Q4 2020 eXp World Holdings Inc Earnings Call
<unk> 4 million and <unk>.
Q4, 2019 to $609 3 million and Q4, so when we look at the full year revenue.
We are going from.
And an increase of 84% from $980 million.
And to $1 $8 billion and revenue.
So that was a great year as I said before we had from a revenue standpoint and from a from a growth standpoint.
And we had a great Q1.
We had a stall, but we have 33% growth rate in Q2, and then the second half of the year was extremely strong for us.
From a revenue standpoint, and our revenue is based on primarily the agent count and the business. We had rapid agent growth and Q4, the number of agents and brokers to join us and ESP and Q4 increased 15% to 41313 compared to 35877 at the end of Q3.
And that was a net add of 5336.
And for a full year.
Our number went from 41000 I'm, sorry from 25000, and 423 to <unk> 41, $3 13, and that was an increase of 63%.
Year over year age accounts.
Our net next metric that we look at it is.
Net income.
And in Q4, and net income increased to $7 7 million from <unk> 8 million and Q4 2019.
And for the full year.
Our net income.
It was $31 million and that was compared to $9 $6 million and 2019.
Record transactions in Q4.
And we went from.
In Q4, the record transactions went from 38611 two.
And to 82055.
And four and then for the entire year.
Did.
135000 transactions $3 22 and 2019.
And we are up 77% to do 238981, and the full year and.
And finally from a volume from a volume standpoint, and some sort.
Yes.
Okay.
One sorry.
And then we find the booth and we finished off with a.
A volume this year.
Yes.
That is my volume numbers.
Annual transaction volume increased.
89% from 72.
From $38 2 billion to $72 2 billion so great.
Great great numbers across the boards, one and say a couple of more things before I get before I finish my original comments, though.
Some some big news on the material weaknesses front. So this this year the company released Remediated all of our material weaknesses and the business and you'll see that and our 10-K and rebranded and update D. S. P. I.
Realty brands and our USPI Corporation, we launched five new countries, Mike will get into that increase the stock buyback to offset dilution and you still have zero debt on the balance sheet completed acquisitions and showcase itx and.
And continuing to build a great product and rubella and the commercial front and.
And then and and finally, we've really significantly strengthen our leadership team across the entire business and especially in the brokerage international marketing areas commercial finance and technology.
Those are some opening comments Tom guidance would you like to say a few words.
Yeah, I'll I'll I'll touch on a few things this loss.
Q4 was there was was a really good quarter force, we ended up making a lot of progress on a number of different fronts.
We ended up.
We've got our acquisition earlier in the year with the showcase itx and they were able to turn on and the fourth quarter, our Canadian portal and <unk>.
P royalty dossier.
And our early this quarter they were they turned on ESP royalty dot com their early stages and the development of our community portal, but we were able to get off of a third party vendor. So we're able to now control for our future as it relates to building a robust consumer experience and also a robust AIDS and experience when it comes to lead Gen and then b.
Able to integrate a lot of things that we.
I've been wanting to do for quite some time around things like affiliated Servicers.
Incorporating things like her express offers platform etcetera, all into one unified and consumer and as a platform. So that was a was a really strong on the DXP royalty side.
We also as a.
And most of you all have noted we purchased a success magazine, we closed on that in.
On December I believe it was of AR and that has been a really inter.
Interesting acquisition, we were the largest single customer success magazine and we've been doing that because we had been mailing the magazine to our agents and brokers for the better part of a couple of years and.
If you think about your sales and general.
Not to mention real estate sales.
Real estate sales and all sales is to some extent and extension of personal development and learning sales scripts.
You're learning.
A lot of things about yourself and how to handle rejection how to a prospect how to do those things that make sales sales and and so success magazine for US really represents a extension of a moat around E X P that mill will allow us to have certain.
And things that are highly proprietary to to us and and having the longest running personal development brand and the history of personal development inside of the E X P World umbrella companies helps.
It helps sort solve for that.
Jeff touched on and the fact that our team is working really really well together I feel like we are right now.
And and it shows up and our and our internal net promoter scores our employee net promoter scores, our glassdoor scores and everything else, but we really do have a team that enjoys building. This company together, which I think is.
And my mind very much of a leading metric on how we're going to do and in future quarters and future years, but more that we enjoy building. This company for our customers and our agents. Our brokers are the better worried about and deliver on those value props and so on.
And Michael will talk a lot about international annual you'll find that here's somebody who has a really passionate about growing that side of the business, but Q4 was great. We ended at 41000 and change and agents.
You May have noted in the press release that we put out our accompanying the.
Q4, and year end earnings that went out earlier this morning that we crossed over 48000 agents.
So a net add of effectively <unk>.
7000 agents, so far year to date and and so that's you know and incredible feat.
And when we think about just the speed of growth and the continued acceleration of growth and how the value proposition really matches up with our agents brokers and staff and.
And then of course rubella is there as a as another platform that we really I mean, obviously you're in the platform now and we're continuing to improve the platform, we're continuing to get some pretty iconic customers and clients through that platform, but more importantly, we're able to use this platform.
To actually enable our ability to scale collaborate build community and ultimately deliver the results that we have for agents brokers and and and staff, which ultimately translates to two to the numbers that you've got a total review so that with that I'll turn it over to.
To Tom and.
Great terrific I appreciate it guys. Thanks for the comments there.
First off I guess I just wanted to say to book Congrats on a great and for the year.
As a crazy year. It was it was a challenging year, but.
And also seem to be a pretty transformational year for the real estate industry overall.
And specifically for you guys, maybe just to kick things off planet I'd be curious to hear just your high level perspectives on on on how.
You I guess I imagine you're pretty proud about how and how the business performed last year and given the pandemic.
Yeah, It really seemed like a new kind of inflection point in your growth would just be curious to hear about what you think.
It is driving that and what drove this kind of new inflection point for you guys.
Yeah, So first and foremost I think you have the the fact that.
The weighted taking place and in Q1 Q2 of 2020 with the pandemic and the Lockdowns and the fact that you know eight real estate and weren't able to easily go in and out of offices. There was a lot of additional overhead just to go to physical offices.
Plaid, obviously, well for a company that doesn't have physical offices poor and a traditional sense. We've got the virtual office and so that's obviously, a louder agents and brokers to work together.
I think the B b.
The other piece is that we've we've really got to a critical mass and and the quality of agents that we have been attracting have been phenomenal and and that's continued to lend itself to continued growth in the model.
I think the other piece is that we've.
We figured out how early on to build a real estate brokerage that could pivot if needed and and so we were able to pivot.
In April of 'twenty, and 'twenty, we reduced from staff, we hired back more than we like golf because Q3 Q4 was a was stronger than we.
We thought it might be and in April of 'twenty, and 'twenty, but we were able to scale down and scale back up very quickly, which resulted in us having really really strong.
Q2, even though revenues were up 33% we ended up significantly more profitable in Q2 than if we'd likely had a model that where we were continuing to expand because we would have been investing and future expansion, but we were able to reduce staff quickly circle the wagons and.
Ultimately put ourselves in a position to be able to scale back up once we knew that things were not going to be as dire as the as the potential it could have been and I think that's the thing that.
We have going for us that again, our other large competitors don't have going for them is that in a downturn.
There's a lot of fixed expenses that they won't be able to get out from under and and for US we built it this way.
On purpose because we launched this you know and 2009 initially when the market was top and and we said hey, we can't afford physical offices and so we ultimately were built for.
Both good economies and bad economies.
Makes sense. Thanks.
And stuff and I wanted to dig into here.
About the business, but maybe just quickly with startups and costs certain some questions on and kind of.
The broader housing market and sort of the macro backdrop and.
Obviously last year was I think a surprisingly strong year for residential real estate volumes I don't think many people expected, how healthy and robust market with kind of snap back after the initial days of the pandemic and.
Can you maybe share your view on what you think kind of drove that that that snapback that expansion and the market last year, and and and and how you think.
The market looks kind of entering.
Entering 2021.
Yeah, So first and foremost your interest rates dropped to historic lows into I think we're still sub 3% on mortgage and 30 year fixed mortgage rates.
And.
Even in the Great Depression, I don't think that it got down to 3% I think that was sort of a historic low and even at that point in time.
And so where we are when we look at buyers.
And that you have income and and everything else that goes along with it.
I can just buy more home for the same mortgage payment so they're looking at the opportunities to buy homes, while interest rates are really low and locking in the property that they they would like to live in and so I think that was probably the biggest thing with all of the.
The fed doing that all the stuff that it was doing.
The stimulus is that that took place obviously, we've got another stimulus that is just the process of.
And getting fully fully passed them and then that will get out to two to everyone. But those stimulus is plus and low interest rates I think were big drivers and the and.
And the housing market along with a lot of other things I think the stock market benefit from from those same same things in general.
I think 2021.
And as we get as we start to work out.
And where we're at.
There's needs to be some interest rates increasing.
And and then <unk>.
Most likely.
Certainly not.
The Crystal ball is working exactly right, but I suspect, there's not going to be much more and the way a stimulus. So that would suggest that later on in and.
This year that will start to see some moderation of the housing market, but it's a combination of low interest rates and and stimulus, but I think were the big drivers and in 2020.
It makes sense what about.
And you get a lot of questions from investors around.
Seasonality of <unk>.
Residential real estate and obviously last year was sort of.
Very atypical in terms of the typical seasonality we see in this industry.
And your results are a great evidence of that given how robust and strong your fourth quarter is which typically isn't.
And a huge quarter for real estate.
Do you think where we have another year here.
I don't know maybe less seasonality.
As folks continue Dan.
Adjusted work from anywhere trends are or what have you.
<unk>.
Do you think we need and returned to normal seasonality at some point or do you think this is it may be and possibly sort of a new normal.
I think Q1 and Q2.
Are going to see just in terms of year over year numbers are going to see strong.
Our strong strong biases the upside just in terms of comparison comparative quarters. I think we you know Q3 was super strong last year and Q4 was obviously really strong not just for us per per everybody and the housing market, but I think that using that as the next backdrop and I think youre going to see some model.
Ration in the growth in Q3, and Q4, just because the growth that you're measuring against was so strong in 2020 and and so those that.
And so if I look at Q4 for US was we were above Q3 normally I think and the last two years prior and our Q4 was actually below our Q3 numbers and.
And that was because of the seasonality and I think if we look at this year.
Nobody knows exactly what's going to go on but I wouldn't be surprised if Q4 is again this year less in Q3 and in Q3 will be somewhat tempered compared to Q3 last year, even though you know just based on our growth rate from Dolby strong.
Okay. So let's give me, maybe we'll shift gears here and dig into some of the operational metrics.
For the business and for you guys and the main area to start obviously as agents and and agent town and.
Obviously agent growth was super strong and 2020 and it.
It seems to be and inflect and up again here in the first quarter.
You said north of 40000 agents.
Can you, maybe just talk a little bit.
About the growth dynamics youre seeing so far in in early 2021 is it is it being driven by international to any significant degree and and kind of how do you expect agent count to kind of play out for the balance of the year.
Yeah. So certainly international is driving a little bit of that growth. There's there's no doubt about that.
The other.
The other part is that our model is I think based on sort of what took place in 2020.
Our model is now recognized as a totally.
Liable and legitimate model for the entire industry and I think we started to see some competitors that are trying to very small, but they're trying to do similar things and and.
But I think that's the key is that our models now accepted as one of the standard models and residential real estate and two years ago.
That would not have been the the commentary the commentary would have been a fair bit different but now it's it certainly is the case, so that plus international international is going to be a big portion of our growth story.
For the foreseeable future.
Two and a half 3% U S.
Agent base, and DXP and you sort of think about does that grow 50% potentially year over year and then what is international then sort of add to that mix and so you kind of play with the numbers and.
Internationally could be a big big percentage of our 2021 numbers.
Of course, yes, I doesn't limit and dig into international and that in and take advantage of micro being here.
Maybe just just sticking with agents domestic agents forbid any kind of update on what the typical new ESP agent looks like.
Are there any particular regions or or <unk>.
Competing brokerages that have been particularly fertile for you then.
And for you guys in terms of attraction recently and also curious whether youre seeing.
Growth and in the overall U S agent pop you population just due to the strength and the market. I mean is it is it bringing people who maybe were semi retired are kind of sitting on the sidelines kind of back and bringing new agents and into the into the into the workforce.
Yeah, well certainly with the that's the the.
Housing market in general there's a lot of people who are getting their license. We saw this to take place and Q.
2005, 2006 2007, when the housing market was really hot and we're seeing a lot of lot of people are getting their license because the business has been really good the last the last few years and so there is there are there definitely is that.
I think in the months of January and February this year and I think we.
Ended up converting somewhere between 14, and 17 independent brokerages to the XP models, so, whereas and regional normally you think of the mainline brands Keller Williams remarks, as being the brokerages that we bring over the most agents from the.
And the reality is is that we're starting to really pull in a lot of the independent brokerages and theyre looking for the basically the.
And the tune is if we can't beat them join them and so a lot of the independent brokerages are going we can't offer the same types of benefits to our agents that DXP provides and ESP because it does run on fairly low margins. They don't see that they're giving up a whole bunch by coming over to you XP and factor in.
They are probably on a net basis, gaining when they look at all the all the value they bring to their agents by joining this platform. So we're seeing a lot of independent brokerages and I think that's where we'll.
We will feel a lot more growth in 2020, one as well.
Okay great.
And remind folks if you if you want to pose a question to <unk>.
Len and and Jeff just go to slide <unk> Dot com hashtag <unk> and we'll get to your questions here and a.
A bit.
Glenn I wanted to touch on the net promoter score and.
And.
The importance of that metric to how you guys.
Run the business and how management makes decisions, there's a big uptick there and net promoter score.
Can you maybe just talk a little bit about what that improvement means you think and and again how are you guys going to use it for internal decision making.
Yeah, so and.
Net promoter score.
For those who aren't aren't familiar it's the question you're on a scale of zero to 10 and a likelihood at leisure.
Refer a friend or colleagues Ranger XP Realty and so that's the that's the basic question and from there you get you'll get a score.
And from that score were able to then make decisions as a team to help improve that score and so when we think about agent.
Experience, whether it be on transactions Onboarding, just overall DXP, we measure multiple places along the agent lifecycle and what it does quite frankly is it allows us to work as a team rather than having to mandate here's our.
<unk> from sort of a corporate top down perspective, and so by using the net promoter that allows any team to work on a part of the business to on improving those scores. So we're and we've got good scores now got some of the best scores, we've ever had and the history of DXP and one thing that we noted.
Back in and around 2016 2017 is if our scores were around 60, then we werent growing that fast and when our scores were above 70, we're actually we're growing faster and we retained a lot more of our agents. So we've really use <unk>.
70 is sort of the the number that we don't want to dip below in any category of the business because we know that below 70 at least for us.
Yeah.
I don't want say bad things start to happen, but we start to see some some pain points, where agents might leave us.
And that will sit there and go and we should have solve that particular challenge. So for US just using that basic score and then asking the second question and which is what influenced you to give us that score and that's obviously, the Gibson and nine or 10, they're going to tell us all the things we did right, but if they give US you know and <unk>.
Seven or eight or six or below and they'll tell us things that we can improve and if we see enough of that data show up in our scores, meaning that I didn't get a phone call back or I can't reach my broker or and what you.
See these different theme show up then it allows our team to go and actually work on solving real issues that make real impact to our agents and and I know Jeff's all over and P. S and works with the team really closely on it and and I think it's you know it's probably.
Probably the number one metric other than making sure where we've got a sustainable model.
Yes, and I'd add Tom that we do the same thing for employees and so our NPS score.
Which is our employee NPS score via the <unk>.
Zach same thing and.
Yes.
The scores above 80, and you can see on the glass door were $4 eight so we do the exact same thing we figure out what's going on and how we can make better and.
Fix things right away and we do that operationally as well as with employees.
Okay, maybe just one more and agents and then we can shift total international forbid and and then maybe talk about some and financials, but.
Glenn in the past you've given some I.
And I guess I won't call it guidance per se, but.
And sort of internal targets, maybe about what you think you can get.
Domestic agent count up too.
And over one year three year five year period, any any kind of update there on your current thoughts I think I caught you.
And our net conference recently and putting out some pretty robust.
Domestic agent target so I just wanted to.
To see if I can get you to clarify or confirm this.
Yeah. So for US you know what I view the numbers.
And for the way I've I've done the math since the beginning is I believe that our model will grow at 50% year over year for quite some time without any.
And obviously, we're still going to do good work, but if we actually work on the model, we should grow in excess of that and so when I when I look at the model.
Right now.
And my thought is domestically and we should be growing somewhere around $60 to 70% this year.
And and internationally, we're gonna grow you really.
Exponentially because there is a much smaller number of agents, but the value prop is really matching up well and these different countries. So you sort of add those two numbers together and I know that this year the <unk>.
Internal aspirational goals and 100000.
I'm I'm still I still feel like that's a little bit aspirational boat less aspirational and when I was talking about it in Q4 last year.
The reality is is that a few things go right for us and we may impact <unk>.
Close to that number at the end of this year, but again its if theres a theres a lot of things that have to go right, but if we start to get up into the 80000.
Plus agent range I feel like that's a pretty pretty doable number even though that's still represent a big growth rate per per 2021.
Yeah that would be.
And then.
And maybe a couple of and international.
So that was another thing I think that stood out to me last year was just that and a year when nobody was getting on planes.
Or traveling you guys were popping up all of these internet new international markets and so.
So maybe I know it's early for a lot of these that maybe you guys could talk a little bit about which of these new geographies youre kind of most excited about either because like structurally on paper. They just look really appealing are attractive for a model like yours or just in terms of what youre seeing in terms of early early agent momentum.
So from microphone share of absolutely glad and I'll grab that and.
And John Thank you for the question and and Youre right. You were just starting to describe what the accomplishments were last year and imagine. This we opened South Africa, India, Mexico, Portugal, and France, all within a span of two months without ever getting on a plane and the middle of a pandemic that is probably.
And something that's not been accomplished and our industry. So this is something where the model became proven on a global scale. There are some incredible markets that we've entered I think that what we've done in India, and Mexico, and Brazil, which we just opened a.
A week and a half ago. These are huge markets. These are markets with those very large number of agent accounts. These are numbers, where everyone has already started to adopt and a very large way our platform and so I think if we start talking about markets, which we are excited about.
And we're excited about all the markets that we enter but I think that where we're looking at is things that have a large number of agents and market that have a large market size or large size of population and a very healthy real estate market in and of itself. So I think Brazil, and India, and Mexico would be markets that I would say to really keep a keen eye on.
Okay terrific and then.
Can you just talk a little bit about.
And how you overcome.
And maybe the obstacles of.
Being a brand new brokerage in some of these markets.
Is the is the goal is the sort of the strategy around expanding and these markets and all that different from from what you guys have done and the U S or is it very much like kind of a.
Our local market by local market, saying, you've got to you've got to win over attract and a high profile agent, who people pay attention to and and then it sort of builds or is there a different kind of strategy for how you look to grow and expand and and these new markets.
A combination of a few things Tom I think that the idea is that we're building a very substantial global brands when I joined ESP last year in the beginning and you started in some of these markets. We were entering having to explain that the success that ESP had had and the market.
And they were already in and we don't need to do that anymore, and it's extraordinary and that that's happened and such a quick period of time, it's the idea that everyone knows ESP when we start talking about ESP. It's the idea that now we've got 48000 and ambassadors across the world that are telling day.
Story, and and organic format and the markets that we're entering now it's less about who is DXP and more about the cohesiveness and that was doing into that platform, where we serve and our local market.
The idea that it's really been great with this model is our agility, we actually has the core model of what ESP is with a very.
General and commission splits with the stock options and with the ability to create a revenue share all of those things remain the same however, the model itself and the numbers all zip for independent tree that we're in so that we have a local competitive advantage. So the idea that with <unk>.
Net agile is what has allowed us to be as successful as we have been as we've entered these new markets.
Okay, and maybe just a last one and international and then I'll shift to some financial questions and then we can go to some of the the audience questions but.
I think it was back in November when we were speaking Michael.
And Glenn.
The topic was kind of international agent mix like what percentage of <unk> overall agent count would be and it can be International's day by the end of this year and I think Michael you were thrown out maybe like a 25%.
100000 agents and in the year curious if you have any kind of updated views on and what your agent mix looks like U S versus international say either exiting this year or maybe in three years or five years I mean could this be.
<unk>.
I don't know if could this be like a 50 50 type is.
Business in terms of agent count in five years or is that.
<unk>.
Okay.
No I think that if we're looking at a five year timeframe. It absolutely can be it's the number of agents that are across the globe. It allows us the possibility to get there with really and internal goal that we have we're certainly looking at north of that 20% number.
We are very much on track for that and we are still very very bullish on what we're doing we're as we say and we're just getting started and the reception has been extraordinary around the globe.
Okay great.
And maybe ill dig into just a couple of.
Questions about the financials and.
Maybe starting with with gross margins.
And then they were they were up nicely.
On a year over year basis for the year, but and the fourth quarter. They declined a bit year over year, and I think Glenn and you've talked.
And then you can elaborate a little bit about some of the impacts there and and.
And how we should think about the trajectory of gross margins here over the balance of 2021.
Yes, so our our gross margins are.
Highly influenced by the sales volume and agents capping and.
And coming out of a really strong Q3.
And then having a follow on really strong Q4 put a lot of agents and a position where they basically pay and the most money they'll pay to ESP for their given copier and so that created some pressure on our on our gross margins.
And then.
Alternatively.
Mentioned, a little bit about showcase itx.
Alternatively, we are really getting into a position, where we should be able to actually increase a little bit of the gross margins don't know what percentage that is but I think that there's going to be some.
Margin expansion.
And once we're able to.
Gift consumers.
In a pre approval cycle get more properties through our express offers platform, which has some nice margins and it.
And then also you get some of the other surfaces title escrow et cetera through through the mix and so this.
Bye.
And most likely by Q3, we'll actually have.
Those services actually built into our consumer platform and and that should start to play out into Q3 Q4 being.
And being able to increase some of those those margins from there.
And Tom on the topic and there was an extraordinary year and Q4, because usually as you know the margins go back up and Q4, but the volume was just.
Huge and that was that was the pressure on margins in Q4.
Okay, and then just I guess over the next couple of quarters not to be so short term focused but.
Obviously, the first quarter looks to be like another strong year I mean, how should we think about I guess the.
And so kind of the timing for when agents.
And cap year's resets.
And I guess.
Remember a couple of years ago, you guys implemented.
And did some changes to make sure that.
You were really kind of optimizing around the Rev share and and.
Doing so and a way that would enable you to hit or at least kind of approach that.
And a 10% gross margin target that you've talked about for core brokerage.
How do you feel I guess outside of the big Spike and volume because of the robustness of the market.
How are you feeling about.
Being able to get to like a 10% gross margin in and core brokerage before some of the ancillary stuff.
Yes, I think it's I think we've backed off.
I think you're even starting in early 2020, we really backed off the top line number of 10% gross margin for core brokerage just because as we learn more about how all this mixes together and.
And it.
It would be tough to get there.
If we didn't fundamentally change the model, which we don't have any interest in doing because our model makes sense and subtracting a large number of agents.
It's really the best model in the and the industry and and for us to get to the 100000, and 200000 and 300000 and 500000 and whatever the number is eventually.
We need to make sure that we're highly competitive for our agents and brokers and then and that's the other side, which is the mortgage the title escrow and other services, which would be where we would expand gross margins, but we do think that.
Net on the.
Net.
Net margin basis really focused on.
And what is that what are all the things that we can do to get back to closer to 4% on a net basis and so when we sort of look at Pat.
And we think that there is there is a path there and that's that's a lot more viable because we really were talking about the 10 six floor model, we think that there is a.
And there is something less than 10% on the top side or something less than 6% on the expense side, and we think that 4% still a.
Viable sort of net number as we continue to grow.
Okay.
A question from an investor just on financials, and then we'll get to some of these final questions, which look interesting to you, but the question was just on too.
To that point, Glenn about that G&A and the efficiency, there and it looks like G&A ticked up a little bit.
Quarter over quarter or could you maybe talk a little bit about Jeff what's the driver there was and and how we should think about.
And that line item and in Opex.
Kind of going forward, yes, I think.
The way we look at it follows that.
We started off the year at 10, 3%.
Revenue and we ended the whole year at 717, 1%. So we think we got about a 24% productivity on the SG&A, so that and that's kind of.
The number went down significantly in Q2, and Q3, a and went back up from Q4 as we added more people. So as we look at it and we think we can we think we can run somewhere around that.
And that seven to seven 5% SG&A line.
And so that's how I would look at it so we are getting productivity.
We have we're not spending more than we need to but we will spend and you will invest to support our agents and support that the NPS and EPS scores, but the seven point and one to seven five.
It looks like that seems to be a bit of it.
That's a number that you can look at going into 2021.
Okay, great Okay.
For the year I'm talking about.
Understood. Thanks.
And I'm not sure. If you guys can see the slide a screen, but I'm looking at it right now it looks like maybe we'll just go top to bottom here from what I see it as aside from Barbella success and <unk> are we considering expanding into different businesses have we considered the creation of a global MLS to help global agents.
Yes, so global MLS as is.
It's a unique and so unique.
<unk> idea that we could look at doing when we get to some sort of critical mass.
And we will have some internal marketplaces, and some internal ways to advertise properties too.
And to consumers.
And our websites, but the.
The reality is that most consumers know where they want a search and so when you think about a global MLS.
Build out DXP royalty dot com to future all our properties across all the markets that we serve.
It will it will serve some of that function, but for the most part.
Yes.
What we have right now as per <unk> success showcase itx DXP royalty those are four per.
Primary.
Businesses and showcase Itx's really and extension of ESP royalty and we don't really have a large appetite for expanding outside of those general spaces, obviously mortgage title escrow inside of Realty would make a lot of sense, but I think we've got more than enough stuff to work on for the next year and so I don't expect.
US to do any other.
Any other business says this year.
Okay next.
Next question.
Think maybe Glen you touched on this but is there a hard day her start date for the integration of showcase <unk> into the ESP platform and Glenn maybe I'd just add.
Can you give maybe a little bit more color for investors.
Uh huh.
And just what exactly would it look like and what will it mean for the core brokerage business.
Yes, so showcase AVX is there a technology team that builds.
Consumer facing websites featuring homes that are part of the MLS ecosystem that DXP as a member of and each of the markets that we're in so U S and Canada have very robust mls's and so we're able to tap into that data and then we're able to create rich and displays of that data.
Pat and potentially some other data sources to create a unique consumer experience and then consumers would search those websites very similar to the way they've searched for Zillow redfin realtor dot com and lots of other other websites for future properties, but they would be able to use that and they are already using it. So we already and we already have.
Showcase powered ESP royalty dot <unk> dot com.
And and so it already exist.
And then we'll just be enhancing a lot of the features and functionalities as we go along both per consumers and then and then and then ultimately as well for per agents and brokers that are working with consumers on those platforms.
Okay.
I'm going to skip 10 to the one question about the.
And a R D O J.
Settlement and Glen will be curious to hear you.
Opine on that and and also curious to hear if you and any thoughts about the latest lawsuit I think was filed by Rex.
Against Zillow, and and the NAR and <unk>.
What do you think the future of the MLS.
And the U S.
So I don't really think that there's going to be a lot of difference quite frankly, I think there's different players that would benefit from a.
And from from MLS is.
Sort of getting disrupted and some way I don't actually think consumers are those are included in that mix I think there are companies that have.
And different models that they.
For websites and.
And then potentially make more money, but I don't know that it's actually truly a consumer benefit that being said the idea of displaying buyer agency commissions, that's part of the MLP.
Yep.
Makes sense has now been done.
By most brokerages around the U S.
And displays that I don't think that actually changes anything fundamentally I think there is.
And I haven't studied too much on rexes lawsuit with.
And with Zillow, but.
I think that there, they're trying to figure out and.
And litigate their way into into a and industry and and I'm not sure that that's that that approach ultimately will work for them and but that doesn't mean that that.
And they're going to stop working on those fronts.
Okay.
There's a question here about.
And what's happened and the stock in recent weeks.
And I guess.
Coincidental with the stock split Glenn and I don't know if you if you went away and weighing on that.
Or not.
Well a couple of things one on an adjusted basis, when we announced the stock split the stock was actually trading at a lower price than it is today.
So when the when the stock split got announced there was a lot of times what.
And what can happen and of course, Tom you've probably even though pie and <unk>.
My time to stock split it gets announced and a lot of people jumped into the stock and the stock splits.
You have twice as many shares as they had before they sell a few shares it puts pressure on the stock but.
On balance the thing that we were trying to solve for.
Was making.
Making sure that agents were getting a meaningful number of shares when they were being awarded shares for various activities inside of ESP and with the stock price going up and.
And getting close to that 70, $80 a share range, which was when we announced it.
And it really was put us in a little bit of a quandary as to and agent may be getting awarded 2.3 shares or something for and activity or if the stock continues to go up even being fewer shares and that and that just does seem to be and opportunity to increase the number of shares and to keep it and a more modest range.
Okay.
There's a question here and how you guys are going to grow your margins over time to increase net income I think and some of the prior answers you've touched on some of the things here, but maybe.
You can respond to that one.
Yes, I think I think we did pretty much cover that I think there is the other side of it is we do have these things and other new or business units to DXP, including.
Success magazine, the personal development spaces, it's $14 billion of your industry, just and U S alone the longest running personal development brand.
It's pretty there's a really high margin businesses.
I've learned even and the last five months, but I've been involved with.
Success magazine lot of digital products. So when we think about other things that we can do.
And we think that there's some really really cool things that we can do and that business that will eventually.
Add to the mix, but on the core brokerage.
It's pretty much the things that we've already talked about.
Okay.
And then and asked about buybacks and maybe that's a good time to from me to ask this question, which.
Kind of touches on that and.
It's around capital deployment and you guys are sitting on a pretty healthy cash position. These days and certainly relative is significantly better than this time last year.
And just kind of curious about.
And how youre thinking about deploying capital.
And <unk>.
M&A share buybacks.
Further investments and kind of ear and your existing businesses any any kind of color. You can you can share on and what you guys might do with that.
And with the cash on the balance sheet.
Yes.
So we look at our company.
As you know we have we still have zero.
Debt on balance sheet, and so we look at our year coming up we believe we have a lot we have as much capital as we need on the balance sheet and what we're trying to do is offset.
The agent equity plants.
From a dilution standpoint, so that's why we've increased the buyback, but we feel with that increase and the buyback and with the cash that's generated from the business naturally.
We have enough capital on the balance sheet and I think if we.
We have had many discussions and if we needed more capital and the balance sheet and newest significant acquisition. We do believe we have the opportunity to do that.
There is no need at this point and time to raise incremental capital.
Through 2021.
Okay sounds.
Sounds good.
Question about the P&L impact per showcase and success and Glen and just sort of touched on success a bit, but maybe you could talk a little bit more about.
How showcase impacts.
And the financial model.
And I'd be curious to hear that.
Yeah. So.
A couple of things that you can look at showcase in the short run.
Being something we're investing and we've grown the team on showcase from the six eight people that came over and we're increasing that likely upwards of 30, 30 people engineers and others to actually build out this robust consumer platform.
Alternatively.
Once all of that gets built out.
And are also a big customer using a third party platform called kv core by inside real estate.
And we believe that we can reduce the expenses that we're spending there or per a third party platform.
And so in the short run I think there's there's investment that's taking place and the longer run we think that there'll be an offset and then and then more importantly.
Over the over the midterm, we're going to actually be able to create new revenue opportunities through actually controlling our own portal. So that's where we're talking about Q3 Q4 being able the condition consumers around mortgage title escrow and other services that DXP provides will be much easier when we can.
Control, the ecosystem and where we're generating thousands of leads a month already through that platform.
Which is which is great to see but eventually we believe that once it's built out it will generate hundreds of thousands of leads per agents and brokers on a monthly basis.
Okay, maybe just a quick follow up on that.
And specifically, how showcase and maybe we'll help you drive attach rates for some of the ancillary and you mentioned kind of conditioning consumers can you can you talk about a little bit about like I guess, maybe agent buy in for <unk>.
Your mortgage and title offerings is it is it also a situation where you might have to say day condition or educate your agents on kind of the benefits of maybe using your mortgage and title offerings or is it is it a.
Situation around trying to get consumers to.
Each of these products, yes, it's a little bit of both one we've got.
Good good products, we've got silver line title and escrow, which I think is.
That's and pretty good shape, where mortgage is.
Partnerships right now arent as strong as we'd like them to be so we're still continuing to work on on what that will look like as we as we go forward.
But the idea is that as consumers hit our website that they would be prompted with have you got preapproved. You know what you are qualified for here's the benefits here.
Rates that are currently available to you.
And so that's that's one stage of the exercise.
And then.
Because of that.
Consumer if the if the agents already know that the consumer is qualified per alone.
And that the pre works already been done and we can create the right interface with the agent then the buyer and is a lot easier than trying to go to an angel and thats working with somebody in their existing database.
Already have those pre conversations and have already connected them to a mortgage officer that they know to get them preapproved. The pre qualified so by getting the consumer earlier and the final helping them get Preapproved then when.
Those relationships continuing to develop your agents are more likely to say hey, once you fill out the mortgage piece on an ESP royalty dot com to at least see what you are approved for or what you qualify for and and then if we can make sure that the relationships and.
And that touches with the agent and the consumer are strong and then again it should be much easier, but if we were to ask and agent to go from cold to using and a mortgage product I think what we've found and most other companies have found is that that's a more difficult ask because you're asking them to trust.
A third party that they may not have ever used before to.
Hopefully if their client approved and if they if they mess up.
Not just the consumer suffers the agents suffers because they were potentially expecting it.
To actually get paid at the end of the transaction. So we've got to make sure that all the stuff lines up and we have to do it and the right order.
Sure that makes sense.
And so again about three minutes here and I see three interesting questions here remaining on the slide us So and I don't know if you want to do a little bit of a speed round and Jeff and maybe just to hit these last three questions here can you see them.
Yes, so the first one.
Is your expectation per verbally and industry efforts and growth for 2020, one going forward and continuing to work on it.
We talked about that we were approaching $1 million a month and revenues.
On the <unk> platform.
And there's still work that needs to get done for us to fully get there were not far away from that but it's it's a unique platform for companies that arent like us for us we see the benefits every day.
We would we would use something we've used for bellow or something like it.
For as long as I can think about running the company going forward because of the well.
What it does for us but.
That's not the same unfortunately per per for as many companies out there. So it's still so a lot of work.
And we and I would add that we are investing heavily and it it's <unk>.
And for US as a company just to give you a couple of stats quickly.
Private campuses went from five to 49 in 2020 team suites went from 49 day.
329, and one time events, which we did non op before yes, 71 major one time of that so it's taking time and building the team we're building the product and we still are huge believers in the product.
Great next question, guys, Hello, rising interest rates or a downturn and the market affect your revenue and income.
So it certainly is going to have an impact on everybody and the real estate space. The differences that I think what we have as a as a model that's growing agents, which means.
The revenue that comes from that agent base.
Can offset to a large extent some of the slowdown and the market and we saw that even in Q2.
And most all of our competitors saw a reduction.
Net reduction in revenue, we were still up 33% even in Q2. So we're just better positioned just because the value prop works.
Okay, and then just last one and everyone's favorite question around.
Zillow loads and our <unk>.
Broker according to the.
Question here, what's a strategic move to protect our interest.
Yeah, So it's to iterate iterate iterate and just continuing to make sure that we've got good consumer experience and that's why showcases.
As a critical component.
But you look at it five five to $6 5 million homes a year.
Almost every one of those is assisted by a and agent one 4 million real force.
The reality is that.
As much as Zillow may make inroads and others make inroads.
We're still in an industry that per for the foreseeable future for as long as I think any of us will be in the real estate business there'll still be a high percentage of the business. That's assisted by individuals', but you know like and trust and helping you through those transactions and and I would add that we got a phenomenal group of agents leaders and.
And growth people and this company right now and we're tracking more and more every day. So we got a great team that's going to market.
Terrific as well.
I think that the.
And it takes the hour thanks against the opportunity to moderate really enjoyed it.
And I enjoyed watching you guys grew over the past year, Glenn and Jeff and I'll pass it off to you is there any any final comments.
No. Thanks for thanks, again, everyone for showing up and being part of the.
Part of the Investor call that we have here.
We can we do this every every quarter.
And so we're just excited as that.
This room continues to grow and.
And that so many people are paying attention to what we're doing so so thanks, everyone for coming here.
Thanks, Tom Thanks, Jeff Thanks, Michael and again, thanks, everyone.
Thank you.