Even More Problems at eXp World Holdings (EXPI)
eXp World Holdings (NASDAQ: EXPI — $1.65 billion) is the world’s largest cloud-based real estate brokerage. The Bear Cave has published on problems at eXp twice before. In April 2022, The Bear Cave published on eXp’s aggressive recruiting, regulatory troubles, and insider selling. And in May 2024, The Bear Cave published on how eXp’s new competitors were stealing eXp’s top agents. Today, The Bear Cave expands on our past coverage with a simple and troubling finding: eXp agents are leaving in record numbers and the exodus shows no signs of slowing.
eXp’s agent base is important because practically all of the company’s income comes from fees directly charged to its agents (e.g., an $85/month “cloud brokerage fee”) and commission splits on home sales (generally 80% for the agent and 20% for eXp).
Since its founding in 2009, eXp has grown rapidly with fourteen straight years of agent growth, peaking at 89,156 agents in Q3 2023. Since then, eXp has posted its first-ever agent count declines. The company ended Q4 2023 with 87,515 agents, a decrease of 1,641 agents that quarter, and ended Q1 2024 with 85,780 agents, for a decrease of 1,735 agents in Q1 2024.
Management has assured analysts that the declines are a one-off caused by the company’s decision to offboard unproductive agents and told investors to expect a return to growth.
On the company’s Q4 earnings call eXp’s founder, chairman, and controlling shareholder, Glenn Sanford, said,
“With home sales in the U.S. and Canada at their lowest levels we’ve seen in decades, we proactively offboarded many nonproductive agents in the fourth quarter… This is the first time in our history that our agent counts declined quarter-over-quarter. However, our agent value proposition remains strong with big teams and agents joining worldwide and agent NPS at their highest it’s ever been.”
In the Q4 earnings call Q&A, Mr. Sanford added,
“It was really just trimming the numbers to be really our productive agents who are actually focused on being here. Moving forward, we expect our agent count to return to growth over time.”
And in response to another analyst question, Mr. Sanford reaffirmed,
“We did offboard some in Q4. We offboarded a few more here in Q1. But I think we’re pretty much done. And there shouldn’t be like big blocks of agents offboarded for this reason because we do want to stay a little bit more up to speed on it so that we don’t show a higher agent count than truly active and productive with eXp.”
On the company’s May 2024 Q1 earnings call management sounded a similar tone about the company’s one-time decision to offboard agents. In prepared remarks, eXp CFO Kent Cheng said,
“We saw a slight decrease of 2% in our agent count year-over-year. This reflects both the challenged market conditions and our strategic decision to offboard a significant number of unproductive agents in the U.S. during the fourth quarter of last year and the first quarter of this year. This move is aligned with our focus on enhancing overall productivity and efficiency.”
In response to an analyst question about whether agent declines would extend into Q2, Mr. Sanford responded optimistically and noted the company implemented a new revenue-sharing policy to further incentivize agent recruitment: