Q2 2021 eXp World Holdings Inc Earnings Call
As well, but the real key for US is to continue to iterate on the agent value proposition. So whether we think about how we developed a rev share how we develop for equity how we think about health care options for agents, how we think about all the different things that are there.
The dividend was it was a natural next step for us because we've been now profitable I think since late 2019 quarter after quarter consistently and now.
You've got Mike and Jeff will talk about financials, but we're now solidly over $100 million in.
In cash on the books it just makes sense to start to.
To look at paying paying out a dividend and then obviously the board would.
Look at this quarterly.
But it would be my goal to ultimately make this a relatively permanent part of the infrastructure of NXP going forward because it then.
This not just be something that you have to sell as an agent to sort of get returns from you'll be able to get income just as an agent.
As an additional stream so for for US It really was a really cool differentiator.
I think it also just highlights the fact that we are running a profitable.
For all real estate brokerage and that is really key and I think when we when we see the housing market turn a bit.
We should be able to as we saw last year in Q2, especially we're able to moderate our expense level such that even in a down market.
We plan to operate it in such a way that we can continue to be profitable and by extension hopefully pay the dividend.
Yes makes sense.
And looking at this relative channel.
You've got a lot of copycats out there there's kind of a is it going to be more of that come because you guys continue to experience a lot of success.
I think you've kind of hit on this.
What are your views relative to competition as far as their ability to pay a dividend. It just seems like this is as you think about the scale of like 1 of the major advantages you guys face right now.
Is your ability to scale to create consistent free cash flow to be profitable, but just talk about how that looks at kind of relative to competition.
Yeah. So obviously, we developed a really unique agent centric real estate brokerage model starting in 2009 and for a lot of for a long time people sort of said that would work and then and then eventually obviously in the last few years has become obvious that did work we've had companies that.
Literally almost copying exactly what we're doing but theyre going cheaper like maybe they are not charging for monthly piece and maybe they're paying up more money or whatever but you know at the end of the day companies do have to eventually actually build themselves to be profitable.
And if they don't then then eventually the equity sort of.
It may not be worth that much at the end of the day and for Us we.
We thought this was another way to sort of draw attention to the fact that our model is scalable and and has really got to a point, where it feels like it's going to be consistently profitable over the long term and that has to do with the various ways that we really really built out.
The model we.
We re cast a little bit of the Rev share model about.
A year and a half ago or so.
Where we committed to the 50% accompanied dollar payouts and so that helped us sort of moderate some things and we just we just moderated everything so that we can in fact be profitable and be able to show apples to apples.
The financial statements the income statements and balance sheets.
Any company industry, now and I think that we're going to look great on on.
For basically every metric you can think of.
Yeah absolutely.
I know, Jeff is going to get into the details on the quarter, but from where you sit kind of at the CEO level.
What did you see in this quarter that was kind of stood out as the most impressive thing to you.
No.
It probably is a little less from a financial perspective, but more just the way our agents and brokers are stepping up to actually do.
Whether it be in real life events from last year was really interesting we didn't have.
Shareholders or ESP con.
In person because of Covid this year.
Shareholders was done.
Online.
In November we're planning on.
And we are scheduled to have <unk> in Las Vegas, or first in real life event, but our agents or brokers really stepped up to fill the gap in terms of collaboration community.
Coaching training. So so many agent led events around the country around the world.
And then we supplemented that with sponsorship of our sprint initiatives, where we would we would help sort of these smaller more intimate groups actually connect and help level up the other thing I think we saw was how.
1 of the tweaks that we made a year or so ago was the way that we count what we refer to as frontline qualifying agents.
<unk>.
We initially gave people sort of credit for anybody they recruited for 6 months when we realized that that wasn't really in the best interest for the people being attractive for the company and to some extent hurt hurt the company heard other agents.
By making that change I think 1 of the things that you saw was this increased productivity.
What I hear consistently from the field as agents, who want agents to be more successful and they are willing to help in any way. They can I heard about an initiative and a lot more detail here. This last weekend called the ESP family tree, which is where a number of our top agents.
Have come together to help any agent anywhere in really in the world.
You'll level off so the company has.
I don't know what the number is now, but it's 60.70 hours a week of in World training. We've got some some in real life stuff going on at local levels sponsor.
Sponsored primarily by the brokers and that sort of thing, but then the agent led stuff is just amazing and I think that's really translating into something very special.
Yeah makes sense I've got 1 more for you and then a lot different than his piece, but.
Clearly what you guys are offering to agents is attractive I think that's pretty evident in the rate of agent growth.
You've seen a pretty positive trend it feels like the last couple of quarters.
Larger kind of agent teams joining the platform.
Are you still seeing that is that still kind of playing off full force and kind of what's driving that.
It is yeah no for sure we continue to attract.
And I think that the.
The longer we are are we prove that we can.
We'll provide that infrastructure that that that platform for agents and brokers to build unique style.
Organizations that is not possible in a franchise model.
The more that these top teams that for thinking about how do I break out of my just my local geography, and how do I actually monetize this in multiple markets DXP really is the only platform that they can tap into that provides so many benefits for them to expand and not just expand.
Nationally into all 50 U S States in Canada, but we've got another on top of that another 15 countries with 2 more coming on board before the end of the quarter.
And you just look at the the ability to leverage your talents that you've honed over 10.15 20 years in the business.
And now you've got a platform that you can.
Monetize.
Your business even better.
Yes, absolutely.
I think that's all I got for now we can go back to Q&A later at other yeah.
Yes.
Moving to.
Alright, alright. Thank you Glenn Thank you John for being here I appreciate it.
Just a quick quick quick story before I start.
In 2018, the company paid $500 million in revenue for.
For the entire year and I started talking about it's not $500 million and it's built right. We've got to start taking bigger and so now a few couple of years later, believing is seeing so are our Q1 revenue just for the summary page Courtney please.
Q2 revenue was $1 billion, so we're up 183% year over year.
Our gross profit in Q2 was $79.9 million.
133% year over year, and our Q2 net income was $37 million that's up 350%.
Our Q2 this is a pretty extraordinary for this quarter and it includes a $20.6 million tax provision benefit by releasing our valuation allowance.
So we've incurred previous operating losses, and built up a net operating loss benefit on our balance sheet over the years.
As we have shown sustained profitability over our recent quarters, we are required by GAAP to release the benefit from our balance sheet to our income statement and that's how we get to the $37 million and net income in Q2.
Our Q2 delivered diluted earnings per share is 2000 for a 3.8% which includes that tax benefit our adjusted EBITDA, which is a non-GAAP metric is $27 million and basically that's a major metric that we look at internally, taking up primarily stock compensation expenses to see how we're doing.
Our operating cash flow in Q2 was $68 million.
That's up 185% year over year. So now lets take a look at some of our key metrics.
I am going to focus first on our Q2 metrics and we're starting here, which is we talk about it a lot, but we really need to highlight it in.
Express how important it is what our agents NPS score is our top metric and basically we have a 70 in 2021 in Q2 and Thats a critical measurement on how we run our business and to put some of this in perspective.
A.
Bain came up with the NPS score and plus zero is good plus 20th favorable plus 50 is excellent and plus 80 is world class. So we're hitting at 70, and we look at that score and as it goes as it goes down in certain areas, we really focus on our business and make sure that that we fix whatever we need to fix to make our agents have the best possible.
Experienced.
From any brokerage so we're at 70, which we're very proud of.
On the agent Count ended at $58.63, which is up 87% versus last year. Our units is $1.15 for 31 up 164% for us last year and a price per unit as we're all experiencing and housing markets is up 17% at $3.49, I mentioned, the Glen I think when I came here I think our app.
Average, we'd like 245000, so way up our volume is $40 billion versus 13 in the second quarter of last year up 210% and so looking now at the financial metrics I mentioned, the revenue being a $1 billion for $354 million up 183% gross margin was $80 million for 34.
Up 133% and gross margin percentage was 8% with $9.7 and this is kind of it's kind of a result of our model between the number of agents capping because we're doing so many so much volume and the price per unit going up that margin kind of goes down a little bit there is pressure on that but the volume makes up.
<unk> for it as you can see in the operating income. So we are getting leverage on the next slide from SG&A. So.
At SG&A were 6.3% of.
Our revenue for 7.4% operating income $17 million versus 8 million net income $37 million versus $8 million and our adjusted EBITDA as I mentioned before is 27% $27 million versus 2014 up 98%.
Operating cash flow of $61 million was 21, and a cash equivalents our cash in the bank after out there all of our investments our buyback is $107 million for $64 million in the second quarter of last year. So we're up 69%. So really really quick on the year to date basis, you can see that most of the operating metrics.
A close other than units so we've done 189309 units.
132% on a year to day basis, and our volume is at 65 billion for 2000.4 billion. So we're up 170 on a year to date basis.
A couple of other metrics 158, 4 billion in revenue year to date up 153%.
Our gross margin is $1.33 for 60% to 114% and then I'll just kind of skip down to the bottom. The net income on a year to day basis was $42 million versus $8 million.
Our operating cash flow for 101 was $36 million.
Our bank balances the same on 107, so very very healthy condition, both from a growth standpoint from an investment standpoint and from a profitability standpoint. So as we look at the next page and you look at our agent and our revenue growth over time.
You can see this chart.
And we had phenomenal agent and revenue growth.
Over time, especially since 2016.
And it really it really exploded in 2018, we've elevated growth for both <unk> and revenues as a result, as Glenn mentioned, our commitment to our agents.
This the chart in front of US shows ESP Realty, ending agent count and revenue by quarter. So to give you. Some perspective, it's a bit of an eye chart, but in 2018. We had we ended the year with 55000 agents $500 million in revenue in 'twenty.
22019, It was 25000 for 'twenty, 3 agents and $980 million of revenue and last year. It was 41, $3.13, $1.8 billion in revenue last year. So overall, our agent growth year over year is 87%. We're now at 60000 agents.
And our total Q2 revenue is $1 billion. So now for some recent highlights and our focused investment areas.
As we mentioned we declared our first cash dividend and a driver of that is that the company has achieved positive accumulated earnings and shareholder equity. So if you look at our balance sheet, we've done from a loss to a positive accumulative earnings so the <unk> <unk> per share.
As expected to be paid on August 30 to shareholders on record as other.
August 16th you have seen our recent press release, where we've established success lending. This is a new joint venture for us with current lending and.
We spent a ton of time on this and we want to make it the best possible value proposition for agents and then our shop share buyback so.
We repurchased approximately $54.9 million of common stock in Q2, and our purpose to remind.
People again is that we have a goal to offset the dilution from our agent equity plans and we're really happy to say that on a quarter basis and on a year to day basis, we have done that with the buyback.
So on the right hand side, our major investment areas for growth include marketing.
Allstate technology innovations and coordinate stuff will get into that in some detail.
Our realty expansion, so we see what's happening in our domestic market in the U S. What we.
We're seeing really is a network effect so back in the day, we had a few large <unk>.
Fluids yours and now we have lots.
We've had some great meetings, just recently with some great great leaders in our business, we're starting to see the network effect in the U S International you've heard a lot about that were in some key countries right now and growing and then our commercial business. We are building awareness and at the same time, we're adding benefits and training tools for our residential agents that do both residential and commercial.
So it's going well affiliate services mortgages are great.
Example of this and then finally, we continue to invest in for Bella and frame our virtual platforms. Our virtual platform for Birla for work is power DXP growth.
The productivity of the growth take international Nobody's got on a plane. So far we're in 17 countries. It's just phenomenal and as time goes on it is the best product on the marketplace and I think a lot more outside company is going to experience that zone.
Thank you very much.
Net thank all our staff and our agents for a great quarter I'd like to now pass it over to <unk>, Our CMO, who is responsible for applying.
The ESP world holding brands and leaning all areas of marketing, including drive digital strategy and growth for enhancing dxp's value proposition for our agents and our staff welcome Courtin.
Join us.
Thank you Jeff.
Glad to be here.
Today, I'm going to be focusing on the agent and consumer insights to inform our marketing strategy and innovation strategy as well.
Good background here on ESPN types for based on proprietary research and generated for us.
For both internal and external sources this strategy that underpins, our findings and Julia Wright uncovering a deeper understanding of the agent value proposition and brand perception as well as a better understanding of consumer sentiment towards home ownership.
<unk> and expectations related to the pandemic. These findings provide key insights that help our team build out to be HP brand in collaboration with agents and which the overall value proposition also guide the priority of our investments in marketing and innovation to help us co create.
Services and capabilities ultimately empower our agent technology to better serve their customers. So let's dive into a little bit more detail here in terms of like Asia values, what is our agents value.
For me service and social listening research, we know the top benefits most valued by our agents range from more tangible to more emotional our agents value share.
On the left hand side.
Inertia and compensation and their development and it's more emotive benefit of freedom.
With regard to ownership the equity component is highly valued.
A key component net.
<unk> talk to us about.
In addition to quantitate.
Quantitative research I'm talking to and we also have a lot of qualitative research and leadership areas of leadership and development training and education and really important on that something we do really well and you can see here and then now we have the DXP University. Our agents are all enrolled they have access to 80 plus hours of training in the world just like we are.
Any day right it's.
It's like from a sense of what's happening real time.
Net course topics.
Building, a real estate business working with buyers and sellers and then now for the attribute of freedom.
It's more for Jackup.
Talking to agents.
From being able to build their personal brands, we really do believe that the agent brand is here all right.
And thats built in tandem with the EXLP, Brian last year, we built DXP brand and visual element with the agents right. We were looking for about 90 days, where we created and voted on the new logo wins for something that historically important to ask the same thing we did when <unk> started the company.
Freedom also means.
This idea of being able to operate across borders and boundaries right. So team can operate across several states and in 17 countries in 17 countries and markets for the operator, alright, So now let's move on to the brand.
So how agents perceive our brand with last year's refresh of the brand I. Just mentioned, we found that agent for year over year report, having stronger associations with the brand attributes. So on the left hand side chart, you can see what resonates most with the agents with the attribute of innovation. So how do you read this is 81 per.
Many of our agents will be selecting the attribute of innovation is something that resonates with them right, which is a 10 point lift over the previous year.
It is really interesting because.
Second valued attribute this associated is the virtual world that we're operating on right. So these are very correlated in terms of being collaborative and successful those kind of like behind it. Since this is the real perception and agents have our brand why that's important as these brand stores.
First of all increased year over year, that's a positive indicator of brand clarity alright, So let's talk more about consumer insights we've been talking so far about what our agents perceptions and brand are and value prop we.
We did a study this year it is Enfield in April.
It's going to be released in the next couple of weeks and the <unk>.
2021, and margin real estate trends study.
Focus on achieving a deeper understanding of new homebuyers and owners and those interested in selling.
The research provides timely insights that consumers, they're recognizing the importance of agents and technology.
The recording of a shift in our perspective upon our share of large which is related to the pandemic right comparing for the pandemic now.
Key findings that will find here for this top level right.
Over 70% of new homeowners and buyers, they're reporting owning a home is more important now because of the dependence right. This is especially true. If you look at the millennial segment. They actually reported that 80% in terms of the pandemic has changed their view on the importance of owning a hump.
And then a lot by understanding for smart financial decision.
Thanks.
If you take a look on the left as well, 86% of new and seem to be homeowners say real estate agents are important are very important for the home buying process. The value of agents remains high and will remain high if we think about what's happening right now and as we take a look it's reasonable to think in the future.
That that will continue.
61% of new Hallmark homeowners and buyers are also more likely to ask about the real estate agent technology and resource tool.
Compared to before the pandemic. So the takeaway here is that there is a customer expectation that the real estate agency Tech savvy right.
So as we move into the innovation update there's an emphasis on technology to empower agents and new ways to connect with them and the consumers during these times and into the future.
So with that I'm going to.
Transition over to our VP of innovation technology set.
<unk> joined US in mid 2019, he has been in the real estate industry for over 2 decades of operating in numerous calls broker startup founder CTO.
In a short time here already he has built several software products elements, including express offers our high volume platform that will continue this presentation review of our innovation approach and areas of opportunity.
Welcome Sam.
Thanks, a lot Courtney.
Thanks for being here everyone.
John DXP about 2 years ago.
And it was kind of an easy decision and looking at the landscape.
It's just super easy to see that this is the most innovative company with the biggest appetite.
The change things for the better while keeping agents at the center of things and Thats, a belief that I share.
As well that agents are indispensable and it's our job and my job here.
To build upon that and continue to build on it.
But today I am Super funds to tell you about a new initiative that we launched that's called the innovation hub.
Obviously innovation is.
Nothing new here at DXP I am talking to you as an avatar and the Ping for laser for instance, that's already pretty innovative, but but do the new innovation hub initiative, we're positioning for take the commitment to innovating for agents really for that next level.
And I'm going to start by telling you a little bit about our approach which is on the slide here.
Innovation hub is new this is a new concept, but the approach is something that we've actually.
Honed and refined for years here.
It allows us to target our resources for for development and innovating.
Really efficiently.
Learn and then developed right after that to summarize it.
Gather information about pinpoints needs opportunities.
And then validate before we type a single line of code rapid prototype, which is something that I think we've got down to a science here and then controlled beta test for them, there, where we can kind of learn.
And refine.
Typical agile cycle and from there we can make a decision and.
And decide if it's something that we want to launch wide.
For me, though the most important steps in this thing are the first 2 and this speaks a lot to what Courtney was just showing you guys.
Okay.
We want to know what to build before we build that essentially we've all heard about companies, adding an innovation department before right, let's be honest, but what you normally end up getting is innovation for the sake of of innovation you get buzzy headlines trendy Tac.
That kind of stuff that we've all sort of heard about but at the end of the day. The other part that we've heard about is that users ended up not really caring about any of that stuff. They don't end up using it and it doesn't make a difference day to day here, we have an unwavering commitment to building things that actually will make a difference day to day to an agent's business.
We want them to want to use it whenever we build and actually go ahead and do so.
Let's call it data driven ideation.
So, let's dig into the innovation hub a bit further.
But on the next slide we're going to start with a project that I started with my first day here at DXP.
Which is called express offers that's our take on the <unk> program because it's a good example of.
All of our innovation in action, a nice mix of innovation and tech and innovation business as well after those that don't know I buying as an alternative approach to selling a home for cash as opposed to the traditional listing process. It.
It sort of allows the seller to sell on their own terms and schedule.
And without dealing with some of the other things that come with the traditional listing like for anthem repairs and showings and financing contingencies and all that kind of stuff in 2019, when I joined I buying which is picking up steam and we heard.
Through our channels from the agents that they needed a way to get a tool.
Like that into their pockets to sort of see to remain competitive.
And are our approach to it differs from the competition.
And in a number of ways the DXP flavor on this is that.
<unk> remains a key part of the process and they guide sellers through the buying process end to end through the express offers.
Start to finish.
We actually maintain a network of third party cash buyers in all 50 states, so, whereas other I buy our companies typically they themselves do the buying ESB doesn't buy any houses in this we work with this network of.
A huge number of buyers and we're in all 50 states, which is another key differentiator.
Most of the way that that is all structured sellers can end up receiving multiple cash offers and the results have been good we've had thousands of property submitted thousands of offers in response to that and all of this is enabled by that for proprietary tech that we ended up building not to run this share of DXP in fact, I myself was lucky.
Enough to actually write the code and build the initial version of the software Thankfully today This program as well.
And it always has been run by a killer team on the business side and Thankfully for me. It's now pushed forward into the future by some of our best software Engineers, who are for.
<unk> taken it over and continue to <unk> and <unk>.
And iterate and bring it forward.
So what's next what opportunities are we're focused on now on the right side of the slide.
Number 1 enhanced agents that capabilities with so much innovation in the real estate space seeking to dis intermediate the agents from the transaction were following the research that Courtney mentioned earlier that the public wants to work with it and we want our innovation everything that we're doing.
To enhance the value of the agent the capability of the agent the scalability of the agents and <unk>.
Everything thats associated with that on our side of the business as well.
Humor portal features as Glenn has mentioned before our consumer portal initiatives Thats really our consumer touch point and could be a great region opportunity 1 day for ESP as well.
We've secured most of the MLS feeds in the U S and we see a really big opportunity potentially.
Potentially for our showcase our Dx team to build a really unique tool for consumers that could end up.
Been a great source of leads for the ESP agents here.
If we are if we really know that just right.
That's experts to continue on the Legion.
<unk> is a a pilot in house lead Gen program that is leveraging some intelligent lead routing software that we built here as well.
That route leads to agents or geographically close to the lead opportunities.
Again region is just showing to be 1 of the most important things that we can provide for agents we hear about it our survey after survey.
Through all agent contact channel. So we're happy to keep providing solutions for that.
Success lending.
As you've also heard that as our recently announced mortgage JV.
Got a big opportunity there.
Our opportunity to create our own native mortgage experience from the ground up we can really make this work for agents and consumers alike, and Theres a lot to chew on here from an innovation standpoint, so it's a big area of interest for me personally as well.
And then an eye towards the future what comes after that what else are we doing on the side.
To be honest for watching the trends we are interested in things like machine learning and AI and thinking about how that can improve our business looking at ways that it can scale our operations as well by automating things that are time consuming but still complex. We're looking at things like cross reality in the opportunities that that could provide for real estate.
Great.
But at the end of the day, we're going to do what moves the needle for our agents and our business, we're not going to innovate for the sake of saying that we innovated, we're always going to focus our resources and remain committed to that data driven ideation approach that I talked about before.
So as I said <unk> always been an innovative company, but we're just taking that next step now we're really interested in and leading the industry with new ideas novel innovation and things that will actually move the needle that will actually make a difference day to day for the agents out there in the field.
In our ESP family and the operation side.
Support them.
So with that now I'm going to hand, it back for Glenn Jeff and John Thanks, everyone. This is fun.
Gary Thank Seth, Thanks, Courtney and and of course, thanks. Thanks, Thanks, Jeff.
This is we've got 1200 I believe the staff that make DXP work from a from a back office leadership perspective, and then and that's in addition to the 60000 agents and this is just obviously, it's such a small subsection of the amazing people that are behind the scenes.
Gluing it altogether there are parts of the organization that are well designed and then there's others that is a lot more on the innovation and let's see if this might work. So it's a great great to get those updates so with that.
Why don't we jump in John I know, you've probably got a few even a few more questions. After hearing from from the team here, but turn it over to you for for some Q&A with the checkmate yeah. Thanks, and congrats again and you guys. It just feels like a professionalizing the business more and more credit structure informality. So this is for.
Fantastic.
I want to start off maybe just on the housing market in general on them for like we can't forget 1 of these calls out of the way without doing that so I mean market still kind of fills crazy you've got a lot of price growth you've got a lot of competition bidding war still happening.
It seems like there could be loosening up a little bit maybe a little bit more inventory coming on the market and maybe buyers are starting to wind back a little bit, but just curious about your thoughts on kind of where we are in the market. Today. If there is a turning point and maybe also if theres any kind of thoughts around the pandemic and if theres effect later this year.
Oh, yeah, so you're asking about my Crystal ball.
So so yeah, we are.
Are definitely seeing a little bit more.
Inventory showing up we got a little less.
Well.
So we're seeing some.
Moderation of the housing market, but not not to the extent that it's slowing.
To any extent, but maybe just not.
Going as fast as the hyper speed that was going.
<unk>.
So I think there from that perspective.
It's actually good for the market to see a little little moderation.
Obviously, we've got this delta variant that's kicked in which is creating masked man.
Vaccine mandates a whole bunch of stuff. So I think it's still a little bit.
Well very much of an unknown as to what are they going to be the various responses.
But.
What I think we're seeing is that that COVID-19 is not going away. Just the fact, the fact that people have got vaccinated.
And isn't fundamentally stopping COVID-19 for them being as a backdrop to what's going on and so I think what we're going to see is we're going to see more.
We call it home office agents agents working.
Remote relative to their brokerage.
That's going to become more and more of a norm. So the question will ultimately come back to why why do offices, even exist and of course, we've really pioneered this for.
Bricks and mortar light.
Or non bricks and mortar based operations of course, we did that with the entire executive team as well from day 1.
So I think from a Covid perspective, I think we're.
To be well positioned to have to adapt with them that plays into the further housing cycle, which is where do people want to live that they don't have to go to an office and I think that's just going to continue to drive a fair bit of of continued transition in the housing market that will keep deal.
That portion going of course low interest rates.
I don't think they're going up anytime soon.
Me personally.
But I think that we are.
We've seen these historical low interest rates I think there's a lot of cash out there.
And as a result, that's going to keep interest rates down as well as in all the fed decisions. So that's going to keep some some positive outlook for for housing because most buyers are in fact payment buyers. So so that's kind of my thoughts Jeff.
Well it probably took everything.
Yes.
I think you've got to cover glass, that's great answer.
Yeah, So Glenn we talked about that.
For the trends around the agent additions in the kind of team based approach kind of playing it playing out for you guys, but if we look at the other side of it like the retention side of things I know this industry can be a game of musical chairs, sometimes I personally don't see why you would leave the E X P platform, especially now with the dividend.
But talk to us about what youre seeing on the retention side I don't know if you guys break it out by like quadrants of agents, but how it has kind of looked under the surface as well.
Yeah, So we don't really break it out too much.
What we have seen and Jeff you actually dive into these numbers more than than I do.
But I believe that since last year since COVID-19 became part of our backdrop. Our retention figures have went up pretty substantially so Jeff.
Yes.
Yes, we don't break it out but.
Our retention has gone up at least 30%.
Since since this time last year. So we saw a lot more movement.
But now I think I mean.
The value proposition, just keeps getting stronger and stronger and I think the other thing too is that we saw.
Talking to earlier about this network effect we.
We just got some really strong leadership across our agent base across the country and now across the world. So I think I think the awareness of the company and the benefits and once they see it.
They cannot see it anymore and I think the retention for the numbers I'm seeing we're up about 30% year over year on retention.
Okay, that's great to hear and then you know.
And Courtney sections, you talked about the importance of the for equity compensation for agents, we've clearly had a lot of questions in the past.
From investors around.
Does the stock price, whether it be up or down does that doesn't have an influence on your recruiting and retention.
I think for my angle, obviously looking at this from an investor I would be more likely to join you guys. If the stock is low right because I think theres a lot of upside because I Wanna get that equity equity issuance and then be able to benefit from it but just curious I mean have you seen kind of any kind of notable conclusions you've been it'll come to just based off the stock price and whether that influences retention and recruiting.
Yeah, I think I think it does influence a little bit on the recruiting side and that your agents are.
They use a lot of social media.
They like to create awareness for <unk>.
For the business on multiple fronts. So when we saw the stock hit hit new highs early this year.
So theres a lot of the social media that was playing around that so I think that does play a little bit into it but I I don't know that it hurts us when the stock is down it just I think it just helps us when when we have.
Different things going on that's a positive in the marketplace. So like today. If you go onto social media, you'll see a lot of social shares for <unk>, because obviously the dividend.
It is something Thats unique.
It makes us stand out from any other company that is trying to do stuff like us.
And so that's going to play out well and just just getting attention on on the company. So anytime there's good things going on in stock price can be considered a good thing when its going up it.
It just helps us on the attraction side.
Yes, I would add John I mean, as we see the company grow like it is.
The agents are just there.
Really excited and I think what the what the equity piece of the stock does it makes them feel like they are owners, which they are alright, so to do the right thing and Youre kind of seeing the long game and we have consistently delivered quarter after quarter up until Q2, and I think people are getting excited as you see the growth you see the profitability that you see the shape of the company.
And they feel like owners, so I think it's as important them feeling as owners.
As opposed to whether it goes up or down we don't goes up or down but on the long haul.
It's just a feeling of ownership, it's a big deal for us.
Right.
I think that's fair and then your owners now with a force that dividend increase for quite some pay raise for you. So that's nice as well.
Yes, let's talk about the commercial or excuse me the international side.
I don't know if you could give us a snapshot now kind of what roughly what percentage of your agent base is international and how that has kind of grown if theres any key markets you might want to call out.
Yes, so internationally about 10% of our agents are international and that includes Canada. So so you sort of look at 60080.6000, and I think we're probably around half of that is actually in Canada.
It's.
1 of the things that we've been doing is kind of looking at as we're in markets for some period of time year 2 years 3 years.
We're looking at what we need to do to tweak the model to become even more competitive and so just just being aware that we have the ability to be more agile I believe.
And a lot of these markets around the world than than most of the incumbents because we because we have such a low cost to operate as a brokerage it does give us certain advantages. So we're definitely making some some some moves there.
You can also.
Check out.
E X P. I believe it's <unk>.
DXP Global Dot partners, if you're from a.
From a website perspective, and that really talks to a bunch of the sort of international expansion, where we're at where we're getting ready to launch.
And.
And so I'll give you a little bit more detail, so ESP global dot partner stock not dotcom DXP global about partners.
Yeah, I'd add John that the markets that we've entered so far.
Some of the that we're getting.
Solid traction.
In countries like India, Mexico Medicaid.
South Africa, Brazil, Portugal, and theirs and.
And in certain countries like I mentioned, Adam day right. Now. So this is a completely and that this is a completely different way of selling real estate in that country and they are doing such a fantastic job.
Really show them the benefits of this model in that country. So we are getting traction the teams up to 17 were up 17 foreign countries right now and as Glenn mentioned as we go and we learn we adapt.
What would be the most competitive and also.
And the benefits that we have for those agents globally and what we're also seeing is were seeing our U S agents getting really excited about growth globally.
That's also a huge benefit of us being 1 brokerage as opposed to the franchise.
Yeah, absolutely and I think that's something that some of us might overlook sometimes is that you know I hate to keep using appreciative of a flywheel, but it's absolutely. What it is that's what you did in the U S. You start off with a handful of thousand agents and it kind of builds upon itself. So it's encouraging that you're weighing those seeds I guess in those international markets, but Glenn I think youre not talked about this before but.
About the split structure.
Relative to the U S relative to some other international markets and how that could maybe impact gross margins over time.
Yeah. So.
And in the U S and Canada, where we're an 80.20 model we cap out at 16000, we have some some some transaction fees.
Post post capping so.
So that were leased.
Our breakeven if not making a small amount on a per transaction basis post cap.
But internationally, the the backdrop and a lot of countries as the us.
Is closer to a 50.50 model so in the U S.
70, 30 in our franchise for you as a pretty typical backdrop.
But the internationally, it's closer to 50, 50, 60, 40, and maybe a franchise fee on top of that so for us to be able to go into a market. We can typically go in it.
A $75.25 and still be the best.
Model or 1 of the best models in the marketplace and then you add the revenue sharing component, which is typically not.
Something that's available for agents to help expand the brokerage and then you add the potential for equity and we've got jumped through a bunch of hoops internationally on the equity side. So there may be some countries where it is.
It's too small to sort of think about but.
Practices and stuff like that but for the most part we want to be able to be the most.
Robust value prop in each market, we go into and we should be able to pick up an extra.
50% or so margin effectively on the transactions while agents are capping.
Just because of the way we're structured so in theory, we should be more profitable internationally, but then the flip side of course is that in a lot of countries. The effective dollar cost of a property is for.
Ft percent, what U S dollar price would be.
So adjusting for those those dynamics, but we should have a higher our higher margin percentage internationally.
Yeah makes sense and then speaking of margin. So gross margin is something some investors point to you got some compression there obviously, but it's.
There is a clear explanation obviously your agents are outperforming your Kathy more so it's not necessarily a bad thing.
I always like to say you don't you don't pay your bills with percentages right from an absolute dollar level. The level of your revenue growth has given you have so much more where you're able to kind of track ahead of expectations. So well that said just talk to us about the gross margin.
The trends around gross margins.
What's kind of driving that lower and then when you feel like there's an inflection point and other maybe drivers longer term of what can get that higher.
Yes.
As you mentioned John I mean, these the cabin is the major driver for the margin to go down and then I'd say the other the other major driver is the price per unit. So.
We're doing less you can do less units and so cap with that price per unit over time as you can see the revenue.
The growth and the volume is making up from a profit standpoint for the lower margins.
But over time, we see we see opportunity in affiliated services and we've talked about this quite a few times.
It's just going to it's going to take some time and we're working hard on it but over over time, we see that and we see some of the other technology that stuff.
Lead generation things Accordingly, we're talking about to help on that margin for.
For the business, so I am talking more operating margin.
But I think that.
A lot of people talk about when times go bad when it's not Covid Ironically, our margin last year as you can see it was close to 10% right. So in a lower growth. We did 33% growth rate last last year. This time and our margin was almost 10%.
So yeah.
As you said the revenue growth makes up for it pressure is really coming from capping and the price per unit, but it does balance out at the end because of the volume makes up for the operating margin.
Yeah makes sense and then you know.
I went deep deep down as far as I could go into my notes on your guys for over all these years and it seems like you've had the cap at 16000 for several years, obviously the housing market has done exceptional since that timeframe.
But any sense for like what percent of agents for capping I don't know if that's something you guys can share.
So Jeff have you broken that out.
I believe our capping agents has historically been around 25% of our agents are capping agents.
Yes that is a historical level.
<unk>.
As you know John I mean, the growth is going so well we don't have averages that we can we can look at it right now about 25% is kind of what we've seen historically mhm it.
It could be up a little more recently because of the price.
But that's around the level that we see.
Okay. That's helpful. I wanted to touch on maybe 1 or 2 other newer developments I know, we're running out of time here, but I.
I thought the <unk>.
Answering other mortgage JV was pretty interesting. So just talk to us about kind lending what drove that decision to pair up with them and what you see as an opportunity over time.
Yeah. So.
If you get a chance to just kind of do the back story Glen Glen Stearns Stearns lending 1 of the top 5 lenders in the country.
Sold for Blackstone I think in 2012 for 2013.
And that was for some personal reasons at the time.
And then.
Here about a year or 2 years ago got back into the mortgage industry. He was on the first season of undercover billionaire which was how I sort of learned about him and of course, we put together our relationship with Greg or Don who was in the second season of undercover billionaire.
So <unk> got a chance to meet him learned about his his background. So very very aligned on core values as core values and our core values in the way they approach things in the way that they do things.
Really matched up well with the way we live with the type of partner that we would love to have in that business. The other part that I think was really key for US was is that.
This is a team that really wants to roll for sleeves and help make a JV work. So it's not like you just.
You announced a deal with guaranteed rate like everybody's got to deal with guaranteed rate kind of thing.
This was actually something much more strategic where we were actually going to work hard together to build a mortgage company.
We.
Combining efforts to actually do something very unique in the marketplace and so for US we think that.
1 huge experience for mortgage a lot of the team that Louis with Stearns is now part of kind of lending and by extension is helping launched the successful lending JV.
And with that I think by October we should have our licensing in place to start to actually do the first loans, but this is someone that has some a celebrity status, which I think is going to be really key because we're talking about our agents brokers and their customers.
Wanting to do business with this entity as opposed to just being in other generic.
Joint venture so for US I think it's again another.
Hope will prove out to be a very strategic move on our part, but we think this is going to be something that.
Glenn <unk> and myself, we're going to actually get on planes work on recruiting loan officers in local markets. The top loan officers to join a really great brand underneath success lending that is able to then leverage that 125 year history of personal development and <unk>.
All of that we're gonna be we want to create something again pretty unique pretty special and then and then being able to then combine that with some of the other offerings that we have.
Yeah, I mean, that's really exciting and even if you look at Realogy.
You know 1 of your competitors that they are doing over $100 million a year in their JV earnings so.
Lots of potential there for its income.
Cause you guys to get that in place cant wait to see what you do with that but.
Gordon Thats, all Ive got Glenn if you want to leave with the closing comments I. Appreciate you guys give me the time to host today and look forward to talking to you guys again simple awesome well. Thank you John Thank you.
Thank you Jeff.
And Courtney and Seth for joining us on stage here today, obviously.
I can tell you that DXP in my opinion changed so much.
And especially in the <unk>.
Third quarter of 2018, what Jeff join joined Us.
He has been such a partner in helping grow the business for thanks again for joining.
Today.
1 we're going to continue to.
To work on the various business aspects of the company and we're going to our goal is to grow to worldwide.
We want to be able to launch.
<unk> 10, plus countries a year.
Really grow internationally.
To a large large size are changing lives of agents and brokers and by extension you know all of us as shareholders benefit from this amazing organization that we are growing together. So again, thanks for joining us today. Thanks for being part of this I think it is.
The fact that Jeff White side gets to talk about the fact that we did $1 billion in revenue in the quarter makes it a pretty special day and again thanks.
Thanks, everyone for being part of this.
Alright, Thanks, Glenn and thanks, John Courtney Seth Thank you very much.
Good day.
With that we conclude our Q2 'twenty.