AGNT, Inc. (AGNT) Q1 2022 Earnings Call Transcript

Earnings fireside chat via live stream and EXPI Campus are metaverse. My name is Courtney Chakarun, I'm the CMO of eXp World Holdings. Today, we will begin our earnings fireside chat with opening comments and a conversation between Glenn Sanford, Founder, Chairman and CEO of eXp World Holdings, and John Campbell, Managing Director with Stephens. We are happy to welcome John back as our moderator. Following this initial segment, we'll move into a presentation, which includes a review of the Q1 2022 financial highlights, there is an investment presented by Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings; followed by Jason Gesing, our CEO of eXp Realty, who will dive deeper into our differentiated model, agent growth and value proposition. We will then return to John Campbell and our leadership team for a continuation of the Q&A and finally, I'll share details on our June 2022 eXp Shareholder Summit to bring our session to a conclusion. Let's review with the beginning of these forward-looking statements. There 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. Please see our filings with the SEC, including our most recent quarterly report on Form 10-Q for a discussion of specific risks that may affect our business, performance and financial condition. We assume no obligation to update or revise any forward-looking statements or information. As a reminder, today's call is being recorded and a replay will also be made available on expworldholdings.com. Now for those of you who are joining on the eXp Campus today, did you have any questions here around the screens, you’ll see three of the top, hit the stage zoom button to the right of your chat box to zoom to a specific screen, you can hit the plus icon above the screen. If you happen to see no slides or a gray slide hit the refresh icon button at the top right hand corner of that screen to correct. While in eXp Campus, should you need any help or have any questions, please put that in a chat box that you see below on the left and a member of the team will contact you directly. As mentioned, the last segment of our fireside chat is the continuation of the Q&A. And here is a way that we're able to communicate and collaborate on some of these questions. You want to ask a question during the presentation, you can enter your questions by scanning the QR code presented on the screen or you can go to the phone, and go to slideo.com and type in the event code, EXPI. From there, you can submit your question and you can even vote up an existing question by giving a thumbs up. If you also like that question ask the screen will remain up on the left-hand side of the stage. At this time, I would like to turn the fireside chat to Glenn, our Founder, to start the earnings conversation with opening remarks.

Thank you, Courtney, and thank you all for being here. This quarter was another strong one for us. Although it wrapped up just over a month ago, 2022 is off to a solid start. Our growth and rapid expansion into multiple countries are significant drivers. eXp Realty remains the primary engine of our growth, supported by our Virbela metaverse platform, which we have been using since 2016 and acquired in 2018, unaware that the metaverse would become a significant focus during the pandemic in 2020 and 2021. Additionally, we have Frame VR, which I'm excited about, and I encourage you to check it out at framevr.io. Another component of our business is SUCCESS Enterprises, which includes SUCCESS Magazine and SUCCESS Coaching, now integrated into our co-working venture, which continues to gain momentum. We're also leveraging the SUCCESS brand in real estate through our SUCCESS landing platform. We'll focus primarily on eXp Realty, as it's the main driver for our company. The business model is designed to thrive in any market condition—whether it's rising, falling, or stable. Currently, we are experiencing some impact from higher interest rates, with inventory staying on the market a bit longer than it did at the end of last year. However, we are well-prepared to adapt to any changes, whether the market continues to grow rapidly or potentially contracts later this year or early next year. We have built our operations with the help of our enabling technology, VirBELA, allowing us to expand to over 21 countries, with a few new ones announced recently, including New Zealand opening this week. Our growth rate is impressive, and despite a slight dip in NAR numbers at the start of the year, our agent count continues to grow month-over-month. We have never recorded a month where we had fewer agents than the previous month. As we remain focused on agent growth, we continuously enhance the agent value proposition, guided by our Net Promoter Score (NPS), which helps us operate collaboratively rather than top-down. This focus on NPS drives our agent growth and ensures that our customers have positive experiences in buying and selling homes. Our global network continues to expand, experiencing over 100% year-over-year growth in our agent count, and we’re excited about the prospects in various international markets. This quarter was also notable for us as we reported our first $1 billion revenue for the first quarter, typically a slower period in real estate. Our company has consistently remained profitable and cash flow positive, with profitability increasing over the last three years. We have a variable cost model that enables us to maintain positive cash flow and earnings for the foreseeable future. While we can't predict the exact market conditions ahead, we are confident in our ability to adapt swiftly. Today, we received an award at the T3 Summit in San Antonio for being the fastest-growing brokerage, and we've accumulated several accolades. Recently, at an event in Houston, we learned that we are now the number one brokerage by agent count and listings in the Houston Association of REALTORS, demonstrating our growing presence in major markets across the country. While we have established ourselves in smaller markets, it's gratifying to see recognition from industry leaders. We are becoming a significant player in the U.S., Canada, and other countries, including the UK, Mexico, and India. Ultimately, our strong agent value proposition continues to drive growth. I’m particularly proud not just of our agent growth, but of our commitment to supporting our agents and staff, as reflected in our excellent Glassdoor scores this past year. We ranked in the top five large employers on Glassdoor, which indicates strong growth potential and enthusiasm for the company. I could elaborate further, but I'll now turn it over to John Campbell for any initial remarks and questions before we continue with the rest of the team.

Thank you, Glenn. It's a pleasure to be back from the virtual environment and to hear firsthand about the continued success you are experiencing in the market. I mention this every time, but it really feels like you are just getting started, as you are only reaching a small fraction of total US agents. There seems to be a significant growth opportunity ahead for you. While your performance is strong, the stock market isn't being kind to you, but this isn't specific to EXPI. The housing sector has faced a tough time overall. Stocks fluctuate, and investors tend to shift their focus between sectors. It's challenging to be on the downside during these times, but I encourage you to keep focusing on your work, as this situation won't persist indefinitely. On the investment side, we typically assess multiples when making stock evaluations, and for those less familiar with investing, that multiple serves as a measure of sentiment. Essentially, we analyze the difference between the enterprise's market value, as reflected by today's market price, and the anticipated earnings. This helps us gauge what investors are prepared to pay for your earnings. Currently, based on our forecasts, the stock sits at roughly 9 times forward EBITDA. This multiple was around 60 times early last year, and you've averaged 24 times since 2018. Applying that historical average multiple of 24 to today’s stock price suggests a value of about $40 for EXPI, meaning there is potential for more than double the current value. In the broader context, it's uncommon to find many companies in the market today trading at such multiples, especially with the disruptive capabilities you possess, combined with your revenue and earnings growth. To conclude, we believe there is substantial upside potential for the EXPI stock, but we need investors to shift away from a pessimistic mindset. But enough on all that, Glenn, I just wanted to maybe start off with one question. Clearly, it's another good quarter for you guys. So let's just start off kind of with your high-level thoughts? How things shook out? How that kind of fared relative to your expectations of what you point to as kind of the key fundamental drivers in the quarter?

Yes, we consistently highlight our Net Promoter Score as a key indicator of our performance. This metric remains significant for us, and we've observed some declines in certain areas, particularly in Canada over the last couple of quarters. We've dedicated a lot of effort to enhancing our NPS related to our Canadian operations. When we evaluate our performance, we consider what our model can achieve if we continue to deliver an excellent experience for agents, while also taking into account the current macroeconomic conditions. We are noticing some slowdown in the market, which has affected our growth rate—it has been slower than we initially anticipated, primarily due to the unexpectedly rapid increase in interest rates. This trend is becoming more evident in our numbers, though our growth in agent count continues to rise. In the U.S., our growth rate is also slower than expected, partly due to a decrease in the number of active real estate agents, even as we grew despite that decline. Overall, we feel positive about our performance, but we are seeing some macroeconomic influences that are aligning with our internal projections.

Yes. That's a good rundown. And kind of sticking on the bigger pick. I mean, obviously, there's a big fear factor around U.S. housing. Like I was mentioning earlier, a multiple is essentially kind of a gauge of sentiment. The multiples are employing in a lot of these stocks that were going back to 1990 existing home sale levels. So I don't think it's very surprising to hear a bit of a slowdown, obviously, with rates moving as they have. But Glenn, I ask you this every time, but like kind of just throw your crystal ball out us and give us your sense for where the market heads over the next several quarters?

I've mentioned this before, and a couple of weeks ago, Brad Inman asked me the same question. With the Federal Reserve planning further interest rate hikes and aiming to cool the housing market, I believe we will definitely see a slowdown in the market in the third and fourth quarters. That's my prediction going into next year. A slowdown could actually be beneficial for the market. From a homebuyer’s standpoint, there is a lot of inventory available. However, we still hear reports of many buyers facing multiple offer situations, unable to purchase the homes they want due to numerous offers, which were around 30 at one point but have since decreased to about 10 or 12 per home; it's still not balanced. I suspect the Fed will continue to incrementally raise interest rates, potentially exceeding 6 percent, which is not far off right now. Additionally, macro factors, such as the ongoing situation in Ukraine, create significant fear and uncertainty, potentially leading people to hold onto their cash rather than make purchases at this time. This influences both sides of the equation.

Yeah, makes sense. And just assuming – I mean, just as a hype of that, if the market kind of rolls over pretty hard later this year, you guys have seen plenty of market swings. Obviously, there hasn't been a dramatic down market that you've seen, the market swinging around in 2014, late 2018. And you performed well regardless of all that. So I just want to get your sense for how you think the eXp model kind of flex. And then also from an agent value proposition standpoint, what kind of stands out from the EXPI standpoint, if the market worsens a little bit?

One of the things that I point to is the second quarter of 2020. It wasn't a pleasant quarter. It was a time when COVID had really fundamentally changed everything for a short period of time. The transaction volume was down across the real estate industry. And yet, we turned out our most profitable quarter to date in that Q2. And the reason why was because we made the tough call, it wasn't a popular call. It was something that, we didn't know relative to residential real estate, if it's going to be essential service, what was happening, all of that, but we reduced the cost to operate such that we turned out our best quarter ever. We were able to do it, again, wasn't pleasant, not something I would look forward to doing again, but we are actually able to adjust our cost to operate very, very quickly in a down market. So that was one where there was a real shock to the system and yet we were able to turn out a very profitable quarter, which was really in our mind at the time, a self-preservation decision because, again, we didn't know what was going to happen in Q3, Q4, and we thought this market could be going off a little bit of a clip for a period of time. So – so that gives us that flexibility in a good market. We should do well in a bad market, we should capture markets there and still do well is the way that I look at it.

Yeah, makes sense. So that's all the kind of high-level questions I've got for right now. I think Jeff is going to do the financial rundown, and I'll come back later with some more kind of in-quarter and financial questions later.

Awesome. And so yes, so welcome my good business partner, Jeff Whiteside. We've been working together since late 2018, I think. Anyway, it's been a while.

It's been actually above four years so. All right. Well, thanks, Glenn. Thanks, Courtney, and thank you, John, for moderating today. Good morning, all, and thank you for joining our first quarter 2022 virtual fireside chat. On behalf of the team, again, I'm really proud to share our results and highlights for Q1 2022. So if we look at our first page, eXp World Holdings delivered another strong performance in the first quarter of 2022. At a higher level, growth in agent count, transaction volume, revenue, net income, and cash flow continues to be compelling. We continue to invest in our future, North America international technology, commercial, affiliated service, and global agency success. We had zero debt on the balance sheet and the agility to adjust where needed. As Glenn just talked about, we're built for good times and we're built for tough times. And so we're feeling great about going into whatever comes at us. We're leading teams in the industry, and we've got the best leadership team. We're delivering exceptional shareholder value. If we look at the second page for a high-level overview, our revenue in Q1 reached $1.010 billion, reflecting a 73% increase compared to Q1 2021. Our gross profit for the same quarter was $83.5 million, up 56% year-over-year. We reported a net income of $8.9 million in Q1, which is an 83% increase year-over-year. This net income includes a $5.1 million benefit from an income tax provision, mainly due to deductions from stock-based compensation. In Q1, our diluted earnings per share stood at $0.06, representing a 100% increase year-over-year. Our adjusted EBITDA for Q1 was $17.7 million, a 20% year-over-year growth. Additionally, our operating cash flow reached $62.2 million, marking a 53% increase year-over-year. Now, regarding our key metrics, we categorize them into operating and financial metrics. For our operating metrics in Q1, we maintain our business operations based on agent and employee Net Promoter Score, aiming to keep it above 70, which is considered world-class and predictive of agent growth, retention, and employee satisfaction. Though we saw a slight decline this quarter, we are still above 70, currently at 71.78. Adding productive agents to our platform is crucial for driving unit sales volume, revenue, and gross margin. Our agent count at the end of the quarter rose to 78,196, an increase from 50,333, translating to a 5% growth. The agent count increased by 55%, particularly showing significant growth in Florida, Texas, and California, along with global expansion. We recently announced 80,000 agents and to give you a split, we're approximately 88% in the US and 12% globally. Going down to the units. Our units were 114,305 versus 73,870, that's up 55%. Our price per unit was 362, up 9% year-over-year, and our volume in Q1 was $41.4 billion versus $24.5 billion, and that was up 69% year-over-year. Now going to revenue. The revenue, as I mentioned before, was up 73%, primarily driven by increased agents and transactions in North America. We look at our gross margin dollars, our gross margin dollars of $83.5 versus $53.5, up 56%. And our gross margin grew $30 million based on an increase on our transaction volume. Our gross margin percentage declined due primarily to higher-priced units and accelerated capping. If we look at our SG&A, our SG&A was 79.05 versus 48.6. So it was up 63%. SG&A costs increased due to higher investments in FTE and growth support international portfolio, technology, and affiliated services. As we look towards the next few lines here, we've gone through the operating income and the net income. So I'll just take you down to the bottom, which is our operating cash flow. You can see the operating cash flow increased 53% from $62.2 million to $40.6 million, and our cash and cash equivalents of the money we have in the bank after all our expenses and investment was at $130 million versus $108.2 million. So that's great results from a key metric standpoint in the quarter. Now if we look at some other Q1 investor highlights and milestones on the last page. In 2022, we marked the 10th consecutive quarter of achieving positive GAAP net income, positive accumulated earnings, and a strong shareholder equity position. As mentioned in the press release, we paid our third cash dividend in Q1 of 2022 and have announced another dividend for this quarter, which is anticipated to be paid on May 31, 2022. Regarding share buybacks, we repurchased about $30 million of common stock in Q1. The Board approved an amendment to increase our stock repurchase program from $400 million to $500 million and raised our monthly buyback from $10 million to $20 million. We have strong confidence in the company's future. The eXp real estate platform has now expanded to 21 global markets. In the first quarter of 2022, we announced plans to open three additional locations, including New Zealand, Chile, and Dubai, in the near term. It was a fantastic quarter from our perspective. We have delivered strong results consistently and are well-positioned to address future challenges. So now I'd like to go over to our CEO of eXp Realty, Jason Gesing. He'll cover our innovative model, agent growth, and value proposition. Good morning, Jason.

Good morning, everyone. Thank you for the warm welcome. I want to start by extending my heartfelt congratulations to our agents, brokers, and staff for their hard work that has brought us to this point. As Glenn mentioned, eXp was founded to succeed in all types of market conditions, specifically designed for adaptability during downturns as well as in strong markets. We believe we are uniquely positioned for growth when the next market shift occurs. This also means we can assist brokerage owners in maintaining their businesses while reducing fixed costs, expanding into new markets with lower risks, and leveraging their networks for growth. We've already seen many brokerage owners join us and successfully migrate their agents. They’ve freed themselves from difficult supervision, expanded into new regions, and achieved higher profitability and satisfaction. This is the kind of market we think makes us an attractive option for brokerage owners when the market changes. Our financial health is strong, with consistent positive cash flow and no long-term debt, distinguishing us from competitors burdened with debt and struggling for profitability. This financial stability allows us to continue investing in growth. Our flexible business model, centered on our global metaverse community with over 80,000 agents, helps reduce operating costs associated with physical locations. We're excited to see the success of our eXp relocation services, which have generated over $425 million in pending and closed volume and more than 2,200 referrals, with a significant number coming this year. Our iBuyer program, ExpressOffers, is also gaining traction, especially as sellers look for quick options due to rising mortgage rates. Moreover, we've introduced a unified global financial system to enhance operational efficiency, which is critical as we scale internationally. We're seeing significant growth globally, including new regional hubs in several regions and a notable increase in agent numbers, reflecting a 314% year-over-year growth. Our commercial division is also thriving with significant revenue increases and expanding its service offerings. We prioritize value for our agents, demonstrated by our Net Promoter Score of 71, which highlights our commitment to building an agent-focused platform. As the first cloud-based brokerage, we empower our agents with flexibility, collaboration, and access to vital resources. Our healthcare initiative, addressing a long-standing industry challenge, has enrolled over 4,100 agents and 12,000 family members. Finally, we continue to focus on fostering a strong culture and community through initiatives such as our Diversity and Inclusion efforts and our ICON Achiever program. Our employee satisfaction scores remain high, and we're honored to be recognized as a top workplace. Thank you for the opportunity to share these updates.

Yes. Thanks, Jason. Let's return to the Q&A segment and start with one of the positive highlights from the press release. Glenn, you mentioned that you have increased your buyback authorization and are doubling the pace of monthly buybacks. Can you explain what influenced the Board's decision?

We had a few points to discuss. First, we limited our stock buyback to $10 million a month, which is the reason we ended up accumulating more cash on our balance sheet, totaling $30 million in buybacks. Our agreement with the Board is to keep $100 million in cash available because we believe this amount is sufficient for our brokerage operations. This strategy allows us the opportunity to repurchase more shares over time. It's not a short-term situation, and considering our growth and ongoing cash flow, we may need to reassess this in the future to maintain that $100 million cash balance. Our focus is on finding the right pace for this. Additionally, we want to demonstrate our commitment to offsetting any dilution related to our equity programs, and in some cases, actually reduce that dilution and return to previous levels regarding the number of shares issued and fully diluted shares outstanding.

Yes, it makes sense. You saw a 20% increase in the cash balance sequentially, so you're in a strong position with your balance sheet. It's challenging to have your multiple under pressure in the public markets, but on the M&A side, you may be able to find some appealing opportunities at attractive multiples. I'm not sure how much this has affected the private markets, but we are likely performing better than the public markets. Please share your thoughts on M&A, which hasn't been a major focus for you, but I'd like to hear your latest perspective on it.

Yes, Kyle Kittleson leads our M&A efforts within the company, managing multiple opportunities monthly and sometimes even weekly. We focus on two main aspects: synergy and culture. Typically, about 80% of M&A attempts fail due to cultural mismatches, so we carefully evaluate both factors. We are currently exploring various opportunities and expect to announce some M&A developments in the coming months. While we don't have any major deals in progress, we have several smaller projects in the pipeline. Given the current pressure on housing stocks, we believe there will be opportunities to acquire assets at reasonable valuations since the market has been quite volatile over the past couple of years. We'll assess potential acquisitions based on both financial and cultural alignment.

Yes, makes sense. And then maybe one for Jeff, here. On gross margins, obviously, that's been a pretty big focus for investors over the last two or three years, but still a little bit of pressure year-over-year. I think almost all of that's just capping, but you've grown it sequentially for the second straight quarter. Before we kind of get the moving parts there, just thinking about the full-year gross margins. Just help us out on this, if you can. If we were to assume that the average commission per agent kind of stayed the same with greater revenue growth, would you be able to see some gross margin expansion? Would it kind of be flattish year-over-year? Just latest out there?

Yes, John. One of the main insights we've gained, which is somewhat apparent, is that as housing prices have risen, our gross margins have improved. Historically, we've maintained an average around 8.4 to 8.5 since 2018. As Glenn mentioned, if we see a decline in business and volume towards the end of the year, we believe this will actually help the percentage. However, our primary focus remains on the gross margin dollars entering the business, as that’s where we derive the most benefit. Historically, our margins have been in the low 8s, and we recorded 8.3% in the latest quarter. Depending on the housing market's trends and whether prices stabilize or decline alongside a drop in volume, we expect the gross margin percentage will increase. Nevertheless, we still enjoy a very healthy gross margin dollar return from the business.

Yes, makes sense. I think on the investor side, we tend to focus too much on percentages.

Yes, I think so. I mean, you can see, I mean, the percentage is obviously, we get to the same market share, right? So that's a big deal for us and investing in the future is a huge deal for us. So we're really looking at that dollar figure, and that dollar figure is growing substantially every quarter.

Yes. Percentages do not pay the bills. That's for sure. Okay. Longer term, do you see a pathway back to the kind of low double-digit margins or gross margins? You guys have done that in the past, but I don't know how much of an impact from ancillary services, that's actually one of the questions from Slideo here, but just talk about kind of the impact of ancillary services and what they can do for gross margins?

Yes, I believe there is a significant opportunity for us in affiliate services and related businesses such as transaction coordination, lead generation, healthcare, mortgage, and title escrow. From my perspective, we have the potential to increase our gross margin by a point or two over the long term. Last year, we finished with very high revenue numbers, which are continuing to grow. Therefore, we see the opportunity to add around two percentage points to our operating margin in the long run.

Yes. Makes sense. And then shifting gears to the OpEx operating expense side of the business. I guess just first, can you give us an update on what the variable kind of versus fixed mix looks like today?

Yes. I believe most of our expenses are related to supporting the brokerage, which are variable expenses. A significant portion of our costs is tied to the growth of the business, reflected in revenue share. Therefore, as the business decreases, those expenses decrease as well, providing an automatic cost buffer. Additionally, as Glenn mentioned earlier, we have options to adjust our costs, particularly since most of our expenses are variable and we can take action if necessary. However, we are currently focused on driving revenue growth in international markets, commercial sectors, and affiliate services. Our primary aim right now is to invest for growth, and we believe that once we move past this period, we will be in a strong position in both the real estate business and the launch of our affiliated services.

Yes, it's a good rundown. One of the things we do, just to try to give a sense because as you mentioned, I think the fixed cost side of the model is a low, low percent of the kind of cost base, but there is a little bit of leverage potential there, right? And you guys – we've looked at it typically on a fixed cost basis per agent. So how much fixed cost is it required to support on a per agent basis that you're getting leverage on that for several years, and then over the last probably 1.5 years, it's kind of going the other way a little bit. It seems like that a lot of this investment, you kind of called some of this out, but maybe walk through some of those investment areas and why the spending there has been a little bit lesser than the revenue growth?

Yes. I mean one thing I would say is that, the technology investment that we're taking on now when we've been taking on over the last couple of years is, all about getting more productivity across our business. So that, that SG&A, direct SG&A costs to support the broker go down. So, Glenn maybe a couple of comments from your side in terms of the productivity and technology that we're working on across the business.

Yes, we are definitely focused on research and development to enhance our transaction workflow process. We have made some investments aimed at simplifying the transaction workflow for both our agents and internal staff. Additionally, we are heavily investing in our portal, specifically with Showcase IDX to expand exprealty.com and .ca. Internationally, our goal is to enter as many countries as possible in a timely manner, understanding that it may take time to achieve positive cash flow. However, we have already reached positive cash flow in several countries we've expanded into, thanks to our low-cost operating model. We intend to maintain our momentum in entering new markets, learning from these experiences, and making the necessary adjustments to establish ourselves as significant players. These investments will yield benefits in the coming years. While we are aware of our short-term results, our primary focus is on achieving our ambitious goal of reaching 500,000 agents within five years. This requires ongoing investment as we aim to become the largest, most agent-centric real estate brokerage globally. Our emphasis is on long-term growth, understanding that what we do now will be instrumental in establishing eXp as a dominant player in the future. Although some may view short-term metrics as indicators, we prioritize a long-term perspective and the necessary steps to ensure our future success.

Yeah, makes sense. I mean, that's like that's the delicate balance with Wall Street, obviously, investing for the long-term while showing near-term results. It's just a balancing act for sure. I want to hit you with one question. Don't need for this at all to be a zinger, but this is a question we get quite often from investors. I've seen it in the chat box here, someone was asking about it. But Glenn, I believe you've got a standard kind of 10b5-1 plan is driving out some of the shares. So how do you respond to the question, why sell here?

I prefer not to sell, but I have options from 2012 that expire this year. I made the mistake of being overly optimistic about the stock last year, so I sold about half of those options at a higher price, which resulted in a significant taxable event for me. A large portion of those sales was to cover taxes, roughly around $16 million, and to rebuild my personal cash reserves. I sold a small amount, around 9,000 shares daily, instead of doing a large bulk sale. I'm not certain I'd approach it the same way in the future, but I have a 10b5-1 plan in place until September, with a floor price of $15 per share. Since I'm not selling at that price, the situation might change if the stock remains under pressure later in the year. I still control and own a substantial amount of stock beyond this, which represents my core holdings, but this discussion mainly revolves around the stock options expiring this year.

Yes, makes sense. There was a question on the slido and also myself curious about this. So talk to us about set-lending. The number of loan officers, kind of, how far off the ground you've gotten that thus far and when you really expect it to start contributing?

Yes. There are some encouraging signs. This is our third venture into the mortgage sector, and we currently have more than 31 loan officers across several states. We started in Illinois and have expanded to Denver and Arizona. We're significantly expanding our network of loan officers. Over the last couple of months, we've completed around 30 transactions each month, working on refining our system alongside Kind Lending, which includes many members of the former Stearns Lending team. They've been putting in a lot of effort to establish an effective process for our consumers and agents, and we're starting to gain traction. While it's not substantial yet, a key aspect of our model compared to other lenders is that we're primarily focused on purchase-based business rather than refinancing, which is virtually nonexistent at the moment. This positions us well for growth and eventually having our own retail-oriented lending branches. We're treating this as a unique joint venture, where business isn't solely generated by eXp Realty; these loan officers are bringing in their own clients. Glenn Stearns has expressed a goal for 50% of the loan volume to come from sources unrelated to eXp. He’s actively pursuing this approach and expanding the pipeline from those loan officers. Glenn has experience in this area, and I believe he's particularly passionate about this initiative. I feel optimistic about its direction, and I expect that by the third or fourth quarter of this year, we will start to see measurable results reflected in our financial reports.

Okay. Great to hear. I've got one last kind of two-part question here. Big picture and this is my last question on my side. But first, you crossed $1 billion of quarterly revenue last year. That was a pretty big event for you guys. You've now shown together three straight quarters of over $1 billion, including 1Q that is seasonally weaker. So, you guys are on a really good path, but medium term, near term, whatever you think. When is the next milestone, the $2 billion of revenue? When do you think you could cross that? And then, the second part of that is, you guys have talked to the 500,000 agents in five years. Let just get your latest view on that kind of divisional net front.

Yes, I believe 2023 is the year when we might achieve our first $2 billion quarter. It's possible it could happen this year, but there are some macro challenges to consider. So, I see 2023 as a reasonable target for reaching that $2 billion in revenue within a single quarter. As for the goal of having 500,000 agents in five years, I see that as aspirational. The timeline may be optimistic, but I genuinely believe we can reach that number over time. We expect international markets to contribute significantly, and we like to foster internal motivation around where we could be if we maintain a strong focus on our agent value proposition, aiming to be the most agent-centric real estate brokerage globally. If we do well, it's like the philosophy of building something great—if we create it, they will come. We are committed to developing the best real estate broker organization while being highly focused on our Net Promoter Score. This commitment will lead to various benefits for a well-managed organization and, ultimately, to a solid growth in agent count over time.

Yes, I have one more question that came in the chat box, and it's something I wanted to ask earlier, specifically for Jeff. Regarding the tax benefits, you've released valuation allowances a couple of times. Can you talk about the sustainability of that, particularly in relation to the share issuance, and whether we should expect this to continue over time?

It's difficult to predict, as you probably know, John. We experienced it in our numbers last year. Essentially, we've been able to generate net income consistently over a long period. Now we can benefit from the compensation tax deduction, which depends on the associated costs and the stock price. This question arises often, and while it should continue in the foreseeable future, we can't calculate it until the end of the quarter to see how the stock price impacts those costs. We've been consistently recognizing this expense for the last three or four quarters, and we expect it to continue. However, we're uncertain about the specific level due to those two factors. Nevertheless, it's a positive sign for our company that we've maintained positive net income for so long, allowing us to take advantages like this tax deduction. That's all I can share for now. It's not something we can precisely predict, but it should persist to some degree in the near term.

Absolutely. Well, that's a great rundown. And I appreciate you guys giving me the opportunity to join you again in the virtual world, especially on the heels of such a great quarter. Thanks for your time.

John, appreciate it.

Awesome and Courtney Chakarun, our Chief Marketing Officer, is going to wrap up this earnings call.

Thank you, Glenn. A reminder, we have our annual eXp shareholder Summit next month. This event is hosted in Orlando, Florida on June 19 through 21. You can actually look if you were in eXp campus on either side through the agenda. You could also see in this presentation a QR code as well as going to our expshareholdersummit.com. This year's event is going to showcase the company highlights, official business for our shareholders, our leadership, industry-leading agents, which I see here today, sharing successes in special guest features. So with that, we also have a virtual opportunity to view the general session in eXp campus. That's where we are today and a live stream length that will be made available on our homepage, expworldholdings.com. Thank you for joining us today. This concludes the eXp World Holdings 2022, Q1 Earnings fireside chat.