eXp World Holdings Inc (EXPI) 2021 Q3 法說會逐字稿

Hello, and welcome to the eXp World Holdings Third Quarter 2021 Earnings Fireside Chat, via live stream in EXPI World, our metaverse. My name is Courtney Chakarun, and I'm the CMO of eXp World Holdings. Today, we will begin our Q3 earning fireside chat with a conversation between Glenn Sanford, Founder and CEO of eXp World Holdings; and Justin Ages, an analyst at Berenberg Capital Markets, covering the intersection of technology and real estate. Following this initial 10- to 15-minute segment, we're going to move into a 20-minute presentation, which includes a review of the Q3 financial highlights presented by Jeff White (sic) [Whiteside], CFO and Chief Collaboration Officer of eXp World Holdings, followed by Jason Gesing, CEO of eXp Realty, who will share drivers of our accelerated growth and unique value proposition. Finally, we'll return to Justin Ages and our leadership for a 10-minute continuation of the Q&A. Let's begin the earnings fireside chat with a review of the forward-looking statements.

There will be a number of forward-looking statements made today to be considered in conjunction with the cautionary statements contained in the company's SEC filings. Forward-looking statements are subject to various risks and uncertainties and could cause our actual results to differ materially from these statements. Please see our filings with the SEC, including our most recent quarterly report on Form 10-Q for a discussion of specific risks that may affect our business, performance and financial condition. We assume no obligation to update or revise any forward-looking statements or information. As a reminder, today's call is being recorded, and a replay will also be made available on expworldholdings.com.

Now for a few logistics as we get started. For those of you joining in eXp World Holdings, our virtual campus, what you will see here is all 3 screens. If you want to see those, you can hit the Stage Zoom button to the right of your chatbox. To zoom to a specific screen, you can hit the plus icon button above that screen. If you happen to see no slides or a gray slide, hit the refresh icon at the top of the right-hand corner of that screen to correct. While an EXPI Virtual Campus, should you need any help or have any questions, please enter your comments in the chatbox at the bottom on the left, and a member of the team will contact you.

I mentioned the last segment of our fireside chat is a continuation of our Q&A. Should you wish to ask any questions during your presentation, you can enter your questions by scanning the QR code presented on the screen. With your phone or go to slido.com and type in the event code, EXPIQ3. From there, you can submit a question or even vote up an existing question by giving a thumbs up to indicate that you would also like that question asked. This screen will remain up on the left-hand side of the stage so that you can see the questions. This time, I would like to turn the fireside chat over to Glenn Sanford and Justin Ages to start the earnings conversation.

Courtney, thank you very much for that intro. And Justin, welcome to eXp, our EXPI World. And Justin is one of our covering analysts from Berenberg Capital. And Justin, I'm going to kind of turn it over to you to ask some questions and then we'll continue on with the various other presenters.

Great. Thanks, Glenn, and to the introduction, Courtney. So it's great to be here with you and the rest of management in this world that you created, and congratulations on what I describe as a strong quarter. Agent count up over 80%, transaction volume up almost 100% and, importantly, fueled by [put-in] transactions, which is to me, especially impressive considering what some of your competitors are experiencing, and total revenue up over 90% as well. So I think just another quarter of solid results really speaks to what you're doing in terms of enabling and incentivizing agents and growing the brokerage. I think that all resonates in the industry and attracts more talent, which drives even more success. But on to the first question, as we start here on the EXPI Campus, I think it bears mentioning that EXPI has been kind of operating this metaverse for years. And recently, there's been a lot of attention on virtual reality where people are interacting with each other. But how has EXPI and its virtual campus benefited customers just because you guys seem to be at the forefront of that?

Yes. So we -- back in 2009, we looked at one, how to run a profitable real estate brokerage in good times and bad times, and the biggest single cost to run a brokerage typically is the bricks and mortar costs [that had] come out of technology. So what we looked at was virtual worlds for business back in 2009. We've been operating effectively now in the popularized term because of Facebook, the metaverse, literally since 2009. We've operated in a number of different platforms and started on the VirBELA platform, the one we're in now, in 2016. And we actually bought the company in late 2018.

And now we've got a number of customers from universities to large enterprises to consulting companies, et cetera, that have adopted or using -- have used, especially since COVID really impacted the marketplace last year. So it's been a really interesting last 18 months relative to the use of other people using the platform. But for us, we've continued to mature it. We've got another platform called FrameVR.io which is an entirely web-based accessible platform, which we're actually really excited about as well. And we think there's a lot of future potentials, but it's been certainly the enabling technology that's allowed eXp to grow as rapidly and as ubiquitously across the world as it has.

Yes. Great. That makes a lot of sense. And then on to the quarter specifically, can you just give us a high level about 3Q and the drivers of the financial and operational performance?

For us, we always come back to the agent value proposition. And again, back in 2009, the big thing was to think about agents as being the most important part of the real estate brokerage, not the broker owner, not the franchise or not the brand but the real estate agent. And by retooling our comp model to really recognize the agent as being central to everything that goes on in real estate brokerage, that's really created the drivers that have continued to propel us forward, our revenue sharing model, where we're sharing out tens of millions of dollars every month in the form of revenue share; our equity plan, where we've shared, based on today's valuation, well in excess of $1 billion worth of equity to our agents and brokers. That has been a huge driver of both attraction, retention and then also creates an opportunity for agents to help us grow the business. So that's -- those have been the biggest drivers and we believe will continue to be huge drivers going well into the future.

Yes. I agree with you and all about that agent proposition model and just how it's driving growth. And then in terms of the housing market, can you give us a flavor of your view for the near term and over the longer both in terms of home price appreciation and transactions?

So my view and I think our collective view is that real estate has been and continues to be something that is very much affected by monetary policy, whether it be interest rates or quantitative easing or whatever those things are that the -- that the Fed and others have done. And as long as interest rates stay low, we think that real estate prices and real estate transactions will continue to be significant. And so from the perspective of not knowing what -- where interest rates specifically are going to go, I have a personal view that interest rates that there's an inherent need to keep interest rates low for a whole variety of reasons at a macro level. And so from that perspective, I think that we're going to continue to see a robust housing market going into 2022 and potentially even beyond that.

Yes, I agree with that sentiment. And it will be interesting to see what the Fed will do over that timeline. But as I see, you guys will continue to take share. And part of taking share is really related to your ability to attract agents, as you touched on briefly in the beginning. So can you speak to what the competitive environment has been and how you continue to find success?

Well, competitively, we kind of invented this new model, a cloud-based real estate brokerage. And we really innovated on a number of different factors. We were the first one to create a meaningful revenue sharing program. First one to actually provide an equity plan and to actually make those publicly traded shares. First company and still the only company operating in the metaverse, which then allows us to actually organize and collaborate and build community in unique and interesting ways without having to have the cost and the constraints of physical bricks and mortar. So those have been really very compelling.

Of course, we think about the idea that we've been doing this so long that we're now over 67,000 agents, getting close to 68,000 worldwide, fastest-growing real estate company in the history of residential real estate. And we think that, that first-mover advantage will continue to play out well for us. And we've also built a model that is, over the long haul, since at least Q4 of 2019 going forward, we've been profitable, and that's resulted in our ability now to actually pay a dividend, which, again, sets us apart from other companies that may have a hard time reaching some net-net profitability and distributing that in a meaningful way to their agents.

Yes. I think the dividend definitely plays a role in attracting agents as part of kind of that agent incentive compensation. And along those lines, maybe you could take it a step further and talk about what EXPI is doing to ensure that competitors cannot copy your business model and the success? I mean, you do have the first-mover advantage and no physical presence. But what are you doing to kind of ensure that moat continues to stay?

Yes. We've done certainly a number of things. Last year was an interesting year in terms of some of the acquisitions that we did, SUCCESS Magazine and SUCCESS Enterprises. That's the longest-standing personal development brand in the history of personal development, which ties in well with real estate professionals. We've expanded that brand. We're creating opportunities for agents and brokers to potentially own SUCCESS co-work franchises, which is kind of an interesting sort of juxtaposition against our cloud-based business model.

There's the ability for people to actually stand up their own co-working locations, which can be a really good environment for connecting with other business people and other people in their local communities. And it's not a real estate office, but it's truly a co-working company with coaching and a café and some other things. So we're continuing to really innovate and try new things.

And I think that's really one of the things that sets us apart is that we've not stopped innovating and trying new things. So we've got SUCCESS Lending is also a joint venture that we put together. And this month in November, we're in a great position to actually start to originate loans through SUCCESS Lending, and we're creating unique ways for agents to tie into that model as well. And we think that just being a long-term profitable company that puts agents first is the best way to build a moat in the industry.

Yes. I think that has played out, and it seems like you are taking the steps in building on kind of your innovative DNA to continue to grow and defend the company. And you mentioned SUCCESS Lending. And so I just wanted to touch on that for a second because I know it's still early days, and you're seeing positive signs there. And then the other kind of service that you have, maybe you could just touch upon your iBuyer model and how it differs, especially in juxtaposition to today's news out of Zillow.

Yes. So I think I touched a little bit on SUCCESS Lending. We're open now technically in about 6 -- 5 or 6 states. We've got another 5 or 6 states that are in the process of opening up as we speak. We've got our first loan officer. We've got -- the president of the division has accepted an offer. And so we'll make some announcements next week about that at EXPCON. So I think that will be a good place to learn a little bit more as we kind of share more on SUCCESS Lending. Obviously, yesterday, big news in that, obviously, Zillow decided to exit the iBuyer space. It's interesting last year, in -- during the downturn from COVID, Zillow, Redfin, I'm not -- I don't remember what Opendoor did specifically, I think they were the same, but everybody quit buying homes in the second quarter of 2001. Because of COVID, we had a platform called Express Offers where we actually continue to operate, and we actually transacted business.

We actually put sellers together with instant buyers through our own marketplace without taking any balance sheet risk. And so we basically approached it from the perspective of let's build a marketplace. Let's connect people. There are always going to be people who need to sell, want to sell, don't want to go through the hassle of actually listing their home for sale in a traditional way, and they're going to be looking for a place to sell. And so we're actually working with our team and doing some reviews even this last week. Our iBuyer platform, Express Offers, has actually been profitable as a platform versus -- because we didn't take balance sheet risk and because we've got built-in margin as buyers buy properties through that. And then it becomes a great listing tool for our agents to be able to go in and show why a fully marketed listing might be a better option than going with the instant sale.

Yes. That makes a lot of sense. Probably the marketplace, at least at this point in time, seems to be one of the better ways to go in terms of the iBuying model. And being profitable in that sector is definitely what I think will make some competitor envious. And just last, before we get into the presentations, can you just comment on the commercial segment? I know I'm switching gears a little bit. Are you seeing the model kind of resonate in the same way that you've seen in the residential segment?

Yes. The commercial is a little bit -- there's definitely a smaller number of agents across the country. We've got well in excess of 1,000 resi-mercial agents, meaning agents that are under the residential brand that also sell commercial. We've got -- we're coming up to about 500 agents on the commercial side. And it's a good, growing segment of the business that we think that will cross-pollinate and have other opportunities to go sort of back and forth between residential and commercial. So it's, again, fairly early days. I mean, we've been doing this for little over a year on the commercial side with a true commercial leader with Jim Huang and the team that he's assembled on the commercial side. But we think that it has the significant potential to make the same sorts of impact over time as eXp Realty has done in the residential side.

Yes, that's great. So confident in the growing segment. But with that, we can turn it over to the rest of the team to kind of present on the quarter.

Okay. And I think next up is Jeff Whiteside.

All right. Thank you very much, Glenn. Thank you, Justin, for joining us today. Good morning, all, and thank you for joining our third quarter 2021 virtual fireside chat. Courtney, I think it's getting a little hot in here. So could you turn the fireplace down? I appreciate that.

Absolutely.

We had another strong quarter of growth, and I'm proud on behalf of the EXPI team to share our third quarter results with you today. On our highlight page that you see in front of you, starting with revenue. Q3 revenue was $1.1 billion. And if you've been following us, we really like the word billion at eXp, 97% year-over-year. So incredible growth continues here. Gross profit in Q3 was $79.5 million, an increase of 70% year-over-year. Our Q3 net income was $23.8 million, and that's up 60% year-over-year. And you can see in a footnote, you can see in the financials that, that included a $12.9 million benefit from income tax provision, primarily driven by the stock-based compensation deduction. We went through this last quarter. And basically, since we've shown consistent profitability in our company, we now have deductions in a major cost area of our business, and that would be stock compensation. So that's a positive for our net income.

Diluted earnings per share was $0.15 versus $0.10 per share, and that's plus 50% versus last year. Our adjusted EBITDA was $23.1 million, up 6% year-over-year. And lastly, on the summary page, our Q3 operating cash flow was 54 -- $55.4 million, an increase of 44% from the same period last year.

So now if we look at our key operating metrics and financial metrics, this chart is broken into 2 categories: operating metrics and financial metrics. And looking at our operating metrics in Q3, and as a reminder, we at eXp, we run our business based on agent and employee Net Promoter Score, so that you'll see ANPS and ENPS. And from our experience and how we run the business, we find that by measuring agent and employee feedback scores, we're able to focus on our resources on fixing and improving key areas that are critical to our business success. Determine that if we keep the scores around 70-plus growth, retention and employee satisfaction all trend positively. And Glenn started this a long time ago. We're all big disciples of this right now. And what you're going to see is a 70 score. I might have went through this before. But a plus 70 score, it's world-class in terms of satisfaction, both from our agents and our employees.

So in our third quarter, our ANPS score was 69. Yes, that's a little lower than our goal versus 73 year-over-year. But on a year-to-date basis, we're at 71. So we're feeling pretty good there. Our third quarter ENPS score was 79 versus 70. And so on a year-over-year basis, we're at 80 versus 72. So the score is slightly down from where we want it to be. So we're working on a number of things from a process standpoint in our business. But overall, the 71 year-to-date and the 80 year-to-date feels very good, and you can see the results on the metric page.

So in our realty business, in our model, adding productive agents to our platform drives unit sales volume and revenue. And our agent count, as was mentioned before, in Q3 ended at 65,269 versus 35,877 with a growth rate of 82%. And just to give you a bit of a breakdown, Glenn mentioned that we're above 67,000 right now. And when you look at our profile, we're about 10% global. Michael and the team are doing a fantastic job. I mean it's rolling out well. We're going to see significant growth in the future, 10% global.

And then we got about 500 pure commercial agents in our company right now, and this is a big season for additions in that area. So Jim and the team are working hard on growing that number. So in terms of unit sales, Q3 was 130,029 versus 75,392, and that's up 72% year-over-year and 103% year-to-date. Price per unit, as we mentioned before, is up 15%. So our average price per unit is $358,600, so that's up 15% quarter and 15% year-to-date.

Volume. Q3 was at $46.6 billion versus $23.6 billion, up 97% year-over-year and 134% year-to-date. So our volume on a year-to-date basis, as you can see, is $111.2 billion. So fantastic results from a growth perspective in the company in Q3 and on a year-to-date basis.

Now I will go to our financial metrics. We're at the bottom of the page. And if we're just looking at our revenue, as we mentioned, $1.1 billion versus $564 million, up 97% in the quarter. $2.7 billion versus $1.2 billion, we're up 127% year-to-date on revenue. Gross margin was $79.5 million in Q3, and that's a 70% growth in dollars year-over-year and as a percentage, it was 7.2% in Q3 2021 versus $46.8 million and 8.3% in Q3 of 2020. We did see a downward pressure in our gross margin percentage in Q3, and that was primarily driven by increased volume, increased capping and the increased unit prices.

So as we move down the P&L to the SG&A, you'll see that our SG&A was $68.4 million versus $31.6 million in the quarter. That's up 116%, and $180 million versus $85 million, which is up 111%. And I touched on that. Obviously, that goes down to our operating income. So our operating income was $11.2 million versus $15.2 million. So year-over-year, we had a decline of 26%. Year-to-date, operating income was $32.6 million versus $23.8 million, so we're up on a year-to-date basis by 37%. So we did see downward pressure on operating income in Q3, and it was driven by incremental investment in our growth areas. All right.

Our big growth areas, and I'll touch on this a little more on the next page, but global residential expansion, commercial expansion, technology investment success, affiliated service investments. So in the quarter, we invested roughly $10 million in those areas. And these are all big future growth areas for our company. And then on a year-to-date basis, we invested about $25 million in these growth areas. So we're very fortunate in our company to have a core business in the U.S. and Canada, really doing very, very, very well. So giving us the opportunity to make these investments, and that's why we're seeing a bit of a dip in the operating income line, but we believe that, that will pay off in a big way into the future.

Net income is $23.8 million versus $14.9 million, so up 16% year-over-year in the quarter and $65.7 million versus $23.3 million, up 182% year-over-year -- year-to-date. Adjusted EBITDA, you can see, is $23.8 million versus $21.8 million, up 6%, and $64.9 million versus $41.2 million, up 50% on a year-to-date basis. So we've had -- as Glenn mentioned before, we've had positive adjusted EBITDA since Q3 of 2018. We've had continued positive net income in the company since Q4 2019. And as we look at operating cash flow, see that we are at $55.4 million versus $38.5 million, up 44% in the quarter and $156.8 million versus $74.1 million, up 112% in the year. And then the positive operating cash flow continues in the company with the investment and with 0 debt on the balance sheet. So we have 0 debt on the balance sheet. And we're able to fund our business, invest in our business, do our buybacks, and we still have a very healthy balance.

As a company, you can see our cash equivalent number from $98.1 million. So we've decided as a leadership team and a Board that we will beat that number around $100 million. So that's where it's at after all these investments. And so we're feeling very good about the growth in the company. We're feeling very good about the investment, where we're putting our money for future growth. And we have a very healthy balance sheet at the same time.

And now on to some recent highlights and more of our focused growth areas. So my last page here is -- recent highlights include the following. We paid our first cash dividend in Q3, and we have a declared dividend for Q4 that has to be approved by the Board, and that already we've done that. So very -- we've achieved positive accumulated earnings and shareholder equity. So that $0.04 per share was paid in Q3 and will be paid again in Q4. We've established successes that Glenn talked about. Now we're starting to get the states open. We're starting to make sure the staff is in place and we're going to start promoting that in a big way. And our share buyback, as we've continued with our efforts to offset the dilution in the company, and we repurchased $53.2 million of common stock in Q3. So those are the highlights.

On the right-hand side of the page, the great growth, as I mentioned before, in performance from our U.S. realty business has enabled us to invest in key future growth areas, that include realty again on the domestic front from a marketing and productivity for scale, all sorts of technology investments going into our U.S. business global expansion. You heard a lot about it, and we're at 17 countries right now. Teams are doing a fantastic job. We got to get -- getting the right people in place. We're starting to get scale in some of the bigger countries. We'll continue to grow that as time goes on.

And then commercial, as Glenn talked about, we're building awareness, education and growing our agent count at the same time. From a technology innovation standpoint, we continue to invest in VirBELA and Frame. As you've heard, all the press recently, I mean, we've been doing this for a long time in running our business. And the results that you see are really on the back of this virtual platform of VirBELA, so we continue to invest there. [Alice] and the team are doing a fantastic job. Showcase, we're investing in our IDX business, agents' tools and portals, going to be a lot of new things coming out of that group this year, actually 2022. And mobile apps and international revenue share is something that we're doing in our core technologies that we've added to support our agents.

And finally, affiliated services and SUCCESS. Now we're coming up with brand new lead generation, [preferred] routing. Scale coaching, we're scaling the coaching program right now, and we're going into a digital expansion as we speak. So overall, very, very happy with our results. Very fortunate to be able to invest in growth for the future, and we believe very heavily that that's going to continue as time goes on. So at this point in time, I'd like to introduce Jason Gesing, who's our CEO of eXp Realty, and he'll expand on our agent growth and key drivers of success.

Terrific. Thank you very much, Jeff. I appreciate it. Good morning, everybody. Good to be here, and I'll just provide a little bit more context in terms of our growth trajectory that Jeff shared. You can see the curve. And as Jeff mentioned, we're up 82% year-over-year in our agent, more than 67,000 agents across the globe. And if you look at it, there's really 3 primary drivers, as Jeff mentioned. The first is U.S. residential performance, but we've really been able to continue to attract top producing agents and teams. And that's really what it boils down to.

And if you really want to get a flavor for the type of person that's joining the company, I'd encourage you to go to life.exprealty.com, where you can see profiles of a number of the folks that have joined us recently, other members of the community. Just yesterday, we did a profile on a 28-year old gentleman out of Arizona. Team of 12, does $200 million in volume, dominates his local market. And he came here because this is a company he said that recognizes the agent and it's the agent first. And for his team members, there's an opportunity for things like equity, like ownership and access to health care, which is an important piece in an industry where many agents are left without it.

And the other thing, too, is that every time we add somebody, an influencer, somebody who's been very successful in the business, sort of owns their local neighborhood, it really triggers the network effect if we grow at an even more and greater accelerated rate. Sometimes, that's because the people who join, they're out there and they're attracting agents they want to make part of their business.

But sometimes, it's just because somebody learns about it. The gentleman I referred to just a moment ago found out about eXp because somebody else in his market joined, and that prompted him, if nothing else, to ask questions. What is eXp? What's it all about? And ultimately, the more questions he asked, the more interest he received, the more determined he was to make this the place for his future and now he's here.

Obviously, the way we operate, we've got an innovative model. We have an innovative platform here. It's really allowed us to expand globally at a time where initially when COVID arrived, we weren't sure that we could. And I would submit in a way that probably nobody else can, in the last year, we've added 10 countries to the footprint. Most recently, in the third quarter, we added Panama and Germany. We think Germany is a great market. I think I read somewhere, the last 10 years, the 7 largest cities in Germany have grown upwards of 123%. So we're picking good markets and we're finding great leaders. And then on commercial, I do want to say that -- go to some of these industry conferences. Jim Huang is really a credible leader, done a great, great job. But commercial typically lags the residential industry in terms of innovation and technology by a number of years.

In addition, historically, commercial agents have earned a much smaller percentage of the overall commission dollar than folks in residential. And so we're really a very compelling offer for true [commercial] agents. And if you go to some of the industry conferences, whether it's ICSC or CCIM, they are speaking about eXp commercial from the stage, and they're describing it as the future of the industry. So we think we have a great advantage there. A platform that we have, it's just been instrumental in creating that awareness and that success.

Quarterly, we're having symposia that Jim and Stephanie are putting together. We've had, I think the first one was about 1,500 agents. Now we've got -- looking for about 7,000 registrants and they come in here. They said they get exposure to VirBELA. They understand how the world works and they're getting certification. So those have been great events for us in order to create awareness. I will say our iBuyer platform is thriving at the moment. We have more than 6,700 agents who are participating. They're certified. They're able to submit properties on the platform. They're receiving offers from iBuyers.

And I'll also point out that within the last -- earlier in the year, we started -- very quietly, we started a relocation division, and we're really excited about how that's going. We're gaining great traction there. And I think that we're set up and structured as one big company to really serve the needs of relocation very, very well.

Jeff talked about -- if we go to the next slide, ANPS metrics. I think the thing here, not to belabor, but it's important to understand that the value prop really impacts NPS as well. Of course, we got a whole team that is taking -- conducting the surveys. They're closing the loop on when they get feedback. But the value prop has a lot to do with it. So one of the things here with our ownership, our agents, they see unlimited upside, but they have to earn it, right, to get the stock.

They either have to sell a property or they have to help the company grow. And if they -- once they do that, there's really no limit. And if you compare that to some other companies who maybe will offer a signing bonus or something upfront with a fixed period of years, it's a onetime benefit. And then essentially, what we've seen is that a lot of the agents of these companies, the moment the lockup period ends, that they're looking for a new opportunity. And I think because our agents are earning their equity because they're earning everything they're doing, they're really invested in agent ownership for us culturally and in terms of our growth has been an absolute key driver and one that I always like to talk about.

And I just want to say VirBELA has just been phenomenal for us. It really has allowed us -- agents, real estate agents are capable people. They want to be around others. They don't like to work in isolation. And in the last 2 years, we've demonstrated more than we ever have before that this environment that VirBELA really allows for the type of interoffice bank collaboration among colleagues. I think last week, our agent experience team had a Halloween costume party. And so that's just one example of the types of things that we're doing here along with the 100 hours of training and all sorts of stuff. So I think at that point, let's see, I think that's pretty much everything, and I'll turn it back over to Justin. And thank you very much for having an opportunity in front of you.

Awesome. I think it's you, me, Jeff and Justin to do the Q&A. So...

Yes. Great. Thanks. And thanks for the presentations. I just want to start, I guess, on the financial side, though. Pretty impressive, Jeff. Can you kind of dig into what's really driving the top line? I know we've talked about attracting agents. And how do you see that tracking going forward?

Thanks, Justin. Appreciate it. Yes, I -- we went through some numbers even as recently as this morning. And as you can see, the agent count, the productivity and agent count absolutely drives revenue. To put it in perspective, we did $0.5 billion in 2018 and that's in the entire year. So now we're -- on a year-to-date basis, we're up $2.7 billion. And I think that even if you take a 50% growth rate, we're at 82% year-to-date. If you take a 50% growth rate over a 5-year period, you're up over 500,000 agents.

So I think between the U.S., one thing I've talked about before is this kind of network effect. I mean when I came back -- when I was here in 2018, we had a few very, very successful attractors and influencers in our business. And now after traveling through the country and seeing what's going on, we have hundreds of these people with us. So hundreds of very, very strong agent leaders in the communities across the U.S. And then as we've talked about, the opportunity international for us is tremendous.

And we're just getting traction there right now. So we're very confident that this is going to continue from a value proposition to the agents, both domestically and globally, and we can see this kind of growth rate continuing as far as we can see.

Yes, that's great. And then we can definitely see how that's going to kind of drive especially the combination of both the U.S. and international. And then switching to some of the cost lines and gross margin in particular. I know you touched upon kind of what that's driving and what bumps that up. But maybe you could just discuss that a little further and where that's been trending and where you expect it to go.

Yes, sure. I mean traditionally, prior to COVID, we used to have a seasonality to the business where we would have higher margins. Q1 and Q4, volumes go down. And basically, what we're seeing now is the volumes being huge across the entire industry. And the reason the gross margin has moved down slightly, it is a direct result of the number of agents having success with our model and capping in addition to the volume and then in addition to the price per unit, right?

So what we're kind of seeing is so far in Q4, although we don't -- as we look at -- we're seeing more seasonality going into Q4 a little bit. We're seeing some of the slowdowns across the markets, although we can't -- it's just a crystal ball, but we're seeing it getting a little more normal, whatever that's going to be, and gross margins going up slightly in the fourth quarter as volume goes down and it gets to a more traditional model. So that's kind of what's going on. I mean what it's doing for us, though, as you can see, is it's really driving market share.

So I think in the not-too-distant future, we'll be able to talk about market share and where we are and things like that. But that's kind of what's happening. As Glenn mentioned earlier today, I mean, we're doing all sorts of things in the business from an investment standpoint to grow our margins, both internationally and domestically. And then on top of that, finding the right opportunities to add incremental operating margins on the business, things like affiliated services and other services we can provide in our company.

Yes. I guess it's kind of a little bit on the one hand, it's a good one to have. And then two, on the other, as you see kind of the more normalized approach and then margin ticking up because it's less pressure from the agents. And then can you provide us -- because I know investors are interested in what percent of agents are capping? And where -- and do you see it staying around there? I know as we talk quarter-to-quarter, there's obviously going to be a little fluctuation, but just in general terms.

Yes. I mean, we actually don't break that out right now, Justin, in the financials because of the growth of the company. I mean we're still -- I think we added 11,000 agents or whatever it was, gross. So we still don't have a stable number to report on that, and we don't do that. But obviously, there's a -- there's an increase of probably now somewhere around 30% more agents capping happening, as we've seen in the past, because of the market -- because of the volume in the market. And I think as we get more normal, I'm not even sure when we get to normalize on growth, but because we have so many new people coming on and so many thousands of new agents, we don't really stick up. We don't stick a -- we don't put a stick in the sand and say, this is the number because the growth is just beyond having a reasonable number on that. But I think a safe number, 30% more agents are capping than they were prior to the volume going through the roof in the (technical difficulty)

All right. No, thanks for that. I appreciate the color there. And then I guess my last question really for you or the rest of the team can kind of weigh in on these investments that you're making, what -- which one kind of excites you the most? Is it something about productivity or teaming up agents to learn from each other and grow from there? So just getting your thoughts around that.

Glenn, do you want to take that one?

Yes. Certainly, from just an agent attraction perspective, I mean, we've been investing in a number of different lead gen initiatives. And I think that lead generation is always something that's valued at the agent level. So between our Showcase IDX investment, which is building out exprealty.com, Express Offers, we actually launched a platform maybe 2 quarters ago, called SUCCESS Experts, which is a lead gen platform for some displaced folks that were displaced by Dave Ramsey's organization.

But we continue to invest in sort of lead gen and then being able to create opportunities for agents to be in front of consumers. And so from my perspective, that's the biggest driver from an agent perspective. From an overall company perspective, I think the big investment that I'm most excited about is SUCCESS Lending. That, in my mind, if we can figure it out, and I say that, but I think we've got a path to figuring it out. This time around, we've done -- we went and approached mortgage twice before, and we've learned a lot from both of those experiences. But I think that we've got an opportunity to crack the code on having an in-house lending opportunity that can get some traction. And if that does get traction, that will meaningfully move the needle from a gross margin perspective and from a profitability perspective. So we're, again, very early stages. We're just going to be announcing our first loan ops or division president and all that next week at EXPCON. We're really excited about what that might look like.

Yes, I think there's definitely a lot of value in kind of adding those services and those other products. And then, as you mentioned, the lead gen initiatives. And then building off of that, and I guess switching to questions about agents specifically and maybe more for Jason. So what would you say are the biggest drivers of kind of agent attraction and retention? Obviously, you have the incentives and now there's the dividend and also the awards. And then second part of that, just taking a question from the slide out. What does your road map look like to get agent and employee Net Promoter Scores even higher?

Yes. Well, thank you. I think, first of all, to get -- we have put in place -- so [Rebecca Hutchison] oversees a team that then also really is focusing on is NPS. And part of that team is to make sure that when feedback comes in that is anything less than a 7 or an 8, we're following up the members of the team. We're closing the loop, as they say, and addressing the concern. And I think continued focus on that and also identifying other areas where we might be able to introduce the survey, right, there's always more and more experiences that our agents are going through as part of the ecosystem. And I think if we're good about identifying which are the ones that impact the overall experience the most and can introduce surveys there, then the scores -- hopefully, get the scores even a little bit higher.

For me, the big drivers of growth are the agent ownership. We've had a great model. We've had a strong revenue-sharing model all throughout the time of our existence. But really, it was when we introduced agent ownership back in 2014, 2015, that from my perspective, we've really, really started to grow. There's a lot of power, I think, in having people who are owners and have a great deal of diversity in their experience. And this is one of those industries where people come from it, they come from -- to it from medical, education, we've got a cardiologist that's an agent with us in New York City. And so there's so much diversity of background and experience. And now you have the global component. So this is now a multilingual environment. It's a multicultural environment. And add all of that together as fellow owners and where everybody is really driven to build the very best company they can because they own a piece of it. And that itself is a really, really large impetus for growth. I think it's a great driver, one that I think -- I won't speak for them, but I know we're both very proud of it.

Yes. Thanks, Jason. And I think that kind of gets back to this virtuous cycle that more agents come, they like the platform, and then more agents stay and more come and that drives more success. In terms of recruitment, what -- can you give us a little detail on the composition of agents who join eXp from word of mouth versus those that are recruited? A little of that please.

Sure. Yes. I mean it really is all word of mouth. Occasionally, we'll get an agent that inquires without having spoken with anybody, and we've got an inside sales team that will follow up with that agent and then get that prospect in the hands of one of our agents who doesn't have anybody yet. So what you won't see, we don't advertise on billboards, we're not on TV. We're not competing with our agents, so it really is all word of mouth. It's all organic, and that's what makes it so powerful.

Obviously, as a company, we're supporting that in whatever way we can. We're offering resources and tools. We've got marketing and training efforts that are really helping agents attract and build their businesses. We're using social media to drive awareness, thought leadership and conventions over the -- I think our last 3 big conventions we had inside of VirBELA. They've been phenomenal events, as Glenn mentioned, in Las Vegas next week. And these events are really -- they're great in so many ways. But for me, they've always demonstrated more than anything else that the relationships that take root inside of VirBELA translates so well into real life. Conversations pick up where they left off. And that's what -- but it's all word of mouth. And I will say that those events, we have a lot of people that will bring guests to those events. And I would say that the overwhelming majority of those people that come as guests ultimately end up joining. And so they're great for us as well.

Yes. I think it's kind of hard to argue with the results of the agent growth that we've seen. Switching to international. In the prepared remarks, I think it was mentioned around 10% of the base is international. Can you just refresh how many countries you're currently in? And where do you see how many countries by the end of the year and maybe into the first half of 2022?

Yes. Well, I think we're in 18 today with the addition of Panama and Germany. There's a number of other markets that we're looking at, but we haven't announced them yet. But we're always considering new markets that really complement and align with our business growth strategy. So as we build a global brand, we're looking to see what strategic countries contribute to us creating a global footprint that really maximizes agent count revenue and transactions. But you mentioned, Justin, the 10%. Just for a little bit of perspective, it took us from 2009 to leap day of 2016 -- February 29, 2016, to hit 1,000 agents in the United States. And we launched in India in November of 2020. So just 1 year ago, and we're already over it in the agents.

So the model is resonating globally. And I think in addition to all of the benefits that we've all discussed here today, rev share, equity, the tools and the training, there's so much knowledge to be shared about how to approach the practice of real estate in this market versus that market and what can an agent in France learn from an agent in California that might help them build a better business. And because everybody is aligned, everybody wants the same thing, everybody is a fellow owner, that help is in abundance. And -- I couldn't be more excited about international. And that is my -- by the way, that is my -- that's the investment that we're making that excites me the most.

Thanks for that color. So it sounds like the agent growth has been mirroring that of the U.S., and it's all driven by kind of EXPI's putting agents at the core of the business. Can you just touch on what the fundamentals are like in international countries? And what I mean by that is, obviously, you go in expecting a return. But are the commission structure similar? Are they more? Are they less in cost basis as well?

Within our model, commission structures will vary a little bit country to country. But the bedrocks are the same, right? The core brand deliverables, your competitive splits, ability to reach 100%, so having a capping model stock, where we're allowed to issue it and the ability to build a global organization, so that -- anyway, I think -- can you just restate the question? I apologize.

No, I was just -- you were touching on the

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versus the U.S. and in terms of the return profile that you're expecting.

Yes. So outside of our model, going to vary, again. You look at the countries and sort of the state of affairs in these countries varies greatly. If we look at the United Kingdom, which was the first country that we went into back in -- I guess, it was 2018, agents, estate agents in the United Kingdom are accustomed to receiving a stipend that's just enough to maybe pay the bills. And after that, when it comes into the estate agency, the agent is going to end up with about 5% or 10% at most. And so we come in, we offer 70% with the capping model and revenue share and equity. And it takes a little bit of an adjustment for that estate agent who is accustomed to getting the stipend. But if they're able to pull it together and they're able to stick through it, it's a long sales cycle in the U.K. They come out on the other side, and they're more excited about their business than they've ever been. They're making a heck of a lot more money.

All right. Thanks. And that makes sense. And then you mentioned in your prepared remarks about the relocation business and how you're excited about that. So what's driving that decision to get into the business? And do you see kind of synergies down the road that you have, obviously, people looking for houses, people looking to sell houses, all part of the relocation? So if you could just comment on that, please.

Yes. So we decided to move forward because of the right opportunity for us. And so this is a great example. Our agent -- one of our agents came to me and said, "I've got this person who's done relocation on a national basis in a number of different organizations," and that leads to a conversation and then that sort of eliminates the opportunity. And if you got the right people, then you go and you pursue the opportunity. We're building great relationships whether those are affinity relationships or relationships with various organizations. Our agents are excited about this. And with the future of work, I guess, very much still, I guess, up in the air in terms of whether people are going to be in an office or not be in an office, we do know that a lot of people have moved out of urban areas. They've moved to more outlying areas because of remote work. So I think the opportunities for relocation will proliferate over time.

Yes. Great. That's helpful. And then just turning to a couple other questions from the audience for the management team. I'm just going to read this one. The history of turning your largest OpEx into assets like SUCCESS and VirBELA, is kvCORE something that you can build internally? Is that a large expense?

So I'll touch on that. It is technically something we can build internally. kvCORE is a pretty mature product. We bought Showcase IDX with some of the ideas of actually building functionality over time. And so we're probably, in terms of actually having a product that could be at parity with kvCORE, we're probably still another year out. Even though Showcase, we now have -- probably 80%, 90% of the listings in the United States is now featured on exprealty.com, which is round out of the Showcase platform.

And with that, we've got a lot of really unique enhancements that will be different from what would be in an agent sort of CRM lead generation style platform. So we're pretty excited about what we're able to do with Showcase. We're also excited about our continued relationship with Inside Real Estate and kvCORE because we have -- I think I talked to Joe, their CEO, last week. And we've had something like 20 million contacts of potential consumers that have been generated into the kvCORE platform, which is a lot of potential business that's locked up in that platform and that ecosystem, which may make more sense to continue to mature than to just move over to a different platform.

I appreciate the incremental color there. And just last because we're bumping up against time, I'll just read this one. So SaaS software sales are a long, expensive process outside of EXPI's core capability, so how do you plan to grow VirBELA? And any plans to break out the revenues expense related to that?

Yes. So last year, when we bought VirBELA, we bought it for the primary reason is that it had truly enabled us to build, at the time, a company in the hundreds of millions of dollars of market value, now in the billions. And that single enabling technology allowed us to get to where we're at today as quickly as we did. But COVID kind of created an opportunity to start to sell it. We've a number of customers that we're supporting on the VirBELA platform. We think that collaboration technology is something that we need to invest in for ourselves but also through that, be able to offer it to other customers. And then so FrameVR.io, in my mind, sort of represents the next generation of VirBELA. Entirely web, mobile, Oculus, ready out of the box. And with it, the features and functions of VirBELA are slowly and surely getting to a similar type of scale while Frame is in beta.

I think that the cool thing about Frame versus VirBELA is that Frame should be able to be very much of an e-commerce transaction without much needed work. VirBELA itself, it's a custom client developed for each particular customer so there's a lot more work involved. Whereas Frame VR, we think, really represents something that can just be bought and used by anyone from an educational institution, an elementary school to -- which we do have schools using it, to enterprises. Trello and Atlassian just did an event in Frame VR. And we've got a number of other companies that have done similar types of things. So we think the future of immersive technology will include both types, but I think Frame VR represents another step forward. And with that will come much more of a SaaS-like sales model that could be pretty exciting, again, if we can figure it out.

Yes. Pretty tough to argue with where the world is moving. So that does it for the questions. I want to thank you for having me, and I'll turn it back over to you, so you can kind of close this out.

Awesome. Thanks, Justin. And Courtney, any last words?

No. Thank you for joining us today. This concludes the eXp World Holdings Q3 2021 Earnings Fireside Chat. Remember, a replay will also be made available

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