eXp World Holdings, Inc. (NASDAQ:EXPI) Q2 2022 Earnings Conference Call August 3, 2022 11:00 AM ET

Company Participants

Courtney Chakarun - Chief Marketing Officer
Glenn Sanford - Founder, Chairman and CEO
Jeff Whiteside - CFO and Chief Collaboration Officer
Shoeb Ansari - Chief Information Officer
Leo Pareja - President of Affiliated Services
Courtney Chakarun - Chief Marketing Officer

Conference Call Participants

Justin Ages - Berenberg Capital Markets

Courtney Chakarun

[Starts Abruptly] equity research analyst for real estate and technology at Berenberg Capital Markets, we are happy to welcome back Justin as our moderator. Following this initial segment, we will move into a presentation which includes a review of the second quarter 2022 and year-to-date 2022 financial highlights presented by Jeff Whiteside, CFO and Chief Collaborate -- pardon me CFO and Chief Collaboration Officer at eXp World Holdings, followed by Shoeb Ansari, Chief Information Officer and Leo Pareja, President of Affiliated Services to give an overview of our technology and referral services priorities, respectively.

We will then return to Justin Ages, our leadership team for a continuation of the Q&A. Finally, I will show shared details on the upcoming EXPCON event, which will focus on delivering first class education, training, coaching and networking for agents and brokers and bring today's session to a conclusion. Let's begin with a review of the forward-looking statements. There will be a number of forward-looking statements made today that should be considered in conjunction with the cautionary statements contained in the company's SEC filings.

Forward-looking statements are subject to various risks, uncertainties that could cause our actual results to differ materially from these statements. Please see our filings with the SEC, including our most recent quarterly report on Form 10-Q for a discussion of specific risks that may affect our business performance and financial condition. We assume no obligation to update or revise any forward-looking statements or information. As a reminder, today's call is being recorded and a replay will also be made available on expworldholdings.com. Now for a few logistics before we get started, for those of you in the EXPI campus today.

You will note that there are three screens, if you hit the stage Zoom button to the right of your chat box, you will be able to Zoom into a specific screen, you can hit the plus icon button above that screen. If you happen to see no slides or gray slide, hit the Refresh icon at the top of the right hand corner of that screen now for a few while in the EXPI campus, should you need any help or have any questions, please enter your comments into the chat box at the bottom on the left, and a member of the team will contact you.

As mentioned the last segment of our Fireside Chat is a continuation of our Q&A. Should you wish to ask a question during this presentation, you can enter your questions by scanning the QR code presented on the screen with your phone or go to slider.com and type in the event code EXPI. From there you can submit a question or vote up an existing question by giving a thumbs up. If you would also like to ask that question, this screen will remain on the left hand side of the stage. At this time, I would like to turn the fireside chat over to Glenn Sanford, our Founder and Justin Ages to start the earnings conversation and opening remarks.

Glenn Sanford

Awesome. Thank you. Thank you, Courtney. And welcome again, Justin for helping host today. So Justin is one of our covering analysts and I know that you cover the housing market and watched actually a few videos recently view on CNBC and other places. So it's great to have you here as part of our fireside.

Justin Ages

Yes, Glenn, thanks for having me. It's great to be back here. Happy to chat with you and the rest of the EXPI team. Now, let's start obviously, the housing market is always a topic of interest for both the public and investors alike. So hopefully each is going to find something worthwhile from our chat today. Just starting there then given all the headlines surrounding the housing market, whether it's ongoing price increases or affordability issues, I think I would describe the quarter for EXPI is pretty solid. You guys saw brokers and agents continue to grow transaction volume increased, you even increased the dividend. So with that in mind, Glenn, how do you feel the second quarter was compared to your expectation, what exceeded, what fell below?

Glenn Sanford

Yes, so I think the big part was in Q2, obviously the headline was the Fed raising interest rates that that was that changed the game quite a bit and we definitely saw a softening especially toward the end of Q2, June especially we saw a slowdown in transactions, I think primarily around interest rates. So what's interesting is interest rates have now retreated somewhat, which is actually I think, we will start to see some increase in buyer volume because of that but that's still yet to be seen. But I think the interest rates definitely slowed things down.

And certainly slowed it down below what we were expecting at the beginning of the year, what we've been able to do is we've started to moderate some of our expenses and other things to match the market, which is part of the reason why I think we were able to increase our dividend even though we saw the market slowing down. We just increased it modestly. But it certainly showed that we were making some progress.

I think the other piece and certainly as we look at what took place in eXp, we definitely saw, us start to retrench based on the market, we introduced some new education around what we're calling level up, we've got internal external outreach, something to note, that's not even part of Q2, but we'll be part of Q3 is we have the largest agent run event in the entire industry is going to actually take place this month in Dallas.

And so that's pretty exciting. We'll have over 4,000 agents hosted by a number of our top agents, and Brent Gove, one of our top agents and brokers has actually put this event together, and actually has Tony Robbins coming to close that out. So we're still seeing a lot of agents looking to join, a lot of agents exposing the business model to other agents, we're supporting them with a lot of technology and tools, we've got some cool things, we'll be announcing in the next month or so around a marketing suite, which we're excited about. And then we start to look at some of the other businesses, Virbela, it's continued to grow from a Metaverse perspective.

But then the Frame VR platform is actually the one I've been talking about. And I'm most excited about, because it's completely web based, we're starting to attract a number of larger clients to that platform. So I think there were about four Fortune 500, Global 500 companies in the last quarter or so that have actually started to use the platform. Some of them are paying clients, and some of our bigger clients now are actually using Frame VR. So we're excited about sort of the growth there.

I know I'm jumping into some of the other parts of the business. But SUCCESS Self has continued to grow and expand. And SUCCESS Coaching has really started to get some traction. So that's been exciting. And so you look at the fact that personal development coaching has about a $20 billion a year TAM with some good profit margins, we're actually pretty excited about the fact that we are really in a position to be actually making money in SUCCESS and starting to actually grow into that business, we introduced a new coaching model, we did that actually at shareholders, so anybody who attended there, got to hear a little bit about that. And that's starting to get some traction. One other note around SUCCESS is that we also have a co-working model under the name of SUCCESS Space, and we've actually got 10 franchises now committed, the first locations opening up this month in August.

So a lot of lot of good things there. And then I think the last piece and again, a lot of these are really more current quarter than prior-quarter, because we tend to think about all the things that we can do, and obviously the results are the results. But we did close the purchase of Zoocasa, which matches up with something we've been talking about for a number of years, which is what we've referred to as our alt portal strategy.

So we've had a number of great strategic conversations and meetings to create alignment to expand Zoocasa across most of Canada and starting to expand in the U.S., starting to get leads into the hands of agents and other markets outside of their primary market of Toronto, Canada, and so that's starting to get some traction as well. So I think those are some of the highlights. I know that Leo will talk a little bit about what we're doing with SUCCESS Lending and affiliate and services. But one thing to note is just that we've started to really expand our leadership team.

And so we'll hear a little bit from Shoeb and Leo here in a little bit, but Shoeb Ansari joined us as our Chief Information Officer and has really been retooling the way we think about improving workflows and technologies. He actually helped us find somebody who's joining us starting tomorrow, Patrick O’Neill, our Chief Operating Officer for eXp Realty. And then, of course, Leo Pareja is our new President of Affiliated Services. So that's exciting. And we'll get to hear a little bit from them, as well. So those are some highlights, some commentary, obviously on the housing market earlier.

Justin Ages

Yes, that's a pretty good synopsis going on, it just kind of shows the breadth of everything that you're involved in, and everything that you're growing to. In specifics to the quarter, maybe you could talk a little more about, what were the key drivers of let's say the transaction volume growing, was it more on the housing price side, as home prices continue to accelerate? And as you continue to grow your agent base, what's resonated with attracting productive agents to your platform?

Glenn Sanford

Yes, so the key drivers certainly, agent growth is a big part of it, we think about the idea that the average agent in the industry is going to do X number of transactions based on what's going on, that's going to be the biggest single predictor of the longer-term of the company. And so that was the biggest driver, our sales prices were generally steady in the quarter. And there was quite frankly, more notable churn in the lower to non-producing agent category.

So, I think that was because, especially as we got toward the second half of the second quarter, the fact that there were fewer transactions due to higher interest rates, some of those agents who are struggling to put deals together, they generally churned out or in some cases may have just, tried to find some place they could hang their license that was cheaper. And so we did see some of that, but our biggest drivers really were around continued growth and market share. And as a result, the sales followed.

Justin Ages

Thanks, Glenn, really good to kind of dig in there and get the puts and the takes of what's driving the quarter. And we touched on the housing market in general. So I won't ask you directly to go to your crystal ball and what you think I'll come at it from a different angle, even as mortgage rates kind of retreat from their highs, many are expecting the housing market to slow so, one of the things that we've been really keyed on is the advantages that EXPI has in recruiting agents. So, can you take this opportunity to talk about those advantages over other models and then how that translates to your growth and market share gains?

Glenn Sanford

Yes, so most agents in the industry belong to more traditional real estate brokerages and so whether they be part of the [indiscernible] brand, actually now the Anywhere Group of Companies,Re/Max, Keller Williams, Berkshire Hathaway, most companies are geared as a, if they're a franchise with some sort of franchise fee off the top, typically 5%, 6%, 7% and then they're typically on a 70:30, 60:40 but probably a 70:30 with the local office. And in most cases, there's some sort of cap where they reset every year and that might be anywhere from $20,000 to $30,000 that they pay the local office before they go to 100%, if they do have a cap.

In the eXp model, we don't have a franchise fee. Our agents are an 80:20 and they have a $16,000 cap and so just right off the bat, agents effectively get a raise coming to eXp, I mean, we do have an $85 a month, a tech and education fee. So that's included in our model. Most brokerages charge more than that on a monthly basis as well. So, agents save money, but then the next part of it is that of that 20%, we pay half of that back out in the form of what we refer to as a revenue share. And so that's the benefits that agents get from helping the company grow by attracting other agents that they're doing cross sales with, et cetera.

And then, of course, we were the first company to really provide meaningful equity to agents and that being in a public company. And so that was another element that's again, missing from the 90% plus of agents out in the field, don't have revenue share, and an equity benefits and a competitive cap and split model.

So all of those make us attractive, and I think it's one of the reasons why we're picking up market share across not just the U.S., but actually now the globe in 21, 22 countries, and starting to grow with a very similar model, even internationally, which is quite attractive. When you look at other models, internationally, which are more akin to a 50:50 split with the agent. Our model is normally around a 75:25. Internationally, which makes us again, a very competitive model, even before you start to add in the revenue share and equity benefits.

Justin Ages

Yes, that's really interesting, Glen, and that just shows how kind of nimble EXPI can be in various kind of housing markets. And I'd be remiss to mention something that you didn't even know you called it a little modest is that the dividend increase makes that, share for the agents just a little more valuable. So I think that's a good starting point on the high level questions that I have. So I'll turn it back to EXPI to continue the presentation.

Glenn Sanford

Okay, awesome. Well, let's welcome up, Jeff Whiteside and to talk a little bit about the financials.

Jeff Whiteside

All right, well, thanks very much, Glenn. And thank you, Justin, for hosting today. Good morning, all. And thank you for joining our second quarter 2022, virtual fireside chat. On behalf of our great agents, business units and staff, I'm proud to share our results and highlights with you today. And a special welcome to I know that Michael Ball days made the entire international team stay up for this. So thank you for staying up. And we really appreciate you being here.

So if as we look at our first page, summary, EXPI delivered another record quarter and a strong performance in Q2. We've had continued growth in agent count, transaction volume, revenue, gross margin dollars and cash flow. And as we see, we continue to grow our market share, as Glenn mentioned, with sustainable operating model and cash flow, the Board of Directors voted to increase our dividend by 13%. So that will go out. So I think that's, I think part of that is an -- it's a, it's a proof of the solid model that we're operating on. And as we go forward, we see -- we finish the first half with a very strong resilient model. And we use the term built for this in the past. We're going to lever up for the next part of challenges that we're going to face. But we've successfully we have a team that's that successfully navigated numerous cycles of the economy and challenging markets.

We again have zero debt on the balance sheet, variables cost structure, and our organic growth models. So as Glenn mentioned, again, we have massive agent events all over the country, mentioned Brent's event that's coming up soon. But if you look, if you follow us on social media, this organic growth model keeps building and building and building and one thing I mentioned before, was back in, when I joined in 2018, there was a relatively small group of influencers and now we really have hundreds across the country. And then, that's also influencing the growth of international.

So finally, on this page, recognizing that the second half of 2022 could be challenging in the industry. We've made ongoing adjustments to our cost structure for the full-year and in preparation for changing the economy and real estate industry. So I think we have been looking at the business, the cost structure, the volumes that we see and forecasting towards the second half of the year, and we are adjusting and we can adjust for that as time goes on.

So if we just move to the second page. At highlight level, and starting with revenue in Q2, our revenue was $1.4 billion, which was up 42% plus Q2 2022. Our gross profit dollars in Q2 was $107.3 million and that's up 34% for 2022. Our net income was $9.4 million and that was down 75% for 2022 and up 6% for Q1 2022. The variance is we had a very favorable tax benefit of $22.2 million in Q2 of 2021. So that's basically just following GAAP. And we had number of different tax benefits that was applied to net income. So that's why there's such a big difference year-over-year.

Our adjusted EBITDA a metric we use it excludes non-cash charges, i.e., stock compensation was $26.9 million, which was flat year-over-year first quarter of 2022. And lastly, on this page, Q2 operating cash flow was $77.2 million an increase of 27% year-over-year. Now I'd like to take a look on the next page at some of our key metrics. This page is broken down into two categories. Number one is the operating metrics. And number two is our financial metrics. Looking at our operating metrics for Q2, our agent NPs was 68 and our employee NPS was 78.

As a reminder, we run our business on net promoter scores with a world class goal of 70. And that's kind of what we shoot for. We've talked about it in a lot of detail in the past. In our Realty business, which is the primary driver of our financial results, adding productive agents to our platform, drives unit sales, volume, revenue, and gross margin dollars that we utilize to invest in our agents and return to our shareholders. So if you look at some of these metrics, our agent count at the end of Q2 ended at 82,856. And that was up 42% year-over-year at this time last year.

In terms of unit sales, we transacted 150,032 units in Q2 up 30% from 2021. And our price actually over the quarter, we didn't see -- we did see some flatness in the last part of the quarter. But overall, the price per unit was up 11% for 2021. And volume was at $57.9 billion was $40.1 billion increase of 44% versus last year.

And now we'll take a look at some of our financial metrics. We have discussed revenue on the first page gross dollars net income adjusted EBITDA at operating cash flow. So some other key metrics that we look at is gross margin percentage. So our gross margin percentage was 7.6%, in Q2 versus 8% in Q2 2021. And again, we're still coming off in very high volume business. And with price increases, that puts pressure on the percentage. As we've seen over time, our growth in dollars has been very extraordinary, our percentage growth gets pressure with the volume and the price increases.

So this SG&A is what we kind of what we spend in the company to invest in our agents, investment expansion, invest in our staff, and prepare for the future, it increased from $63.4 million to $95.6 million was driven primarily by investments in our business. We've talked before about technology, international affiliate services, et cetera. And that's where most of that money goes the incremental money.

Our operating income was $11.6 million in Q2 2022 versus $16.5 million in 2021, and this quarter was driven primarily by one time incremental expenses that hit Q2 2022. And a slowdown and some of the volume we saw towards the end of Q2 in 2022.

And finally on the key metrics results, our cash balance in end of the quarter at $134.9 million versus $107.4 million an increase of 25%. So we both from a situation where we have no debt on the balance sheet, cash flow and cash balance. It's very healthy balance sheet.

So if I'm looking at our chart four, if we just turn the page, we'll take some other Q2 2021 milestones EXPI in Q2 2022 to achieve positive GAAP net income for the 11th quarter in a row. We continued positive accumulated earnings and shareholder equity. And as I mentioned, we decided to -- that the board decided to increase the dividend 13% from $0.04 to 4.5%. And our share buyback so this is the -- this is our commitment to offset dilution of agent awards, we repurchased approximately $50 million of common stock in Q2. And then lastly, we returned about $6 million to shareholders in the form of dividends. So we in total it was about $56 million, we turn back to our shareholders in the form of a stock buybacks and the dividends.

So if I were going to take a quick look at our historical -- I'm sorry, we're going to take a quick look at our year-to-date 2022 results versus 2021. So you can see the agent numbers the same thing were up 42%. Our units went from $189,000 to $264 year-to-date up 40%. Volume went from $64 billion to $99 billion up 54%. Our revenue on a year-to-date basis is up 53% were $2.4 billion versus $1.5 billion.

And you can see -- you can just follow the chart along. Our gross margin grew at $57.3 up 43% due to an increased transaction volume. And as I mentioned before, with that volume and the price, the percentage did decline. SG&A we talked about, net income we did talk about. And as I mentioned previously, the cash and cash equivalents increased by 25% on a year-to-date basis.

So if we go into our next chart, this is a chart I always like to kind of bring people back to a little bit. Taking a quick look at our historical growth in agents and revenue. From 2018 through Q2 2022, we've gone from $500 million of revenue in 2018, with 15,000 agents to $2.4 billion of year-to-date in Q2 2022 with 83,000 plus agents.

And when we look at this chart, it's actually very extremely strong growth, extremely strong business model that we've grown on with cash flow and zero debt. And what we believe, a long road of growth opportunities ahead, free EXPI.

So if I go to my final chart, please. We've been asked to quantify our addressable market a number of times, and you'll see in the last chart, our estimates that we see from an addressable market standpoint is there's about $467 billion of revenue that we see being in our addressable market. So if I just start at the bottom of this chart, our core market, which is a U.S. residential real estate brokerage is $106 billion.

Our professional coaching opportunity, as Glenn mentioned before is about $20 billion. Our growth verticals mortgage title escrow affiliated services $54 billion, expansion and U.S. commercial is under $12 billion. And our expanded opportunity in an international real estate is under $95 billion. So as you can see, our growth, historical growth has been fantastic. But there's still a long way to go. And we think the addressable market is wide open.

And as we go through these challenging times, potentially in the second half of this year, we're also investing in the company both from a leadership standpoint, and a technology standpoint to actually go after these markets. So feeling really good where we are. And that's my reporting from a financial standpoint.

So right now I'd like to pass it on to Leo, our President of Affiliated Services. Thank you all and welcome, Leo.

Leo Pareja

Thank you very much, Jeff. I'm actually very grateful to be here and be part of this team. Over the last several years, eXp has experienced explosive growth in agent count. And that's actually translated into hyper growth of transactions. Of a company of our size now, we're poised to take advantage of that big opportunity and create higher attachment rates across the board and create additional monetization that is similar to the incumbent players like anywhere Berkshire Hathaway.

Second part of my focus initially, will be to really build out a diversified channel of corporate referral sources, ranging from foreclosure sales, corporate relocation contracts, LED networks in captive channels and partners due to our robust national coverage that makes us an amazing partner for large participants. We're a large monolithic brokerage with national coverage, which makes us an easy button for a lot of these players that we weren't before. This internal discipline will be competency that we will use for attraction and retention. This can potentially also increase our per person productivity, which is a very important metric to focus on.

In addition to our external opportunities of attraction, we'll also be investing in our internal lead generation capabilities with our new investment in Zoocasa and potentially scaling that. So we're really focused on two categories. One, you're generating attachment across the enterprise at all transaction levels, and two being able to refer additional opportunities to our agents to increase company dollar as well as retention and attraction. With that, I'll hand it over to Shoeb. Thank you very much.

Shoeb Ansari

Thank you. Good morning, everyone. I'd like to highlight three key outcomes, after to continue to fuel our growth. First one, increasing operation, number two, providing an exceptional experience to our agents. Number three, regional expansion. Let's go through each one of them. Over the last several years, we have done an outstanding job in scaling our operational processes to support the growth we have had.

Using our experience, we are building just the right solutions, driving our productivity to further enhance our transaction unit economics. For example, tighter integration between our transaction processing system, and ancillary systems that surround, that reduces the steps necessary to process a transaction, sanction of our work queue management process where we can be very efficient in how we process each one of the transaction with speed. Let's talk about exceptional experience, solutions like myEXP, we aim to provide an easy to use surface for our agents to conduct their business well, we will continue to deliver incremental improvements to myEXP space in an agile manner with our agents such as use it as an agent facing portal into our transaction management system, making it easier for agents to find what they need.

Let's talk about regional expansion using our cloud first strategy and effective use of partnerships across the globe coupled with having a set of eXp core systems that is common to our global eXp footprint. We can provide regional experiences, while leveraging our domestic expertise and operational processes to process transactions and server agents.

Now I'll pass back to Justin Ages for the continuation of our Q&A with Glenn and Jeff. Justin?

Question-and-Answer Session

Q - Justin Ages

Thank you for the presentation. A lot of interesting information to come out. Hopefully, we have enough time to get to all of it. Given Jeff's presentation, I think I'll just start with from the CFOs perspective, Jeff what stood out to you, was it maybe the dated SG&A, was it the ongoing performance give you the opportunity to expand upon that?

Jeff Whiteside

Yes, Justin, thank you for that. I know the growth, what we saw was -- we had a great first quarter of the year. And now we're seeing the first two-thirds of the second quarter was pretty strong. And what as Glenn mentioned, we're starting to see a bit of a slowdown from the growth numbers we expected in June, based on the economy. So I think that what impresses me and what has impressed me for the last couple of years now is the organic growth model. All right, so if you follow our agents across the country, I mean, they're in Detroit, they're in Nashville. They're all over the country, growing the business.

And so that's I think that's the biggest thing and that's going to continue regardless of what happens in the economy, that's going to continue and I think as we pointed out, the opportunity for growth here in all the business lines we're going after is substantial. So that's my view from and my last point on Justin would be that we have prepared, we were [indiscernible] market talking to a lot of the analysts in the first quarter. And did hear a lot of feedback on the expectation that it's going to be tougher second half, and possibly next year, first half of next year.

So we started adjusting our full 2022 plan from a cost standpoint back in Q1, we're spending a lot of time on that now to make sure it's adjusted properly to reflect the volume that we're going to see. So I think we're going to be prepared for whatever happens.

Justin Ages

Thanks, Jeff. And continuing along with that, I got a question from slide out here, Tom White, hoping you can quantify the slowdown in an operating expense, operating expense in the second half of the year, you were able to put any numbers on it or directionally how we should be thinking about that?

Jeff Whiteside

Yes, I mean directionally, we had a plan, and we are going into 2022, and we're looking to decrease that plan by approximately 25%. So that's kind of that's, we don't really break out our forecast for SG&A and things like that, but we're looking to decrease our spending by about 25% compared to what plan we had going into 2022.

Justin Ages

Okay, thanks. That's helpful. And then I just want to jump to some of the new presenters on the Affiliated Services view, I think there's plenty of opportunity there. And then it could lead to some really exciting movements for EXPI, so can you discuss the high level strategy or what you have in mind in general for that business, and also add on as it pertains to the lead gen business?

Jeff Whiteside

Leo, do you want to take that?

Leo Pareja

Yes, absolutely. So at a high level, there are services that attached to every real estate transaction across the country. And with our current size and scale, we have an untapped opportunity to try to get aligned with the right partners and get the proper conversions that you see other established legacy players have. And then if we switch over to the referral business, that you can point to companies like Cartus, inside of the Anywhere Family of Companies, where there is a very strong affinity from the agents inside of the platform to stay within the company, and really count on that referral business that's corporately generated on their behalf on an annual basis.

Justin Ages

All right, thanks for that, Leo, that's helpful. And then maybe one for Shoeb on the technology side, one of the key kind of growth facets is making agents more productive. And my ears were a little peeked with this myEXP, the incremental improvements there, the agent facing portal. So maybe you can talk about what you're seeing in terms of or what you're expecting in terms of kind of improvements or new products to bring online, both in terms of attracting agents and then making them more productive once they come onto the platform?

Shoeb Ansari

Sure, so from a perspective of myEXP, we obviously want to offer a surface, that the agents pretty much look at it as their place to work. So any information they need to get from eXp, whether it's about their transactions, their commissions, how it is processing, we want it on their fingertips at all times. Let's talk about communication, the communication that goes on between the brokerage staff and the agents, we would like to make sure that the myEXP surface is the place for them to go to.

So if we make it easier for an agent to do business with us where all the information they need, about their transactions are right on their fingertips, on their mobile, on their tablet, on the PC, then it becomes easier for them to do business, it becomes faster for them, faster for us. So it's very important for us to provide a great experience, great mobile experience, great tablet experience, great PC experience. That by itself, if you think about it, if we can offer our most important constituent which is the agent, the level of service, the speed of service, experience that we provide, that it by itself will attract more and more agents to come to us because we're making it easier for them to focus on what they do best which is go out and sell properties, go out and help buyers to buy properties, that is where we are focused on.

Justin Ages

All right, that's helpful and a good kind of peek into what you guys are looking to do. Maybe just a follow-up for you for anyone who wants to take it a couple of questions on slide on Zoocasa, is there the opportunity to expand that beyond Canada and then U.S. and how are you guys thinking about that?

Glenn Sanford

Yes, there certainly is. I mean, the obviously the bulk of our agents are in the U.S. and Canada at the moment. And there's robust MLS integrations that allow us to quickly display a large volume of properties. Basically all properties that are listed for sale in the U.S. and Canada, where it gets a little bit unique when we start to think about going into other markets and we do plan to go into other markets is there's not normally an MLS. So we're looking at as we continue to expand how do we aggregate a volume of listings to make it a true consumer portal? And so is that strictly with eXp listings or there ways to maybe include or even use it as a bit of a way to attract agents to eXp to use Zoocasa and/or other forms of marketing to create a more sticky eXp, but the cost will definitely go beyond the U.S. and Canada most natural market next would be to go to into Mexico.

There's some initiatives there around excellent MLS initiative that we're part of driving in, in Mexico, and that would provide a natural feeder for Zoocasa. And so we'll be looking at how can we aggregate listings into that.

Justin Ages

All right, that's helpful, Glen, and it could set the stage for some more. Are you able to project or estimate how it will translate into increases in transactions and revenue, or is it still kind of early innings at this point?

Glenn Sanford

It is early, but the Zoocasa, historically was one of the most advertised portals and all of Canada was used to be owned by Rogers Communications. And they were advertising somewhere in the vicinity of a million and a half dollars a month in advertising spend. And then they because of regulatory reasons, they had the solid off the paper brokerages weren't allowed in Canada. So there was a need to sell it off, which created the opportunity for the management team that's now running it to scale and use the well-established brand of Zoocasa.

So from a consumer portal perspective, we think it's got a lot of opportunities. And it was the plan of the Zoocasa team to actually build it out across Canada and around North America with a strategy that provides a much higher value per lead through the platform. So you can think about the idea that leads may have something akin to what Zillow or realtor.com would charge in terms of a referral fee on lead. So you can think about almost a Zillow flex, like opportunity, but we own it together all of our agents, brokers, our shareholders, as well as the primary beneficiary of those leads. And so and then that the next piece is the ability to pre approve and predispose consumers through that platform to success lending to our title escrow operations, et cetera.

So, it's a great entry point. It has a large traffic base already across Canada. And so there's a lot of markets in Canada that even this month, we'll start to be able to put leads into agents hands in a high accountability type of format, which we're pretty excited about. And so, not ready to quantify it, but we are going to be investing in Zoocasa quite extensively, because we believe that it could be a major portal in the next three to five years.

Justin Ages

Yes, it definitely sounds like the operative is there. I want to switch the discussion to the agent side of the business just given how integral it really is to the whole operations. A question from Slido from [indiscernible]. Agent growth was still very strong and 42% sounds like churn of low producing or non-producing agents is up. So what's happening to gross agent growth? Pre that that churn that you mentioned in your prepared remarks?

Glenn Sanford

You broke up just slightly for me, what was the…?

Justin Ages

Yes, I had a question from Slido, looking to look at gross aging product before the churn that you mentioned in your prepared remarks on the lower end of the productive agent side.

Glenn Sanford

Okay, yes. Jeff, do you know what the gross agents adds for the quarter?

Jeff Whiteside

Just give me one second.

Glenn Sanford

Okay. Will look that up.

Justin Ages

Okay, well, Glenn looks that up, while we're on the topic of agent, I did ask this at the top and I want to get in a little bit recruiting tool, as you're deployed to ensure now ongoing agent growth?

Glenn Sanford

Yes, so our primary tools is really our -- what we refer to as our aligned compensation model, which is the key driver, obviously having been productive agent, and team builder and brokerage owner. There's a lot of things that we're able to identify and help identify that are pain points for agents. We've got, it's either this month or next month, we're actually rolling out a new marketing suite of tools, which we're really excited about to automate a lot more marketing for agents.

The education and training is a big part of it. And what we're seeing which is really interesting is given a little bit of the slowdown in the market, we're actually seeing our top producing agents and brokers and those who have grown large organizations, actually doing more on the education and attraction and in retention side of the business, because they basically all have many effective brokerages inside the brokerage just through the way that the compensation model is designed.

And so we're really seeing kind of a doubling down on education and training, as well. As you know, we're continuing to look at tools and technologies mean, Zoocasa, is one a way that we're looking at improving lead to agents and then we're putting in some lead qualification scrubbing systems that we're excited about to help agents when they do get leads from either eXp realty.com or anywhere that the leads come in as something that's actionable, and then we're providing more accountability around those leads, which will help agents be more productive just by getting better training.

Jeff Whiteside

Yes, the net number that we report on is 4,660 agents in the quarter from Q1 to Q2.

Glenn Sanford

And what was the gross level?

Jeff Whiteside

Closer to 6,500.

Glenn Sanford

Okay.

Justin Ages

And then I know [Technical Difficulty].

Glenn Sanford

That will continue to be attractive, there will always be cheaper places, they'll all be always be more expensive places. But what we don't want to do is introduce any concept that we might even increase any sort of cap or fees to agents, not our intention or our belief that we'll do that we get investors that ask us to do that. But we think that's a short-term solution that won't solve for how do we get to 500,000 agents in over the long haul. So we think about market share as being our biggest driver. And so having a competitive model, not increasing the expenses to agents, recognizing there's going to be continued competitive pressures in the marketplace. But as long as we continue to grow the agent base, we start to look at affiliate services.

We look at other things like Zoocasa and other premium lead gen programs, there are ways to increase margins without increasing the cap or the fees on agents in general.

Justin Ages

All right, that's really informative. Glenn. Thank you. And with that, that does it for my question. So I'll turn it back over to you and your team for any closing remarks.

Glenn Sanford

And Courtney.

Courtney Chakarun

Thank you very much. As a reminder, I'm going to talk a little bit about eXp beacon, we talked about being built for this, but we're also built for the future. Right, a reminder, we do have our annual eXp Con Summit just around the corner. This year's event is hosted in Las Vegas, Nevada, October 11 through the 14. eXp is a great reminder of how fast we've grown as a company and our continued commitment to agents and brokers success.

Looking back 2014 a group of 75 people joined our first eXp con in Chicago. Eight years later, we're hosting 1000s of agents and brokers across the world with the goal of helping them take their businesses to the next level, serve their customers and expand the eXp community. So register we'd love you to join please scan the QR code on the screen with your phone or visit eXp con exprealty.com. We want to thank you for joining today. This concludes the eXp world holdings Q2 2022 earnings fireside chat.