond to these requirements, or if risks arise outside our reasonable ability to respond effectively, our business and financial condition may be harmed. Additionally, SUCCESS Lending relies on third-party sources, including credit bureaus, for credit, identification, employment and other relevant information in order to review and select qualified borrowers.
If we are not able to timely and effectively respond to these requirements, or if risks arise outside our reasonable ability to respond effectively, our business and financial condition may be harmed.
Risks Related to our Real Estate Business We may be unable to maintain our agent growth rate, which would adversely affect our revenue growth and results of operations. We have experienced rapid and accelerating growth in our real estate broker and agent base.
Risks Related to our Real Estate Business We may be unable to maintain our agent growth rate, which would adversely affect our revenue growth and results of operations. During the year ended December 31, 2023, our agent and broker base grew to 87,515 agents and brokers, or by 2%, from 86,203 agents and brokers as of December 31, 2022.
From time to time, we may become involved in lawsuits and legal proceedings which arise in the ordinary course of business. At present, we are not involved in any material pending legal proceedings and there are no proceedings in which any of our directors, officers or affiliates is an adverse party or has a material interest adverse to our interest.
Except as set forth in Note 13 – Commitments and Contingencies to the consolidated financial statements included elsewhere within this Annual Report, we are not involved in any material pending legal proceedings and there are no proceedings in which any of our directors, officers or affiliates is an adverse party or has a material interest adverse to our interest.
There can be no assurance that we would prevail in such lawsuits. Any significant impairment of our intellectual property rights could harm our business. Our business could be adversely affected if we are unable to expand, maintain and improve the systems and technologies which we rely on to operate.
Our business could be adversely affected if we are unable to expand, maintain and improve the systems and technologies which we rely on to operate or fail to adopt and integrate new technologies.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that leased facilities are adequate to meet current needs and that additional facilities will be available for lease to meet future needs. 20
Biggest changeWe believe that our leased facilities are adequate to meet current needs and that additional facilities will be available for lease to meet future needs.
Item 2. PROPERTIES Our principal corporate office is located at 2219 Rimland Drive, Suite 301, Bellingham, WA and is leased office space.
Item 2. PROPERTIES Our principal corporate office is located at 2219 Rimland Drive, Suite 301, Bellingham, Washington and is leased office space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. LEGAL PROCEEDINGS Refer to Item 1A. – Risk Factors” and Part II, Item 8. Financial Statements and Supplementary Data, Note 13 – Commitments and Contingencies to the consolidated financial statements included elsewhere within this report for additional information on the Company’s legal proceedings. The Company believes that it has adequately and appropriately accrued for legal matters.
Biggest changeItem 3. LEGAL PROCEEDINGS The information set forth under “ Contingencies ” under Note 13 – Commitments and Contingencies to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report is incorporated herein by reference. Item 4. MINE SAFETY DISCLOSURES Not applicable. 24 PART II
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We recognize expenses for legal claims when payments associated with the claims become probable and can be reasonably estimated. ​ Litigation and other legal matters are inherently unpredictable and subject to substantial uncertainties and adverse resolutions could occur.
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In addition, litigation and other legal matters, including class-action lawsuits, government investigations and regulatory proceedings can be costly to defend and, depending on the class size and claims, could be costly to settle.
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As such, the Company could incur judgments, penalties, sanctions, fines or enter into settlements of claims with liability that are materially in excess of amounts accrued and these settlements could have a material adverse effect on the Company’s financial condition, results of operations or cash flows in any particular period. Item 4. MINE SAFETY DISCLOSURES Not applicable. 21 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRefer to Note 10 – Stockholders’ Equity to the consolidated financial statements herein for more details regarding our stock repurchase program. 22 The following table provides information about repurchases of our common stock during the quarter ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Total number of shares purchased ​ Average price paid per share ​ Total number of shares purchased as part of publicly announced plans or programs (1) ​ Approximate dollar value of shares that may yet be purchased under the plans or programs 10/1/2022-10/31/2022 ​ 1,072,024 ​ $ 12.39 ​ 1,072,024 ​ $ 118,094,465 11/1/2022-11/30/2022 ​ 1,102,290 ​ 12.07 ​ 1,102,290 ​ 104,797,279 12/1/2022-12/31/2022 ​ 1,125,422 ​ 11.90 ​ 1,125,422 ​ 91,497,289 Total ​ 3,299,736 ​ $ 12.12 ​ 3,299,736 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) In December 2018, the Company’s board of directors approved a stock repurchase program authorizing the Company to purchase its common stock.
Biggest changeThe following table provides information about repurchases of our common stock during the quarter ended December 31, 2023: ​ 25 ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Total number of shares purchased ​ Average price paid per share ​ Total number of shares purchased as part of publicly announced plans or programs (1) ​ Approximate dollar value of shares that may yet be purchased under the plans or programs 10/1/2023-10/31/2023 ​ 827,770 ​ $ 14.49 ​ 827,770 ​ $ 444,553,702 11/1/2023-11/30/2023 ​ 614,063 ​ 12.85 ​ 614,063 ​ 436,563,204 12/1/2023-12/31/2023 ​ 411,270 ​ 14.81 ​ 411,270 ​ 430,567,463 Total ​ 1,853,103 ​ $ 14.05 ​ 1,853,103 ​ ​ (1) In December 2018, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to purchase its common stock.
The S&P Internet Select Industry Index is comprised of U.S. equities of internet and direct marketing retail, internet services and infrastructure and interactive media and services companies. ​ ​ ​ ​ ​ ​ ​ ​ Year 2018 2019 2020 2021 2022 EXPI $ 100.00 $ 88.00 $ 490.00 $ 524.00 $ 174.00 S&P 500 Index 100.00 119.00 138.00 176.00 141.00 S&P Homebuilders Index (XHB) 100.00 114.00 146.00 219.00 156.00 S&P Internet Index (XWEB) 100.00 109.00 209.00 195.00 85.00 ​ ​ ​ 23 Item 6. [RESERVED]
The S&P Internet Select Industry Index is comprised of U.S. equities of internet and direct marketing retail, internet services and infrastructure and interactive media and services companies. ​ ​ ​ ​ ​ ​ ​ ​ Year 2018 2019 2020 2021 2022 2023 EXPI $ 100.00 $ 88.00 $ 490.00 $ 524.00 $ 174.00 $ 247.00 S&P 500 Index 100.00 119.00 138.00 176.00 141.00 176.00 S&P Homebuilders Index (XHB) 100.00 114.00 146.00 219.00 156.00 253.00 S&P Internet Index (XWEB) 100.00 109.00 209.00 195.00 85.00 119.00 ​ ​ ​ Item 6. [RESERVED]
Dividends During 2022, the Company’s Board of Directors declared the following dividends on its common stock: Declaration Date Record Date Payable Date Per Share February 17, 2022 March 11, 2022 March 31, 2022 $0.040 April 29, 2022 May 16, 2022 May 31, 2022 $0.040 July 29, 2022 August 12, 2022 August 29, 2022 $0.045 October 27, 2022 November 14, 2022 November 28, 2022 $0.045 ​ Payment of cash dividends is at the discretion of the Company’s Board of Directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for growth.
Dividends During 2023, the Company’s Board of Directors declared the following dividends on its common stock: Declaration Date Record Date Payable Date Per Share February 9, 2023 March 13, 2023 March 31, 2023 $0.045 April 27, 2023 May 12, 2023 May 31, 2023 $0.045 July 28, 2023 August 18, 2023 September 4, 2023 $0.050 October 25, 2023 November 16, 2023 November 30, 2023 $0.050 ​ Payment of cash dividends is at the discretion of the Company’s Board of Directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for growth.
Company Stock Performance The following graph compares the performance of our common stock to the Standard & Poor’s (“S&P”) 500 Index, the S&P Homebuilders Select Industry Index and the S&P Internet Select Industry Index by assuming $100 was invested in each investment option as of February 28, 2018, which represents the month our common stock began trading on the Nasdaq.
Company Stock Performance The following graph compares the performance of our common stock to the Standard & Poor’s (“S&P”) 500 Index, the S&P Homebuilders Select Industry Index and the S&P Internet Select Industry Index by assuming $100 was invested in each investment option as of December 31, 2018.
No date has been established for the completion of the share repurchase program and we are not obligated to repurchase any shares. Subject to applicable corporate securities laws, repurchases may be made at such times and in such amounts as management deems appropriate. Repurchases under the program can be discontinued at any time management feels additional repurchases are not warranted.
No date has been established for the completion of the share repurchase program and we are not obligated to repurchase any shares. Subject to applicable corporate securities laws, repurchases may be made at such times and in such amounts as management deems appropriate or in accordance with the terms of the 10b5-1 plan.
Holders of Record As of February 17, 2023, we had approximately 116,394 shareholders of record which hold shares of the Company’s common stock. This does not include persons whose stock is in nominee or “street name” accounts through brokers.
Holders of Record As of February 16, 2024, we had approximately 113,899 stockholders of record who hold shares of the Company’s common stock. This does not include persons whose stock is in nominee or “street name” accounts through brokers.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of eXp World Holdings, Inc. (“eXp”, or, collectively with its subsidiaries, the “Company”, “we”, “us”, or “our”) is traded on the Nasdaq Global Market operated by Nasdaq, Inc. under the trading symbol “EXPI”.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of eXp is traded on the Nasdaq Global Market under the trading symbol “EXPI”.
Any shares repurchased under the program are returned to the status of authorized but unissued shares of common stock until retired.
Repurchases under the program can be discontinued at any time the Board of Directors feels additional repurchases are not warranted. Any shares repurchased under the program are returned to the status of authorized but unissued shares of common stock until retired.
In May 2022, the Board approved an increase to the total amount of its buyback program from $400.0 million to $500.0 million. The stock repurchase program is more fully disclosed in Note 10 – Stockholders’ Equity to the consolidated financial statements.
In May 2022, the Board approved an increase to the total amount of its buyback program from $400.0 million to $500.0 million. In June 2023, the Board approved an increase to the total amount of its buyback program from $500.0 million to $1.0 billion.
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Refer to Note 9 – Stockholders’ Equity to the consolidated financial statements included elsewhere within this Annual Report for more details regarding our stock repurchase program.
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The stock repurchase program is more fully disclosed in Note 9 – Stockholders’ Equity to the consolidated financial statements included elsewhere in this Annual Report.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table reflects the results of each of our reportable segments during the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ Year Ended December 31, ​ ​ ​ 2022 ​ 2021 ​ % Change ​ 2021 ​ 2020 ​ % Change ​ ​ (In thousands) ​ (In thousands) Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ North American Realty ​ $ 4,552,938 ​ $ 3,745,354 ​ 22% ​ $ 3,745,354 ​ $ 1,791,446 ​ 109% International Realty ​ 35,924 ​ 17,804 ​ 102% ​ 17,804 ​ 2,004 ​ 788% Virbela ​ 8,485 ​ 8,615 ​ (2)% ​ 8,615 ​ 5,736 ​ 50% Other Affiliated Services ​ 5,084 ​ 2,896 ​ 76% ​ 2,896 ​ 327 ​ 786% Segment eliminations ​ (4,270) ​ (3,499) ​ 22% ​ (3,499) ​ (1,228) ​ 185% Total Consolidated Revenues ​ $ 4,598,161 ​ $ 3,771,170 ​ 22% ​ $ 3,771,170 ​ $ 1,798,285 ​ 110% Adjusted Segment EBITDA (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ North American Realty ​ 103,255 ​ 116,800 ​ (12)% ​ 116,800 ​ 73,649 ​ 59% International Realty ​ (13,708) ​ (9,138) ​ 50% ​ (9,138) ​ (1,615) ​ 466% Virbela ​ (9,642) ​ (12,637) ​ (24)% ​ (12,637) ​ (5,017) ​ 152% Other Affiliated Services ​ (2,600) ​ (3,322) ​ (22)% ​ (3,322) ​ (380) ​ 774% Corporate expenses and other ​ (16,756) ​ (13,708) ​ 22% ​ (13,708) ​ (8,796) ​ 56% Total Reported Adjusted EBITDA ​ $ 60,549 ​ $ 77,995 ​ (22)% ​ $ 77,995 ​ $ 57,841 ​ 35% ​ 30 ​ (1) Adjusted Segment EBITDA is not a measurement of our financial performance under U.S.
Biggest changeThe following table reflects the results of each of our reportable segments during the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ Change 2023 vs. 2022 ​ December 31, 2023 ​ December 31, 2022 ​ $ % ​ ​ (In thousands, except share amounts and per share data) Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ ​ Revenues ​ ​ ​ ​ ​ ​ ​ North American Realty ​ $ 4,220,063 ​ $ 4,552,938 ​ ($ 332,875) ​ (7)% International Realty ​ 53,931 ​ 35,924 ​ 18,007 ​ 50% Virbela ​ 7,284 ​ 8,485 ​ (1,201) ​ (14)% Other Affiliated Services ​ 4,802 ​ 5,084 ​ (282) ​ (6)% Segment eliminations ​ (4,975) ​ (4,270) ​ (705) ​ (17)% Total Consolidated Revenues ​ $ 4,281,105 ​ $ 4,598,161 ​ ($ 317,056) ​ (7)% Adjusted Segment EBITDA (1) ​ ​ ​ ​ ​ ​ ​ ​ North American Realty ​ 91,101 ​ 103,255 ​ ($ 12,154) ​ (12)% International Realty ​ (13,657) ​ (13,708) ​ 51 ​ -% Virbela ​ (5,725) ​ (9,642) ​ 3,917 ​ 41% Other Affiliated Services ​ (3,795) ​ (2,600) ​ (1,195) ​ (46)% Total Segment Adjusted EBITDA ​ 67,924 ​ 77,305 ​ (9,381) ​ (12)% Corporate expenses and other ​ (10,376) ​ (16,756) ​ 6,380 ​ 38% Total Reported Adjusted EBITDA ​ $ 57,548 ​ $ 60,549 ​ ($ 3,001) ​ (5)% (1) Adjusted Segment EBITDA is not a measurement of our financial performance under U.S.
The following discussion should be read together with our consolidated financial statements and related notes included elsewhere within this report. This discussion contains forward-looking statements that constitute our estimates, plans and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.
The following discussion should be read together with our consolidated financial statements and related notes included elsewhere within this Annual Report. This discussion contains forward-looking statements that constitute our estimates, plans and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.
We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our operating requirements for at least the next 12 months.
We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our normal operating requirements for at least the next 12 months.
If this were to occur, we would be required to record a non-cash charge to earnings for the write-down in the value of the goodwill, which could have a material adverse effect on our results of operations and financial position but not on our cash flows from operations. During the fourth quarter of 2022, we performed an assessment of goodwill.
If this were to occur, we would be required to record a non-cash charge to earnings for the write-down in the value of the goodwill, which could have a material adverse effect on our results of operations and financial position but not on our cash flows from operations. During the fourth quarter of 2023, we performed an assessment of goodwill.
See “Forward-Looking Statements” and “Item 1A. – Risk Factors” included elsewhere within this Annual Report on Form 10-K for a discussion of certain risks, uncertainties and assumptions associated with these statements. This section generally discusses items pertaining to and comparisons of financial results between 2022 and 2021.
See “Forward-Looking Statements” and “Item 1A. – Risk Factors” included elsewhere within this Annual Report on Form 10-K for a discussion of certain risks, uncertainties and assumptions associated with these statements. This section generally discusses items pertaining to and comparisons of financial results between 2023 and 2022.
Significant assumptions used 34 in determining the allocation of fair value include the following valuation techniques: the cost approach, the income approach and the market approach, which are determined based on cash flow projections and related discount rates, industry indices, market prices regarding replacement cost and comparable market transactions.
Significant assumptions used in determining the allocation of fair value include the following valuation techniques: the cost approach, the income approach and 36 the market approach, which are determined based on cash flow projections and related discount rates, industry indices, market prices regarding replacement cost and comparable market transactions.
In turn, this often leads to enthusiastic fans of eXp who will promote our Company and continue leading us through strong organic growth. The NPS measure is an important vehicle for delivering on our core values of transparency. While we strive for high satisfaction, it is equally important to investigate a low or unfavorable trending of NPS.
In turn, this often leads to enthusiastic fans of eXp who will promote our Company and continue leading us through strong organic growth. The NPS process is an important vehicle for delivering our core values of transparency. While we strive for high satisfaction, it is equally important to investigate a low or unfavorable trending of NPS.
As of December 31, 2022, based on our assessment of the realizability of the net deferred tax assets, we reached the conclusion that our net deferred tax assets will most likely be fully realized and therefore no valuation allowance was recorded.
As of December 31, 2023, based on our assessment of the realizability of the net deferred tax assets, we reached the conclusion that our net deferred tax assets will most likely be fully realized and therefore no valuation allowance was recorded.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to inform the reader about material information relevant to an assessment of the financial condition and results of operations of eXp World Holdings, Inc. and its subsidiaries for the three-year period ended December 31, 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to inform the reader about material information relevant to an assessment of the financial condition and results of operations of eXp World 26 Holdings, Inc. and its subsidiaries for the three-year period ended December 31, 2023.
Management evaluates the operating results of each of its reportable segments based upon revenue and Adjusted Segment EBITDA. Adjusted Segment EBITDA is defined by us as net income before depreciation and amortization, interest expense, net, income taxes and other items that are not core to the operating activities of the Company.
Management evaluates the operating results of each of its reportable segments based upon revenue and Adjusted Segment EBITDA. Adjusted Segment EBITDA is defined by us as net income before depreciation and amortization, stock-based compensation expense, interest expense, net, income taxes, impairment expense and other items that are not core to the operating 33 activities of the Company.
Discussions of 2020 items and comparisons between 2021 and 2020 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 MD&A”).
Discussions of 2021 items and comparisons between 2022 and 2021 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 MD&A”).
The following discussion focuses on the operating performance of the Company for the years ended December 31, 2022 and 2021 and the financial condition of the Company as of December 31, 2022.
The following discussion focuses on the operating performance of the Company for the years ended December 31, 2023 and 2022 and the financial condition of the Company as of December 31, 2023.
Outlook As we continue to scale our Company by investing in people, systems and processes, we expect to increase market share, agent base and real estate transactions volume in the U.S. and Canada and selectively grow in the international markets.
Outlook As we continue to scale our Company by investing in people, technology and processes, we expect to increase market share, agent base and real estate transaction volume in the U.S. and Canada and selectively grow in the international markets.
This non-GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. We define the non-U.S.
GAAP financial measure, to understand and evaluate our core operating performance. This non-GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP.
GAAP reported amounts and equals the difference between revenue and cost of sales. Gross margin is the calculation of gross profit as a percentage of total revenue. Commissions and other agent-related costs represent the cost of sales for the Company.
Gross profit is calculated from U.S. GAAP reported amounts and equals the difference between revenue and cost of sales. Gross margin is the calculation of gross profit as a percentage of total revenue. Commissions and other agent-related costs represent the cost of sales for the Company.
Under our equity incentive program, agents and brokers who qualify are issued shares of the Company’s common stock and it continues to be another element in creating a culture of agent-ownership. Our agent compensation plans represent a key lever in our strategy to attract and retain independent agents and brokers.
Under our equity incentive program, agents and brokers who qualify are issued shares of the Company’s common stock and it continues to be another element in creating a culture of agent-ownership. Our agent equity program (“AEP”) represents a key lever in our strategy to attract and retain independent agents and brokers.
Corporate expenses include costs incurred to operate the corporate parent of eXp, including expenses incurred in connection with strategic resources provided to the agents, as well as certain other centrally managed expenses that are not allocated to the operating segments, including administrative, brokerage operations and legal functions.
Corporate expenses include costs incurred to operate eXp World Holdings, Inc., including expenses incurred in connection with strategic resources provided to the agents, as well as certain other centrally managed expenses that are not allocated to the operating segments, including administrative, brokerage operations and legal functions.
GAAP requires us to make certain judgments and assumptions, based on information available at the time of our preparation of the financial statements, in determining accounting estimates used in the preparation of the statements. Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to the consolidated financial statements.
GAAP requires us to make certain judgments and assumptions, based on information available at the time of our preparation of the financial statements, in determining accounting estimates used in the preparation of the statements. Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to the consolidated financial statements included elsewhere in this Annual Report.
Settled home purchases and sales transactions and volume resulted from closed real estate transactions and typically change directionally with changes in the market’s existing home sales transactions as reported by NAR, as disproportionate variances are representative of company-specific improvements or shortfalls.
Settled home purchases and sales transactions and volume result from closed real estate transactions and typically fluctuate directionally with changes in the market’s existing home sales transactions as reported by NAR, with disproportionate variances representative of company-specific improvements or shortfalls.
GAAP and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-U.S. GAAP Financial Measures”.
GAAP and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, and why we believe Adjusted EBITDA is useful to investors see “Non-U.S. GAAP Financial Measures”.
GAAP financial measure of Consolidated Adjusted EBITDA to mean net income, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, stock-based compensation expense and stock option expense. Adjusted Segment EBITDA is defined as operating profit plus depreciation and amortization and stock-based compensation expenses.
We define the non-U.S. GAAP financial measure of Consolidated Adjusted EBITDA to mean net income, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, stock-based compensation expense and stock option expense. Adjusted Segment EBITDA is defined as operating profit plus depreciation and amortization and stock-based compensation expenses and impairment expense.
Factors include, among others, (i) changes in demand for the Company’s services and changes in consumer behavior; (ii) macroeconomic conditions beyond our control; (iii) the Company’s ability to effectively maintain its infrastructure to support its operations and initiatives; (iv) the impact of governmental regulations related to the Company’s operations; and (v) other factors, as described in this Annual Report on Form 10-K in Part II, Item 1A, “Risk Factors.” ​ 33 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in accordance with U.S.
Factors include, among others, (i) changes in demand for the Company’s services and changes in consumer behavior; (ii) macroeconomic conditions beyond our control; (iii) the Company’s ability to effectively maintain its infrastructure to support its operations and initiatives; (iv) the impact of governmental regulations related to the Company’s operations; (v) the outcome of ongoing antitrust litigation; and (vi) other factors, as described in this Annual Report in Part II, Item 1A, “Risk Factors.” 35 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in accordance with U.S.
GAAP and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted Segment EBITDA and a reconciliation of Adjusted Segment EBITDA to net income, see “Non-U.S. GAAP Financial Measures”.
GAAP and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted Segment EBITDA and a reconciliation of Adjusted Segment EBITDA to net income, and a discussion of why we believe Adjusted Segment EBITDA is useful to investors, see “Non-U.S. GAAP Financial Measures”.
We do not believe these off-balance sheet arrangements have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. For information regarding the warehouse credit agreements, see Note 13 – Commitments and Contingencies .
We do not believe these off-balance sheet arrangements have or are reasonably likely to have a current or future material effect on our financial 34 condition, results of operations, liquidity, capital expenditures, or capital resources. For information regarding the warehouse credit agreements, see Note 13 – Commitments and Contingencies to the consolidated financial statements included elsewhere in this Annual Report.
The 2021 MD&A is incorporated by reference herein from Part II, Item 7 of our Annual Report on Form 10-K dated February 25, 2022 (Commission File No. 001-38493 ).
The 2022 MD&A is incorporated by reference herein from Part II, Item 7 of our annual report on Form 10-K filed on February 28, 2023 (Commission File No. 001-38493 ).
During 2022, our unconsolidated joint venture, SUCCESS Lending, obtained $25 million in revolving warehouse credit lines from each of Flagstar Bank FSB and Texas Capital Bank, which represent off-balance sheet arrangements for the Company. The Company’s capital liability under the warehouse credit lines is limited to $3.25 million in the aggregate.
We currently do not hold any marketable securities. During 2022, our unconsolidated joint venture, SUCCESS Lending, obtained $25 million in revolving warehouse credit lines from each of Flagstar Bank FSB and Texas Capital Bank, which represent off-balance sheet financing arrangements for the Company. The Company’s capital liability under the warehouse credit lines is limited to $3.25 million in the aggregate.
Our future capital requirements will depend on many factors, including our level of investment in technology, our rate of growth into new markets and cash used to repurchase shares of the Company’s common stock.
Our future capital requirements will depend on many factors, including the outcome of pending antitrust litigation, our level of investment in technology, our rate of growth into new markets and cash used to pay quarterly cash dividends and repurchase shares of the Company’s common stock.
See Note 12 – Income Taxes to the consolidated financial statements for further information related to our income tax positions. ​ 35 Litigation We recognize expenses for legal claims when payments associated with the claims become probable and can be reasonably estimated.
See Note 12 – Income Taxes to the consolidated financial statements included elsewhere in this Annual Report for further information related to our income tax positions. 37 Litigation We recognize expenses for legal claims when payments associated with the claims become probable and can be reasonably estimated.
Regardless of whether the housing market continues to slow or grow, we continue to believe that we are positioned to leverage our low-cost, high-engagement model, affording agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners looking to prosper in a series of fluctuations in economic activity.
Regardless of whether the housing market continues to decline or growth returns, we continue to believe that we are positioned to leverage our low-cost, high-engagement model, which affords agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners looking to prosper amidst fluctuations in economic activity.
As principal and upon satisfaction of our obligation, the Company recognizes revenue in the gross amount of consideration to which we expect to be entitled to. Revenue is derived from assisting home-buyers and sellers in listing, marketing, selling and finding real estate.
The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. As principal and upon satisfaction of our obligation, the Company recognizes revenue in the gross amount of consideration to which we expect to be entitled. Revenue is derived from assisting homebuyers and sellers in listing, marketing, selling and finding real estate.
The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general.
The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general including rising interest rates and declining transaction volume in the U.S.
Real estate transaction volume represents the total sales value for all homes bought and sold by our agents and brokers and is influenced by several market factors, including, but not limited to, the pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, local inventory levels, mortgage interest rates and seasonality.
Transaction volume represents the total sales value for all transactions and is influenced 29 by several market factors, including, but not limited to, the pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, economic growth, local inventory levels, mortgage interest rates, and seasonality.
For the year ended December 31, 2022, cash used in our investing activities decreased primarily due a decrease of ($1.4) million in capital expenditures and a decrease of $2.5 million invested in unconsolidated subsidiaries in the current year offset by an increase in payment for business acquisitions (Zoocasa in 2022) by $7.4 million from prior year.
For the year ended December 31, 2023, cash used in our investing activities decreased primarily due to a decrease of ($6.7) million in capital expenditures and an increase of $5.4 million invested in unconsolidated subsidiaries in the current year offset by $9.9 million Zoocasa business acquisition in 2022.
GAAP Financial Measures All dollar amounts are in USD thousands except share amounts and per share data and as otherwise noted. OVERVIEW eXp is a diversified portfolio of service-based businesses whose operations benefit substantially from utilizing our enabling technology platform.
GAAP Financial Measures All dollar amounts are in USD thousands except share amounts and per share data and as otherwise noted. OVERVIEW eXp is a diversified portfolio of service-based businesses whose operations benefit substantially from utilizing our enabling technology platform. The Chief Operating Decision Maker (“CODM”) manages the business and allocates resources as four separate operating segments.
Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand. In periods of economic growth, demand typically increases resulting in higher home sales transactions and home sales prices.
The economic conditions influencing housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand. In periods of economic growth, rising consumer confidence and lower interest rates, demand typically increases resulting in higher home sales transactions and home sales prices.
The following table presents our net working capital for the periods presented: ​ ​ ​ ​ ​ ​ December 31, 2022 December 31,2021 Current assets ​ $ 255,113 ​ $ 319,315 Current liabilities ​ (127,299) ​ (186,814) Net working capital ​ $ 127,814 ​ $ 132,501 ​ ​ ​ ​ ​ As of December 31, 2022, net working capital decreased ($4.7) million, or (4)%, compared to the prior year, primarily due to a decrease in accounts receivable of ($46.2) million, partially offset by an decrease in accrued liabilities of ($32.7) million and an increase in cash and cash equivalents of $13.4 million.
The following table presents our net working capital for the periods presented: ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 Current assets ​ $ 266,475 ​ $ 255,113 Current liabilities ​ (141,640) ​ (127,299) Net working capital ​ $ 124,835 ​ $ 127,814 ​ ​ ​ ​ ​ As of December 31, 2023, net working capital decreased ($3.0) million, or (2)%, compared to the prior year, primarily due to a decrease in accounts receivable of ($1.3) million, partially offset by an increase in accrued liabilities of $9.2 million and an increase in cash and cash equivalents of $5.3 million.
GAAP and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-U.S. GAAP Financial Measures”. Our strength is attracting real estate agent and broker professionals that contribute to our growth.
GAAP and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, and a discussion of why we believe Adjusted EBITDA is useful to investors, see “Non-U.S. GAAP Financial Measures”.
When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20 percent down payment and ability to qualify for a mortgage. The unfavorable housing affordability index is due to increased mortgage rate conditions and low inventory levels, driving increases in the average home price.
As home prices and interest rates have increased, the housing affordability index has become unfavorable. When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20 percent down payment and ability to qualify for a mortgage.
Commission and Other Agent-Related Costs Commission and other agent-related costs were $4.2 billion in 2022 compared to $3.5 billion in 2021, an increase of $756.1 million, or 22%. Commission and other agent-related costs include sales commissions paid and are reduced by agent-related fees.
Commission and Other Agent-Related Costs Commission and other agent-related costs were $4.0 billion in 2023 compared to $4.2 billion in 2022, a decrease of ($274.2) million, or (6)%. Commission and other agent-related costs include sales commissions paid and are reduced by agent-related fees.
The Company’s presentation of Adjusted Segment EBITDA may not be comparable to similar measures used by other companies. 2022 Compared to 2021 North American Realty revenue increased 22% in 2022 compared to 2021 primarily due to increased real estate transactions driven by higher agent count.
The Company’s presentation of Adjusted Segment EBITDA may not be comparable to similar measures used by other companies. 2023 Compared to 2022 North American Realty revenue decreased (7)% in 2023 compared to 2022 primarily due to a decrease in overall real estate transactions, driven by market conditions, partially offset by growth in our agent base.
As a result of the analysis performed, management believes the estimated fair value of the reporting units continue to exceed their carrying values and does not represent a more likely than not possibility of potential impairment. The goodwill analysis did not result in an impairment charge.
To perform these assessments, we identified and analyzed macroeconomic conditions, industry and market conditions and Company-specific factors. As a result of the analysis performed, management believes the estimated fair value of the reporting units continue to exceed their carrying values and does not represent a more likely than not possibility of potential impairment.
Strategy Our strategy is to grow organically in the North American and certain international markets by increasing our independent agent and broker network. Through our cloud-based operations and technology platform, we strive to achieve customer-focused efficiencies that allow us to increase market share and attain strong returns as we scale our business within the markets in which we operate.
Through our cloud-based operations and technology platform, we strive to achieve customer-focused efficiencies that allow us to increase market share and attain strong returns as we scale our business within the markets in which we operate. By building partnerships and strategically deploying capital, we seek to grow the business and enter attractive vertical and adjacent markets.
The following table outlines the key business metrics that we periodically review to track the Company’s performance: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ Performance: ​ ​ ​ ​ ​ ​ Agent count ​ 86,203 ​ 71,137 ​ 41,313 Transactions ​ 511,859 ​ 444,367 ​ 238,981 Volume ​ $ 187,252,204 ​ $ 156,101,836 ​ $ 72,206,457 Revenue ​ $ 4,598,161 ​ $ 3,771,170 ​ $ 1,798,285 Gross profit ​ $ 366,899 ​ $ 296,031 ​ $ 159,611 Gross margin (%) ​ 8.0% ​ 7.8% ​ 8.9% Adjusted EBITDA (1) ​ $ 60,549 ​ $ 77,995 ​ $ 57,841 ​ (1) Adjusted EBITDA is not a measurement of our financial performance under U.S.
The following table outlines the key business metrics that we periodically review to track the Company’s performance: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Performance: ​ ​ ​ ​ ​ ​ Agent count ​ 87,515 ​ 86,203 ​ 71,137 Real estate sales transactions ​ 422,772 ​ 460,150 ​ 407,197 Other real estate transactions ​ 71,636 ​ 51,709 ​ 37,170 Volume ​ $ 169,202,948 ​ $ 187,252,204 ​ $ 156,101,836 Revenue ​ $ 4,281,105 ​ $ 4,598,161 ​ $ 3,771,170 Gross profit ​ 324,051 ​ 366,899 ​ 296,031 Gross margin (%) ​ 7.6% ​ 8.0% ​ 7.8% Adjusted EBITDA (1) ​ $ 57,548 ​ $ 60,549 ​ $ 77,995 ​ (1) Adjusted EBITDA is not a measurement of our financial performance under U.S.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. These assumptions and estimates include projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates and other market factors.
These assumptions and estimates include projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates and other market factors.
Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand. Additionally, regulations imposed by local, state and federal government agencies and geopolitical instability, can also negatively impact the housing markets for which we operate.
Conversely, in periods of economic recession, declining consumer confidence and higher interest rates, demand typically decreases, resulting in lower home sales transactions and home sale prices. Additionally, regulations imposed by local, state and federal government agencies and geopolitical instability can also negatively impact the housing markets in which we operate.
Our home sale transaction growth was directly related to the growth of our agent base over the prior comparative period. 26 We utilize gross profit and gross margin, financial statement measures based on generally accepted accounting principles in the U.S. (“U.S. GAAP”), to assess eXp’s financial performance from period to period. Gross profit is calculated from U.S.
Our real estate sales transaction decline was directly related to the decline in existing home sales in the U.S. in 2023 compared to 2022 as reported by the NAR. We utilize gross profit and gross margin, financial statement measures based on generally accepted accounting principles in the U.S. (“U.S. GAAP”), to assess eXp’s financial performance from period to period.
At each reporting period, we estimate revenue for closed transactions for which we have not yet received the closing documents due to timing of when a transaction settles. Additionally, provisions for anticipated differences between consideration due and amounts expected to be received are estimated and recorded to revenue.
At each reporting period, we estimate and accrue revenue for closed transactions for which we are entitled to but have not yet received the closing documents due to timing of when a transaction settles. The accrual for estimated revenue was immaterial for the years ended December 31, 2023 and 2022.
The Company provides these services itself and controls the services necessary to legally represent the transfer of real estate. Correspondingly, the Company is defined as the principal. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction.
The Company is contractually obligated to provide services for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services necessary to legally represent the transfer of real estate. Correspondingly, the Company is defined as the principal.
The decrease of accounts receivable and accrued liabilities was due to lower real estate transactions in the fourth quarter 2022 compared to the fourth quarter 2021. 32 Cash Flows The following table presents our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 ​ 2021 Cash provided by operating activities ​ $ 210,535 ​ $ 246,892 ​ Cash used in investment activities ​ (22,461) ​ (18,923) ​ Cash used in financing activities ​ (204,514) ​ (179,924) ​ Effect of changes in exchange rates on cash, cash equivalents and restricted cash ​ (87) ​ (59) ​ Net change in cash, cash equivalents and restricted cash ​ ($ 16,527) ​ $ 47,986 ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022, cash provided by operating activities decreased ($36.4) million compared to the same period in 2021.
Cash Flows The following table presents our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 ​ 2022 Cash provided by operating activities ​ $ 209,131 ​ $ 210,535 ​ Cash used in investment activities ​ (13,503) ​ (22,461) ​ Cash used in financing activities ​ (184,089) ​ (204,514) ​ Effect of changes in exchange rates on cash, cash equivalents and restricted cash ​ (38) ​ (87) ​ Net change in cash, cash equivalents and restricted cash ​ $ 11,501 ​ ($ 16,527) ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2023, cash provided by operating activities decreased modestly compared to the same period in 2022.
The accrual for estimated revenue was immaterial for the years ended December 31, 2022 and 2021. Business combinations The Company accounts for business combinations using the acquisition method of accounting, under which the consideration for the acquisition is allocated to the assets acquired and liabilities assumed.
Business combinations The Company accounts for business combinations using the acquisition method of accounting, under which the consideration for the acquisition is allocated to the assets acquired and liabilities assumed. The Company recognizes identifiable assets acquired and liabilities assumed at the fair values as of the acquisition date.
In doing so, we have adopted many of the principles of the Net Promoter Score ® (NPS) across many aspects of our organization. NPS is a measure of customer satisfaction and is measured on a scale between -100 and 100. A NPS above 50 is considered excellent. The Company’s agent NPS was 73 in the fourth quarter of 2022.
NPS is a measure of customer satisfaction and is measured on a scale between -100 and 100. A NPS above 50 is considered excellent. The Company’s aNPS was 73 for 2023 and 77 in the fourth quarter.
The Company recognizes identifiable assets acquired and liabilities assumed at the fair values as of the acquisition date. Acquisition-related costs, such as due diligence, legal and accounting fees, are expensed as incurred and not considered in determining the fair value of the acquired assets.
Acquisition-related costs, such as due diligence, legal and accounting fees, are expensed as incurred and not considered in determining the fair value of the acquired assets. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors.
This fast and iterative approach has already led to improvements in parts of our business such as agent onboarding, commission transaction processing and employee benefits. Agent Ownership The Company maintains an equity incentive program whereby agents and brokers of eXp Realty can become eligible for awards of the Company’s common stock through the achievement of production and agent attraction benchmarks.
Agent Ownership The Company maintains an agent growth incentive program (“AGIP”) whereby agents and brokers of eXp Realty can become eligible for awards of the Company’s common stock through the achievement of production and agent attraction benchmarks.
Cash equivalents are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase, primarily money market funds. We currently do not possess any marketable securities.
We currently do not hold any bank debt, nor have we issued any debt instruments through public offerings or private placements. As of December 31, 2023, our cash and cash equivalents totaled $126.9 million. Cash equivalents are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase, primarily money market funds.
Revenue Our total revenues were $4.6 billion in 2022 compared to $3.8 billion in 2021, an increase of $827.0 million, or 22%. Total revenues increased primarily as a result of higher volume of real estate brokerage commissions, which is attributable to growth in our agent base, an increase of real estate transactions and increased home sales prices compared to 2021.
Total revenues decreased primarily as a result of lower volume of real estate brokerage commissions, which is attributable to a decrease of overall real estate transactions and lower home sales prices in our markets, partially offset by growth in our agent base, compared to 2022.
Based on this analysis, in December 2022, we determined that there are four operating segments and three reportable segments. The CODM uses Adjusted Segment EBITDA as a key metric to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.
The CODM uses Adjusted Segment EBITDA as a key metric to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions and allocate resources. The Company has four reportable segments as follows: North American Realty, International Realty, Virbela and Other Affiliated Services.
The Company has four reportable segments as follows: North American Realty, International Realty and Virbela and Other Affiliated Services. We report corporate expenses, as further detailed below, as “Corporate expenses and other.” All segments follow the same basis of presentation and accounting policies. See Note 2 of the Notes included herein for the Company’s significant accounting policies.
We report corporate expenses, as further detailed below, as “Corporate expenses and other.” All segments follow the same basis of presentation and accounting policies. See Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements included elsewhere in this Annual Report for additional information about the Company’s significant accounting policies.
Commission and other agent-related costs increased primarily as a result of growth in agent base, increased real estate transactions and increased home sales prices compared to 2021. 29 General and Administrative Expense General and administrative expenses were $346.1 million in 2022 compared to $249.7 million in 2021, an increase of $96.4 million, or 39%.
Commission and other agent-related costs decreased primarily because of a decrease in overall real estate transactions and lower home sales prices, partially offset by growth in our agent base and an increase in agent-related stock-based compensation. 32 General and Administrative Expense General and administrative expenses were $319.2 million in 2023 compared to $346.1 million in 2022, a decrease of ($27.0) million, or (8)%.
GAAP FINANCIAL MEASURES To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance.
S ee Note 13 – Commitments and Contingencies to the consolidated financial statements included elsewhere in this Annual Report for further information related to our litigation. NON-U.S. GAAP FINANCIAL MEASURES To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, a non-U.S.
Gross profit increased year-over-year primarily due to growth in agent base, an increase of real estate transactions and increased home sales prices compared to 2021 For the years ended December 31, 2022, 2021 and 2020, gross margin was 8.0%, 7.8% and 8.9%, respectively.
For the years ended December 31, 2023, 2022 and 2021, gross profit was $324.1 million, $366.9 million and $296.0 million, respectively. Reported gross profit decreased year-over-year primarily due to a decrease in real estate transactions and an increase in reported agent-related stock-based compensation expense, compared to 2022.
Brokerage real estate transactions are recorded when our agents and brokers represent buyers and/or sellers in the purchase or sale, respectively, of a home. The number of real estate transactions are key drivers of our revenue and profitability.
One of our key strengths is attracting real estate agent and broker professionals that contribute to our growth. Real estate sales transactions are recorded when our agents and brokers represent buyers and/or sellers in the purchase or sale, respectively, of a home. Other real estate transactions are recorded for leases, rentals and referrals.
North American Realty and International Realty The Company serves as a licensed broker in the areas in which it operates for the purpose of processing real estate transactions. The Company is contractually obligated to provide services for the fulfillment of transfers of real estate between buyers and sellers.
Revenue recognition The Company generates substantially all of its revenue from North American Realty and International Realty and generates a de minimis portion of its revenues from software subscription and professional services. North American Realty and International Realty The Company serves as a licensed broker in the areas in which it operates for the purpose of processing real estate transactions.
Existing Home Sales Transactions and Prices According to NAR, seasonally adjusted existing home sale transactions for the year ended December 2022 (preliminary) decreased to 4.02 million compared to 6.09 million for the year ended December 2021. NAR anticipates transactions to decrease slightly in 2023 due to higher mortgage rates.
The unfavorable housing affordability index is due to increased mortgage rate conditions and higher average home prices driven by inventory levels. Existing Home Sales Transactions and Prices According to NAR, existing home sale transactions for the year ended December 2023 (preliminary) decreased to 4.09 million compared to 5.03 million for the year ended December 2022.
Year ended December 31,2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Change 2022 vs. 2021 ​ December 31, 2022 ​ Revenue ​ December 31, 2021 ​ Revenue ​ $ % ​ ​ (In thousands, except share amounts and per share data) Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues $ 4,598,161 ​ 100% ​ $ 3,771,170 ​ 100% ​ $ 826,991 ​ 22% Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commissions and other agent-related costs ​ 4,231,262 ​ 92% ​ 3,475,139 ​ 92% ​ 756,123 ​ 22% General and administrative expenses ​ 346,132 ​ 8% ​ 249,699 ​ 7% ​ 96,433 ​ 39% Sales and marketing expenses ​ 15,359 ​ -% ​ 12,180 ​ -% ​ 3,179 ​ 26% Total operating expenses ​ 4,592,753 ​ 100% ​ 3,737,018 ​ 99% ​ 855,735 ​ 23% Operating income ​ 5,408 ​ -% ​ 34,152 ​ 1% ​ (28,744) ​ (84)% Other (income) expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (income) expense, net ​ (804) ​ -% ​ 292 ​ -% ​ (1,096) ​ (375)% Equity in losses of unconsolidated subsidiaries ​ 1,624 ​ -% ​ 188 ​ -% ​ 1,436 ​ 764% Total other (income) expense, net ​ 820 ​ -% ​ 480 ​ -% ​ 340 ​ 71% Income before income tax expense ​ 4,588 ​ -% ​ 33,672 ​ 1% ​ (29,084) ​ (86)% Income tax (benefit) expense ​ (10,836) ​ -% ​ (47,487) ​ (1)% ​ 36,651 ​ (77)% Net income ​ 15,424 ​ -% ​ 81,159 ​ 2% ​ (65,735) ​ (81)% Add back: Net loss attributable to noncontrolling interest ​ 18 ​ -% ​ 61 ​ -% ​ (43) ​ (70)% Net income attributable to eXp World Holdings, Inc. ​ $ 15,442 ​ -% ​ $ 81,220 ​ 2% ​ (65,778) ​ (81)% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA (1) ​ $ 60,549 ​ 1% ​ $ 77,995 ​ 2% ​ ($ 17,446) ​ (22)% Earnings per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.10 ​ ​ ​ $ 0.56 ​ ​ ​ ($ 0.46) ​ (82)% Diluted ​ $ 0.10 ​ ​ ​ $ 0.51 ​ ​ ​ ($ 0.41) ​ (80)% Weighted average shares outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 151,036,110 ​ ​ ​ 146,170,871 ​ ​ ​ ​ ​ ​ Diluted ​ 156,220,165 ​ ​ ​ 157,729,374 ​ ​ ​ ​ ​ ​ (1) Adjusted EBITDA is not a measurement of our financial performance under U.S.
Year ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Change 2023 vs. 2022 ​ December 31, 2023 ​ Revenue ​ December 31, 2022 ​ Revenue ​ $ % ​ ​ (In thousands, except share amounts and per share data) Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues $ 4,281,105 ​ 100% ​ $ 4,598,161 ​ 100% ​ ($ 317,056) ​ (7)% Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commissions and other agent-related costs ​ 3,957,054 ​ 92% ​ 4,231,262 ​ 92% ​ (274,208) ​ (6)% General and administrative expenses ​ 319,153 ​ 7% ​ 346,132 ​ 8% ​ (26,979) ​ (8)% Sales and marketing expenses ​ 12,156 ​ -% ​ 15,359 ​ -% ​ (3,203) ​ (21)% Impairment expense ​ 9,203 ​ -% ​ - ​ -% ​ 9,203 ​ -% Total operating expenses ​ 4,297,566 ​ 100% ​ 4,592,753 ​ 100% ​ (295,187) ​ (6)% Operating (loss) income ​ (16,461) ​ -% ​ 5,408 ​ -% ​ (21,869) ​ (404)% Other (income) expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (income) expense, net ​ (4,414) ​ -% ​ (804) ​ -% ​ (3,610) ​ (449)% Equity in losses of unconsolidated affiliates ​ 1,388 ​ -% ​ 1,624 ​ -% ​ (236) ​ (15)% Total other (income) expense, net ​ (3,026) ​ -% ​ 820 ​ -% ​ (3,846) ​ (469)% Income (loss) before income tax expense ​ (13,435) ​ -% ​ 4,588 ​ -% ​ (18,023) ​ (393)% Income tax (benefit) expense ​ (4,462) ​ -% ​ (10,836) ​ -% ​ 6,374 ​ 59% Net (loss) income ​ (8,973) ​ -% ​ 15,424 ​ -% ​ (24,397) ​ (158)% Add back: Net loss attributable to noncontrolling interest ​ - ​ -% ​ 18 ​ -% ​ (18) ​ (100)% Net (loss) income attributable to eXp World Holdings, Inc. ​ (8,973) ​ -% ​ 15,442 ​ -% ​ (24,415) ​ (158)% Adjusted EBITDA (1) ​ $ 57,548 ​ 1% ​ $ 60,549 ​ 1% ​ ($ 3,001) ​ (5)% (Loss) earnings per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ($ 0.06) ​ ​ ​ $ 0.10 ​ ​ ​ ($ 0.16) ​ (160)% Diluted ​ ($ 0.06) ​ ​ ​ $ 0.10 ​ ​ ​ ($ 0.16) ​ (160)% Weighted average shares outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 153,232,129 ​ ​ ​ 151,036,110 ​ ​ ​ ​ ​ ​ Diluted ​ 153,232,129 ​ ​ ​ 156,220,165 ​ ​ ​ ​ ​ ​ (1) Adjusted EBITDA is not a measurement of our financial performance under U.S.
Effective January 1, 2020, we issued share-based compensation to our agents and brokers at a 10% discount to the market price of our common stock. Our operational strategy and the importance of the agent compensation plans to our strategy have not changed.
Agents and brokers can elect to receive 5% of their commission payable in the form of Company common stock at a 10% discount to the market price of our common stock . Our operational strategy and the importance of the AEP and AGIP to our strategy have not changed.
Adjusted EBITDA has grown significantly for the years ended December 31, 2021 and 2020 due to our revenue growth and higher leverage of our cost structure. RECENT BUSINESS DEVELOPMENTS North American Realty Initiatives The Company continues to also focus on growth in the United States and in Canada. On July 1, 2022, the Company acquired Zoocasa.
GAAP financial measure, to understand and evaluate our core operating performance. For the year ended December 31, 2023 adjusted EBITDA declined due to lower revenue, and increased operating costs. RECENT BUSINESS DEVELOPMENTS North American Realty Initiatives The Company continues to focus on growth in the United States and Canada.
For the year ended December 31, 2022, cash used in financing activities primarily related to higher repurchases of our common stock of $7.5 million compared to the prior year period and increased dividends paid of $13.7 million compared to 2021.
For the year ended December 31, 2023, cash used in financing activities decreased primarily related to lower repurchases of our common stock of $18.9 million and increased proceeds from stock option exercises $4.3 million compared to 2022 partially offset by an increase in dividend payments of $3.3 million compared to 2022.
In 2022, the existing home sales market declined 16%, according to the National Association of Realtors (“NAR”), which is the lowest the market has been since 2014. Due to the increasing interest rates and increasing inflation, the market began a contraction trend beginning in the second quarter of 2022.
In 2023, the existing home sales market declined 18.7%, according to preliminary data from the National Association of Realtors (“NAR”), the lowest level in nearly 30 years. Due to increasing interest rates and continued low inventory of homes for sale, the market contraction that began in the second quarter of 2022 continued through 2023.
National Housing Inventory Throughout 2022, increased mortgage interest rates and higher home prices have caused inventory levels, as measured in months of supply, to rise. Construction of new homes continues to slow also due to rising mortgage rates and the strained availability of labor and materials.
National Housing Inventory In 2023, the continued increase of mortgage rates and higher home prices have caused inventory levels, as measured in months of supply, to rise. According to the United States Census Bureau, new construction housing starts decreased by 9% in 2023, compared to 2022; however, new construction housing completions increased 4.5% in 2023 compared to 2022.
See additional information in Note 14 –Segment Information . eXp manages its operations in four operating business segments: North American Realty; International Realty; Virbela; and Other Affiliated Services. While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions.
See additional information in Note 10 –Segment Information to the consolidated financial statements included elsewhere in this Annual Report. eXp manages its operations in four operating business segments: North American Realty; International Realty; Virbela; and Other Affiliated Services.
The increases in revenue directly contributed to Adjusted EBITDA (loss) decrease of (22)%. Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty.
Other Affiliated Services revenue decreased (6)% due to a decrease of coaching revenue as a result of a reset of the business strategy. Adjusted EBITDA decreased by (46)% primarily due to an increase in personnel costs and the decrease in revenue. Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty.
In 2021, Virbela also released a new product called Frame into beta. Frame is a metaverse collaboration technology that is accessible from any device with a browser such as mobile, personal computer, virtual reality device and tablet.
Virbela We continue to develop the core Virbela enterprise virtual world technology and the newer WebXR FrameVR (“Frame”) platform through our subsidiary, eXp World Technologies, LLC. Frame is a metaverse collaboration technology that is accessible from any device with a browser such as mobile, personal computer, virtual reality device and tablet.
The increase in these costs (increase in Adjusted EBITDA (loss) of 56% in 2021 compared to 2020) reflect additional executive compensation & travel related to the expansion of the business along with legal expenses. ​ 31 LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are our cash and cash equivalents on hand and cash flows generated from our business operations.
The decrease in these costs reflects the impact of cost cutting initiatives. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are our cash and cash equivalents on hand and cash flows generated from our business operations.
See Note 10 – Stockholders’ Equity to the consolidated financial statements for more information regarding the assumptions used in estimating the fair value of our awards. Revenue recognition The Company generates substantially all of its revenue from North American Realty and International Realty and generates a de minimis portion of its revenues from software subscription and professional services.
See Note 9 – Stockholders’ Equity to the consolidated financial statements included elsewhere in this Annual Report, for more information regarding the assumptions used in estimating the fair value of our awards.
Sales and marketing costs include lead capture costs and promotional materials. Sales and marketing expenses increased primarily as a result of an increase in lead costs of $1.7 million and advertising costs of $1.7 million.
Sales and marketing costs include lead capture costs and promotional materials. Sales and marketing expenses decreased primarily as a result of a decrease in advertising costs of ($1.8) million and internet advertising costs of ($1.3) million. Impairment expense 2023 includes impairment charges for goodwill and amortizable intangible assets of $9.2 million related to the Virbela segment.
Refer to Critical Accounting Policies and Estimates within the MD&A and Note 12 - Income Taxes to the consolidated financial statement for further information. BUSINESS SEGMENT DISCLOSURES See Note 14 – Segment Information to the consolidated financial statements for additional information regarding our business segments.
BUSINESS SEGMENT DISCLOSURES See Note 10 – Segment Information to the consolidated financial statements included elsewhere in this Annual Report for additional information regarding our business segments.
Our stock repurchase program and agent growth incentive program are more fully disclosed in Note 10 – Stockholders’ Equity to the consolidated financial statements. 28 RESULTS OF OPERATIONS Year ended December 31, 2022 vs.
The costs attributable to these plans are also a significant component of our commission structure and our results of operations. Additional information for our AGIP and AEP programs are more fully disclosed in Note 9 – Stockholders’ Equity to the consolidated financial statements included elsewhere in this Annual Report. 31 RESULTS OF OPERATIONS Year ended December 31, 2023 vs.
GAAP financial measure, for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 Net income ​ ​ $ 15,424 ​ $ 81,159 Other expense, net ​ ​ 820 ​ 480 Income tax benefit ​ ​ (10,836) ​ (47,487) Depreciation and amortization (1) ​ ​ 9,838 ​ 6,248 Stock compensation expense (2) ​ ​ 30,861 ​ 24,493 Stock option expense ​ ​ 14,442 ​ 13,102 Adjusted EBITDA ​ ​ $ 60,549 ​ $ 77,995 ​ The primary driver for the changes in Adjusted EBITDA was lower net income attributable to the increased general and administrative costs resulting from the Company’s increase in employee count to continue to support our agent growth strategy and increased costs related to entering international markets and investments in Virbela. 36
GAAP financial measure, for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 Net (loss) income ​ ​ ($ 8,973) ​ $ 15,424 Total other (income) expense, net ​ ​ (3,026) ​ 820 Income tax (benefit) expense ​ ​ (4,462) ​ (10,836) Depreciation and amortization ​ ​ 10,892 ​ 9,838 Impairment expense ​ ​ 9,203 ​ - Stock compensation expense (1) ​ ​ 43,178 ​ 30,861 Stock option expense ​ ​ 10,736 ​ 14,442 Adjusted EBITDA ​ ​ $ 57,548 ​ $ 60,549 (1) This includes agent growth incentive stock compensation expense and stock compensation expense related to business acquisitions.
Based on Freddie Mac data, the average rate for a 30-year, conventional fixed rate mortgage was 6.42% in December 2022 compared to 3.1% in 2021. As inflation continues to moderate into 2023, mortgage rates are expected to decline, which we expect to boost homebuyer demand and homebuilder sentiment.
According to NAR, inventory of existing homes for sale in the U.S. was one million. Mortgage Rates Persistently high mortgage rates continue to negatively impact the demand for homebuying. Based on Freddie Mac data, the average rate for a 30-year, conventional fixed-rate mortgage was 6.61% in December 2023 compared to 6.42% in December 2022.
Real estate transaction revenue represents the commission revenue earned by the Company for closed brokerage real estate transactions. We continue to increase our agents and brokers significantly in the United States and Canada through the execution of our growth strategies. We are continuing to expand our agent base internationally, as well.
We continue to increase our agents and brokers in the United States and Canada through execution of our growth strategies despite a challenging market.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Risk The majority of our net sales, expenses and capital purchases were transacted in U.S. dollars. However, exposure with respect to foreign exchange rate fluctuation existed due to our operations in Canada, the United Kingdom (U.K.), Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama and Germany.
Biggest changeHowever, exposure with respect to foreign exchange rate fluctuation existed due to our operations in Canada, the U.K., Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama, Germany, The Dominican Republic, Greece, New Zealand, Chile, Poland, and Dubai albeit each individually and in the aggregate to a small extent.
Our investments in the net assets of our international operations were also subject to currency risk. As of December 31, 2022, the impacts of translations of foreign-denominated net assets of our international operations were immaterial to the Company’s consolidated financial statements. The translation impacts related to the net assets of our international operations are recorded within accumulated other comprehensive income.
Our investments in the net assets of our international operations were also subject to currency risk. As of December 31, 2023, the impacts of translations of foreign-denominated net assets of our international operations were immaterial to the Company’s consolidated financial statements. The translation impacts related to the net assets of our international operations are recorded within accumulated other comprehensive income.
Historically, we have not hedged this exposure, although we may elect to do so in future periods. 37
Historically, we have not hedged this exposure, although we may elect to do so in future periods. 39
Based on fiscal 2022 performance, a hypothetical appreciation or decline in the value of the Canadian dollar in relation to the U.S. dollar of 10% would have an immaterial impact on operating income.
As of December 31, 2023, our largest international operations were in Canada. Based on fiscal 2023 performance, a hypothetical appreciation or decline in the value of the Canadian dollar in relation to the U.S. dollar of 10% would have an immaterial impact on operating income.
Removed
Throughout 2022, we commenced operations in the Dominican Republic, Greece, New Zealand, Chile and Poland, albeit each individually and in the aggregate to a small extent. As of December 31, 2022, our largest international operations were in Canada.
Added
Foreign Currency Risk The majority of our net sales, expenses and capital purchases were transacted in U.S. dollars.

Other EXPI 10-K year-over-year comparisons