AGNT, Inc (AGNT) Earnings Call Transcript & Summary

So I'm Ron Josey, I cover the Internet sector here at JMP. And I'm pleased to have with us today Glenn Sanford, the Founder, CEO and Chairman of the eXp World Holdings; and Jeff Whiteside, the CFP -- the CFO as well. So Glenn and Jeff, welcome. We're going to do a quick presentation a couple minutes, and then we'll get into Q&A after that. [Operator Instructions] So with that, Glenn, the floor is yours, and we'll go from there.

Awesome. Thanks, Ron, and thanks for having us. My name, again, Glenn Sanford, the Founder, CEO of eXp World Holdings. And for those of you who aren't up to speed, eXp World Holdings actually owns a few different companies. We actually own eXp Realty. That's our primary business. We're a cloud-based residential real estate brokerage and most -- all of our numbers are really driven based on eXp Realty. So if you've taken a look at the press release we put out earlier today, we actually made sure it went out this morning, so we could talk a little bit about that here during the conference here. But almost all those numbers are driven based on building what we refer to as a cloud-based residential real estate brokerage. We're the first real estate brokerage in -- really in the world that has figured out how to run entirely without bricks-and-mortar offices. We're in all 50 U.S. states, most of Canada and also, I think, 12 additional countries outside of that, most of which we've actually opened up in the last couple of quarters. So Q4 last year, Q1 this year, we've opened up a bunch of new countries, all based on this unique model that provides a platform for residential real estate agents to build their businesses. I come from a technology background. At one time I worked for AOL. I launched an e-commerce logistics company just before the dot-com collapse. And I actually got into residential real estate, while I was looking for my next opportunity as a brand-new licensee back in 2002, and quickly recognized how much technology could be used in the residential real estate space to build market share for me as an individual agent, but then also how I could take some of those tech skills and tech background and actually apply it to an industry to actually modernize the residential real estate brokerage. So in 2009, we launched as a cloud-based real estate brokerage, mainly because I couldn't afford physical offices. So since then, we've grown substantially. I'll go through some basic numbers here in just a minute. But we now own eXp Realty. We own a company called VirBELA, and you can find at virbela.com. It's a virtual world for work platform. So basically, it creates a virtual cloud-based, avatar-based 3D office campus environment that we actually use to power eXp and all the growth that we've had all over the world. And as you can imagine, last year during the pandemic, and still even today, we've had tons of people come to us and say, "How do you grow a company without going to the office." And so we have lots of unique and interesting customers. We've got some Fortune 500 companies now that are using it. Big, big conferences and other people that are using it. But primarily still, it's -- for us, eXp Realty is the single enabling technology that's allowed us to do what we've done at eXp Realty. Last -- in addition, underneath VirBELA, you'll see frame as a subset. That's a fully WebXR, so anybody who's tech oriented will understand that, but it's an XR platform or you can actually go to frameVr.io and you can literally go into a virtual world on your web browser or immediately put on your Oculus Quest headset and go in and start interacting, and that's building out a virtual platform for businesses to use on the web and then through Oculus. Last year, we bought a company called Showcase IDX, which is allowing us to build under the real estate umbrella a portal that would compete effectively head-to-head with Zillow, Redfin, realtor.com. And so we've just started to build out our own national platform. And so you'll see the beginnings of it right now at exprealty.com, still fairly formative, quite honestly. But as you follow the iterations on the website, you should see massive improvements. We've been scaling up the technology team that's going to build out that platform considerably. So we bought a company last year to do that. And then the other acquisition we did in Q4 last year was SUCCESS Enterprises. And one of the reasons why we did that -- a lot of these will seem a little disparate in terms of underneath the eXp World Holdings umbrella. But we, as a company, have been mailing the SUCCESS magazine to all of our agents and brokers for the last 2.5 years. And we think about personal development as being the foundational mindset or tool set for productive real estate agents or anybody in the sales profession. And so an opportunity came up to acquire that. And that allows us to also create a little bit of a competitive moat in the residential real estate space, having also inside of the same company the longest-running personal development brand in that sort of the history of modern personal development. And so SUCCESS magazine has been around since 1895 or something like that. So 124-year-old brand. It's now part of our ecosystem. And there's a lot of really cool cross-pollination around coaching, collaboration and some other things that we've got on the horizon. So this last year, we -- if you got a chance to look, we did almost just shy of $1.8 billion in residential real estate revenue. And most of that was from the residential real estate industry compared to about $1 billion last year. So crazy growth. And also, if you look at the quarterly growth, we grew about 122% on that. So this is just a little bit of a graph on how our agent count, and you'll see our agent count is in the line. So you see the blue line, that's our agent count. But you'll see, as we grow our agent count, our revenues follows. So it's highly, highly correlated to agent count. And so when you look at things like what is our agent count, and I believe that this is potentially being broadcast, but we're right there. We're over 46,000 agents today, up from 41,000 and change at the beginning of the year. We're bordering on crossing the 47,000 agent threshold. We might even be there today. So we're growing very, very rapidly in terms of our agent count. And then with the international expansion, we're starting to see a lot of traction in some of these other new markets, Mexico, Brazil, France. We're in the process of getting ready to open up in Italy, Hong Kong and a bunch of other countries as well. And then we've also got Canada, U.K., Australia, South Africa and some other countries. So a lot of this growth is going to spill over from just outside of North America, where we still have this tremendous ramp and tremendous opportunity. We're still, from a brand perspective, really probably #4 or #5 in terms of agent count by brand. So we've got a lot of room to grow. But we expect that over the next 3, 4, 5 years that we will, in fact, be the largest single real estate brokerage or brand, not just brokerage, but the largest single brand in residential real estate in the 100,000, 200,000. Potentially, even if you look out 5 years, the potential is we could domestically have as many as 250,000, 300,000 agents. So there's a lot of room to grow if everything works out right. And then worldwide, as we sort of think about growth, we think about the idea that our target market are probably somewhere around the 18 million to 20 million agents worldwide as we sort of expand this market worldwide. Whereas in the U.S., we've got about 1.4 million to 2 million licensed agents. When we think about it worldwide, we're really looking at a marketplace of close to 20 million agents and brokers. So it's a very unique model. We're very agent centric. Fastest-growing real estate brokers in North America. We think actually fastest-growing real estate brokerage in the world presently. And so it's been a lot of fun. And really, the big value prod has to do with how we compensate agents, being able to build this really cool community for agents so they can really support each other in addition to us supporting them. We -- the way our compensation model works is that agents actually get compensated for attracting other agents to the eXp platform. And so we've actually built effectively a comp plan that's akin to sort of a network marketing style comp plan. But we've taken sort of the best elements of nontraditional comp plans, brought that into our model, reduced the cost of running the brokerage substantially by being cloud-based, and then we passed back a portion of that savings through our unique compensation model that uses both what we refer to as a revenue share model in addition to an equity model. So a lot of interesting things that we've done there. This is a chart. Definitely go take a look at our deck. This gives you a lot of the historical elements, but there's a lot of cool things that we've done in the 11-plus years that we've grown. One of the things I'm really, really super proud of is that 4 years in a row Glassdoor has ranked us in the top 100 companies to work for. We, again, got that award. Currently have a 4.7 ranking out of 5 by our agents and brokers and staff as a best place to work. And so that's been really an amazing award and accolades. The VirBELA platform, you can check it out. You can go to virbela.com, you can download, you can try it out. We've got a fully staffed campus. It's free to try out and to play with and to meet people. We've got a whole staff there that will walk you through it. And -- but it's really solved lots of things around events working. We've got Stanford University that's been using it for a long time. We've got a number of other universities that use it for various different activities, from ASU to -- I can't list all the universities. We've got universities now in Australia that are working with it and other places. But remote work and then training and development. And so this is actually what it looks like to actually be in an auditorium. We've had 1,500 people just in 1 auditorium. But we've got auditoriums, offices and the whole 9 yards. Leadership team won't go into that. You guys can do the research on it. But myself and Jeff, obviously, here. Alex Howland runs the VirBELA platform. And -- but we've got so many great folks involved with the company. So with that, let's maybe just turn it over for questions. Or Jeff, do you have any other comments?

No, I think the model itself is being driven by agent growth, productive agent growth. You've seen that again. So if you look at the agent growth, even in lower economic times like Q2 of this year, the growth was still around 54% year-over-year. And then when volume picks up, that growth comes in and really drives the top line revenues and the volume for the company. But I would add that the VirBELA platform has really enabled us from a competitive standpoint to grow, to be productive and scale globally. So we -- Glenn mentioned, we added about 10 countries over the last couple of quarters. Nobody got on a plane. Nobody opened an office. So from a productivity standpoint and a growth standpoint, it's a big deal for us as we go forward, and there's lots of opportunity for growth.

That's great. Well, Glenn and Jeff, thank you for that. Maybe we'll get into the Q&A portion. We have about 10 minutes left. So very helpful, and congrats on a great 4Q.

So we have some questions in the queue, but maybe I'll kick it off with just one. Glenn, you mentioned potentially having 250,000 domestic agents over time. Can you just talk about the path to get there? When do you think that might happen? I think you might have said 3 to 5 years, but that's a lot of growth from here and there. So would love to have any additional insights on that?

Yes. So if we take kind of our numbers right now, let's just say it's 47,000 agents. And if we grow just 50% year-over-year, I'm just -- yes, so 4, 4.5 years from now, we're 250,000 agents, just on 50% year-over-year growth rate. And I think 50% is a pretty reasonable growth rate in terms of our -- we think about a 4 or 5-year growth plan. So I think it's pretty reasonable to assume that, that's in the cards.

Got it. Okay. So just continuing over -- continuing the share gains that you've been seeing with attractions coming through, what would you say would be the number one reason for new agents to join? Is it just the freedom, flexibility? I mean I would imagine it's the package. But can you just walk through that, please?

Yes. Well, the financial package is certainly a big attractor. And then the community is probably the other piece. And so you saw that. The ability to now be around so many top producing agents and brokers and agents who have had success on the platform, that's a big draw in and of itself. I mean the reason why we've got an Icon Agent Program in eXp is because we know that top producers will bring in other agents who want to be where top producers are. So we do incent top producers additionally so that they're on our platform.

Got it. And you mentioned -- and we'll get into questions here in a second, so keep on tuning them up, guys. But you mentioned you're building out and launching a competing portal to Zillow, scaling out the tech team. Just can you remind us, what are you looking to solve here? Is it just you've got the data, why wouldn't you have a similar solution?

Yes. A couple of reasons. One, prior to launching eXp, I ran 6 of the top-ranked real estate websites in the country. So I was ranked #1 for Phoenix real estate, Seattle real estate, Nashville real estate, Portland real estate. I mean -- and so Vancouver real estate. So I had a lot of these top-ranked websites. And so I already understand it, just at my DNA level. So it just makes sense for us to go back there. And the reason why we didn't do it before was because we saw it as being cost prohibitive to compete against Zillow and Redfin back in 2009. So we said, why don't we aggregate agents and eventually, once we have the critical mass, we can come back and put the SEO playbook back in play.

Got it. Makes perfect sense. That's very interesting. So let's get into some custom investor questions here. Let's see. So someone's asking -- or Steve is asking, what is Zillow's acquisition of ShowingTime to EXPI's business and the industry in general? The impact of the Zillow acquisition of ShowingTime is the question.

Yes. So first and foremost, it kind of scared the industry because a lot of MLS' actually use ShowingTime as their scheduling service. So I think what ends up happening is it just lets the industry know that Zillow isn't really an industry friend, that they're acquiring these things and they're using these things against the agents and brokers that they ultimately are selling leads to presently. So that's what we all see from an industry perspective. The second part of it is, I think that you're going to see a lot of people now creating alternative showing platforms. So we've already looked at different things we can do to create alternative showing platforms. And this isn't rocket science, like ShowingTime was. They bought it for a lot of money, but calendarily connected to each listing, which do 90% of what ShowingTime does. So there's some really interesting ways to sort of solve for the exactly the same thing that ShowingTime does. So we see it as being a place for companies like ours and others to innovate and come up with alternative solutions if you don't want to use the Zillow product.

Got it. Makes sense. Jeff, you mentioned international expansion. I think it was 10 or in the 12 markets, probably maybe 10 the last year without hopping on the plane. Just talk a little bit more in terms of international expansion longer-term to the model? And how that sort of fits in?

Yes. I think we kind of dipped our toe in the water for the U.K. and Australia in 2019, right, just to prove the platform works. And then we brought on Michael Valdes from Realogy. And so that's really skyrocketing the initiative. And we're seeing a great amount of reception for the model. And a lot of the countries we're going into have like a 50-50 split on the commission. So we're able to go in and offer 75-25 or 70-30 and still be well above the competition. So I think the stock, revenue share, the split, the same reason why agents in the U.S. and Canada have been attractive to the model. We're seeing the exact same reception globally. So I mean to put it in perspective, I think they were in about 130 countries, Realogy. And our competitors are in 130 countries, and so we have quite a ways to go. And so we don't have to set up a brick-and-mortar. We have the infrastructure. We have enterprise, which is our operating system that is scaled and can do [indiscernible] globally now. So a lot of great technology to make that happen.

That makes sense. Let's see, I got a question here from a client asking where are most agents coming from? Is there any one area or...

Yes. Well, brokerage wise, the largest brokerage is primarily Keller Williams and RE/MAX in terms of largest brands that people recognize, lots of independents, a lot of independent brokerages that convert over. So we're bringing over 10 brokerages a month right now or converting their brokerages to eXp, and they're almost all independent. And the industry is pretty fragmented. So 50% of brokerages out there are independent brokerages, 50% are part of a franchise system of some sort. And so we're converting a lot of those independent brokerages over to eXp as well.

Okay. And some other questions around VirBELA, specifically. So wondering about the growth and success of VirBELA outside of eXp? And any plans to do -- as you think about VirBELA sort of longer term, how does it fit into the mix of EXPI?

Yes. So the one thing we want to make sure that we always have with VirBELA, no matter what happens with it in the future, is that we have the exclusivity for the residential real estate industry on that platform because it is such an enabling technology for us. But outside of that, we explored last year quite a bit, what it might look like to potentially spin it out and have it as its own separate entity. Because of timing, I think we're -- from a tax perspective, we're limited for another 2.5, 3 years, I think, something like that. And then depending on what's going on in the market, it might be its own deal.

And that -- from -- got it. Understood. That's...

Yes. And we run it as a separate company now, Ron. So we invest in it and we're growing it. We're making this product better all the time.

Got it. And as we look through 2021, Glenn, if you could just remind us sort of maybe the key investments that you plan to make? Obviously, we know about adding new agents and we know about potentially a new portal -- or not potentially, we know about the portal, thinking about international expansion. But just tell us about how you view 2021 maybe bigger picture wise?

Yes. So we want to automate more of the transaction management workflow. So we're making investments there. So that's a big one. When you think about the hundreds of thousands of transactions that we do, that's still a fairly manual process. We're also investing -- we're investing in VirBELA, for sure, because it's such an enabling technology. And then our most recent acquisition, SUCCESS, we're doing some -- we're expanding that brand. So we'll talk about some stuff probably in April of this year of stuff that we think is pretty exciting with the SUCCESS brand that will actually dovetail quite nicely with some of the things we're trying to solve on the real estate side. So that's just a teaser, but we're excited about talking about that in April.

And Ron, I'd add to the list in 2021. So it's -- we're going to continue to invest in international expansion, and we also launched a commercial group back in the fourth quarter of last year. So we're investing there.

Okay. So we have about a minute left, but I saw a new client question coming in. It looks like transaction sizes are very strong this quarter. Can you talk up to the increase in productivity and it's [ good product ] to have, but can you talk about any impact to gross margins from capping?

Yes. So great observation because if agents cap quicker, our gross margins go down. So you'll see that as a side effect, even though our net profit should go up, even though our gross profit goes down in those -- in productive times. So Q4 was really strong. But we're -- it's a function of low interest rates and a function of just overall demand and agent count. So we've got kind of 3 things kind of playing into that, and that's -- age of productivity, we've got lots of training and coaching. But I wouldn't say that our agents are getting that much more productive than the industry. I think it's just a factor of market forces.

Okay. That's great. And with that, I think we are at time. So Glenn and Jeff, congratulations, great quarter, great year. Lots to look forward to. And I think like full earnings is what, March 11, if not mistaken.

Yes, [ we marked it ] on 11th. Yes.

We'll hear more about it then. Great. Thank you very much, guys.

Thanks, Ron.

Thank you very much.

Time to say bye-bye.