AGNT, Inc (AGNT) Earnings Call Transcript & Summary

All right. Welcome back to our third session here on the real estate services side, the Stephens Investment Conference. I said it last two sessions; I will say it all day. We're just thrilled to be back in person. It's good to see everybody's faces and, actually, interface with real human beings as opposed to digital avatars on Zoom. But now -- so today or the third session, we've got eXp World Holdings. We have the CEO and founder, Glenn Sanford, and then we have the CFO, Jeff Whiteside. We followed the story for years. I think initially coming out, it looked like a very disruptive story. I felt like we were right in that call initially, but these guys have gone way beyond what we expected and maybe even what they expected. I don't think maybe Glenn would say that. But it's been a very disruptive story. I mean, going from a couple of hundred agents to 65,000, 60,000, almost 70,000 agents has just been remarkable over the years. But we're glad to have him here today to kind of tell us about the story, how that's come to be, what's kind of -- what's -- what the world looks like for these guys in the next couple of years. But I'm going to run through a couple of questions in Q&A, but I want to leave you guys plenty of time with the audience to ask questions.

So with that, Glenn, let's start on just the macro side, just a couple of questions there. I want to get into the business model. But housing took a little bit of a kind of momentary breather around COVID, and then it just skyrocketed right out of COVID, and things have been fantastic since then. So talk to us about kind of what took us out of that trough of the market, how you feel about the sustainability of trends right now and kind of outlook for next year.

Well, obviously, the whole housing market benefited from all the stimulus and then also low interest rates and then the fundamental need for consumers to have a place that they wanted to live if they didn't have to live in the city. And so there was obviously a bit of a shift there. I tend to play the idea that interest rates are probably the most significant driver of real estate purchases because most buyers are payment buyers. And so if 70%, 80% of home sales go to people who need a mortgage, then they're going to -- with low interest rates, either one, refinance, which obviously, there was a huge refinancing that was going on with low interest rates, or they end up taking advantage of buying the home that they wanted with that sort of more dollars or more -- larger home with the same payment. So I think we've seen interest rates go up a little bit. Recently, that's sort of created a little bit more -- a little bit of softness relative to the super robust housing market, but not enough to really think about it being a slow market by any stretch of the imagination. So I think as long as interest rates stay reasonably low, we're going to see a fairly, fairly strong housing market. And depending on what the Fed does and other things, I think there's a fundamental reason why low interest rates are probably here to stay even if we've seen like interest rates creep up a little bit more recently.

Yes. Makes sense. Aside from interest rates, and I agree with you, it seems like, most times, there's more of a shock factor, maybe, than a direct impact to affordability, but maybe that hurts the market a little bit. But aside from that, inventory is an issue. I mean it's been a bit of a conundrum. Good thing the velocity is very high, like homes are on the market, off the market, on the market. So you're getting the transactions. Talk to us about how you think we get out of this inventory conundrum because prices can't grow at this rate forever, right?

Well, yes, I think that probably is -- the solution is that once prices do moderate a bit, I think there's a lot of people who don't want to sell because they're sort of looking at the fact that next month, next quarter, next year, the property that they currently own might be worth more. And so why sell it? So I think that once we do have a more normalized pricing, then we're going to actually see more fundamental inventory. So that's the way I kind of -- I think about it. The other side is there hasn't been a whole bunch of building in the last 10, 15 years of newbuilds relative to the overall economy. So I think there's definitely a need for new housing stock to be built. And so the question is, when will that take place? And I think there's some fundamental problems even in builders being able to build in terms of just regulations and cities and counties and -- have made it somewhat hard for people to go through the process. So the friction, maybe, makes it not as worth it from a developer standpoint. So I think there's a challenge on the development side of just building more inventory.

Yes. I feel like you guys have so much interesting things cooking at the macro discussions, just kind of -- so we'll move off of that. I just feel like you guys -- I mean, just big picture, you're adding more agents weekly than a lot of guys can do in a quarter and a year. Agents are clearly flocking to the system in a very quick way. So you've got a good mousetrap. So I want to talk a little bit about, high level, what that mousetrap is. And then from a bigger picture, what is it -- exactly does it mean to be a cloud-based brokerage?

Yes. So the mousetrap, if we want to call it that, is ultimately, in 2009, I've been a top agent, and I started as an agent in 2002. And I saw the challenges that weren't being solved by the current brokerage model for me as a top agent. As rookie of the year, ran a top team in our region, top 50 in Keller, my fourth year in the business. So I hit sort of all the growth goals that anybody could hit. I probably grew my personal practice faster than anybody sort of in the history of real estate at the time. And one of the things that I recognize is that I still fundamentally was -- had a business that really owned me and that I didn't own, and -- which meant that if I ever stepped away from the business, the business would effectively decline on an agent basis, but also as a small brokerage that same fundamental flaw existed. So for me, I thought about the idea of how do we build something that I can actually pour into and have something to show later on in my life, that I have an asset that I can -- that produces income for me, I have equity in. And so what we ended up doing is basically building the brokers that I would have worked for, had it existed in 2009, and it didn't exist. And so we created it. And so the idea is that agents that are joining our platform, if they attract other agents to the company because they're doing cross sales and other things with them, they're going to get financial benefits for as long as they and that agent are with the company. And then we've done that through sort of a network marketing style comp plan, which goes about seven levels deep. So you can recruit an agent, they can recruit an agent, they can recruit an agent, and you can get income off of that whole base of agents. So we literally now have a fair number of agents that are making six figures a month just in the agent attraction benefits, a whole load of agents who are making six figures a year in the -- I don't know what the number is, but it's probably 100-plus agents that are making six figures a year or more and just that ability to sort of have an additional stream of income from the real estate practice. The other piece, and of course, we're a public company, and that's why we're here, is all of our agents become shareholders. And so we were the first ones to create a meaningful revenue share program. We were also the first company that provide a meaningful equity stake in the company, and that really became sort of the overall mousetrap. Now the other piece, which is worth noting is, obviously, myself, but many people in the leadership team, we were high-producing, highly productive real estate professionals. And I think that's something worth noting because there are other companies out there where they're -- they've got an interesting story, but they're not being -- they're being led by people who actually haven't sold real estate. And that becomes -- that creates a fundamental disconnect of actually understanding what agents actually want and need. And so when we actually make decisions, we're doing it from a position of actually having been there, actually having done the business, and I think that allows us to really continue to iterate on the mousetrap in a way that allows us to continue to stay ahead of the competition and continue the vital growth rate that we've had.

Yes. And maybe, mousetrap's a bad term because your agents are not mice, but -- now so talk to us about kind of what differentiates you guys. You've mentioned a couple of different things around other brokerages. You guys have -- and this is one of the best ones of flattery, right? I mean you have copycat models out there trying to do exactly what you do. And it's like, instead of the 6-minute ads, they're like, well, we've got the 5-minute ads, right? So I feel like you've got some copycat models out there. So just talk to us about some of the things that you are able to do structurally different. I mean, obviously, your first mover advantage; you've got scale. And then when you announced the dividend the other day, I think a lot of us on my side were like, what in the hell are they doing? And then the more you think about it, agents with the equity and getting the passive income, it's actually -- it's a good retention tool. It's a good recruiting tool. So, talk to us about that as also being a part of kind of the way you differentiate yourself.

Yes. So fortunately, we've been doing this now 12 years. And so we are -- we cover basically every single geography in the country. So there's really no market that we're not in as a company, but we're also in 17 additional countries. So we're international. We've really -- this has really went beyond just domestic U.S.-based operation. I think the -- just the fact that the opportunity is so large for agents at eXp versus companies that are copycat or otherwise is, by its very nature, sort of the best opportunity for agents. We've done other things. Last year, the one that I think is most unique was the purchase of SUCCESS magazine. And so now, we've got coaching platforms that are now showing up. So we've got education that's connected to the longest-running personal development brand in the history of personal development outside of the bible, but it's been around for 125 years. And so we're able to leverage that in some really interesting ways, where agents and brokers can now sign up for coaching and training with that platform. And what's unique about it as well is that we actually have agents and brokers, actually, from competitive firms that are actually already starting to sign up for that brand, SUCCESS-branded coaching and training, which is pretty unique to have that in our ecosystem that we can scale. And you look at a company like Keller Williams; they have a platform called MAPS, Millionaire Agent Productivity Systems (sic) [ Mega Agent Productivity Systems ]. The -- they don't break out the numbers exactly, but the rumor is that it says about $100 million a year in revenue. And we've got a better opportunity to scale education and training underneath SUCCESS than even Keller Williams has. And so you start to just look at the various things that we've done from a moat perspective, and I think it will allow us to be the premium brand that agents want to be affiliated with if they want to be part of the cloud-based brokerage.

Wow, $100 million of revenue just from -- and that's just a subscription service?

Well, they pay for coaching. Like a lot of agents will pay $1,000, $2,000 a month for coaching through MAPS, and then there's other training that's done through there. And we're creating a very similar analog under SUCCESS.

Yes. So we've talked about this in the RE/MAX session. We talked about it in Compass. I think this is a key message that, I think, investors need to be taking into account is that you guys do have a captive audience of customers, right? They are agents, but they're also spending money to run their day-to-day operations, and they're buying subscription services like magazines, and they're paying for marketing services. So it seems like that that's a way that you guys can drive revenue that maybe is underestimated.

It is. Yes. We've looked at a number of different verticals of services that will actually serve our agents specifically. We've got SUCCESS Lending, which is really about the consumer. But we're thinking -- we're looking at coaching and training as something our agents are yearning for, and they're looking for premium coaching. We've done a lot of free coaching and training that takes place in eXp World and through our eXp platforms. But there are some that are like literally saying, "I want an accountability coach. I want somebody to help me take my business to the next level, and I'm willing to pay for it." And so that's just one of probably four or five different verticals where agents are actually interested in investing. So another one was health care for real estate agents. We were the first company to provide sort of a nationwide healthcare option for independent contractors that actually works. And we've got agents who are literally saving $6,000, $7,000, $8,000 a year on their healthcare expenses and getting better coverage than they had from insurance. And so looking at other things that we can do to actually expand that universe, maybe we get into health insurance in another year or so, and that ends up being a pretty high-margin business for us. And then you can sort of think about some of the other things that agents would want and need. So whether it be marketing services, we've got a platform internally. It's not well monetized at the moment, but it's called Making It Rain, where agents can actually pay to actually have us do their lead gen for them. And so they don't have to learn about Google pay-per-click or Facebook advertising or any of that stuff, and that's high-margin business for us as well.

Yes. And it's almost like a little bit of an ad agency where you can aggregate that spend and get more favorable terms and -- makes sense. So let's go back to the agent count growth. I mean that's a key driver of your model. If you're going to build out a revenue model, that's what you're going to look at. You guys have taken that to a point where, I think, people worry that, oh, if the stock price goes down, it hurts recruiting. If it goes up, it might hurt recruiting because people don't want to join, because they're going to strike their equity right there. So you've always had concerns, and then you have concerns around the law of large numbers and growth will slow. But it has been -- I mean the sequential adds just from a dollar -- I mean from a total, like, figure amount. It went from a couple of hundred to a couple of thousand to like -- so I would say just over the last 3 or 4 quarters, there's been a meaningful inflection hire. So, talk to us about what that catalystic moment was, if there's one single thing driving it. I know one of the things you talked about is adding larger teams of brokerages and smaller independent brokerages of chunkier wins. So just kind of talk to us about what has driven that faster trajectory.

So yes. So the cool thing about every time we add an agent, we're also adding an evangelist to the platform. So it means that effectively, and Jeff loves -- likes to use the word network effect, every agent effectively creates that sort of Metcalfe's law, the power network is a square of its nodes. It just becomes a richer environment. It allows the platform to scale even better. And we're no longer -- it's no longer like, one or two agents in any given market. Like in Houston, we're the #1 single brokers in all Houston, Texas, which is a big market, #1 brokerage in Charlotte, North Carolina. There's a lot of cities around the country where we're not the #1 brokerage. And when agents are thinking about where do I go? Do I go to a traditional brokerage that is a 70-30 split, maybe has a franchise fee or to a company that maybe has a little bit better split but doesn't have a cap? And all of a sudden, it's like, well, all these listings are with eXp. They've got a better financial model. Why the heck wouldn't I join? So I think it's just the fact that we -- pretty much in any market in the country now, there's enough of a base of agents that we're now a safe place to hang your license, whereas if we had this conversation, which we probably did 3 years ago, eXp was still very much of an unknown around the country. This year, we'll have more agents in the United States than RE/MAX has, which is a pretty incredible sort of number. We're approaching -- I think they're around 60,000 or so agents. We're 60,000-or-so agents right now. And so by the end of this year, we'll be the largest single brokerage in the country as a single brokerage. But we'll be the third largest brand in the United States based on agent count. So it will be Keller Williams, the Coldwell Banker and then it will be eXp.

Yes. That's remarkable. I mean it took a couple of decades for Liniger and the RE/MAX crew to grow out to that size, and you guys have done it in a fraction of the time. So...

John, on the same topic, I mean, what we found, I think, we saw in Q1 of this year and basically happened in the U.S., where we really did hit this effect. And I mean 3 years ago, we would have a handful. Say, there was 30 big influencers in the country, right, in the U.S. Now we got literally hundreds. So really, top leadership across the entire country. So that's happening. And the great news for us is that the U.S. is performing so well, right, that we can invest in international. We can invest in commercial. We can invest in affiliated services at the same time when we're growing that agent base. So when that all pulls together, there's a lot of opportunity for incremental margin.

Yes. Yes, no doubt about it. And that's one thing that feels like it's interesting is getting a massive base of agents is to one thing, what I was talking about earlier, sell into those agents. But also, it does give you enough free cash flow to pay dividends and to reinvest in the business and build out a national portal and invest in technology. So you can kind of have your cake and eat it for sure. So, I've been asked questions in the past, like, how many agents you think they could have? Well, you're cloud-based brokerage, so you don't have capacity constraints, if you will, from an office space standpoint. You're giving up a lot of the commission dollars back to there, leaving a lot of the commission dollars with the agent. So the splits are very favorable. They're getting a dividend. They're getting stock. Is it half the market? I don't know. I mean you guys have thrown out the third. You said 500,000 agents recently. So talk to us about kind of how you think about that over time.

Yes, so the 500,000 agent number that we threw out, and we did it at EXPCON, is a little bit of a rallying cry for the company, but it's a sort of -- it's not quite a BHAG, but it's certainly very much of a stretch goal for the next 5 years. And half of those agents would be international. So if you think about the idea, you have 500,000 agents will be 1/3 of the agents in the U.S. Well, 250,000, which isn't -- we've got -- Keller's got 150,000, 160,000 agents domestically. So 250,000 isn't that unreasonable to have domestically. And there's another 15 million real estate professionals around the world in markets that we can actually go into to pick up that other 250,000 agents. So when we think about adding international markets -- and of course, Michael Valdes is here in the room with us. He heads up international growth, and he headed up international for Realogy prior. We start to look at the idea that this value prop actually works just as well, if not better internationally than it does domestically. The number of 500,000 agents in the next 5 years is not an unreasonable potential. And I would say don't call that guidance because we're not saying that's where we're going to be 5 years from now, but it is something that we think is possible.

We've grown on average about 63% from '18 all the way to '20. This year, we're in the 80s. So when we talk about growth potential, I mean, if you just took 50% growth, done with that quite often. I mean it gets you pretty close to those numbers.

Yes. So I heard all that. So you're guiding for 500,000 agents next year. Is that -- just kidding. For the transcript, just kidding. Now let's talk about a little bit about the NPS score, your Net Promoter Score. A lot of -- that's thrown out quite often. I think some people kind of -- some businesses, some leaders just kind of look at that as a vindication, or they look at it in passing. It seems like you guys, that's a very core metric for you. So talk to us about, I guess, a, if that's true; and then b, how that guides your business, why that's so important.

Yes. So it's a really fundamental difference, a different way to run a business. If you think about most businesses are run very top down, meaning that -- we'll say that the CEO then has the vision that hands it off to the next group that hands it down to the next group. It doesn't create a lot of ability for teams to actually make independent decisions around how to improve the business. NPS, which stands for Net Promoter Score, we use all over the business. And what it does is it gives us actionable data that teams inside of the business can actually use to improve the business without it being a top-down discussion. They can say, here's what we're finding in NPS. This is what our agents are telling us, and this is how we're going about solving for those challenges. And so it allows the company to continue to scale rapidly, without it being about telling people what to do. It's allowing them to discover what would be the highest value of their time to work on based on the department that they're in. And so it allows us to actually continue to scale. A lot of times companies scale, they actually slow down their ability to innovate. Now not to say that we don't have some of that. Every company has some bureaucratic elements that sort of creep up as it gets larger. But the more we can sort of like actually push down the decision-making and the tools for decision-making further into the organization, it just allows us to improve and be that much better for our agents at the point where they're actually engaging with the platform.

And it's the same thing for employees, right? When we talk about our financials, we start with EMPS and MPS. And basically, the big -- the success factor for us is attracting and retaining agents, attracting and retaining employees. And so we measure the hell out of everything. And when something goes wrong, like, big things go wrong. It's like onboarding, payments, things like that. And those are like some of the big things that keep the agents there, keep the employees there, benefits and things like that. So that's really -- we really do use it. I've been in companies before, but we've tracked it, but we didn't run the company on it. We didn't run the company on it. And actually, it frees up a lot of time, too, because you don't spend -- you're not getting into the nitty-gritty of who spent how much on this trip. You start at the top, and you look at what's really important to keeping the agents and in growing the company. And so far, it's worked. And when we talk to the company, we start there and come all the way down to net income or cash flow, right, because that -- it starts here and then that ends up with the kind of results that we're seeing so far.

Yes. I came out of school and worked at a large Fortune 500 company. And it's funny because it seems like such a simple process of find out what bothers employees and fix it, but it's very rarely run like that. So I think that's actually a very interesting concept. So let's do two more kind of bigger picture on the core business, and I'll definitely get in the financials and some of the gross margin stuff. But on international, talk to us about the initial decision. Why, 2 years ago, 2.5 years ago, did it make sense to start to push? What was the trigger point? And how it's been, initially -- has it been up to expectations or far exceeded expectations? Just big picture view.

Yes. I think the reality is, is that the real estate brokerage business is actually a fairly simple business. And the business is pretty much the same all over the world. The difference between the U.S. -- U.S. and Canada have multiple listing services. The rest of the world fundamentally doesn't have MLSs, which creates a lot more fundamental fragmentation internationally than it does domestically, which actually has allowed brokerages, internationally, to actually maintain pretty high splits with their agents, meaning you've got a lot of brokerages that are still 50-50 with their agents, whereas here, domestically, for us to create a compelling business model, we're 80-20 with our agents. And so internationally, we -- the business actually listing properties and then finding buyers is still pretty much the same, and the agents are the ones out there doing the work. And so we believe that it would actually translate well internationally. We thought that it would make sense. And sure enough, it actually has done -- have done as well as I think we expected. And I think maybe to some extent, it's actually grown faster than we originally thought about, partially, because Michael is just a glutton for punishment, and he keeps on opening up new countries. And so as a result, we're just in there sooner. And if we think about the further part of it, at the end of the day, we want to be in any country that's reasonable for us to be in internationally, which is probably 100-plus countries eventually. And for us, it's really getting that beachhead in every country and then expanding that over time. And it might take us a while, like Canada. When we first opened up, it took us a while to get there. But now, we're probably the third or fourth largest brand in Canada. And so we'll -- first part is just get in country and then expand over some period of time, whether it be a year or 2 years. Like India, we're over 1,000 agents now, and that's in less than a year. And -- but in other markets, it's just going to take us a little bit longer, but the model itself will just sort of self-perpetuate itself once we've got the right leadership in the country.

And it's a model, and it's also the platform. So the software platform we developed basically allows agents to run their businesses on this platform pretty much in most country, not every country but probably 100 countries, as Glenn said. So that said, we tested in the U.K., we tested in Australia, the first year, and then we'll obviously bring in Michael on scale it. So we still want to go into a place where we can get traction, right? So we don't want to just open a country to say we're open in the country. So what we're working on now in the countries that we're in is getting traction, right, and building the influence and building the transactions' levels up.

Yes. So you make a good point about the brokerage splits, how the dynamic changes pretty dramatically overseas. Given that U.S. agents are still the bulk of the business and then also Canada, you start agents at an 80-20 split. And then right now, your gross margin -- effectively, it's gotten to like a little bit less than 10%, right? So agents are taking a little bit over 90% themselves now. How does that look international? Just if I use that as the bogey, the 9% here domestic, 10% whatever it is, how does that look blended international right now? Any sense?

Yes. I mean international should improve it a little bit, but we only pick up an extra 5 points internationally, and that's up until they cap. So again, our top producers, which -- what actually pushes our gross margin down isn't really -- I mean some of it is the 20%, and then we're paying out 50% of the company dollar, but it's also the number of highly productive agents on our platform. So one thing to note is that, like, over the last couple of years, our productivity per agent has went up dramatically because we're attracting literally some of the biggest and highest producing teams in the country to the eXp platform. And so that creates -- and when I think about gross margin, I think about it as the percentage of total dollars. But if you look at our gross margin in terms of total gross margin, that's been scaling just as fast as everything else. And as we create efficiencies, we're going to be able to actually enjoy more net profit from that as well.

Yes. Wise man once told me that percentages don't pay bills. And I think that's right. I mean the gross profit dollars had been growing...

It's tracking with the revenue. Like, from a growth standpoint, it's close to 100%.

Yes. No doubt about it. All right. So let's talk about the gross margin a little bit. I think that's a part of the story that I think some people -- some newer investors, they see the explosive growth. They see the disruption. They see the agent adds, but the gross margin decline has held people at bay. So talk to us about why that's not a concern because you just talked about that -- the dollars that matter more. But from a percent standpoint, just talk to us about the ways that you can stabilize that, drive that higher, like what you have cooking right now that could play out over time.

Yes. So there's a couple of things to note. One, with the sort of big hairy audacious goal of getting to 500,000 agents, we need to stay highly competitive in terms of our caps and our fees. Like, we have 69,000 agents plus, all paying us effectively $85 a month. And so if you think about -- there's sort of almost a SaaS revenue component. Every time we add an agent, we're adding about $1,000 a year just in monthly recurring revenue from those agents. And then they're doing transactions. And then we're going -- then we're working on adding other services that can be added to the transaction. So last quarter, we did over 130,000 real estate transactions. You sort of look at what does that mean going into next year. Sort of even if you just multiply that times 4, that's close to 0.5 million transactions for next year. And obviously, it will be probably larger than that. But you start to think about the idea that if you can attach a mortgage to 5% or 10% of the buy-side transactions and -- or you could add titled escrow to 10% to 15% of the transactions and each one of those sort of generates an extra $1,000 of actual margin that actually goes straight to the bottom line, that becomes a pretty meaningful driver. And so our goal is to get as many agents paying us a little bit of money to be on our platform and doing the transactions but then getting the highest percentage of those transactions to have other services attached to them. And then thinking about the -- just the ecosystem of agents, and we talked about it earlier, just the ability for them to consume products and services themselves that they want to and they're purchasing from others in the industry, I think the margins just continue to look better and better.

Yes. I mean if you look at our financials now, again, there's no debt on the balance sheet still. We're doing our buybacks. We're investing in the company big time. We still got cash flow and the cash balance. So when you look at them now, there's 0 contribution margin coming from any of these affiliated services. So we're working really hard. We have about 10 programs going on. We're going to crack it. So once it gets cracked, then you got 100,000 agents buying, at some point in time, 15% to 20% attach rate. I mean it's going to be significant from a bottom line standpoint. So that's kind of where we see it. I mean we can't -- I mean with the caps and the volume and what's happened in the last year from a volume standpoint. Like, as you know, traditionally, first quarter, it's a higher gross margin. Last quarter, it's a higher gross margin and then the volume season. But we haven't stopped the volume season yet for like a year. So that's a big part of it. The other big part of it, too, is that the pricing -- the housing price has gone up. So I mean not too long ago, we're about [ $250,000 ]. Now we're close to [ $350,000 ] on average. So that's a part of it, too. But we think that from a long-term standpoint, the real margin is going to come from the affiliated services to add to the existing gross margin.

Yes. So for those new to the story, when we talk about the caps and gross margins, started 80-20 split. You hit a $16,000 commission cap, which you pay to the company, and then you go 100% commission back to yourself, right? So that -- so as you cap, as transactions are really robust, good, you can cap earlier, and it's more dilutive to gross margin. So next year, housing slows or whatever, like you could actually see upwards pressure to gross margins, like a benefit to gross margin.

As a percentage.

Right. As a percentage-wise. Percentage-wise.

But again, I mean, to your early point, really, I mean we're growing close to 100% on both the revenue side and the gross margin side, from a dollar standpoint, which is -- that's what's paying -- really fortunate to be investing the money we're investing, does all the stuff in international, commercial. There are technology plays, SUCCESS. I mean we're spending...

Well -- and next year, we're going to start to enjoy some benefits from some of our technology initiatives, where we're going to be able to actually increase the efficiencies of our transaction processing significantly. So right now, we've got about 1,000 people who are working brokerage operations, maybe even a little bit more than that. And our anecdotal data that we have right now is that we're getting about a 25% productivity improvement just on stuff that we've done in the last 90 days. And so we start to think about the idea that we could actually do the same number of transactions with 25% staff, or what we think will happen is that we think that we could potentially get a 50% or more improvement with some of the stuff. So next year, we're starting to roll out a platform where we're going to actually be able to automate the transaction -- the contract process, meaning that agents aren't going to have to do a bunch of data entry. It's actually going to do a bunch of the work that our current staff does in terms of making sure that a lot of the stuff that's done on contracts is actually done. And then it will flag contracts where stuff hasn't been done so that staff isn't spending as much time. So right now, the average transaction takes 1.5 hours to 2 hours per transaction for staff members. The agent might have only taken 45 minutes to write the contract and then negotiate it around. But it's taking 1.5 hours to 2 hours. We might be able to shorten that to less than an hour. And so that could be a really big improvement in terms of overall efficiencies.

Yes. I think we've got time for a handful of questions here. If you guys in the audience, anybody have questions?

Have you seen a competitive response from any of the big brokerages to losing so many agents?

No. The -- probably the largest company to create a response was a company called HomeSmart, slightly above 15,000 agents nationally. They do some franchising. They're kind of a 100% brokerage model, but this last year, actually probably about 3, 6 months ago, they literally created a rev share model for agents to elect into. And the challenge, I think, for them is that they're going to have to figure out what model they serve as a brokerage, but they're like, well, if you like the eXp model, we'll give you the rev share model. But I don't -- that's the largest company to do anything. Keller has tried for years to come up with something, but they've got pushback from their franchisees and regional owners around any changes they wanted to make. And I think that, that's been -- fundamentally, the challenge with any of the franchisers is their franchise agreements and territories and requirements of franchisees to have bricks-and-mortar keeps them from actually being able to launch something that would be akin to the eXp model, which is why we haven't seen anything from Realogy. I haven't seen anything from RE/MAX. I haven't seen anything from Berkshire Hathaway, et cetera.

On the splits, I mean, you guys got the best payments in the industry, right? What is prohibiting, perhaps, some of the other guys from getting irrational or...

Yes. So, there's actually a lot of companies that actually have 80-20 splits. So I think even Compass who was just here, I think they were 80-20, if I'm not mistaken. So that financial model is now becoming a more normalized point. What's still very unique is our revenue sharing opportunity, where agents actually have a financial incentive to actually attract other productive agents to the platform. That one, most mainstream brokerages, they just fundamentally can't get their head around that they sort of either internally stigmatize the model as being somehow a negative to the model. So they'll sort of create some negative stereotypes of our model, which I think, then also stops them from actually adopting those types of models. So that ensures our ability to continue to compete relatively unopposed with that sort of style comp model. And that, in my mind, is actually the biggest single driver. And there are -- we've got some of these, some copycat models out there that are trying to be eXp but cheaper. And there's a bunch of actually companies now. There's probably at least five or six small companies that are trying to be the next eXp. So it's going to be, I think, kind of noisy in the small company space. But I don't think the large companies can actually make the irrational decision to compete effectively.

[indiscernible] couple of years ago, you've had an initiative where some agents were recruiting almost like the other agents for revenue share bonus that you had, kind of course-correct on that. What did you end up doing? And what did you learn from that?

Yes. So because of the way our model initially worked, the way we gave -- any time an agent was attracted to the eXp model, even for the first 6 months when they didn't do a transaction, they were counted as if they were productive agents on the platform. So it was, I think, the end of 2019 or early 2020, we made the decision that we would only count agents once they were actually productive on the platform. And what we wanted to do is prevent agents from gaming the what we refer to as our revenue sharing system. So we made a couple of tweaks to the model. One was that we pay out 50% of our company dollar to our rev share system, and we'll never pay more than that. And then the second part is that we only allow agents to count agents once they've sold their first deal. And so that actually, I think, has actually translated to our -- some of our productivity gains we've seen over the last year or so has been it's no longer financially beneficial to recruit agents who are just nonproductive agents. And so what you'll see is in the last 12, 18 months, we've actually seen higher productivity per agent compared to some of our competitors haven't really seen that productivity improvement.

I've got one final question here for Jeff. The NOL balance, if you can just give us an update on that. And then, obviously, you guys issue a lot of equity to agents; that's part of the value prop. So talk about the continuation of potential tax savings from that. And the last 2 quarters you've actually released, that has been able to drive up cash and buy back more stock. So talk to us about the sustainability of that and if that's -- if those things are connected going forward.

Yes. I think that -- I mean once we became a sustainably profitable company, we had some deductions that we can take, and mostly it's around the stock compensation. So it's hard to forecast because some of it comes -- based on the price of the stock and what went out that quarter. But it seems to be sustainable into the foreseeable future, like over the next 4 quarters. That's kind of what we're seeing right now. But again, it will fluctuate. Are you talking about the buyback?

Yes, because with your buyback -- because I think you guys want to maintain a similar level of cash you have right now. And then we think a dividend now, obviously, a portion of that needs to go back to the agents and the shareholders.

Yes. So we put a buyback in place 3 years ago, just going to that. So basically, this year, we've completely offset any kind of dilution from the agent compensation, stock compensation. So we're doing that. We have an internal balance that we want to keep in cash just in case. And then on top -- even with the buyback and with the dividend, with the investment, we're going to come out and be able to offset dilution and keep that balance for the foreseeable future without any need for capital in the company.

Yes. That's great. Okay. Well, I think that's a wrap. I appreciate the time, guys. And everybody in the audience, thanks for taking part today. Have a good rest of your day.

Appreciate it.