'Extremely challenging' market contributed to eXp's mixed results in Q1
The cloud-based brokerage reported declines in revenue and transactions, but ended the quarter in the black and boosted agent count.
In an earnings call on May 2, eXp leaders were upfront about challenges in the market and the resulting impact on the company's financials.
eXp World Holdings founder, chairman and CEO Glenn Sanford noted that rising interest rates over the past year have "put a drag on the market," while CFO Jeff Whiteside said it was "an extremely challenging quarter for the entire industry." But the company saw some bright spots for both the quarter and the year.
The cloud-based brokerage reported mixed results for Q1, with declines in revenue, gross profit and transactions, but improvements in EBITDA, net income — which was positive after a loss in the previous quarter — and agent count, which grew 12%, representing an 8% gain in market share.
"One of the things we've talked about in the past and really the past year or so [is] the fact that in a down market, we believed we would pick up market share, and we wanted to switch the focus from just pure growth to market share growth," said Sanford.
Relative to other companies, eXp Realty has performed well during the market slowdown. It recently ranked No. 4 on the T3 Sixty list of top brokerages for 2022, and it was the only company in that category to see sales volume increase over the year prior.
While the company as a whole saw some declines, eXp's international segment posted a record quarter with 52% year-over-year revenue growth.
Revenue: $850.6 million for the quarter, off nearly 9% from Q4 2022, and down 16% from a year prior.
Cash and cash equivalents: $122.8 million, down slightly from $130 million a year ago.
Gross profit: $73.1 million, down from $83.1 million the previous quarter, and off 12% compared to Q1 2022.
Net income: $1.5 million, a turnaround from the company's net loss of $7.2 million in Q4 2022.
EBITDA (earnings before interest, taxes, depreciation and amortization): $13.3 million, up from $3.6 million the previous quarter.
Transactions: Closed transactions for the quarter decreased 10% from a year prior to 102,305.
Agent count: 87,000+, an increase of 12% year over year
What eXp had to say
"As we iterate on the agent value proposition, our focus is to modernize our infrastructure for the next generation of real estate agents," said Sanford. "Our cloud-based model and solid financial foundation enable us to continue investing in synergistic products and technologies that lay the groundwork for the future, while delivering an enhanced agent experience today."
Whiteside also noted that "during the first quarter, the financial benefits of our variable cost model were apparent as we generated positive net income and over $39 million of operating cash flow despite the global residential real estate market downturn."
The first quarter of 2023 was also Sanford's first quarter back in the CEO role at eXp Realty. When asked about his experience thus far, he said it has been a "roll up the sleeves [period] of just reorienting the agent-centric model a little bit."
The company noted that a "flurry" of agents and teams joined the brokerage in Q1. Sanford credited "benefits that are tough for other companies to provide because we are one large brokerage," namely their referral-based business opportunities. "We're just continuing to help agents do more business is really what it comes down to and our overall value prop is resonating well."
Sanford said the company is "probably missing the ball" when it comes to AI but is now thinking about how AI might impact the future of their business. "As we look at different technologies, and if we can drive down the cost of the brokerage, then there's in theory opportunities to drive down some of the costs from an agent perspective while providing the same or better benefits."