With revenue down and domestic agent growth essentially flat, eXp is pivoting to better fit its virtual-focused brokerage model into the “tightening” post-pandemic real estate market, seeking to attract larger real estate teams and upping its revenue sharing program as it also aims for efficiencies through AI.
In Q2 of this year, the brokerage saw revenue fall 13% to $1.2 billion, with domestic agent count topping out at 88,000, up 7% from last year. eXp is still reporting positive cashflow, with a net income of $9.4 million.
The company’s stock was trading lower, off by about 6% in early trading Friday.
“With the rapid growth that we had for many sequential years, we were throwing bodies at the challenge and not being as systematic in how we solved for agent challenges,” said CEO Glenn Sanford on the company’s “fireside chat” following the earnings release.
With a business model that appeared prescient when the pandemic struck—all virtual, no physical offices and offering relatively high splits and low fees—eXp saw dizzying growth during the 2020-21 boom market, nearly tripling its agent count in two years. As home sales slumped, the company has continued to emphasize agent supports as the best way to transition to a more normalized real estate environment.
But that transition won’t necessarily happen overnight, with a relatively high attrition rate (mostly among new, less productive agents). eXp and Sanford are also facing a lawsuit filed by several former employees this year, who claim they were drugged and sexually assaulted by recruiters at eXp events, and that both the company and Sanford personally did nothing when these incidents were brought to their attention
What the company calls an “agent-centric” model right now means an emphasis on real-time agent services and supports, and enticing high-producing teams through more open, flexible agreements with the company, according to Sanford.
Implementing that has meant “changes” to some personnel, noted Sanford.
“Some of it has also required us to turn over some of our staff so that we have a staff that’s both competent, but then also a staff that is truly engaged with the agent in a constructive way. And sometimes, those two people don’t live in the same body,” he said.
Sanford called the market slowdown “an opportunity” to be more strategic about these things, trying to listen to what agents are most concerned with and understanding what is working or not working down to the regional level. And that could be paying off, with Michael Valdes, eXp chief growth officer, claiming that there are currently 1,500 agents with almost $3 billion in production in “the active pipeline” to join eXp.
“When we’re looking at a market that’s tightening at this time, to really have an independent brokerage—they’re running on thin margins as it is,” Valdes said. “When you look at our platform, we’re a very viable solution for them.”
In response to an investor question, Sanford also said he sees plenty of potential from AI, with generative AI already helping provide agent support on the back end. Particularly, AI is something eXp hopes to use when working on the minutiae of transaction workflow, including catching potential legal issues.
“So I think there’s 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,” Sanford said. “We don’t have enough data to say when that’s going to become a reality, but we are playing with it.”
