AGNT, Inc. (AGNT) Q2 2022 Earnings Call Transcript

Equity research analyst for real estate and technology at Berenberg Capital Markets, we are pleased to welcome back Justin as our moderator. After this initial segment, we will proceed with a presentation that includes a review of the second quarter and year-to-date financial highlights for 2022, presented by Jeff Whiteside, CFO and Chief Collaboration Officer at eXp World Holdings. This will be followed by insights from Shoeb Ansari, Chief Information Officer, and Leo Pareja, President of Affiliated Services, who will discuss our technology and referral services priorities. We will then return to Justin Ages and our leadership team for a continuation of the Q&A session. Lastly, I will provide details about the upcoming EXPCON event, which will focus on offering top-tier education, training, coaching, and networking for agents and brokers, before concluding today's session. Let's start with a review of the forward-looking statements. Today, several forward-looking statements will be made that should be considered alongside the cautionary statements in the company's SEC filings. These statements are subject to various risks and uncertainties that may lead to actual results differing significantly from the predictions. Please refer to our SEC filings, including the most recent quarterly report on Form 10-Q, for a discussion on specific risks that could impact our business performance and financial condition. We have no obligation to update or revise any forward-looking statements or information. Additionally, this call is being recorded and a replay will be available on expworldholdings.com. Before we begin, I'd like to outline a few logistics for those of you attending from the EXPI campus. You will notice there are three screens; by pressing the stage Zoom button next to your chat box, you can focus on a specific screen. You can also click the plus icon above that screen. If you see no slides or a gray slide, refresh the screen using the icon located at the top right corner. If you need assistance or have any questions while at the EXPI campus, please submit your remarks in the chat box on the bottom left, and a team member will reach out to help you. As previously mentioned, the final segment of our Fireside Chat is dedicated to continuing the Q&A. If you'd like to ask a question during this presentation, you can scan the QR code displayed on the screen with your phone or visit slider.com and enter the event code EXPI. There, you can submit a question or upvote an existing one by clicking the thumbs-up icon. This screen will remain on the left side of the stage for your convenience. Now, I would like to hand over the fireside chat to Glenn Sanford, our Founder, and Justin Ages, to kick off the earnings discussion and opening remarks.

Awesome. Thank you. Thank you, Courtney. And welcome again, Justin for helping host today. So Justin is one of our covering analysts and I know that you cover the housing market and watched a few videos recently on CNBC and other places. So it's great to have you here as part of our fireside.

Yes, Glenn, thanks for having me. It's great to be back here. Happy to chat with you and the rest of the EXPI team. Now, let's start obviously, the housing market is always a topic of interest for both the public and investors alike. So hopefully each is going to find something worthwhile from our chat today. Just starting there then given all the headlines surrounding the housing market, whether it's ongoing price increases or affordability issues, I think I would describe the quarter for EXPI as pretty solid. You guys saw brokers and agents continue to grow transaction volume increased, you even increased the dividend. So with that in mind, Glenn, how do you feel the second quarter was compared to your expectations, what exceeded, what fell below?

Yes, so I think the big part was in Q2, obviously the headline was the Fed raising interest rates, that changed the game quite a bit and we definitely saw a softening, especially toward the end of Q2, June especially we saw a slowdown in transactions, I think primarily around interest rates. So what's interesting is interest rates have now retreated somewhat, which is actually, I think, we will start to see some increase in buyer volume because of that, but that's still yet to be seen. But I think the interest rates definitely slowed things down. And certainly slowed it down below what we were expecting at the beginning of the year. What we've been able to do is we started to moderate some of our expenses and other things to match the market, which is part of the reason why I think we were able to increase our dividend even though we saw the market slowing down. We just increased it modestly. But it certainly showed that we were making some progress. I think the other piece and certainly as we look at what took place in eXp, we definitely saw us start to retrench based on the market, we introduced some new education around what we're calling 'level up', we've got internal external outreach. Something to note that's not even part of Q2 but will be part of Q3 is that we have the largest agent-run event in the entire industry is going to actually take place this month in Dallas. And so that's pretty exciting. We'll have over 4,000 agents hosted by a number of our top agents, and Brent Gove, one of our top agents and brokers has actually put this event together, and actually has Tony Robbins coming to close that out. So we're still seeing a lot of agents looking to join, a lot of agents exposing the business model to other agents, we're supporting them with a lot of technology and tools, we've got some cool things we'll be announcing in the next month or so around a marketing suite, which we're excited about. And then we start to look at some of the other businesses, Virbela, it's continued to grow from a Metaverse perspective. But then the Frame VR platform is actually the one I've been talking about and I'm most excited about because it's completely web-based, we're starting to attract a number of larger clients to that platform. So I think there were about four Fortune 500, Global 500 companies in the last quarter or so that have actually started to use the platform. Some of them are paying clients, and some of our bigger clients now are actually using Frame VR. So we're excited about sort of the growth there. I know I'm jumping into some of the other parts of the business. But SUCCESS Self has continued to grow and expand. And SUCCESS Coaching has really started to get some traction. So that's been exciting. And so you look at the fact that personal development coaching has about a $20 billion a year TAM with some good profit margins, we're actually pretty excited about the fact that we are really in a position to be actually making money in SUCCESS and starting to actually grow into that business, we introduced a new coaching model. We did that actually at the shareholders meeting, so anybody who attended there got to hear a little bit about that. And that's starting to get some traction. One other note around SUCCESS is that we also have a co-working model under the name of SUCCESS Space, and we've actually got 10 franchises now committed, the first locations opening up this month in August. So a lot of good things there. And then I think the last piece, and again, a lot of these are really more current quarter than prior-quarter, because we tend to think about all the things that we can do, and obviously the results are the results. But we did close the purchase of Zoocasa, which matches up with something we've been talking about for a number of years, which is what we've referred to as our alt portal strategy. So we've had a number of great strategic conversations and meetings to create alignment to expand Zoocasa across most of Canada and starting to expand in the U.S., starting to get leads into the hands of agents in other markets outside of their primary market of Toronto, Canada. And so that's starting to get some traction as well. So I think those are some of the highlights. I know that Leo will talk a little bit about what we're doing with SUCCESS Lending and affiliated services. But one thing to note is just that we've started to really expand our leadership team. And so we'll hear a little bit from Shoeb and Leo here in a little bit, but Shoeb Ansari joined us as our Chief Information Officer and has really been retooling the way we think about improving workflows and technologies. He actually helped us find somebody who's joining us starting tomorrow, Patrick O’Neill, our Chief Operating Officer for eXp Realty. And then, of course, Leo Pareja is our new President of Affiliated Services. So that's exciting. And we'll get to hear a little bit from them as well. So those are some highlights, some commentary, obviously on the housing market earlier.

Yes, that's a pretty good synopsis going on, it just kind of shows the breadth of everything that you're involved in, and everything that you're growing to. In specifics to the quarter, maybe you could talk a little more about what were the key drivers of, let's say, the transaction volume growing, was it more on the housing price side, as home prices continue to accelerate? And as you continue to grow your agent base, what's resonated with attracting productive agents to your platform?

Yes, so the key drivers certainly, agent growth is a big part of it. We think about the idea that the average agent in the industry is going to do X number of transactions based on what's going on, that's going to be the biggest single predictor of the longer-term of the company. And so that was the biggest driver, our sales prices were generally steady in the quarter. And there was, quite frankly, more notable churn in the lower to non-producing agent category. So, I think that was because, especially as we got toward the second half of the second quarter, the fact that there were fewer transactions due to higher interest rates, some of those agents who are struggling to put deals together, they generally churned out or in some cases may have just tried to find some place they could hang their license that was cheaper. And so we did see some of that, but our biggest drivers really were around continued growth and market share. And as a result, the sales followed.

Thanks, Glenn, really good to kind of dig in there and get the puts and the takes of what's driving the quarter. And we touched on the housing market in general. So I won't ask you directly to go to your crystal ball and what you think; I'll come at it from a different angle. Even as mortgage rates kind of retreat from their highs, many are expecting the housing market to slow. One of the things that we've been really keyed on is the advantages that EXPI has in recruiting agents. So, can you take this opportunity to talk about those advantages over other models and then how that translates to your growth and market share gains?

Yes, so most agents in the industry belong to more traditional real estate brokerages. So whether they be part of the Keller Williams, Re/Max, Berkshire Hathaway, most companies are geared as a franchise with some sort of franchise fee off the top, typically 5%, 6%, 7%, and then they're typically on a 70:30, 60:40 but probably a 70:30 with the local office. In most cases, there's some sort of cap where they reset every year and that might be anywhere from $20,000 to $30,000 that they pay the local office before they go to 100%, if they do have a cap. In the eXp model, we don't have a franchise fee. Our agents are on an 80:20 and they have a $16,000 cap. So just right off the bat, agents effectively get a raise coming to eXp. I mean, we do have an $85 a month tech and education fee, so that's included in our model. Most brokerages charge more than that on a monthly basis as well. So, agents save money, but then the next part of it is that of that 20%, we pay half of that back out in the form of what we refer to as a revenue share. And so that's the benefits that agents get from helping the company grow by attracting other agents that they're doing cross sales with, et cetera. And then, of course, we were the first company to really provide meaningful equity to agents and that being in a public company. And so that was another element that's again, missing from the 90% plus of agents out in the field, don't have revenue share and equity benefits in a competitive cap and split model. So all of those make us attractive, and I think it's one of the reasons why we're picking up market share across not just the U.S., but actually now the globe in 21, 22 countries, and starting to grow with a very similar model, even internationally, which is quite attractive. When you look at other models internationally, which are more akin to a 50:50 split with the agent. Our model is normally around a 75:25. Internationally, which makes us again, a very competitive model, even before you start to add in the revenue share and equity benefits.

Yes, that's really interesting, Glenn, and that just shows how nimble EXPI can be in various housing markets. And I'd be remiss to mention something that you didn't even know you called it a little modest, is that the dividend increase makes that share for the agents just a little more valuable. So I think that's a good starting point on the high-level questions that I have. So I'll turn it back to EXPI to continue the presentation.

Okay, awesome. Well, let's welcome up Jeff Whiteside to talk a little bit about the financials.

Thank you, Glenn, and thank you, Justin, for hosting today. Good morning, everyone. I appreciate you joining our second quarter 2022 virtual fireside chat. On behalf of our dedicated agents, business units, and staff, I am excited to share our results and highlights with you today. A special welcome to Michael Ball, who kept the entire international team awake for this, and we truly appreciate your presence. As we review our first page summary, EXPI has achieved another record quarter with strong performance in Q2. We have seen ongoing growth in agent count, transaction volume, revenue, gross margin dollars, and cash flow. Our market share continues to grow, supported by a sustainable operating model and cash flow, which has allowed the Board of Directors to approve a 13% increase in our dividend. This reflects the solid model we are operating under. Moving forward, we completed the first half with a very resilient model that we have referred to as "built for this." We are prepared to tackle the challenges ahead, having successfully navigated various economic cycles and market challenges in the past. We maintain zero debt on our balance sheet, have a variable cost structure, and rely on our organic growth models. As Glenn mentioned, we are hosting major agent events nationwide, including Brent's upcoming event. Our organic growth model is continually expanding, and when I joined in 2018, we had a small group of influencers; now we boast hundreds across the country, which is further driving our international growth. Lastly, we recognize that the second half of 2022 may present challenges in the industry, so we are making ongoing adjustments to our cost structure for the full year in preparation for changes in the economy and the real estate sector. We are closely monitoring the business, our cost structure, the volumes we're seeing, and forecasting for the latter half of the year, and we will continue to make adjustments as necessary. Now, let's move to the second page. In Q2, our revenue reached $1.4 billion, representing a 42% increase compared to Q2 2022. Our gross profit for the quarter stood at $107.3 million, up 34% year-over-year. We reported a net income of $9.4 million, which was a 75% decrease from 2022, although it was up 6% compared to Q1 2022. This variance is primarily due to a considerable tax benefit of $22.2 million we received in Q2 2021, in accordance with GAAP. Several tax benefits were applied to our net income, which explains the significant difference from the previous year. Our adjusted EBITDA, which excludes non-cash expenses like stock compensation, was $26.9 million, remaining stable compared to the first quarter of 2022. Additionally, our operating cash flow for Q2 was $77.2 million, a 27% increase year-over-year. Focusing on our key metrics, our agent NPS was 68, while our employee NPS was 78. We aim for a world-class goal of 70 on our net promoter scores. In our Realty business, which is crucial to our financial performance, increasing the number of productive agents on our platform is essential as it boosts unit sales, volume, revenue, and gross margin, which we reinvest in our agents and return to our shareholders. Our agent count at the end of Q2 was 82,856, marking a 42% increase from the same time last year. We also transacted 150,032 units in Q2, a 30% increase from 2021. While we experienced some price flatness towards the end of the quarter, the price per unit increased by 11% year-over-year. The volume reached $57.9 billion, a notable 44% increase from last year, which reflects an increase of $40.1 billion. When examining our financial metrics, we have gone over revenue, gross profit, net income, adjusted EBITDA, and operating cash flow. Another important metric is our gross margin percentage, which was 7.6% in Q2 compared to 8% in Q2 2021. The challenges we face with profit percentages stem from being in a high-volume business with rising prices. Although we have seen remarkable growth in gross dollars, the percentage is pressured due to volume and price increases. Our SG&A expenses, which are essential for investing in our agents, expansion, and staff, increased from $63.4 million to $95.6 million as a result of our business investments, particularly in technology and international services. Our operating income for Q2 2022 was $11.6 million, down from $16.5 million in 2021, mainly due to one-time expenses incurred in Q2 2022. Meanwhile, our cash balance at the end of the quarter rose to $134.9 million from $107.4 million, reflecting a 25% increase, putting us in a strong financial position with no debt. Looking at milestones from Q2 2022, we achieved positive GAAP net income for the 11th consecutive quarter and continued to see positive accumulated earnings and shareholder equity. The board decided to increase the dividend by 13% from $0.04 to $0.045. To counterbalance dilution from agent awards, we repurchased approximately $50 million of common stock in Q2 and returned around $6 million to shareholders through dividends. Overall, we returned about $56 million to our shareholders through stock buybacks and dividends. If I look at our year-to-date 2022 results compared to 2021, our agent numbers increased by 42%. Our units rose from $189,000 to $264 year-to-date, a 40% increase. Volume grew from $64 billion to $99 billion, up 54%. Our revenue has also increased by 53%, totaling $2.4 billion compared to $1.5 billion. You can see the growth chart. Our gross margin reached $57.3, up 43%, thanks to higher transaction volumes. As I mentioned earlier, while volume and price increased, the percentage did decline. We discussed SG&A and net income. Furthermore, our cash and cash equivalents have risen by 25% year-to-date. So if we go into our next chart, this is a chart I always like to kind of bring people back to a little bit. Taking a quick look at our historical growth in agents and revenue. From 2018 through Q2 2022, we've gone from $500 million of revenue in 2018, with 15,000 agents to $2.4 billion of year-to-date in Q2 2022 with 83,000 plus agents. And when we look at this chart, it's actually very strong growth, extremely strong business model that we've grown on with cash flow and zero debt. And what we believe, is a long road of growth opportunities ahead for EXPI. So if I go to my final chart, please. We've been asked to quantify our addressable market a number of times, and you'll see in the last chart, our estimates that we see from an addressable market standpoint is there's about $467 billion of revenue that we see being in our addressable market. So if I just start at the bottom of this chart, our core market, which is a U.S. residential real estate brokerage, is $106 billion. Our professional coaching opportunity, as Glenn mentioned before, is about $20 billion. Our growth verticals, mortgage title escrow, and affiliated services $54 billion, expansion in U.S. commercial is under $12 billion. And our expanded opportunity in international real estate is under $95 billion. So as you can see, our growth, historical growth has been fantastic, but there's still a long way to go. And we think the addressable market is wide open. And as we go through these challenging times, potentially in the second half of this year, we're also investing in the company both from a leadership standpoint, and a technology standpoint to actually go after these markets. So feeling really good where we are. And that's my reporting from a financial standpoint. So right now I'd like to pass it on to Leo, our President of Affiliated Services. Thank you all and welcome, Leo.

Thank you very much, Jeff. I'm actually very grateful to be here and be part of this team. Over the last several years, eXp has experienced explosive growth in agent count, and that's actually translated into hyper growth of transactions. Of a company of our size now, we're poised to take advantage of that big opportunity and create higher attachment rates across the board and create additional monetization that is similar to the incumbent players like Anywhere and Berkshire Hathaway. The second part of my focus initially will be to really build out a diversified channel of corporate referral sources, ranging from foreclosure sales, corporate relocation contracts, LED networks in captive channels and partners due to our robust national coverage that makes us an amazing partner for large participants. We're a large monolithic brokerage with national coverage, which makes us an easy button for a lot of these players that we weren't before. This internal discipline will be a competency that we will use for attraction and retention. This can potentially also increase our per person productivity, which is a very important metric to focus on. In addition to our external opportunities of attraction, we'll also be investing in our internal lead generation capabilities with our new investment in Zoocasa and potentially scaling that. So we're really focused on two categories. One, generating attachment across the enterprise at all transaction levels, and two, being able to refer additional opportunities to our agents to increase company dollar as well as retention and attraction. With that, I'll hand it over to Shoeb. Thank you very much.

Thank you. Good morning, everyone. I'd like to highlight three key outcomes, after to continue to fuel our growth. First one, increasing operation, number two, providing an exceptional experience to our agents. Number three, regional expansion. Let's go through each one of them. Over the last several years, we have done an outstanding job in scaling our operational processes to support the growth we have had. Using our experience, we are building just the right solutions, driving our productivity to further enhance our transaction unit economics. For example, tighter integration between our transaction processing system and ancillary systems that surround, that reduces the steps necessary to process a transaction, sanction of our work queue management process where we can be very efficient in how we process each one of the transaction with speed. Let's talk about exceptional experience, solutions like myEXP, we aim to provide an easy-to-use surface for our agents to conduct their business well, we will continue to deliver incremental improvements to myEXP space in an agile manner with our agents such as using it as an agent-facing portal into our transaction management system, making it easier for agents to find what they need. Let's talk about regional expansion using our cloud-first strategy and effective use of partnerships across the globe coupled with having a set of eXp core systems that is common to our global eXp footprint. We can provide regional experiences while leveraging our domestic expertise and operational processes to process transactions and serve agents. Now I'll pass back to Justin Ages for the continuation of our Q&A with Glenn and Jeff. Justin?

Thank you for the presentation. A lot of interesting information to come out. Hopefully, we have enough time to get to all of it. Given Jeff's presentation, I think I'll just start from the CFO's perspective. Jeff, what stood out to you? Was it maybe the dated SG&A, or was it the ongoing performance; can you give the opportunity to expand upon that?

Yes, thank you, Justin. We had a fantastic first quarter and the initial two-thirds of the second quarter have also been strong. However, as Glenn pointed out, we are beginning to notice a slight slowdown in our growth expectations for June due to the current economic environment. What has impressed me over the last couple of years is our organic growth model. Our agents are active across the country, from Detroit to Nashville, consistently expanding our business. This momentum will persist regardless of economic fluctuations. Additionally, as we've mentioned, there is significant growth potential in all the business areas we are pursuing. We have also been proactive in addressing market feedback received in the first quarter about a potentially challenging second half of the year and early next year. Therefore, we started revising our full 2022 plan from a cost perspective back in Q1, and we are currently focusing on ensuring it's appropriately adjusted to align with the expected volume. We are preparing to navigate whatever circumstances may arise.

Thanks, Jeff. And continuing along with that, I've got a question from slide out here, Tom White, hoping you can quantify the slowdown in an operating expense, operating expense in the second half of the year. Can you put any numbers on it or directionally how we should be thinking about that?

Yes, I mean directionally, we had a plan, and we are going into 2022, and we're looking to decrease that plan by approximately 25%. So that's kind of, we don't really break out our forecast for SG&A and things like that, but we're looking to decrease our spending by about 25% compared to what we planned going into 2022.

Okay, thanks. That's helpful. And then I just want to jump to some of the new presenters on the Affiliated Services view, I think there's plenty of opportunity there. And then it could lead to some really exciting movements for EXPI. So can you discuss the high-level strategy or what you have in mind in general for that business, and also add on as it pertains to the lead gen business?

Leo, do you want to take that?

Yes, absolutely. So at a high level, there are services that attach to every real estate transaction across the country. And with our current size and scale, we have an untapped opportunity to try to get aligned with the right partners and get the proper conversions that you see other established legacy players have. And then if we switch over to the referral business, that you can point to companies like Cartus, inside the Anywhere Family of Companies, where there is a very strong affinity from the agents inside of the platform to stay within the company, and really count on that referral business that's corporately generated on their behalf on an annual basis.

All right, thanks for that, Leo, that's helpful. And then maybe one for Shoeb on the technology side, one of the key kind of growth facets is making agents more productive. And my ears were a little peaked with this myEXP, the incremental improvements there, the agent facing portal. So maybe you can talk about what you're seeing in terms of or what you're expecting in terms of kind of improvements or new products to bring online, both in terms of attracting agents, and then making them more productive once they come onto the platform?

Sure, so from a perspective of myEXP, we obviously want to offer a surface that the agents pretty much look at it as their place to work. So any information they need to get from eXp, whether it's about their transactions, their commissions, how it is processing, we want it on their fingertips at all times. Let's talk about communication, the communication that goes on between the brokerage staff and the agents, we would like to make sure that the myEXP surface is the place for them to go to. So if we make it easier for an agent to do business with us where all the information they need about their transactions is right on their fingertips, on their mobile, on their tablet, on their PC, then it becomes easier for them to do business. It becomes faster for them, faster for us. So it's very important for us to provide a great experience, great mobile experience, great tablet experience, great PC experience. That by itself, if you think about it, if we can offer our most important constituent which is the agent, the level of service, the speed of service, the experience that we provide, that by itself will attract more and more agents to come to us because we're making it easier for them to focus on what they do best, which is go out and sell properties, go out and help buyers to buy properties, that is where we are focused on.

All right, that's helpful and a good kind of peek into what you guys are looking to do. Maybe just a follow-up for you for anyone who wants to take it, a couple of questions on slide on Zoocasa. Is there the opportunity to expand that beyond Canada and then U.S. and how are you guys thinking about that?

Yes, there certainly is. I mean, the obviously the bulk of our agents are in the U.S. and Canada at the moment. And there's robust MLS integrations that allow us to quickly display a large volume of properties, basically all properties that are listed for sale in the U.S. and Canada. Where it gets a little unique when we start to think about going into other markets, and we do plan to go into other markets, is there's not normally an MLS. So we're looking at as we continue to expand how do we aggregate a volume of listings to make it a true consumer portal? And so, is that strictly with eXp listings or are there ways to maybe include or even use it as a bit of a way to attract agents to eXp to use Zoocasa and/or other forms of marketing to create a more sticky eXp? But the cost will definitely go beyond the U.S. and Canada; the most natural market next would be to go into Mexico. There's some initiatives there around an excellent MLS initiative that we're part of driving in Mexico, and that would provide a natural feeder for Zoocasa. And so we'll be looking at how we can aggregate listings into that.

All right, that's helpful, Glenn, and it could set the stage for some more. Are you able to project or estimate how it will translate into increases in transactions and revenue, or is it still kind of early innings at this point?

It is early, but Zoocasa, historically was one of the most advertised portals and all of Canada, was used to be owned by Rogers Communications. And they were advertising somewhere in the vicinity of a million and a half dollars a month in advertising spend. And then they because of regulatory reasons, they had to sell it off; the paper brokerages weren't allowed in Canada. So there was a need to sell it off, which created the opportunity for the management team that's now running it to scale and use the well-established brand of Zoocasa. So from a consumer portal perspective, we think it's got a lot of opportunities. And it was the plan of the Zoocasa team to actually build it out across Canada and around North America, with a strategy that provides a much higher value per lead through the platform. So you can think about the idea that leads may have something akin to what Zillow or Realtor.com would charge in terms of a referral fee on lead. So you can think about almost a Zillow flex-like opportunity, but we own it together: all of our agents, brokers, our shareholders, as well as the primary beneficiary of those leads. And then the next piece is the ability to pre-approve and predispose consumers through that platform to SUCCESS lending to our title escrow operations, et cetera. So, it's a great entry point. It has a large traffic base already across Canada. And so there are a lot of markets in Canada that even this month, we'll start to be able to put leads into agents' hands in a high accountability type of format, which we're pretty excited about. And so, I'm not ready to quantify it, but we are going to be investing in Zoocasa quite extensively, because we believe that it could be a major portal in the next three to five years.

Yes, it definitely sounds like the opportunity is there. I want to switch the discussion to the agent side of the business just given how integral it really is to the whole operations. A question from Slido from one of the participants: agent growth was still very strong and 42%. Sounds like churn of low producing or non-producing agents is up. So what's happening to gross agent growth? Pre that churn that you mentioned in your prepared remarks?

You broke up just slightly for me, what was the…?

Yes, I had a question from Slido, looking to look at gross aging product before the churn that you mentioned in your prepared remarks on the lower end of the productive agent side.

Okay, yes. Jeff, do you know what the gross agents adds for the quarter?

Just give me one second.

Okay. Will look that up.

Okay, well, Glenn looks that up, while we're on the topic of agent, I did ask this at the top and I want to get in a little bit recruiting tool, as you're deployed to ensure ongoing agent growth?

Yes, so our primary tools is really our – what we refer to as our aligned compensation model, which is the key driver, obviously having been a productive agent, and team builder and brokerage owner. There's a lot of things that we're able to identify and help identify that are pain points for agents. We've got, it's either this month or next month that we're actually rolling out a new marketing suite of tools, which we're really excited about to automate a lot more marketing for agents. The education and training is a big part of it. And what we're seeing which is really interesting is given a little bit of the slowdown in the market, we're actually seeing our top producing agents and brokers and those who have grown large organizations, actually doing more on the education and attraction and retention side of the business, because they basically all have many effective brokerages inside the brokerage just through the way that the compensation model is designed. And so we're really seeing kind of a doubling down on education and training, as well. As you know, we're continuing to look at tools and technologies mean, Zoocasa, is one way that we're looking at improving leads to agents and then we're putting in some lead qualification scrubbing systems that we're excited about to help agents when they do get leads from either eXp realty.com or anywhere that the leads come in as something that's actionable, and then we're providing more accountability around those leads, which will help agents be more productive by just getting better training.

Yes, the net number that we report on is 4,660 agents in the quarter from Q1 to Q2.

And what was the gross level?

Closer to 6,500.

Okay.

And then I know there was a technical difficulty.

That will continue to be attractive, there will always be cheaper places, there will always be more expensive places. But what we don't want to do is introduce any concept that we might even increase any sort of cap or fees to agents, not our intention or our belief that we'll do that. We get investors that ask us to do that. But we think that's a short-term solution that won't solve for how do we get to 500,000 agents in over the long haul. So we think about market share as being our biggest driver. And so having a competitive model, not increasing the expenses to agents, recognizing there's going to be continued competitive pressures in the marketplace. But as long as we continue to grow the agent base, we start to look at affiliate services. We look at other things like Zoocasa and other premium lead gen programs, there are ways to increase margins without increasing the cap or the fees on agents in general.

All right, that's really informative. Glenn. Thank you. And with that, that does it for my question. So I'll turn it back over to you and your team for any closing remarks.

And Courtney.

Thank you very much. As a reminder, I'm going to talk a little bit about eXp beacon, we talked about being built for this, but we're also built for the future. Right, a reminder, we do have our annual eXp Con Summit just around the corner. This year's event is hosted in Las Vegas, Nevada, October 11 through the 14. eXp is a great reminder of how fast we've grown as a company and our continued commitment to agents and brokers' success. Looking back in 2014, a group of 75 people joined our first eXp con in Chicago. Eight years later, we're hosting thousands of agents and brokers across the world with the goal of helping them take their businesses to the next level, serve their customers and expand the eXp community. So register we'd love you to join please scan the QR code on the screen with your phone or visit eXp con exprealty.com. We want to thank you for joining today. This concludes the eXp world holdings Q2 2022 earnings fireside chat.