10-Q: eXp World Holdings Reports Q2 Loss Amid Rising Costs and Agent Declines, International Segment Shows Growth

eXp World Holdings, Inc. reported a significant operating loss and decreased Adjusted EBITDA for the second quarter and first half of 2025, driven by increased costs and a decline in agent count, despite a slight revenue increase and strong international realty performance.

Summary

• Revenues increased by 1% to $1,308,877 thousand for the three months ended June 30, 2025, and to $2,263,783 thousand for the six months ended June 30, 2025, compared to the same periods in 2024.
• Operating income shifted to a loss of $2,376 thousand for Q2 2025, down from an income of $18,537 thousand in Q2 2024, and a loss of $12,752 thousand for H1 2025, compared to an income of $363 thousand in H1 2024.
• Net loss increased to $2,291 thousand for Q2 2025 (from $12,383 thousand net income in Q2 2024) and to $13,315 thousand for H1 2025 (from $3,256 thousand net loss in H1 2024).
• Adjusted EBITDA decreased by 66% to $11,201 thousand for Q2 2025 and by 70% to $13,356 thousand for H1 2025, compared to the same periods in 2024.
• Basic and diluted net loss per share were $0.01 for Q2 2025 and $0.09 for H1 2025.
• Agent count declined by 5% to 82,704 in the first six months of 2025 compared to the same period in 2024.
• Real estate sales transactions decreased by 1.7% for Q2 2025 and 1.9% for H1 2025.
• Real estate sales volume increased by 1% for Q2 2025 to $52,477,798 thousand and by 2% for H1 2025 to $91,118,882 thousand, primarily due to increased home sale prices.
• Real estate per transaction cost increased by 27% for Q2 2025 to $621 and by 20% for H1 2025 to $670, driven by increased personnel and technology costs and lower transaction volume.
• General and administrative expenses increased by 21% for Q2 2025 and 14% for H1 2025, due to increased employee-related and litigation expenses, including $6.0 million in strategic investments and severance costs.
• A $17.0 million installment of the $34.0 million U.S. antitrust litigation settlement was paid during Q2 2025, with the remaining $17.0 million due within one year.
• The Agent Net Promoter Score (aNPS) improved to 77 for Q2 2025 and 78 for H1 2025, up from 76 and 75 respectively in 2024.

Sentiment

Score: 3

Explanation: The sentiment is negative due to significant declines in operating income, net income, and Adjusted EBITDA, coupled with a decrease in agent count and increased per-transaction costs. While there's a slight revenue increase and strong international segment growth, the overall financial performance and challenging market conditions present substantial headwinds.

Positives

• Revenues increased by 1% for both the three and six months ended June 30, 2025, driven by higher home sales prices and increased international production.
• International Realty segment revenues increased significantly by 59% for Q2 2025 and 78% for H1 2025, reflecting improved agent production in previously launched markets.
• The Agent Net Promoter Score (aNPS) improved to 77 for Q2 2025 and 78 for H1 2025, indicating strong agent satisfaction and engagement despite challenging market conditions.
• Real estate sales volume increased by 1% for Q2 2025 and 2% for H1 2025, primarily due to increased home sale prices, which offset the decline in transaction volumes.
• The company maintains an efficient operating model with lower fixed costs due to its cloud-based structure, without brick-and-mortar locations.
• The stock repurchase program was increased to $1.0 billion in June 2023, demonstrating commitment to shareholder returns.
• International Realty Adjusted EBITDA loss improved by 4% for the six months ended June 30, 2025, due to increased revenues and improved business efficiencies.

Negatives

• Operating income turned into a loss of $2,376 thousand for the three months ended June 30, 2025, and a loss of $12,752 thousand for the six months ended June 30, 2025.
• Net loss increased to $2,291 thousand for Q2 2025 and $13,315 thousand for H1 2025, indicating a worsening financial bottom line.
• Adjusted EBITDA saw a substantial decrease of 66% for Q2 2025 and 70% for H1 2025, reflecting higher operating costs and agent-related expenses.
• Agent count declined by 5% in the first six months of 2025, indicating a reduction in the company's independent agent and broker network.
• Real estate sales transactions decreased by 1.7% for Q2 2025 and 1.9% for H1 2025, impacting revenue drivers.
• Real estate per transaction cost increased significantly by 27% for Q2 2025 and 20% for H1 2025, primarily due to increased personnel and technology costs and lower transaction volume.
• General and administrative expenses increased by 21% for Q2 2025 and 14% for H1 2025, driven by higher employee-related and litigation expenses.
• Technology and development expenses increased by 22% for Q2 2025 and 18% for H1 2025, contributing to overall cost increases.
• North American Realty Adjusted EBITDA decreased significantly by 49% for Q2 2025 and 51% for H1 2025, indicating reduced profitability in the core market.
• Other Affiliated Services revenues decreased substantially by 52% for Q2 2025 and 53% for H1 2025, with Adjusted EBITDA loss increasing by 132% and 113% respectively.
• Net cash provided by operating activities decreased by $55.9 million for H1 2025, primarily due to the litigation settlement payment, lower operating results, and decreased customer deposits.
• The company incurred approximately $6.0 million in expenses related to strategic investments and severance to streamline operations during the quarter.

Risks

• Profitability is highly dependent on the strength of the residential real estate market, which is cyclical and affected by macroeconomic conditions such as economic slowdowns, increased unemployment, higher interest rates, inflation, and geopolitical instability.
• The U.S. residential real estate market has been adversely affected by high interest rates, elevated mortgage costs, and declining affordability, leading to a slowdown in buyer demand and longer market times for homes.
• The real estate market may be severely impacted by industry changes resulting from class action lawsuits, settlements, or government investigations, particularly regarding agent and broker compensation models.
• The NAR settlement agreement, which prohibits requiring listing brokers or sellers to offer compensation to buyer brokers on the MLS and requires written buyer agreements, could significantly change the brokerage landscape and adversely affect financial condition.
• Home lending rules currently do not allow buyers to include buyer's agent compensation in the home loan, potentially impairing homebuyers' ability to pay agent fees.
• Adverse outcomes in litigation and regulatory actions against other companies and agents in the industry could increase the likelihood of similar claims against the company, leading to significant liability.
• The significant stock ownership by Glenn Sanford (27.19%) and Penny Sanford (17.35%) could adversely affect the trading price of common stock and allow them to significantly influence stockholder approvals and management decisions, potentially delaying or preventing changes in control.
• The company's stock price has been and is likely to remain volatile due to operating performance, market conditions, industry changes, and broader economic and political factors.
• The company faces a risk of future impairment to goodwill if individual reporting unit performance does not meet projections or if valuation factors change unfavorably.
• The ultimate liability for ongoing legal proceedings, including the Canadian antitrust litigation and derivative litigation, is currently unable to be reasonably estimated and could differ materially from current expectations.

Future Outlook

The company is committed to strengthening its competitive position by retaining its most productive agents in the U.S. and Canada through growth strategies and an end-to-end suite of services. It aims to continue offering a low-cost, high-engagement model and leverage its efficient cloud-based operating model. The company is evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its deferred tax assets and liabilities, with potential changes to be reflected in the third quarter of 2025. While current operating structure is expected to provide sufficient cash flows for long-term liquidity, the company may seek additional funding through equity or debt financing to support future growth plans, especially given the volatile real estate market and potential industry changes.

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, we led the industry by introducing new listing agreements and buyer representation forms for our agents and the industry.
• Our robust agent support infrastructure continues to drive engagement, retention and productivity.
• We continue to offer agents a low-cost, high-engagement model, which affords agents and brokers increased income and equity ownership opportunities while offering a scalable solution to brokerage owners who want to survive and thrive during market fluctuations.
• We have an efficient operating model with lower fixed costs driven by our cloud-based model, with no brick-and-mortar locations.
• We are committed to retaining our most productive agents in the U.S. and Canada through the execution of our growth strategies and the end-to-end suite of services we offer our agents.
• We continue to encourage employees to drive efficiency by integrating artificial intelligence (AI) tools to enhance workforce productivity.

Industry Context

The U.S. residential real estate market continues to face significant challenges due to persistent high mortgage rates, elevated home prices, and declining affordability, leading to a slowdown in buyer demand and increased inventory levels. The industry is also undergoing substantial changes due to antitrust litigation, particularly the NAR settlement, which is reshaping commission structures and buyer-broker agreements. These shifts, including the potential for new compensation models and direct buyer-listing agent interactions, are creating an uncertain environment for brokerages. Despite these headwinds, the company's improved Agent Net Promoter Score suggests its agent-centric model and cloud-based operations may offer a competitive advantage in retaining and engaging agents amidst market volatility.

Comparison to Industry Standards

• The filing references National Association of Realtors (NAR) data for industry-wide metrics: inventory of existing homes for sale in the U.S. was 1.5 million as of June 2025 (preliminary) compared to 1.3 million in June 2024, representing 4.7 months of inventory in 2025 compared to 4.0 months in 2024.
• The average rate for a 30-year, conventional, fixed rate mortgage was 6.77% in June 2025 compared to 6.86% in June 2024, based on Freddie Mac data.
• The composite housing affordability index increased slightly to 97.2 for May 2025 (preliminary) from 92.3 for May 2024, according to NAR.
• Existing home sale transactions were flat at an annual rate of 3.93 million in June 2025 (preliminary), consistent with June 2024, as reported by NAR.
• The nationwide existing home median sales price for June 2025 (preliminary) was $435,300 compared to $426,900 in June 2024, an increase of 2.0%, according to NAR.
• The filing mentions Compass, Inc. filing a lawsuit against Zillow Group, Inc. claiming anti-competitive conduct, highlighting broader industry litigation risks, but does not provide specific comparable financial or operational results for these companies.

Management Changes

Legal Proceedings

• U.S. Antitrust Litigation: The company settled U.S. nationwide claims for $34.0 million, with the first $17.0 million installment paid in Q2 2025. Preliminary court approval was granted on May 23, 2025, but the settlement remains subject to final court approval and appeals.
• Canadian Antitrust Litigation: The company is vigorously defending against the Kevin McFall v. Canadian Real Estate Association, et al. lawsuit, with no accruals recorded as of June 30, 2025.
• Derivative Litigation: A derivative lawsuit, Los Angeles City Employees Retirement System, on behalf of eXp World Holdings, Inc. v. Glenn Sanford, et. al., alleges fiduciary duty breaches related to sexual misconduct reports and improper compensation. No accruals have been recorded as the proceeding is in preliminary stages.

Stakeholder Impact

• Shareholders: Impacted by increased net losses, decreased Adjusted EBITDA, and potential stock price volatility due to market conditions and significant insider ownership. The stock repurchase program and dividend payments aim to provide returns.
• Employees: Affected by strategic investments and severance costs incurred to streamline operations, though the company encourages efficiency through AI tools.
• Agents/Brokers: Agent count declined, but the company maintains a high Agent Net Promoter Score (aNPS) and continues to offer agent-centric programs, including equity opportunities and revenue share, to attract and retain productive agents. Industry changes from antitrust lawsuits may alter compensation models.
• Customers: Indirectly impacted by changes in real estate transaction processes and agent compensation models resulting from industry-wide legal settlements.

Next Steps

• Evaluate the impact of the One Big Beautiful Bill Act (OBBBA) on deferred tax assets and liabilities and the effective tax rate, with potential reflection in the third quarter of 2025.
• Continue to streamline operations and align cost structure with current revenue trends, including encouraging employees to drive efficiency with AI tools.
• Pay the final $17.0 million installment of the U.S. antitrust litigation settlement on or before the one-year anniversary of the initial payment.
• Continue to vigorously defend against claims in the Canadian putative class action antitrust lawsuit.
• Monitor and adapt to industry changes resulting from antitrust lawsuits and settlements, including potential shifts in agent and broker compensation models.

Key Dates

Recommendation

The company faces significant financial headwinds, including a shift to operating losses, increased net losses, and a sharp decline in Adjusted EBITDA, alongside a decrease in agent count. These factors suggest a challenging period. However, the company shows resilience in its international segment growth, improved agent satisfaction (aNPS), and proactive measures to address industry changes and streamline costs. The stock repurchase program also provides some support. Given the mixed signals – poor financial performance but strategic efforts and some operational positives – a 'hold' recommendation is appropriate, suggesting investors monitor the company's ability to execute its cost-saving initiatives and adapt to the evolving real estate market.

Keywords

Real Estate, Brokerage, SEC Filing, 10-Q, Financial Results, Earnings, Revenue, EBITDA, Agent Count, Real Estate Transactions, Housing Market, Antitrust Litigation, Stock Repurchase, Corporate Governance, Cloud-based Real Estate, Agent-centric Model, North American Realty, International Realty