Q3 2022 eXp World Holdings Inc Earnings Call
Turning to financial highlights.
And Tom what it means.
Gordon can you just kind of it looks like I've got a bit of an echo give me one moment. Please.
Brittany.
As said before I will return for a continuation of the Q&A before concluding the fireside chat lets begin with a review of the forward looking statements.
There'll be a number of forward looking statements made today that should be considered in conjunction with the cautionary statements contained in the company's SEC filings forward looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Please see our filings.
With the SEC, including our most recent filed quarterly report on Form 10-Q, and annual report on Form 10-K for a discussion of specific risks that may affect our business performance and financial condition, we assume no obligations to update or revise any forward looking statements for information as a reminder, today's call is.
Being recorded and a replay will also be made available on XT rolled holdings Dot com.
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At this time I would like to turn the fireside chat over to Glen.
Our founder and Tom light to start the earnings conversation in opening remarks.
Over to you Glen.
Thanks, Gordon and Phil.
Welcome Tom.
Yes.
And from 30 some.
Right.
Article on a microphone okay, no that's fair enough.
So yes, we're talking from obviously, you've been covering us for quite some time and.
I'm sure you've got some questions to kick things off, but obviously had a oh.
Our.
Great quarter, considering what's going on in the economy by dollar I'll turn it over to to Youtube.
Can I ask some questions.
Great terrific. Thanks Glen Thanks.
Courtney and Jeff and the rest of the team for asking me to host this quarter.
I.
<unk> it.
Yes, Glenn a lot of stuff to talk about looking forward to digging in.
To maybe just to kick things off sort of a high level here and maybe just touch on.
Maybe he our highlights from the from the third quarter performance.
Yes.
So we've been you know we've talked talking a little bit about you know what we were expecting.
In Q3 Q4, even at the beginning of the year as rates.
We're going up and the fed was raising rates.
Sure enough.
<unk>.
Have not been immune to what has been taking place.
I think later on today, we're going to have another announcement as to what the fed is going to do relative to <unk>.
The.
Triste rates from there some expectations around what that's going to be in a higher rate.
Interest rates are a big.
Indicator of.
A buyer's ability to buy at current prices based on the fact that 70 or so.
Percent of buyers use of mortgage to purchase a property.
So with that.
There's been a slowdown in the market.
And with that we've also started to.
Let's see what we'll call market attrition.
In that.
Our agents are.
In this mode of either not renew weight.
We're not getting licensed to begin with in the industry itself. So works.
So, we're making a little bit of a shift we've talked about it for a while.
Is that.
Hi, David.
When the market does shipped we expect to pick up market.
Okay.
Cold of the Brendan Bouchard shipyard.
Yes.
Okay.
Okay.
A much more robust.
Space to impact you know a large number of lives, but with that we think theres a lot of opportunities for growth.
We'll go to the next next slide here.
We think about the idea that you know.
When we adjust in the coaching space just use that.
We think about that as being a business that will be in the $50 million to $100 million year range over time and it will take the off take multiple years to get there.
But it is something that where we're focused on really building that out we've got.
You recently did a partnership with a with a company called Aden Academy.
And in working too.
To do a sales mastery event in early January and.
And we've got some big plans of how we can bring them into the into the to fold in some capacity.
To build out the real estate vertical of coaching and training with a high high value coaching offering.
And then we're building out all the other coaching and other offerings in that space. So when we think about building out all these things you see revenue.
That's actually are holding organization for all of our.
Referral based opportunities that slight up by Leo Perea.
And also the DXP solutions is has a number of as a big marketplace. That's also part of that same shamed network that Leo is overseeing theres a lot of opportunities for four leaves for agents, but also then monetizing those leaves M and turning those into two to more.
Revenue opportunities for the company and in some cases the agents themselves.
Based on what we're able to do in some countries, we actually have a lot of.
<unk> ability to create.
Aligned interest with our agents in the U S. It's.
It's a little bit tougher to do affiliated services, mainly just because of sort of the way the rustbelt laws work, but we're still working on building out really cool platforms for them. We also launched a just at DXP Con in October we announced our E X P luxury initiative and so we've got some luxury branding and canned.
Paths for actually really helping agents market at a high level we.
We will announce our referral division and I already talked a little bit about success coaching but one of the other pieces that we also launched and success was a as an initiative around success health and that's around Biohacking biometric Wearables and.
We have already formed our first partnership with a company called biome.
That's going really well.
And we're going to perform some other partnerships with other large organizations to really bring.
A health and challenge based.
Health metrics two organizations, not just our DXP and our success community, but other organizations as well. So we're excited about a lot of the various aspects of those businesses that we're going to be able to continue to to scale with we also just initial literally was it was over the last week or so we.
We just launched our first discord community.
For for success and so if anybody listening to this call is interested in what that community is participating in some capacity feel free to email me at Galena at success Dot Com, Glenn with two n's that success Dot com with the subject line gets scored we'll definitely get you in.
In right into that community can check it out become a part of it.
One thing that we've done.
We've had as we've we've had questions come up with quite a bit around our agent attrition by.
Bye levels and so this is up.
Subject that and when we talk to investors.
We talked to we go I think you even ask quite often the same question we've.
We've actually started to break this out and.
In in.
We will.
He said anecdotally that we believe that at the agents that were churning off of our platform somewhere around 80% of our agents that we're churning off where in that zero to two agent category turns out we were.
Pretty close 77.1% of the agents that are actually churning out of E X P. So agents that are.
Leaving E X P. In most cases, they are leaving the industry.
But that's where.
Most of our churn is we've also broken out some of the other levels. Just so you can see you know what percentage of our churn is happening and then we've done some some additional.
Metrics in the background.
But we're.
Our our lowest producing agents are churning off based on the population of those agents, they're churning up 4.5 times as much as our highest producing agents.
And so we've.
We.
We estimate that is all in line base.
Based on production levels, the higher production U R. M E X P ecosystem the more sticky that we are we are as an organization.
One of the other metrics that we're going to break out in future time periods as well is attrition based on amount of time on the platform.
And we believe that that's actually again correlated to production levels be the the higher your production the more likely you're going to stay.
I think that's kind of shown a little bit missing some of my commentary, we're going to start to break that out.
Relative to how long have you been on the platform before you before you churn out and we think that that's going to be another metric that's going to be interesting to investors I certainly.
I'm looking forward to sharing more of that data because I think it would just show how sticky the E X P platform is based on different production levels. So with that I'll turn it back over to you Tom too.
Ask any other questions you have.
Thanks for that Glenn and interesting new disclosures there that look forward to looking at looking at those more closely.
I know jeff's going to talk a little bit about kind of the financial performance in the quarter, but you guys did release, our third quarter results. This morning, maybe just just briefly would be curious to hear you know.
Were there any I guess, how did the key kind of financial metrics and operational metrics that you follow.
How did they kind of match up to your ex maybe to your expectations heading into the quarter.
You know for the last three months.
Yeah, I think it yet Jeff we'll definitely talk to a bit of this I mean, one of the things that we've it's a little bit different than.
Say Q2 of 2020, we saw that massive slowdown because of the terms that we'll call it the COVID-19 pause and.
We didn't know how bad it was going to be in weeks of week literally cut a significant portion of our staff and then we came out of that and literally you know then Q3 Q4 was really busy all the way through a really Q1 beginning of Q1 of this year. So we have this really significant ramp.
We knew that as interest rates were going up that we were going to need to halt hiring and and then.
Potentially shift the way that we work with our head count to make up more of that variable based on elements, but it wasn't.
We haven't been approach it.
The same way that we did in in in 2020. So I think one of the things that we're looking at is how do we.
Moderate our expense load to match up with our transaction mode.
And the way I think about it is that we.
Once we get to sort of this this next level of where the market sort of bottoms out at we become again a fairly profitable organization.
As a company because we are able to shift our our resources in such a way that we should be able to to be.
Profitable in good markets and bad markets and of course, we're in the shift.
We'll be in for another couple of few quarters before we get to what we'll call that flattened level, but once we hit that then I think where we're going to look really good just in terms of the way that we're structured as an organization.
I hope that that helps a little bit there yeah no. It just it does thank you.
So you referenced that in.
You know, obviously, what's kind of happening in the broader housing market here and in the agents on your platform are going to have kind of a different next few quarters than they've had.
Nonetheless can afford four to eight quarters or so.
Can you talk a little bit about what you guys are doing too.
Help your agents kind of whether this slowdown.
Be it the new products the new resources.
We're a few weeks off of the ESP DXP Con event, you guys announced a flurry of new things revenues referral division luxury.
Maybe it seems like those are all about kind of trying to give agents new tools and new ways to succeed in in kind of a tough housing market, maybe just talk a little bit about which of those year sort of most excited about and you know is it is it about kind of outright revenue contribution from these things is it.
More about agent retention or agent attraction, maybe just walk through that a bit yeah. So.
Well there is you know where we.
We focus on all of those things in various different initiatives, but one of them that we announced was our around our newer Perl division. So that's the ability.
For an agent.
And they're really going to be that low producing agent.
That is looking at say 2023, saying hey, the markets can be really slow I've got a PE real tour dues I have to be a pay per M of last years I've got to pay for a bunch of stock just to be in the business. So we've got a a peripheral division, where if they're not going to be.
Actively.
Showing our listing property they can actually hang their license, there and and actually reduce their fee.
Exposure quite a bit and simply refer out transactions. So it gives them a place to hang their license or during.
During the slower periods, if certainly if they've been here for a period of time and they built a revenue share organization up.
That would be maybe a place for some of them to move their license.
As well so that I think is is one of the ways that were working on the retention front.
The other retention pieces is really growth oriented is we believe that agents.
Through training coaching.
And just.
Getting the basics of the business blocking and tackling down that theyre going to be more successful and so we provide games.
70, 80 hours a week of training in our on our in our campuses. We've got we've got these now partnerships with companies like age of Academy, where for very low dollar amount I think it's $350 an agent can actually go to a three day super intensive training.
Platform.
And when they do that in person and excellence that we're involved in is in January and Port Lauderdale, but they're going to be able to really get in that environment to help them take their business to the next level, even though the market slowing those who can figure out ways to to drum up business are going to do fine.
So that that I'm excited about so those are those are a couple of them of them certainly the things we're doing with new Casa.
Lead Gen in Canada, we're doing that across the cross Canada and then also we're looking at how do we create more opportunities in the U S and I know that in underneath our revenue has some and some of our.
Other opportunities are coming from that theres going be different things that agents are going to get exposed to because we're one large brokerage one large platform that some of these national players can just tie into they don't need to negotiate with all kinds of franchises too to get their business into the hands of <unk>.
Active agents, so where it works out of all of them.
No that's great.
I think mountain, maybe Jeff if you're ready might be a good time for you to walk through our new content absolutely. So thank you Glenn Thank you Tom and good morning, all and thank you for joining our third quarter 2022 virtual fireside chat.
Half of our agents as units are staffed team I'm proud to share our third quarter results and highlights with you today as.
As we look at the first page.
Summary, DXP delivered a solid third quarter with record revenue.
Continued growth in agent count as Glenn mentioned transaction volume and gross margin and we continue to have very positive cash flow throughout the business.
DXP Realty continues to grow market share with sustainable operating model and positive cash flow.
Board of directors voted debate four five cents per share Q4 dividend.
And Ajay as Glenn mentioned before we successfully navigated numerous cycles of the economy and challenging markets in as you can see from our results in third quarter.
We have done that again.
We continue to have zero debt on our balance sheet, our variable cost structure and our organic growth model that as provided resilience as we move into the future year.
One thing I wanted to clear up was that as we previously communicated.
We entered 2022 after a very strong 2021 with annual SG&A plan of about $40 million for the year alright.
Alright, and missile and what we've done in the past we supported we've actually hired ahead of the curve supporting the anticipated growth and that's kind of where that $400 million plant came from and as we as we saw.
Saudi in the indication in Q1 pointed towards a a weaker economy in the second half of 2022, we reduced our plan to about $360 million. So we took about $40 million off our annual SG&A plan and as part of that $40 million annual reduction we did adjust in in Q.
Three our cost structure, resulting in about $20 million in annual savings.
So you get youre going to see E N C a little bit of that in Q4, but you're actually going to see that as we move in into 2023.
And assuming negative industry growth rates in the short term, we're targeting a run rate of about $80 million in SG&A per quarter as we move into 2023.
So if we turn to the next page.
At a highlight level starting with revenue in Q3, our revenue was $1 $2 billion.
Up 12% versus Q3 of 2021.
<unk> profit in Q3 was $93 1 million.
17% versus Q3 in 2022 net income was $4 4 million and that was down year over year.
Versus two.
2021, and that I'm really driven by lower operating margin and lower tax benefits for Q3 of 2021.
In Q3, our diluted earnings per share was <unk> <unk> and in our adjusted EBITDA metric. We use to that includes ex excludes noncash charges I E stock compensation was $12 $3 million.
So if we and finally on this page I'm looking at our Q Q3 operating cash flow our cash flow was $64 1 million an increase of 16% was Q3 2021.
Now I'll look at key metrics on chart three.
We are a key metric says as we've discussed before broken down into two categories operating metrics and financial metrics.
Looking at our operating metrics, Egypt N P. S was 71.
And our employee NPS was 72, both scores above our goal of 70 as a world class NPS score.
And our Realty business, which continues to be the primary driver of financial results, adding productive agents to our platform drives unit sales volume revenue gross margin dollars that we invest in our business utilized to support our agents staff and return to our shareholders.
Our agent count at the end of Q3 was 84911 up 30% versus this time last year.
In terms of unit sales, we transacted in 138340 354 units in Q3 up 6% lift from this time last year, our average price per unit was up 2% versus 2021.
Our volume was $50.4 billion were $46 6 billion up 6% I'm, sorry, 8% versus Q3 2021.
And now as we look at our financial metrics.
We've highlighted revenue gross margin dollars net income adjusted EBITDA and operating cash flow on a previous page.
Other financial metrics include gross margin percentage, which was 7.5% with seven 2% in Q3, 2021 that was up 5% year over year, our SG&A increased from $68 four and 93.1, driven by higher personal personnel related expenses technology and growth investments.
This quarter also contained severance cost of about $2 million.
Related to the actions we discussed on page one.
Our operating income was $26000 versus $11 2 million in Q3, driven primarily by increased SG&A investments and.
And finally on our key metrics results, our cash balance in Q <unk> 2022 was $134 5 million versus $98 1 million in 2021, and that's an increase of 37.
Percent.
We look at chart four.
Some additional Q3 2022 milestones ESP ESP I achieved positive GAAP net income for the 12th quarter Ralph.
We continued positive accumulated earnings in shareholders' equity.
We paid our fifth cash dividend in Q3 of 2022 and declared a dividend for Q4 and 2022 I mentioned the $4.05 per share that was approved by our board of directors.
To be paid on November 28 to shareholders of record of November four inch and then again, we continue to offset dilution via our our share buyback and we spent about $60 million in common stock in Q3 types of dilution of our agents and the liver we returned about 7 million.
To shareholders in the form of dividends.
In Q3 of 2022.
So if we get if we take a quick look at our year.
Year to date numbers.
Agents basically we talked about that already our units on a year to date basis our.
402961, and that's up 26% year over year, our volume was $1 49.7.
Seven was 111.2 up 35% revenue growth on a year to date basis was 36% were coming in at almost $3 $7 billion in revenue year to date, our gross margin was 283.8 up 33% gross margin percentages based on that.
A pretty pretty strong first half of the year or 7.7 versus seven 9% of last year.
SG&A as I as I talked about before edge has increased year over year to the tune of 48%.
Our operating income of $16 1 million was 32.6 was down 51% year over year.
EBITDA at 57 million versus 64.9.
Down, 12% and our operating cash flow was two or 3.5 versus 156.8 up 30% and finally, our cash and cash equivalents the amount of money. We have in the bank was 134.5 was $98. One so the cash our cash balances up 37% year over year.
So if we look at the next chart chart six.
We've got to take a quick look at our historical growth in agents and revenue from 2018 through Q3 2022, we have grown from $500 million of revenue in 2018 with 15000 agents three.
$3 7 billion in revenue year to date 2022 with class 85000 agents and as Glenn mentioned as we started the conversation today, although there will clearly be challenges in our economy in the short term. We believe we have a long road of material growth opportunities ahead of us and H P. I.
And remain confident in our ability to gain market share over the long term.
Thank you for your time and I will pass it back to Tom Glenn for some Q&A.
Great. Thanks, Jeff that's great a lot of detail in there, but maybe just to kick things off.
Jetblue.
But I guess just for me from your seat as the CFO and kind of looking at all the financial metrics and data like under the one or two things that maybe stood out to you. The most in terms of the performance of the company in the quarter.
Yeah, I think I think the thing that stood out to me. The most time was the basically the continuation and the success of our organic growth model.
Indeed, the events, including X P comment you mentioned before.
The agent event that we're having across the country and across the world. So I think that we've got to to a level.
This organic growth model, just keeps going day after day week after week quarter after quarter. So I think that's the highlight and I think that that's that's going to be the major competitive advantage, that's going to get us across.
Through these through these times.
And and really shine as the economy picks up again.
Yes.
Great.
And then circling back on the commentary on operating expenses at thank you for for for clarifying.
That and sort of what the new run rate is I think investors have been focused on.
On the trends there can you could you maybe just talk a little bit about where are the areas, where you're either making cuts or or driving.
Big efficiencies and you.
You know how much more room potentially do you have to further drive efficiencies in operating expenses you know, let's say if if the housing market you know takes another leg down or is.
Is softer for even a longer period of time than then.
And then maybe folks think.
Yeah, I mean first of all you know, we're decreasing our spend across all the areas of the business, where we have increased capacity growth. So as I mentioned before time historically, we've we've hired ahead of the curve and we've invested ahead of the curve from a capacity standpoint for the for the royalty business. So we stopped doing that in Q1 of.
This year alright, so there is opportunity in that area, and that's where that's where a lot of the debt.
The current savings is going to come from we're also looking around our business that as we do on a continual basis and look at our business units.
See what makes sense from an investment standpoint, and you know what what's changing alright, and shifting resources I think that there is a tremendous amount of opportunity for us from a productivity standpoint, and Patrick in the brokerage team is making huge strides and I think we're going to see.
In the first part.
First half of next year, So I think there's opportunity there and.
If if if the volume and the volume of the industry continues to decline the way.
It's it's predicted as we sit here today I mean, we do have the ability to decrease our cost structure to reflect and to match that.
Volume that's in the industry.
Great.
That's helpful.
Maybe moving up the income statement a little bit.
Gross margins I noticed that they were up a few hundred basis points on a year over year basis can you, maybe just talk a little bit about.
Obviously, there are a bunch of different things that can impact gross margin, but you know in the third quarter and over the next few quarters. You know what are the the main kind of the drivers that are going to move.
Move gross margins around in.
Can we anticipate that we're going to see.
Kind of further gross margin.
Expansion here over the next few quarters, Yeah, I think there I think what we're going to see is if as volumes go down the actual gross margin percentage as you as you saw in.
In the quarter actually goes up.
Alright, and improve what we focus on the dollars, but did that answer your specific question on the percentages I mean, we do believe that's going to go up towards that about 8% range and that's the functions is it's the volume its capping and its price.
So ask as as volume comes down price comes down that percentage is actually go out.
So we do see that going towards about 8% and in the a.
In the near term.
Okay.
I guess, maybe last one for you Jeff and then we can.
Open it up and get going back, but I guess.
LG outside of operating expenses, which he he kind of touched on I mean, when you think about how to manage the business through a challenging housing market.
What are your kind of most focused on from a financial perspective, yes.
Yes, we're focused on making sure we have we're matching our capacity.
From a cost standpoint, with what volumes coming through the front door.
And we're also at the same time looking for other opportunities from a revenue standpoint, Glenn mentioned, there's a lot of things around affiliate services I know, we've talked about that for years, but we're actually we have very specific programs to increase our operating margin.
Affiliated services, we're looking at.
Huge productivity opportunities across our business on the brokerage side and at the same time, we're looking out as we hit a environment.
It's as is down as people predict it could be I mean, we just got to look at our business definitely in things that we were able to put into our raw cost structure before we might not be able to put in our cost structure and in that environment. So we do have the opportunity to decrease cost structure time, and I think we have the opportunity to increase margin.
Through other sources and net gain that productivity.
Great.
Yeah, maybe it maybe it will let them bring Glen in here to join Us again.
Uh huh.
Good segue there, Jeff as far as attaching unaffiliated services wanted to maybe just get an update from you guys.
Where do things stand right now as it relates to Canada. The key affiliated services that you guys are investing in and are focused on and when can investors may be look forward to those having.
A more appreciable impact done on on the income statement.
They want one one that we've been investing in now for over a year is the successful lending joint.
Joint venture.
That one we actually are.
It's it's an interesting one to be investing in in a slowing especially dramatically slowing mortgage market.
The nice thing about where we're at is that we're working.
We're continuing to grow six personal lending, whereas almost everybody who has established are shrinking their lending platform. So we're actually in a really interesting place to be able to actually attract.
Reductively loan officers onto the platform doesn't it doesn't mean that that were.
Profitable in that segment yet.
We're actually investing another I think there was a little bit of a cash call just a small one but a half million dollars in it I think it's our first cash call in may and in in that.
But it's just because the market has slowed more dramatically than we had anticipated when we launched this in 2021.
And so that's but we're we're optimistic around a business that we're getting a lot of really good loan officers in the seats geographically distributed around the country and then creating opportunities too.
Get them loan business, but we're in this we'll call it a little bit of a slowdown pause you know at the time of day rates go up we see mortgage applications decline.
And we've seen that happen five times. So far this year I think today. The today's announcement will make a six and so that has an <unk> dampen that so I think where we're looking at is where we are in a market that's dramatically slowing and but we're able to because we're actually forming these businesses in a down.
Market were actually better positioned.
To build out the infrastructure.
It's more when the market gets back to normal where I actually think we're growing it at exactly the right time, because its actually tougher to grow in.
In some respects in it in an upmarket because.
Loan officers, they're doing a lot of business and now they're actually looking for where's the opportunity and so that specific JV actually is a pretty good one.
And then we're just continue to work on other of the other initiatives you know mortgage arena title.
In escrow or looking at your escrow opportunities in California, We're looking at you know title and escrow opportunities across the U S and we're going to have some things to announce probably early in the year around some of that stuff that we're we'll be excited to share.
Yeah, Thomas I'd add that you know from a from an operating margin standpoint, I think in the second half of next year.
We'll be able to point to a number of successful programs that the team is working on very hard right now and I think they are going to start becoming material in the second half next year.
Got that.
That's great.
You know I guess, you can consider the unaffiliated services, but I wanted to double click on.
On the success brand into specifically, Canada, the coaching and training part of it and Glenn I think you mentioned a little bit earlier in your prepared remarks that you know you guys thought this could be kind of a $50 million to $100 million business in and in a few years can you just talk a little bit about like.
You know how it get out there like the building blocks of that yes for sure.
Been evaluating and we just finished a.
Made up of some of the some of the folks involved the success Gerrick Robbins markets Truman are our head coach our Courtenay.
He is also the chief operating officer over on the success side as well. So we're working diligently on this but we were looking at you know where a lot of our traction in our success coaching certification program.
Is something that's getting a ton of traction we actually are booked out till February March or.
Coaches wanting to get certified because the and it's the brand in the history of the brand that makes it so compelling to become a success certified coach. We currently are certifying 30 coaches a month or two.
Through that and they're investing between five and $6000.
To go through the coaching certification.
We believe that some time in 2023, while we're gonna be able to increase the number of coaches getting certified to closer to 100 to 150 coaches a month going through coaching certification and then we have on the back side.
The revenues from doing delivering actual coaching through a.
True relationships that the coaches generate or relationships that success generates and and so there'll be a for those who are on the success coaching team, which is different than the certification, but they're actually on the team.
That should be a pretty significant revenue stream as well then we've got the partnerships that we currently have like on the agent Academy, where there'll be some some revenue or profit sharing that comes from some of those activities and we're still in the throes of figuring out what that looks like and then we're starting to to have partner.
Chip conversations with other other companies.
We are the <unk>.
Conversely Asian here recently.
Organization with over 400000.
Members in their.
Community that they're looking to outsource.
Some coaching group coaching to to success to help coach you'll members of their organization, and so where that opportunity might be a little bit too big for us too.
Completely.
Match today, but we believe that theres lots of those opportunities that we'll be able to go in.
<unk> build a coaching curriculum training relative to the goals that that organization has a build or bring a number of of already pre embedded success certified coaches that saw the coaching piece.
We think there is a it is just the certification processes are multimillion dollar year enterprise and then the coaching all beyond that is is again at a large enterprise. It. We're just on the early stages of this has been we've been working on now for less than a year Mark as Truman our head coaches.
During the six months ago, we're now putting in a lot of the scaling infrastructure that will be.
Pretty meaningful over time.
Okay. That's that's helpful. Thank you.
Just a few more minutes here and maybe we can you know.
Talk about.
Agents, a little bit more than you know.
At at ESP Con at the Investor meeting there.
You guys sounded pretty confident that you expect to be able to kind of continue to grow.
Agent Count you Kenneth.
Through through this year, and and and presumably kind of into next regardless of kind of what the market is doing and.
And can you maybe just Johnny I guess, it's only been a couple of weeks since then but it's a.
Rapidly.
Evolving backdrop here, maybe just kind of give us an update on how things are going on the agent count.
Side of things and are you still confident there and maybe just touch on like N. P. S. Like.
How do you kind of see agent N P S holding up in a in a in a slower market.
Yeah. So one thing to note is our M. P. S foods are actually up.
Versus Q3 last year. So I think we're 71 versus <unk> 69 on our M. P S and the way we look at M. P. S.
As we think about the idea that if we're over 70, we're really in a good place N P. S wise.
It's not us.
It's not a number that.
Normally you can get to a 100, but big deal our MTS and then our employee NPS. Our combined has resulted in us being.
I think number or employer.
Has recognized by Glassdoor for best places to work and so the our focus on building.
Building the most agent centric real estate brokers on the planet and truly doing that like not not just being a phrase that we use for marketing purposes, but we actually iterate around that that yields a high NPS score, which which results in our agents are wanting to be with us and what we're we're having right now.
As we're having this large amount of churn, especially on that low.
Production category.
The agents, but we're also starting to really see agents that are higher producing <unk>.
Taking a serious look at DXP and they could be doing 456.
$800 million a year historical production say 2021 2022 might be down for them too and a lot of cases, they're down 20, 30% in terms of their team volume.
But where we're really the place that a lot of these people are moving to because of that sort of focus on on that if our NPS numbers or art below 60, and where of where in any category.
So that could be onboarding, it could be transaction services it could be so corn it could be whatever it is in.
In those areas, we bring a sort of an all hands on deck kind of.
Approach to that because we know how critical M. P. S is and that's our way of understanding where the pain points in the organization.
So when we think about the number of agents, but will have towards the end of the year than were in November we're 85 going on about 86000 agents.
And we look at that drove that takes us off of our original projected pace of going over 100000 by the end of the year and and puts us in a position where we're now looking at 80 780 889000 agents towards the end of the year. So that's kind of where we're where we're trending at the <unk>.
Moment wed.
We'd like to be very transparent with our numbers. That's why we quote in every in the bottom of every one of our press releases our agent count because.
It allows you to just see what's going on in terms of moderated growth rate taking out if you want a builder a chart out as an investor you can easily sort of look at you know what that looks like.
And you can see that you know where our growth rate right now is moderated.
From an agent count perspective, but we think that that's that's why we are shifting to two market share in the short run.
While the markets sort of does this thing because we know we're picking up market share even if our agent counts isn't going up dramatically.
Okay. That's helpful.
Maybe I just yeah.
You Didnt shared the the.
The new disclosures around attrition and.
Of the folks that attrit.
Breaking it out by by productivity level.
Glen or Jeff can you, maybe just give us a little bit of a sense theres. Some quarters I think that you guys in your slideshow gross adds.
And net adds.
Just trying to get a sense of like.
I guess just that that dynamic.
How is like rose attraction going.
And at relative to two two to attrition.
Yes.
Yeah. So the gross the additions in our a relatively strong compared to other quarters. Although there is a lot less people entering the industry right now what's happening what we're seeing Tom though is there's more people, leaving the industry.
And I think that's where we're going to see when we see our data that comes out.
So the.
What's happened from a trending standpoint as our addition churn has gone down slightly but there is still relatively strong from a growth standpoint, the terminations have gone up over the last quarter two quarters as people exit the exit the industry.
Yes.
Okay.
That's great.
And then maybe just last one from.
From my side here.
Talk a little bit about kind of teams and an independent brokerages you know it seems like that might be a fertile hunting ground. If you will.
Specifically these independent brokerages that.
<unk> significant overhead presumably are on kind of a legacy type business model and are going to you know maybe maybe struggle.
When volumes decline like how do you guys make sure you make the most of the opportunity to go after those may be kind of vulnerable.
You know teams in and try and.
Get them to port over like what's the I mean, the pitch to the agents.
Would seem super compelling you know, what's the pitch to like the brokerage owner.
And how do you make sure you make the most of of the opportunity there.
Well, our basic our basic pitch.
Is that they can if they convert their brokerage over to E X P that in most cases, they'll actually net more.
And moving their brokerage to E X P than they do running their own brokerage.
And we when you look at it based on the economics of our brokerage you've got your fixed bricks and mortar expenses.
And then you've got your staffing expenses to support that and if youre not.
If you're a small brokerage spur.
Spreading those those expenses over your agent count most small brokerages and actually a lot of even mid size and larger brokerage was there right now losing money and so if they have an opportunity to get out from underneath their leases and move their agents to DXP no immediate the Gulf.
From losing money to actually making making money and then the the upside.
Around our aligned compensation model of helping <unk> grow allows them to still have the upside.
In some cases in most cases more upside.
Growing E X P.
Then they did theyre running their individual individual officer of brokers. So that's really the piece in there they're hurting right now there we're going into where in November December and January .
And those brokerages will be fine.
A lot of pressure financially I suspect that we're going to see a number of broker owners and we saw this in the 2008 2009 period to 2007, where we're going to see a lot of broker owners that Unfortunately, we'll have to declare bankruptcy just because the economy from their perspective in the way of the paper.
Run their brokerage and no fault to them.
Just as the economics for them to not work in a down market and that's where we find ourselves so theyre going to be looking for a home. So it's really trying to meet them, where they're at I help them with a a soft.
On ramp on onto the E X P platform and then and then and then help them help their agents actually create a different type of career path than they had in the in the brokerage model that they they had previously and so that's really the pitch in the conversations.
And then when we think about.
Large teams, obviously I think there they're looking at their influence having.
Having built large credible real estate teams that in some cases are known.
Throughout the country has being highly productive agents and teams and so they're able to then leverage there.
Personas in the industry.
To actually grow a network of agents.
Through the country and so for them it becomes an additional revenue stream.
Sure.
Already reasonably if not very successful real estate practice.
That's great we're running short on time here, but we did get some questions from the audience that maybe we can do just a quick little speed round here, Glenn and Jeff.
First one is can you explain why net income.
Went from 20.
$23 8 million last year to $4 4 million as the first one second is an update on international agent Count and what's the latest there and then someone asking Glenn.
Ah why that the recent stock sales on your part.
Yes, so I can take the first one so basically there's two drivers to the lower net income year over year. One is your investment is our investment from an SG&A standpoint was higher this year and then another big deal is that we've had we have lower tax benefits this year.
Based on the deductions that we can take so it's.
222 drivers Tom one is the lower operating margin based on higher.
Adjustments in the second one is lower tax benefits year over year, both in Q3 and on a year to date basis.
Yeah, and I'll take the other two there.
The.
Obviously, you know this but I had expiring options that expired at the end of.
Joining us at the end of September of 'twenty.
2022, and so that.
That was the last stock.
Stock sales was was to make sure that I made it into.
Make before my options actually expire and currently I have no plans in place too.
To sell more shares. So there was work that was in conjunction with my <unk>.
Stock options that were set in 2012.
So that was.
That was that.
That was actually if you look at my my sales I believe.
100% of the sales that took place in 2022 we're all related to expiring stock options.
And then the other piece was around international agent Count.
Our U S agent Count I think we looked at it was a year over year is about 23%.
Growth.
And.
Our agent base over the over the for the Q.
Q3 to Q3 was 30% a balance of that was international agent growth and so that was a combination of Canada and other markets. So we're now.
In excess of 10 or 11000, maybe 12000 agents internationally.
In Canada. So that's that is the fastest growing part of our organization I believe it's well in excess of 100% year over year growth rate.
As a category and so we expect that international is going to be.
Significant growth area for the company as we.
Grow new markets like we talked on the past, but we've been the passive Bernie brokerages.
The U K South Africa.
India actually most of the markets that we can go into Mexico. Most of those markets. Let me go into we've become fairly quickly the fastest growing brand in the country, we're already and I think the top 12 or 13.
State agencies in South Africa now.
And by by brands and so we're and we're saying.
Grow into fairly large sizes fairly quickly. So that's been an exciting growth piece of the model.
A terrific as I think we've used the full 60 minutes I just wanted to thank you again forgive any opportunity to host a really appreciated the discussion I will I'll pass it back to you guys for any closing comments.
Thank you very much Tom really appreciate your help.
Thanks, Tom.
Alright I'll. Thank you as a reminder, please visit ex fuel holdings Dot com for the latest updates on <unk> results and events. Additionally, you will find the reporting of this call and our latest investor presentation. Thank you for joining today. This concludes the external Ralph Holdings Q3 2022 Ernie.
<unk> Fireside chat.
Thank you all very much.
Okay.
Guessing that our our livestream is done.
Yes.