10-Q: eXp World Holdings Q3 2025: Profitability Returns Amidst Market Shifts

eXp World Holdings reports a return to net income in Q3 2025, driven by increased revenues and improved operating income, despite ongoing real estate market challenges and a decline in agent count.

Summary

• Revenues for Q3 2025 increased by 6.9% to $1.32 billion, and by 3.2% to $3.58 billion for the nine months ended September 30, 2025, compared to the same periods in 2024.
• The company achieved a net income of $3.5 million in Q3 2025, a significant improvement from a net loss of $8.5 million in Q3 2024.
• Year-to-date net loss improved to $9.8 million for 9M 2025, compared to a loss of $11.8 million for 9M 2024.
• Operating income for Q3 2025 was $4.0 million, a turnaround from an operating loss of $8.3 million in Q3 2024, primarily due to the absence of litigation contingency accruals in the current quarter.
• Adjusted EBITDA decreased by 26% to $17.7 million in Q3 2025 and by 54% to $31.1 million for 9M 2025, reflecting increased agent commissions and higher operating costs.
• Agent count declined by 2% year-over-year to 83,446 as of September 30, 2025, though the rate of decline has slowed.
• Real estate sales transactions increased by 3.1% in Q3 2025, while sales volume grew by 6.5% in Q3 2025 and 3.8% for 9M 2025, driven by higher home sales prices and increased agent productivity.
• The company paid the first $17.0 million installment of a $34.0 million antitrust litigation settlement in Q2 2025, with the remaining $17.0 million accrued and expected to be paid from available cash.
• Net cash provided by operating activities decreased by $73.0 million to $104.8 million for 9M 2025, partly due to the litigation payment and lower agent equity compensation.
• The Board declared a quarterly cash dividend of $0.05 per share, payable on December 1, 2025.

Sentiment

Score: 6

Explanation: The company demonstrated a return to quarterly profitability and revenue growth, indicating resilience in a challenging market. However, significant declines in Adjusted EBITDA and a decrease in agent count, coupled with ongoing litigation risks and industry-wide regulatory changes, temper the overall positive sentiment. The long-term outlook is cautiously optimistic, but current operational efficiency and agent growth remain areas of concern.

Positives

• Return to net income in Q3 2025 ($3.5 million) from a loss in the prior year quarter, indicating improved quarterly performance.
• Operating income turned positive in Q3 2025 ($4.0 million) from a loss in Q3 2024, partly due to the absence of new litigation contingency accruals.
• Revenue growth of 6.9% in Q3 2025 and 3.2% for 9M 2025, driven by higher U.S. home sales prices and increased international production.
• Real estate sales transactions increased by 3.1% in Q3 2025, and sales volume increased by 6.5% in Q3 2025 and 3.8% for 9M 2025, indicating improved market activity and agent productivity.
• International Realty segment showed strong revenue growth (68% in Q3, 74% in 9M) and improved Adjusted EBITDA loss.
• Agent Net Promoter Score (aNPS) remained high at 75 in Q3 2025 and 76 for 9M 2025, indicating strong agent satisfaction and retention efforts.
• Net working capital increased by $17.6 million to $99.7 million as of September 30, 2025, from $82.1 million at December 31, 2024.
• The company's stock repurchase program continues, with $243.1 million remaining under authorization as of September 30, 2025, demonstrating commitment to shareholder returns.

Negatives

• Adjusted EBITDA significantly decreased by 26% in Q3 2025 to $17.7 million and by 54% for 9M 2025 to $31.1 million, primarily due to increased agent commissions and higher operating costs.
• Year-to-date operating loss slightly worsened to $8.7 million for 9M 2025 compared to $8.0 million for 9M 2024.
• Agent count declined by 2% year-over-year to 83,446, indicating challenges in agent attraction or retention despite efforts.
• Net cash provided by operating activities decreased substantially by $73.0 million to $104.8 million for 9M 2025, partly due to the $17.0 million antitrust litigation payment.
• Real estate per transaction cost increased by 5.9% in Q3 2025 and 14.9% for 9M 2025, reflecting higher personnel and technology costs.
• Other Affiliated Services segment experienced significant revenue declines (53% in Q3 and 9M) and increased Adjusted EBITDA losses.
• Accumulated deficit increased to $100.9 million as of September 30, 2025, from $68.1 million at December 31, 2024.

Risks

• Profitability is tied to the strength of the residential real estate market, which is cyclical and affected by macroeconomic conditions such as high interest rates, elevated mortgage costs, and declining affordability.
• The company's ability to attract and retain qualified personnel and maintain its agent growth rate is crucial for its business model.
• Adverse outcomes in ongoing litigation and regulatory actions, including the Canadian antitrust lawsuit and a derivative lawsuit, could result in substantial monetary damages or undesirable changes to business practices.
• Industry changes resulting from class action lawsuits and settlements, such as the NAR settlement, may require significant adjustments to the company's business model, including agent compensation and buyer agreements, potentially impacting financial results.
• The inability of homebuyers to include buyer agent compensation in home loans, as a result of new industry rules, could impair their ability to pay agent fees and reduce transaction volumes.
• Concentrated stock ownership by Glenn Sanford (27.19%) and Penny Sanford (17.35%) could significantly influence corporate decisions, potentially delaying or preventing changes in control, and may depress the stock price.
• The company's stock price has been and is likely to remain volatile due to various factors, including operating performance, market conditions, competitor actions, and global capital market instability.
• Risks associated with the ethical and compliant use of Artificial Intelligence (AI) tools and safeguarding client data, including potential for data breaches, misuse of Personally Identifiable Information (PII), and non-compliance with evolving regulations.

Future Outlook

The company believes it is well-positioned to strengthen its competitive stance long-term, leveraging its agent support infrastructure, low-cost cloud-based operating model, and scalable solutions. It continues to seek opportunities to expand and enhance its portfolio of solutions and capture additional revenues. The company expects existing cash and cash flows to be sufficient for operating requirements for at least the next twelve months.

Management Comments

• We remain focused on empowering our agents, increasing their productivity, and maintaining strong engagement through our agent-centric initiatives.
• In response to industry changes as a result of U.S. antitrust lawsuits, the Company led the industry by introducing new listing agreements and buyer representation forms for its agents and the industry.
• Our sustainable revenue share plan... continues to be critical to attracting and retaining our most productive agents.
• The current environment is challenging, [but] the Company continues to believe it is well positioned to strengthen its competitive position over the long term.

Industry Context

The U.S. residential real estate market is experiencing a slowdown due to persistent high mortgage interest rates, elevated home prices, and declining affordability. While mortgage rates saw a slight decline in Q3 2025 from Q2 2025, they remain higher than the prior year, impacting homebuying demand. Housing inventory levels have risen, and existing home sales transactions and median prices have shown modest increases year-over-year in September 2025. The industry is also navigating significant changes stemming from antitrust litigation, particularly the NAR settlement, which mandates changes to cooperative compensation and buyer agreements, potentially reshaping agent compensation models and buyer-broker interactions.

Comparison to Industry Standards

• The company's agent NPS of 75-76 is considered excellent, suggesting strong agent satisfaction compared to general industry benchmarks where a score above 50 is typically seen as very good.
• The decline in agent count by 2% year-over-year contrasts with the company's stated strategy of agent growth, indicating a potential underperformance in agent attraction/retention relative to its own goals, though the filing notes the decline has slowed.
• The increase in real estate sales transactions (3.1% in Q3 2025) and sales volume (6.5% in Q3 2025) suggests the company is performing relatively well in a challenging market, where overall demand for homebuying is negatively impacted by high mortgage rates.
• The significant revenue growth in the International Realty segment (68% in Q3, 74% in 9M) indicates strong performance in these markets, potentially outpacing general international real estate market growth, though specific comparable international brokerage growth rates are not provided.
• The increase in real estate per transaction cost (5.9% in Q3, 14.9% in 9M) could indicate rising operational inefficiencies or increased investment in agent support, which might be higher than some leaner competitors.
• The company's proactive approach in introducing new listing agreements and buyer representation forms in response to U.S. antitrust lawsuits positions it as a leader in adapting to regulatory changes, potentially setting a standard for other brokerages.

Corporate Governance

Legal Proceedings

• U.S. Antitrust Litigation (Hooper Action): The company entered into a Settlement Agreement on December 9, 2024, to resolve all U.S. nationwide claims for $34.0 million. The first $17.0 million installment was paid in Q2 2025, and the remaining $17.0 million is accrued as a probable loss. Preliminary court approval was granted on May 23, 2025, but the settlement is subject to final court approval and appeals.
• Canadian Antitrust Litigation (Kevin McFall v. Canadian Real Estate Association, et al.): The company is vigorously defending against claims alleging participation in a system that resulted in inflated buyer broker commissions. Management is currently unable to reasonably estimate the possible loss or range of possible loss due to preliminary stages, unspecified damages, factual issues, and novel legal theories. No accruals have been recorded as of September 30, 2025.
• Derivative Litigation (Los Angeles City Employees Retirement System, on behalf of eXp World Holdings, Inc. v. Glenn Sanford, et. al.): A lawsuit filed on September 25, 2024, alleging breaches of fiduciary duties by certain current and former directors and officers related to alleged sexual misconduct and improper compensation arrangements. The company is a nominal defendant. Management is currently unable to reasonably estimate the possible loss or range of possible loss due to preliminary stages, unspecified damages, factual issues, and novel legal theories.

Related Party Transactions

• Glenn Sanford (Chairman and CEO) and Penny Sanford (significant stockholder) beneficially owned approximately 27.19% and 17.35% of outstanding common stock, respectively, as of January 31, 2025. This concentration of ownership is noted as a risk factor.
• Stock options are granted to directors, officers, certain employees, and consultants.
• Restricted Stock Units (RSUs) are granted to officers and certain employees.

Stakeholder Impact

• Shareholders: Quarterly dividend declared ($0.05/share), ongoing stock repurchase program, but diluted EPS remains negative year-to-date. Stock price volatility and concentrated ownership by key individuals are noted risks.
• Agents: Agent count declined, but agent NPS remains high, indicating satisfaction among existing agents. Agent-centric initiatives, equity programs (AEP, AGIP), and revenue share plan are key to attraction/retention. Industry changes from antitrust settlements could significantly impact agent compensation models.
• Customers (Homebuyers/Sellers): Changes in industry practices due to antitrust settlements (e.g., no MLS compensation offers, required buyer agreements) could alter how they engage with agents and potentially impact affordability if buyer agent fees cannot be included in home loans.
• Employees: General and administrative expenses increased due to employee-related costs. Stock options and RSUs are part of compensation.
• Creditors: Net working capital increased, and the company believes it has sufficient liquidity for the next 12 months, which is positive for creditors.

Next Steps

• Pay the remaining $17.0 million antitrust litigation settlement amount from available cash.
• Continue to vigorously defend against the claims in the Canadian putative class action antitrust lawsuit.
• Monitor and respond to the derivative lawsuit.
• Repurchase up to $10.0 million of common stock during November 2025, subject to maintaining a minimum consolidated cash and cash equivalents balance of at least $100 million.
• Pay a quarterly cash dividend of $0.05 per share on December 1, 2025.
• Continue to evaluate the potential impact of the OECD's BEPS framework and Pillar Two rules on future periods.
• Continue to seek opportunities to expand and enhance the portfolio of solutions and enter attractive verticals and adjacent markets.

Key Dates

Recommendation

The company demonstrated a return to quarterly profitability and revenue growth in a challenging real estate market, which is a positive sign of resilience. However, the significant decline in Adjusted EBITDA year-to-date and the continued decrease in agent count are concerning operational trends. The ongoing legal proceedings, particularly the Canadian antitrust litigation and derivative lawsuit, introduce unquantifiable liabilities and uncertainty. Furthermore, the broader industry changes stemming from the NAR settlement present a fundamental shift in agent compensation models, the full impact of which is yet to be seen. While the company is adapting, these changes could significantly alter its business model and profitability. The concentrated ownership also presents a governance risk. Given the mixed financial performance, operational headwinds, and significant industry-wide uncertainties, a "hold" recommendation is appropriate as investors await clearer trends in agent growth, the full impact of industry regulatory changes, and the resolution of legal matters.

Keywords

Real Estate Brokerage, Cloud-based Realty, Agent-centric Model, SEC Filing, 10-Q, Financial Results, Revenue Share, Agent Equity, Antitrust Litigation, Residential Real Estate Market, Mortgage Rates, Housing Affordability, Agent Productivity, Operating Income, Adjusted EBITDA, Stock Repurchase, Dividends, Corporate Governance, Risk Factors, Technology Platform, International Expansion, North American Realty, eXp World Holdings