Q2 2023 eXp World Holdings Inc Earnings Call
It will 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.
Forward looking statements are based on assumptions as of today August three 2023, and the company undertakes no obligation to revise or update them.
Please see our filings with the SEC, including our most recently filed quarterly report on Form 10-Q for a discussion of specific risks that may affect our business performance and financial condition.
As a reminder, today's call is being recorded and a replay will also be made available on ESG World Hall, <unk> Dot com.
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Now I'll turn the fireside chat over to our speakers before opening the call to questions.
You can go ahead.
Okay.
Okay.
Denise can you hear Glenn.
I apologize.
Whereas our covers my my bad borrowers.
Everyone. Thank you so much for them.
Her for coming to their interest is a quick review of our ESP Realty is are our cloud based brokerage.
And we have now at 8000 agents in 24 countries.
We also have success enterprises, which we invested in in 'twenty, 'twenty, I believe and which is continuing to build out our coaching and training ecosystem.
The dollar is our meta versus popcorn by along with a number of meta versus related entities inside of our back company, which supports all those things that we do.
As a company we run with no physical offices, where we have been enabled to grow all of our businesses.
Without having to be dependent on bricks and mortar since inception and propeller has been a big part of that story since we used start using their platform and in 2016.
Bob kind of two to actually look at a little bit of the highlights.
The company I'll take you through some of those before turning the call over to Michael Valdez to speak about growth ancillary services in the Jeff White side for a more detailed review of the financials.
No.
The second quarter of 2023, we continued to grow a number of different parts of the business, but most importantly, we always work on the age of value proposition that is your XD royalty being our largest business and the business that I started almost 14 years ago.
With 24 agents, we've now grown too.
88000 agents worldwide, our net income and adjusted EBITDA were both positive and we continue to have solid financial profile with strong cash flow generation.
And a significant cash balance.
And zero debt.
And in International also posted another record quarter, increasing 35% over Q2 last year and 42% year to date.
Our core North American Realty business continues to be strong as profitable.
With unit growth in either grows to outperforming the industry and north.
North American Realty, which is U S and Canada delivered 34 million.
EBITDA in the quarter to $5 million year to date to staples us to grow.
What we're doing at your Experian continues to strengthen our overall value prop.
I believe this is also what's driving a meaningful increase in our quarters of NPS score, which increased from 68 in the second quarter of last year to 72 of this year.
Talk a little bit about how we've continued to sort of build that out.
We really do continue to invest in our agents are and that's really the big driver. When we think about what has been taking place over the last year or so and we talked about this a little bit in the first quarter early in the first quarter, we switched from cost cutting to actually more investment in.
Actually growing out the ecosystem of E X P and I think you'll see you're seeing that in both our Asia net promoter score and you're also seeing in our employee net promoter score, which has also been improving and it really is.
Is around this a whole idea of delighting the agent and supporting the agent and so.
We we've also invested in a lot of.
Additional support services for our agents. So we now have 24 hour support for agents, whether it be transaction, new agent Onboarding et cetera, So there's a ton of support.
24 seven.
We've also added a technology like Luna, which is our first.
AI enabled a tool that's built into a number of our different.
Platforms, whether it be our our workplace platform by meta.
Our our verb Bella and other places so agents can get tons of support with a generative AI platform, which is doing a great job at providing first level support for for agents and the the <unk>.
Range of questions and the accuracy and the support is pretty amazing what we've been able to do on a very short period of time.
And so that's really it it's really increased dramatically.
That the use of that platform.
We've also focused a lot on Egypt payouts in.
Getting agents aster.
And in some markets, especially in Canada have been working on actually getting agents paid before even the company gets paid.
And that has to do with that with some of the ways that.
That traditionally real estate has been done and so we're bringing those tap to pay features throughout the E X P ecosystem.
We've also now houses burn from an NPS perspective, we have a 48 hour follow ups system. So if you are a detractor, meaning that you've given us a score of zero to six and were following up with you very quickly and we're building out.
Any thematic.
From that so that we can continue to make sure that we're doing a great job.
We've also added what.
Our operations team is really about a.
Proud of which is the no busters Hot decline. So if you received a no from a part of the organization you didn't actually believe should be and now we actually have it goes actually.
Incentive to help you get those Noah's turned into a yes.
Talked a little bit about the 24 hour check ins that we already have and now we have a three year support task.
For for our for our agents, especially our icons and top producers and the like.
So with that let me.
Actually.
Let's go to two attrition and talk a little bit about that and this is something we've been talking about now for about a year I think we've been with which.
When talking about the attrition metrics and our attrition right now 75% of our attrition.
It has been historically between 75 and 80% has been in the zero to two category that's been.
For quite a number of years and in this this quarter no different 75% of our agents were in that zero to two category.
What's interesting to note is that our heinous is a platform, we're actually improved proving for our top producing agents or agents doing over 21 sales Mr. Basically our icon agents.
We've actually become stickier since we started to report. This these metrics out. So originally were about I think three and a half times more sticky for the top producing agents than the than the bottom producing agents.
We're now 4.4 times.
As sticky.
At the <unk> that are based on the number of agents in that cohort. So don't see the agents churning there is significantly smaller as a percentage of that space.
Then then the other groups so from a churn perspective, our top producing agents are continued to have very low churn.
So with that let me go ahead and turn to Michael Valdez to talk about what we're doing to drive the agent value prop and.
Consolidated services.
Glenn. Thank you. So much you know egencia intimating I'm sitting here in and hearing our story of starting this 14 years ago with 24 agents and it's extraordinary to think about that and where we've gone in such a short period of time and really it's my pleasure to talk about our last quarter with ancillary services in growth. So in the terms of Angela.
ARY services. Our team is really focused on solutions that help our agents increasing their value proposition and create amazing customer experiences for their end customers with products like home warranty utility services signs in home renovation pre listing services.
We're also in the process of a cost conscious build out of our mortgage business and we're well positioned for growth were now licensed and operating in 42 States and success lending has actually tripled funded units and.
Loan volume Q2 of 2023 over the same period last year.
And we launched our first local level E X P endorsed titled partnership with our top producing agents and already have two to three other jv's a near term pipeline. So stay tuned for those announcements and on our growth team, they're really focused on growing.
Across all segments of our business and we launched a couple of programs in Q2 to further drive the agent value proposition. The first thing that we launched was the boost program, which provides financial incentives to qualifying independent teams and brokerage.
Is that join ESP Realty now the program just launched on June 29th So it's still very early but partly but current applicants represent over 1500 potential agents and over $3 billion of potential production. These candidates are moving through.
Our approval process very quickly and we have over 50 other candidates that are in various stages of our due diligence pipeline.
And secondly, we reduced revenue share criteria to accelerate agent rewards at a time when other companies are actually raising their barrier to entry for many agents were committed to putting agents first and helping them focus on driving production now on the next slide.
And then in talk and turn our attention to what we've done on our growth led events. So on the first one has been our top agent masterminds now Leopardi Herron Chief strategy Officer, and I have been on a bit of a road show following on what Glenn has done with his mastermind.
On our key events and what we've been doing is meeting with our top agent and these are the top producing agents by production. We have been facilitating really deep discussions on cord topics that are focused on driving growth, which has really been an amazing experience and now we're actually.
I'm proud to announce our very first E X P Con Canada. This is the first Canadian conference that in line with the country's strong growth trajectory. We have over 6000 agents in Canada. This event will be taking place in Vancouver on September 638, and our speakers are going to.
Focus on production on technology, and again of course on grow of course, we're doing our E X pecan.
In Las Vegas on October 2nd Defense, and our focus actually on that event will be on AI, which has been a key focus of ours, Glenn alluded to our our onto our App Luna other deliverables that we've done we're also going to be focusing on agent production mindset and growth.
Finally, our regional rallies. These are our agent led event, which will take place in November across the country, where patent planning about 15 to 20 of them. It builds community and celebrate milestones. It helps deliver education and training last year, we did Oh gosh should think about.
3000, or so agents that were touched during those rally. So it's been incredible with our growth story and with that I'm going to let you get to the meat of this meeting with our CFO , Jeff lifetime to talk about our numbers, Jeff over to you Sir.
Alright, well, thank you very much Michael and good afternoon, all and thank you for joining us today for our second quarter 2023 earnings call.
Before I take you through the financials I wanted to share a couple of data points during the current operating environment residential real estate.
Continues to be in a pressures as we all are aware.
In terms of unit sales Fannie Mae forecasted in Q2, 2023 total home sales declined 17% year over year.
This forecast compares our business, where we were minus nine year over year decline in the R. E. S. P. North American Realty business and then in terms of age accounts.
Unit sales now talking about agent count.
Each account growth nor reported U S residential real estate agents decline in numbers by one 1% from June year over year, 2022 to 2023 and for us in North and if our U S agents actually increased by 4%.
Within our ESP North American Realty group.
ESP total agent count grew at 7% to 88000 to 48, and we are now operating in 24 global markets year over year.
So just at a higher level at the World Holdings level, our highlights were as follows.
Net income of $9 $4 million, which was an increase of 1% year over year compared to the second quarter 2022, while our revenue declined 13%.
Operating income of $11 1 million reflect the eight basis points of year over year operating margin expansion. We also generated significant adjusted EBITDA of $24 $7 million and that was driven primarily by North America Realty, which generated an adjusted EBITDA of 34.1 million showcasing the resiliency of ESP.
Model, while I'm down market.
And adjusted operating cash flow, which excludes customer deposits was $64 6 million at the end of the second quarter and 2023.
Now I'll review, our Q2 financial for each segment on the next slide.
On this slide you can see our Q2 2023 segment revenue and adjusted EBITDA for our four business segments and a breakout of our corporate allocations.
North American Realty segment is again the primary driver of revenue.
At $1.2 billion and as I mentioned in previous slides North American royalties segment remained profitable with $34 million and adjusted EBITDA.
International royalty had another record quarter, increasing revenue by 35% year over year to $12 million.
Rubella contributed a modest amount of revenue and improved its EBITDA loss by approximately 1.5 million year over year in the quarter.
Our affiliated services segment also contributed modest amounts of revenue and with the corporate eliminations, we consolidate to one point to three $2 billion in revenue and $24 7 million and adjusted EBITDA in Q2.
On the next slide I'll review, our financial details on a consolidated basis.
One a numbers on this slide, but and we've talked about some of them already but on a consolidated basis, we've increased our agent Mps's Glen was talking about from 68.
To 72 quarter over quarter versus 2022.
While also at the same time, adding agents. Despite a tougher macro environment unit sales were 137199 as referenced earlier and that's a 9% drop versus 17% drop in the industry.
We saw our price per unit dropped 8%.
From 386 $354000.
Revenue was one point to three 2 billion as noted and decreased 13% year over year.
Gross margin dollars decreased 10%, while gross margin percentage increased 3% due to lower transaction volume.
SG&A decreased minus 11% and slowdown in hiring decreased marketing spend and a reallocation of agent growth incentive stock compensation expense that we discussed in detail in Q1.
Net income grew to one grew 1% now for as I mentioned, we generated $24 7 million of adjusted EBITDA or cash flow was $64 6 million and we ended the quarter with $124 million seven of cash and cash equivalents on our bank <unk>.
Finally on this page, we increased our dividend 11% in the quarter.
Five sensor versus 4.5 cents and that's going to be effective in the next payout.
So going to the next slide we'll take a look at our year to date segment.
And this slide details our segment revenue on a year to date basis, and our adjusted EBITDA for each of our four business units.
On a year to date basis, North American Realty is down 15% compared to our first half of 2022 with over $2 billion in revenue and $55 million and adjusted EBITDA International.
International royalty revenue was up 42% year to date with a record $22 7 million.
Uh huh.
Year to date with a record $22 $7 million in revenue and as you can see we continue to invest in international Realty.
<unk> is up 3% year to date compared to the same time period last year and improved its EBITDA loss by approximately 55%.
And revenue in the other segment is up 46%.
Year to date basis to $2 7 million with an adjusted EBITDA down 17% to 1.8 and this is where we're investing again as Michael mentioned with some of the programs we have in his presentation.
On my final slide, we'll look at agent and revenue growth over a rolling five year periods.
So this is the final frontier HR was getting pretty difficult three we add I'll. Let you go almost from the beginning of time, so we've shortened it and the timeline to a five year rolling basis, but the story is still the same.
Historically, we've grown agents and revenue and even with recent market conditions impacting revenue. We continue to increase Exe's agent count, which grew at 7% on a year over year basis this quarter.
Continue to have zero debt on our balance sheet and are proud of the results. We produced for our investors over the short medium and long term.
Summary for the second quarter of 2023, although our revenue decreased year over year, driven by volume slow down across the industry.
We outperformed the industry and we'll continue to invest in future growth priorities and delivering profitability comparable second quarter 'twenty to 2022, when the revenue is higher.
With that I'll turn it over to Denise for Q&A.
Great. Thanks, Jack so let.
Let me kick it off with a question for Glen before we open the call to our covering analysts.
First Glenn regarding N P. S vantage a big increase this quarter. What do you think has the biggest impact on on driving N. P F.
Hum.
I think theres been a number of things one we've been making an investment in growth since the beginning of Q1 and <unk> and as I alluded comments, that's been really helpful. But I think more important is the way our entire brokerage operation.
Organization has really rallied around Haiti supporting agents in real time.
And with the rapid growth that we have had for many sequential years, we were throwing bodies at the challenge in and not being a systematic in how we solved for agent challenges and I think one of the things that the.
Slowdown or of the housing market has given US has also given us the opportunity to retool our N. Two.
To really think.
Sure.
Particularly on what are the best ways to support agents are out there listening and selling homes and providing them with the services that they need in real time, and so that I think has really worked well and then.
Also getting this down to the individual brokerage units for individual states.
Parisian cities et cetera.
I think there's been a really a buying to understanding what that really means and how they are empowered to actually solve challenges, even even better than maybe they were before some of it is also required us to turnover you know some of our staff so that we have.
Staff disposed confident but then also staff that is truly.
Engage with the agent in a constructive way.
And sometimes those those two people don't live in the same body. So we've had to make different changes from time to time to make sure that we have the right people.
On the right seats on the bus.
Great that makes sense.
Alright, let's open it up and why don't we can take our first question from John Campbell from Stephens.
John Go ahead hi.
Hi, guys. Good afternoon, thanks for having us.
Sure Chris.
I'm going to touch on the lower revenue share criteria and I know you guys are obviously pretty hell bent on enhancing that agent value prop. We can see that you know pretty directly to the positive effects on the agent M. P. S. I get why why you did it but my question here is what led up to the changed or maybe why now and then Jeff just kind of separate.
Lee I'm thinking this is probably not going to have a huge influence on gross margin, but just kind of want to get your latest thoughts on what that impact might be.
Yes, so we're continuing to listen to the agents.
One of the one of the and they're also your agents are in it to win long term with us as a brokerage platform.
We are.
Some of the feedback came from our agents has to things we can do to make the model a bit better.
From our perspective is there out there growing their organizations inside of DXP.
Jeff can certainly comment to the the financial impact, but one of the things that hasnt changed at all.
Is what.
What we put in place in late 2019, which is our 50% of all company dollar is paid out in the form of Rev share and so we will do it.
We adjust the Rev share payout such that every month, we pay out exactly 50 ton of company dollar in the parmer Rev share regardless of any other little inside the minor tweaks that we might might make so.
Yeah.
So it's kind of like the initial commentary yeah.
And so John So there is still that there won't be any impact on the financials for the change it's basically it's a it's a reallocation of the 50%.
Oh Gotcha that makes sense, Okay and then.
And one other thing. It also allows our leaders to focus within their own organizations to put more time into making them more productive as well, which will also increase the agent P. P. P.
Okay. All that makes sense I appreciate that and then on the AI work, which he started that sounds pretty interesting. It sounds like at least for now that Luna is going to be geared more towards kind of that internal agent support and Glenn I know you guys have spent a lot of time and effort on kind of improving that onboarding process I imagine that's going to be hugely helpful. There.
But I'm curious Glenn I mean, you do tend to think big you've got pretty Grand aspirations. I'm curious, what you think might be able to become one day, if you ever really envision agents using that directly or if it's sitting you know one day in between agents and consumers.
Yeah, I mean, there is elements of AI, that's sitting between agents and consumers right now through our.
Inside real estate K V core.
We've got innovation work being done insiders do Casa Burke berths for were using using AI. So there will be some AI components for sure between our web experience and the consumer experience.
Where I think there is a lot of really interesting stuff is with regard to transaction processing and brokerage review of contracts and sort of what does that look like in the future.
We'll still have the same individuals.
They're required.
Okay.
By law to be in place, but there their roles are gonna be significantly enhanced by AI.
We heard even before we went down this road, but even even a couple of years ago, where.
Legal AI is we're we're catching things legally at a higher rate than than human.
We're in terms of just just understanding contracts in and what's in there and all that so AI is going to be hugely beneficial in the transaction process and workflow.
Over time, and then I do think that that again simplifies both improves the agent experience.
Simplifies the brokerage management piece, where it's more.
Managed based on actual real estate law band.
Based on what one persons.
Maybe.
Leaning.
Two being conservative or liberal interpretation of what real estate law is.
And so I think theres just a lot of good stuff, that's going to come out of that from a from a.
Our brokerage through put perspective, so I think theres a lot of good stuff, that's going to come from AI.
What it's going to be I think it's very experimental at this point.
We don't have enough data to say that it's you know when that's going to become a reality, but we are playing with it and we've got a number of different teams working on various function AI initiatives.
Okay. All very helpful. Thank you guys.
Sure. Thanks, John .
So I wanted to take our next question from Matt <unk> from William Blair.
Matt go ahead.
Hey, Glenn and Jeff you have Matt file it on for Stephen Sheldon. Thank you for taking my questions was wondering if you could provide some more color on your recent initiative to attract larger broker teams thinking of things like the types of teams you are looking to attract what the offer terms look like and what it could mean for agent.
Growth over the near and long term.
Yeah. So.
Yep.
We talked a little bit about Michael talked about the boost program.
And what we've done with the boost program is we've actually memorialized a lot of the things that we were already doing when brokerages, where we're looking to convert meaning that often times they would come in but we'd have to sort of.
Negotiate to some numbers.
And sometimes they won't even start the discussion because I didn't know if there was any flexibility around our model to really invite them in so we've done a couple of things one is in order to get to the numbers stayed we actually have a cultural questionnaire that a broker owner needs to actually go.
Through and an answer and it really has to do with the fact that we are we want them. We know that there is a continuity of leadership.
Need.
So sorry for transitions from agents being underneath one broker or independent brokerage over an E X P and that is that the leader they bought into needs to be bought into what we're doing here and they need to be part of the growth story of DXP going forward and if theyre not commit.
Added to being part of the growth story of ESP theyre not culturally aligned.
And we've done we have enough experience around dusk to have seen when people are culturally aligned and those that are culturally not in there just dropping their agents off and hoping they make money off of Rev share et cetera, and so the whole idea is to really attract the right type of brokerage to ESP that wants to actually help.
<unk> E X P.
Understand our mission vision and values are around our agents and then our wanting to actually take a go on the journey with us growing E X P and so that's really at the the financials.
Where we're able to provide some pretty good numbers to these broker owners.
Because we're able to value the agents as individual agents, even if may is broker owners weren't able to run.
Profitable real estate brokers, just because of a tougher market and so we're able to give them. Some good good transition money to actually transition their agents over and as I think Michael.
Alluded to there is theres a number of agents in the pipeline Arnaud. If you mentioned that number Michael maybe you can talk a little bit more about that.
Not much has happened yeah, what we have in the active pipeline has about 1500 potential agents and close to $3 billion of production from what we have of people that have raised their hands already.
And to Glenn's point, when we're looking at.
A AME as a market that's tightening at this time.
To really have an independent brokerage, they're running on thin margins as it is and so when you are looking at their entire Opex. When you look at our platform, we're very viable solution for them, which allows them a global platform by which they can continue to grow their business and those agents are very much attracted to.
That deliverable. So we do expect this to be a a very viable part of our growth.
That's a tremendous overview. Thank you both for that very helpful.
Wanted to ask one on success lending no that success has been more of an expense line as you build out capabilities and market conditions remain challenging, but when do you think that could become accretive and then as a second part to that question. Just curious on how many loans are currently coming through on a monthly basis.
Yes.
Relative to where it should become accretive in.
In all likelihood next year 'twenty 'twenty four it will be accretive.
This is.
No.
Definitely I think the loan apps are up two to three X what they've been.
Earlier, this year, where we're talking.
And maybe Jeff you've got the more specific numbers in terms of.
Loans closed behind all those numbers are growing pretty.
Pretty rapidly.
On the platform talks, but they are is growing rapidly on on fairly small numbers at the moment. So maybe Jeff you've got any more clarity on an on a year to date and units are somewhere around 500.
Units that have gone through the system.
They are in different stages, but that's now we were initially doing.
Somewhere around 10 loans.
Per month, so that so the rates are going up and I would look.
Glen statement on <unk>.
Next year.
The business should be turning around.
Different product for the company.
Great. Thank you very much I'll jump back in the queue.
Thanks, Matt.
We also have a question emailed in from.
Analysts you couldn't be on stage today, Tom White from D. A davidson.
He asked should we add this is bringing a gap should we expect a similar step up for the remaining quarters of this year in terms of G&A expense or is this a good level to model the third and the fourth quarters.
Yes, I think any of those yet.
Okay.
So to answer that question Tom.
So theres two things that happen from Q1 to Q2, the biggest drivers of the G&A going up was D.
The clusters.
And then we had sort of chevron's event, so that that was a.
There is an increasing cost and then the second one is the merit increases that hit in the second quarter.
So if you look at what we have we did $85 4 million in SG&A and that's that's around that kind of around what we're seeing for the rest of the year.
And again, we say this every time, we talk about SG&A, if we have an opportunity to invest the cash.
To grow we're going to do that but.
That 85.4 has.
Kind of in the in the range of what we're seeing.
No.
Alright, okay.
Thanks, You hear me, yes, great.
Great.
He also had a follow up question to that which were one of the biggest sources of incremental operating expenses investments since Q1 or are you, mostly induction and acquire Youll ask brokerage is an international mortgage.
Yeah. So the biggest biggest investment that we have going right now is international.
And.
Kind of all the investments we have sites that would be.
Above and beyond what we're doing in the core business. So we look we cannot we cannot look at the core business and we're going to fund that and we're going to make sure. We have the right NPS in the rate.
Support network in place to do that.
From a <unk>.
Broker job standpoint technology standpoint, but are above and beyond investment the largest one is still going to international.
That's kind of that hasn't changed from the last I'd say four quarters.
Alright, great.
Also I am just as a reminder, if you want to ask a question. It's laid out there is the.
The code up on their left hand screen, if he wants to download that or go to a spider dotcom ESP and submit a question would you have another question from one of our newest covering analyst cell.
Firstly at D. P. I G. He emailed in his question as well and he asked a question on agent productivity.
He was asking about this metric that he sees continues to decline in line with the market transaction. So what steps you've taken to improve the agent productivity metric going forward.
Yeah, we will we are definitely investing.
In.
Technology and tools.
Success side of the house, we go up.
We've now partnered.
With.
With a number of top coaches and trainers, bringing them into our ecosystem, where we have been doing nickel you touched on the masterminds that.
That we've been doing with our agents to help them be more productive our regional rallies are around production Ho Hum a lot most of our events are around production and then we've got.
Literally 80 hours.
Available training in World and online.
Every single week for agents in various different parts of the business. We now have at least I think two different.
Podcasts going on.
From from members here excellent Michael and I, both Dupont Cas along with a number of other agent productivity podcast on buyer agents for agents to help support agents. So there's there's a there's a ton of coaching and training masterminding going on and Thats, where Berkeley most of the.
Business has been improved for agent is an independent contractor so.
They they have to op Dan.
To a large extent proving their business, but if they opt in we have something for them to opt into two to take their business to the next level.
We also have a 30 60 90 day program that we've initiated as well as well as a kick start program for those that are either new to E X P. New to the industry of both and also how they can have their path and journey to productivity. So everything that Glenn just said, we've got a very formalized plan for that and continue to.
So as we continue to build the program out through our ESP University and other resources.
Great and I think we have a follow up question from John Campbell Stephens.
Go ahead.
Thanks, I had a question that was kind of related to the one you just answered on agent productivity I'm actually seeing the opposite it looks like that you guys from a transactions per agent standpoint looks like you outperformed the market by a pretty wide measure. This this quarter I mean, obviously, it's down year over year.
You know just given transactions it looks like you did outpace the market My question here and Ive been kind of curious about this last couple of quarters, you guys keep citing that you know about.
About three fourths of of you know what.
Tricia is largely coming from those agents doing a zero to two transactions I would think maybe from a mix shift standpoint that would be helpful for overall productivity, but also.
What I'm curious about is you know.
How long do you think that you see that kind of heightened attrition on the lower end I know it usually takes a little bit of time as people have annual dues coming up you know that easily could be a kind of a moving point for them to maybe move off the platform, but I'm curious about how long do you think that ends up being a bit of a headwind.
Yeah, well I think.
So a third of our agents historically have joined our brand new agents in about 80% of those agents.
Historically haven't made it to their first renewal. So you can just think about that's a big amount of churn that comes from that group just automatically.
Because of that and so that will continue to be the case, but the because we are stickier. The more production productive you are on the platform.
There is a bit of a.
Uh huh.
It will just improve over time, just based on us continuing to support agents long as we continue to be the best place for top producing agents to hang their license. So we think that that will be the case. The other thing that happened is that over the last year and a half or so lets say since Q1.
<unk> 2022.
The zero to two cohort has has increased in terms of the size of people in that group from agents, who previously may be we're selling three to four homes.
And now they're having trouble finding doing.
Even even the drone to slow down and so when the housing market picks up.
Some of those agents, who would be marginal in that sort of two categories are going to find it easier to do the third and fourth transaction and fifth transaction et cetera. So.
Right now we're still in this market.
You know generally pre TARP, we are we haven't seen the attrition.
In the industry overall.
That would be reflective of the real estate transactions going on so I, certainly expect there to be a fair bit more attrition.
And for a number of reasons, including having a pretty robust economy, even considering the what's going on in the housing market I think that just that as well supports the notion that part time agents can still have a goal.
Another income and have a real estate license not feel the need to to hang it up. So there's just a few different dynamics that are going on.
But I do expect that theres going to be fewer agents in the industry in the next 12 months, we're seeing some pockets where renewals are being imposed.
Based on a six month lagging a renewal cycle.
Where we're seeing agents you know have to leave the business because they are.
Refusing to pay their dues and they're not making any money.
Okay. Thanks, so much.
Alright, thanks, everyone with no other question kind of play out.
It's a good time to remind everyone that our first DXP Con Canada will take place in Vancouver September six through eight this year.
And the annual ESP kind of event that Michael had mentioned, we'll be in Las Vegas October 2nd you've been so please register ESP kind, Canada Dot com, our ESP condom Exa realty to join Us and as always please stay connected by visiting <unk> Holdings Dot com for the latest updates on ESP news without prevent an.
You'll find a recording of this call and our latest investor presentation on the investors section of the site. Thank you for joining US today. This concludes DXP work holding second quarter 2023 earnings Fireside chat.
Thanks, Nish and Ron Thank you very much.