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Cloudbusting: eXp more than doubles profits in 2021

Virtual brokerage also more than doubles revenue, but will Wall Street take notice?

eXp founder and CEO Glenn Sanford

Years before Mark Zuckerberg introduced the “Metaverse,” there was eXp, a cloud-based real estate brokerage where executives and agents appear on a computer screen as if they are characters in Second Life or The Sims.

On Thursday the cartoon avatars returned. eXp founder and CEO Glenn Sanford reported a profitable year for a brokerage that is quickly growing.

Net income at eXp was $81 million for 2021, according to a virtual world earnings call Thursday livestreamed on YouTube. That’s a 162% jump from $31 million in 2020 profit.

Revenue increased 110% to $3.8 billion in the year. But that figure includes full home sales commissions, which mostly return to eXp’s independent contractor agents. Once commissions and other related costs are subtracted, total revenue was $296 million.

The brokerage is generating more revenue because eXp is briskly hiring agents, and those agents are doing more deals. Agent count increased 72% in 2021 to over 71,000 at December’s end. The count now hovers at 76,000, Sanford said, while boasting 1 in 25 U.S. agents are now at eXp.  

eXp agents took part in 444,367 deals in 2021, 86% more than 2020. And eXp reported a year-over-year 116% explosion in transaction volume to $156 billion.

eXp has grown both quickly and profitably, Sanford said, unlike other brokerages that are burning through money, a possible reference to Compass.

“Of the hypergrowth companies, we’re the only one that’s being consistently profitable,” Sanford said, adding eXp is “running a model that can be sustainable in the long run. We don’t need to raise the money to continue to grow and sustain the brokerage.”

The brokerage’s growth, however, has lost its Wall Street sheen. eXp’s stock price and corresponding market capitalization has plummeted more than 200% in the past year, to presently over $3.9 billion.

In response to a question about its stock price, an eXp spokesperson replied with a company statement, “We can’t comment on near term volatility in the stock price as it is ultimately determined by external market factors. Management is focused on expanding the business through the company’s primary focus on enhancing its value proposition for agents, which has resulted in increasing market share capture and profit.”

The dissonance between financial performance and stock was not addressed on the earnings call. But Sanford did say how the company might diversify beyond sales commissions.

Sanford discussed a partnership with Glenn Stearns’ Kind Lending to originate and refinance mortgages, which has now launched in 23 states. This mortgage joint venture – a business plan that has enjoyed a renaissance in popularity among brokerages and lenders the past five years – could attract mortgage talent looking for work amid the refinancing freefall.

“We are actually hiring local on the ground loan officers,” Sanford said, adding that “successful LO teams” are being hired in Illinois, Texas and Colorado.

Another possible growth opportunity is eXp’s international presence. The brokerage is in over 20 countries, Sanford said, adding there is “a lot of growth” in Israel and South Africa. But eXp has not broken out international revenue.

At one moment during the livestream it appeared Sanford might comment on eXp’s puzzling stock performance, only for the feed to cut out.

“Anyone got Glenn’s comments on the stock,” a livestream participant calling themselves XM chatted.

Participant blayzei shot back, “Stream going down just when should’ve talked about the stock and how it has lost 50% of the last six months or so,” a remark punctuated by a smirking face emoji.

Also not addressed is the fracas between eXp and Keller Williams, An Austin, Texas judge issued a restraining order on former Keller Williams CEO Mark Willis joining eXp, because Willis holds shares in three Keller Williams franchises. Meanwhile, eXp has made Willis’s status a cause celebre as Sanford has egged on a “freemarkwillis” Twitter hashtag, and frequently tweeted about the situation.

Judge Cleve Doty scheduled a hearing for April on whether to extend the restraining order. Willis has declined to comment on the matter.

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