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eXp CEO loves Glenn Stearns’ star power

During a company earnings call, Glenn Sanford says a mortgage joint venture with Kind Lending will benefit from Stearns' "celebrity status."

HW+ Glenn stearns
Glenn Stearns, founder and CEO at Kind Lending

Residential real estate brokerage eXp continues to be profitable, and company CEO Glenn Sanford became a fan of Glenn Stearns through reality television.

Those were two takeaways from the company’s second quarter earnings call on Wednesday, in which Sanford and other company executives wrestled with how to diversify a company that has been a somewhat unlikely darling of Wall Street.

The Bellingham, Washington-based company reported $37.0 million in net income for the months of April through June, with $20.6 million of that figure coming from a one-time income tax benefit. The tax benefit primarily comes from a release of a valuation allowance, according to a footnote in eXp’s Securities and Exchange Commission filing.

But while eXp has proven consistent profitability and rapidly grown its brokerage, its business has insignificantly diversified beyond collecting a sliver of agent commission splits and assorted agent fees.

One attempt to change that is a partnership with Kind Lending – the new mortgage company from Stearns Lending founder Glenn Stearns – to originate mortgages. The joint venture announced this July is called Success Lending, and it is slated to get off the ground in October.

During the earnings call, Sanford said of Stearns, “He was on the first season of Undercover Billionaire, which is how I sort of learned about him.”

A show on the Discovery Channel, Undercover Billionaire follows Stearns trying to build a “thriving million-dollar business for a small town in the U.S.”

“How he did things really matched up well with how we did business,” Sanford said. “This is a team that wants to roll-up its sleeves. It’s not like announcing a deal with Guaranteed Rate. Everyone has a deal with Guaranteed Rate.”

Sanford was alluding to rival brokerage Compass announcing a venture with mortgage lender Guaranteed Rate, also last month. Chicago brokerage king @properties also has a longstanding Guaranteed Rate joint venture.

Added Sanford of Stearns, “This is someone who really has celebrity status which I think is really going to be key. It’s not just another generic joint venture.”

The joint venture will try to build on eXp’s growing share of the U.S. real estate market.

The brokerage reported $40.1 billion in quarter two sales volume, a 210% leap compared to the second quarter of 2020.

In periodic announcements and again on today’s earning call, eXp has repeatedly touted its agent growth. The company now reports having over 58,000 real estate agents, which is an 87% increase from the second quarter of 2020. Perhaps agents are enticed by eXp’s equity program in which incumbent agents share in the company’s revenue after they recruit new salespeople.

eXp reported $1.0 billion in gross revenue in the second quarter, an almost three-fold leap from second-quarter 2020 revenue of $353 million.

Gross revenue assumes eXp retaining 100% of their affiliated agent’s commission, and not partaking in revenue sharing. The company has a longstanding policy of giving back to agents 80% of their split and 100% of the split after the first $16,000 an agent makes each year.

In fact, $919 million of eXp’s second quarter expenses, or a 92% offset of gross revenue, were “commissions and other related costs.”

One interesting eXp wrinkle is the brokerage’s stock price. At the start of 2021, eXp had a valuation well above $7 billion. The company’s market capitalization later dipped below $5 billion, but it has since partly rebounded. As of Tuesday, eXp traded at $46 a share on Nasdaq with a market cap of $6.7 billion.

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